FEDERAL COURT OF AUSTRALIA Ross v Paea trading as Bombora Café [2020] FCA 766 File number: NSD 1476 of 2019 Judge: PERRAM J Date of judgment: 3 June 2020 Catchwords: INDUSTRIAL LAW – where Applicant employed as cook by First Respondent – where Applicant claims unpaid wages, annual leave, taxation and superannuation under Fair Work Act 2009 (Cth)('the Act') – whether the Restaurant Industry Award 2010 applies to First Respondent – whether First Respondent is employer under s 47 of the Act – whether First Respondent contravened the Act SUPERANNUATION – whether employee can sue employer where employer fails to make superannuation contributions to complying fund – nature of compulsory superannuation laws as tax in constitutional sense BANKRUPTCY – where First Respondent has filed for bankruptcy prior to Court reserving judgment – whether leave granted to Applicant to proceed under s 58(3)(b) of the Bankruptcy Act 1966 (Cth) – where Court has already heard evidence in the case – where trustee of bankrupt estate neither agrees nor objects to leave being granted PRACTICE AND PROCEDURE – where Applicant assisted by unadmitted acquaintance who appears to have been holding himself out as lawyer – whether judgment reasons should be referred to Law Society of New South Wales Legislation: Constitution ss 51(ii), 51(xx), 51(xxxi), 51(xxxvii), 55, 122 Bankruptcy Act 1966 (Cth) s 58(3)(b) Evidence Act 1995 (Cth) s 29(2) Fair Work Act 2009 (Cth) ss 30H, 30N, 30L, 42, 44, 45, 46, 47, 61, 87, 90, 539, 545 Federal Court of Australia Act 1976 (Cth) s 51A(1) Superannuation Guarantee Charge Act 1992 (Cth) ss 3, 5, 6 Superannuation Guarantee (Administration) Act 1992 (Cth) ss 17, 19, 23, 33, 34, 36, 46, 65 Taxation Administration Act 1953 (Cth) s 18-15 of Sch 1 Restaurant Industry Award 2010 cl 4, 20, 35 Industrial Relations (Commonwealth Powers) Act 2009 (NSW) ss 3, 5 Legal Profession Uniform Law (NSW) s 10(1) Cases cited: Cassaniti v Commissioner of Taxation [2010] FCA 641; 186 FCR 480 Re Mendonca; ex parte Commissioner of Taxation (1969) 15 FLR 256 at 259 Date of hearing: 18-19 December 2019 Date of last submissions: 7 January 2020 (Applicant) Registry: New South Wales Division: Fair Work Division National Practice Area: Employment & Industrial Relations Category: Catchwords Number of paragraphs: 75 Counsel for the Applicant: The Applicant appeared in person with the assistance of Mr D Johnston Counsel for the First Respondent: The First Respondent appeared in person Counsel for the Second Respondent: The Second Respondent did not appear Table of Corrections 2 July 2020 In paragraph 61, 'Ms Paea' has been replaced with 'Ms Ross' ORDERS NSD 1476 of 2019 BETWEEN: TAHLIA JADE ROSS Applicant AND: JEVAN PAEA TRADING AS BOMBORA CAFÉ ABN 58 776 169 949 First Respondent CATHERINE PAEA Second Respondent JUDGE: PERRAM J DATE OF ORDER: 3 june 2020 THE COURT ORDERS THAT: 1. Leave be granted to the Applicant to proceed against the Bankrupt Estate of the First Respondent. 2. Judgment for the Applicant against the First Respondent for $17,583.26. 3. The Applicant be entitled to interest on that sum from 11 November 2017 at the cash rate plus 1% together with an interest premium of 0.1% calculated on a monthly basis in arreas and without interest being added to the principal sum. 4. The matter be stood over for a further case management hearing on 17 June 2020 in relation to the Applicant's claim against the Second Respondent. 5. A copy of these reasons be provided to the President of the Law Society of New South Wales and the President's attention be drawn to my comments about Mr Johnston at [66]-[74]. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT PERRAM J: introduction The Applicant's employment at Bombora Café 1 Sandwiched between Tuggerah Lake, Soldiers Point and Cabbage Tree Harbour, on the Central Coast of New South Wales, is a suburb called Norah Head. That suburb is home to a number of airy beaches, a picturesque lighthouse and various holiday facilities. Until recently, Norah Head was also home to Bombora Café ('the Café'), which was owned and operated by the First Respondent, Mr Jevan Paea. Mr Paea is married to the Second Respondent, Mrs Catherine Paea. 2 On or around 8 August 2016, the Applicant, Ms Tahlia Ross, then aged 19, commenced employment as a cook at the Café. Subject to some jurisdictional issues to which I return below, the conditions of Ms Ross' employment were stipulated by the Restaurant Industry Award 2010 ('the Award'). There is some dispute over Ms Ross' precise working hours, but she was employed on a full-time basis. 3 Ms Ross' job at the Café was her first full-time role. Throughout her employment, her net pay fluctuated, but Ms Ross was content with her job for the first seven or eight months. In or around April 2017, however, her pay decreased significantly, which Ms Ross says was unconnected with the number of hours worked and resulted in her often having to call Mr Paea to seek further payment. Her relationship with Mr and Mrs Paea soured, and the circumstances are said to have had a deleterious impact upon her mental health. On or around 11 November 2017, Mr Paea terminated Ms Ross' employment. 4 Ms Ross claims that throughout the employment period, she was underpaid and not afforded a number of entitlements owed to her under the Award. She claims, inter alia, that her net pay fluctuated and never amounted to the minimum wage stipulated by the Award; that she was not provided or paid annual leave; that Mr Paea did not withhold adequate taxation; and that she was not paid any superannuation. Ms Ross further claims that she should be compensated for the impact that her employment had upon her mental health, that she is owed interest on her unpaid wages and entitlements, and that the Respondents should be ordered to pay pecuniary penalties in respect of breaches of the Fair Work Act 2009 (Cth) ('FW Act'). Procedural issues 5 It is these circumstances which led Ms Ross to file the originating application in this matter on 11 September 2019. Since that time, this matter has been attended by various procedural eccentricities. First, at all stages of this proceeding, Ms Ross was assisted by an acquaintance of hers, Mr Daniel Johnston. I understand that Mr Johnston at some point in his life attained a law degree of some kind, but was never admitted as a solicitor and has never held a practicing certificate. During the hearing, some concern was raised as to the nature of his involvement in these proceedings. I return to that concern later in these reasons. 6 Secondly, when this matter was called on for hearing, Mrs Paea did not appear. Mr Paea proffered a medical certificate issued by a general practitioner at Mrs Paea's place of employment, Wallarah Bay Medical Centre, to certify that Mrs Paea was unable to participate in the hearing. Mr Johnston sought to cross-examine the doctor as to the veracity of the certificate, which the doctor duly (and may I say unsurprisingly) confirmed. I accepted the certificate and accordingly permitted the hearing to proceed only against Mr Paea. 7 Thirdly, and perhaps most significantly, during the hearing of this matter but before Ms Ross sought to file further submissions on 7 January 2020 (and therefore before judgment was reserved), Mr Paea filed a debtor's petition with the Australian Financial Security Authority. The debtor's petition was accepted on 19 December 2019, which rendered Mr Paea an undischarged bankrupt. The consequence of s 58(3)(b) of the Bankruptcy Act 1966 (Cth) was therefore that the proceedings were effectively stayed against Mr Paea, preventing Ms Ross from taking any steps in the proceeding without the leave of the Court. I queried with Mr Johnston whether this litigation had any point once that occurred but he told me Ms Ross wished to proceed and so here we are. 8 Ms Ross makes the following claims for relief, which appear to have been made under the FW Act: (1) unpaid wages in the amount of $33,814.00; (2) unpaid withheld taxation in the amount of $19,897.00; (3) unpaid annual leave in the amount of $4,093.00; (4) unpaid superannuation in the amount of $8,421.00; (5) interest on (1)-(4); (6) compensation in the amount of $66,252.00; and (7) an order that the Respondents pay a pecuniary penalty of unknown or unspecified quantity in respect of the contraventions of the FW Act. the evidence 9 Ms Ross relied on the following evidence at the hearing: An affidavit of Ms Ross affirmed on 5 November 2019 which was read without objections. The annexures to that affidavit, TRSUPP-001 through TRSUPP-015, were treated as being in evidence. Ms Ross was cross-examined at the hearing on her experience with seeking treatment under a mental health plan prior to her employment and cash payments made during her employment. A further affidavit of Ms Ross affirmed on 26 November 2019, which was read without objections, and its annexures TR-1 through TR-16 were treated as being in evidence. A witness statement of Mr Cody Vinten made on 31 October 2019, which was treated as being in evidence. It was noted in the hearing that his name is misspelt as 'Vincent' on the witness statement itself. Mr Vinten was cross-examined on 18 December 2019 by Mr Paea. A witness statement of Ms Samantha Cocks also made on 31 October 2019, which was treated as being in evidence. Ms Cocks was cross-examined on 18 December 2019. 10 Mr Paea relied on the following evidence: An affidavit of Mr Paea affirmed on 30 November 2019, which was read without objections together with its annexures A through J which were treated as being in evidence. Mr Paea also gave evidence in narrative form pursuant to a direction under s 29(2) of the Evidence Act 1995 (Cth). I took this course because the prospect of Mr Paea asking himself non-leading questions under the eagle-eye of Mr Johnston was just too much. He was cross-examined by Mr Johnston on 18 and 19 December 2019. Throughout the hearing Mr Paea also tendered various documents including a doctor's certificate concerning the Second Respondent, receipts of cash payments and emails in respect of his debtor's petition application. leave to proceed 11 The first issue which needs to be determined is whether I should grant Ms Ross leave to proceed against Mr Paea notwithstanding his bankruptcy. 12 Prior to the first day of the hearing Mr Paea informed me he had filed an application for bankruptcy. The application was accepted on 19 December 2019. Subsequently I was informed by the Australian Financial Security Authority (Insolvency and Trustee Services) ('AFSA') that it neither consented nor opposed a grant of leave to proceed under s 58(3)(b) of the Bankruptcy Act 1966 (Cth). As I have already mentioned, Ms Ross actively sought the grant of leave. By the time I was notified that AFSA had accepted Mr Paea's bankruptcy application, I had heard the evidence of the case. If leave is not granted then AFSA will need to determine the quantum of Ms Ross' claim for itself on her submission of a Proof of Debt. This will require the same ground to be traversed as I have already traversed although perhaps not encumbered with the need to run a trial bearing some kind of semblance to ordinary civil procedure. It would be wasteful for me having heard the evidence to decline to decide the case and thereby to require AFSA to undertake what I have already done. In that circumstance, I propose to grant Ms Ross leave to proceed against the bankrupt estate on the grounds of public utility. The relevant award RATES 13 Ms Ross' case was that the matter was governed by the Restaurant Industry Award 2010 ('the Award'). I accept this submission although Mr Johnston was not able to give any meaningful explanation for why this might be so. Mr Paea appeared to accept in his affidavit that the Award applied. In the end I decided not to ask why Mr Paea thought this was so, since it seemed to me unlikely that he would be better informed than Mr Johnston. 14 So here we go. The Award is a 'modern award' since it is an award which was made under Pt 2-3 of the FW Act. Such an award will not impose obligations on a person unless it applies to them: s 46. Relevantly, s 47 of the FW Act provides that a modern award will apply to an employer and employee if it 'covers' them. There are two requirements here although one of them is less obvious than the other. The first requirement is that there should be an employer and an employee. The second is that the award should 'cover' that relationship. The second requirement is not in doubt in this case because the Award certainly applies to cafés and the cooks who work in them: cl 4.1. 15 It is in relation to the first requirement that the matter is more complex. On the facts of this case, it might appear obvious that Mr Paea and Ms Ross were, respectively, employer and employee and hence that the condition was satisfied. But such a process of reasoning would proceed on the assumption that the references to 'employer' and 'employee' in s 47 mean what they say. Where Commonwealth statutes are concerned this is rarely a safe assumption and one must be astute to the presence of other provisions declaring that the provision under consideration means something else entirely. In fact, s 42 of the FW Act provides that an 'employer' means a 'national system employer'. 'National system employer' is defined at s 14. This concept reflects limitations inherent in the various heads of legislative power which were available to the Commonwealth Parliament in passing the FW Act. There is no need to dwell on the definition in s 14 because it is clear that Mr Paea is not a national system employer (for completeness, because he is not a corporation within the meaning of s 51(xx) of the Constitution, he is not the Commonwealth or a Commonwealth authority, he is not an airline, he is not a shipping line, he is not a stevedore and, at least so far as I could see, he has no apparent connection with a territory within the meaning of s 122 of the Constitution). 16 But just as 'employer' under s 47 does not mean 'employer' neither, it transpires, does 'national system employer' simply mean 'national system employer'. In fact, as I will endeavour now briefly to explain, even though Mr Paea is not a national system employer as defined in s 14 he is, in fact, taken to be a national system employer. Thus whilst Mr Paea does not fall within the basic terms of either statutory definition he ends up being deemed to satisfy both. This easy-to-follow drafting emerges in part from s 30N(1)(a) of the FW Act which extends the concept of a national system employer to include individuals who are in a 'referring State'. A 'referring State' is one which has referred legislative power to the Commonwealth under s 51(xxxvii) of the Constitution in relation to matters covered by subsections (3), (4) and (5) of s 30L. New South Wales is such a state and, as it will be recalled, the Café is comfortably within the territorial confines of New South Wales. 17 The provisions dealing with 'referring State[s]' are somewhat technical in nature. Since they were not the subject of any useful submission by Mr Paea or Mr Johnston I am not going to dwell upon them but those with time on their hands should consult ss 30N(1)(a), s 30L and 30H. The net effect of these provisions is that New South Wales is a 'referring State' due to the operation of the Industrial Relations (Commonwealth Powers) Act 2009 (NSW). This Act refers various subject matters including minimum terms and conditions of employment contained in instruments such as awards and employment standards: Industrial Relations (Commonwealth Powers) Act 2009 (NSW), ss 5(1) and the s 3(1) definition of 'referred subject matters' in cl (a)(i) and (ii). This means that in relation to terms and conditions of employment contained in the Award or in relation to minimum conditions of employment contained in employment standards, Mr Paea is taken to be a national system employer and therefore an employer. 18 But there is an exception to this. The 'referred subject matters' in the Industrial Relations (Commonwealth Powers) Act 2009 (NSW) expressly do not include any 'excluded subject matter': s 3(1) definition of 'referred subject matters'. The excluded subject matters includes the topic of superannuation: s 3(1) definition of 'excluded subject matter' in cl (b). It follows that Mr Paea is not an employer for the purposes of an award to the extent that the award deals with superannuation but otherwise is. 19 Consequently, the Award binds Mr Paea and Ms Ross in relation to her terms and conditions of employment other than those relating to superannuation. 20 What did the Award require? The Award's requirements depend largely on the classification an employee's position falls under. One such classification is Cook Grade 1: cl 4.1; Sch B cl. B.3.4. Such a cook is an employee who 'carries out cooking of breakfasts and snacks, baking, pastry cooking or butchering'. A Grade 1 Cook is a Level 2 employee under the Award: cl 20.1. Mr Paea thought that Ms Ross was employed as a Grade 1 Cook. While Ms Ross stated in her affidavit that she was a 'Grade 2 Cook', all her pay slips including the ones that she tendered indicate a classification of Grade 1 Level 2. The possibility of Ms Ross being a Grade 2 Cook was not pressed in the so-called hearing and I find that the evidence supports Ms Ross being employed as a Grade 1 Cook. 21 The Award draws a distinction between full-time, part-time and casual employees. It was not suggested that Ms Ross had worked part-time but there was some uncertainty as to whether she had worked full-time or casually. Ms Ross said she was employed full-time throughout her employment. Mr Paea said that she had commenced working full-time but at some point had become a casual employee. Mr Paea has produced the timesheets for Ms Ross and they all record that Ms Ross was employed on a full-time basis. Under cross-examination Mr Paea attempted to say that the time sheets were in error in this regard. There is some reason to doubt the accuracy of these timesheets but since the classification of Ms Ross as a full-time employee is contrary to Mr Paea's interests and consistent with Ms Ross' evidence I propose to accept that she was employed on a full-time basis throughout. 22 Across that period the rate applicable for a full-time Level 2 Grade 1 Cook was specified in the table to cl 20.1 of the Award. By cl 6 these rates are minimum rates. It was not suggested by Ms Ross or Mr Paea that the parties had agreed that Ms Ross should be paid any more than the minimum award rates so it is this table which applies in this case. However, by way of additional confusion, the rates were altered at the end of the 2016-2017 financial year during the period that Ms Ross was employed by Mr Paea. As a result, two different versions of the table in cl 20.1 are applicable. These two tables are thus: Award rate up to 30 June 2017 (PR579913): Classification Minimum weekly wage Minimum hourly wage $ $ Level 2: 718.60 18.91 Cook grade 1 Award rate from 1 July 2017 (PR592222): Classification Minimum weekly wage Minimum hourly wage $ $ Level 2: 742.30 19.53 Cook grade 1 23 The percentage of the Award rate an employee is entitled to is dependent upon their age. Ms Ross was 19 when she commenced her employment and turned 20 on 30 September 2016. Throughout her employment the relevant percentage of the Award rate she was entitled to was laid out in cl 20.3 of the Award as follows: Age % 19 years of age 85 20 years of age 100 How much work did ms ross do and how much was she paid? 24 There is then a factual dispute between Ms Ross and Mr Paea as to the amount of work she did. Having concluded that she was a full-time employee this issue is relevant only to the extent that it bears on her working on public holidays, weekends or more than 38 hours per week since, as a full-time employee, she was entitled to be paid as such. 25 Ms Ross' version of events is as follows: she says was employed at the Café in the weeks preceding 18 August 2016. While it is unclear what specific date Ms Ross commenced working for the Café, it is likely it was on or around 8 August which is the first day of the pay period on her first pay slip. She says that when she began working she worked seven days per week from 8 am to 4 pm. She noticed over time that her pay fluctuated and thought this odd since she was working the same hours every week. At the end of September 2016 she noticed that she was paid the lowest amount she had ever received. Her first pay had been $900 but by late November it had fallen to $600. She says she had her concerns about this but let it pass. But on 11 April 2017 she only received $250 and rang the Respondents to complain. Shortly afterwards a further $383.21 was deposited into her bank account. Following further complaints about her fluctuating pay, Ms Ross noticed that she began to be paid in round figures such as $350 (on 26 April 2017) and $250 (on 27 April 2017). She continued to complain but could not leave the employ of Mr Paea since she needed the job. Ms Ross also contends that she received no payments for working in the weeks commencing 24 May 2017 and 29 September 2017. On 11 November 2017 Mr Paea terminated her employment. 26 Mr Paea's version of events is different. He says that in around early April 2017 he had a conversation with Ms Ross about her pay and work status. According to Mr Paea, this was the first time that Ms Ross had raised the issues of wages with him. Mr Paea said that Ms Ross would be paid a portion of her weekly wage of around $300 by electronic funds transfer and the balance would be paid in cash out of the weekend takings. 27 In relation to the payment of superannuation and the withholding of instalments of income tax, Mr Paea says that Ms Ross told him not to bother but he says he did not agree to this. Mr Paea says that he told Ms Ross that he would need to sort it out with his accountant. Unfortunately, his accountant became unwell and required a kidney transplant (truly) which hindered Mr Paea in dealing with this issue (also the accountant was a two hour drive away). Mr Paea agreed that he had not dealt with taxation or superannuation in the 2017-2018 financial year. 28 There are two sets of records which indicate the amount Ms Ross worked and what she was paid. The first of these is Ms Ross' bank statements which record regular payments made by Mr Paea to her. The second consists of the timesheets for Ms Ross maintained by Mr Paea. These two sets of records do not agree. For example, for the week of 6 to 12 November 2017, Mr Paea's timesheet records that the total net payable to Ms Ross (after deduction of income tax) was $222.17. But Ms Ross' bank statements shows that she received $227.17 in respect of the same pay period. A further confusion arises because Ms Ross has produced a small number of Mr Paea's timesheets too and although they do not materially differ from Mr Paea's they are not exactly the same either. It is difficult to know what to make of that. 29 Mr Paea cross-examined Ms Ross and sought to have her concede that he had sometimes made up her pay using cash taken from the till but she resisted this ('No. You never, ever paid me cash'). On the other hand, Mr Paea's evidence was that the amounts which were deposited into her bank account were supplemented by cash payments which when taken together totalled the amount owed. Throughout the hearing, Mr Paea referred to the fact that some of the payment transfers in Ms Ross' bank statements included the words 'Part Pay' to support his contention that cash payments were made to address shortfalls. 30 Mr Paea's timesheets suggest that the amount paid to Ms Ross was highly variable. Her evidence was that whilst she noticed that the pay kept varying she did not raise it with Mr Paea until such time as it became obvious she was being underpaid in April 2017. 31 Analysis of Mr Paea's timesheets demonstrates that they are unreliable. For example, they are replete with arithmetical errors. The timesheet for the week 7 August 2017 to 13 August 2017, for example, records this: Ordinary Hours 30 hrs $585.90 Saturday Hours Sunday Hours 7.5 $132.80 TOTAL 37.5 hrs $834.90 32 But $585.90 plus $132.80 is $718.70, not $834.90. Further, each timesheet suggests that income tax had been deducted from the amount to be paid. However, as I will explain below, in the 2017-2018 financial year these numbers do not reflect any actual withholdings of income tax. The timesheets do not depict the reality of what was happening between the parties which appears to have been quite different. 33 I do not accept Ms Ross' evidence that Mr Paea never paid her cash. Mr Paea produced as Exhibit 2 some the cash float records from the Café for a small number of the periods in question which appeared to show that cash had been diverted from the float to pay for things such as bread and eggs. They also recorded Mr Paea sometimes taking cash from the til and also making some payments to Ms Ross. These payments total $500. I accept Exhibit 2 is a genuine document. I also accept that it means that I accept, to an extent, Mr Paea's evidence that he did pay cash to Ms Ross on some occasions. Correspondingly, I reject Ms Ross' evidence that she was never paid cash. I should say that the conclusion that in a regional café cash payments were sometimes made strikes me as unremarkable. 34 But to say that I accept that cash was sometimes paid does not entail Mr Paea's larger assertion that to the extent that there were shortfalls in the amounts paid into Ms Ross' bank account these were made up to her by cash payments. Indeed, it is clear that they do not. Thus, for example, Mr Paea's cash float document shows that he paid Ms Ross $200 on Saturday 5 August 2017. Assuming, as Mr Paea's evidence implies, that this was to compensate her for an underpayment in the previous pay cycle, this directs attention to her bank account statements. These show that he paid Ms Ross into her bank account $300 on 1 August 2017. That payment related to the pay period 24 July 2017 to 30 July 2017 and her timesheet suggests that her net pay for this period was $753.77. It will be seen that $200 plus $300 is $500 and not $753.77. I therefore do not accept Mr Paea's evidence that the cash payments made up for any shortfall in what was being paid according to the timesheets. 35 The situation then is that all of the evidence is unreliable in one way or the other. The timesheets do not seem to be connected closely, or perhaps at all, with reality, the cash payments do not seem to be connected with the timesheets, Mr Paea's evidence that he made up the shortfalls with cash top ups does not hold up when looked at closely and Ms Ross' evidence that Mr Paea never paid her cash seems likely to be false. 36 In that circumstance, the only thing which appears clear is that Ms Ross was employed full-time as a Level 2 Grade 1 Cook for the period of 8 August 2016 to 11 November 2017. I do not accept Ms Ross' evidence that she worked seven days per week eight hours per day. If she had done so, she would have complained about the wildly fluctuating pay she was receiving and for a long time she did not complain. I think it likely that Ms Ross did receive cash across the period but I am unable to quantify this effect. 37 In the circumstances, whilst recognising that she worked on the weekends I propose to approach the matter on the basis that she is entitled to be paid for working five days per week and that two of those days were on the weekend. I accept Ms Ross' contention that each day she worked she worked 8 am to 4 pm. I will account for a half hour break on each day worked. As I am assuming she worked weekends, I will calculate her wage based on her minimum hourly rate under the Award including weekend penalty rates. On these assumptions, there is no need to calculate any overtime. I will treat all public holidays as worked (excluding Easter Sunday), entitling Ms Ross to appropriate public holiday penalty rates. How much was the underpayment in the 2016-2017 financial year 38 As I outlined previously, the Award provides for different rates depending on whether the work is done during the week, or on Saturday or Sunday, depending on the age of the employee and depending on the position worked and at what level. These minimum entitlements are regulated by cl 20. Taking into account Ms Ross' birthday the following table illustrates the applicable Award rates throughout Ms Ross' employment during the 2016-2017 financial year including penalty rates: Award Age Standard and Penalty Rates Weekly Standard Hourly Standard Saturday Sunday Public Holidays 125% 150% 250% Up to 30 June 2017 (Cook Grade 2) 19 $610.81 $16.07 $20.09 $24.11 $40.18 20 $718.60 $18.91 $23.64 $28.37 $47.28 39 As I outlined in [37] above, each week I have assumed that Ms Ross worked 22.5 hours at the hourly standard rate (three week days), 7.5 hours at the Saturday hourly rate and 7.5 hours at the Sunday hourly rate. Therefore, I calculate Ms Ross' pay entitlements during the 2016-2017 financial year as follows: Award Rate Weeks Weekly rate Gross wages owed 19 year old in 2016-2017 financial year 8 $693.08 $5,544.64 20 year old in 2016-2017 financial year 39 $815.55 $31,806.45 Total $37,351.09 40 To this total, I will add $2,060.27 to account for worked public holidays. This means that across the 2016-2017 financial year, before tax, Mr Paea should have paid her a gross amount of $39,411.36. Ms Ross' bank statements show that he in fact paid her a net amount of $29,956.21. It is then necessary to say something about tax. income tax in the 2016-2017 financial year 41 Ms Ross says that she received a PAYG payment summary for the 2016-2017 financial year. It was in evidence. It suggested that she had been paid $36,441.77. This is inconsistent with Ms Ross' bank statements which, as I stated above, indicate she received $29,956.21 throughout this period. In respect of the wages received, I take the bank statements provided by Ms Ross to be definitive and I find that she was paid $29,956.21. 42 The PAYG payment summary also suggested that Mr Paea had withheld $5,755.73 in income tax instalments. Ms Ross accepted in her submissions (made on her behalf by Mr Johnston) that Mr Paea had withheld around $5,800 in withholding payments in the 2016-2017 financial year and this somewhat matches the amount which appears in the PAYG payment summary ($5,755.73). I therefore rely on the PAYG payment summary to reflect the amount of tax withheld by Mr Paea during the 2016-2017 financial year. Ms Ross' bank statements show that she received a payment from the Australian Taxation Office ('the ATO') on 3 November 2017 in the amount of $2,116.69. Under cross-examination she agreed with Mr Paea that this was 'tax from Bombora Café'. 43 Accepting the payment summary as evidence of tax withheld, $5,755.73 in withholding payments was deducted from Ms Ross' gross pay for the period 7 August 2016 to 30 June 2017. She received this in the form of a tax credit. This means her actual gross pay was $35,711.94. This means that she was underpaid $3,699.42. 44 In due course, I will order Mr Paea to pay this amount. It will be Ms Ross' responsibility to file an amended tax return for the year ending 30 June 2017 returning as income in that year whatever she obtains on a Proof of Debt. She has already had the benefit of the amounts withheld in procuring the refund on 3 November 2017. The amounts she now recovers from Mr Paea's bankrupt estate for the 2016-17 financial year will be gross figures on which she will need to pay income tax. Underpayment and income tax in the 2017-2018 financiaL year 45 In relation to the period of employment from 1 July 2017 to 11 November 2017 the situation is this. Mr Paea paid into her bank account an amount of $5,527.17. There is no evidence that he issued Ms Ross with a payment summary, from which I conclude that he did not withhold any income tax from these amounts (as he was obliged to do). Mr Paea agreed that he had not withheld tax in this income year under cross-examination. Despite that, the timesheets across this period do refer to amounts as having been withheld. For reasons I have already given, these timesheets are for the most part not reliable sources of information. Combined with Mr Paea's evidence I am confident that the amounts recorded in those timesheets as having been withheld do not reflect an actual withholding of amounts of income tax and are, basically, made up numbers. As such Ms Ross will not be entitled to claim a credit for them since the tax has not been 'withheld' within the meaning of s 18-15 of Sch 1 to the Taxation Administration Act 1953 (Cth). As Edmonds J observed in Cassaniti v Commissioner of Taxation [2010] FCA 641; 186 FCR 480 at [163]-[165]: There must be a process by which this withholding takes place … Where in the usual case the withholding process is represented only by accounting entries the question whether a legitimate process of withholding has ensued will depend upon a close examination of those books and records and the surrounding circumstances to see whether it may be inferred from those record and circumstances that a withholding has occurred. 46 In this case I am confident that in the 2017-2018 financial year there was no withholding within the meaning of s 18-15. 47 The effect of Mr Paea's failure to withhold the instalments of income tax is that Ms Ross will not obtain the benefit of any tax credits if she eventually files a return for the 2017-2018 financial year. Since Ms Ross does not have the benefit of any tax credits in relation to the sum of $5,527.17 which she received electronically, this means that this sum is a gross figure from which tax has not yet been deducted. 48 There are 19 weeks across the period in question. While Ms Ross turned 21 throughout this period, this did not result in a change in the Award rate applicable to her. Ms Ross was entitled to the following minimum Award rates during the 2017-2018 financial year: Award Age Standard and Penalty Rates From 1 July 2017 (Cook Grade 2) Weekly Standard Hourly Standard Saturday Sunday Public Holidays 125% 150% 250% 20+ $742.30 $19.53 $24.41 $29.30 $48.83 49 Based on my earlier assumption that Ms Ross works five days per week, two of which are on the weekend Ms Ross is entitled to a weekly rate of $842.25. Ms Ross should have been paid this amount per week for 19 weeks as well as an additional amount for working on a public holiday which means Mr Paea was obliged to pay her a gross salary of $16,225.50. Of that he has only paid $5,527.17 to which I would add the $500 which Exhibit 2 persuades me he slipped to her out of the cash register (so the total pay she received was $6,027.17). Although I am reasonably confident that Mr Paea paid Ms Ross more cash than that he has failed to prove what that amount was beyond the $500 and this is his problem. 50 She has therefore been short paid $10,198.33 on a gross basis. She is entitled to that amount in unpaid wages but she will be liable to pay income tax on it when she files her income tax return for the 2017-2018 financial year. annual leave 51 Turning then to the question of annual leave, this is governed by cl 35 of the Award. It provides for annual leave entitlements in accordance with the National Employment Standards set out in Div 6 of Pt 2.2 of the FW Act. As a full-time employee, these entitlements applied to Ms Ross. By s 87(1)(a) of the FW Act an employee is entitled to four weeks of paid annual leave per year. By s 87(2) this accrues progressively throughout the employment year. By s 90(2) where an employee's employment ends and the employee has a period of untaken annual leave, the employer must pay the employee the amount the employee would have been entitled to if the employee had taken the annual leave. By s 90(1) an employer must pay an employee who takes annual leave the employee's base rate of pay for the employee's ordinary hours of work. 52 Ms Ross was employed for 66 weeks. On the basis, as I have found, that Ms Ross was employed for 7.5 hours per day, 5 days per week this amounts to 2,460 hours worked and therefore an entitlement to 188.71 hours of annual leave. I have calculated this on the basis that two days (15 hours) should be deducted from hours worked for Ms Ross' attendance at a funeral and Easter Sunday. This amounts to $3,685.51, calculated at Ms Ross' base hourly rate at her time of departure. superannuation 53 The Award makes provision for superannuation in cl 30. However, nothing substantive is provided for in those provisions other than that they refer to the operation of the Superannuation Guarantee (Administration) Act 1992 (Cth) ('the SGA Act') which, in any event, applies in accordance with its own terms. That Act does not impose any obligation on Mr Paea which is enforceable by Ms Ross to pay superannuation contributions to a fund nominated by her although it provides him with economic incentives to do so. Briefly, the scheme is as follows: the SGA Act specifies a 'charge percentage' of 9.5% for the years starting on 1 July 2016 and 1 July 2017 (i.e. the relevant years): s 19(2). For each quarter s 19(1) then defines an employer's 'individual superannuation guarantee shortfall' to be the wages for that quarter multiplied by the charge percentage in practice at the relevant time. Thus for the relevant dates, the individual superannuation guarantee shortfall was 9.5% of the quarterly wages (before deduction of income tax instalments). There is then defined in s 17 the 'superannuation guarantee shortfall' which is the sum of the individual superannuation guarantee shortfall together with amounts of interest to encourage prompt payment. An employer is able to reduce the amount of the superannuation guarantee shortfall by paying a contribution to an employee's superannuation fund: s 23. No particular amount is specified but the arithmetic of the provision is such that if the employer pays (relevantly) the full 9.5% this will reduce the amount of the superannuation guarantee shortfall to nil. 54 The SGA Act is cognate legislation with the Superannuation Guarantee Charge Act 1992 (Cth) ('the SGC Act'). The Commonwealth Parliament does not have a legislative power with respect to superannuation: Constitution, s 51. But it does have a power with respect to taxation: s 51(ii). The SGC Act is a law which imposes a tax on employers. By s 3 it incorporates the whole of the SGA Act so that the two statutes are read as one. By s 5 a charge is imposed on any superannuation guarantee shortfall of an employer for a quarter. By s 6 the amount of the charge is the amount of the shortfall which is an oblique way of saying that the amount of any superannuation guarantee shortfall is subject to a 100% tax. The separation of the act which imposes the charge, the SGC Act, from the act which administers it, the SGA Act, is thought to reflect the requirement of s 55 of the Constitution that laws imposing taxation 'shall deal only with the imposition of taxation'. Whether s 55 actually means that administration provisions cannot validly appear in a tax bill and, if it does, whether such prohibition could be evaded by the cosmetic device of splitting the legislation into two acts which incorporate each other is a question not presently necessary to address. Nor is it necessary to consider whether a tax imposed at a rate of 100% is a tax or rather an acquisition of property within the meaning of s 51(xxxi). 55 Returning to the SGA Act, provision is then made for the assessment of the tax due and the issue of notices of assessment. Section 33 requires an employer to lodge a quarterly superannuation guarantee statement for each quarter and by s 34 this is taken to be an assessment. The employer is then obliged to pay the amount of the statement on the lodgement day: s 46. In practical terms, an employer who chooses to pay the full 9.5% superannuation contribution to a superannuation fund nominated by an employee and does so on time will have an assessment of $0 and will not be required to pay any tax. Late payment or non-payment of the tax leads to the imposition of onerous interest obligations and possibly late payment penalties. The operation of these provisions is that it is not economically rational not to pay the 9.5% superannuation contribution into a fund nominated by an employee. But this is an economic imperative not a legal one. 56 As it happens, Mr Paea has not lodged any statement under the SGA Act and hence has not generated any assessments. In the case of employers who fail to lodge a statement provision is made for the Commissioner of Taxation ('the Commissioner') to issue default assessments: s 36(1). But there was no evidence in this case that the Commissioner has in fact done so. The situation therefore is that due to the lack of any assessment of liability to the charge, Mr Paea presently has no crystallised tax liability which s 46 obliges him to pay. Of course, he has an uncrystallised obligation by reason of the operation of the SGC Act in the sense that the charge has been imposed by s 5 of the SGC Act. The charge is due and owing but not yet payable: cf. Re Mendonca; ex parte Commissioner of Taxation (1969) 15 FLR 256 at 259 where Gibbs J described the liability of a taxpayer to the income tax prior to the issue of a notice of assessment as one where '…the tax is due and owing, although not payable'. 57 The point for present purposes is that neither the SGC Act nor the SGA Act give any entitlement to an employee to require an employer to pay a superannuation contribution to a nominated superannuation fund. Even the Commissioner may not do so. The employer is legally entitled not to make the contribution but the consequence of doing so will be that it is then obliged to pay the same amount in tax to the Commissioner. It is true that the Commissioner is obliged by s 65 of the SCA Act to pay the amount of any tax received from the employer to the employee's nominated superannuation fund. However, this highlights the lack of any legal entitlement in the employee to compel the employer to make the payment. 58 It may be doubtful that it would be within the scope of the taxation power in s 51(ii) to provide for such a direct right of action for it would most likely deprive the charge of its quality as a tax. 59 There are potentially some quite subtle issues about the ability of the parties by private bargain (or the State or Commonwealth by means of an industrial instrument) to bind an employer to make the contribution rather than pay the tax. One view could be that the SGA Act gives the employer a choice as to which path it prefers and that any arrangement or instrument which sought to remove that choice could be contrary to the operation of the SGA Act (particularly in relation to the Commonwealth where any element of compulsion might disturb the constitutional calculus on which the legislation rests, i.e., that it is tax levied by the Commonwealth). Another view might be that the choice is a legal entitlement the employer has and which it can give away as part of a bargain or which can be taken from it under an instrument. It is not necessary to say any more about that because it was not suggested in this case that there was such a contractual requirement and because cl 35 of the Award does not purport to have any such effect. 60 The consequence is that Ms Ross has no rights against Mr Paea in relation to her unpaid superannuation. mental distress 61 Ms Ross also claimed compensation for mental distress. She gave some evidence about this, including a care plan with her local GP, but I would not be prepared to act on her evidence without it being supported by some evidence from a medical practitioner. civil penalties 62 In her originating application she also sought the imposition of a civil penalty. However, no submissions were advanced about this at the trial or in her written submission and Mr Paea was not called upon to respond to any such claim. As such it seems the claim was not pursued. I disregard it. relief? 63 Having concluded, however, that Ms Ross was entitled under the Award to be paid more than she was and under the FW Act to be paid amounts in relation to annual leave which she has not been paid, the question then arises as to the source of this Court's jurisdiction and power to grant the remedy sought. In relation to the underpayment of wages, Mr Paea has contravened the Award. Section 45 of the FW Act provides that a person must not contravene a modern award. Section 45 is a civil remedy provision: s 539(1). By s 545(2) this Court can award compensation for loss suffered by reason of a breach of a civil remedy provision. 64 Mr Paea's obligation to pay Ms Ross her accrued annual leave arises via a different channel. Her entitlement to accrued annual leave is erected by s 87 of the FW Act. Section 87(2) clearly contemplates the idea of accrued untaken annual leave at the end of an employment relationship (as the note to the provision illustrates). Section 90(2) requires an employer to pay an employee accrued but untaken annual leave at the end of the employee's employment. Section 90(2) appears in Division 6 of Pt 2-2 which sets out the 'National Employment Standards'. Section 61(3) says that Divisions 3 to 12 'constitute the National Employment Standards'. Consequently, Mr Paea's obligation to pay Ms Ross her accrued annual leave is an obligation properly described as a National Employment Standard. By s 44(1) an employer must not contravene a National Employment Standard. By s 539(1), s 44(1) is a civil remedy provision. By s 545(2) this Court is authorised to award compensation for a breach of a civil remedy provision, including a National Employment Standard. 65 In those circumstances, there will be judgment for Ms Ross against Mr Paea in the sum of $17,583.26. In her originating application and again in her written submissions, Ms Ross sought interest on the amounts claimed by her. I take this to be an application for interest up to judgment under s 51A(1) of the Federal Court of Australia Act 1976 (Cth). I will order that Ms Ross be entitled to interest on the sum I have awarded from the day of her dismissal at the prevailing cash rate at the Reserve Bank plus 1% together with an interest premium of 0.1%. The interest premium is to be applied because the underpayments occurred at the end of each pay cycle. For practical reasons, however, I have taken the interest all to run from the date of dismissal but increased the interest rate by the premium to take into account that this is a later date than theoretically required. There will be no order as to costs. other matters 66 That leaves two loose threads. The first of these is Mrs Paea, the Second Respondent. She was successful in being excused from the hearing against her husband on the grounds of health. The claim against her remains unresolved. Based on the material I have seen (which may be incomplete) this claim appears problematic but if Ms Ross wishes to pursue it, that is her right. However, the pursuit of cases which have little merit can have costs consequences and Ms Ross should understand that. I strongly counsel Ms Ross against the further pursuit of Mrs Paea. The time for a line to be drawn under this series of unfortunate incidents has arrived. 67 Although, as I shortly explain, Mr Johnston denies that he has been giving Ms Ross legal advice, that seems to me to be very unlikely. My impression of Mr Johnston's capabilities as an unqualified industrial lawyer is that his estimation of his own legal acumen substantially exceeds my estimation. To be frank, Ms Ross has succeeded despite the efforts of Mr Johnston on her behalf. I found nothing he said to me of value. He was also to my observation rude to Mr Paea which was quite unnecessary and certainly unhelpful. 68 This brings me more directly to the issue of Mr Johnston. I permitted Mr Johnston to appear for Ms Ross as he informed me he was her friend, was assisting her and had a law degree. Given the very small nature of the case, the fact that it should never have been brought in this Court and a suspicion that between them Mr Paea and Ms Ross would have no idea what they were talking about, it seemed to me at the time that it would be useful both to Ms Ross and to me to have someone with legal qualifications involved in the case. I have come to regret this decision. 69 During the course of the hearing it became apparent that Mr Johnston has been holding himself out as a lawyer. Further, he appears to have developed a habit of making inappropriate threats whilst in the course of so purportedly acting. The evidence for this is as follows. First, an email from Mr Johnston to Mr Paea dated 15 January 2019 in which, inter alia, Mr Johnston said: Please be advised that Tahlia Ross is represented in the matter to which you refer. … As discussed on the phone, I have again been informed that you are studying a Law Degree. Please be advised that our civil claim against you will likely result in criminal charges brought against you by The Commission of Taxation, ASIC and The Federal Police. Please be advised that it is highly unlikely the Supreme Court will issue a practising certificate to you should any conviction be successful. … It is my intention to file for immediate orders restraining direct contact with my client should you fail to adhere to my request. 70 Secondly, an email from Mr Johnston to Mr Zachary Harrison (the local Member of Parliament) and Mr Paea dated 17 January 2019 in which he said the following statements: As discussed, I have been engaged to act on behalf of former employees of Bomborra Café/Café oNo operating at Norah Head. … My current client Ms Tahlia Ross, approximately 22 years old worked for the business … I note the State Labor policy is set to criminalise this conduct if elected in March. I would like to invite the sitting Member Mr Harris to have a discussion with Ms Ross on the doorsteps of her former employer with media present should he be interested. In the interests of transparency I have included the owner of the Bombora Café in this email. 71 Next is an email from Mr Johnston to Mr Paea dated 10 January 2019 entitled 'Letter of Demand': Please be advised I act on behalf of your former employee, Miss Tahlia Ross. I have been instructed to demand immediate payment of the following: 72 Finally, in an email dated 28 February 2019 Mr Johnston wrote to Mr Paea and said: Please be advised that I act for your former employee Tahlia Ross in the capacity of an Employee Advocate. 73 I am concerned that Mr Johnston has been holding himself out as a lawyer. I raised this with him at the hearing and he made a separate submission about it. In short: he had not held himself out as a solicitor; he was approached by Ms Ross; he did not give legal advice; Ms Ross had been present whilst all the letters were written which had been sent at her request; and, his conduct had been exemplary. In the hearing he also contended that he was an 'employee advocate'. I am by no means sure about any of this. I granted Mr Johnston leave to appear on Ms Ross' behalf at the hearing and that grant of leave would, I accept, cover the preparation of submissions on her behalf. However, the tenor of Mr Johnston's emails is that he is acting on behalf of Ms Ross and he has not been backward in making quite improper threats of a legal nature. 74 The conduct of a legal practice in New South Wales by a person who is not a qualified entity is an offence: Legal Profession Uniform Law (NSW), s 10(1). Despite Mr Johnston's submission that I should not take this step, I will send a copy of these reasons to the President of the Law Society of New South Wales. orders 75 The orders I therefore make are that: (1) Leave be granted to the Applicant to proceed against the Bankrupt Estate of the First Respondent. (2) Judgment for the Applicant against the First Respondent for $17,583.26. (3) The Applicant be entitled to interest on that sum from 11 November 2017 at the cash rate plus 1% together with an interest premium of 0.1% calculated on a monthly basis in arreas and without interest being added to the principal sum. (4) The matter be stood over for a further case management hearing on 17 June 2020 in relation to the Applicant's claim against the Second Respondent. (5) A copy of these reasons be provided to the President of the Law Society of New South Wales and the President's attention be drawn to my comments about Mr Johnston at [66]-[74]. I certify that the preceding seventy-five (75) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Perram. Associate: Dated: 3 June 2020