FEDERAL COURT OF AUSTRALIA

Minister for Immigration and Border Protection v Choong Enterprises Pty Ltd (No 2) [2015] FCA 553

Citation:	Minister for Immigration and Border Protection v Choong Enterprises Pty Ltd (No 2) [2015] FCA 553	
		
Parties:	MINISTER FOR IMMIGRATION AND BORDER PROTECTION v CHOONG ENTERPRISES PTY LTD, RONALD KHEONG HUAT CHOONG and KIM CHOONG	
		
File number:	NTD 34 of 2014	
		
Judge:	MANSFIELD J	
		
Date of judgment:	4 June 2015	
		
Catchwords:	MIGRATION – contraventions of Reg 2.79 of the Migration Regulations 1994 (Cth) – orders for restitution in respect of the underpayment of wages to sponsored employees – calculation of restitution under s 486S of the Migration Act 1958 (Cth) – whether restitution is calculated using the prescribed base rate fixed for the purposes of s 104S or the applicable award – requirement that the terms and conditions provided to a sponsored employee are no less favourable than those that would apply to an Australian citizen performing equivalent work

TAXATION – contraventions of Reg 2.79 of the Migration Regulations 1994 (Cth) – orders for restitution in respect of the underpayment of wages to sponsored employees – calculation of taxation – orders for restitution to be paid to the Australian Taxation Office 	
		
Legislation:	Migration Act 1958 (Cth) 
Migration Regulations 1994 (Cth) 	
		
Cases cited:	Minister for Immigration and Border Protection v Choong Enterprises Pty Ltd [2015] FCA 390 	
		
Date of hearing:	15 May 2015	
		
Date of last submissions:	20 May 2015	
		
Place:	Adelaide	
		
Division:	GENERAL DIVISION	
		
Category:	Catchwords	
		
Number of paragraphs:	36	
		
Counsel for the Applicant:	A Michelmore	
		
Solicitor for the Applicant:	Sparke Helmore Lawyers	
		
Counsel for the Respondents:	A Williams	
		
Solicitor for the Respondents:	Finlaysons	

IN THE FEDERAL COURT OF AUSTRALIA		
NORTHERN TERRITORY DISTRICT REGISTRY		
GENERAL DIVISION	NTD 34 of 2014	
 
BETWEEN:	MINISTER FOR IMMIGRATION AND BORDER PROTECTION
Applicant
	
AND:	CHOONG ENTERPRISES PTY LTD
First Respondent

RONALD KHEONG HUAT CHOONG
Second Respondent

KIM CHOONG
Third Respondent

JUDGE:	MANSFIELD J	
DATE OF ORDER:	4 June 2015	
WHERE MADE:	ADELAIDE	

FURTHER TO THE ORDERS MADE ON 27 APRIL 2015, THE COURT ORDERS THAT:

1.	Pursuant to s 486S(4) of the Migration Act 1958 (Cth) (Migration Act) the First Respondent pay to or on account of Mr Rex Dumasig:
(i)	to him				$20,005.58
(ii)	to the Commonwealth		  $4,521.23
being an amount it underpaid him thereby failing to satisfy the obligation contained in Reg 2.79 of the Migration Regulations 1994 (Cth) (Migration Regulations).

2.	Pursuant to s 486S(4) of the Migration Act the First Respondent pay to or on account of Ms Cheryll Sebastian:
(i)	to her				$20,551.96
(ii)	to the Commonwealth		  $3,932.00
being an amount it underpaid her thereby failing to satisfy the obligation contained in Reg 2.79 of the Migration Regulations.

3.	Pursuant to s 486S(4) of the Migration Act the First Respondent pay to or on account of Mr Emerson Rodriquez:
(i)	to him				$20,056.38
(ii)	to the Commonwealth		  $4,397.32
being an amount it underpaid him thereby failing to satisfy the obligation contained in Reg 2.79 of the Migration Regulations.

4.	Pursuant to s 486S(4) of the Migration Act the First Respondent pay to or on account of Ms Uziel Gaitan:
(i)	to her				$25,556.84
(ii)	to the Commonwealth		  $6,085.54
being an amount it underpaid her thereby failing to satisfy the obligation contained in Reg 2.79 of the Migration Regulations.

5.	Pursuant to s 486S(4) of the Migration Act the First Respondent pay to or on account of Mr Roderick Largado:
(i)	to him				$26,393.00
(ii)	to the Commonwealth		  $7,083.67
being an amount it underpaid him thereby failing to satisfy the obligation contained in Reg 2.79 of the Migration Regulations.

6.	Pursuant to s 486S(4) of the Migration Act the First Respondent pay to or on account of Ms Perla Culion:
(i)	to her				  $6,850.19
(ii)	to the Commonwealth		         $0.00
(apparent overpayment of $65.71)  
being an amount it underpaid her thereby failing to satisfy the obligation contained in Reg 2.79 of the Migration Regulations.

7.	Pursuant to s 486S(4) of the Migration Act the First Respondent pay to or on account of Ms Guamelee Enriquez:
(i)	to her				  $6,542.57
(ii)	to the Commonwealth		     $440.85
being an amount it underpaid her thereby failing to satisfy the obligation contained in Reg 2.79 of the Migration Regulations.

8.	The First Respondent pay to the Applicant costs of and incidental to the further hearing on 15 May 2015.

Note:	Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

IN THE FEDERAL COURT OF AUSTRALIA		
NORTHERN TERRITORY DISTRICT REGISTRY		
GENERAL DIVISION	NTD 34 of 2014	
 
BETWEEN:	MINISTER FOR IMMIGRATION AND BORDER PROTECTION
Applicant
	
AND:	CHOONG ENTERPRISES PTY LTD
First Respondent

RONALD KHEONG HUAT CHOONG
Second Respondent

KIM CHOONG
Third Respondent

JUDGE:	MANSFIELD J	
DATE:	4 JUNE 2015	
PLACE:	ADELAIDE	

REASONS FOR JUDGMENT
1		Orders were made in this matter on 27 April 2015: Minister for Immigration and Border Protection v Choong Enterprises Pty Ltd [2015] FCA 390 (Reasons).
2		In addition to the declaratory orders concerning the contraventions of the Migration Act 1958 (Cth) (the Act), pecuniary penalties were ordered to be paid by Choong Enterprises Pty Ltd (Choong Enterprises) totalling $175,400 and by Kim Choong of $800.
3		Orders were also made under s 486S(4) of the Act that Choong Enterprises pay to four of the persons who it sponsored as visa entrants to Australia amounts which it had recovered from them by wrongly deducting those amounts from their wages: see Reasons at [77]-[78] and [130].
4		The Reasons explained at [80]-[83] why I did not at the time make orders for restitution under s 486S(4) in respect of the underpayment of wages to the sponsored employees.
5		That topic has now been the subject of a Supplementary Statement of Agreed Facts; and additional submissions.  I am grateful to those instructing on behalf of the Minister for the extensive work they have undertaken to identify precisely the entitlements, the PAYG tax paid and payable, and the reimbursement sought.
Further Restitution Payments
6		The material before me indicates that there is a significant difference between the calculation of restitution under s 486S(4), depending on whether the prescribed base rate fixed for the purposes of s 140S(1) is used or the applicable award is used.
7		Somewhat surprisingly, the prescribed base rate results in a higher “entitlement” restitution than the applicable award rate, on the material provided by the Minister.  I have no reason to doubt its accuracy.
8		For example, in the case of one of the sponsored employees, Perla Culion, the following is either agreed or not disputed (I chose this example simply because it falls within one financial year);
Gross wage entitlement 24/11/11 – 11/03/12
	
	(a) under reg 2.79	$14,137.61	
	(b) Under applicable Award	9,288.66	
			
Wages paid	7,287.42	
PAYG tax withheld (and paid to ATO)	2,432.56	
		
Entitlement under reg 2.79	14,137.61	
	Less PAYG tax payable	2,366.85	
	Adjusted for PAYG tax withheld 	2,432.56	
	Credit to employee	(65.71)	
	Less paid (including PAYG)	7,287.42	
	Restitution	$6,850.19	
		
Entitlement Under Award	9,288.66	
	Less PAYG tax payable	965.42	
	Adjusted for PAYG tax withheld	2,432.56	
	Credit to employee	(1,467.14)	
	Less paid (including PAYG)	7,287.42	
	Restitution sought	$2,001.24	

9		The difference is stark.  In her case, in either event, she might then be entitled to a refund from the ATO for overpaid PAYG tax, subject to her personal circumstances.  Without going into the detail of each of the seven sponsored employees involved, as the PAYG tax adjustment in each case is different, the total claimed by way of reimbursement of reg 2.79 fixes the entitlement, the total reimbursement sought by the Minister is $125,956 compared to $52,480 if the Award is the appropriate starting point.
10		Despite that difference, the Minister contends that the Court should make restitution orders based upon the higher “entitlements”.
11		Section 486S(4) relevantly provides:
If, when determining the application [for a civil penalty], it appears to the eligible court that

(a)	an amount of a kind prescribed in the regulations for purposes of subsection 1405(1) is required to be paid by the person [against whom the civil penalty is sought] to the Commonwealth, a State or Territory or another person; and

(b)	the amount remains unpaid after the time for payment; and

(c)	proceedings to cover the amount have not been brought under section 140S;

the court may order that the amount be paid to the Commonwealth, State, Territory or other person (as the case may be).

12		It is accepted by Choong Enterprises (to which I refer discretely only because it is the respondent against which an order is sought under s 486S(4)) that s 140S applies to it as an approved sponsor, and that s 140S then applies to it if it is:
Required to pay an amount of a kind prescribed in the regulations ... to another person (the payee) in relation to a sponsorship obligation.

13		If it applies, s 140S(2) entitles the payee to recover the amount as a debt due to the payee.
14		The relevant regulatory trail then is through the Migration Regulations 1994 (Cth) (the Regulations).
15		Regulation 2.79(1)(a) applies to a sponsor of a primary sponsored person holding a Subclass 457 visa – it is accepted that each of the seven relevant sponsored employees are within that category – unless reg 2.79(1A) is enlivened.  Reg 2.79(1A) is accepted not to be enlivened:  it says that reg 2.79 does not apply if (relevantly) the annual earnings of the sponsored person are equal to or greater than the amount specified by the Minister in an instrument in writing for reg 2.79.
16		Regulation 2.79 then provides:
(2A)	For subregulations (2) and (3), if:
(a)	the person is mentioned in paragraph (1)(a); and

(b)	the nomination by the person of an activity, in relation to which the primary sponsored person was granted a Subclass 457 (Business (Long Stay)) visa, was approved under regulation 1.20H (as in force immediately before 14 September 2009);

then

(c)	from 14 September 2009 until immediately before 1 January 2010:

(i)	subregulations (2) and (3) do not apply; and

(ii)	the person must ensure that the primary sponsored person’s salary is not less than the minimum salary level worked out and paid in the way specified by the Minister in an instrument in writing for this paragraph; and

(d)	on and after 1 January 2010, subregulations (2) and (3) apply.

17		For the period 14 September 2009 to 31 December 2009, the Minister prescribed a formula for determining a minimum base salary based on an applicable base salary of $45,220: Minister for Immigration and Citizenship (Cth) Minimum Salary Levels for the Subclass 457 Temporary Business (Long stay) Visa IMMI 09/109, 10 September 2009 (Instrument No IMMI 09/109).
18		Thereafter, subregs 2.79(2) and (3) are engaged.
19		It is noteworthy, for reasons which appear below, that separately reg 2.79(2) specifically provides that, subject to subreg (2A), the sponsor must ensure that the terms and conditions provided to a sponsored employee are no less favourable than those that would apply to an Australian citizen performing equivalent work.
20		Regulation 2.79(3) is the relevant sub-regulation, as the agreed fact is that each of the relevant sponsored employees was nominated under reg 1.20GA in the case of Mr Dumasig and Ms Sebastian, and Mr Rodriguez and under reg 1.20G in the case of Ms Gaitan and Mr Largado, and under s 140GB of the Act in the case of Ms Culion and Ms Enriquez and was not engaged in information and communication technology activities.  Specifically reg 2.79(3)(a) provides that a person sponsored under s 140GB is to be given payments no less favourable than those which, under para 2.72(10)(c) of the Regulations, would be given to an Australian citizen, and reg 2.79(3)(b) provides that a person sponsored under reg 1.20GA should have a base rate of pay of not less than $40,705, and reg 2.79(3)(c) provides that a person sponsored under reg 1.20G should have a base rate of pay of not less than $45,220.
21		I do not consider that s 486S(4) gives the Court a discretion to order the payment of a lesser amount than the application of the Regulations and any relevant Instrument imposes.  That is not to say that the Court does not have a discretion, indicated by use of the word “may”, whether or not to make an order of the type contemplated.  It is clear that an affected sponsored employee may be left to bring that person’s new claim under s 140S.  But s 486S(4) empowers, but does not oblige, the making of an order that “the amount”, namely the amount prescribed by the Regulations for the purposes of s 140S(1), be paid.  It does not suggest any discretion in the quantification of the amount.  Although reg 2.79 is headed “Obligation to ensure equivalent terms and conditions of employment”, and that concept is then embedded in subreg(2), subregs (2A) and (3) which concern what seems to be the Ministerial prescription of the minimising of the amount required to be paid to satisfy that objective.  On the data provided by the Minister, it plainly does not do so but is more favourable to the sponsored employee than to an Australian citizen doing the same work.  It is a Ministerial prescription nevertheless, partly by Instrument No 09/109 up to 31 December 2009 and then embedded in the Regulations themselves.
22		The labyrinthine detail of the Regulations, quite apart from their apparent effect (on the Minister’s own submission) may merit their further consideration.
23		As no submission was put on behalf of Choong Enterprises to controvert the calculations of the Minister based upon either the amounts prescribed by the Regulations, or upon the applicable Awards, I will proceed on the basis of the calculations provided.  I also see no reason why the underpaid sponsored employees should not be paid their prescribed entitlements.  No submission was made that I should not do so.  It is necessary to adopt the proposed orders to ensure that the PAYG component of the payments is paid to the Commonwealth (as I discussed in the reasons, the payment is for wages that should have been paid and Choong Enterprises should also be protected by fulfilling its statutory obligations to deduct PAYG tax and account for that to the Australian Taxation Office).  The order directing part payment to the Commonwealth is, in essence, that component of the underpaid wages so it should be accounted for by the ATO.

24		Choong Enterprises is therefore ordered to pay to each of the seven sponsored employees the gross wage entitlement, less the actual net wage payments received, and adjusted for the PAYG tax required to have been withheld on the gross wage entitlement and for the PAYG tax already paid, and to the Commonwealth the adjusted PAYG tax payable less that received from Choong Enterprises.  In one instance, that PAYG tax deducted and already paid is greater than that payable on the gross wage entitlement.  In that case, the amount payable to the Commonwealth is shown as $0, but the sponsored employee may, depending upon that person’s personal circumstances, be entitled to a refund from the ATO.
25		The orders will be that Choong Enterprises pay:
(a)	to or on account of Mr Dumasig:
(i)	to him				$20,005.58
(ii)	to the Commonwealth		  $4,521.23
(b)	to or on account of Ms Sebastian:
(i)	to her				$20,551.96
(ii)	to the Commonwealth		  $3,932.00
(c)	to or on account of Mr Rodriquez:
(i)	to him				$20,056.38
(ii)	to the Commonwealth		  $4,397.32
(d)	to or on account of Ms Gaitan:
(i)	to her				$25,556.84
(ii)	to the Commonwealth		  $6,085.54
(e)	to or on account of Mr Largado:
(i)	to him				$26,393.00
(ii)	to the Commonwealth		  $7,083.67
(f)	to or on account of Ms Culion:
(i)	to her				  $6,850.19
(ii)	to the Commonwealth		         $0.00
(apparent overpayment of $65.71)
(g)	to or on account of Ms Enriquez:
(i)	to her				  $6,542.57
(ii)	to the Commonwealth		     $440.85
Terms of Payment of Pecuniary Penalties and Restitution Orders
26		Choong Enterprises says it will have paid the restitution amounts ordered by Order 3 of the Orders made on 27 April 2015.
27		It submitted that it should be given a timetable for the payment of the pecuniary penalties, and the further restitution orders made with these reasons for judgment.  Its proposal in the course of submissions was that it should be given 12 months to pay the restitution payments, and then further time to pay the pecuniary penalties imposed at the rate of $3000 per month, thus resulting in a further period of nearly five years to comply with those orders.
28		The material relied upon to support that application, apart from the submissions themselves, consists of a draft set of financial statements of Choong Enterprises at 30 June 2014, and a draft taxation return of Mr Choong.  Neither was verified by affidavit.  Their utility, and reliability, was questioned by the Minister, and the Minister relied upon an affidavit of a solicitor Bromley Hornsby (prompted by the written memorandum of the respondents) to support that position.
29		The Respondents were, in those circumstances, given the opportunity to file and serve further material to prove or support the submissions made, and to verify the accuracy of the draft documents.
30		They later indicated that they did not wish to do so.
31		In those circumstances, I do not place much weight upon the draft documents referred to above.
32		It is clear that the trading assets of Choong Enterprises have been very significantly reduced in the last few years, so that it now operates only the Nightcliff Fish and Chips Shop.  However, the disposition of other trading businesses, at least some of them, have been to a company D & C Gourmet Pty Ltd, and the third respondent Kim Choong (or Kim Lien Ly) is the sole shareholder and director of that company.  That was not acknowledged in the written submissions on behalf of Choong Enterprises, but it was acknowledged in oral submissions following Mr Bromley’s affidavit which pointed out that the purchaser of three of the businesses of D & C Gourmet Pty Ltd had Kym Lien Ly as its sole director and shareholder, and that Kym Lien Ly had the same address as Mr Choong.  It is also not clear that the transfer of those businesses was at a proper price.
33		In the absence of confirmation of the draft financial statements, it is necessary to look at them with caution.  The goodwill of the remaining business more or less equals the debt owing by D & C Gourmet Pty Ltd (apparently vendor finance to buy three others of its businesses).  There is no explanation.  Its indebtedness to Choong Enterprises increased between 2013 and 2014 by only about $5000, so the regular repayments of $5000 per month were either not paid by D & C Gourmet Pty Ltd, or not accounted for.  If they were not paid, it would be normal for the whole of that indebtedness to become payable, even if in the first instance it was agreed that it would be payable at a monthly rate (as is asserted in the submission).  On the other hand, it appears that the Choong Family Trust has made advances to Choong Enterprises by some $259,477.40 in the 2014 financial year.  It is not clear why or how that came about.  There is no information about that trust concerning its trustee or beneficiaries.  It is not clear how that trust had such readily available resources, having regard to the asserted problems of the trading businesses of Choong Enterprises, or the relatively small taxable income of Mr Choong.
34		In the circumstances, I am not satisfied the position of Choong Enterprises is such that it is appropriate to make any order for the periodic payment of the monies now ordered to be paid by way of restitution, or the pecuniary penalties.
35		Accordingly, the orders referred to in [25] above are to be made, and to avoid any doubt the cost of and incidental to this further hearing are also to be paid by Choong Enterprises.  As it did not directly concern either Mr Choong or Ms Choong, I do not extend that costs liability to them.  I decline to make any order for the periodic payment of any amounts ordered to be paid by these orders or by the orders made on 27 April 2015.
36		I note that the Minister has accepted that, to the extent to which Choong Enterprises no longer has details of the seven persons in whose favour these orders are made, the Minister will appropriately ensure that those details are made available.

I certify that the preceding thirty-six (36) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Mansfield.	

Associate: 

Dated:	4 June 2015