Breaches of the Fair Work Act; the consequences

Sec 550 of the Fair Work Act 2009 provides that a person or party which is “involved in” a contravention of the Fair Work Act, which means a contravention of the Act or the NES or a modern award or an enterprise agreement, is liable to have a civil penalty imposed upon him or her, or in the case of a corporation, it.

But what does involved in” mean?

Here is the answer. “The phrase “involved in” is a phrase commonly employed in both Commonwealth and State legislation.  The boundaries of the phrase have been fairly carefully canvassed in the authorities.

For the purposes of s 550 of the Fair Work Act, Senior Counsel on behalf of the Fair Work Ombudsman submitted (inter alia), in accordance with well-established principle, that a person could only be “involved in” a contravention if that person intentionally participated in the contravention which involves actual – not constructive – knowledge of the essential matters that made up the contravention.

But “actual knowledge”, it should be noted, may be inferred from “suspicious circumstances”:  Compaq Computer Australia Pty Ltd v Merry (1998) 157 ALR 1 at 4 to 5. When discussing the comparable term formerly employed in the Trade Practices Act 1974 (Cth), Finkelstein J there observed:

A contravention of s 52(1) of the Trade Practices Act can occur regardless of whether the corporation is acting honestly or reasonably.  But where it is sought to make a person liable as an accessory to a contravention of s 52(1) based on s 75B it is necessary to establish that the person has intentionally participated in the contravention. To establish intentional participation it must be proved that the person has knowledge of the essential matters that make up a contravention of s 52(1): see generally Yorke v Lucas (1985) 158 CLR 661. In this regard “knowledge” means actual and not constructive knowledge. For example, it would not be sufficient merely to show that the person charged with accessorial liability had shut his eyes to the obvious if that is intended to be a substitute for actual knowledge: Giorganni v R (1985) 156 CLR 473. Of course, where there is a combination of suspicious circumstances and a failure to make an inquiry it may be possible to infer knowledge of the relevant essential matters: Pereira v Director of Public Prosecutions (1988) 82 ALR 217.

(Some citations omitted)

“Suspicious circumstances” of course are not the only factual foundation from which an inference of “actual knowledge” could be drawn.

Assistance as to the meaning to be given to accessorial liability provisions was also provided in Gore v Australian Securities and Investments Commission [2017] FCAFC 13, (2017) 341 ALR 189.  There in question were the terms of s 1324(1)of the Corporations Act 2001 (Cth). That sub-section provides as follows:

Where a person has engaged, is engaging or is proposing to engage in conduct that constituted, constitutes or would constitute:

(a)        a contravention of this Act; or

(b)        attempting to contravene this Act; or

(c)        aiding, abetting, counselling or procuring a person to contravene this Act; or

(d)          inducing or attempting to induce, whether by threats, promises or otherwise, a person to contravene this Act; or

(e)          being in any way, directly or indirectly, knowingly concerned in, or party to, the contravention by a person of this Act; or

(f)         conspiring with others to contravene this Act;

the Court may, on the application of ASIC, or of a person whose interests have been, are or would be affected by the conduct, grant an injunction, on such terms as the Court thinks appropriate, restraining the first mentioned person from engaging in the conduct and, if in the opinion of the Court it is desirable to do so, requiring that person to do any act or thing.

In respect to this provision, Dowsett and Gleeson JJ observed (at 192):

ACCESSORIAL LIABILITY, APART FROM THE CRIMINAL CODE

[6]        There is, in our view, a distinction between being concerned in, or party to a contravention and being knowingly concerned in, or party to that contravention. Neither participation in the alleged contravention, nor knowledge of the elements of the contravention is sufficient in itself to attract accessorial liability under s 1324(1)(e). Rares J has demonstrated that Ms Gore so participated. We need say nothing further about that aspect. The remaining question concerns the state of Ms Gore’s knowledge at the times at which she participated.

[7]        In Yorke v Lucas (1985) 158 CLR 661 Mason ACJ and Wilson, Deane and Dawson JJ held that in order to establish, in civil proceedings, that a person is liable as an accessory to a statutory contravention, all of the elements of that contravention must be proven, as must be the alleged accessory’s knowledge of the essential facts constituting the contravention. At 661, their Honours said, concerning a legislative provision similar to s 79 and paras (c) to (f) of s 1324(1):

In our view, the proper construction of par. (c) requires a party to a contravention to be an intentional participant, the necessary intent being based upon knowledge of the essential elements of the contravention.

See also:  Rares J at 219 to 220 [135] and 235 [209].

More recently, and for the purposes of s 550 itself, Greenwood, Flick and Rangiah JJ in Construction, Forestry, Mining and Energy Union v BHP Coal Pty Ltd [2017] FCAFC 50 have concluded:

[59]       … To be knowingly involved, those respondents must have intentionally participated in the contravening conduct, with actual knowledge of the essential facts which constituted the contravention: see Yorke v Lucas (1985) 158 CLR 661 at 667. It may be that s 361(1) of the [Fair Work Act] has application to the question of whether the respondents intentionally participated in the contravening conduct, but the point was not argued before the primary judge or in the appeal and it is unnecessary to decide it.

Underlying the authorities is the proposition that a person cannot become “involved in” an act merely by reason of his knowledge of the conduct being pursued; to be “involved in” conduct, there has to be some conduct which “implicates” a person in the offending conduct such that they become “involved in” or “associated with” that conduct.

Thus, for example, when considering whether a person could be “knowingly concerned in” the importation of goods into Australia contrary to the Customs Act 1901 (Cth), in R v Tannous (1987) 10 NSWLR 303 at 307 to 308, Lee J reviewed some of the authorities and concluded as follows:

The meaning of the expression “knowingly concerned in” has been considered in a number of cases … but it is sufficient in my view to make brief reference to only two of these cases. In R v Goldie the charge was that P had been knowingly concerned in the commission of an offence by W, in that W, being a prohibited immigrant, was, contrary to the Immigration Act 1901-1935 (Cth), found in the Commonwealth in contravention or evasion of the Act. Latham CJ said (at 260):

“… In order that a person may be concerned in an immigrant being found within the Commonwealth it is necessary to show that he had something to do with him being in the Commonwealth instead of being in some place outside the Commonwealth.”

In Ashbury v Reid [[1961] WAR 49], a case involving a true aiding and abetting section in much the same terms as the Crimes Act(Cth), s 5, Virtue J delivering the judgment of the court gave the words the meaning taken from the Oxford Dictionary, namely “to have to do with”, “to have a part in”, “to be implicated or involved in” and “to have to do with something, especially something culpable”. His Honour went on (at 51):

“… The question which a court should ask itself in determining whether an act or omission on the part of the individual comes within the terms of s 54 is whether on the facts it can reasonably be said that the act or omission shown to have been done or neglected to be done by the defendant does in truth implicate or involve him in the offence, whether it does show a practical connexion between him and the offence.”

In my view the above quotation correctly establishes the meaning of the expression “knowingly concerned in” and is wholly in accordance with the common law that a person cannot become criminally involved in an act made unlawful by mere knowledge or inaction on his part — some act or conduct on his part is necessary.

With respect to the application of this principle to the facts of that case, his Honour continued (at 308):

In the present case the appellant has been shown to have agreed with at least two of the persons arranging the importation that the money owing to him by Lahood could be used, as Doe told him it had been, in funding the importation and to have made an agreement with Lahood and Doe that he should become a partner in the venture involving the importation and sale of the cannabis; he would thus not only receive his money back, but also whatever extra the profits would provide. It is not to the point that he was deceived by Lahood and Doe, and that none of the money was in fact used in the enterprise. Nor is it to the point that the appellant did not, in a sense, actively, that is, physically, do anything to further the importation. What is of importance is that by his conduct, that is by what he said and agreed to, he did in fact become associated with and thus involved, in the relevant sense, in the importation of the cannabis. He was in fact making, as he believed, a contribution to the furtherance of the importation by his agreement to allow the money Lahood owed to him to be used (as he thought) as a source of funds for the importation and, further, he was to share in the profits. It is not for the court to speculate as to what might have happened if he had refused to concur in the arrangement being suggested.

Chief Justice Street and Finlay J agreed with the reasons of Lee J.

In Leighton Contractors Pty Ltd v Construction, Forestry, Mining and Energy Union [2006] WASC 144, (2006) 154 IR 228 at 235, Le Miere J cited with approval the observations in Tannous and referred as follows to the need for a “practical connection”:

[29]       A person is not involved in a contravention unless he assents to or concurs in the conduct which constitutes the contravention. To be involved in a contravention requires that the person have a practical connection with the contravention. However, it is not necessary that the person physically do anything to further the contravention. It is sufficient if the person, by what he said and agreed to do, in fact became associated with and thus involved, in the relevant sense, in the conduct constituting the contravention: see R v Tannous (1987) 10 NSWLR 303 at 308.

In applying that approach to the facts, his Honour went on to conclude in the context of determining whether there was a serious question to be tried (at 236):

[36]       On that evidence, McDonald did more than merely attend a meeting and recommend to the Employees that they return to work. It is open to the tribunal of fact to infer that McDonald convened the meeting and presided over it. McDonald acted as the spokesman for the striking Employees in presenting its response to the Joint Venture representative and in speaking about the matter on the radio. It is open to infer that McDonald associated himself with the unlawful industrial action.

And these observations were in turn cited with approval by Moore J in Qantas Airways Ltd v Transport Workers’ Union of Australia [2011] FCA 470 at [324] to [325], (2011) 280 ALR 503 at 567.

The observations in Ashbury v Reid, relied upon by the New South Wales Court of Appeal in Tannous, have also been cited with approval in Australian Securities and Investments Commission v ActiveSuper Pty Ltd (in liq) [2015] FCA 342 at [407], (2015) 235 FCR 181 at 258 per White J. The approach set forth in Ashbury v Reid and Tannous, with respect, is clearly correct.

It was the application of these principles to the facts which divided the parties to the present appeals.

The involvement of the Individual Respondents

It was common ground that decisions such as York v Lucas and Gore accurately set forth the reach of s 550 of the Fair Work Act. That which divided the parties was whether the facts fell within the reach of s 550 and whether the findings of fact made by the primary Judge were sustainable.

For the purposes of testing the case being advanced on behalf of Mr Silverbrook and Ms Lee, it was accepted that the following admissions could be made in respect to the Individual Respondent’s potential liability pursuant to s 550 for the corporate contraventions of (for example) s 323 of the Fair Fork Act:

  • prior to the relevant period of non-payment, Mr Silverbrook and Ms Lee had knowledge – or knew – that persons were receiving wages and other entitlements due to them from one or other of the corporate employers;
  • that those persons were “employees” of the corporate employers and were being paid wages and other entitlements monthly;
  • that during a period of 10 months from February to December 2014, there were a number of employees who were not receiving monthly payment in the normal course into their bank accounts for wages and entitlements as they had previously been receiving them; and
  • that during that period of time, there were some employees who had not received any  wages and entitlements for some months and some employees who had not received any wages and entitlements for the entire 10 month period.

Such admissions, it may be observed, were correctly made and were consistent with the evidence. Notwithstanding those admissions, it was maintained on behalf of Mr Silverbrook and Ms Lee that their conduct could not fall within the reach of s 550 by reason of:

  • their having taken all such reasonable steps as were open to them to secure payment of wages and entitlements in circumstances where the consequences of their conduct was beyond their control; and
  • their reasonable expectation that the payment of wages and entitlements would be secured sooner rather than later.

These admissions have to be considered against the following findings of fact as made by the primary Judge in the primary judgment ([2016] FCCA 1474):

  • “The five companies were controlled by Mr Silverbrook at the time of the alleged contraventions” (at para [4]);
  • “Mr Silverbrook was at all times in control of and the corporate mind of Superlattice” (at para [93]); and
  • “In the present case the applicant has proved at the time of the alleged contravention of s.119 that Mr Silverbrook was a third entity that controls each of the five corporate entities” (at para [182]).

Given the admissions made, it is respectfully considered that it is difficult to resist a conclusion (for example) that Mr Silverbrook and Ms Lee by their “act[s] or omission[s] [were] … directly or indirectly, knowingly concerned in” the contraventions of the corporate employers arising from the non-payment of wages and entitlements.  Such was the like conclusion reached by Buchanan J in Fair Work Ombudsman v Ramsey Food Processing Pty Ltd [2011] FCA 1176, (2011) 198 FCR 174 at 205, where his Honour concluded:

[126]     Not only was Mr Ramsey involved in any contravention committed by Ramsey Food Processing, he was its guiding mind. He is wholly concerned in and responsible for the contraventions by Ramsey Food Processing. He is liable in his own right as an accessory.

Even if it be accepted that the non-payment by the corporate employers was due to circumstances beyond the control of Mr Silverbrook and (where relevant) Ms Lee and that they were taking reasonable steps to secure payment, the fact of non-payment remains.  Employees were not being paid their wages and entitlements in the normal monthly manner for a considerable period of time.  And Mr Silverbrook and Ms Lee knew that the employees were not being paid.  So much is inherent in the finding at para [132] of the primary judgment that “both Mr Silverbrook and Ms Lees applied and exhausted their own personal funds in their endeavours to ensure that the entitlements of employees were paid”.  They were actively involved in continuing the payments owing to the employees of one or other of the corporate employers for as long as possible.

Just as Mr Silverbrook and Ms Lee were “actively involved” in the continuation of payments for as long as possible, they were equally “involved” in the non-payments when that occurred.

It may well be assumed that non-payment was regretted and certainly not what Mr Silverbrook or Ms Lee desired.

The conclusions reached by the Federal Circuit Court Judge seem to focus attention upon the “reasonableness” of the “belief” on the part of Mr Silverbrook and Ms Lee that wages and entitlements would soon be paid and fail to focus any real attention upon whether either were “in truth implicate[d] or involve[d]” (cf. Ashbury v Reid [1961] WAR 49 at 51) in the corporate contraventions. The degree of “control” exercised by Mr Silverbrook over the corporate employers would tend to suggest that he was in fact “implicate[d]” in the corporate non-payments.  The role played by Ms Lee would also tend to suggested that she is “implicate[d]” in the contraventions by Silverbrook Research.  The findings of the primary Judge tend to suggest a “practical connection” (cf. Leighton Contractors v CFMEU [2006] WASC 144, (2006) 154 IR 228; Qantas Airways v TWU [2011] FCA 470, (2011) 280 ALR 503) between the corporate non-payments and the Individual Respondents, even if it were to be accepted that the particular outcome was unavoidable. Such focus as was placed upon “knowledge” was also impermissibly poisoned, with respect, by the consideration given by the primary Judge to the “reasonableness” of the conduct being pursued.

The conclusion that neither Mr Silverbrook nor Ms Lee were “involved in” the corporate contraventions within the meaning of s 550 of the Fair Work Act should be set aside. As frequently is the case, it should be noted that this Court would appear to have been given greater assistance than was provided to the Federal Circuit Court Judge as to the relevant legal principles to be applied.

As the matter is to be remitted to the Federal Circuit Court for re-hearing, the preferable course is to refrain from making any finding of fact as to whether either Mr Silverbrook or Ms Lee did in fact fall within the reach of s 550. Findings of fact should be made on re-hearing and a fresh determination made as to their accessorial liability. It may well be the case that Mr Silverbrook and Ms Lee may be attributed with “actual knowledge” for the purposes of s 550(2)(c) (cf. Compaq Computers v Merry (1998) 157 ALR 1). It may well be the case, in addition, that Mr Silverbrook and Ms Lee had a “practical connection” to the non-payments (cf. Leighton Contractors v CFMEU [2006] WASC 144, (2006) 154 IR 228;Qantas Airways v TWU [2011] FCA 470, (2011) 280 ALR 503). But all such future findings of fact are, it is stressed, matters best left to the Court to which the matter is to be remitted.

It is sufficient for present purposes to conclude that the primary Judge erred in his construction and application of s 550 to the facts.

The financial difficulties confronting the corporate employers

Of relevance to the conclusions that Mr Silverbrook (and Ms Lee) did not assume liability there were, it would seem, at least two strands to the reasoning of the Federal Circuit Court Judge, namely:

  • a lack of intention to participate in any contravention; and
  • the reasonableness of a belief that the financial circumstances of the corporate employers could soon be addressed and that all employees would be paid their wages and entitlements.

With reference to the latter strand of reasoning, the Fair Work Ombudsman contended that the financial circumstances of the corporate employers and any belief that payment would be imminent were irrelevant considerations.  This further submission should also be accepted.

A contravention, for example, of s 323 of the Fair Work Act is made out by proof that wages and entitlements have not been paid as required. The reasonableness of a belief that wages and entitlements may soon be paid, and the steps taken to ensure prompt payment, may be relevant to penalty, but assume no relevance to proof of the contravention: cf. Lynch v Buckley Sawmills Pty Ltd (1984) 3 FCR 503. In the context of considering breaches of an award, Keely J there concluded (at 508):

I also have borne in mind the evidence as to the financial difficulties of the respondent at the material times. … In this connection it is important that the respondent – and other employers bound by the award or by other awards under the Act – understand the importance of complying with an award and it follows that any decision taken by them which is regarded as affecting their obligations to comply with particular provisions of an award or the award generally should only be taken after careful consideration. They must not be left under the impression that in times of financial difficulty they can breach an award made under the Act either with impunity or in the belief that no substantial penalty will be imposed in respect of a breach found by a court to have been committed.

Financial difficulty, it has long been recognised, “is not a justification for an employer to fail to comply with its statutory and award obligations”:  Fair Work Ombudsman v South Jin Pty Ltd (No 2) [2016] FCA 832 at [50] per White J.”
Fair Work Ombudsman v Priority Matters Pty Ltd [2017] FCA 833 delivered 25 July 2017 per Flick J