Application by Glass Now Pty Ltd
[2023] FWC 2444
•20 SEPTEMBER 2023
| [2023] FWC 2444 |
| FAIR WORK COMMISSION |
| DECISION |
Fair Work Act 2009
s.400A - Application for a costs order against a party
Application by Glass Now Pty Ltd
(C2023/5043)
| COMMISSIONER SPENCER | BRISBANE, 20 SEPTEMBER 2023 |
Application for a costs order against a party – costs application made – s.400A – unreasonable act or omission – s. 611 – no reasonable prospect of success – application dismissed.
INTRODUCTION
This Costs decision deals with the costs application made by Glass Now Pty Ltd (the Respondent) pursuant to s.400A and s.611 of the Fair Work Act 2009 (Cth) (the Act). The costs application relates to the associated section 394 unfair dismissal proceedings brought by Ms Alice Berry (the Applicant). A jurisdictional objection was filed by the employer. The Respondent had previously been granted legal representation (for the jurisdictional objection) pursuant to s.596(2)(a) of the Act. The grant of legal representation was made on the basis that there was some complexity to the matter, and it would add to the efficient conduct of the application before the Commission. That legal representation continued in the costs application.
The Respondent sought a Costs Order against the Applicant (Ms Alice Berry). It was submitted on behalf of the Respondent that costs were incurred due to the unreasonable acts or omissions of the Applicant and because there was no reasonable prospect of success in connection with her conduct or the continuation of the matter. The Respondent’s legal representative stated that he clearly put the Applicant on notice as to costs from 1 June 2023, and that the Applicant had acknowledged the employer’s potential costs application in her reply submissions.
The costs application was filed within the required filing period however due to an administrative issue, the application was not brought to the attention of the Regional Panel Head or allocated to the Commission as currently constituted until sometime after it had been filed. The parties were advised of this issue and that on receipt of the costs application, Directions were sent and by consent, the matter was determined on the papers.
BACKGROUND
The Applicant had originally filed an application under s.394 of the Act for an unfair dismissal remedy (the application) on 7 April 2023. The Applicant was employed as an Accounts and Office Manager, and as the trustee of the Kvapilova Trust, alongside her husband, they both were shareholders of the business, Glass Now Pty Ltd, until they sold their shares to the Applicant’s brother-in-law, Mr Vilem Cerny. The Respondent then entered into a contract with Crownsun Pty Ltd for consultancy services (the Agreement) in which Ms Berry and her husband were equal shareholders. Ms Berry advised the Respondent that the Agreement would not extend past 3 January 2023. After a month’s absence, on 1 February 2023, Ms Berry commenced employment with the Respondent, now owned by Mr Cerny and her employment was terminated on 29 March 2023. Ms Berry argued the one month’s absence was approved unpaid leave. The Respondent refuted this. In the jurisdictional objection decision, I determined that this was not a period of annual leave approved by Mr Cerny and not one month of service and sought compensation for lost wages in lieu of reinstatement (and had sought payment for the purchase of her shares in the Respondent’s Company), pursuant to s.391 of the Act.
The Respondent objected to Ms Berry’s s.394 application; filing a jurisdictional objection in accordance with s.382 of the Act, that Ms Berry had not served the minimum employment period of six months.
The matter was determined by decision dated 21 July 2023. The jurisdictional objection was upheld and the Applicant’s application pursuant to s.394 was dismissed.[1]
In summary terms pursuant to s.400A of the Act, the costs application alleges that the Applicant caused the Respondent to incur costs by engaging in the following unreasonable acts or omissions:
A. The Applicant’s continuation of the matter after receiving the Respondent’s Form F3 response was unreasonable.
In summary terms pursuant to s.611 of the Act, the costs application alleges that the Applicant caused the Respondent to incur costs by making the application:
A. The Applicant had no reasonable prospect of success, and the Application was made vexatiously and without reasonable cause.
LEGISLATION
Section 400A of the Act provides:
“400A Costs orders against parties
(1) The FWC may make an order for costs against a party to a matter arising under this Part (the first party) for costs incurred by the other party to the matter if the FWC is satisfied that the first party caused those costs to be incurred because of an unreasonable act or omission of the first party in connection with the conduct or continuation of the matter.
(2) The FWC may make an order under subsection (1) only if the other party to the matter has applied for it in accordance with section 402.
(3) This section does not limit the FWC’s power to order costs under section 611.”
Section 611 of the Act provides:
“ 611 Costs
(1) A person must bear the person’s own costs in relation to a matter before the FWC.
(2) However, the FWC may order a person (the first person) to bear some or all of the costs of another person in relation to an application to the FWC if:
(a) the FWC is satisfied that the first person made the application, or the first person responded to the application, vexatiously or without reasonable cause; or
(b) the FWC is satisfied that it should have been reasonably apparent to the first person that the first person’s application, or the first person’s response to the application, had no reasonable prospect of success.
Note: The FWC can also order costs under sections 376, 400A, 401 and 780.
(3) A person to whom an order for costs applies must not contravene a term of the order.”
SUMMARY OF THE RESPONDENT’S SUBMISSIONS
The Respondent sought an order for the Applicant to bear all of the costs associated with the application to the Commission, on an indemnity basis or, alternatively in accordance with scale costs, from 27 April 2023 (when the Form F3 response was provided) onwards because of the unreasonable acts or omissions in the continuation of the matter by the Applicant, (in accordance with s.400A of the Act) and having no reasonable prospect of success in the application (in accordance with s.611 of the Act).
Without reasonable cause
The Respondent submits in its Form F6 Application:
“• that the Application was doomed to fail and the Applicant’s submissions in respect of the Contractor agreement were not arguable on the points of law. It was clear from the outset, on the Applicant’s own facts, that she had not completed the minimum employment period.”[2]
The Respondent submits that the Applicant in her Form F2 Application at page 16 that she was engaged by the Respondent as a consultant between 1 July 2022 and 1 February 2023 and again at page 18:
“• In Early December 2022 I have provided Glass Now with a 4-week notice advising Director that I will not work under consultancy agreement past 3.1.23 but if the Director wishes I am happy to engage as an employee from 1.2.2023.”[3]
The Respondent further submits that this assertion was in accordance with the Agreement and on 18 June 2023 that the Applicant filed further documents titled ‘Applicant Reply to Respondents’ Supplementary Evidence’ stating:
“• Applicant does not dispute that Consultancy Agreement was a true and entire agreement and fully agreed upon by all parties.”[4]
The Respondent submits that these two factors alone prove the Application was ‘doomed to fail’.[5]
Vexatious Conduct
The Respondent submits:[6]
“• The Applicant has, in the course of these proceedings, provided approximately 20,232 words worth of submissions, not including annexed pictures or statutory declarations. The bulk of these submissions were not directed to the jurisdictional issues that the FWC was considering…”
The Respondent submits the voluminous amount of discursive submissions reasonably gives rise to the inference that the Application was filed to pressure the Respondent to resolve other disputes the Applicant had.[7]
Unreasonable Continuation
The Respondent submits in its Form F3 that it clearly addressed the jurisdictional issues surrounding the minimum employment period as follows:
“• a. At paragraphs 14 to 16 — the minimum employment period;
b. At paragraphs 17 to 18 — that continuity of service had been severed by her resignation on 1 July 2022; and
c. At paragraphs 21 to 24 — that the Applicant was a contractor until 31 December 2022”[8]
Costs
The Respondent submits the Applicant was made aware that her response to the Respondent’s Form F3 had flaws and was ‘put on notice as to costs on 1 June’[9] and that the Applicant reply submissions dated 2 June 2023 stated:
[29] Applicant understands that Commission may order costs against a party if the Commission is satisfied that party caused those costs to be incurred because of an unreasonable act or omission in connection with the conduct or continuation of the matter. In the light of all the above Applicant sees her intent to pursue the matter as entirely reasonable.
[30] Applicant understands that the Commission may order a person to bear some or all the costs of another person where a claim had not reasonable prospects of success. Applicant argues that the claim has a very good ground and that she has provided lot more legislative as well as relevant background information than Respondent. “
The Applicant again submitted a further reply on 16 June 2023 that:
“• Respondent has made a point of threatening Applicant that if she does not withdraw he will sue for legal costs. Applicant has following to say…
iii. Applicant, her legal team and Applicant’s accountant have all put considerable amount of effort into settling all disputes including unfair dismissal. …”[10]
The Respondent concludes that the Applicant admits to having received legal advice in respect of her application and acknowledged the possibility of an adverse costs order, was entirely aware of, and accepted the risk of a costs order. The Respondent seeks to:
“• be paid as a lump sum, in the amount of $9,182.80 (inclusive of GST), plus the costs of this application, in the amount of $1369.50 (inclusive of GST), and otherwise relies upon Item 1201 of the Scale of Costs within the Fair Work Regulations 2009 (Cth) to allow reasonable amounts in the circumstances for general care and conduct.”[11]
SUMMARY OF THE APPLICANT’S SUBMISSIONS
The Applicant in summary terms rejected the Employer’s costs application, and rejected that she had, in pursuit of her s.394 application and in response to the jurisdictional objection, filed material for an ulterior purpose. The Applicant considered her arguments in response to the jurisdictional objection were realistically made against the context of the sale of the business, the consultancy, the agreement, and the further employment periods.
The Applicant rejected that she should be subject to a costs order in circumstances where she considered the response to the jurisdictional objection was made on a proper interpretation of the facts and circumstances of her original application. She did not consider in the circumstances that the order for costs was warranted against her. She held genuine views on the circumstances that she had met the minimum employment period. The circumstances in terms of the periods of engagement were set out in summary terms in the jurisdictional objection decision.
PERIODS OF SERVICE
The facts and circumstances of the Applicant’s period of service were set out in the jurisdictional decision as follows:[12]
“In accordance with ss.383 and 384 of the Act, the period of continuous service that the Applicant completed with the Respondent at the time of dismissal must be determined.
There is no dispute that the Applicant completed a period of service with the business, when owned by the Applicant and Mr Berry, from 27 October 2003 until the execution of the Share Sale Agreement on 28 June 2022.
From 1 July 2022 to 3 January 2023, the Applicant was engaged as a contractor by the Respondent, owned by Mr Cerny. As discussed earlier, the Applicant was not an employee of the Respondent throughout this period, meaning the period was not a period of service. As the Applicant ceased to be an employee, this period as a contractor broke the Applicant’s continuity of service. Therefore, this period from 1 July 2022 to 3 January 2023 cannot be included in any consideration of the Applicant’s continuous service at the time of her dismissal.
Then, from 3 January 2023 to 31 January 2023, the Applicant did not perform work for the Respondent. The Applicant contended that she was on a period of agreed unpaid leave during this time. She stated that this had been agreed before the Share Sale Agreement. The Applicant argued that this period was an excluded period and therefore, without being considered a period of service, did not break her continuity of service. Even if this were so, the Applicant had already ceased being an employee of the Respondent at this time, and her continuity of service had already been broken by the execution of the Consultancy Agreement. Further, the old employer, after selling the business, had no authority to approve leave. This period was therefore not a period of service.
There is no dispute that, after the one-month absence, the Applicant completed a new period of service with the Respondent from 1 February 2023 to 29 March 2023, a period of 56 days.
As the Applicant was not an employee of the Respondent throughout the period of the Consultancy Agreement and the following one-month absence, this period, from 28 June 2022 to 31 January 2023, does not constitute a period of service in accordance with s.22 of the Act. The transfer of employment provision in s.22 of the Act also prevents the Applicant’s initial period of service, before the Share Sale Agreement, from contributing to this second period of service. Accordingly, the period from 28 June 2022 to 31 January 2023 is required to be excluded, meaning the totality of the Applicant’s employment with the Respondent was not continuous service.
Therefore, in accordance with s.384(1) of the Act, the Applicant’s total period of continuous service as an employee with the Respondent as at the date of her dismissal, lasted from 1 February 2023 to 29 March 2023, being a total of 56 days.”
CONSIDERATION
The general rule is that each party must bear their own costs in proceedings before the Commission, other than where permitted under s.400A and s.611 of the Act.[13] In cases where the statutory criteria may be enlivened, the Commission’s power to award costs under this provision of the Act is discretionary. The case law sets out that the exercise of discretion must be in a manner which is ‘fair and just’ and takes into account ‘equity, good conscience and the merits of the matter’, and there is a broad nature to the factors which may be relevant to the exercise of the discretion.[14] There is also a requisite causal link between the act or omission and the costs incurred.
The Explanatory Memorandum to the Fair Work Amendment Bill 2012 relevantly provides, at [168] to [171], in respect of s.400A of the Act that:
“Item 4 inserts a new section 400A to enable the FWC to order costs against a party to an unfair dismissal matter (the first party) if it is satisfied that the first party caused the other party to the matter to incur costs by an unreasonable act or omission in connection with the conduct or continuation of the matter.
As with the new power to dismiss applications under section 399A, the power to award costs under section 400A is not intended to prevent a party from robustly pursuing or defending an unfair dismissal claim. Rather, the power is intended to address the small proportion of litigants who pursue or defend unfair dismissal claims in an unreasonable manner. The power is only intended to apply where there is clear evidence of unreasonable conduct by the first party.
The FWC’s power to award costs under this provision is discretionary and is only exercisable where the first party (whether the applicant or respondent) causes the other party to incur costs because of an unreasonable act or omission. This is intended to capture a broad range of conduct, including a failure to discontinue an unfair dismissal application made under section 394 and a failure to agree to terms of settlement that could have led to the application being discontinued.
However, the power to award costs is only available if the FWC is satisfied that the act or omission by the first party was unreasonable. What is an unreasonable act or omission will depend on the particular circumstances, but it is intended that the power only be exercised where there is clear evidence of unreasonable conduct by the first party.”
(emphasis added)
In Matthew Gugiatti v SolarisCare Foundation Ltd[15] the Full Bench stated that:
“Section 400A(1) establishes two pre-conditions for the making of an order for costs under the subsection (in addition to the requirement in s.400A(2)). The first is that the Commission must be satisfied that a party engaged in an unreasonable act or omission in relation to the conduct or continuation of a matter. The second is that such act or omission caused the other party to the matter to incur costs. Once these preconditions are satisfied, a discretionary power to order the payment of such costs is enlivened.”
In the decision of Lorraine Roche v Trustees of the Roman Catholic Church for the Diocese of Wagga Wagga,[16] Sams DP summarised the objective test of reasonableness that applies to applications made under s.400A, stating:
“Section 400A imports a test of objective reasonableness based on facts which were known, or which should have reasonably been known at the time of the alleged act or omission. This may be at any point in the proceedings. So much so is clear from the decision in Stagno v Frews Wholesale Meats [1998] 84 IR 270 where the Full Bench said:
‘What is considered to be without reason is determined by reference to the stage that the proceeding has reached. We note that this leaves open the possibility that proceedings may commence which are with reasonable cause but may, in particular circumstances at a later stage, be further prosecuted unreasonably.’
In practical terms, a person may gain knowledge in the lead up to proceedings (when the opposing party’s evidence is filed) or during the proceedings (e.g. after the cross examination of a crucial witness) which, when viewed objectively, would satisfy the test of an unreasonable act or omission in continuing the matter, for which costs may be awarded against the defaulting party. It would be from that point that costs may be awarded, if the person did not take steps to recognise that their case was frivolous, untenable, groundless or faulty. For an applicant, this may mean discontinuing the matter and for a respondent it may mean making substantial offers to settle a matter.”
(emphasis added)
When considering the operation of s.400A, the Full Bench in Baxter Healthcare Pty Ltd T/A Baxter Healthcare v Mr Andrew Portelli[17] stated:
“[28]As to s.400A the Commissioner observes that it sets out additional circumstances in which the Commission can make costs orders against parties in unfair dismissal cases and that:
‘What is unreasonable will depend on the circumstances. It is intended that costs only be ordered where there is clear evidence of unreasonable conduct.”
The principles governing the operation of s.400A was summarised in Mr Demesw Wederay v Airline Cleaning Services Pty Ltd T/A Cabin Services Australia.[18] It was noted in this decision that:
“[13] The principles governing the operation of section 400A (and its predecessors) have been considered by full benches of the Commission in Roy Morgan Research v Baker [2014] FWCFB 1175, Hansen v Calvary Health Care Adelaide Ltd [2016] FWCFB 8162, Gugiatti v SolarisCare Foundation Ltd [2016] FWCFB 2478 and Baxter Healthcare Pty Ltd v Portelli [2017] FWCFB 3891.
[14] Without being exhaustive, the principles emerging from these authorities are summarised as follows:
1. Before an order can be made, causation must be found to have existed between the unreasonable conduct or continuation of the matter and the incurring of the costs;
2. The power to order costs is the exercise of a general discretion. Section 400A of the FW Act provides that the Commission “may” make an order. Where the Commission finds that a party acted unreasonably in the conduct or continuation of a matter and that unreasonable conduct caused the costs to be incurred, then an order may be made. However, the statute does not provide that the Commission shall make an order even in those circumstances;
3. Being a general discretion, all relevant factors need to be taken into account. The discretion must be exercised judicially that is to say not arbitrarily, capriciously or so as to frustrate the legislative intent. Ultimately the provision sits within a framework where the objects include that the parties be provided ‘a fair go all round’;
The legal representative of the employer has set out the specific omissions relied upon in seeking the costs application pursuant to s.400A and s.611, the following considerations are made.
In summary terms, the costs application alleges that the Applicant acted unreasonably since the first conciliation, by engaging in a series of unreasonable acts and omissions, which the Respondent referred to in their costs application.
Whilst costs orders in this jurisdiction are relatively rare, it is not necessary for an application for costs to establish any sort of exceptional circumstances. However, the Commission’s power to award costs ‘is quintessentially an exercise of discretion’.
In the present matter, it was taken into account that the determination to allow legal representation for the employer pursuant to s.596(2)(a) was made in the determination of the jurisdictional matter. The grant of that legal representation continued in the costs matter. This consideration for the permission of legal representation was made against the detail of the circumstances for the assessment of the jurisdictional objection. It must be recognised that the Applicant did not have legal representation in pursuing her case.
However, it has to be taken into account that the employer in seeking and being granted legal representation did so in the knowledge that the Applicant prepared and presented her case with the absence of legal representation. Although the Applicant makes some reference to legal representation or advice, there was no direct communication about that in the proceedings. That is not to diminish the reply submissions of the Applicant, but to note that the employer’s position was at all times that they were aware that they were afforded the right of legal representation as sought whilst the Applicant was self-represented. In pointing this out that does not mean there has not been a serious consideration of the matters raised on the arguments that the employer’s legal representative submits justifies a costs order. It is, however, a matter that can be taken into account in exercising the discretion regarding costs.
In this matter, it is acknowledged that the Applicant filed a volume of material, and that material had relevance to the s.394 application overall, rather than just the matters in contest in the jurisdictional objection. It is also recognised, however, that the Applicant in good faith considered the material was relevant to the change in circumstances of her role with the jointly owned business that had been sold, affording her the right of a consultancy agreement with the business, which she then finalised, and at a later point after a break, became an employee.
This jurisdictional objection, and the resulting decision do not represent straightforward matters. Whilst the employer’s legal representative considered the matter would be resolved on the jurisdictional objection because of the interpretation of particular facts the Applicant at all times did not share the employer’s representative’s interpretation of the facts and considered the associated argument to be convincing. To have failed in that regard does not necessarily mean that costs should follow automatically.
The determination of the jurisdictional objection had associated complexity in interpreting each period and type of contract made between the parties and whether the further period of absence broke the continuity of service. The reasoning provided in the jurisdictional objection, makes clear the outcome, the employer’s legal representative considered he notified the Applicant that this would be the relevant outcome on the facts of the jurisdictional objection. The Applicant had particular views of the circumstances of the period of service that she had undertaken and had a different interpretation of the facts. The parties clearly held divergent views in relation to the facts and circumstances of the matter, and the consideration of all of these relevant factors, does not warrant exercising the discretion to order costs in this matter.
The application for costs is dismissed.
I order accordingly.
COMMISSIONER
[1] Alice Berry v Glass Now Pty Ltd[2023] FWC 1801.
[2] Form F6 at [8].
[3] Form F2 of the Applicant at page 18.
[4] Applicant Reply to Respondents’ Supplementary Evidence at [12] dated 18 June 2023.
[5] Form F6 at [12].
[6] Form F6 at [14].
[7] Form F6 at [15].
[8] Form F6 at [17].
[9] Form F6 at [18].
[10] Evidence for Jurisdictional Objection dated 16 June 2023 at [11] pages 23-24.
[11] Form F6 at [22].
[12] Alice Berry v Glass Now Pty Ltd[2023] FWC 1801 at [59]-[65].
[13] Fair Work Act 2009 (Cth) s. 611(1); see also Church v Eastern Health[2014] FWCFB 810 at [26].
[14] Baxter Healthcare Pty Ltd v Portelli[2017] FWCFB 3891 at [104].
[15] [2016] FWCFB 2478 at [43].
[16] [2020] FWC 326 at [8] – [9].
[17] [2017] FWCFB 3891.
[18] [2017] FWC 6232.
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