Fair Work Ombudsman v Sushi Bay Pty Ltd

WIGNEY J: 1 The applicant in this matter, the Fair Work Ombudsman, seeks leave to proceed against the first to fourth respondents, Sushi Bay Pty Ltd, Sushi Bay ACT Pty Ltd, Auskobay Pty Ltd and Auskoja Pty Ltd (collectively the corporate respondents) pursuant to s 471B of the Corporations Act 2001 (Cth).

Nature of the proceeding 2 The Ombudsman commenced this proceeding in February 2022. The corporate respondents were part of a group of companies that operated sushi restaurants in New South Wales, the Australian Capital Territory and the Northern Territory. The fifth respondent, Ms Yi Jeong (Rebecca) Shin, was the sole director of each of the corporate respondents. 3 The Ombudsman alleges that the corporate respondents contravened a number of civil remedy provisions in the Fair Work Act 2009 (Cth) and the Fair Work Regulations 2009, including: ss 45, 325(1), 535(4), 536(3) and 718A of the Act and reg 3.44(1) of the Regulations. In short summary, the Ombudsman alleges that the corporate respondents made and kept records relating to the wages paid to employees which were false or misleading and failed to pay their employees' wages and other entitlements as required by the Restaurant Industry Award 2010. The Ombudsman also alleges that some of the corporate respondents' contraventions were serious contraventions because they knowingly contravened the various provisions and their conduct was part of a systematic pattern of conduct. 4 As for Ms Shin, the Ombudsman alleges that she was involved in the corporate respondents' contraventions, within the meaning of s 550 of the Act and is therefore taken to have contravened the provisions that were contravened by the corporate respondents. The Ombudsman alleges that some of Ms Shin's contraventions were serious contraventions because she knew that the corporate respondents' contraventions were serious contraventions: s 557A(5A). 5 The relief sought by the Ombudsman against the corporate respondents includes: declarations that the respondents contravened the various civil remedy provisions; orders which require the corporate respondents to rectify the underpayments of wages and other monetary employee entitlements, together with interest; and pecuniary penalties. 6 The corporate respondents' and Ms Shin's proceeding is listed for a final hearing commencing on 5 June 2023. The applicant has filed all of the evidence it intends to rely on at the hearing. The corporate respondents have not filed any evidence. While the parties estimated that the trial would take up to four weeks, it now appears that the trial will be much shorter. That is in large part due to the fact that a liquidator has been appointed to each of the corporate respondents.

Liquidator appointed to the corporate respondents 7 Each of the corporate respondents has been wound up in insolvency by the Court under the provisions of the Corporations Act. The applicant in each case was the Deputy Commissioner of Taxation. Mr Christopher Palmer was appointed liquidator of: Auskobay on 3 February 2023; Sushi Bay on 17 March 2023; Sushi Bay ACT on 31 March 2023; and Auskoja on 21 April 2023. 8 Mr Palmer has informed the Ombudsman that: he does not intend to defend the proceeding brought by the Ombudsman against the corporate respondents or file any evidence in the proceeding; does not require any of the Ombudsman's witnesses for cross-examination; and while he does not consent to the Ombudsman's application for leave to proceed against the corporate respondents, nor does he oppose that application. Mr Palmer did not and has not identified any reason why leave to proceed should not be granted.

Relevant principles 9 Section 471B of the Corporations Act provides as follows: While a company is being wound up in insolvency or by the Court, or a provisional liquidator is acting, a person cannot begin or proceed with: (a) a proceeding in a court against the company or in relation to property of the company; or (b) enforcement process in relation to such property; except with the leave of the Court and in accordance with such terms (if any) as the Court imposes. 10 As can readily be seen, s 471B does not identify the principles that are to be applied in determining whether leave to proceed should be granted. Nor does it identify the considerations that must, or must not, be taken into account. The relevant principles have, however, been discussed in a number of decisions in this and other courts in respect of s 471B and cognate leave to proceed provisions: see, for example Re Gordon Grant & Grant Pty Ltd (1983) 7 ACLR 669; [1983] 2 Qd R 314 at 315 - 317; Vagrand Pty Ltd (In Liq) v Fielding (1993) 41 FCR 550 at 554 - 555; Eopply New Energy Technology Co Ltd v EP Solar Pty Ltd [2013] FCA 356 at [22]; Executive Director of the Department of Conservation and Land Management v Ringfab Environmental Structures Pty Ltd [1997] FCA 1484; Rushleigh Services Pty Ltd v Forge Group Ltd (In Liq) [2016] FCA 1471 at [14] - [18]; Australian Competition and Consumer Commission v Australian Institute of Professional Education Pty Ltd (in liq) [2017] FCA 521 at [22] - [26] (ACCC v AIPE). 11 The key principles may be summarised as follows. 12 First, a decision granting or refusing leave to proceed against a corporation in liquidation involves the exercise of a discretion which must be exercised judicially. 13 Second, the purpose of having a requirement for leave is to prevent a corporation in liquidation being subjected to actions that may be expensive and carried on at the expense of the creditors of the company, perhaps unnecessarily. 14 Third, in determining whether leave should be granted, the Court considers whether the balance of convenience lies in allowing the applicant to proceed by pursuing a proceeding to judgment, or whether the applicant should be left to pursue his or her claim by lodging a proof of debt with the liquidator. The onus is on the applicant to demonstrate why it is more appropriate to pursue the claim in question by way of legal proceedings. 15 Fourth, for leave to be granted, it must be shown that there is a serious or substantial question to be tried and a real dispute between the parties. Leave will not be granted where the applicant does not demonstrate that the claim is genuine or where the proceedings would be futile. 16 Fifth, while it is impossible to state in an exhaustive manner all of the circumstances in which leave to proceed may be appropriate, circumstances which in the past have been said to be relevant include: the amount and seriousness of the claim; the degree of complexity of the legal and factual issues involved; and the stage to which the proceedings, if already commenced, may be progressed. 17 Sixth, it may be appropriate to grant leave to proceed where the applicant is a regulator and the proceedings in question are civil penalty proceedings. In such cases, the public interest may favour the grant of leave because the proceedings serve to vindicate a public right and the imposition of pecuniary penalties and the making of declarations of contravention serve to promote compliance with the relevant regulatory regime by way of deterrence: ACCC v AIPE at [26]; Australian Securities and Investments Commission v Union Standard International Group Pty Ltd (No 2) [2020] FCA 1871 at [7].

Leave to proceed should be granted 18 The liquidator of the corporate respondents had indicated that he does not oppose leave being granted to the Ombudsman to proceed with the proceeding against them. It is nevertheless necessary for the Court to be satisfied that the grant of leave to proceed is appropriate in all the circumstances. 19 There are a number of considerations which strongly militate in favour of the grant of leave. 20 First, the Ombudsman is bringing the proceeding as an independent regulator seeking to enforce the standards prescribed by the Act and Regulations. There is a clear public interest in permitting a regulator such as the Ombudsman to pursue proceedings of that type, even against companies in liquidation. 21 Second, the liquidator of the corporate respondents has advised that he does not intend to defend the proceeding on behalf of the corporate respondents or to otherwise involve himself in the proceeding. The liquidator is therefore unlikely to be burdened or distracted from his duties in winding up the companies by the grant of leave to the Ombudsman to pursue this proceeding. 22 Third, the material filed by the Ombudsman to date indicates that there is, at the very least, a serious or substantial question to be tried in respect of the liability of the corporate respondents. It certainly cannot be said that the Ombudsman's claim against the corporate respondents is anything other than genuine or that the proceedings would be futile in all the circumstances. 23 Fourth, the proceeding is at an advanced stage. The Ombudsman will be pursuing its claim against Ms Shin in any event. The grant of leave to proceed against the corporate respondents will not increase the length or complexity of the proceeding, particularly given that the liquidator does not intend to file any evidence or otherwise participate in the proceeding on behalf of the corporate respondents. 24 Fifth, if the Ombudsman succeeds in proving that the corporate respondents contravened the relevant civil remedy proceedings, it will ultimately be a matter for the Court to determine the nature of the relief granted against the corporate respondents. It would appear at this stage that the financial position of each of the corporate respondents is such that their creditors are unlikely to be materially prejudiced or disadvantaged by the grant of any relief against the corporate respondents. The reality is that the creditors are unlikely to recover anything from the winding up of the companies in any event. 25 There are no real considerations which materially weigh against the grant of leave to proceed. 26 In all the circumstances, the balance of convenience clearly weights in favour of allowing the Ombudsman to pursue the proceeding to judgment, as opposed to leaving it to pursue the claims against the corporate respondents by lodging proofs of debt with the liquidator. Orders will accordingly be made in the terms sought in the Ombudsman's interlocutory application dated 9 May 2023. I certify that the preceding twenty-six (26) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Wigney.