2024 WAIRC 00177
INDUSTRIAL MAGISTRATES COURT OF WESTERN AUSTRALIA


CITATION : 2024 WAIRC 00177

CORAM : INDUSTRIAL MAGISTRATE T. KUCERA

HEARD : TUESDAY, 27 FEBRUARY 2024

DELIVERED : TUESDAY, 23 APRIL 2024

FILE NO. : M 121 OF 2023

BETWEEN : JILLIAN DENISE DIXON
CLAIMANT

AND

PETER STOJIC
FIRST RESPONDENT
MIRJANA STOJIC
SECOND RESPONDENT

CatchWords : Imposition of pecuniary penalty – Failure to comply with compliance notice – Principles considered when determining penalty – Where respondent has shown remorse and taken corrective action
Legislation : Industrial Relations Act 1979 (WA)
Instrument : Electrical Contracting Industry Award R 22 of 1978
Case(s) referred
to in reasons: : Gardos v Baker [2024] WAIRC 00128
Trade Practices Commission v CSR Limited [1990] FCA 762; (1991) ATPR 41-076
Australian Building and Construction Commissioner v Pattinson [2022] HCA 13; 274 CLR 450
Callan v Smith [2021] WAIRC 00216; 101 WAIG 1155
Australian Ophthalmic Supplies Pty Ltd v McAlarySmith [2008] FCAFC 8; 165 FCR 560
Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (No 2) [2018] FCA 1563
Fair Work Ombudsman v Viper Industries Pty Ltd [2015] FCCA 492
Ponzio v B&P Caelli Constructions Pty Ltd [2007] FCAFC 65; 158 FCR 543
CPSU, the Community and Public Sector Union v Telstra Corporation Limited [2001] FCA 1364; 108 IR 228
Shop Distributive & Allied Employees Association v Baljit Kaur Pty Ltd [2024] WAIRC 00040
Result : Contravention proved. Penalty imposed
Representation:
Claimant : Mr M. McIlwaine (of counsel) as instructed by the State Solicitor’s Office
Respondents : Mr P. Stojic and Ms M. Stojic (in person)

REASONS FOR DECISION
1 This decision deals with the imposition of a pecuniary penalty for an employer’s failure to comply with a compliance notice that was issued by an industrial inspector.
Background
2 The claimant in this matter (Ms Jillian Denise Dixon) is an industrial inspector designated pursuant to s 98(1) of the Industrial Relations Act 1979 (WA) (IR Act), employed by the Department of Energy, Mines, Industry Regulation and Safety (Department).
3 Peter Stojic and Mirjana Stojic are the respondents in this matter (respondents). The respondents were partners in a small electrical contracting business; Dr Sparks Electrical and Maintenance Services (business). The respondents employed Mr Michael Hewins in the business to perform electrical work (Mr Hewins). Mr Hewins is a qualified electrical tradesman.
4 Following an investigation into a complaint Mr Hewins made to the Department, the Department formed a reasonable belief that the respondents had been underpaying Mr Hewins contrary to the terms of the Electrical Contracting Industry Award R 22 of 1978 (Award). The Department formed a belief the respondents had underpaid Mr Hewins by not paying him at all for work he had performed in the period of 17 May 2021 to 20 August 2021 (complaint).
5 The Department raised the complaint with the respondents, who, with the Department’s assistance agreed to a payment plan to pay Mr Hewins his outstanding wages (payment plan). The respondents made three payments in accordance with the payment plan but then without explanation, failed to make any further payments.
6 To recover the balance of the amount by which the Department alleged Mr Hewins was underpaid, the claimant on 16 March 2023, issued each respondent with a compliance notice under s 84Q of the IR Act (compliance notice).
7 Specifically, the compliance notice required the respondents to pay Mr Hewins the sum of $10,250.36 together with a further sum for unpaid superannuation entitlements. The claimant subsequently advised the Court that the further amount for superannuation contributions was the sum of $1,000.98. In total, the respondents were liable to pay $11,251.34 (underpayment).
8 The date by which the respondents were required to provide evidence that they complied with the compliance notice was 20 April 2023 (due date).
9 On 20 April 2023, Mr Stojic contacted the claimant to advise that they did not have sufficient funds to pay Mr Hewins for the underpayment and that as a result, they would not be able to comply with the compliance notice by the due date. Following this, the respondents failed to pay Mr Hewins as required by the compliance notice.
10 On 31 May 2023, Mr Paul Callaghan, the Department’s General Manager of Compliance (Mr Callaghan) wrote to the respondents regarding their failure to comply with the compliance notice. In his letter, Mr Callaghan gave the respondents until 9 June 2023, to either comply with the notice or to provide a reasonable excuse for any noncompliance.
11 Mr Callaghan advised the respondents that the Department did not accept financial difficulty provided a reasonable excuse for not complying with a compliance notice. Mr Callaghan did not receive a response to his letter.
Proceedings commenced in the Industrial Magistrates Court
12 On 2 October 2023, the claimant filed an originating claim under s 83E of the IR Act, alleging that the respondents had contravened s 84T of the IR Act, without reasonable excuse, by failing to comply with the compliance notice by the due date (claim).
13 On 23 October 2023, the respondents filed a Form 2 response to the claim. In their response, the respondents admitted that they had not complied with the compliance notice and to the underpayment. The respondents also consented to the Court making the orders the Department sought against them.
First Hearing
14 The claim was listed for an initial hearing on 4 December 2023 (first hearing). On this date, Mr Stojic appeared in person by videolink and was unrepresented. Mrs Stojic did not appear. Ms Emily Negus, of counsel (Ms Negus), from the State Solicitors Office (SSO) appeared for the claimant.
15 During the first hearing, I warned Mr Stojic that a continued failure on his part to rectify the underpayment was a relevant matter the Court would consider when deciding whether it would impose a penalty for a contravention of s 84T of the IR Act. Mr Stojic said that he hoped to be able to pay Mr Hewins by the start of January 2024.
16 The first hearing concluded with the matter being adjourned to a penalty hearing to be held on 29 January 2024. I suggested to Mr Stojic that the respondents should seek legal advice in relation to the claim. I also told Mr Stojic that both respondents would have to appear in person for their next Court date.
Second Hearing
17 On 29 January 2024, a second hearing was held in relation to the claim (second hearing). The respondents both appeared by video link and were unrepresented. Ms Negus continued to appear for the claimant.
18 During the second hearing, I asked the respondents if they had rectified the underpayment. Mr Stojic confirmed the respondents had not paid Mr Hewins because Mr Stojic had been laid off from his previous employment. Mr Stojic confirmed that he had secured employment elsewhere and that he would be starting work in this role in early February 2024.
19 I again warned the respondents that a continued failure on their part to rectify the underpayment, would be a relevant matter the Court would consider when determining whether a pecuniary penalty should be imposed for their contravention of s 84T of the IR Act, and for any amount they may be ordered to pay.
20 The second hearing was adjourned with the respondents being directed to advise on their available dates to appear in person at a reconvened penalty hearing.
Final Hearing
21 A final hearing was held in relation to the claim on 27 February 2024 for the purposes of hearing from the parties on penalty (final hearing). The respondents appeared in person and were unrepresented. The SSO continued to represent the claimant, however, Mr Michael McIlwaine of counsel (Mr McIlwaine), appeared instead of Ms Negus.
22 Prior to the final hearing, the claimant filed and served an outline of submissions on penalty. While Mr McIlwaine made some short further points during the final hearing, he was, in the main, content to rely upon his written outline.
23 The respondents did not file any written materials. The respondents did however make some progress on rectifying the underpayment by making a payment of $8,000 to Mr Hewins to which I will refer.
24 During the final hearing, the respondents confirmed they had read the submissions from the SSO. They accepted they did not comply with the compliance notice, and they owed Mr Hewins the sum of $11,251.34, less the amount of $8,000 they had already paid.
25 At the conclusion of the final hearing, I reserved my decision for the purposes of preparing the reasons that follow. I also indicated that I would not start drafting my reasons before 19 March 2024, to give the respondents a further opportunity to rectify the underpayment in full. To this end the final hearing was concluded with the issuance of the following orders;
1. The Court reserves its decision on penalty to be issued on a date not before 19 March 2024.
2. The respondents are to pay the sum of $1,000.98 in superannuation contributions (super contributions) to Mr Hewins’ nominated superannuation fund (super fund) by 19 March 2024.
3. The respondents are to file with the Court and serve upon the claimant together with a Form 29 – Multipurpose Form, under the heading ‘Respondent’s evidence of compliance’ by 19 March 2024, evidence / proof of the following;
i) pursuant to the order the Court made on 4 December 2023 the respondents have paid Mr Hewins the sum of $10,250.36 in full; and
ii) pursuant to order 2 above, the respondents have paid Mr Hewins superannuation contributions into his super fund.
Compliance notices
26 This case is very similar to the matter in Gardos v Baker [2024] WAIRC 00128 (Gardos v Baker) in which I imposed a pecuniary penalty for an employer’s failure to comply with the terms of a compliance notice.
27 In Gardos v Baker at paragraphs [31]  [33] I made the following observations about the purposes of compliance notices which I have extracted below:
The purpose of compliance notices is to provide industrial inspectors with an efficient means to achieve compliance with the provisions of industrial awards and other employment standards, and to provide employees with a quick mechanism to secure their unpaid entitlements. Compliance notices are an alternative to enforcement proceedings under s 83 of the IR Act.
The benefit to employers in complying with a compliance notice is twofold. Firstly, an employer that complies with a compliance notice will not face further proceedings in respect of the underlying contraventions of awards or statutes, the subject of a compliance notice. This is because the claimant under s 84S(1) the IR Act is prevented from pursuing enforcement proceedings under s 83 where those matters, the subject of compliance notice are rectified.
Secondly, a complying employer will not, as a result of s 84S(2) of the IR Act, be taken to have admitted or contravened the underlying contraventions that are the subject of the compliance notice.
Penalty for non-compliance
28 Section 84T of the IR Act deals with what happens when a person does not comply with a validly issued compliance notice. The provision relevantly states:
84T. Person must comply with compliance notice
(1) A person must comply with a compliance notice.
(2) A contravention of subsection (1) is not an offence but the subsection is a civil penalty provision for the purposes of section 83E, except that the pecuniary penalty cannot exceed —
(a) in the case of a body corporate — $30 000;
(b) in the case of an individual — $6 000
(3) Subsection (1) does not apply if the person has a reasonable excuse.
Matters to be considered when determining penalty
29 In Gardos v Baker at paragraphs [52]  [60] I provided a summary of the relevant legal principles to be applied when determining penalty. I have also extracted these paragraphs which are set out below:
The primary purpose of pecuniary penalties under a statute such as the IR Act, is to secure compliance with the provisions of the statutory regime: see French J in Trade Practices Commission v CSR Limited [1990] FCA 762. French J in Trade Practices Commission v CSR Limited [1990] FCA 762; (1991) 13 ATPR 41-076, was cited with approval in Callan v Smith [2021] WAIRC 00216; 101 WAIG 1155 at [30].

As the High Court in Australian Building and Construction Commissioner v Pattinson [2022] HCA 13; 274 CLR 450 (Pattinson) said at [66]:
… the financial disincentive involved in the imposition of a pecuniary penalty will encourage compliance with the law by ensuring that contraventions are viewed by the contravenor and others as an economically irrational choice.
Noting the purpose of pecuniary penalties is to secure compliance with the provisions of a statutory regime, the Court is required to set a penalty to an appropriate level that will have the effect of deterring a contravener from engaging in the same or similar conduct. Shop Distributive & Allied Employees Association v Baljit Kaur Pty Ltd [2024] WAIRC 00040 at [46].

The factors which inform an assessment of a civil penalty with an appropriate deterrent value, were described by the High Court in Pattinson at [18]. The considerations described are consistent with and much the same as those set out in Callan v Smith [2021] WAIRC 00216; 101 WAIG 1155 (Callan v Smith).
In Callan v Smith, a Full Bench of the Western Australian Industrial Relations Commission observed that when determining penalty, the court is required to have regard to a nonexhaustive range of considerations when deciding if particular conduct calls for the imposition of a penalty, and if it does, the amount of a penalty. Callan v Smith at [90].

The following considerations were set out in Callan v Smith at [90], which include but are not limited to:
(a) the nature and extent of the conduct which led to the breaches;
(b) the circumstances in which that conduct took place;
(c) the nature and extent of any loss or damage sustained, as a result, of the breaches;
(d) whether there had been similar previous conduct by the respondent;
(e) whether the breaches are properly distinct or arose out of the one course of conduct;
(f) the size of the business enterprise involved;
(g) whether or not the breaches were deliberate;
(h) whether senior management was involved in the breaches;
(i) whether the party committing the breach had exhibited contrition;
(j) whether the party committing the breach had taken corrective action;
(k) whether the party committing the breach had cooperated with the enforcement authorities;
(l) the need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements; and
(m) the need for specific and general deterrence.
Citing the decision in Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8; 165 FCR 560, the Full Bench in Callan v Smith at [91] observed the task of the court is to fix a penalty which pays appropriate regard to the circumstances in which the contraventions have occurred and the need to sustain public confidence in the statutory regime which imposes the obligations.
A further consideration is the maximum penalty identified in the statute for the contravention. As Flick J stated in Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (No 2) [2018] FCA 1563 at [19]:
In undertaking the task of assessing and quantifying the penalties to be imposed, the maximum penalty prescribed by the Commonwealth legislature for a specific contravention serves as a ‘yardstick’ against which the assessment of penalties is generally to proceed.
The High Court in Pattinson noted the list of considerations when determining penalty is not a rigid catalogue of matters for attention. Relevantly at [19] the majority concluded:
It is important, however, not to regard the list of possible relevant considerations as a ‘rigid catalogue of matters for attention’ as if it were a legal checklist. The court’s task remains to determine what is an ‘appropriate’ penalty in the circumstances of the particular case. (footnotes omitted)
30 As in Gardos v Baker I have had regard to each of these factors when determining the penalty to be imposed. My findings in respect of the various criteria are set out in the paragraphs that follow.
Maximum potential penalty
31 While this matter involves a single contravention of the IR Act for which the maximum pecuniary penalty of $6,000 for an individual applies, there were two individual respondents involved. This means the respondents could each be fined for their involvement in the same contravention.
32 It also means the potential penalty the respondents could face if the maximums were imposed individually, and their fines added together, is a maximum combined penalty of $12,000.
Nature and extent of the conduct
33 The respondents acknowledged that they had received the compliance notice, were aware of its requirements and that their noncompliance would result in enforcement proceedings being commenced against them. Despite this, the respondents failed to comply with the compliance notice.
34 The respondents cited financial difficulty as the reason for their non-compliance. However, and as I found in Gardos v Baker, financial difficulty does not provide a reasonable excuse for failing to comply with a compliance notice or other workplace laws. In the circumstances, I can only conclude the respondents made a deliberate choice not to comply with the compliance notice.
Circumstances in which the conduct occurred
35 The circumstances which led to the issuance of the compliance notice commenced with Mr Hewins making a complaint to the Department in 2022. One of the matters giving rise to the complaint was the respondents’ failure to pay Mr Hewins more than three months wages for work that he had performed.
36 After investigating the complaint, the Department tried to rectify the underpayment with the payment plan. The Department could have commenced enforcement proceedings against the respondents when the payments ceased but instead opted to try and resolve the matter by issuing a compliance notice.
37 Mr Stojic and Mr Hewins were not new to the electrical contracting industry. During the final hearing Mr Stojic said that he has known Mr Hewins for almost 30 years. At the time Mr Hewins was working for the respondents he was 59 years old. After the respondents failed to pay Mr Hewins his wages, he was forced to borrow money from his parents to pay his mortgage.
Nature and extent of the loss
38 I accept the respondents’ failure to comply with the compliance notice resulted in the continued underpayment of Mr Hewins’ lawful entitlements for more than two and half years.
39 The total amount of the underpayment is $11,251.34 which includes $1,000.98 in unpaid superannuation entitlements. For any employee, this is a large sum of money.
Previous conduct
40 There is no evidence the respondents have previously engaged in similar conduct or that they have underpaid employees before. On this basis, I have concluded the contravention should be treated as the first of its type.
Corrective action
41 To the respondents’ credit, and in contrast to the case in Gardos v Baker, the respondents have taken steps to rectify the underpayment, even though it did take the commencement of these proceedings before it occurred.
42 In the same way the respondents failed to adhere to the payment plan, the payments the respondents said they would make during the first and at final hearing were not on time and remain incomplete. Mr McIlwaine acknowledged in his submissions that on 16 February 2024, the respondents had paid Mr Hewins the sum of $7,000. During the final hearing Mr Stojic advised that he had paid a further $1,000.
43 I am aware from my inquiries with Registry Staff that the orders I made during the final hearing, as at 19 March 2024, had still not been complied with leaving the balance of $3,251.34 outstanding.
44 For the avoidance of any doubt the amount owing to Mr Hewins is the total sum of $11,251.34. It includes an amount of $1,000.98 that must be paid to Mr Hewins’ nominated superannuation fund and any amounts that must be remitted to the Australian Taxation Office (ATO).
45 In the absence of documentary proof from the respondents that they have paid Mr Hewins what they are required to as a net amount, they have paid the applicable taxation deductions to the ATO and $1,000.98 from the total sum has been paid in superannuation contributions to Mr Hewins’ superannuation fund, it cannot be said the respondents have completely rectified the underpayment.
46 In this matter, like the case in Gardos v Baker, I warned the respondents on the two occasions they appeared before the final hearing, that rectifying the underpayment would have a significant bearing on the level of penalty that would be imposed for their failure to comply with a compliance notice. The respondents were also given a further three weeks from the date of the final hearing to 19 March 2024 to completely rectify the underpayment before I would start preparing my reasons.
47 In Gardos v Baker the respondent’s failure to rectify the underpayment was one of the factors that led me to conclude that a pecuniary penalty at the upper end of the range was justified.
48 In the circumstances of this case, it is appropriate for me to have regard to the efforts the respondents have made to rectify the underpayment and to set a penalty which acknowledges that unlike the case in Gardos v Baker, they have at least attempted to comply with the warnings I gave them.
49 I must, however, have regard to the length of time it has taken the respondents before they paid the $8,000 towards the underpayment; that it remains incomplete; and that Mr Hewins was out of pocket for more than two and half years before the respondents paid this money.
Remorse and contrition
50 During the final hearing, the respondents presented as remorseful, particularly Mrs Stojic who was visibly upset as she addressed the Court.
51 I also find that by making an effort to rectify the underpayment, the respondents have shown contrition, which I view favourably in mitigation.
The involvement of senior management in the contravention
52 As partners in the business the respondents were both responsible for ensuring the Award and the compliance notice were complied with. It is reasonable to conclude the responsibility for their non-compliance rests equally with them too.
53 Mrs Stojic managed the books for the business. Mrs Stojic also has permanent part time job with a company unconnected to the respondents’ business. Mrs Stojic said she works in payroll for this company. From her work in these two roles, Mrs Stojic acknowledged that she was aware of the importance of complying with workplace laws and that there were consequences for noncompliance.
The size of the business involved
54 There is little doubt the respondents were operating a small business. As I observed in Gardos v Baker at [85] while some latitude may, in appropriate circumstances, be given to small business owners by way of mitigation when determining penalty, it should not be viewed as an automatic discounting factor on penalty.
55 In addition, the respondents in this matter were given latitude by being afforded an opportunity to rectify the underpayment which they have taken some steps to address.
56 During the final hearing Mr Stojic indicated that it was unlikely he would restart the business and that he would instead continue to work for wages. Despite these assurances, I hold concerns that without a greater effort at compliance, there is a risk the respondents could engage in further contravening behaviour if they reopen the business.
Cooperation with enforcement authorities
57 By filing a Form 2 response in which they admitted the claim, the respondents have ensured the claimant did not have to incur the costs and resources involved in a contested hearing.
58 The respondents were also initially cooperative when the Department contacted them about Mr Hewins’ complaint. The admissions the respondents made should be viewed to their benefit, even though it took their noncompliance with the payment plan, the commencement of these proceedings, and two Court hearings before the respondents took steps towards rectifying the underpayment.
Enforcing compliance with minimum standards
59 I earlier observed that the purpose of compliance notices is to provide industrial inspectors with an efficient means to achieve compliance with industrial awards and other minimum employment standards.
60 I also accept the claimant’s submission that a failure to comply with a compliance notice has the potential to undermine the utility and function of compliance notices as a mechanism to ensure awards and other workplace laws are adhered to. Gardos v Baker at [94] referring to Emmet J in Fair Work Ombudsman v Viper Industries Pty Ltd & Anor [2015] FCCA 492 at [42]

61 While the respondents did not comply with the compliance notice, its issuance and the enforcement proceedings that have followed, have served their purpose because the respondents have taken steps towards rectifying the underpayment, which is why the compliance notice was issued in the first place.
Special and general deterrence
62 As I indicated in the preceding paragraph [56], I hold concerns that without a greater effort at compliance there is a risk the respondents could engage in further contravening behaviour if they reopen their business. One of the factors I have had regard to when setting a penalty is ensuring that in the event the respondents decide to reopen their business, they are deterred from repeating or engaging in similar contravening conduct again.
63 On the issue of general deterrence, the case law I referred to earlier at paragraph [29] makes it clear that a fine must be set sufficiently high that it will not only deter the respondents from engaging in further contravening conduct, but others involved in or contemplating taking a similar path from doing the same.
64 In Gardos v Baker at paragraphs [98] - [100], I set out some of the matters relevant to the issue of general deterrence that I relied upon to impose a significant pecuniary penalty:
i. the penalty cannot be so low that it will be viewed by the respondent or others as an acceptable cost of doing business. Pattinson at [98].

ii. the penalty has to be of a kind that it would be likely to act as a deterrent in preventing similar contraventions by like-minded persons or organisations Ponzio v B&P Caelli Constructions Pty Ltd [2007] FCAFC 65; 158 FCR 543 at [93].
.
iii. there will be occasions where general deterrence must take priority and, in that case, a penalty should be imposed to mark the law’s disapproval of the conduct in question and to act as a warning to others not to engage in similar conduct. CPSU, the Community and Public Sector Union v Telstra Corporation Limited [2001] FCA 1364; 108 IR 228 at [9]

65 In my view, this matter needs to be viewed differently to the decision in Gardos v Baker because the respondents have to an extent, taken heed of the warnings I gave them during first and second hearings and made an effort to rectify the underpayment. While there is still some way to go (the respondents having paid $8,000 of the total sum of $11,251.34) specific deterrence is less of a consideration than it was in Gardos v Baker.
66 While I agree with the claimant that the penalty imposed must recognise the importance of deterring others from not complying with workplace laws it is reasonable in some cases to impose a lower penalty in circumstances where contravenors admit their contraventions at the earliest possible time and where underpayment of wages occurs, take steps to rectify that underpayment.
Penalty to be imposed
67 For the reasons outlined in the preceding paragraphs, I have concluded that while the respondents’ failure to comply with a compliance notice cannot be allowed to occur without consequence, it is reasonable to impose a lower penalty than what I imposed in Gardos v Baker.
68 I have therefore determined that each respondent will be fined the sum of $1,000. If the respondents had complied with the orders I made at the final hearing and provided evidence that they had rectified the underpayment in full by 19 March 2024, I would have been minded to impose a penalty that was less than the amount I have determined is appropriate.
Other orders
69 Pursuant to s 83F(2) of the IR Act I will order that payment of the penalty be made to the claimant.
70 The claimant sought an order under s 83E(11) of the IR Act for the payment of its disbursements, fixed in the sum of $271.92. The amount claimed was for the cost of engaging a process server to personally serve the respondents with the originating claim.
71 The amount the claimant sought for the payment of its disbursements was reasonable in the circumstances. I will accordingly make orders to ensure the respondents pay this sum too. I will split this amount evenly and order that each respondent pay the sum of $135.96 in addition to their individual fines.
72 Finally, and as the compliance notice was issued to rectify the underpayment, I will make an order under s 83E(2) of the IR Act requiring the respondents pay Mr Hewins the sum of $3,251.34, being the amount from the underpayment that remained outstanding as at 19 March 2024.
73 Having found the contravention of s 84T of the IR Act proved, and noting the respondents have admitted both the underpayment and their failure to comply with the compliance notice, it is appropriate the order be made to prevent any further breaches of the compliance notice.


T. KUCERA
INDUSTRIAL MAGISTRATE