Fair Work Ombudsman v NSH North Pty Ltd trading as New Shanghai Charlestown

Case as pleaded and relief sought 10 The penalty hearing proceeded upon the basis of: (1) an amended originating application (amended OA) that was handed up in Court on the first day of the penalty hearing without objection and electronically filed the next day; and (2) a further amended statement of claim (FASOC). 11 The amended OA sought: (1) declarations as to contravention of: (a) s 45 of the FW Act, by failing to pay, as required under the Restaurant Industry Award 2010 (Cth) (Award), minimum prescribed adult and junior rates of pay, casual loadings, Saturday, Sunday and public holiday penalty rates, overtime rates, and superannuation contributions; (b) s 45 of the FW Act, by failing to provide an arrangement for ordinary hours of work; (c) s 92 of the FW Act, by cashing out annual leave owed to some full time employees; (d) s 535 of the FW Act, by failing to keep records with the prescribed information; (e) s 536(1) of the FW Act, by failing to give employees payslips within a working day of payment in relation to the work performed; (f) reg 344(1) and (6) of the FW Regulations, by knowingly making and keeping, and knowingly making use of, false or misleading employee records; (g) involvement in various of the above contraventions by Mr Chen and Ms Sarah Zhu, and to a lesser extent by Ms Jenna Xu, as proscribed by s 550(1) of the FW Act - the contraventions that they admitted to being involved in, and the precise nature and scope of that accessorial involvement are addressed in more detail below; (2) an order under s 545(1) of the FW Act that New Shanghai Charlestown pay outstanding sums not already paid to employees by reason of the contraventions to the FWO, plus interest, within 60 days of the Court's final orders, with the FWO to pay those sums to the relevant employees who can be located and the balance to the Commonwealth - the outstanding sum involved at the time the amended OA was signed on 20 July 2017 was $126,876.57 out of the total underpayment of entitlements referred to above of $583,688.68; (3) orders that all four respondents pay penalties under s 546(1) of the FW Act for the pleaded contraventions, and to pay those sums to the Commonwealth by a date to be fixed by the Court; and (4) an order that the FWO have liberty to apply on seven days' notice if any of the orders made are not complied with.

Admitted contraventions by New Shanghai Charlestown, Mr Chen and Ms Jenna Xu 12 While no defence was filed by New Shanghai Charlestown, Mr Chen or Ms Jenna Xu, the following key admissions were made in the combined statement of agreed facts: (1) New Shanghai Charlestown admitted to all of the contraventions summarised above. (2) Mr Chen admitted to having been involved in all of the contraventions by New Shanghai Charlestown, except for the failure to make superannuation contributions. By reason of s 550 of the FW Act, he is taken to have contravened: (a) s 45 of the FW Act, by failing to pay, as required under the Award, minimum prescribed adult and junior rates of pay, casual loadings, Saturday, Sunday and public holiday penalty rates and overtime rates; (b) s 45 of the FW Act, by failing to provide an arrangement for ordinary hours of work; (c) s 92 of the FW Act, by cashing out annual leave owed to some full time employees; (d) s 535 of the FW Act, by failing to keep records with the prescribed information; (e) s 536(1) of the FW Act, by failing to give employees payslips within a working day of payment in relation to work; and (f) reg 344(1) and (6) of the FW Regulations, by knowingly making and keeping, and knowingly making use of, false or misleading employee records. (3) Ms Jenna Xu admitted to having been involved in all of the contraventions by New Shanghai Charlestown, except for the contraventions concerning superannuation contributions, cashing out of annual leave, failing to keep records and knowingly making and keeping employee records that were false or misleading. By reason of s 550 of the FW Act, she is therefore taken to have contravened: (a) s 45 of the FW Act, by failing to pay, as required under the Award, minimum prescribed adult and junior rates of pay, casual loadings, Saturday, Sunday and public holiday penalty rates and overtime rates - with the important qualification of only having the necessary knowledge that New Shanghai Charlestown was required to comply with the Award for just over the last five weeks of the Assessment Period, from 12 September 2014 to 20 November 2014; (b) s 45 of the FW Act, by failing to provide an arrangement for ordinary hours of work; (c) s 536 of the FW Act, by failing to give employees payslips within a working day of payment in relation to work; and (d) reg 344(6) of the FW Regulations, by knowingly making use of false or misleading employee records.

Admitted contraventions by Ms Sarah Zhu 13 By the defence that was filed on behalf of Ms Sarah Zhu, and by her statement of agreed facts with the FWO, she admitted to having been involved in the following contraventions by New Shanghai Charlestown and, by the operation of s 550(1) of the FW Act, thereby to having contravened: (1) s 45 of the FW Act, by failing to pay, as required under the Award, minimum prescribed adult and junior rates of pay, casual loadings, Saturday, Sunday and public holiday penalty rates and overtime rates; and (2) reg 3.44(1) of the FW Regulations, by knowingly making and keeping false or misleading employee records.

Agreed facts 14 The following is substantially drawn from the two statements of agreed facts and other documents in evidence. The affidavit evidence and cross-examination at the penalty hearing are addressed separately below. 15 New Shanghai Charlestown was at all material times a "national system employer" within the meaning of s 14 of the FW Act. Its employees were entitled to be paid in accordance with the classifications provided in the Award. 16 For all three natural persons, it was agreed that the conduct by each of them described in the two statements of agreed facts was engaged in on behalf of New Shanghai Charlestown, within the scope of their actual or apparent authority, and with their state of mind taken to be the state of mind of New Shanghai Charlestown. The agreed role of each of the natural person respondents in this context is to be understood in that context, as follows: (1) Mr Chen was the sole director and shareholder of New Shanghai Charlestown. He was responsible for the overall direction, control, management and supervision of New Shanghai Charlestown's operations in relation to the restaurant, including in relation to setting and adjusting the employees' rates of pay and determining wages and conditions of employment. (2) Ms Sarah Zhu was employed by New Shanghai Charlestown as a "human resources manager" with that title. Her duties included payroll and some human resources tasks for the employees at the restaurant. While she held the title of human resources manager in respect of the business conducted by New Shanghai Charlestown, she primarily worked in an office in Chatswood, and was the holder of a 457 Visa sponsored by NSH Restaurant Pty Limited, a related company. She was subject to the direction of, and acted in accordance with the instructions of, Mr Chen and/or Ms Jenna Xu in respect of the hourly rates of pay to be paid to the employees. Her duties included processing payroll and arranging for the payment of wages in respect of the employees, keeping and maintaining records in respect of the employees, and performing, from time-to-time, other human resource functions in respect of New Shanghai Charlestown's business, including preparing some employment contracts and/or position descriptions, drafting some job advertisements for positions, responding to employee enquiries in respect of leave entitlements and advising New Shanghai Charlestown and/or Mr Chen on compliance with industrial obligations, including employee entitlements under the Award. Her admissions to agreed facts did not include any admission as to her state of knowledge other than where that was specifically stated. (3) Ms Jenna Xu was employed by New Shanghai Charlestown in the position of store manager of the restaurant and was responsible for the day-to-day management and day-to-day supervision of the employees during the Assessment Period. She was responsible for setting the hours and days of work for the employees and making certain of the decisions regarding the employment of staff. She did not set pay rates or have authority to do so. 17 During the Assessment Period, namely between 6 July 2013 and 20 November 2014, New Shanghai Charlestown employed 85 staff at the restaurant, consisting of: (1) 40 floor staff; (2) 40 kitchen staff; and (3) five cooks, each of whom were listed in appendices to both statements of agreed facts with reference to relevant details, such as their Award classification, the hourly rates of pay they were in fact paid and the basis upon which they were employed, namely full-time or part-time. The duties of the employees in each of these roles were set out in both statements of agreed facts in some detail, but do not need to be repeated here. 18 New Shanghai Charlestown paid floor staff, kitchen staff and cooks hourly rates that were below the appropriate rate for both adult and junior employees, and failed to pay casual loadings, Saturday penalty rates, Sunday penalty rates and public holiday penalty rates to which employees were entitled. There was a similar failure to pay certain full-time employees overtime rates for each hour worked outside of the spread of hours set out in the Award. The details of all of these breaches were set out in considerable detail in both of the statements of agreed facts, leading to the calculated total underpayment of $583,688.68. 19 New Shanghai Charlestown made and kept records in respect of the employment of its employees which included, in particular, two types of pay and time worked records. The first type of records consisted of what was conveniently referred to as Employer Time Records, a sample of which was annexed to each statement of agreed facts. Those records set out the employee number, employee first name or nickname, and the hours worked on each day of the week. Those time records were created by Ms Jenna Xu at the direction of Mr Chen, based on rosters referred to as "Charlestown staff work time tables". Those rosters, which showed the hours worked by each of the employees, were prepared by Ms Jenna Xu and were not retained by New Shanghai Charlestown. 20 The second type of records consisted of weekly spreadsheets recording the wages paid to staff. These records set out information in columns, including the employee number, employee first name or nickname, the hourly rate, the total weekly hours worked, the gross weekly wages, the amounts paid, the public holiday hours worked and the amounts paid by bank transfer. Those spreadsheets were referred to as Employer Wage Records. A sample of the Employer Wage Records was annexed to each of the statements of agreed facts. The Employer Wage Records were created by Ms Sarah Zhu at the direction of Mr Chen by populating a spreadsheet in electronic form (initially created by Mr Chen) with data supplied by Ms Jenna Xu in the form of the Employer Time Records. In order for New Shanghai Charlestown's payroll to be processed, Ms Jenna Xu sent a copy of the Employer Time Records by email to Ms Sarah Zhu each week during the Assessment Period. That email was copied to Mr Chen. 21 Employee wages were usually paid in cash. Weekly wages were calculated by Ms Sarah Zhu using data from the Employer Time Records to determine the days and hours worked, and thereby the wage for each employee. Ms Sarah Zhu did the calculations using flat hourly rates of pay provided to her by Mr Chen and/or Ms Jenna Xu. Ms Sarah Zhu would place the weekly wage stated in the Employer Wage Records (that is, the spreadsheet populated with data supplied by Ms Jenna Xu in the form of the Employer Time Records) to be paid to each of the employees into an envelope with their name on the front and would provide these envelopes to Mr Chen. Mr Chen would then provide the pay envelopes to Ms Jenna Xu to distribute to the employees. From time-to-time, amounts were paid to some of the employees by bank transfer. Those electronic payments were recorded on the Employer Wage Records. 22 Throughout the Assessment Period, Ms Sarah Zhu knew that the Award applied to the employees. She knew the hourly rates of pay that were paid to each of the employees, the hours that were worked by them during the Assessment Period (because she was informed of this by Ms Jenna Xu) and the days of the week worked by the employees (again, she was informed of this by Ms Jenna Xu). 23 Ms Sarah Zhu also arranged for the advertisement of staff positions at the restaurant, and prepared a contract of employment dated 11 February 2014 and job description on behalf of New Shanghai Charlestown for one employee (and as such, knew the contractual terms that were being used). She advised Mr Chen of the day on which employees were to be paid their wages and was a person responsible for responding to inquiries made by employees about their employment with New Shanghai Charlestown and their conditions of employment. 24 As noted above, during the Assessment Period, Ms Sarah Zhu would receive an email with the Employer Time Records attached and use those records to calculate the weekly pay. She created the Employer Wage Records by entering data into the spreadsheet templates and she placed the cash amounts into the envelopes marked with the employees' names. While processing payroll in that way, she did not take any steps to pay, or ensure that New Shanghai Charlestown paid to any of the employees, amounts sufficient to meet the correct hourly rates, casual loading, Saturday penalty rates, Sunday penalty rates, public holiday penalty rates or overtime rates. 25 In or about July 2013, Ms Sarah Zhu provided advice to New Shanghai Charlestown when she informed Mr Chen that the hourly rates were below those prescribed by the Award. Yet she continued to process payments using the wrong hourly rates and did not take any further steps to ensure that employees were paid in accordance with New Shanghai Charlestown's obligations under the FW Act. 26 In or around April 2014, Ms Sarah Zhu became aware of a complaint made by an employee of New Shanghai Charlestown in respect of wages paid to her by the company. The complaint had not been made to Ms Sarah Zhu. After becoming aware of the complaint, Ms Sarah Zhu did not take any steps to ensure that New Shanghai Charlestown was complying with its obligations under the FW Act and/or the Award in respect of the payment of wages to its employees. 27 At the direction of Mr Chen, Ms Sarah Zhu created the false records, including by conducting online research and obtaining information on the day-to-day duties of individual employees from Ms Jenna Xu. Ms Sarah Zhu knew at the time that the false records were created that they did not accurately record the hours worked or amounts paid to the employees. She admitted that, by way of acts or omissions, she aided and abetted, or was directly or indirectly knowingly concerned or party to, those contraventions of New Shanghai Charlestown referred to at [13] above. She accepted that she was taken to have contravened each of the corresponding provisions that New Shanghai Charlestown had admitted to contravening. 28 Mr Chen admitted that at all material times, he was a person who made decisions on behalf of New Shanghai Charlestown regarding the basis upon which persons engaged to perform work for New Shanghai Charlestown would be engaged, including whether they would be full-time, part-time or casual, and the terms and conditions on which they would be engaged. This included the amount that each employee would be paid for each hour worked. He was a person with knowledge of, and experience in, the restaurant industry in Australia, in that he had operated a chain of at least seven restaurants since at least 2010. He was the person to whom Ms Sarah Zhu and Ms Jenna Xu reported and he knew that the Award applied to the employees during the Assessment Period. 29 Mr Chen knew that the trading hours of the restaurant were from approximately 11.00 am to 9.00 pm seven days per week, including public holidays. He knew the hours worked by the employees and the duties required to be performed by each of them and he knew about New Shanghai Charlestown's practice of cashing out annual leave for some of the employees. He knew that New Shanghai Charlestown did not provide payslips to the employees and was aware of the basis upon which the employees were engaged by New Shanghai Charlestown. He was aware of the hourly rates of pay paid by New Shanghai Charlestown to each of the employees during their employment periods and, in consultation with Ms Jenna Xu, determined the base hourly rates of pay to be paid to each of them during their employment periods. 30 Together with Ms Jenna Xu, Mr Chen directed Ms Sarah Zhu as to the hourly rate of pay to be paid to each of the employees during their employment periods, and was aware that New Shanghai Charlestown did not keep employment records which specified, as required, the employer's name, the employees' name, whether the employee was full-time or part-time, whether the employee was permanent, temporary or casual, the date on which employment began, the gross and net amounts paid to each employee, the number of overtime hours worked by an employee during each day, when the employee started and ceased working overtime hours and whether a penalty rate or loading was also required to be paid for overtime hours actually worked. 31 Mr Chen admitted that, by his acts or omissions, he aided and abetted, counselled or procured, or was directly or indirectly knowingly concerned in or party to the contraventions of New Shanghai Charlestown as detailed above. He accepted that, by reason of his involvement, he is taken to having himself contravened each of the provisions of the FW Act that New Shanghai Charlestown contravened (except as to superannuation). Mr Chen also admitted to his role in causing the false or misleading records to be created and provided in response to the FWO notice to produce, accepting that he was relevantly involved in those contraventions and was thereby to be treated as having contravened reg 3.44 (1) and (6) of the FW Regulations. 32 Ms Jenna Xu was aware of the duties performed by each of the employees and provided direction to them on the nature and scope of those duties. She was aware of the basis upon which the employees were engaged by New Shanghai Charlestown, and she set the hours of work for each of the employees during their employment periods. She created the rosters and Employer Time Records. She sent emails to Mr Chen and Ms Sarah Zhu attaching the Employer Time Records each week to enable weekly wages for the employees to be processed. She knew that the trading hours of the restaurant were from approximately 11.00 am to 9.00 pm, seven days per week, including public holidays. She was aware of the hourly rates paid by New Shanghai Charlestown to each of the employees during their employment periods and assisted and/or was consulted by Mr Chen in the determination of the base hourly rates of pay to be paid to each of the employees. 33 Together with Mr Chen, from time to time Ms Jenna Xu would inform Ms Sarah Zhu as to the hourly rates of pay to be paid to each of the employees, as agreed to by Mr Chen during their respective employment periods. Ms Jenna Xu was the person who paid the employees amounts in cash for performing work by distributing envelopes with cash amounts inside them that were provided to her by Mr Chen. She was aware that full-time employees did not take periods of annual leave and she did not provide payslips to the employees. 34 From at least 12 September 2014, being the day after the FWO notice to produce was issued, Ms Jenna Xu knew that New Shanghai Charlestown was required to comply with the Award in relation to the terms and conditions of employment of the employees. She accepted that by her acts or omissions she aided and abetted, and was directly or indirectly knowingly concerned or involved in or party to, each of those contraventions alleged against New Shanghai Charlestown that have been identified at [12(3)] above. She accepted that she was to be treated as having herself contravened each of those provisions. 35 As to the creation and provision of false or misleading records, Ms Jenna Xu admitted that, at the direction of Mr Chen, she had provided information to Ms Sarah Zhu to assist in the creation of the false records. She was provided with those false records by Mr Chen and was directed by him to produce those records to the FWO, which she did. She knew at the time they were so produced, on about 29 September 2014, that they did not accurately record the hours worked, gross and net amounts paid, and penalty rates paid during the specified period. That is, she knew that the records created and produced were false. She again accepted accessorial liability and her being treated as having committed a contravention of reg 3.44(6) by having made use of the false records.

The required approach to imposing civil penalties 36 The written submissions in chief for the FWO helpfully outlined the approach that should be taken in determining the appropriate penalty, there being no dissent between the parties at this level of principle. Five steps were described as follows (with some adjustment of expression): (1) Identify the separate contraventions, with each breach of each obligation being a separate contravention, and each breach of a term of the Award being a separate contravention. (2) Consider whether each separate contravention should be dealt with independently or with some degree of aggregation for those contraventions arising out of a course of conduct, noting that s 557 of the FW Act provides that two or more contraventions of a given civil remedy provision are to be taken to be a single contravention if committed by the same person and arising out of a course of conduct by that person. (3) Consider whether there should be further adjustment to ensure that, to the extent of any overlap between groups of separate aggregated contraventions, there is no double penalty imposed, and that the penalty is an appropriate response to what each respondent did. (4) Consider the appropriate penalty in respect of each final individual group of contraventions, taken in isolation. (5) Consider the overall penalties arrived at, including by reference to those which may be proposed by the FWO (as permitted by Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46; 258 CLR 482 (CFMEU Civil Penalties Case) at [64]) and what is proposed by the respondents, and apply the totality principle, to ensure that the penalties for each respondent are appropriate and proportionate to the conduct viewed as a whole, making such adjustments as are necessary: see Kelly v Fitzpatrick [2007] FCA 1080; 166 IR 14 at [30]; Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8; 165 FCR 560 at [23]. [71] and [102]. 37 The FWO's submissions addressed each of the five steps. In these reasons, the first two steps are addressed immediately below, as there was no dispute about the approach taken by the FWO in relation to each of them. The remaining three steps are addressed in the context of the competing submissions as to the outcome they should produce.

The first two steps: identification and grouping of contraventions under s 557(1) of the FW Act and adjusting for any overlap 38 Section 557(1) of the FW Act provides as follows: 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. 39 Following Rocky Holdings Pty Ltd v Fair Work Ombudsman [2014] FCAFC 62; 221 FCR 153, the phrase "civil remedy provision" in s 557 does not refer to ss 44(1) and 45 of the FW Act, but rather to "a provision" of the National Employment Standards or "a term" of a modern award. What is required is a focus on the substance of the particular obligation creating provisions, and "grouping" them accordingly to produce a rational outcome: Rocky Holdings at [23], [26]. This process of grouping is analogous to the criminal law concept of "rolled up" charges and can produce a considerable degree of leniency in the penalty determination process, albeit that the process is mandated by statute: cf R v Glynatsis [2013] NSWCCA 131; 230 A Crim R 99 at [65]-[66]. 40 The FWO's submissions identified 20 discrete types of contraventions by New Shanghai Charlestown that had been "grouped" by reference to s 557(1). Those 20 types were in turn further reduced to 13 discrete types of contraventions to overcome a degree of overlapping between closely associated but nominally separate contraventions. Each of these contraventions involved multiple acts over time. The final figure of 13 distinct contraventions following grouping, not disputed by the respondents, was arrived at as follows: (1) There were 12 different types of breaches of s 45 of the FW Act referrable to particular Award payment obligations that had not been observed. Those 12 types of breaches were made up of breaches of two different Award provisions for each of the six categories of underpayment, being adult minimum rates, junior minimum rates, casual loadings, Saturday penalty rates, Sunday penalty rates and public holiday penalty rates. By grouping the two different kinds of Award provisions so as to count as one contravention each, and by further grouping the adult and junior rates to count as a single contravention, there was a single group of contraventions for underpayment in respect of each of the following five categories: (a) adult and junior minimum rates; (b) casual loadings; (c) Saturday penalty rates; (d) Sunday penalty rates; and (e) public holiday penalty rates. The maximum penalty for each those five groups of contraventions was $51,000 for New Shanghai Charlestown and $10,200 for each natural person accessory. (5) There were a further three different kinds of breaches of s 45 of the FW Act referable to further award obligations that had not been observed. These were breaches of Award provisions for: (a) the payment of overtime rates; (b) the payment of superannuation; and (c) the arrangement of ordinary hours for employees (that is, a minimum of eight full days off work per four week period). Again, the maximum penalty for each of those three groups of contraventions was $51,000 for New Shanghai Charlestown and $10,200 for each natural person accessory. (6) There were contraventions of s 44 of the FW Act for illegally cashing out annual leave for full-time workers which were aggregated as a single contravention. Again, the maximum penalty for this contravention as grouped was $51,000 for New Shanghai Charlestown and $10,200 for each natural person accessory. (7) There were contraventions of s 536(1) of the FW Act, by failing to provide payslips, which were aggregated as a single contravention. The maximum penalty for this contravention as grouped was $25,500 for New Shanghai Charlestown and $5,100 for each natural person accessory. (8) There was a contravention of reg 3.33 of the FW Regulations for failing to keep records as required. The maximum penalty for this contravention as grouped was $25,500 for New Shanghai Charlestown and $5,100 for each natural person accessory. (9) There were two types of contraventions of reg 3.44(1) and (6) of the FW Regulations for creating and making use of false records respectively. The maximum penalty for each contravention was $17,000 for New Shanghai Charlestown and $3,400 for each natural person accessory.

The third, fourth and fifth steps 41 As noted above, the third step of considering any further adjustment to avoid double penalties, and the fourth and fifth steps as to determination of individual penalties and consideration of the totality principle, are addressed below in the context of the evidence and competing submissions.

Penalties sought by the FWO and the alternative penalties sought by the respondents 42 The written submissions in chief for the FWO annexed a table setting out the maximum penalties for each provision that had been contravened, and a further table setting out the penalties sought for each respondent by reference to the nature of the contravention, a grouping of contraventions, the maximum penalty for each group of contraventions, the maximum penalty after a 20% discount for cooperation, and a range of asserted appropriate penalties as a percentage of the maximum after the cooperation discount. The ranges proposed were as follows: FWO suggested range: Bottom Top New Shanghai Charlestown $258,400 $301,920 Mr Chen $46,784 $54,672 Ms Sarah Zhu $16,592 $21,760 Ms Jenna Xu $18,224 $23,800 Overall total: $340,000 $402,152

43 It may be observed that the combined top of the penalty ranges proposed by the FWO of $402,152 is just over two-thirds of the total underpayment of entitlements of $583,688.68. The combined bottom of the penalty ranges proposed by the FWO of $340,000 is below 60% of the total underpayment of entitlements. On that measure at least, the FWO could not be accused of being heavy-handed or over-zealous in the range it proposed. 44 The Court is not bound by a specific penalty agreed between parties to civil penalty proceedings, but should not depart from it without giving the parties an opportunity to be heard, not least because it may have been a basis for agreement in the first place, including as to the fact and scope of liability: CFMEU Civil Penalties Case at [47], endorsing the Full Court in NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 at 291B, discussed further below at [118]. Logically, the same reasoning and principles and therefore practice should apply to agreed penalty ranges as does where a single figure penalty has been agreed to, in that the Court should not depart from the range that has been agreed - either by going above or below that agreed range - without giving the parties an opportunity to be heard. 45 In the case of a penalty proposed only by a regulator, that is, without agreement being reached, as a matter of judicial restraint and overall fairness to respondents in knowing what is sought against them and being able to respond (including deciding whether to respond), the Court generally should not exceed the regulator's unilaterally proposed maximum penalty, or the top of a proposed penalty range: see Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd [2016] FCAFC 181; 340 ALR 25 at [178]. There should not necessarily be any corresponding restraint on the Court imposing a penalty below the regulator's unilaterally proposed penalty or penalty range when that is considered appropriate, even if that has not been specifically sought by a respondent. The minimum, if not agreed, is no more than a bare submission, albeit influential and not to be ignored. 46 Considered with the FWO's oral and written submissions, the FWO's table helpfully elucidated the regulator's stance. Based on a discounted maximum penalty of 80% of the statutory maximum by reason of the 20% discount for cooperation, the FWO proposed penalty ranges for the different types of conduct by each of the respondents, being as much as 80-90% of the discounted maximum, and as little as 30-40% of the discounted maximum. Corresponding tables were furnished on behalf of each of the respondents in their written submissions and were also of great assistance in clearly understanding the stance taken by each orally and in writing. Those schedules and the corresponding submissions are considered in greater detail below. 47 The submissions of each of the respondents on the approach that should be taken to deciding upon the quantum of the penalties to be imposed can be summarised as follows: (1) On behalf of New Shanghai Charlestown, it was submitted that the penalties imposed should be at the lower end of the FWO's range of $258,400 to $301,920, taking into account the company's corrective action, the contrition demonstrated by its sole director, and the evidence of further compliance training and monitoring. The suggested 20% discount for cooperation was agreed to. The penalty to be imposed will need to fall within the FWO's proposed range in the absence of any further submissions being sought. (2) On behalf of Mr Chen, it was submitted that imposing separate penalties on him in addition to the penalties that New Shanghai Charlestown will be ordered to pay would be to, in effect, penalise Mr Chen twice for the same conduct, having regard to his ownership of New Shanghai Charlestown. He therefore submitted that he should not be directly penalised financially at all, an outcome strongly opposed by the FWO. As there was no agreement on the penalty to be imposed on Mr Chen, this Court's independent assessment as to whether the proposal of no direct sanction whatsoever on Mr Chen was required by law, or was otherwise appropriate, is constrained only by the maximum penalty sought against Mr Chen by the FWO in the absence of seeking further submissions. With that restraint being exercised, no further submissions are required to be sought. (3) On behalf of Ms Sarah Zhu, it was submitted that the total penalties imposed on her should be $10,470, compared to the FWO's proposed range of $16,592 to $21,760, on the basis that the FWO had overstated her involvement in and culpability for the contraventions compared to Mr Chen and Ms Jenna Xu. She submitted that a cooperation discount of 25% was appropriate, as opposed to the 20% discount suggested by the FWO. As with Mr Chen, in the absence of agreement on the penalty to be imposed, this Court's independent assessment is constrained only by the maximum penalty sought by the FWO in the absence of seeking further submissions. With that restraint being exercised, no further submissions are required to be sought. (4) On behalf of Ms Jenna Xu, it was submitted that only a very modest penalty should be imposed, reflecting Ms Xu's limited knowledge of employee entitlements until the time of the 11 September 2014 FWO notice to produce, her language skills and background, her "narrow" role in the conduct, and the small timeframe for which accessorial liability attaches to her. She agreed with the cooperation discount of 20% proposed by the FWO, but submitted that the total penalty imposed on her should be 5% of the discounted maximum, being a total of $4,148, rather than a figure in the range suggested by the FWO of between $18,224 and $23,800, arrived at by the application of a range of 30-40% of the discounted maximum for the underpayments and 70-80% of the discounted maximum for creating the false or misleading records. As with Mr Chen and Ms Sarah Zhu, in the absence of agreement on the penalty to be imposed, this Court's independent assessment is constrained only by the maximum penalty sought by the FWO in the absence of seeking further submissions. With that restraint being exercised, no further submissions are required to be sought. 48 If the submissions for the respondents were accepted in full, the total penalty imposed on all four respondents would be $273,018, compared to the FWO's suggested range of $340,000 to $402,152. The respondents' combined proposed total penalty would be comfortably less than 50% of the underpayment of entitlements to the 85 employees of $583,688.68 during a period of just over 16 months between 6 July 2013 and 20 November 2014. Given this disparity between the position of the FWO and the respondents, careful consideration of the competing arguments and evidence relied upon for those submissions is required, starting with the additional evidence in the context of the agreed facts outlined above.

Affidavit and oral evidence of Mr Chen (second respondent) 49 Mr Chen gave both affidavit and oral evidence. His evidence has been set out in general categories below.

Mr Chen's business experience 50 Mr Chen holds a Bachelor of Engineering and a Master of Business Industry. He gave evidence that he started working in the restaurant industry in July 2009 to help out his parents, who owned a restaurant. 51 In cross-examination by counsel for the FWO, Mr Chen gave evidence of his involvement to varying degrees since 2009 in the running of other restaurants that operate under the name "New Shanghai". In particular, Mr Chen indicated that between June 2009 and 27 October 2011, he had been a director of NSH Restaurant Proprietary Limited, which operates a restaurant in Chatswood Chase. He gave evidence that his wife has replaced him as the director of that company. He accepted that he maintains an active involvement in the running of the business. Mr Chen also indicated that since January 2010, he has been the director and secretary of NSH Food Manufacturing Pty Limited, a company which provides semi-prepared food to the various "New Shanghai" restaurants.

Mr Chen's evidence as to Ms Sarah Zhu's responsibilities 52 Mr Chen was asked a number of questions in cross-examination as to the nature and scope of Ms Sarah Zhu's responsibilities in the business of New Shanghai Charlestown and other "New Shanghai" businesses. He accepted that he was the sole person giving Ms Sarah Zhu instructions and directions on how to perform her job. He accepted that Ms Sarah Zhu's position as human resources manager primarily entailed responsibilities as to "payroll", "super" and "workers' compensation", in effect being evidence that her true role was more limited than her title of "human resources manager" might suggest. He indicated that Ms Sarah Zhu provides that assistance to "all the restaurants", being New Shanghai Charlestown, two restaurants in Chatswood, one restaurant in Ashfield, two restaurants in Brisbane and two restaurants in Melbourne.

Understanding of the seriousness of Mr Chen's conduct 53 It was Mr Chen's evidence that he did not fully appreciate the serious nature of his actions until he engaged specialist employment lawyers in November 2014, which was said to be the first time that he had received specialist employment law advice. In cross-examination, Mr Chen accepted that he had received some legal advice around November 2011 in relation to a complaint received by the FWO from one of his employees. Mr Chen said that this legal advice was brief and not very specialised. 54 Mr Chen also accepted that New Shanghai Charlestown had been the subject of a complaint by another employee to the FWO in April 2014, which had put him on notice of his failure to pay proper wages, including overtime and penalties, and to provide the employee with pay slips. Mr Chen accepted that he had been informed by the FWO of the seriousness of his conduct in relation to that employee, but had not taken any corrective action to ensure that all current employees thereafter received their minimum entitlements.

Mr Chen's contrition 55 Mr Chen made a number of statements accepting responsibility for the contraventions of workplace laws by New Shanghai Charlestown. He said that his actions were very serious and that he regrets what he had done. He said that he apologises unreservedly and publicly to the staff who have been affected by his actions. While acknowledging the seriousness of the contraventions, he said that fear and panic had contributed to his wrongful actions. He believed that trying to deal with the matter himself, without the assistance of lawyers, may have contributed to the serious mistakes he made.

Rectification by New Shanghai Charlestown and Mr Chen 56 Mr Chen gave evidence that he had taken a number of steps, detailed in his affidavit, to rectify his and New Shanghai Charlestown's contraventions of the FW Act. He indicated that, after engaging specialist employment lawyers in November 2014, he promptly provided the correct employee records and all documents sought by the FWO. He gave evidence that New Shanghai Charlestown had rectified, as at 3 March 2017, all underpayments that were the subject of these proceedings in respect of all employees it had been able to locate. He gave evidence of the steps he had caused to be taken to locate the 39 or so employees who had not been paid their outstanding entitlements. He gave evidence that to ensure payment of staff at the correct rate, he had adjusted the prices on the restaurant's menu, ensured a dividend was not declared by the company, and directed that 100% of his wage derived from New Shanghai Charlestown be applied to meet the underpayment obligations, to the effect that he had not received any income from the company between July 2015 and March 2017. 57 Mr Chen also gave evidence that he had received training from his lawyers on the National Employment Standards, the Award, and employer obligations under the FW Act. He indicated that he planned to undertake further training in the near future on termination of employment, unfair dismissal and general protections. 58 In cross-examination, Mr Chen accepted that New Shanghai Charlestown had benefitted from the delay in paying the outstanding entitlements to its employees. Mr Chen also accepted that the company had benefited from the contraventions by reason of the fact that $126,000 of entitlements remained outstanding to those employees who could not be located. Mr Chen accepted that his conduct showed a preparedness to create false documents to serve his own interests.

Affidavit and oral evidence of Ms Sarah Zhu (third respondent) 59 Ms Sarah Zhu gave both affidavit and oral evidence supplementary to her statement of agreed facts. That evidence has been set out under the topic headings below.

Circumstances surrounding Ms Sarah Zhu's involvement in the contraventions 60 In large part, Ms Sarah Zhu's supplementary evidence concerned further detail as to the circumstances surrounding her involvement in the contraventions. She gave evidence that her parents and Mr Chen's parents-in-law were friends, and that she had been offered the role of human resources manager with NSH Restaurant Pty Limited due to that family connection. She commenced that role on 7 November 2012. She gave evidence that as part of her employment, Mr Chen had offered and agreed for NSH Restaurant Pty Limited to take over the sponsorship of her 457 visa. Mr Chen's wife was the director of that company. 61 Ms Sarah Zhu gave evidence that she was obedient to Mr Chen because he was her boss, and that defiance of the boss by a junior employee is not tolerated in the Chinese culture in which she was raised. She suggested that it would bring shame on her family if she was disrespectful to Mr Chen. She said that she was mindful that her residential visa status was dependent on her continuing employment with NSH Restaurant Pty Limited. 62 Ms Sarah Zhu's evidence was that she had no role in the operational or day-to-day management of the New Shanghai Charlestown, and carried out her duties from an office in Chatswood. She gave evidence that she had no role in the hiring or firing of employees, the classification of employees or the duties they were assigned at the restaurant. She said that this was done by Ms Jenna Xu. She said that she had no role in setting the rates of pay, this being done by Mr Chen and Ms Jenna Xu. 63 Consistently with her statements of agreed facts, Ms Sarah Zhu's evidence was that her payroll functions were undertaken using Excel spreadsheets that had been provided to her by Mr Chen. She gave evidence that Mr Chen had told her that he had inserted all the formulae for calculating wages and holiday entitlements in the spreadsheets, and that she was to enter the data of hours worked each week by the employees, as sent to her by Ms Jenna Xu. She said that during the contravention period, Ms Jenna Xu would provide her with a document each week containing the name, employee number and the hours worked by each employee, which were to be entered into the spreadsheet. She gave evidence that Mr Chen had given her the direction, which she complied with, to issue payslips only if an employee asked for them. 64 In her affidavit evidence, Ms Sarah Zhu sought to provide further detail of the conversation, identified at [106] of her statement of agreed facts, in which she advised Mr Chen that the hourly rates being paid to the employees were below the prescribed Award. In Ms Sarah Zhu's account, she said, "You need to pay the proper amount pursuant to the Award. You are legally required to do so". Her evidence was that Mr Chen said, "I will talk no more about this. You will do the payroll as I have told you". 65 In cross-examination by counsel for the FWO, Ms Sarah Zhu accepted that she had been aware of the Award and the correct rates of pay to be paid to employees prior to the contravention period. It was put to her that she could have reported the underpayment and other issues to the FWO herself. She said that she had never thought about it. In further cross-examination by counsel for the FWO, Ms Sarah Zhu accepted the proposition that her conduct showed a preparedness to breach Australian law in circumstances where it suited her own interests. 66 In cross-examination by counsel for the first and second respondents, Ms Sarah Zhu accepted that her concern about having to leave the country in the event that she were to lose her job was one that she had formed on her own, without Mr Chen having said anything of the kind to her. She accepted that Mr Chen had at no stage threatened her visa status or her sponsorship.

Ms Sarah Zhu's involvement in the creation of false records, including a prior telephone conversation 67 Ms Sarah Zhu gave evidence in relation to a phone conversation which was said to have taken place between her and Ms Jenna Xu prior to Ms Xu meeting with the FWO on 12 September 2014. This was not a matter that was detailed in the statements of agreed facts. Undoubtedly, this evidence was responsive to an assertion made by Ms Jenna Xu in her affidavit that Ms Zhu had called her prior to the meeting and suggested answers to questions that might be asked by the Fair Work Inspector. 68 Ms Sarah Zhu's evidence was that Ms Jenna Xu had called her and told her about the upcoming interview with the Fair Work Inspector. Ms Sarah Zhu said that she told Ms Jenna Xu to be honest and cooperative. She accepted in cross-examination by counsel for the FWO that after this conversation in September 2014, she was involved in the creation of false records. Ms Zhu said that her conduct in this regard was "stupid". It is unclear as to whether this reflected regret in having participated, or merely regret in having been caught. Either way, it does not amount to any meaningful mitigation. 69 Ms Sarah Zhu gave evidence by her affidavit that Mr Chen had directed her to create the false time and wage records for production to the FWO, and that she had said to Mr Chen "I don't think we should do that", to which he responded "Just do what I say". She said that Ms Jenna Xu told her what to put in for the dates and hours worked and that she searched online for the relevant rates of pay.

Ms Sarah Zhu's contrition 70 By way of her affidavit evidence, Ms Zhu said that she was truly sorry for her role in the contraventions, accepting that employees had been deprived their correct wages and entitlements. She said that she was under the belief that she had to adhere to the directions given by her boss, Mr Chen. She said that she obeyed Mr Chen because of the connection between their families, her junior role in the company, his position as her boss, and because she wanted to keep her job, as her right to stay in Australia depended on it. She acknowledged that she should not have obeyed his directions.

Affidavit and oral evidence of Ms Jenna Xu (fourth respondent) 71 Ms Jenna Xu gave affidavit and oral evidence with the assistance of a mandarin interpreter. A summary of her evidence is set out under the headings below.

Potential inconsistencies between Ms Jenna Xu's evidence and the combined statement of agreed facts 72 In her affidavit and oral evidence, Ms Jenna Xu made several assertions that appeared to be inconsistent to varying degrees with the events described in the combined statement of agreed facts. When asked in cross-examination why she had agreed to that document in light of her apparently inconsistent evidence, she said that she hadn't paid attention to the details and now wished to tell "the whole truth". Three key inconsistencies warrant individual consideration. 73 First, Ms Jenna Xu denied, at least to some extent, her involvement in setting the rates of pay in the Excel spreadsheet used to create the actual time and wage records for the employees. This was potentially inconsistent with [143(i)] of the combined statement of agreed facts, where it was said that she "assisted, and/or was consulted by the Second Respondent in the determination of the base hourly rates of pay paid to each of the Employees during their respective Employment Periods". This was also inconsistent with Ms Sarah Zhu's evidence on affidavit that the rates of pay for employees were set by Mr Chen and Ms Jenna Xu. In cross-examination, Ms Jenna Xu conceded that she had been consulted by Mr Chen and assisted him, but only in setting the rates of pay for a limited number of cooks or chefs. She said that she hadn't paid attention to the details of the combined statement of agreed facts, and disagreed with it to the extent that it suggested she was involved in setting the rates of pay in respect of each employee. 74 Second, Ms Jenna Xu denied the accuracy of [147(1)] of the combined statement of agreed facts, where it was stated that she had "provided information in respect of the duties of the [relevant employees] to [Ms Sarah Zhou] to assist in the creation of [the false records]". By way of affidavit, she said that: The time and salary records provided by [New Shanghai Charlestown] to the [FWO] in relation to the First Notice to Produce were initially provided by [Ms Sarah Zhu] to me. [Ms Sarah Zhu] provided me with a template and asked me to complete the rest of the records according to that template. I sent the records I completed back to [Ms Sarah Zhu], after which I received a phone call from [Mr Chen], asking me to complete the records in the way [Ms Sarah Zhu] had asked me. 75 These assertions, which were repeated in cross-examination, were also inconsistent with the affidavit evidence of the third respondent, Ms Sarah Zhu, that Ms Jenna Xu had "told [Ms Sarah Zhu] what to put in for the dates and hours worked" in creating the false records. 76 Third, Ms Jenna Xu gave evidence both in her affidavit and in cross-examination that she had provided the false time and salary records to the FWO at the direction of Mr Chen and Ms Sarah Zhu. This was inconsistent with the position detailed at [148] of the combined statement of agreed facts and [98] of her statement of agreed facts that the documents were produced at the direction of Mr Chen only. 77 It should be noted that in an affidavit made on 24 April 2017, which was styled as a "supplement" to the combined statement of agreed facts, Ms Jenna Xu, somewhat inconsistently, made the following statement at [15] as to her involvement in the falsification of records given to the FWO (emphasis added): I accept that the manipulation of the records which I gave to the Fair Work Ombudsman inspector was wrong. I did it because I thought it would help [New Shanghai Charlestown] pass the inspection and after that [New Shanghai Charlestown] would make the changes necessary to comply with the Law. I did not understand the consequences of my actions. I did this on my own. I was not asked to do it by anybody. 78 That statement was "clarified" by Ms Jenna Xu by way of a further statement in an affidavit made on 26 June 2017, as follows: I refer to paragraph 15 of my affidavit of 24 April 2017. [Mr Chen and Ms Sarah Zhu] directed me to deliver the records to the Fair Work Inspector. [Ms Sarah Zhu] printed the documents which she arranged to deliver to me and then asked me to deliver to the Fair Work Inspector. After I delivered the documents, [Mr Chen and Ms Sarah Zhu] called me to check that I had done as they requested. I refer to the last two sentences of paragraph 15 of my affidavit of my affidavit of 24 April 2017. In those sentences I wanted to convey that I fully accepted my wrongdoing. I was trying to show my unconditional acceptance of my wrongdoing, however, the details in the preceding paragraph of this affidavit are what actually occurred. 79 Ms Jenna Xu's oral evidence at the hearing was consistent with the position in her 26 June 2017 affidavit.

Ms Jenna Xu's involvement in the creation of false records 80 In her affidavit evidence, Ms Jenna Xu referred to having received a phone call from Ms Sarah Xu prior to the first visit by the Fair Work Inspector. This was a matter that had not been addressed in the statements of agreed facts. In Ms Jenna Xu's account of the phone conversation, Ms Sarah Zhu had suggested answers to possible questions that might be asked by the inspector. In cross-examination, Ms Zhu said that those suggested answers included advice on "the minimum rates", and the rates for Saturdays, Sundays and public holidays. 81 In cross-examination by counsel for the third respondent, Ms Jenna Xu denied the proposition that Ms Sarah Zhu had told her to tell the truth and to give truthful answers to the Fair Work Inspector. Similarly, Ms Jenna Xu did not agree that Ms Sarah Zhu had not suggested answers to give to the Fair Work Inspector. In light of the conclusions reached about Ms Sarah Zhu's evidence on this topic at [68] above, nothing turns on this disputed evidence and, accordingly, resolution as to who is telling the truth, were that possible, is not required. 82 In cross-examination by counsel for the FWO, Ms Jenna Xu was asked about the 29 letters of offer to restaurant employees that were among the false documents provided to the FWO in response to the first notice to produce. Ms Jenna Xu accepted that she signed each of those letters knowing that they were not letters that had been previously provided to employees. Ms Jenna Xu denied having signed the documents on behalf of the relevant employees. She said that Ms Sarah Zhu had provided her with printed copies of the documents and asked her to ask the employees to sign them. She said that she had presented the documents to the employees and asked them to sign them, knowing that the information in the documents was false.

The effect of s 191 of the Evidence Act on Ms Jenna Xu's additional evidence 83 The Court raised at the penalty hearing the proposition that, to the extent that Ms Jenna Xu's evidence contradicted or qualified an agreed fact, she would require leave of the Court under s 191 of the Evidence Act 1995 (Cth) to adduce it. No such leave was sought. Instead, it was submitted on Ms Xu's behalf that her evidence in cross-examination was consistent with the combined statement of agreed facts. For the reasons that follow, I do not accept that certain aspects of that additional evidence were consistent with the combined statement of facts. To that extent, the question of granting leave to rely upon that additional evidence must be determined. 84 The relevant assertions by Ms Jenna Xu in her additional evidence may be summarised as follows: (1) First, that Ms Jenna Xu was only involved in the setting of rates of pay during the contravention period in respect of a limited number of employees. (2) Second, that Ms Jenna Xu did not provide the employee information to Ms Sarah Zhu for Ms Zhu to create the false records, but rather was directed by Ms Zhu to complete the false records using a template that she provided; and (3) Third, that Ms Jenna Xu was directed by both Mr Chen and Ms Sarah Zhu to provide the false records to the FWO. 85 As to the first assertion, concerning Ms Jenna Xu's involvement in the setting of rates of pay for a limited number of employees, this evidence was not necessarily inconsistent with the combined statement of agreed facts on this point. It does, however, entail Ms Jenna Xu downplaying her involvement in the contraventions, as does much of her evidence. In the end result, it does not make a great deal of difference, as it does not in any meaningful way mitigate her involvement in the creation and production of the false records, having regard to her knowledge of the nature of the illegality by the time that she participated in the efforts to cover it up. Leave to adduce that evidence should be and hereby is given, but little weight should be given to it. The real weight comes from the limited scope of her admission in the combined agreed statement of facts as to awareness of the Award obligations until the time of the service of the FWO notice to produce. 86 As to the second assertion, the mechanics of how precisely the false records were created - undeniably to deceive the FWO - are of much less significance than the combination of efforts on the part of Mr Chen, Ms Jenna Xu and Ms Sarah Zhu to achieve that objective. Plainly, Mr Chen was the primary directing mind, and both women were subordinate to him in this illegal activity. Ms Xu either provided the false information in a document, or put that information herself in the template for provision to the FWO. In both instances, she knew it was for the purpose of creating false records to give to the FWO. Again, leave to adduce that evidence should be and hereby is given, but little weight should be given to it. 87 The third assertion is of a kind that ideally should not have been adduced without leave first being sought and granted, although this is not intended as a criticism of Ms Jenna Xu's legal representatives. This was a conclusion arrived at after careful consideration, and to an extent with the benefit of hindsight. However, such leave should be refused. The combined statement of agreed facts clearly attributes responsibility solely to Mr Chen for directing that the false records be provided. That makes more sense in the circumstances and in the context of all the material before the Court. In any event, to the extent that Ms Sarah Zhu may have told Ms Jenna Xu to provide the records, it may be doubted that this would have been conveyed in the authoritative manner of a direction, but rather more in the manner of passing on or expressing what Mr Chen required to take place.

Ms Jenna Xu's contrition 88 Ms Jenna Xu said that she was very sorry for her involvement in the events giving rise to these proceedings. She said that, at the company's direction, she has done everything in her capacity to ensure that the employees are paid in accordance with the Award. She detailed the steps she has taken to locate staff members who have left employment with the restaurant. She gave evidence that Mr Chen and Ms Sarah Xu have provided her with Fair Work guides in relation to employment obligations, and that she has made an effort to learn the information in those documents.

Civil penalty assessment principles 89 The key principles in relation to the fixing of civil penalties have been stated with clarity by the High Court in the CFMEU Civil Penalties Case at [55]: ... whereas criminal penalties import notions of retribution and rehabilitation, the purpose of a civil penalty, as French J explained in Trade Practices Commission v CSR Ltd [(1991) ATPR 41-076 at 52,152], 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." 90 The CFMEU Civil Penalties Case, and a number of other authorities concerning civil penalty determination principles that are directly relevant to this case, were succinctly summarised in a Full Court decision handed down a week after judgment in this case was reserved, and that summary cannot be improved upon. In that decision, Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union [2017] FCAFC 113 (Queensland Children's Hospital case), the following was said: General principles 98 Whereas criminal penalties import notions of retribution and rehabilitation, the purpose of a civil penalty is primarily, if not wholly, protective in promoting the public interest in compliance: Trade Practices Commission v CSR Ltd [1990] FCA 521; (1991) ATPR 41-076 at 52,152 [42]; Commonwealth v Director, FWBII at [55] (per French CJ, Kiefel, Bell, Nettle and Gordon JJ). The principal object of a pecuniary penalty 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; both specific and general deterrence are important: Chemeq at [90]; Ponzio at [93]. A pecuniary penalty for a contravention of the law must be fixed with a view to ensuring that the penalty is not to be regarded by the offender or others as an acceptable cost of doing business: Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640 at 659 [66]; Singtel Optus Pty Ltd v Australian Competition and Consumer Commission [2012] FCAFC 20; (2012) 287 ALR 249 at 265 [62]-[63]. In relation to general deterrence, it is important to send a message that contraventions of the sort under consideration are serious and not acceptable: Australian Securities and Investments Commission v Southcorp Ltd (No 2) (2003) 130 FCR 406 at 418 [32]. … 100 The fixing of a pecuniary penalty involves the identification and balancing of all the factors relevant to the contravention and the circumstances of the defendant, and making a value judgment as to what is the appropriate penalty in light of the protective and deterrent purpose of a pecuniary penalty. While there may be differences between the criminal sentencing process and the process of fixing a pecuniary penalty (cf. Commonwealth v Director, FWBII at 491 [56]-[57]), the fixing of a pecuniary penalty may to an extent be likened to the "instinctive synthesis" involved in criminal sentencing: TPG Internet Pty Ltd v Australian Competition and Consumer Commission (2012) 210 FCR 277 at 294. Instinctive synthesis is the "method of sentencing by which the judge identifies all the factors that are relevant to the sentence, discusses their significance and then makes a value judgment as to what is the appropriate sentence given all the factors of the case": Markarian v The Queen (2005) 228 CLR 357 at 378 [51] (per McHugh J). Or, as the plurality put it in Markarian (at 374 [37], per Gleeson CJ, Gummow, Hayne and Callinan JJ) "the sentencer is called on to reach a single sentence which … balances many different and conflicting features". Like the exercise of imposing a sentence for an offence, the process of fixing an appropriate pecuniary penalty should not be approached as a mathematical exercise involving increments to or decrements from a predetermined range of sentences: Wong v The Queen (2001) 207 CLR 584 at 611-612 [74]-[76]. 101 In fixing the amount of a civil penalty, reference is frequently made to the lists of factors or considerations identified by Santow J in Australian Securities and Investments Commission v Adler (No 5) [2002] NSWSC 483; (2002) 42 ACSR 80 at 114-115 [126] and French J in Chemeq at 534 [99]. Those lists of relevant considerations, which have been approved and elaborated on by many subsequent decisions of this Court, were not, and plainly were not intended to be, exhaustive. Nor was it suggested that each of the factors referred to in the respective lists was necessarily relevant or important in every case. These lists of factors should not be treated as a rigid catalogue or checklist of matters to be applied in each case; the overriding principle is that the Court should weigh all relevant circumstances: Australian Securities and Investments Commission v GE Capital Finance Australia [2014] FCA 701 at [72]. 102 In general terms, the factors that may be relevant when fixing a pecuniary penalty may conveniently be categorised according to whether they relate to the objective nature and seriousness of the offending conduct, or concern the particular circumstances of the defendant in question. 103 The factors relating to the objective seriousness of the contravention include: the extent to which the contravention was the result of deliberate, covert or reckless conduct, as opposed to negligence or carelessness; whether the contravention comprised isolated conduct, or was systematic or occurred over a period of time; if the defendant is a corporation, the seniority of the officers responsible for the contravention; the existence, within the corporation, of compliance systems and whether there was a culture of compliance at the corporation; the impact or consequences of the contravention on the market or innocent third parties; and the extent of any profit or benefit derived as a result of the contravention. 104 The factors that concern the particular circumstances of the defendant, particularly where the defendant is a corporation, generally include: the size and financial position of the contravening company; whether the company has been found to have engaged in similar conduct in the past; whether the company has improved or modified its compliance systems since the contravention; whether the company (through its senior officers) has demonstrated contrition and remorse; whether the company had disgorged any profit or benefit received as a result of the contravention, or made reparation; whether the company has cooperated with and assisted the relevant regulatory authority in the investigation and prosecution of the contravention; and whether the company has suffered any extra-curial punishment or detriment arising from the finding that it had contravened the law. 105 Where the defendant is a body corporate, the size of the body does not of itself justify a higher penalty than might otherwise be imposed: Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd [2015] FCA 330; (2015) 327 ALR 540 at 559-561 [89]-[92]. The size of the corporation may, however, be particularly relevant in determining the size of the pecuniary penalty that would operate as an effective deterrent. The sum required to achieve that object will generally be larger where the company has vast resources: Australian Competition and Consumer Commission v Leahy Petroleum Pty Ltd (No 3) [2005] FCA 265; (2005) 215 ALR 301 at 309 [39]; Australian Competition and Consumer Commission v Apple Pty Limited [2012] FCA 646 at [38]. 106 Careful attention must also be given to the maximum penalty for the contravention. That is so for at least three reasons: first, because the legislature has legislated for the maximum penalty and it is therefore an expression of the legislature's policy concerning the seriousness of the prescribed conduct; second, because it permits comparison between the worst possible case and the case that the Court is being asked to address; and third, because the maximum penalty provides a "yardstick" which should be taken and balanced with all the other relevant factors: Markarian at 372 [31] (per Gleeson CJ, Gummow, Hayne and Callinan JJ). 107 Even where the maximum penalty for the contravention is high, and the amount necessary to provide effective deterrence is large, the amount of the penalty should be proportionate to the contravention and should not be so high as to be oppressive: Stihl Chainsaws at 17,896; NW Frozen Foods at 293. 91 The factors identified above, in keeping with any sort of checklist, are a guide and are not intended to be exhaustive, nor to replace the essential judicial function of fact-finding and consideration of all relevant circumstances. They must not become a rigid catalogue of matters for attention: Plancor Pty Ltd v Liquor, Hospitality and Miscellaneous Union [2008] FCAFC 170; 171 FCR 357 at [58].

Overall characterisation of the conduct by the FWO 92 In written and oral submissions, the FWO emphasised the following features of the contravening conduct overall as particularly informing the need for general and specific deterrence: (1) the conduct overall constituted a serious and systemic failure to afford employees even their minimum entitlements under the FW Act and the Award; (2) the significant underpayment of $583,688.68 to such a large number of employees, being 85 in total, over a considerable period of time in excess of 16 months; (3) the fact that many of the employees were vulnerable, the majority being from non-English speaking backgrounds and many working in Australia on visas; (4) the employees who were floor staff, kitchen staff and cooks were part of a fluctuating, casual workforce covered by the Award and vulnerable to exploitation; and (5) the need for specific deterrence was acute given: (a) the respondents' past and continuing involvement in the hospitality industry; (b) the deliberateness of the conduct resulting in systemic breaches, despite prior warnings by the regulator arising out of a prior complaint; and (c) the conduct in deliberately creating employee records that were known to be false or misleading (as already noted, the better view is that they were false rather than merely misleading, having been created using false information), which were then provided to the regulator, supporting an inference that this conduct was designed to avoid the regulator detecting the underpayment of entitlements.

The principal contraventions by New Shanghai Charlestown 93 In relation to each group of contraventions, the FWO highlighted the following features: (1) As to the seven contraventions involving underpayment of entitlements: (a) the objects of the FW Act set out in s 3 emphasise the importance of an effective minimum safety net and of providing "effective compliance mechanisms" and thus effective enforcement of those minimum standards; (b) the minimum wages and penalty rates set by the FW Act and Award are a key component of the legislative "safety net", such that an employer should be in no doubt that they have a positive obligation to ensure compliance with those standards, which will be a "mere shell unless they are respected": Fair Work Ombudsman v Maclean Bay Pty Ltd (No 2) [2012] FCA 557 at [29]; (c) during the Assessment Period, employees were paid well below the minimum hourly rate safety net: (i) adult floor staff were receiving between 55% and 92% of their minimum entitlement; (ii) junior floor staff were receiving between 75% and 85% of their minimum entitlement; (iii) kitchen staff were paid between 55% and 95% of their minimum entitlement; and (iv) cooks were paid between 56% and 94% of their minimum entitlement; (d) payment of those rates below the minimum continued after Mr Chen had already had dealings with the FWO in relation to an earlier investigation and complaint and had been specifically provided with information in respect of the applicable minimum pay rates; (e) the rates paid by New Shanghai Charlestown were in many instances not only less than the Award, but significantly less per hour than the national minimum wage, being the most basic of wage entitlements in Australia - by way of example, payment to adult employees of $11 an hour represented 67% of the national minimum wage in the pay period commencing 1 July 2013 and 65% of the national minimum wage in the pay period commencing 1 July 2014, which was objectively exploitative; (f) the total underpayment in respect of minimum rates was $136,498.84 for adult employees and $2,058 for two junior employees; (g) with respect to casual employees: (i) their loss was compounded by New Shanghai Charlestown's failure to pay the additional casual loading, ranging between $4.03 and $4.50 per hour, which applied to 79 of the 85 employees, including all the floor staff and all the kitchen staff with one exception; (ii) the purpose of providing a casual loading to employees is to compensate for the itinerant nature of the engagement and the fact that employees do not accrue leave, termination and redundancy entitlements; and (iii) the wholly inadequate flat hourly rates paid by New Shanghai Charlestown did not include any casual loading, resulting in underpayment of $116,382.59. (h) with respect to employees working Saturday, Sundays, public holidays and overtime there was an underpayment of: (i) $112,114.53 in respect of Saturday loading; (ii) $117,663.05 in respect of Sunday loading; (iii) $21,661.17 in respect of public holiday loading; and (iv) $77,310.50, in respect of overtime for the cooks and one of the kitchen staff who were full-time employees. (2) As to the failure to pay superannuation during the Assessment Period, New Shanghai Charlestown was required under the Award to make superannuation contributions for each employee who earned $350 or more in a calendar month, so as to avoid the employer being required to pay the superannuation guarantee charge under superannuation legislation in relation to that employee. The compulsory superannuation guarantee was introduced to create a pool of savings designed specifically to provide income for employees when they retire. Thirty-one employees were entitled to superannuation contributions during the Assessment Period, which were not paid. (3) As to the cashing out of annual leave, pursuant to s 92 of the FW Act, New Shanghai Charlestown was prohibited from cashing out the annual leave entitlements of its full-time employees, except as provided for under the Award, in recognition of the importance of leave for rest and recreation. The Award does not and did not authorise annual leave entitlements to be cashed out. Despite this, New Shanghai Charlestown paid employees amounts of cash in lieu of taking their annual leave entitlements during the Assessment Period. This was a regular practice of New Shanghai Charlestown that occurred every three months, with those payments being documented in employee records. This practice also occurred in the context of the full-time employees working significant overtime. (4) As to the failure to provide an arrangement for ordinary hours of work, under the Award, full-time employees were entitled to a minimum of eight full days off per four-week period, and were prohibited from working in excess of 11.5 hours on any one day. Despite this, some full-time employees worked hours contrary to these provisions. 94 The FWO further submitted that the claimed underpayments were conservative and likely to have been less than the actual loss suffered by reason of the paucity of information available to the FWO, who was unable to identify some staff members. Unless the FWO had been able to interview an employee to confirm their duties, she, through her staff, had to apply the lowest level of classification in considering the underpayment contraventions, even where information indicated that some floor staff could have been classified at a higher level or rate. The rectification of underpayments only commenced on 14 July 2015, approximately seven months after the commencement of the investigation, and was only finally rectified as of 3 March 2017 for the employees who could be located. Some employees were not able to be identified or located, and although arrangements will be made for those amounts to be paid to the Commonwealth on trust for those employees, it is possible that they may never be located and will therefore be permanently deprived of their entitlements. Not only were the underpayments significant as an aggregate sum over a considerable period of time, they are also significant at an individual level. 95 The evidence of one of the employees who was a witness, Ms Huo, was that she had sought employment with New Shanghai Charlestown as she needed money to support herself and her husband and to pay for her permanent residency application. Despite this, while working eight hours per day, she was not earning enough to cover her bills and support her husband, and was forced to use her savings to pay her bills. In the first month of her employment, she worked 10 hours a day, six days a week, receiving $10 per hour with a one-hour break per shift. Although she received subsequent pay rises, these only occurred after she spoke to Ms Jenna Xu to complain about the money she was receiving. Despite those pay rises, she was never paid more than $16 per hour, which was below the national minimum wage, and was still not enough to cover her bills and living expenses, which caused her a lot of stress. She was tired after her shifts, but did not say anything because she needed the money for her bills. She was also hesitant to look for a new job because of her limited understanding of English. She was told that she no longer had a job with New Shanghai Charlestown following a trip to visit her sick mother in China and her complaint to the FWO. She struggled to find a new job. She is now a carer for her husband and relies on her savings and her step-son to help her pay her bills. She found another job to help her pay her bills, but did not retain that job due to her English language difficulties. The FWO relied upon this example to emphasise the impact of the contraventions at an individual level. 96 The FWO submitted that it could be inferred that at least some of the other employees would have been affected in the same way as Ms Huo. For example, 26 casual employees, who were paid as little as $10 an hour, being less than 50% of their minimum hourly entitlement inclusive of casual loading, worked approximately double the number of hours they were paid for. On Sundays, they were earning just 36% of their minimum hourly entitlement and were therefore working close to three times the number of hours they were paid for. The FWO submitted that such underpayments could only be viewed as exploitative and highly commercially beneficial to both New Shanghai Charlestown and Mr Chen by reason of his shareholding. This must have had a large impact on all the employees who were entitled to be paid much higher rates of pay for their work. Even where the amounts owing to some individual employees might seem small, this did not mean that the significance of the underpayments to them was any less. The comments made by the Federal Circuit Court of Australia in Fair Work Ombudsman v Zillion Zenith International Pty Ltd [2014] FCCA 433 at [52] were relied upon as follows: It is no answer to addressing the gravity of the conduct and loss involved in the aggregate to seek to emphasise the individual amounts for some of the employees. The amounts involved may seem trifling to some but they were required to be paid to young employees for whom they were far from trifling and for which they've had to wait. 97 The FWO submissions developed a number of other considerations. As to the vulnerability of the employees, it was submitted that many were: (1) relatively young, with some being under the age of 20 and/or students; (2) not Australian nationals but in Australia on visas, with 29 of the 65 employees for whom visa information status was sought being visa holders, including holders of temporary graduate and student visas; (3) not from non-English speaking backgrounds; and (4) it could be inferred, like Ms Huo, of limited financial means, with limited capacity to communicate effectively in English, limited experience in and knowledge of Australian workplaces and limited employment opportunities, placing reliance upon what was said in Fair Work Ombudsman v Go Yo Trading Pty Ltd [2012] FMCA 865 at [15] to the effect that foreign nationals working in Australia on visas represent a particular class of employee who are potentially vulnerable to improper practices by their employer. 98 It was pointed out that Mr Chen and Ms Jenna Xu have admitted that they were aware that during the Assessment Period, the majority of the employees were from non-English speaking backgrounds. It was submitted that it could be inferred that Ms Sarah Zhu had a similar awareness of these factors, as she undertook an information collection process between November 2012 and March 2013, in which she obtained information from employees, including their visa status.

Submissions on the record keeping contraventions 99 As to the contraventions involving record keeping and the creation and use of false records, the FWO submitted that: (1) New Shanghai Charlestown admitted to four contraventions: (a) by way of failing to keep required employee records specifying the employer's name, the employee's full name, whether the basis of employment was full-time, part-time, permanent, temporary or casual, the date upon which the employee's employment began, the number of overtime hours worked by the full-time employees or the breakdown of gross and net amounts paid to the employees; (b) that for 28 May 2014, New Shanghai Charlestown did not give the majority of employees a payslip within one day of paying them or at all, which was not a minor contravention, citing Fair Work Ombudsman v South Jin Pty Ltd (No 2) [2016] FCA 832 at [55]: … [Payslips] allow employees to understand how their pay is calculated and to obtain independent advice concerning their entitlements. They allow genuine mistakes or misunderstandings to be identified quickly and rectified. In this way, the obligation of employers to issue pay slips is a significant adjunct to the enforcement of compliance with the requirements of industrial legislation and industrial awards. The keeping of proper employment records serves a like purpose. (c) kept employee records that, to its knowledge, were false or misleading; and (d) made use of employee records which it knew were false or misleading, in relation to extensive records that were applied to multiple employees. (1) Mr Chen admitted to being involved in each of New Shanghai Charlestown's record keeping contraventions. In particular, he knew that the company did not provide payslips and did not keep required records. He also knew, from the time he directed the creation of the false records, that they were false. Despite that, he directed them to be provided to the FWO. (2) Ms Jenna Xu admitted to being involved in the use and production of the false records, and Ms Sarah Zhu admitted to being involved in creating the false records. (3) The record keeping contraventions were objectively serious, not least because failure to keep records undermines and frustrates the attainment of one of the principal objects of the FW Act of maintaining an effective safety net and ensuring effective enforcement. The failure to keep records also creates a structure within which breaches of industrial laws can be perpetrated easily. (4) The significance of the record keeping contraventions is illustrated by the fact that the failure to keep proper records benefited New Shanghai Charlestown because it limited the scope of the FWO's investigation. Employees were not able to be identified or contacted and underpayments have not been able to be rectified for 39 employees. As observed above, the underpayments are conservative by reason of the paucity of records, which did not include details such as start and finish times of employees. (5) The circumstances in which the false records came to be created is important and aggravating: (a) In April 2014, the FWO received a complaint from an employee of New Shanghai Charlestown, a Ms Li, alleging that the company had failed to pay her proper wages, including overtime, penalty rates and to provide payslips. (b) The FWO commenced an investigation and on 27 May 2014, a Fair Work Inspector met with Mr Chen and his lawyers to advise New Shanghai Charlestown of the outcome of the investigation and to provide it with educational material. (c) At that meeting, there was a discussion about the record keeping obligations of employers under the FW Act (such as payslips), the differences between casual and full-time/part-time employment, the National Employment Standards and the Award, including relevant pay rates. (d) Mr Chen was given a finalisation of investigation letter, in which the FWO set out that it had determined that New Shanghai Charlestown had contravened s 536 of the FW Act with respect to payslips. It also set out corrective action that should be taken. An infringement notice was issued requiring the payment of a fine. Mr Chen was also given a copy of the relevant guides and fact sheets regarding employer obligations under the FW Act. From that point onwards, New Shanghai Charlestown and Mr Chen were clearly on notice as to their obligations under the FW Act and the consequences of a failure to comply with that Act. (e) A short time later, on 12 August 2014, another employee (Ms Huo, who has previously been referred to) complained to the FWO. This complaint and the ensuing investigation formed the basis of these proceedings. It gave rise to the issue of the notice to produce, discussions between an inspector and Ms Jenna Xu about the complaint and a review of the documents provided in response to the notice to produce, which purported to be time and wage records but are now admitted to have been falsely created for provision to the FWO. This resulted in a second notice to produce and further discussions with employees at that time. (f) From the time that Mr Chen directed that the false records be created for the purposes of production to the FWO, New Shanghai Charlestown, Mr Chen, Ms Sarah Zhu and Ms Jenna Xu knew that those records were false. As is evident from the samples of the false records in evidence, they were entirely reconstructed to give the appearance of compliance and were entirely different from the real records kept in the usual course of business. (g) It was clear to the inspector that the false records were not correct, on the basis of a comparison with the documents that had been provided by Ms Huo. This resulted in the issue of the second notice to produce, which specified the precise documents by reference to those provided by Ms Huo.

Overall circumstances 100 As to overall circumstances, the FWO submitted that the failure of New Shanghai Charlestown to comply with its obligations and the failure of Mr Chen, Ms Sarah Zhu and Ms Jenna Xu to procure compliance should be seen in the context of: (1) the efforts of the FWO to advise New Shanghai Charlestown and Mr Chen of their obligations under the legislation in respect of the complaint made by Ms Li in April 2014 - with the contraventions continuing for six months after that time; and (2) the awareness of the respondents as to the application of the Award and their knowledge of their obligations and the steps taken by each of the respondents to hide the true position from the FWO by supplying false records created specifically for that purpose. 101 It was emphasised that, despite being provided with information on the record keeping obligations of employers, the National Employment Standards and the pay and conditions guide for the award in May 2014, New Shanghai Charlestown continued to underpay its employees and continued to fail to make and keep relevant records. New Shanghai Charlestown and Mr Chen had ample opportunity following the meeting on 27 May 2014 to seek professional advice about their obligations. 102 The substance of the FWO's submission was therefore that New Shanghai Charlestown and Mr Chen were on notice as to the potential consequences of non-compliance with the FW Act and the Award, yet continued the contraventions. The finalisation of investigation letter provided in 2014 by the FWO in respect of Ms Li's complaint specifically requested, among other things, that New Shanghai Charlestown ensure that all current employees receive their minimum entitlements in accordance with the enclosed guide and be issued pay slips within one working day of having been paid. Further, at the meeting on 27 May 2014 in respect of Ms Li's complaint, the FWO inspectors advised Mr Chen of the FWO's expectations as to future compliance and to take the complaint seriously. File notes from that meeting indicate that Mr Chen was informed that: … today's meeting provided him with a starting point to go back to his business, review his current practices and implement processes to ensure compliance. … the FWO would take into consideration the fact that a number of issues had been brought to the Employer's attention during FWO's recent interaction with his business in the event of any future noncompliance ie putting Employer on notice … FWI ML further advised that many contraventions under the FW Act such as s536 contained civil remedy provisions which meant that the FWO's enforcement options could include initiating proceedings against Employer's who do not adhere with their record keeping obligations. The director stated that he understood this. 103 The FWO submitted that it was clear that Mr Chen and Ms Sarah Zhu knew much earlier than May 2014 of their obligations, prior to the contravention period. That is because, as of at least 10 November 2011, Mr Chen was aware of the capacity for employees to make workplace complaints. He had called the Fair Work information line seeking advice about a notification of a workplace complaint made against New Shanghai Charlestown. Similarly, Ms Sarah Zhu's evidence made it clear that she had informed Mr Chen in July 2013 that employees were not being paid in accordance with the Award, yet Mr Chen took no steps to amend New Shanghai Charlestown's pay practices following this discussion. Ms Sarah Zhu took no steps to take the matter further and continued to pay the employees in accordance with the underpayment rates. 104 It was submitted that New Shanghai Charlestown and Mr Chen pursued a business model which benefited from the deliberate underpayment of employees on a large scale.

Size and financial position of New Shanghai Charlestown 105 As to the size and financial position of New Shanghai Charlestown, the FWO submitted, consistently with authority cited and quoted above, that the size of the business undertaking was relevant to the determination of the quantum of penalty. It was submitted that employers must not be left under the impression that, because of their size or financial difficulties, they are able to breach an award without consequences. In any event, New Shanghai Charlestown's business was and is large. It is not a small business without the resources to educate itself about its statutory obligations. While New Shanghai Charlestown suggested in letters to the FWO that it had "limited surplus funds available" to make a total repayment in one instalment, with Mr Chen asserting that it took 20 months to complete rectification of underpayments in order to ensure the ongoing viability of the business, the effect that imposition of a penalty may or may not have should not be taken into account when imposing a penalty, especially when New Shanghai Charlestown has elected not to adduce any proper evidence of such an effect. 106 The FWO's submissions should be accepted. As was pointed out in Australian Competition and Consumer Commission v Leahy Petroleum Pty Ltd (No 2) [2005] FCA 254; 215 ALR 281 at [9]: The size of the contravening companies and their respective capacities to pay a penalty were relied upon as factors in mitigation in the present case. Plainly, such factors can be relevant to the penalty that is necessary to deter the company from contravening the Act in the future. Size may also be relevant to general deterrence because other potential contraveners are likely to take notice of penalties imposed on companies of a similar size. However, a contravening company's capacity to pay a penalty is of less relevance to the objective of general deterrence because that objective is not concerned with whether the penalties imposed have been paid. Rather, it involves a penalty being fixed that will deter others from engaging in similar contravening conduct in the future. Thus, general deterrence will depend more on the expected quantum of the penalty for the offending conduct, rather than on a past offender's capacity to pay a previous penalty. I therefore respectfully agree with the observation of Smithers J, referred to by Burchett and Kiefel JJ in NW Frozen Foods, to the effect that, a penalty that is no greater than is necessary to achieve the object of general deterrence, will not be oppressive. I have approached the issue of corporate penalties on that basis. The penalties in relation to the individuals may need to be tempered by personal considerations. 107 The above principle quoted from Leahy Petroleum was summarised and endorsed by Heerey J in Jordan v Mornington Inn Pty Ltd [2007] FCA 1384; 166 IR 33 at [99], who noted that capacity to pay is less relevant than general deterrence. The Full Court endorsed that conclusion in Mornington Inn Pty Ltd v Jordan [2008] FCAFC 70; 168 FCR 383 at [69], and it has been applied many times since then. It may be regarded as settled law. 108 The FWO pointed out that there was no evidence as to the financial position of the three natural person respondents that suggested any inability to pay a pecuniary penalty.

Deliberateness of contravention, involvement of senior management and the need to ensure compliance with minimum standards 109 The FWO submitted that the Court should be satisfied on the evidence that the conduct was deliberate because it appeared to have been the standard business model of New Shanghai Charlestown that its employees were paid at a rate below the Award and did not receive other statutory benefits, with pay rates being the decision of Mr Chen. It was emphasised that New Shanghai Charlestown and Mr Chen were aware of the underpayment from at least July 2013 and took no steps to correct that. They were aware of the importance of compliance with workplace relations obligations and were asked to take steps to comply in May 2014. Despite being on notice of their obligations, they took no steps to ensure compliance and continued to contravene. It should be observed in this regard that the lack of any prior matters having been brought against the respondents in court proceedings counts for little in circumstances where at least the company and Mr Chen were plainly on notice as to their obligations. 110 The FWO submitted that it was a conscious decision on the part of Ms Sarah Zhu and (for a more limited period) Ms Jenna Xu to participate in the conduct, despite knowing it was unlawful. Importantly, there was a clear and deliberate decision to create false records and to provide those to the FWO. It could readily be inferred that this conduct was intended to avoid the FWO becoming aware of the contraventions. 111 As to the involvement of senior management in the contraventions, the FWO submitted that the decision not to comply with the legislative requirements was made at a senior level, especially on the part of Mr Chen as the sole shareholder, sole director and company secretary. 112 The FWO emphasised the need to ensure compliance with minimum standards, pointing out that prolonged contraventions of fundamental and basic entitlements undermine the workplace regime as a whole. It was submitted that ensuring compliance with modern awards is vital to creating an even playing field and ensuring that all employees are appropriately remunerated for their work, especially in an industry which employs large numbers of people. 113 The point made about an even playing field is an important one. It should be observed that a failure to ensure compliance by way of detection, investigation, litigation and sanction, may result in a de facto punishment for those who do the right thing and are required to compete in a market against those who do not. For this reason, amongst others, the FWO submitted that penalties needed to be imposed at a meaningful level for the Court to denounce the respondents' conduct, to encourage compliance, and to create a financial incentive to change from non-compliance practices. The record keeping contraventions were said to be particularly serious because of the impact such conduct can have on the investigation of contraventions and the determination of unpaid entitlements.

Contrition and cooperation 114 The FWO acknowledged that the respondents had expressed a degree of acceptance of responsibility by their admissions. It was submitted, however, that those admissions were self-serving and should not be given much weight in the assessment of penalty. As to rectification, the FWO said that this was not a case in which the respondents, upon the realisation of a mistake, had immediately rectified the underpayments. Rather, this was a case in which the respondents (or at least New Shanghai Charlestown, Mr Chen and Ms Sarah Zhu) had underpaid employees despite having knowledge of being in breach. 115 The FWO made submissions about the repayment negotiations in order to meet the case made on behalf of the respondents, and New Shanghai Charlestown in particular, that it had taken substantial corrective action. While it may be true, as pointed out by the FWO, that there was some reluctance and some delay in making the payments, by the time of the penalty hearing, the repayments made were substantial, amounting to over three-quarters of the underpayment of entitlements. Due credit must be given for the corrective action taken, although it is true that limited weight can be given to it as an indication of contrition, as opposed to acceptance of the inevitable. 116 New Shanghai Charlestown and Mr Chen also relied upon the corrective action that they had taken in the lead up to the penalty hearing, which was still incomplete at that time. The FWO submitted that there was in fact no evidence that New Shanghai Charlestown was now compliant, nor any evidence of steps taken by Mr Chen to verify for himself that this was the case. The FWO submitted that the Court could not be satisfied that New Shanghai Charlestown was currently complying with its obligations or that the remedial actions referred to were adequate, had in fact in occurred, or will occur as stated, so as to ensure future compliance. It is correct to say that the evidence of current compliance is slight, such that not a great deal of weight can be placed on this. 117 The FWO acknowledged that where respondents cooperate to make admissions early in the course of an investigation, or soon after the commencement of proceedings, it is appropriate to allow a discount on penalty but, relying upon the Full Court's decision in Mornington Inn, it was submitted that this discount should not be available simply because the community has been spared the cost of a contested trial. Rather, it was submitted that the benefit of such a discount should be reserved for cases where it can fairly be said that an admission of liability has indicated an acceptance of wrongdoing and a suitable and credible expression of regret, indicating a willingness to facilitate the course of justice: see also Cameron v The Queen [2002] HCA 6; 209 CLR 339 at [13]-[15]. The FWO acknowledged that this had been met to the extent that New Shanghai Charlestown, through its solicitor, had engaged with the FWO during the investigation and entered into a statement of agreed facts. The FWO also acknowledged that Mr Chen and Ms Sarah Zhu cooperated in the investigation by undertaking an electronically recorded interview, and that each of those parties and Ms Jenna Xu entered into a statement of agreed facts. The FWO submitted that a discount on penalty of no more than 20% should be made for each respondent reflecting that cooperation. By using the term in its submissions of "no more than", the FWO might be seen not to have bound itself to that precise degree of discount, but no other figure was suggested. 118 The approach taken in Mornington Inn of treating an admission of liability as indicating an acceptance of wrongdoing and a suitable and credible expression of regret, indicating a willingness to facilitate the course of justice, has the effect that most, if not all, of the aspects of mitigation advanced on behalf of New Shanghai Charlestown considered further below, may be seen to form part of that acceptance of wrongdoing and making of amends. Even so, the cooperation discount of 20% seems very generous, perhaps unduly so, and probably exceeds the extent of the discount that I would have independently arrived at in all the circumstances of this case, the cooperation in part being an acceptance of the inevitable, given the apparent strength of the FWO case. However, that degree of discount must be taken to be a considered one on the part of the FWO, dictated in part at least by the pragmatic desire to encourage respondents generally to give up the fight and free up the regulator's resources for allocation to other investigations and enforcement litigation. Such considerations have been recognised as legitimate by the High Court in relation to agreed penalties in the CFMEU Civil Penalties Case at [47]-[48], [57]-[61], [65]. 119 The High Court in the CFMEU Civil Penalties Case at [47] quoted and endorsed the conclusion reached by the Full Court in NW Frozen Foods at 291B as to the approach to be taken to agreed penalties (and thus as to agreed ranges of penalties). It is worth reproducing the Full Court's reasoning in NW Frozen Foods in greater detail, as it makes the task of the judge in applying an agreed penalty or range of penalties clearer. Their Honours (Burchett and Kiefel JJ, Carr J agreeing) said at 290-291: Because the fixing of the quantum of a penalty cannot be an exact science, the Court … does not ask whether it would without the aid of the parties have arrived at the precise figure they have proposed, but rather whether their proposal can be accepted as fixing an appropriate amount. There is an important public policy involved. When corporations acknowledge contraventions, very lengthy and complex litigation is frequently avoided, freeing the courts to deal with other matters, and investigating officers of [the regulator] to turn to other areas … . These beneficial consequences would be jeopardised if corporations were to conclude that proper settlements were clouded by unpredictable risks. A proper figure is one within the permissible range in all the circumstances. The Court will not depart from an agreed figure merely because it might otherwise have been disposed to select some other figure, or except in a clear case. 120 It is clear, applying the above reasoning from NW Frozen Foods, that agreements as to penalty cannot readily or lightly be departed from. If seeking to depart from an agreed position, this Court is required to find that the penalty proposed is not appropriate and to give the parties an opportunity to be heard. A possible exception is where it has been made clear at the hearing that what is proposed is clearly unacceptable, so the parties will not be taken by surprise if such a different conclusion is ultimately reached. That may be seen to apply equally where there has been active agreement, or absence of dissent, between the parties as to component parts of civil penalty determinations, such as cooperation discounts. In the present case, a cooperation discount of 20%, while perhaps being more generous than might have been arrived at by an independent adjudication, cannot be regarded as inherently inappropriate, particularly where the parties have not been heard as to why it should not be applied. It would not be appropriate to allow any lesser discount than 20% in all the circumstances. 121 The same cannot be said for the suggestion made on behalf of Ms Sarah Zhu that a cooperation discount of 25% should be allowed, as opposed to the discount of 20% proposed by the FWO. First, there is no agreement as to that greater discount. Secondly, Ms Sarah Zhu's cooperation was no greater than the other respondents. Thirdly, the higher discount she proposes produces an adjusted maximum penalty that is too low to enable an appropriate penalty to be fixed so as to reflect the objective seriousness of her conduct. 122 As the FWO pointed out, the CFMEU Civil Penalties Case compels general and specific deterrence as the dominant consideration in fixing a civil penalty. This is to promote the public interest in compliance and to put a sufficient price on contravention to deter both the contravener and other employers from regarding the penalty merely as an acceptable cost of doing business. The FWO submitted that this was a case that clearly required general and specific deterrence.

Specific deterrence 123 As to specific deterrence, the FWO submitted that the respondents had not exhibited a sufficient level of acceptance of responsibility or genuine remorse, nor implemented adequate steps to ensure that they would not be tempted to contravene in the future. The persistence with which the respondents embarked upon their conduct was said to be a matter which continues to warrant a deterrent penalty, particularly given their current circumstances. It was pointed out that New Shanghai Charlestown continues to operate a restaurant and is still a registered entity. Mr Chen, Ms Jenna Xu and Ms Sarah Zhu continue to work for the business, and Mr Chen remains the sole director, secretary and shareholder. Relevantly, Mr Chen is also a director of other companies in the restaurant industry. The evidence reveals that businesses associated with New Shanghai Charlestown and Mr Chen are operated at multiple sites throughout Australia and there is no evidence before the Court that would establish that those entities are compliant. It may be that imposing a requirement to prove compliance goes too far. It is, in any event, difficult to know what difference the absence of such evidence should produce in relation to the penalties to be imposed. 124 In relation to New Shanghai Charlestown and Mr Chen, it was submitted that not only did they take no reasonable steps to ensure compliance, but they deliberately continued to engage in contravening conduct despite being on notice as to what was required. The FWO's attempts to secure ongoing compliance were not successful in deterring or preventing the conduct that is the subject of these proceedings. Further, in relation to Mr Chen, it was emphasised that he had worked in the industry since 2009 and had knowledge of the Award. During the assessment period, he knew the circumstances in which the employees were underpaid. It was submitted that the Court could infer that he was aware of the requirements to keep and maintain accurate records, issue payslips and pay superannuation. 125 In relation to Ms Sarah Zhu, it was pointed out that she had several years' experience working for the international professional services firm PricewaterhouseCoopers. It was submitted that the Court should infer that she was aware of the requirements to pay employees in accordance with the FW Act and the Award. In any event, as of at least July 2013, she had informed Mr Chen of the company's failure to pay the required rates under the Award, yet continued to participate in the conduct. 126 In relation to Ms Jenna Xu, it was pointed out that she has admitted that she was aware of the Award since early September 2014 and knew, at least during the tail end of the contravention period, that the rates being paid to the employees were inconsistent with the Award. Nonetheless, she continued to participate in the underpayment practices of New Shanghai Charlestown. 127 The FWO submitted that the overall effect of all of the foregoing was that the respondents' conduct was objectively serious and warranted a significant deterrent penalty to indicate that such repeated and exploitative conduct will not be tolerated. It was submitted that the Court should mark its disapproval of the behaviour to ensure that the prospect of future contraventions is commercially and personally undesirable.

General deterrence 128 In relation to general deterrence, the FWO relied upon Ponzio v B & P Caelli Constructions Pty Ltd [2007] FCAFC 65; 158 FCR 543 at [93]: There are three purposes at least for imposing a penalty: punishment; deterrence; and rehabilitation. The punishment must be proportionate to the offence and in accordance with the prevailing standards of punishment: R v Hunter (1984) 36 SASR 101 at 103. Therefore the circumstances of the offence or contravention are especially important. The penalty must recognise the need for deterrence, both personal and general. In regard to personal deterrence, an assessment must be made of the risk of re-offending. In regard to general deterrence, it is assumed that an appropriate penalty will act as a deterrent to others who might be likely to offend: Yardley v Betts (1979) 22 SASR 108. The penalty therefore should be of a kind that it would be likely to act as a deterrent in preventing similar contraventions by like minded persons or organisations. If the penalty does not demonstrate an appropriate assessment of the seriousness of the offending, the penalty will not operate to deter others from contravening the section. However, the penalty should not be such as to crush the person upon whom the penalty is imposed or used to make that person a scapegoat. In some cases, general deterrence will be the paramount factor in fixing the penalty: R v Thompson (1975) 11 SASR 217. In some cases, although hardly in this type of contravention, rehabilitation is an important factor. 129 Following the High Court decision in the CFMEU Civil Penalties Case, it may be doubted that punishment and rehabilitation should properly be taken into account in these circumstances, relying as that does upon inapposite criminal sentencing principles. This issue was commented upon by the Full Court in the Queensland Children's Hospital case at [99] (omitted from the passages quoted above): The question whether a pecuniary penalty involves an element of punishment remains somewhat controversial: see the discussion in Australian Competition and Consumer Commission v Cement Australia Pty Ltd [2016] FCA 453; 242 FCR 389 at [76]; ACCC v ANZ at [78]-[83]; Construction, Forestry, Mining and Energy Union v Australian Building and Construction Commissioner [2016] FCAFC 184; 341 ALR 383 at [8], referring to NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 at 296-7; Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (1997) 75 FCR 238 at 241; Trade Practices Commission v Stihl Chainsaws (Aust) Pty Ltd (1978) ATPR 40-091 at 17,896; Australian Competition and Consumer Commission v Ithaca Ice Works Pty Ltd [2001] FCA 1716; (2002) ATPR 41-851 at 44,543 [50]. To a certain extent, that debate appears to be more semantic or philosophical than real. It is sufficient to say that, accepting that the primary purpose of imposing a pecuniary penalty is to protect and deter, that purpose is achieved by imposing a punishment in the form of a pecuniary penalty: ACCC v ANZ at [83]. 130 The FWO submitted that two facts were of particular relevance to general deterrence. First, these proceedings involve significant underpayment. Such underpayment can allow employers to avoid tax obligations and to undercut other employers who are paying their employees in accordance with the correct terms and conditions. This may result in some employers becoming unprofitable, which may result in job losses and other economic impacts. The FWO pointed out that these considerations underline the need to deter other employers from being tempted to contravene. 131 The second point relevant to general deterrence relied upon by the FWO was the nature of the restaurant industry itself. It was submitted that this is an industry where the courts have often found contraventions that involve exploitation of vulnerable employees in a weak bargaining position, such as the young, visa workers and those with language difficulties, which makes enforcement especially difficult. The FWO relied upon a series of cases on these topics: see Fair Work Ombudsman v Yogurberry World Square Pty Ltd [2016] FCA 1290; Fair Work Ombudsman v Mamak Pty Ltd [2016] FCCA 2104; Fair Work Ombudsman v Food Republic Pty Ltd [2017] FCCA 263; Fair Work Ombudsman v Golden Vision Food and Beverage Services Pty Ltd [2017] FCCA 534; Fair Work Ombudsman v ECFF Pty Ltd [2014] FCCA 2996; Fair Work Ombudsman v Java Spice Australia Pty Ltd [2015] FCCA 2930. 132 As the FWO pointed out, Gray J, as a member of the Full Court in Plancor, at [37] recognised that the hospitality industry is notorious for non-compliance with standards imposed by industrial laws and is an industry in which enforcement of those standards has proved very difficult. That reality is almost a matter of judicial notice, or at least common sense reasoning. The profile of the employees of New Shanghai Charlestown revealed by the evidence can be seen to be typical, rather than atypical, of the hospitality industry, of which restaurants and cafes are a very important component. 133 The FWO relied upon a report by a FWO analyst giving a profile of the current state of the hospitality industry. The analyst relied on industry evidence drawn from the FWO's case-management system, data from anonymous reports to the FWO, FWO campaign reports, publicly available data from the Australian Bureau of Statistics and the Department of Employment labour market information portal and IBISWorld subscription reports of research on over 500 industries. The report, indicating the nature and scope of the problems giving rise to the asserted need for general deterrence, was summarised in the FWO's submissions as follows: (a) the [FWO] received the greatest number of dispute form lodgements (DFL) in this industry in the period July 2013 to June 2016 (11% of all lodgements); (b) the most common age group for workers who lodged a DFL was 20 to 24 years, closely followed by the 25-29 age group; (c) the comparatively low number of DFLs lodged by employees in the 15-19 years bracket may point to workers being more unlikely or wary to lodge a DFL due to barriers they are faced with or a lack of awareness of minimum entitlements or a lack of concern based on earning a wage for the first time; (d) 22% of the DFLs received from 2013 to 2016 were received from visa workers within the cafes, restaurants and takeaway food services industry, of the top ten industries for highest FWO disputes "this industry has the highest proportion relating to visa workers"; (e) during the 2015 National Hospitality Campaign - Restaurants, Cafes and Catering, 58% of businesses were found to be in contravention, leading to a total recovery of $1,215,212 for 2,752 employees; (f) during the 2016 National Hospitality Industry Campaign - Takeaway foods, 67% of businesses were found to be in contravention, leading to a total recovery of $582,410 for 929 employees; (g) the industry contains 68,219 businesses, the number of which increased by 4.3% in the 12 months to June 2016. The sector ranks as the 6th highest across all industry groups in terms of the number of businesses operating; (h) the median age for employees in accommodation and food services is 27 years (as of 2013) which is the lowest of all broad industry groups. A large proportion (50%) of workers employed within the industry are young workers, compared with 15% overall; (i) around 35% of workers employed within the industry were born outside of Australia, with 28% born in a country other than a main English speaking country; (j) only 10% of workers had completed a bachelor degree or higher qualification compared to 27% for all employment. Only 36% had completed year 11 as their highest educational achievement; and (k) of s 457 visa holders the most common nominated industry was this one. 134 Counsel for Ms Jenna Xu made submissions that little weight could be given to this evidence. However, as I indicated at the hearing and did not appear to be resisted, the evidence is relevant and may be given appropriate weight insofar as it establishes that there are problems in the hospitality industry which render general deterrence of substantial and continuing importance in fixing civil penalties for the contraventions in this case. The existence and prevalence of such conduct usefully informs the exercise of the Court's discretion. Evidence indicating a substantial problem with compliance can readily be seen to be a significant and weighty consideration, particularly where the question of general deterrence arises in the context of a growing industry with a reasonably vulnerable workforce characterised by youth, transience (reflected also in the high proportion of workers who are visa holders), language difficulties and a high proportion of casual staff. These features of the workforce commonly mean that employees are in a weak bargaining position and have limited ability to complain or seek rectification. The temptations and opportunity to exploit such a workforce require penalties of a scale that will help to deter both the present respondents and other employers from engaging in behaviour of the kind that has taken place in this case, with a particular emphasis on underpayment, record keeping and not creating or using false or misleading records. 135 The FWO submitted that, in fixing penalties in respect of record keeping breaches, the Court should have regard to decisions in cases brought by the FWO which have shown a concerning trend of inadequate and false or misleading records in the past three years, citing 12 Federal Circuit Court decisions on the issue: (1) Fair Work Ombudsman v ECFF Pty Ltd [2014] FCCA 2996 - a penalty determination relevantly concerning the production of false or misleading records in respect of an employee chef, who had been underpaid a total of $86,118.09; (2) Fair Work Ombudsman v Oz Staff Career Services Pty Ltd [2016] FCCA 105 - a decision concerning accessorial liability for breaches involving unlawful deductions from the wages of 102 employees and the issuing of false and misleading payslips in respect of 17 employees; (3) Fair Work Ombudsman v Amritsaria Four Pty Ltd [2016] FCCA 968 - a penalty determination relevantly concerning the production of false or misleading records in respect of two petrol station employees who had been underpaid an approximate total of $49,000; (4) Fair Work Ombudsman v Singh [2016] FCCA 1335 - a penalty determination relevantly concerning the production of false and misleading records in respect of 12 employee truck drivers, who had been underpaid a total of $26,696.93; (5) Fair Work Ombudsman v Mai Pty Ltd [2016] FCCA 1481 - a penalty determination relevantly concerning the production of false and misleading records in respect of 12 petrol station employees, who had been underpaid a total of $82,661.85; (6) Fair Work Ombudsman v Mamak Pty Ltd - a penalty determination relevantly concerning the production of false or misleading records in respect of six people employed as casual wait staff who had been underpaid a total of $87,349.69; (7) Fair Work Ombudsman v Shaik [2016] FCCA 2345 - a penalty determination relevantly concerning the production of false pay slips for two restaurant employees who had been underpaid a total of $85,844.68; (8) Fair Work Ombudsman v Rubee Enterprises Pty Ltd [2016] FCCA 3456 - a penalty determination relevantly concerning the production of false records for five restaurant staff who had been underpaid a total of $87,000; (9) Fair Work Ombudsman v Little Vienna Pty Ltd [2017] FCCA 916 - a penalty determination relevantly concerning the production of false or misleading records in circumstances where eleven employees had been underpaid a total of $66,179.84; (10) Fair Work Ombudsman v EJ Group International Pty Ltd [2017] FCCA 997 - a penalty determination relevantly concerning the production of false or misleading records in respect of two restaurant employees who had been underpaid a total of $9,858.13; (11) Fair Work Ombudsman v Kang [2017] FCCA 1010 - a penalty determination relevantly concerning the production of false and misleading records in respect of restaurant employees who had been underpaid a total of $19,307.57; and (12) Fair Work Ombudsman v Civic National Pty Ltd [2016] FCCA 2459 - a decision relevantly concerning liability for production of false and misleading documents in respect of five trolley collection employees. The above cases may properly be regarded as giving some indication of the prevalence and need for general deterrence of contraventions involving the creation and production of false or misleading records to the FWO, in circumstances where employees have not been accorded basic entitlements. That prevalence will be of even greater concern where there are likely to be present additional elements of vulnerability, such as in the hospitality industry. 136 The FWO submitted that notwithstanding the strong commentary and penalties imposed in the above 12 Federal Circuit Court cases, there remained a need for deterrence, especially given the considerable impact of this conduct in undermining the regulatory regime, and to emphasise that the deliberate provision of false information to a regulator is inexcusable and will be met with a strong penalty outcome. As emphasised by the FWO, the seriousness of the contraventions in this case concerning the deliberate production of false records to the regulator cannot be overstated. At the end of these reasons, I have made observations about the inadequacy of the penalties that were available for that conduct under the FW Act. 137 The FWO submitted that in imposing penalties, this Court should have regard to the "message sent" to employers and the community generally, making it clear that the obligations to workers cannot be avoided or abrogated. It was submitted that the imposition of penalties in this matter would assist in ensuring that employers in the restaurant industry are compliant with their workplace obligations.

Totality 138 As to the fifth step of totality, the FWO submitted that that there was no evidence before the Court that demonstrates that a penalty in the range proposed by the FWO would be oppressive or crushing on the respondents. It was submitted that, in the absence of such evidence, financial capacity must be considered to be a neutral factor.

Mitigation 139 In relation to mitigation in respect of the three natural person respondents, the FWO submitted that this was not a case where significant mitigating factors arise. 140 The key factors urged to be taken into account by New Shanghai Charlestown were: (1) corrective action taken, by way of payment of just under 80% of the underpayments by the time of the penalty hearing, with the balance to be paid within 60 days either to the employees or to the FWO; (2) contrition, by way of acknowledgement of wrongdoing, which was said to be genuine and not merely self-serving. Reference was made to Mr Chen having panicked (in his capacity as the guiding mind of New Shanghai Charlestown) at the time that he ordered the creation of false records and their production to the FWO. This was said to be extenuating rather than aggravating; (3) denying that the expressions of regret were self-serving and asserting that they were genuine; (4) further compliance training and monitoring of New Shanghai Charlestown, to be provided by the solicitors for the company and Mr Chen, some of that training having already taken place; and (5) charitable acts by New Shanghai Charlestown to the benefit of the local community. 141 New Shanghai Charlestown also sought time to pay by equal portions over a year, on the basis that it was not in the same position as a large, publically listed company for which an order to pay hundreds of thousands of dollars may not be of great moment. 142 In oral submissions, the FWO submitted that it was irrelevant whether the penalties imposed on Mr Chen, on Ms Jenna Xu and on Ms Sarah Zhu would be paid by New Shanghai Charlestown. That submission should be accepted, especially in the absence of any evidence that this will occur, or submissions as to what, if anything, the Court could or should do in response. The decision of the Full Court on this topic in Construction, Forestry, Mining and Energy Union v Australian Building and Construction Commissioner [2016] FCAFC 184; 247 FCR 339, particularly at [15], [26] and [66], is not just binding, but also compelling, authority to the effect that there is no power to make any orders to prohibit a person ordered to a pay a penalty under s 545(1) of the FW Act from being indemnified against the liability to pay that penalty.

Separate submissions in relation to the three natural person respondents 143 The FWO made further submissions specifically in relation to Mr Chen, Ms Sarah Zhu and Ms Jenna Xu, as detailed below and in contrast to the submissions made on behalf of each of them.

Submissions in relation to Mr Chen 144 The FWO submitted that Mr Chen's conduct must be considered in light of his experience and background, including as a businessman and as the operator of a chain of at least seven restaurants since 2010. He holds two degrees, one post-graduate. He admits to his knowledge of and experience in the Australian restaurant industry, in which he started work in 2009 at his parents' restaurant. 145 It was again emphasised that Mr Chen was on notice of his obligations and the role of the regulator by reason of his previous interactions with the FWO. Despite that prior experience and exposure, Mr Chen was directly responsible for New Shanghai Charlestown's underpayment contraventions. He was a person who made decisions on behalf of New Shanghai Charlestown regarding the engagement of employees and their terms of engagement, including pay. He knew that the Award applied to employees during the Assessment Period and was aware of the hours worked by them in their duties. He knew that they were not being paid the correct hourly pay as he, together with Ms Jenna Xu, directed Ms Sarah Zhu as to the hourly rates to pay the employees. 146 Despite being informed by Ms Sarah Zhu in July 2013, being the start of the Assessment Period, that the wages being paid to employees did not meet the necessary requirements under the Award, Mr Chen made the conscious decision not to pay the employees what they were entitled to. He continued to underpay the employees, even after several conversations with Ms Sarah Zhu to the same effect and after receiving information from the FWO about workplace obligations. He was also aware of and indeed authorised New Shanghai Charlestown's practice of cashing out annual leave and knew that employees were not receiving payslips. He was also centrally concerned with the record keeping contraventions and directed that the false records be created and provided to the FWO. He persisted despite the attempts at resistance on the part of Ms Sarah Zhu. In his affidavit, he submitted that "fear and panic" contributed to his actions. The FWO submitted that, while it is a natural response to feel panic at the prospect of being caught contravening the law, especially given the seriousness of the conduct, it is Mr Chen's response in the face of that panic which warrants a serious penalty, and cannot be seen as anything but aggravating and calling for deterrence. 147 The dominant submission for Mr Chen was that the FWO's assessment of the appropriate penalties for him made no allowance for the fact that he was the sole shareholder of New Shanghai Charlestown and will, in reality, bear the burden of any penalties imposed upon it personally. Reliance was placed on him being, at all material times, the sole director, shareholder and secretary of New Shanghai Charlestown. It was emphasised that, as reflected in the combined statement of agreed facts, he was responsible for the overall direction, control, management and supervision of the company's operations in relation to the restaurant, including in relation to setting and adjusting pay rates in determining wages and conditions of employment. Similarly, it was emphasised that he was a person responsible for the keeping of employee records on behalf of New Shanghai Charlestown and was at all material times responsible for the management and supervision of Ms Sarah Zhu and Ms Jenna Xu. In those circumstances, it was submitted that to impose separate penalties on Mr Chen in addition to the penalties imposed on New Shanghai Charlestown would be to penalise Mr Chen twice over for the same conduct. For that reason, it was submitted that no penalty should be imposed on him at all. 148 Reliance was placed upon the following authorities in support of the argument that no penalties should be imposed on Mr Chen at all: (1) The Queen v Hoar (1981) 148 CLR 32 at 38; (2) Trade Practices Commission v Cue Design Pty Ltd [1996] FCA 192 at [27]; (3) Australian Competition and Consumer Commission v Dimmeys Stores Pty Ltd [1999] FCA 1175; (4) Australian Competition and Consumer Commission v Ithaca Ice Works Pty Ltd [2000] FCA 997 at [13]; (5) Australian Competition and Consumer Commission v Commercial and General Publications Pty Ltd (No 2) [2002] FCA 1349 at [27]-[30]; (6) Australian Competition and Consumer Commission v ABB Transmission and Distribution Ltd (No 2) [2002] FCA 559; 190 ALR 169 at [45] and [50]; (7) Minister for the Environment and Heritage v Greentree (No 3) [2004] FCA 1317; 136 LGERA 89 at [78]; (8) Greentree v Minister for the Environment and Heritage [2005] FCAFC 128; 144 FCR 388 at [54]; (9) Australian Competition and Consumer Commission v Visy Industries Holdings Pty Ltd (No 3) [2007] FCA 1617; 244 ALR 673 at [294]; (10) Australian Competition and Consumer Commission v Oobi Baby Pty Ltd [2008] FCA 1488 at [12]; (11) Australian Competition and Consumer Commission v SMS Global Pty Ltd [2011] FCA 855 at [119]; and (12) Minister for Immigration and Border Protection v Choong Enterprises Pty Ltd [2015] FCA 390; 234 FCR 478 at [103]-[107]. 149 Particular reliance was placed on one of those cases, Choong Enterprises, where it was said: 103 Clearly, Mr Choong was complicit in these (and all the) contraventions. He was the principal person involved. He was the person deciding on the payment regime, and the person who received and did not take heed of the warnings. 104 The Minister has sought pecuniary penalties be imposed on Mr Choong, in round figures representing the something less, as a proportion of the applicable maximum for an accessory, than the suggested pecuniary penalties for Choong Enterprises. 105 However, it is accepted that Mr Choong is the sole shareholder and director of Choong Enterprises. Consequently, the pecuniary penalties imposed on Choong Enterprises will involve a loss that will ultimately be borne by Mr Choong. In Australian Competition and Consumer Commission v ABB Transmission & Distribution Ltd (No 2) (2002) 190 ALR 169, that circumstance led to Finkelstein J imposing a considerably lesser accessorial penalty on the director than would otherwise have been the case: see at [45] and [50]. In Australian Competition and Consumer Commission v Visy Industries Holdings Pty Ltd (No 3) (2007) 244 ALR 673, Heerey J took the same factor into account at [294], noting that there were other decisions also that recognise that in such circumstances it is legitimate to avoid double counting where an individual contravener is an owner of a corporate contravener. In that case, no pecuniary penalty was imposed on that individual. See also the remarks of Weinberg J in Australian Competition and Consumer Commission v Commercial & General Publications Pty Ltd (No 2) [2003] ASAL 55-090 at [27]-[29] to the same effect. 106 For the same reasons, I do not propose to impose additional pecuniary penalties on Mr Choong for the contraventions to which he was an accessory. As Weinberg J considered, in my view that will not diminish the deterrent effect of the orders to be made. I note that there is no suggestion that Choong Enterprises will not be able to meet the substantial pecuniary penalties imposed on it 150 The FWO responded by way of reply and oral submissions. The FWO submitted principally that the relationship between Mr Chen and New Shanghai Charlestown was irrelevant and, in the alternative, that it should carry very little weight. The FWO relied upon four propositions in opposition to the assertion that separate penalties should not be imposed on Mr Chen. 151 First, it was submitted that the authorities relied upon by Mr Chen could be distinguished factually and legally, and include criminal cases which involve different principles. In all the civil penalty cases relied upon by Mr Chen where no penalty was imposed on the shareholder respondent, this was by way of an agreed position or submission by the regulator. It was submitted that none of the authorities stand for the proposition that a Court is prohibited from awarding penalties against both a shareholder/director of a company and the company itself. It was pointed out that, in fact, dual penalties were awarded in several of those matters, including Australian Competition and Consumer Commission v ABB Transmission and Distribution Ltd (No 2). It was submitted that the consistent theme in all the authorities is that each case needs to be assessed individually and in the context of and for the purposes of achieving the relevant statutory purpose. 152 Secondly, the FWO submitted that Mr Chen had neglected to refer to the clear line of authority in cases arising under the FW Act following Fair Work Ombudsman v Ramsey Food Processing Pty Ltd (No 2) [2012] FCA 408, in which Buchanan J said at [8]: A submission was made by the respondents that some consideration should be given to reducing the amount of the penalty imposed on one or other of the respondents to account for the intimate connection between the actions of the first respondent and the conduct of the second respondent. As I understood the submission, it was that there was a risk of punishing twice for the same conduct - i.e. punishing both the first and second respondents for the conduct of the second respondent. The submission appeared to rely on the judgment of Mansfield J in Australian Prudential Regulation Authority v Holloway (2000) 45 ATR 278; [2000] FCA 1245, although I do not understand how it could do so. In that judgment Mansfield J fixed lesser penalties on Mr Holloway, the "alter ego" of Holloway & Co, than on Holloway & Co. In the legislative scheme which his Honour was applying no distinction was made between the maximum penalty that could be applied to corporations and the maximum penalty that could be applied to individuals. That is not the case here. The present legislative scheme fixes quite different (and much lower) penalties for individuals than for corporations. The culpability of each respondent must be assessed individually and in the context set by the maximum penalty prescribed in each case. I reject the suggestion, if this was what was intended, that either or both respondents might have the benefit of any reduction in penalty because they were jointly, as well as individually, culpable. 153 The FWO's reply submissions listed a large number of decisions of the Federal Circuit Court in which Ramsey Food Processing had been applied and both directors and companies had been made the subject of separate penalties. It was submitted that a significant number of cases have involved imposition of penalties on shareholder respondents as well as their company without specifically referring to Ramsey Food Processing. For example, Barker J in Fair Work Ombudsman v Han Investments Pty Ltd [2017] FCA 623 at [132]-[135] rejected a submission that a shareholder/beneficial owner should not be penalised for her role in the contraventions of her three companies. 154 Thirdly, it was submitted that the FW Act allows for, and its purpose is achieved by, imposing penalties on both New Shanghai Charlestown and Mr Chen. Section 546(2)(b) of the FW Act sets out the maximum penalty that can be imposed on a body corporate in relation to its direct liability. Section 550 of the FW Act imposes accessorial liability for persons involved in such contraventions. Those provisions therefore act to protect the public by making each entity or person that is responsible for the unlawful conduct accountable for their conduct and separately penalised. That is particularly apposite given that New Shanghai Charlestown and Mr Chen are distinct legal entities for which it is not disputed that liability can be found. The fundamental distinction between the two is reflected in the differing maximum penalties. Moreover, as the High Court pointed out in Hamilton v Whitehead (1988) 166 CLR 121 at 128, there was nothing conceptually wrong in prosecuting both the managing director of a company and the company for the same conduct. This situation was addressed by Foster J in Minister for Sustainability, Environment, Water, Population and Communities v Woodley [2012] FCA 957; 194 LGERA 290, a case concerning illegal lobster fishing, where his Honour said at [66]: Whilst Mr Woodley is clearly the controlling mind of Venture, that fact does not mean that only one penalty is appropriate or that a purely nominal penalty should be imposed upon one or other of the respondents. This is particularly the case where, as here, much greater maximum penalties are applicable to corporations than to individuals (see Fair Work Ombudsman v Ramsey Food Processing Pty Ltd (No 2) [2012] FCA 408 at [8] (per Buchanan J)). Venture was, after all, the trading vehicle for the commercial fishing activities conducted by Mr Woodley. It would have been the repository of the financial rewards from the contravention, had any lobsters actually been caught in the Reserve. 155 The FWO submitted that, having erected the structure of a corporation, Mr Chen could not rely upon New Shanghai Charlestown's status as a separate legal entity when it suited him, and then reject that status when inconvenient. It was submitted that the doctrine of approbation and reprobation precludes a person who has exercised a right from exercising another right which is alternative to and inconsistent with the right that has been exercised: Commonwealth v Verwayen (1990) 170 CLR 394 per Brennan J at 421.7. The FWO relied upon the comments of Young J in Morgan v 45 Flers Avenue Pty Ltd (1986) 10 ACLR 692 at 694-5: Unfortunately, it very often happens in cases in this court that a person has arranged his affairs for commercial or fiscal reasons employing a particular structure, which with respect to creditors and the Government he expects to be recognized as no sham, but when it comes to a dispute with his former wife or former business associates it is not in his interests to maintain the structure and he pleads before this Court that one must not look at the structure at all but rather at the "realistic" or "practical" effect of what has happened. I do not find this sort of submission attractive. So long as the law permits people to erect structures which have meaningful legal consequences then if a person elects to erect such a structure he must take the consequences of such erection for better, for worse, for richer or poorer, in commercial sickness or commercial health. 156 Fourthly, the FWO submitted that the FW Act, like other liability schemes, provides for contraventions against persons and other entities for the same acts, whether direct or accessorial, citing as examples s 11.2 of the Criminal Code (Cth) and s 79 of the Corporations Act 2001 (Cth). It was submitted that the capacity for dual liability is the outcome of legislative intention and cannot be seen to be accidental. Reliance was placed on the comments of Biscoe J in Leichhardt Council v Geitonia Pty Ltd (No 7) [2015] NSWLEC 79, in which his Honour said, in the context of the Environmental Protection and Biodiversity Conservation Act 1999 (Cth) and having regard to United States legislation which allowed for offsetting penalties for related entities: 62 In all the Australian avoidance of double penalty decisions to which I have referred, both the one man company and its man were fined substantial amounts. It was acknowledged in Greentree and Kinnarney that the "total" fines imposed on them should be appropriate in the circumstances of the case - a principle analogous to the totality principle. In ABB, Greentree, Kinnarney and Palfrey (but not Mouawad) heavier fines were imposed on the corporation compared with the individual, taking into account that there were heavier maximum statutory penalties for corporations compared with individuals. In ABB, the ratio between the two (20:1) was reflected precisely in the fines imposed. In Greentree the ratio of the maximum statutory penalties for corporations and for individuals was 10:1 but the ratio of the fines imposed was 2:1, which appears to have been the product of instinctive synthesis. In Mouawad the same fine was imposed on the corporation and the individual. Where there was no difference in the maximum statutory penalties, the individual was fined substantially more than the corporation: Keir. In the present case, there is no difference in the statutory maximum penalty for a corporation and an individual. 63 On one view, a logical way to avoid double penalty in a case such as the present, where the individual is the sole shareholder and alter ego of his company (at least where the maximum statutory penalty for each is the same), is to impose a fine on the individual and only a nominal (or no) fine on his company. That would accord with the result under the United States Guidelines Manual. But none of the Australian authorities to which I have referred have taken (nor have they explicitly considered) that view. The explanation may lie in the proposition that avoidance of a double penalty is to be taken into account with other considerations, and that other considerations such as the sentencing objectives of deterrence, denunciation and punishment still require more than a nominal fine to also be imposed on the one man company. This suggests that although Mr Gertos, as the guiding mind behind the offences committed by Geitonia and indeed GRC, should bear the heaviest fine, Geitonia should also bear a fine that is not nominal. 157 It was submitted on behalf of the FWO that Mr Chen was the creator of the exploitative scheme and the guiding mind behind the contraventions, which were objectively serious. There was a public interest in imposing penalties on both New Shanghai Charleston and Mr Chen to achieve the purposes of both general and specific deterrence. 158 After the penalty hearing, the Full Court handed down its decision in Australian Competition and Consumer Commission v Cement Australia Pty Ltd [2017] FCAFC 159. The Full Court relevantly observed: 363 Thirdly, the ACCC submits that there is a more appropriate approach to common ownership, namely that the Court can take this into account in the exercise of its discretion. For example, where there are close economic relationships between two contravenors, it may be proper for the Court to ultimately reduce the separate penalty imposed on each contravenor - or decline to impose any penalty on one of the contravenors - on the basis that any penalty imposed on one contravenor will ultimately be borne by the other: Australian Competition and Consumer Commission v Visy Industries Holdings Pty Ltd (No 3) (2007) 244 ALR 673 at [294] per Heerey J; Australian Competition and Consumer Commission v Commercial and General Publications Pty Ltd (No 2) [2002] ATPR 41-905; [2002] FCA 1349 at [27] per Heerey J. 364 The ACCC contends that the appropriate approach in order to take into account common ownership (such as in this case) is first, to identify the respondent with the greatest responsibility for each contravention (the 'lead' contravenor) and determine the appropriate penalty for that respondent that achieves specific and general deterrence, and secondly, to determine the appropriate penalty for the remaining corporate respondents involved in the contraventions and, in doing so, to take into account the fact that a significant penalty is already to be imposed on the lead contravenor. 365 The ACCC concludes by submitting that, although a close economic relationship between contravenors may justify a reduction in the separate penalties imposed on one or both of them, it does not follow that it justifies a single penalty being imposed on related contravenors jointly and severally. The ACCC submits that the contravenors made deliberate choices to conduct their business through separate legal entities and therefore must take both the benefits and burdens that come with separate legal personality: Australian Competition and Consumer Commission v Origin Energy Limited [2015] FCA 55 (Origin Energy) at [62]-[64] per White J. 159 The weight of authority does not support the FWO's contention that the relationship between New Shanghai Charlestown and Mr Chen is irrelevant. However, nor does it provide much, if any support, for the proposition that, in the circumstances of this case, Mr Chen should receive no direct penalty at all. That is particularly so in the absence of any evidence as to the financial position of New Shanghai Charlestown. 160 In the circumstances of this case, the weight that should be attached to the relationship between New Shanghai Charlestown and Mr Chen should be limited. If persons like Mr Chen choose to avail themselves of the advantages of a corporate structure, which includes such things as limited liability, asset protection and tax advantages, there is a limit to which they can then seek to rely upon the disadvantages of that structure, in circumstances where it has been the primary vehicle by which they have engaged in serious contraventions of workplace laws. In all the circumstances, the appropriate course is therefore to take into account the relationship between Mr Chen and New Shanghai Charlestown, but for it to have a limited effect on the ultimate penalty to be imposed. That is particularly the case where the maximum penalty available for each group of underpayment contraventions is well below the illegal benefits that were obtained and therefore makes it difficult to arrive at a final penalty which adequately advances the need for general and specific deterrence. 161 The need for both general and specific deterrence in this case is substantially heightened by the conduct of Mr Chen in deliberately directing and contributing to the creation of false employment records and their production in response to the FWO's notice to produce. That deception was only detected by the eagle-eyes of the Fair Work Inspector, and might otherwise have permitted the contraventions to continue to this day. In those circumstances, Mr Chen has a very weak case for any reduction of penalty by reason of his ownership of New Shanghai Charlestown, let alone for no direct penalty being imposed at all. 162 Mr Chen's case for contrition and remorse was difficult to assess. The overall impression he conveyed was more of sorrow at having been caught, than of remorse for having engaged in the conduct in the first place. Had the matter proceeded to a hearing, there would have been little reason to impose anything less than the maximum penalty available, making the 20% discount for cooperation proposed by the FWO a real and substantial advantage accruing to him and to New Shanghai Charlestown, as well as Ms Jenna Xu and Ms Sarah Zhu. 163 The most compelling case for mitigation in assessing any direct penalty that might be imposed on Mr Chen was advanced in oral submissions on his behalf. It was convincingly pointed out by his counsel that he and New Shanghai Charlestown, at his direction, had commenced full and complete cooperation with the FWO from November 2014, which was the time at which solicitors were engaged to provide specialist workplace relations legal advice. There was no evidence and no suggestion that anything other than full and complete cooperation had occurred since November 2014. That cooperation should be accepted as an important mitigating factor, at least obviating the need to call for submissions as to why the FWO penalty range should be adhered to. There is a public interest in encouraging people to cooperate with the regulator. For that reason, there should be seen to be a real benefit in such cooperation, as otherwise the worth in doing so may be questioned. 164 A second argument made on behalf of Mr Chen, accruing also to the benefit of New Shanghai Charlestown, and collaterally, for parity reasons, to the benefit of Ms Jenna Xu and Ms Sarah Zhu, is that as at the end of June 2015, the solicitors acting for New Shanghai Charlestown and Mr Chen had accepted the underpayment figure and begun a discussion with the FWO of the timing as to when that amount would be made good. The rectification of the underpayments commenced on 14 July 2015. While it had been suggested on the company's behalf that there should be a longer payment period, that was only raised as a possibility and, once rejected, the payment sought by the FWO commenced almost immediately. Once again, those submissions should be accepted and, again, such cooperation should be, and be seen to be, appropriately recognised. 165 The third factor that it was submitted should be taken into account, again to the benefit of Mr Chen and through him New Shanghai Charlestown, was Mr Chen's voluntary and candid participation in a recorded interview with the FWO on 26 February 2016. That submission should be accepted. The transcript of the interview indicated full and complete cooperation on Mr Chen's part, frank admissions of wrongdoing and an acceptance of responsibility, with no attempt to try and blame anyone else or excuse his actions. 166 While the evidence as to the training and future compliance to be provided to New Shanghai Charlestown was less compelling, it does to an extent give some comfort that future contravention by the company is less likely. While I am not satisfied that this conduct warrants a departure from what the FWO has proposed in favour of a more lenient penalty, it is a factor that points away from the need to consider going beyond the regulator's proposal and calling for submissions as to why that should not occur. But for the measure of cooperation considered above - suggesting some degree of contrition and an asserted firm determination not to contravene again - there would have been no reason to go below the maximum penalty after the 20% cooperation discount. That inclination, to the extent that it is demonstrated on the evidence and given some weight, should not be left in a vacuum. That is especially so where the deliberate and persistent nature of the company's contravention and the attempt to thwart the FWO's investigation are more reliable indicators of the risk of repetition than bare assertions, even on oath. The intention of New Shanghai Charlestown and Mr Chen to mend their ways needs to be supported and reinforced with a suitable specific deterrence penalty. General deterrence also remains a vitally important consideration.

Submissions in relation to Ms Sarah Zhu 167 The FWO's submissions in relation to Ms Sarah Zhu highlighted various aspects of the circumstances surrounding her involvement in the contraventions by New Shanghai Charlestown. Ms Sarah Zhu was employed by a separate company, NSH Restaurant Pty Ltd, in the role of human resources manager, earning $100,000 per annum. She also held that title in respect of New Shanghai Charlestown's business. There is limited evidence as to her role, but she admitted that her duties included processing payroll and arranging for the payment of wages. She also created and maintained records in respect of the employees. She performed other human resource functions, including in relation to contracts, job advertisements, enquiries in relation to leave entitlements and advising New Shanghai Charlestown and/or Mr Chen on compliance with industrial obligations, including employee entitlements under the Award. 168 Before her role in the business of New Shanghai Charlestown, Ms Sarah Zhu completed a university degree and was employed by PricewaterhouseCoopers in China, who sponsored her to come to Australia to work for PwC Australia in graduate recruitment. As part of her later employment in the role of human resources manager, she was sponsored by NSH Restaurant Pty Ltd on a skilled migration program. Despite this, and despite being employed on a significant wage, she asserted that she had no qualifications or formal training in human resources management. It is plain, however, that she had sufficient training or capacity to carry out the directions given to her in her role, including the creation of false records. 169 Ms Sarah Zhu was subject to the direction of Mr Chen and/or Ms Jenna Xu in respect of the hourly rates of pay to be paid to the employees. She knew that the Award applied to those employees and the actual rates of pay that were paid to them. She knew that those rates of pay were below the award entitlements. Although she provided Mr Chen with advice as to the correct rates, she continued to process payments that did not accord to employees their proper entitlements. She took no steps to ensure that New Shanghai Charlestown was complying with its obligations after becoming aware of the complaint in 2014. She played an active role in the creation of the false records and knew that they were false. Although not directly involved in production of the documents to the FWO, she was plainly aware that this was intended and was the ultimate purpose of creating the false documents in the first place. 170 Counsel for Ms Sarah Zhu submitted that the penalty range suggested by the FWO was too high, primarily on the basis that the factors that led to her involvement in the contraventions were not of her own making and that she was vulnerable to the dictates of Mr Chen. 171 The submissions for Ms Sarah Zhu sought to place her in a parallel position of vulnerability to that of many of the employees of New Shanghai Charlestown by reason that she was also from a non-English speaking background and also working in Australia on a 457 visa, that visa being conditional upon employment and sponsorship by NSH Restaurant Pty Limited. However, the comparison is not apt. A distinction must be drawn between vulnerability to being exploited, which is a position of victimhood, and supposed vulnerability by way of reduced ability to resist participation in illegal activity, which is a position of participation. In no sense was Ms Sarah Zhu a victim of the conduct. If this aspect of Ms Sarah Zhu's circumstances is really mitigation at all, it cannot be given much weight. That is so both as a matter of public policy in requiring individuals to put compliance with the law ahead of their personal interests, and having regard to Ms Sarah Zhu's knowledge that the law was being disobeyed for the entire period of over 16 months. Moreover, she took an active role in the attempt to thwart the FWO investigation. 172 The written submissions for Ms Sarah Zhu attempted to downplay her role by referring to her supposed lack of autonomy or decision-making power as to the hours of work of any of the employees, the rates they were paid or the terms and conditions upon which they were retained. Reliance was placed on her acting upon data that was provided to her in a spreadsheet with formulae already entered into it. It was submitted that she was directed by Mr Chen simply to populate the spreadsheet each week with the names of the relevant employees and information about the hours worked by them as given to her by Ms Jenna Xu, and then to do the calculations for gross and net wages. It was submitted that she was not able to change the formula and was not consulted about the setting of rates of pay, as that was all done by Mr Chen and Ms Jenna Xu. It was submitted that she rarely attended the restaurant, having perhaps only done so on one or two occasions, and that she had no role in the rostering of employees. Her state of knowledge about the hours actually worked and the work actually performed was apparently limited to what she was told. It was emphasised that Ms Sarah Zhu had alerted Mr Chen to the correct Award rate and had been rebuffed. 173 The value of these asserted factors in mitigation must be limited. The public interest in ensuring compliance with workplace laws is not served by excusing a person's ongoing participation in a contravention by reason only that they have raised the illegality of the conduct as an issue with their superiors and been rebuffed. That is especially so where the contravening conduct was far from momentary, and involved considerable time and effort to execute. In that regard, the factors identified above on Ms Sarah Zhu's behalf must be seen in light of the entirety of her conduct, which included knowledge for the entirety of the Assessment Period that workers were not being accorded their proper entitlements and active involvement in the attempt to thwart the FWO's investigation. 174 It was submitted that by reason of Ms Sarah Zhu's situation, including the familial, cultural and visa factors, she "not unreasonably, felt that she could do no more and continue to pay the wages and the way in which she been directed to do". Issue was taken with the FWO's submissions to the effect that beyond bringing the underpayment issue to the attention of Mr Chen, Ms Sarah Zhu somehow had an ability to do something more. The question rhetorically posed on Ms Sarah Zhu's behalf was "what more could she have done?" It was submitted that it was not within the scope of her employment, nor did she have the capacity, to prevent, rectify or remedy the underpayment contraventions. She could not pay the employees the correct rate of pay as she did not have the authority to set the pay rates or break the bank account. It was submitted that it was "not feasible" for her to refuse to process the payroll as a result of her familial, cultural and economic factors, and that had she not processed the payroll, the employees would not have been paid at all. It was therefore submitted that her attempt to have Mr Chen comply with the award should be treated as a mitigating circumstance rather than something for which she should be penalised. 175 In response, the FWO's reply submissions pointed out that every accessory to a contravention may variously claim that they were only acting under direction or by reference to organisational hierarchy, personal ties and self-interest. The FWO asserted that such submissions should be rejected as they misconstrued the nature of Ms Sarah Zhu's obligations and liability under the FW Act. It was pointed out that there is no statement of principle to be had that precludes a finding of accessorial liability where individuals are under the direction or control of another; rather, individual responsibility turns on the facts of each case. What is relevant is actual knowledge, active participation or a practical close connection to the conduct or assent to the conduct. Similarly, the FWO submitted that no regard should be had to Ms Sarah Zhu's Chinese cultural background, social ties through her family with Mr Chen and being "obedient". Reliance in that regard was placed on Fair Work Ombudsman v Wongtas Pty Ltd (No 2) [2012] FCA 30, in which two respondents who were foreign nationals claimed that traditional cultural views regarding the importance of pregnancy and the need for rest and protection of pregnant women contributed to their illegal actions in relation to a pregnant employee. In fixing the appropriate penalty, this Court rejected those submissions as follows: The second and third respondents have raised cultural issues with regard to the decision concerning their actions in relation to Ms Ye. Both the second and third respondent, and Ms Ye, are former nationals of the People's Republic of China. Mr Wang has resided in Australia since 14 November 1987, having been born in the People's Republic of China on 22 March 1963. Mr Wang commenced trading as a sole trader in the printing business in 1993 but after 1996, when Wongtas was incorporated, Mr Wang operated the company with the third respondent, his wife. The submission was made by them that they had traditional views concerning the importance of pregnancy and the need for rest and protection of pregnant women. Whilst the second and third respondents may well have held such traditional beliefs, they cannot prevail over the statutory requirements relating to the employment of personnel under the FWA and constitute no excuse for the contraventions. 176 The cultural and related factors relied upon by Ms Sarah Zhu cut both ways. While they might be seen to reduce, to some limited extent, her moral culpability, they also indicate that the need for specific deterrence is heightened. While it was submitted on behalf of Ms Sarah Zhu that the cultural factors contributing to her conduct are no longer in play, it is not apparent why that is so apart from her no longer being reliant on a visa. Balancing those factors produces little advantage either way. As a matter of evidence, the cultural factors were less than compelling and did not properly explain the duration of the contraventions. As a matter of public policy, the cultural explanation for the contraventions can only be given limited weight. 177 The submission on behalf of Ms Sarah Zhu also sought to characterise her conduct and circumstances as being very different to those of Mr Chen and Ms Jenna Xu. As with all of the respondents, reliance was placed on a lack of prior contraventions, which was said to entitle her to a significant discount on penalty as a first-time contravener, relying on Finance Sector Union v Commonwealth Bank of Australia [2005] FCA 1847; 147 IR 462; 224 ALR 467 at [44]. In that case, Merkel J observed that the penalty imposed would have been significantly higher if the respondent bank had been involved in other relevant contraventions or if there had been specific evidence of actual financial harm suffered by employees as a result of the unlawful conduct. The first aspect was absent for the present respondents, but the second aspect was not. The harm in this case was real and substantial. In any event, a first time contravention does not, as a matter of principle or practice, always require a substantial discount for a first-time contravener. That is especially so in a case involving very serious contraventions over a considerable period of time. These submissions were also a part of the foundation for the assertion that a 25% discount, rather than 20%, was appropriate, which has already been rejected. 178 It was submitted that not only was Ms Sarah Zhu not in the senior management of New Shanghai Charlestown, she was not even employed by that company. The title of "human resources manager" was said to belie her rather more modest role in that she had no relevant decision-making power. It was pointed out that there was no evidence that she benefited directly from the contraventions, although it was acknowledged that she received a fixed salary, albeit with no incentives or bonuses linked to performance. 179 Counsel for Ms Sarah Zhu objected to the suggestion in the FWO's submissions that Ms Zhu should be viewed as having the same level of culpability as Ms Jenna Xu. In particular, it was denied that it was a conscious decision on Ms Sarah Zhu's part to participate in the conduct, pointing out that she was not consulted by Mr Chen and involved in the decision-making about the hours of work or rates of pay. It was submitted that she did no more than carry out the directions of those two more senior persons, and did so in the context of the familial, cultural and visa obligations already referred to. 180 It was submitted that Ms Sarah Zhu had expressed genuine contrition for her role and sought to characterise her behaviour as simply obeying the instructions of Mr Chen because she wanted to stay in Australia, acknowledging that she should not have obeyed those directions. It was described as unwarranted for the FWO to submit that Ms Sarah Zhu's expression of contrition was self-serving and should not be given any weight. It was submitted that the FWO should have acknowledged the very different role that she played. It was submitted that the correct conclusion to reach is that she had participated in the contraventions through misplaced obedience and was now deeply remorseful having done so. 181 In relation to specific deterrence, it was submitted that consideration should be given to the "singular circumstances of this case" that were "one-off and unlikely to occur again". That was said to be so because it is highly unlikely that Ms Sarah Zhu would again be obedient to the directions of Mr Chen and Ms Jenna Xu if she knew the directions to be unlawful. She now has residency and is no longer reliant on a visa to remain in Australia. It was submitted that the Court could be confident that if similar circumstances arose, she would not feel any obligation to remain in that employment. It may be observed that this degree of confidence was not established by the evidence. 182 It was submitted that in relation to general deterrence, Ms Sarah Zhu's practical inability to act independently of Mr Chen's direction or approval and inability to prevent or rectify the underpayment contraventions was significant. It was submitted that imposition of a significant penalty would send a harsh message to human resource or payroll personnel that they must resign from their employment if, having brought a contravention to an employer's attention and advised appropriate changes, the employer continues to underpay employees in the face of that advice. It was said that the Court should also be careful to avoid deterring such personnel from speaking out when they observe possible contraventions. 183 Again, the problem with the last of those submissions is that to give weight to them would be to endorse a course of action whereby a person may raise contraventions as an issue, be rebuffed, and continue to participate in the conduct for a considerable period of time until independently detected by the regulator. There is nothing wrong with sending the message that an employee should indeed resign if that is the only alternative to continuing to participate knowingly in illegal activity, ideally coupled with reporting the conduct, in a case such as this, to the FWO. That would rob a primary offender such New Shanghai Charlestown and its guiding mind, Mr Chen, of the means of having such conduct continue except by, in this case, Mr Chen's own hand. The submissions for Ms Sarah Zhu gloss over her knowing participation over a considerable period of time in what she knew, or should have known, were serious contraventions. They also gloss over the active role she took in the creation of false records for production to the FWO, as well as the very substantial income she was receiving. 184 Taken as a whole, the submissions advanced on Ms Sarah Zhu's behalf may be accepted insofar as they highlight certain aspects of the agreed facts and point out that she was in a different position to Mr Chen and did not have the same level of control or culpability. These are relevant factors that need to be, and are, taken into account. Nonetheless, for the foregoing reasons, and with consideration of Ms Sarah Zhu's circumstances as a whole, I am not satisfied that the submissions made on her behalf give rise to a proper basis for departing from the penalty range suggested by the FWO. Indeed, the FWO emphasised that it has submitted proposed penalties that reflect each respondent's culpability and known relevant factors, which is reflected in the higher penalties sought against Mr Chen as compared with Ms Sarah Zhu and Ms Jenna Xu. In this regard, I do not accept that the penalties as proposed by the FWO are inappropriate, having regard to Ms Sarah Zhu's particular circumstances. 185 While it may be accepted generally that Ms Sarah Zhu was not necessarily in the same position of control and did not have the same culpability as Mr Chen, there are serious aspects to her involvement in the contraventions, as highlighted by the FWO, which call for the imposition of a significant, as opposed to nominal, penalty. Those aspects included knowledge for the entirety of the Assessment Period that employees were not being accorded their proper entitlements and active involvement in the creation of the false time and wage records. While Ms Sarah Zhu's role might be seen to be less than that of Ms Jenna Xu, the duration of her illegal conduct was much greater and the facts disclose greater knowledge that what she was doing was wrong. In a regime in which there is no fault element, knowing that conduct constitutes illegality is a circumstance of aggravation: Reckitt Benckiser at [124]-[125], [131]-[132]. 186 The submissions put on behalf of Ms Sarah Zhu for a substantial reduction from the penalty range proposed by the FWO should not be accepted. Instead, the FWO submissions are compelling and should be accepted. Ms Sarah Zhu remains in the same position with New Shanghai Charlestown. She is well-paid relative to her responsibilities and has powerful incentives to keep that job. Having regard also to the serious and protracted nature of her conduct, there is a real need for specific deterrence that is not met by the relatively nominal penalty of $10,470 that her counsel proposed.

Submissions in relation to Ms Jenna Xu 187 Ms Jenna Xu has admitted to involvement in each of the underpayment contraventions and the failure to provide full-time employees with an arrangement for ordinary hours of work, albeit only from 12 September 2014 onwards. She has also admitted to making use of false records and failing to give employees a payslip. As the store manager of the restaurant responsible for the day-to-day management and supervision of employees, she was aware of the duties of the employees and provided direction in that regard. She was also aware of the basis upon which they were engaged, the hours of work, rates of pay, that payslips were not provided and that full-time employees did not take periods of annual leave. She, together with Mr Chen, would from time to time inform Ms Sarah Zhu as to the hourly rates of pay to be paid to each of the employees as agreed to by Mr Chen. Although Ms Jenna Xu did not herself set the pay rates or have authority to do so, she was responsible for paying the employees in cash by distributing the envelopes provided to her by Mr Chen. She admitted that, from at least 12 September 2014 onwards, she knew of the requirement to comply with the Award. She was also actively involved in the record keeping contraventions, especially in relation to the creation and production of false records to the FWO. 188 The written submissions on behalf of Ms Jenna Xu noted that she was educated in China and arrived in Australia on 25 November 2005. In 2000, she attended TAFE to learn English, but is not proficient in English language and cannot read English except for basic communications. She has needed the assistance of an interpreter to understand communications with her legal team. In 2007 and 2008, she worked as a casual employee in the kitchen in several Chinese restaurants. In about April 2008, she began working in Mr Chen's family's restaurant to Chatswood. She moved to work at New Shanghai Charlestown in about November 2010, where she was and remains employed as the "store manager". Although she held that title and position, she was never provided with any human resources education or training and was not advised about the relevant awards that applied to the employees. She did not set the pay rates and had no authority to do so. Although she accepted that she discussed with Mr Chen the rates that should be paid to employees, she did not determine or decide those rates. Outside the limited timeframe between 12 September 2014 and 20 November 2014, accessorial liability is not to be attributed to her. 189 It was submitted that a careful reading of both statements of agreed facts disclosed that Ms Jenna Xu had the least understanding of the Australian industrial relations landscape and only had knowledge of the relevant award from 12 September 2014. There was no evidence that she had an understanding of overtime rates, penalty rates and casual rates prior to that date. It was submitted that there was no suggestion that she benefited in any direct way from the contraventions. 190 It was submitted that Ms Jenna Xu is clearly sorry for her actions and had taken a very cooperative and constructive attitude from the commencement of the proceedings. This was said to constitute an acknowledgement and awareness of her wrongdoing. It was submitted that her attitude and cooperation, particularly in admitting wrongdoing, has saved public resources, including those of the FWO and this Court. 191 It was submitted that Ms Jenna Xu was not in any real position to prevent the contraventions, given that she did not set the rates of pay, did not know what the award requirements were and did not process the pay; rather, she sent timesheets to Ms Sarah Zhu. It was therefore submitted that, having regard to her limited knowledge of employee entitlements, limited language skills and modest employment background, and the narrow remit of her authority in the small timeframe for which accessorial liability attached to her, only a very modest penalty should be imposed. It was submitted that general and specific deterrence considerations would not be advanced by imposing a penalty that was not "very modest", because a court would not secure better deterrence by imposing a burdensome penalty on an individual whose autonomy and independent participation in the breaches was so narrowly limited. 192 Separately, in relation to the contraventions concerning the production of false employee records, it was submitted that Ms Jenna Xu had accepted that her conduct was wrong and adopted the penalty range submitted by the FWO of $1,904 to $2,176. 193 It was submitted on Ms Jenna Xu's behalf that, in all the circumstances, a total penalty for the prior contraventions of $4,148 was appropriate (as against the FWO range of $14,688 to $19,584). 194 The FWO's submissions in relation to issues of autonomy and limited responsibility are in large measure addressed in relation to Ms Sarah Zhu at [171]-[172] above. Similar observations should be made in relation to Ms Jenna Xu, albeit that the duration of her involvement in the conduct was much less. Ms Jenna Xu, like Ms Sarah Zhu, had the moral choice to walk away rather than continue to participate in the offending, especially in relation to the deliberate attempt to thwart the FWO investigation by the creation (in the case of Ms Sarah Zhu) and production (in the case of Ms Jenna Xu) of false employment employee records at the direction of Mr Chen on behalf of New Shanghai Charlestown. The FWO submitted that Ms Jenna Xu's lower culpability was adequately reflected in the lower range of penalties sought, which was generally between 30% and 40% of the maximum available after the cooperation discount. That submission should be accepted.

Steps four and five: determination of appropriate penalties in isolation and consideration of adjustment for totality 195 In this case, it is difficult for any of the individual penalties imposed on New Shanghai Charlestown to be excessive once the generous cooperation discount of 20% has been applied to the maximum penalty. The effect of the grouping was to produce groups of contraventions that, comprising extensive aggregated conduct, were at the highest levels of objective seriousness. The grouping effect meant that there was also limited scope for the totality principle to do any meaningful work. 196 A similar conclusion applies to the contraventions by Mr Chen and Ms Sarah Zhu. That is because the process of aggregation meant that each group of contraventions was made up of a larger number of what would otherwise have been many more contraventions. This also applies to Ms Jenna Xu, though to a lesser extent, having regard to the reduced period for which accessorial liability attaches to her. As already observed by reference to R v Glynatsis at [65]-[66], the consequence of this grouping of contraventions is to produce a significant degree of in-built leniency, akin to the effect of "rolled up" charges in criminal proceedings. In this case, it also had the practical effect, which is required to be taken into account in assessing the objective seriousness of the groups of contraventions, both in isolation and as a whole, that the conduct involved was at a very high level of seriousness, having regard to the number of staff affected, the duration and, in particular, the total amount of the underpayments. The underpayments in each category were well over the maximum penalty that could be applied, making the benefit obtained by the conduct disproportionate to the potential detriment in the event of being caught, an imbalance which is compounded also by the difficulty faced by the regulator in ascertaining the full extent of the contravening conduct and underpayments. 197 The above reasoning does not limit the need to consider the appropriate penalties in isolation. 198 As highlighted by the FWO, the need for general and specific deterrence in the present case is significant. The contraventions encompassed a widespread, systematic and prolonged failure to accord employees their basic entitlements. The seriousness of this conduct is underscored by the extent of the contraventions, the respondents' various degrees of knowledge that the restaurant was not according employees their proper entitlements, and the fact that many of the employees were vulnerable, the majority being from non-English speaking backgrounds and working in Australia on visas. 199 While conduct that is not the subject of the proceedings cannot be taken into account directly, the need for general deterrence is informed by the reality that the conduct has occurred in the hospitality industry. The evidence and decisions relied on by the FWO point to there being a significant problem with compliance in that industry. Civil penalties must be fixed with a view to ensuring that the penalty is not to be regarded as an acceptable cost of doing business: Singtel Optus Pty Ltd v Australian Competition and Consumer Commission [2012] FCAFC 20; 287 ALR 249 at [62]-[63], Australian Competition and Consumer Commission v TPG Internet Pty Ltd [2013] HCA 54; 250 CLR 640 at [66]; Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd at [58]. 200 The failure to produce accurate records, and the choice to instead create and produce false records, supports a clear and ready inference that all the respondents were aware that they were contravening the law, if not long before in the case of Ms Jenna Xu. It constituted a deliberate diversion of the FWO from its statutory duty. It was an attempt to conceal what had taken place and prevent enforcement action being taken. It may well have facilitated the illegal conduct continuing. It certainly impeded an effective investigation taking place until accurate records were produced. 201 Moreover, the creation and production of false records to the FWO for the inescapable purpose of thwarting the FWO's investigation can be taken into account not just in relation to the regulation breaches, but also as indicating the moral culpability of each of the respondents in relation to the contraventions this was evidently designed to conceal, albeit mainly in relation to New Shanghai Charlestown, Mr Chen and Ms Sarah Zhu. The wilful deception engaged in by New Shanghai Charlestown, Mr Chen and Ms Sarah Zhu, reflects their attitude toward the primary contraventions and elevates the need for general and specific deterrence in relation that antecedent conduct. In the case of Ms Jenna Xu, even though it has not been shown that she knew what the Award obligations were until the FWO notice to produce was served, it is clear that she knew from the time of the creation and production of the false records and was an active participant in the attempted cover-up. 202 The conduct of New Shanghai Charlestown and Mr Chen was deliberate and systematic. Mr Chen was aware of the underpayment from at least July 2013 and took no steps to correct that. Significantly, the contraventions were engaged in notwithstanding efforts by the FWO to put Mr Chen and New Shanghai Charlestown on notice of its obligations under the FW Act and the Award. 203 Similarly, Ms Sarah Zhu's involvement in the contraventions was deliberate and serious in nature. It has been suggested that there was little more that Ms Sarah Zhu could have done in the circumstances. That must be rejected. Ms Sarah Zhu, while subject to certain contextual pressures, acted in her own interests. Her participation in the contraventions by New Shanghai Charlestown cannot be described as other than deliberate and with knowledge of the underlying illegality. As a matter of public policy, this Court is required to fix penalties to deter persons in similar situations from giving precedence to their own interests over compliance with workplace obligations. Similarly, there is a public interest in sending the message that a person's involvement in a contravention will not be excused where he or she seeks to raise the issue of the contravention with superiors, but nonetheless continues to participate in the underlying conduct. Indeed, such a course of action tends to indicate a high degree of knowledge on the part of the contravener that what they are doing is wrong. 204 It was submitted that Ms Jenna Xu had the least knowledge of the respondents of workplace laws and the duration of her offending was limited. However, that is counterbalanced, to some extent, by the significance of her role as the store manager of the business. Further, it is clear that for the periods relevant to her as an accessory to the contraventions, she was aware of the Award and aware that workers were not being paid their proper entitlements. That knowledge must be seen in light of the deliberateness reflected by the production of false documents to the FWO. 205 As pointed out by the FWO, the need for specific deterrence in relation to each of the respondents is also informed by the fact that New Shanghai Charlestown continues to operate and that each of Mr Chen, Ms Sarah Zhu and Ms Jenna Xu continue to hold their respective positions in relation to the business. It should also be taken into account in relation to New Shanghai Charlestown and Mr Chen that previous attempts to ensure compliance by the FWO have not been successful. 206 It may be accepted that some oversight and training will be provided to New Shanghai Charlestown and Mr Chen by their solicitors, suggesting a commitment to future compliance. This accrues to the benefit of each of the respondents in providing slight comfort that the likelihood of future contraventions and the need for specific deterrence are reduced. 207 The fact that Mr Chen, Ms Sarah Zhu and Ms Jenna Xu have each expressed remorse and acknowledged the wrongfulness of their actions must be acknowledged and given due weight. However, the sincerity of this contrition is difficult to accept fully and without qualification in all the circumstances, carrying, as it does, the impression of remorse more at having been caught, than genuine regret for their actions, and the consequences for those affected. The weight that should be accorded this factor is slight. 208 For the foregoing reasons, the conduct of New Shanghai Charlestown, Mr Chen and Ms Sarah Zhu warranted imposition of a penalty at the highest end of the available penalty range applicable, after appropriate credit is given for their cooperation. This requires proper regard to those maximum penalties, not the discounted maximum arrived at by the FWO by the application of the 20% discount for cooperation, being one of the areas in this context in which criminal law principles are appropriately influential, including Markarian v The Queen [2005] HCA 25; 228 CLR 357 at [30]-[31], in relation to the approach to be taken to maximum penalties.

Penalty to be imposed on New Shanghai Charlestown 209 Weighing up all of the competing considerations, the discount of 20% for cooperation was, as already indicated, generous and somewhat greater than I would have been inclined to arrive at independently, especially as the FWO's proposed penalties for New Shanghai Charlestown reduce that discounted maximum further. The conduct within the spectrum of possible contraventions was, in the greater part, grave, especially when regard is had to the attitude towards that conduct manifested in creating false records and producing them in purported response to a FWO notice to produce. As in the criminal jurisdiction, it is no longer appropriate to describe conduct such as this as being "in the worst category": see R v Kilic [2016] HCA 48; 259 CLR 256 at [17]-[20]. However, had this matter proceeded to trial and the contraventions now admitted been found to been proven, it would have been entirely open to have characterised this as being sufficiently grave to warrant imposing the maximum prescribed penalty for most, if not all, of the contraventions. That is especially so having regard to the inherent leniency afforded by the grouping exercise under s 557(1) of the FW Act, at least where that has aggregated a very large number of what would otherwise have been separate contraventions. After such a successful trial, the maximum penalty open to being imposed on New Shanghai Charlestown would have been $544,000. 210 The Markarian benchmark against which a proposed penalty is to be assessed is not the discounted maximum, but rather the statutory maximum, albeit constrained by the submissions made by the regulator and any agreement reached. Viewed in that way, further reducing the penalty to be imposed on New Shanghai Charlestown to the top of the agreed FWO range of $301,920, a reduction of $242,080 (or about 44%) from the statutory maximum is a very substantial reduction for cooperation and all other available mitigation. It also leaves ample scope to address the concern of a double penalty arising by reason of Mr Chen being the sole natural person standing behind the company, as addressed below. 211 The individual penalties are set out in the table for New Shanghai Charlestown in the schedule to this judgment.

Penalty to be imposed on Mr Chen 212 As already indicated, the discount of 20% for cooperation is somewhat greater than I would have been inclined to arrive at, especially as the FWO's proposed penalties for Mr Chen reduce that discounted maximum further. Mr Chen's accessorial conduct, as the principal guiding mind of New Shanghai Charlestown, within the spectrum of possible contraventions was, in the greater part, grave. That is especially so when regard is had to the attitude towards that conduct manifested by Mr Chen directing that false records be created and produced to the FWO in an obvious attempt to avoid detection. 213 Again, had this matter proceeded to trial and the contraventions now admitted been found to have been proven, it would have been entirely open to have characterised the underlying conduct as being sufficiently grave to warrant imposing on Mr Chen the maximum prescribed penalty for most, if not all, of the contraventions, a total of $98,600. The FWO's proposed upper limit penalty of $54,672, when measured against the maximum penalty benchmark of $98,600, amounts to a discount of about 45% from the statutory maximum. Not only does that amply reward the cooperation and every aspect of mitigation, it also amply addresses the concern of any aspect of double penalty arising from Mr Chen being the alter ego of New Shanghai Charlestown. Even imposing the top of the FWO range on both New Shanghai Charlestown and Mr Chen does not, in combination, amount to any excessive sanction being imposed directly or indirectly on Mr Chen. The top of the range proposed by the FWO remains appropriate overall, when proper regard is had to the overall conduct and the manifest need for both general and specific deterrence. 214 The individual penalties imposed are set out in the table for Mr Chen in the schedule to this judgment.

Penalty to be imposed on Ms Sarah Zhu 215 Weighing up all the competing considerations, once again the upper limit of the penalty range proposed by the FWO needs to be benchmarked against the statutory maximum, not the discounted maximum. In the case of Ms Sarah Zhu, $21,760 is to be benchmarked against the overall available maximum of $64,600, albeit recognising that her culpability was considerably greater for her role in creating the false records, than for the involvement in the underpayment of entitlements. Viewed in that way, an overall penalty of just over a third of the available maximum cannot be viewed as anything other than entirely reasonable. 216 The individual penalties imposed are set out in the table for Ms Sarah Zhu in the schedule to this judgment.

Penalty to be imposed on Ms Jenna Xu 217 Weighing up all the competing considerations, once again the upper limit of the penalty range proposed by the FWO needs to be benchmarked against the statutory maximum, not the discounted maximum. However, in this case, the top of the range proposed for Ms Jenna Xu deploys the same percentage ranges as for Ms Sarah Zhu. This does not sufficiently recognise Ms Jenna Xu's much shorter period of participation than Ms Sarah Zhu in relation to the underpayment of entitlements. For parity reasons, it is therefore appropriate to use the lower end of the FWO proposed range, which sufficiently gives account of the material, but still limited, differences in the case against Ms Jenna Xu as compared to the case against Ms Sarah Zhu. On that basis, the underpayment contraventions that Ms Jenna Xu was involved in (that is, excluding her involvement in the making of the false records) produce a lower-range total amount of $16,320, to be benchmarked against a similarly reduced overall maximum of $66,300 (excluding the maximum penalty for the making of the false records). That penalty amount, representing approximately 25% of the reduced maximum, could not be described as other than reasonable, and amply recognises the shorter duration of her participation. It produces an appropriate penalty for this aspect of Ms Jenna Xu's conduct. 218 As to Ms Jenna Xu's involvement in the making of the false records and producing them to the FWO, the top of the FWO range total is $2,176, against a statutory maximum of $3,400, or about 64%. That is an appropriate sanction for this conduct. 219 The overall penalty for Ms Jenna Xu is therefore $18,496. The individual penalties imposed are set out in the table for Ms Jenna Xu in the schedule to this judgment.

Totality 220 Application of the totality principle does not call for any reduction of the penalties imposed.

Declarations and orders 221 The declarations and orders set out prior to these reasons will be made, subject only to any corrections of a linguistic or grammatical kind suggested by any of the parties. The total penalties to be paid by each of the respondents are as follows: New Shanghai Charlestown $301,920 Mr Chen $54,672 Ms Sarah Zhu $21,760 Ms Jenna Xu $18,496 Overall total: $396,848

222 Each penalty is to be paid within 60 days of the date upon which the orders are made, that is, by 11 January 2018.

Postscript - observations about the laws proscribing the creation and production of false employee records 223 It should be observed that the conduct of making and producing false employee records in response to a FWO notice to produce was made the subject of only regulatory contraventions for creating and making use of false or misleading records, namely being contrary to reg 3.44(1) and (6) of the FW Regulations. As already observed, the maximum penalty for each contravention was only $17,000 for New Shanghai Charlestown and only $3,400 for each natural person. The conduct could also have been made the subject of a single civil remedy provision for failing to comply with the FWO notice by not producing the true records that were required to be produced (and were in fact produced in response to the second FWO notice to produce). Such a contravention is brought under s 539 of the FW Act (per item 32 of the table to s 539(2) in respect of s 712(3)), with a maximum penalty of 60 penalty units, at that time being $170 per penalty unit, which has since increased to $210 and is to be subject to indexation from 1 July 2020: see s 4AA of the Crimes Act 1914 (Cth). However, alleging such a contravention may not have captured the antecedent conduct of creating the false records, nor of using the false records by producing them in lieu of those sought by the FWO notice to produce. 224 The collective maximum penalty for all four respondents in respect of the record-based contraventions that were agreed to was only $54,400, yet the underlying conduct was essentially criminal in nature, evidently designed to conceal underpayments to 85 employees of over 10 times that aggregate maximum penalty amount, being $583,688.68, plus a range of other contraventions with other consequences for the employees concerned. On any view, this was a woefully inadequate sanction for such serious and premeditated conduct involving direction and collaboration. In other regulatory settings, such as in relation to compliance with notices under s 155 of the Competition and Consumer Act 2010 (Cth), the maximum penalty is two years' imprisonment. Even that may be inadequate for conduct as serious and calculated as occurred in this case, which in other settings often has the flavour of perverting the course of justice. The production of the false records to the FWO could have been the subject of a criminal prosecution for the offence of giving false or misleading information to a Commonwealth entity or a person exercising powers or functions in connection with a law of the Commonwealth, contrary to s 137.1 of the Criminal Code (Cth), which carries a maximum penalty of 12 months' imprisonment and/or a fine of $12,600. However, it should be observed that such proceedings could not be brought in this Court and instead would require parallel proceedings in a State court exercising federal jurisdiction, in keeping with most federal criminal offences. 225 Had this conduct not been detected, the primary contraventions could well have continued, unabated. Being able to lie to or otherwise deceive a regulator such as the FWO, yet face only minimal financial consequences if caught, has the potential to compromise the effectiveness of enforcement of federal industrial laws. The disparity between a substantial illegal gain and a manifestly inadequate sanction made the equation of cost and benefit one that offered every incentive to lie or deceive, and much less incentive to behave honestly. The existence of real sanctions is therefore necessary to provide a sufficiently powerful incentive to comply. 226 It appears that the inadequacy of the maximum civil penalties available under the FW Act has been addressed for circumstances such as these by the Fair Work Amendment (Protecting Vulnerable Workers) Act 2017 (Cth), which commenced on 15 September 2017. Under the regime established by those amendments, certain contraventions of the FW Act will now give rise to "serious contraventions" if found to have been deliberate and forming part of a systematic pattern of conduct: see s 557A. Significantly, this includes contraventions relating to record keeping failures and contravention of a modern award under s 45 of the FW Act. Where a serious contravention is established, the maximum penalty available is 600 penalty units for individuals, and 3,000 penalty units for bodies corporate, presently equating to $126,000 and $630,000 respectively per grouped contravention. 227 Relevantly, the maximum penalties available for an "ordinary" strict liability contravention of the record keeping provisions, contained in regulation 3.44 of the Fair Work Regulations, have also been increased from 20 penalty units to 60 penalty units, and from 100 to 300 penalty units for bodies corporate, presently equating to $12,600 and $63,000 respectively per grouped contravention. 228 The Explanatory Memorandum to that Act relevantly states as follows: The increase to these maximum penalties recognises that the current penalty levels for these contraventions are too low compared to other civil penalty provisions within the Act. This also acknowledges the important role employee records and payslips play in determining compliance under the Act; without reliable employee records, employees may be unable to prove their case and recover their minimum entitlements at law. If underpayments cannot be proved, employers may end up with a significant windfall, even if fined for contraventions relating to records under sections 535 and 536. This increase in the penalties is not designed to target those employers who genuinely overlook recordkeeping requirements. Rather, it is aimed at deterring the small minority of employers who deliberately fail to keep records as part of a systematic plan to underpay workers and disguise their wrongdoing. 229 The importance of ensuring compliance with the record keeping requirements under the FW Act is certainly made clear by this case. The decision of the Parliament to increase penalties for cases such as this appears entirely warranted. I certify that the preceding two hundred and twenty-nine (229) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Bromwich.

Associate: Dated: 10 November 2017 SCHEDULE Penalties imposed on New Shanghai Charlestown (NSC) - first respondent Nature of contravention of FW Act/FW Regulations Total under-payment Maximum corporate penalty after grouping Maximum corporate penalty after cooperation discount of 20% FWO submission on appropriate penalty range for New Shanghai Charlestown (NSC) Penalty sought by NSC Penalty imposed on NSC (maximum penalty for company) Low Range (% of maximum penalty after cooperation discount) High Range (% of maximum penalty after cooperation discount) Minimum rates - adult (s 45) $136,498.84 $51,000 $40,800 $28,560 $32,640 $28,560 $32,640 Clause 20.1 of the Award (70%) (80%) ($51,000) Clause A.2.5 of Sch A to the Award ($51,000) Minimum rates - junior (s 45) $2,058.00 Clause 20.3 of the Award ($51,000) Clause A.2.5 of Sch A to the Award ($51,000) Casual loading (s 45) $116,382.59 $51,000 $40,800 $28,560 $32,640 $28,560 $32,640 Clause 13.1 of the Award (70%) (80%) ($51,000) Clause A.5.4 of Sch A to the Award ($51,000) Saturday penalty rates (s 45) $112,114.53 $51,000 $40,800 $28,560 $32,640 $28,560 $32,640 Clause 34.1 of the Award (70%) (80%) ($51,000) Clause A.7.3 of the Award ($51,000) Sunday penalty rates (s 45) $117,663.05 $51,000 $40,800 $28,560 $32,640 $28,560 $32,640 Clause 34.1 of the Award (70%) (80%) ($51,000) Clause A.7.3 of Sch A to the Award ($51,000) Public holiday rates (s 45) $21,661.17 $51,000 $40,800 $24,480 $28,560 $24,480 $28,560 Clause 34.1 of the Award (60%) (70%) ($51,000) Clause A.7.3 of Sch A to the Award ($51,000) Overtime rates (s 45) $77,310.50 $51,000 $40,800 $24,480 $28,560 $24,480 $28,560 Clause 33.1 of the Award (60%) (70%) ($51,000) Superannuation (s 45) No evidence $51,000 $40,800 $24,480 $28,560 $24,480 $28,560 Clause 30.2 of the Award (60%) (70%) ($51,000) Arranging ordinary hours (s 45) N/A $51,000 $40,800 $12,240 $16,320 $12,240 $16,320 Clause 31.2 of the Award (30%) (40%) ($51,000) Cashing out annual leave (ss 44, 92) N/A $51,000 $40,800 $12,240 $16,320 $12,240 $16,320 ($51,000) (30%) (40%) Record keeping (reg 3.33) N/A $25,500 $20,400 $12,240 $14,280 $12,240 $14,280 Failing to keep records as required (60%) (70%) ($17,000) Creating false or misleading records (reg 3.44(1)) N/A $17,000 $13,600 $10,880 $12,240 $10,880 $12,240 ($17,000) (80%) (90%) Using false or misleading records (reg 3.44(6) N/A $17,000 $13,600 $10,880 $12,240 $10,880 $12,240 ($17,000) (80%) (90%) Not providing pay slips (s 536(1)) N/A $25,500 $20,400 $12,240 $14,280 $12,240 $14,280 ($17,000) (60%) (70%) TOTALS: $583,688.68 $544,000 $435,200 $258,400 $301,920 $258,400 $301,920

Penalties imposed on Mr Zhong Yuan Chen - second respondent Nature of contravention of FW Act/FW Regulations Total under-payment Maximum individual penalty after grouping Maximum individual penalty after cooperation discount FWO submission on appropriate penalty range for Mr Chen Penalty sought by Mr Chen Penalty imposed on Mr Chen (maximum penalty for individual) Low Range (% of maximum penalty after cooperation discount) High Range (% of maximum penalty after cooperation discount) Minimum rates - adult (s 45) $136,498.84 $10,200 $8,160 $5,712 $6,528 Nil $6,528 Clause 20.1 of the Award (70%) (80%) ($10,200) Clause A.2.5 of Sch A to the Award ($51,000/$10,200) Minimum rates - junior (s 45) $2,058.00 Clause 20.3 of the Award ($51,000/$10,200) Clause A.2.5 of Sch A to the Award ($10,200) Casual loading (s 45) $116,382.59 $10,200 $8,160 $5,712 $6,528 Nil $6,528 Clause 13.1 of the Award (70%) (80%) ($51,000/$10,200) Clause A.5.4 of the Award ($10,200) Saturday penalty rates (s 45) $112,114.53 $10,200 $8,160 $5,712 $6,528 Nil $6,528 Clause 3.41 of the Award (70%) (80%) ($10,200) Clause A.7.3 of the Award ($10,200) Sunday penalty rates (s 45) $117,663.05 $10,200 $8,160 $5,712 $6,528 Nil $6,528 Clause 3.41 of the Award (70%) (80%) ($10,200) Clause A.7.3 of the Award ($10,200) Public holiday rates (s 45) $21,661.17 $10,200 $8,160 $4,896 $5,712 Nil $5,712 Clause 34.1 of the Award (60%) (70%) ($10,200) Clause A.7.3 of the Award ($10,200) Overtime rates (s 45) $77,310.50 $10,200 $8,160 $4,896 $5,712 Nil $5,712 Clause 33.1 of the Award (60%) (70%) ($10,200) Arranging ordinary hours (s 45) N/A $10,200 $8,160 $2,448 $3,264 Nil $3,264 Clause 31.2 of the Award (30%) (40%) ($10,200) Cashing out annual leave (ss 44, 92) N/A $10,200 $8,160 $2,448 $3,264 Nil $3,264 ($10,200) (30%) (40%) Record keeping (reg 3.33) N/A $5,100 $4,080 $2,448 $2,856 Nil $2,856 Failing to keep records as required (60%) (70%) ($5,100) Creating false or misleading records (reg 3.44(1)) N/A $3,400 $2,720 $2,176 $2,448 Nil $2,448 ($3,400) (80%) (90%) Using false or misleading records (reg 3.44(6) N/A $3,400 $2,720 $2,176 $2,448 Nil $2,448 ($3,400) (80%) (90%) Not providing pay slips (s 536(1)) N/A $5,100 $4,080 $2,448 $2,856 Nil $2,856 ($3,400) (60%) (70%) TOTALS: $98,600 $78,880 $46,784 $54,672 Nil $54,672

Penalties imposed on Ms Ting (Sarah) Zhu - third respondent Nature of contravention of FW Act/FW Regulations Total under-payment Maximum individual penalty after grouping Maximum individual penalty after cooperation discount FWO submission on appropriate penalty range for Ms Zhu Penalty sought by Ms Zhu Penalty imposed on Ms Zhu (maximum penalty for individual) Low Range (% of maximum penalty after cooperation discount) High Range (% of maximum penalty after cooperation discount) Minimum rates - adult (s 45) $136,498.84 $10,200 $8,160 $2,448 $3,264 $2,448 $3,264 Clause 20.1 of the Award (30%) (40%) ($10,200) Clause A.2.5 of Sch A to the Award ($51,000/$10,200) Minimum rates - junior (s 45) $2,058.00 Clause 20.3 of the Award ($51,000/$10,200) Clause A.2.5 of Sch A to the Award ($10,200) Casual loading (s 45) $116,382.59 $10,200 $8,160 $2,448 $3,264 $2,448 $3,264 Clause 13.1 of the Award (30%) (40%) ($51,000/$10,200) Clause A.5.4 of the Award ($10,200) Saturday penalty rates (s 45) $112,114.53 $10,200 $8,160 $2,448 $3,264 $2,448 $3,264 Clause 3.41 of the Award (30%) (40%) ($10,200) Clause A.7.3 of the Award ($10,200) Sunday penalty rates (s 45) $117,663.05 $10,200 $8,160 $2,448 $3,264 $2,448 $3,264 Clause 3.41 of the Award (30%) (40%) ($10,200) Clause A.7.3 of the Award ($10,200) Public holiday rates (s 45) $21,661.17 $10,200 $8,160 $2,448 $3,264 $2,448 $3,264 Clause 34.1 of the Award (30%) (40%) ($10,200) Clause 34.1 of the Award ($10,200) Overtime rates (s 45) $77,310.50 $10,200 $8,160 $2,448 $3,264 $2,448 $3,264 Clause 33.1 of the Award (30%) (40%) ($10,200) Creating false or misleading records (reg 3.44(1)) N/A $3,400 $2,720 $1,904 $2,176 $1,904 $2,176 ($3,400) (70%) (80%) TOTALS: $583,688.68 $64,600 $51,680 $16,592 $21,760 $16,592 $21,760

Penalties imposed on Ms Jin (Jenna) Xu - fourth respondent Nature of contravention of FW Act/FW Regulations Total under-payment Maximum individual penalty after grouping Maximum individual penalty after cooperation discount FWO submission on appropriate penalty range for Ms Jenna Xu Penalty sought by Ms Xu Penalty imposed on Ms Xu (maximum penalty for individual) Low Range (% of maximum penalty after cooperation discount) High Range (% of maximum penalty after cooperation discount) Minimum rates - adult (s 45) $136,498.84 $10,200 $8,160 $2,448 $3,264 $408 $2,448 Clause 20.1 of the Award (30%) (40%) ($10,200) Clause A.2.5 of Sch A to the Award ($51,000/$10,200) Minimum rates - junior (s 45) $2,058.00 Clause 20.3 of the Award ($51,000/$10,200) Clause A.2.5 of Sch A to the Award ($10,200) Casual loading (s 45) $116,382.59 $10,200 $8,160 $2,448 $3,264 $408 $2,448 Clause 13.1 of the Award (30%) (40%) ($51,000/$10,200) Clause A.5.4 of the Award ($10,200) Saturday penalty rates (s 45) $112,114.53 $10,200 $8,160 $2,448 $3,264 Not referred to $2,448 Clause 3.41 of the Award (30%) (40%) ($10,200) Clause A.7.3 of the Award ($10,200) Sunday penalty rates (s 45) $117,663.05 $10,200 $8,160 $2,448 $3,264 $408 $2,448 Clause 3.41 of the Award (30%) (40%) ($10,200) Clause A.7.3 of the Award ($10,200) Public holiday rates (s 45) $21,661.17 $10,200 $8,160 $2,448 $3,264 Not referred to $2,448 Clause 34.1 of the Award (30%) (40%) ($10,200) Clause A.7.3 of the Award ($10,200) Overtime rates (s 45) $77,310.50 $10,200 $8,160 $2,448 $3,264 $408 $2,448 Clause 33.1 of the Award (30%) (40%) ($10,200) Using false or misleading records (reg 3.44(6)) N/A $3,400 $2,720 $1,904 $2,176 $1,904 $2,176 ($3,400) (70%) (80%) Not providing pay slips (s 536(1)) N/A $5,100 $4,080 $1,632 $2,040 $204 $1,632 ($3,400) (40%) (50%) TOTALS: $583,688.68 $69,700 $61,200 $18,224 $23,800 $4,148 $18,496