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Under the Fair Work Act 2009 (Cth) (FW Act), the Federal Circuit and Family Court of Australia (Division 2) (the Court) is able to determine certain underpayment disputes as “small claims proceedings”.

The informal nature of small claims proceedings means that orders made typically only require an employer to rectify underpayments up to the value of $20,000.

However, in a recent interlocutory decision within a small claims proceeding, the Court has confirmed that it also has the power in such matters to make adverse findings, including findings of accessorial liability, against directors of deregistered companies.

This position overturns the long-standing position at common law in the decision of Beer v Lim & Anor [2012] FMCA 524 (Beer v Lim) that an order against an accessory is unavailable to the Court in proceedings under the small claims procedure pursuant to section 548 of the FW Act.

In Nino v Kuksal [2022] FedCFamC2G 401, eight employees were variously employed by either the Director or by one of the two since deregistered entities that the Director had owned and controlled. The employees performed duties such as cleaning and housekeeping for guest accommodation.

Through the small claims procedure, the employees applied to the Court for compensatory orders against the Director as an accessory to their employer’s contraventions of the FW Act in failing to pay or underpaying the employees in the amount totalling to approximately $22,000.

In addition to a denial of the allegations, the Director also submitted that the Court did not have the jurisdiction in a small claim proceeding to hear or determine claims that an officer of a deregistered company had contravened the FW Act or was an accessory to such a contravention. The Director relied on the common law position established by Beer v Lim.

The Director also relied on the informal nature of small claims proceedings in submitting that he would be denied the benefit of the rules of evidence which would ordinarily be applied in a proceeding against an accessory.

In this interlocutory decision, the Court considered only the jurisdictional objections raised by the Director.

In doing so, the Court noted the general power conferred on a Court by section 545 of the FW Act, which allows it to make any order it considers appropriate if it is satisfied that a person has contravened, or proposes to contravene, a civil remedy provision of the FW Act. The Court also looked to section 550 of the FW Act which deems a person involved in a contravention to be the contravener themselves. Therefore, the Court found it had the power to make a finding against the Director as an officer of a deregistered company, including that he was an accessory to the alleged contraventions.

The Court also considered that section 548(2) of the FW Act (which applies specifically to small claims proceedings) did not expressly prescribe against whom it might make compensatory orders. Accordingly, such orders in relation to the underpayment of wages were not necessarily limited to employers.

The Court could, for instance, make compensatory orders against a deregistered company, providing it is satisfied that the company has contravened a civil remedy provision. This also included any person who is deemed a contravener, or an accessory, to the company’s contravention “if the court considers it appropriate to do so”.

The Court also clarified that, while it may not be bound by the usual rules of evidence and procedure under the small claim procedure, it does not follow that the parties will not be afforded natural justice or fair process, stating that “relaxation of the rules and procedures does not mean that the standard of proof is diminished”.

Having regard to the above, the Court held that Beer v Lim was not correctly decided and that it was not bound to follow it. It therefore rejected the Director’s submissions and confirmed that the employees’ application would remain listed for a final hearing to determine the claims of underpayment.

Lessons for employers

The long-accepted understanding of small claim proceedings under the FW Act was that they provide an informal, timely and cost-effective avenue for disputes in relation to underpayments up to the value of $20,000 and, as a result, the range of potential adverse orders in such proceedings was quite limited.

However, this decision now confirms that the Court’s power in such matters can extend to other findings, such as findings of accessorial liability against directors of deregistered companies, as well as compensatory orders against individuals involved in such contraventions of the FW Act.

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