Liability of professional advisors for contraventions committed by their clients

You could be ordered to pay a substantial fine if it is found that you were knowingly concerned in contraventions committed by your client.

What do you need to know?

1. Professional advisors (legal, accounting, HR) should be aware that the threshold for being "involved in" a contravention is low. "I did not know" will not be a defence.
   
   
2. Professional advisors need to obtain full instructions and set out the terms of their engagement in a detailed retainer agreement.
   
   
3. If you see your client doing the wrong thing, you cannot wilfully shut your eyes to it. If you see something wrong, and your client does not act on your advice to rectify it, you should consider whether the retainer is that important to you.

In 2014 the Fair Work Ombudsman (FWO) identified contraventions of the Fair Work Act 2009 (Cth) (the Act) by a fast food business. The fast food business engaged an accountant to remedy the contraventions. Unfortunately for the business and its accountant there were further contraventions.

In 2017 the FWO commenced proceedings [1] against the business, the manager responsible for the day to day operations and the accountant alleging that they contravened the Act by failing to pay the base rate of pay, loadings and penalty rates as set out in the relevant Award. The business and the manager admitted contraventions, and was fined $115,706.25.

The accountant chose to fight the allegations. The accountant's defence was that he was provided a spreadsheet with the number of hours worked and how much should be paid to each employee, which he entered into MYOB. The accountant said he was not aware of what hours were actually worked, whether penalty rates were paid and whether an Award applied. The accountant said he did not have the authority to alter the rates in MYOB.

The problem for the accountant was that the Act provides that it is not only the person who contravenes the provisions of the Act who may be liable to a penalty. Section 550 is drafted in wide terms and provides that a person who:

1.  has aided, abetted, counselled or procured the contravention; or

2.  has induced the contravention by threat or promise; or

3.  has been in any way, directly or indirectly, knowingly concerned in or party to the contravention; or

4.  has conspired with others to effect the contravention, is involved in a contravention of the civil remedy provision is treated as having contravened that provision.

The Federal Circuit Court found that the accountant was accessorially liable for the contraventions and ordered the accountant to pay a fine of $53,880.0 .

What does "knowingly concerned in" mean?

The accessory must have had actual knowledge of the conduct. Actual knowledge may be inferred from "exposure to the obvious".[2]

A person may be "knowingly concerned" in a contravention even if they did not know the exact details of the contravention. [3]

The accountant appealed to the Full Court of the Federal Court of Australia.[4]

The Full Court was not sympathetic. It held: 

1. the accountant had actual knowledge of the Award;

2. the accountant knew the business was underpaying employees;

3. the accountant's knowledge established a "practical connection" between the accountant and the contraventions by the business;

4. the "practical connection" was the act of facilitating the underpayments knowing them to be underpayments; and

5. that was sufficient to implicate the accountant in the contraventions even though he did not know the details of each contravention.

The Full Court reduced the fine payable by the accountant to $51,330.00 because there was no evidence to support some of the contraventions. 

If you think you need legal advice call Fox & Staniland on 9440 1202. 

[1] Fair Work Ombudsman v Blue Impression Pty Ltd [2017] FCCA 810

[2] Australian Building and Construction Commissioner v Parker [2017] FCA 564

[3] Fair Work Ombudsman v Grouped Property Services Pty Ltd [2016] FCA 1034

[4] EZY Accounting 123 Pty Ltd v Fair Work Ombudsman [2018] FCAFC 134