Bannon v Nauru Phosphate Royalties Trust (Costs Ruling)
[2018] VSC 643
•29 October 2018
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
EMPLOYMENT AND INDUSTRIAL LIST
S CI 2015 03354
| PAUL BANNON | Plaintiff |
| v | |
| NAURU PHOSPHATE ROYALTIES TRUST | Defendant |
| and | |
| NAURU PHOSPHATE ROYALTIES TRUST | Plaintiff by Counterclaim |
| v | |
| PAUL BANNON | Defendant by Counterclaim |
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JUDGE: | McDonald J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | On the papers (written submissions dated 1, 8 and 23 October 2018) |
DATE OF RULING: | 29 October 2018 |
CASE MAY BE CITED AS: | Bannon v Nauru Phosphate Royalties Trust (Costs Ruling) |
MEDIUM NEUTRAL CITATION: | [2018] VSC 643 |
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COSTS – Whether court’s power to order costs pursuant to s 24 of the Supreme Court Act 1986 is subject to s 570 of the Fair Work Act 2009 (Cth) – Plaintiff claimed imposition of penalties upon defendant for failure to comply with National Employment Standards – Plaintiff abandoned claim on first day of trial – Claim for penalty had no prospect of success – Whether claim should be struck out as an abuse of process – Whether proceeding in Supreme Court of Victoria was in relation to a matter arising under the Fair Work Act 2009 (Cth) – Claim struck out as an abuse of process – Commonwealth Constitution ss 77, 109 – Fair Work Act 2009 (Cth) ss 44, 61, 539, 545, 546, 570, – Judiciary Act 1903 (Cth) s 78B – Supreme Court Act 1986 ss 24, 58, 60 – Civil Procedure Act 2010 ss 23, 63 – Supreme Court (General Civil Procedure) Rules 2015 rr 10.02, 10.09.
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APPEARANCES: | Counsel | Solicitors |
For the Plaintiff | Mr T J North QC with Mr M G Rinaldi | Lander & Rogers |
For the Defendant | Mr R A Millar | HMB Employment Lawyers |
HIS HONOUR:
On 14 September 2018 I delivered judgment in this matter.[1] This judgment deals with the question of costs of the 18 day trial heard on various days between 16 April and 20 July 2018. It also deals with reserved costs, including the costs of several interlocutory applications.
Is the court precluded from awarding costs in favour of Mr Bannon by s 570 Fair Work Act 2009 (Cth)?
[1]Bannon v Nauru Phosphate Royalties Trust [2018] VSC 532.
Mr Bannon’s statement of claim includes a claim for the imposition of penalties upon NPRT for its failure to have complied with National Employment Standards (‘NES’) prescribed by the Fair Work Act 2009 (Cth) (‘FWA’). Paragraphs [36] to [38] of the statement of claim allege:
36.Further or in the alternative, pursuant to the following sections of the FW Act the plaintiff was entitled to the following National Employment Standards (as defined by section 61(3) of the FW Act):
(a)sections 87(1)(a) and 90(2): four weeks of paid annual leave for each year of service and payment of accrued but untaken annual leave upon termination of employment;
(b)sections 117(1), 117(2)(b) and 117(3): payment in lieu of notice of termination of four weeks calculated on more than five years of service; and
(c)sections 119(1)(a) and 119(2): 12 weeks of redundancy pay due to the plaintiff’s employment being terminated by NPRT due to redundancy.
37.Section 44 of the FW Act provides that an employer must not contravene a provision of the National Employment Standards.
38.In breach of section 44(1) of FW Act, a civil remedy provision, NPRT has contravened the following sections of the FW Act by failing to pay to the plaintiff:
(a) section 90(2): his accrued annual leave entitlements of 291 days, totalling $223,846.15;
(b)section 117(3): payment in lieu of notice of termination of five weeks following more than five years of service, totalling $19,230.77; and
(c)section 119(2): 12 weeks of redundancy pay due to the plaintiff’s employment being terminated by NPRT due to redundancy, totalling $46,153.85.
Paragraphs [D] and [E] of the prayer for relief claim:
D. Civil penalties equal to 60 penalty units for each breach of section 44(1) of the FW Act to be imposed on NPRT in accordance with sections 44(1) and 539(2) of the FW Act.
E.The amount of any civil penalty ordered to be paid by NPRT in accordance with the above paragraph to be paid to the plaintiff in accordance with section 546(3) of the FW Act.
The claims set out above were not pressed at trial. On the first day of the trial Mr North QC, who appeared with Mr Rinaldi on behalf of Mr Bannon, abandoned any reliance upon the claims set out above (‘FWA claims’).[2] Mr Millar submits that, notwithstanding the abandonment of the FWA claims, s 570 of the FWA operates to preclude the court from exercising the power it would otherwise have pursuant to s 24 Supreme Court Act 1986 to make an award of costs in respect of Mr Bannon’s claim for damages. However, he submits that s 570 does not limit the power to make a costs order in NPRT’s favour in respect of its counterclaim.
[2]Transcript of Proceedings (16 April 2018) 112.31.
Section 570 provides:
(1)A party to proceedings (including an appeal) in a court (including a court of a State of Territory) in relation to a matter arising under this Act may be ordered by the court to pay costs incurred by another party to the proceeding only in accordance with sub section (2) or section 569 or 569A.
…
(2)The party may be ordered to pay costs only if:
(a)the court is satisfied that the party instituted the proceedings vexatiously or without reasonable cause; or
(b)the court is satisfied that the party’s unreasonable act or omission caused the other party to incur costs; or
(c)the court is satisfied of both of the following:
(i)the party unreasonably refused to participate in a matter before the FWC;
(ii)the matter arose from the same facts as the proceedings.
Section 24(1) of the Supreme Court Act 1986 provides:
Unless otherwise expressly provided by this or any other Act or by the Rules, the costs of and incidental to all matters in the Court, including the administration of estates and trusts, is in the discretion of the Court and the Court has full power to determine by whom and to what extent the costs are to be paid.
Section 61 of the FWA prescribes minimum standards which apply to the employment of employees. The entitlements pleaded in paragraphs [36](a), (b) and (c) of the statement of claim are the NES prescribed in s 61(2)(d) (annual leave) and (i) (notice of termination and redundancy pay). Section 44(1) of the FWA provides that an employer must not contravene a provision of the NES. Section 44(1) is a civil remedy provision. An employee has standing pursuant to s 539(2) to apply for an order in relation to a contravention of s 44(1) to:
(a) the Federal Court;
(b) the Federal Circuit Court;
(c) an eligible State or Territory court.
Section 545(1) provides:
The Federal Court or the Federal Circuit Court may make any order the court considers appropriate if the court is satisfied that a person has contravened, or proposes to contravene, a civil remedy provision.
Section 545(2)(b) provides that the orders of the Federal Court or Federal Circuit Court may include an order awarding compensation for loss that a person has suffered because of the contravention.
Section 546(1) provides:
The Federal Court, the Federal Circuit Court or an eligible State or Territory court may, on application, order a person to pay a pecuniary penalty that the court considers is appropriate if the court is satisfied that the person has contravened a civil remedy provision.
Section 546(3)(c) provides that the court may order that the pecuniary penalty, or part of the penalty, be paid to ‘a particular person.’
An ‘eligible State or Territory court’ is defined in s 12 of the FWA as:
(a) a District, County or Local Court;
(b) a magistrates court;
(c) the Industrial Relations Court of South Australia;
(ca) the Industrial Court of New South Wales;
(d) any other State or Territory court that is prescribed by the regulations.
Section 77(iii) of the Commonwealth Constitution confers legislative power upon the Commonwealth Parliament to make laws investing any court of a State with federal jurisdiction. Sections 12 and 539 of the FWA invest the Magistrates’ Court of Victoria and the County Court of Victoria with federal jurisdiction; that is, jurisdiction conferred by the FWA to make orders in respect of the alleged contravention of the NES, including, in respect of annual leave, notice of termination and redundancy pay. By virtue of s 546(1) that jurisdiction includes the power to impose a pecuniary penalty for contravention of s 44(1).
It is important to note two matters regarding the formulation of Mr Bannon’s claim based upon contravention of s 44(1) by reason of the failure of NPRT to comply with the NES in respect of annual leave, termination of employment and redundancy pay. First, Mr Bannon made no application for orders pursuant to s 545(2)(b) that he be compensated by payment of an amount equivalent to the prescribed NES for annual leave, termination of employment and redundancy pay. Mr Bannon’s only claim for relief under the FWA was for the imposition of penalties, to be paid to him, for contravention of s 44(1). Second, Mr Bannon did not contend that the NES entitlements in respect of annual leave, termination of employment and redundancy pay were terms of his contract. His statement of claim does not plead that the NES provisions were terms of his contract of employment, either by way of express incorporation or as implied terms of the contract.
The current proceeding is in a fundamentally different category to Aufgang v Kozminsky Nominees Pty Ltd.[3] In Aufgang, Smith J held that minimum standards in respect of annual leave prescribed by the Workplace Relations Act 1996 (Cth) were imported into the plaintiff’s contract of employment and were enforceable as contractual terms.[4] Aufgang provides no support for the proposition that, notwithstanding it is not an eligible court, the Supreme Court has jurisdiction to impose a penalty for a contravention of s 44(1) of the FWA. Aufgang did not consider this issue. Rather, it was concerned with the question of whether the court had jurisdiction to award damages equivalent to the minimum 4 week annual leave standard prescribed by the Workplace Relations Act, because this entitlement was imported into Mr Aufgang’s contract of employment. There was no suggestion in the current proceeding that the elements of the NES pleaded at paragraphs [36] to [38] were implied terms of Mr Bannon’s contract of employment. Absent an express contractual provision incorporating the NES standards into a contract, it is difficult to conceive of a basis upon which the NES standards could be implied terms. The NES standards constitute statutory rather than contractual rights. The enforcement of such rights is in accordance with the provisions of the FWA.[5] Such powers of enforcement are only exercisable by an eligible court.
[3][2008] VSC 27.
[4]Ibid [42].
[5]Byrne v Australian Airlines Ltd (1995) 185 CLR 410, 420–422.
The Magistrates’ Court of Victoria and the County Court of Victoria would have had jurisdiction to hear and determine Mr Bannon’s claim for the imposition of a penalty for contravention of s 44 of the FWA. Where the Magistrates’ Court or the County Court exercise jurisdiction conferred by the FWA, s 570 operates as a fetter upon the discretion to order costs which would otherwise apply pursuant to s 131 of the Magistrates’ Court Act 1989 or s 78A of the County Court Act 1958. This is so irrespective of whether the court is exercising jurisdiction in respect of non-FWA claims in addition to FWA claims.[6]
[6]Melbourne Stadiums Ltd v Sautner (2015) 317 ALR 665, 696 [157].
The Supreme Court of Victoria is not an eligible court as defined in s 12 of the FWA. The Supreme Court has no jurisdiction to impose penalties in respect of alleged contraventions of civil penalty provisions. The claims pleaded at paragraphs [36] to [38], and [D] and [E] of the prayer for relief in the statement of claim, were hopeless and doomed to fail from the outset. Absent this characterisation of the claims, s 78B of the Judiciary Act 1903 (Cth) would probably have been engaged. Section 78B(1) provides:
Where a cause pending in a federal court including the High Court or in a court of a State or Territory involves a matter arising under the Constitution or involving its interpretation, it is the duty of the court not to proceed in the cause unless and until the court is satisfied that notice of the cause, specifying the nature of the matter has been given to the Attorneys-General of the Commonwealth and of the States, and a reasonable time has elapsed since the giving of the notice for consideration by the Attorneys-General, of the question of intervention in the proceedings or removal of the cause to the High Court.
If there was an arguable case that the Supreme Court had jurisdiction to hear and determine the FWA claims a question of inconsistency between Commonwealth and Victorian legislation (s 570 of the FWA vis-à-vis s 24 of the Supreme Court Act) would have arisen, which in turn would have enlivened the potential application of s 109 of the Commonwealth Constitution. However, as recently observed by Riordan J in Members Equity Bank Pty Ltd v Elefterescu,[7] it is well established that the duty of the court ‘not to proceed’ pending compliance with the notice requirements under s 78B only arises if the constitutional point is ‘real and substantial’.[8]
[7][2018] VSC 223.
[8]Ibid [34] citing Gageler J in Re Culleton (2017) 340 ALR 550, 556 [29].
During the course of the trial I expressed the view that there was no requirement to serve s 78B notices because there was no real question of inconsistency between s570 of the FWA and s 24 of the Supreme Court Act because the plaintiff’s claims based on the FWA were ‘manifestly hopeless’.[9] I also stated that there was ‘no credible argument’ which could be advanced that the Supreme Court could exercise jurisdiction under the FWA.[10] Mr Millar agreed with the proposition that ‘only eligible courts can exercise jurisdiction and the contrary proposition is utterly hopeless.’[11]
[9]Transcript of Proceedings (7 June 2018) 1531.21.
[10]Ibid 1531.24−1531.26.
[11]Ibid 1533.4−1533.7.
Notwithstanding the exchanges set out above, Mr Millar submits that as a result of the FWA claims having been pleaded, the current proceedings are in relation to a matter arising under the FWA and subject to s 570. He submits that s 570 applies to the entire proceeding, notwithstanding the fact that Mr Bannon abandoned the FWA claims on the first day of hearing. The submission which NPRT now advances is inconsistent with the submission advanced by Mr Millar on the first day of the trial when he became aware of the abandonment of the FWA claims. In response to my question whether s 570 had no work to do by reason of the abandonment of the FWA claims, Mr Millar submitted:
I certainly accept that s 570 has been dropped, and the proceeding now is prospectively, without consequence under the Act – because he's no longer seeking the exercise of jurisdiction under the Act, but the ground that we've traversed thus far has been quite clearly in proceedings brought or purporting to be brought under the Fair Work Act and carries with it all of the baggage that's involved in a proceeding that's brought under the Act.[12]
[12]Transcript of Proceedings (16 April 2018) 125.5–125.13.
Ultimately, it is not necessary to express a concluded view on the question of whether, by pleading the claims of paragraphs [36] to [38] of the statement of claim, the court’s power to order costs in the proceeding is constrained by s 570. I have come to a clear view that the claims at paragraphs [36] to [38] and paragraphs [D] and [E] of the prayer for relief are an abuse of process and should be struck out with effect from 29 June 2015.
The FWA claims are devoid of merit. From the outset they had no prospect of success. I agree with the observation of Dawson J in Sykes v The Governor-General:
The limited time and facilities of this Court are not to be devoted to litigation which is futile and destined to lead only to expense and inconvenience for the parties. [13]
[13](1995) 69 ALJR 884, 884. See also Renowden v Hurley [1951] VLR 13, 15 and 23; Riches v DPP [1973] 2 All ER 935.
The fact that the FWA claims were pleaded by Mr Bannon does not constitute a valid reason for the court refraining from striking them out. Irrespective of whether FWA claims are pleaded by a plaintiff or defendant, it is an abuse of the process for the scarce resources of the Supreme Court to be deployed in respect of claims which have no prospect of success.
Mr Millar submits that the court should refrain from striking out the FWA claims because Mr Bannon maintained the claims until the first day of trial, notwithstanding having been on notice of the potential adverse cost consequences of s 570. He submits that Mr Bannon made a deliberate decision to bring and maintain the FWA claims. Mr Millar points to an exchange which occurred on 24 June 2016, during an application brought by the Republic of Nauru to set aside a third party notice and service of the notice by Mr Bannon. During an exchange with Mr Rinaldi, I referred to the risk that s 570 could be relied upon by NPRT. Notwithstanding this warning, Mr Bannon made no application to amend his statement of claim to remove the FWA claims.
I have given careful consideration to this submission. However, I do not consider it outweighs the factors in support of striking out the FWA claims. Prior to this ruling there has not been any detailed consideration of the interaction between s 570 of the FWA and s 24 of the Supreme Court Act 1986. In the future, litigants in Mr Bannon’s position will have the benefit of this ruling. Further, NPRT filed a summons on 19 January 2017 to strike out the FWA claims but subsequently abandoned the application. At the time of doing do, NPRT submitted ‘[t]he defendant accepts that the defences on these claims are proper for determination at trial and does not pursue the interlocutory strike out application.’[14] This submission is tantamount to an acceptance by NPRT that the FWA claims were arguable.
[14]‘Defendant’s submissions in support of summons dated 19 January 2017’, 13 February 2017, [10].
It is unnecessary to express a concluded view on the matter, but the history of the proceeding supports an inference that both parties to the litigation wanted to keep s 570 ‘in the ring’ to be called upon in the event of a potential adverse costs outcome. Whatever motivated the parties to adopt their respective positions, it is antithetical to the administration of justice in the State of Victoria for the court’s ability to exercise the power conferred by s 24 of the Supreme Court Act to potentially be compromised by a party pleading, but not pursuing, FWA claims which are an abuse of process.
I reject Mr Millar’s submission that it is unfair to strike out the FWA claim if this has the consequence that Mr Bannon receives the benefit of a costs order which would otherwise not be available. First, as discussed below, I have concluded that irrespective of whether the FWA claims are struck out, s 570 does not apply to the current proceeding. Second, if s 570 does apply, it would also apply to NPRT’s counterclaim. I reject Mr Millar’s submission that NPRT’s counterclaim is quarantined from the operation of s 570. There is one proceeding before the court commenced by writ filed by Mr Bannon on 29 June 2015.[15] NPRT’s counterclaim is a claim in that proceeding. This is clear from r 10.02(1) of the Supreme Court (General Civil Procedure) Rules 2015 (‘the Rules’), which provides that a defendant who has a claim against a plaintiff may counterclaim in the proceeding. Thus, if the proceeding is in relation to a matter arising under the FWA by reason of the pleading of FWA claims, s 570 applies generally to the proceeding, including in respect of non-FWA claims in the counterclaim. The position is no different to the application of s 570 to both FWA claims and common law claims in Melbourne Stadiums Ltd v Sautner.[16]
[15]Melbourne Stadiums Ltd v Sautner (2015) 317 ALR 665, 696 [156].
[16]Ibid, 696 [156]−[157].
I shall order that paragraphs [36] to [38] and [D] and [E] of the prayer for relief of the statement of claim be struck out with effect from 29 June 2015. It is appropriate to strike out the FWA claims from the date of commencement of the proceeding because from the outset the claims had no prospect of success. The court has power in the exercise of its inherent jurisdiction to strike out claims which are an abuse of process. The court also has an express power to strike out claims which have no prospect of success pursuant to s 63 of the Civil Procedure Act 2010.
The making of orders striking out the FWA claims renders it unnecessary to express a concluded view as to whether the current proceeding is ‘in relation to a matter arising under’ the FWA within the meaning of s 570. Nevertheless, for the sake of completeness, I shall set out my reasons for concluding that the current proceeding is not ‘in relation to a matter arising under’ the FWA.
Whether the current proceeding is ‘in relation to’ a matter arising under the FWA requires consideration of whether there is sufficient nexus between the proceeding and a matter arising under the FWA.[17] In circumstances where the FWA claims pleaded at paragraphs [36] to [38] are plainly unarguable, there is insufficient nexus between those claims and the FWA for the proceeding in the Supreme Court of Victoria to be in relation to a matter arising under the FWA.[18] This conclusion is not altered by the fact that s 570(1) refers to ‘a court of a State or Territory’ rather than an ‘eligible court of a State of Territory’. The failure of the legislature to qualify ‘court of a State or Territory’ with the descriptor ‘eligible’ does not mandate a conclusion that the pleading of a FWA claim in a proceeding in the Supreme Court of Victoria which is manifestly hopeless, results in a proceeding being ‘in relation to a matter arising under’ the FWA.
[17]PMT Partners Pty Ltd (In Liq) v Australian National Parks and Wildlife Service (1995) 184 CLR 301, 330; Kennon v Spry (2008) 238 CLR 366, 440 [217].
[18]Cf Standish v University of Tasmania (1989) 28 IR 129, 138; Autistic Association of NSW v Dodson [1999] FCA 715.
In Stanley v Service to Youth Council Inc (No 3),[19] an applicant failed in claims under the Sex Discrimination Act 1984 (Cth) and succeeded partially in claims under the FWA. The respondent sought costs in relation to the failed discrimination claims. White J of the Federal Court considered whether s 570 limited the court’s power with respect to costs under the Sex Discrimination Act:
Ordinarily, the requisite degree of connection in the context of s 570 will be satisfied when an applicant seeks to enforce an entitlement for which the FW Act provides.
The limitation on the courts’ powers with respect to costs operates in respect of any “party to the proceedings”, provided that those proceedings relate to a “matter” arising under the FW Act. On its face, the limitation operates whenever those considerations are satisfied, whether or not the proceedings also include claims under other federal legislation or in the accrued jurisdiction.[20]
[19](2014) 225 FCR 357.
[20]Ibid 363 [27]–[28].
I agree with White J that ‘ordinarily’ the requisite degree of connection in the context of s 570 would be satisfied where an applicant seeks to enforce an entitlement for which the FWA provides. However, the requisite degree of connection is not made out in the circumstances of the present case where the pleaded claims under the FWA were, from the outset, plainly untenable. This conclusion is reinforced by the fact that ultimately Mr Bannon did not seek to enforce an entitlement under the FWA.
Ultimately, nothing turns on the matters set out above. I have struck out paragraphs [36] to [38] and paragraphs [D] and [E] of the statement of claim with effect from 29 June 2015. The striking out of these claims puts beyond doubt that the current proceeding is not one ‘in relation to a matter arising under’ the FWA. The court’s power to order costs are not constrained by s 570 of the FWA.
Interest
Rule 10.09 of the Rules provides:
Where the plaintiff succeeds on the claim and the defendant succeeds on the counterclaim and a balance in favour of one of them results, the court may give judgment for the balance.
In paragraphs [310] and [311] of the primary judgment, I set out my conclusion that Mr Bannon was entitled to damages in the sum of $511,275.58 and NPRT is entitled to damages in the sum of $141,052.91. I concluded that ‘[w]hen allowance is made for this sum, NPRT is liable to pay damages to Mr Bannon of $370,222.67.’
I consider that, in the circumstances of the present case, it is appropriate for the court to enter judgment for Mr Bannon in the sum of $370,222.67 and to calculate interest on that amount. I accept the submission advanced on behalf of NPRT that its entitlement to damages is comprised of money which was advanced to Mr Bannon during the course of the 2014 financial year by way of upfront reimbursement, which exceeded expenses which he actually incurred on behalf of the Trust. This is an appropriate case to exercise the power conferred by r 10.09.
Interest is to be calculated on the sum of $370,222.67 from 29 June 2015. I reject the submission advanced on Mr Bannon’s behalf that interest should be calculated from 30 June 2014. Mr Bannon has not recovered ‘a debt or sum certain’ within the meaning of s 58(1) of the Supreme Court Act. Rather, interest is to be calculated in accordance with s 60 of the Supreme Court Act. Interest is calculated as follows:
29 June 2015 to 31 January 2017 – 582 days at $96.36 $56,081.52
1 February 2017 to 29 October 2018 – 635 days at $101.43 $64,408.05
TOTAL as at 29 October 2018 $120,489.57
Costs
Section 24 of the Supreme Court Act confers a wide discretion on the court. While costs are always in the discretion of the court, there is a settled practice that, in the absence of good reason to the contrary, a successful litigant should receive his or her costs.[21] In the present proceedings both Mr Bannon and NPRT succeeded, at least in part, in pursing their respective claims for damages. Mr Bannon’s total claim for damages was $4,020,733.01. In its original form, NPRT claimed damages by way of counterclaim totalling $363,510.95. However, the amount of the counterclaim increased to $2,765,576.30 in an amended counterclaim dated 12 August 2016. In its final form NPRT counterclaimed damages of $1,021,034.
[21]Towercom Pty Ltd v Fahour (No 4) [2013] VSC 585 [7].
It is apparent that the amount of damages awarded to Mr Bannon and NPRT represent a relatively small proportion of their respective claims, at their highest. On the other hand, both Mr Bannon and NPRT successfully defended significant aspects of the claims brought against them.
Mr Bannon’s damages claim was comprised of eight discrete elements:
(i) Secretary/Director fees;
(ii) 12 weeks’ pay in lieu of notice of termination;
(iii) accrued annual leave;
(iv) accrued sick leave;
(v) 17.5 per cent leave loading;
(vi) back pay of a $60,000 salary increase from May 2013 to 30 June 2014;
(vii) accrued long service leave;
(viii) 12 weeks’ redundancy pay.
NPRT’s counterclaim was comprised of four discrete elements:
(ix) The balance of Mr Bannon’s general ledger account;
(x) Alleged unauthorised payment of back pay and tax in respect of a $60,000 salary increase approved in late 2007;
(xi) A loan of $77,500 advanced to Romys Eobob;
(xii) Unauthorised payments as particularised in paragraph [42A] of the defence and counterclaim.
Mr Bannon failed in respect of the primary element of his claim, $3,111,000 in damages in respect of unpaid Secretary/Director fees. He was also unsuccessful in his claim for 12 weeks’ pay in lieu of notice of termination. His claim in respect of accrued annual leave was largely successful. His claim for 17.5 per cent leave loading was unsuccessful. The other four elements of his claim set out at (iv) and (vi), (vii) and (viii) were all successful. NPRT was unsuccessful in respect of the first three elements of its counterclaim. It succeeded in respect of the fourth element of the claim, but only in respect of the 2014 financial year.
The trial was heard over 18 days. Approximately 40 per cent of the hearing was devoted to evidence and submissions in respect of Mr Bannon’s claim. The balance was taken up with evidence and submissions in respect of the counterclaim.
One option is to apportion the costs of the trial by reference to the time spent in respect of the competing claims. On this approach, Mr Bannon would be entitled to an order that NPRT pay 40 per cent of his costs of the trial and NPRT would be entitled to an order that Mr Bannon pay 60 per cent of its costs of the trial. There are, however, shortcomings with this approach. Approximately 3.5 days of the hearing was taken up with the evidence of Mr Fitzgerald. As recorded in the primary judgment, Mr Fitzgerald made numerous concessions during cross-examination. These concessions resulted in a substantial reduction in the quantum of NPRT’s counterclaim. Further, NPRT was unsuccessful in respect of three elements of its counterclaim. Its success in respect of the unauthorised payments claim is limited to the 2014 financial year. Based on these considerations, I do not consider it appropriate to apportion costs of the trial based upon the hearing days which were devoted to the respective claims.
Mr Bannon submits that the court should have regard to the fact that his claim for Secretary/Director fees was defeated by an estoppel by convention defence that was pleaded during the trial, by an amendment made on 6 June 2018 by inserting paragraph [16AA] into the defence. I do not accept this submission. Leave to amend was granted in circumstances where Mr Bannon did not point to any prejudice arising from the amendment. In particular, no submission was advanced in opposition to the effect that Mr Bannon would have conducted his case any differently if estoppel by convention had been pleaded prior to the commencement of the trial. Further, the plaintiff had been on notice of a defence of promissory estoppel by reason of amendments made by leave granted on 28 September 2016. The same matters which underpinned the pleading of promissory estoppel also underpinned the pleading of estoppel by convention.
As to the costs of the counterclaim, Mr Bannon submits:
25. In the circumstances of:
(a) the limited extent of success of the defendant on its counterclaim;
(b)the success being based on an amended paragraph of particulars to paragraph 42A of the Further Amended Defence and Counterclaim filed pursuant to an Order made by McDonald J on 14 May 2018, not supporting any pleaded allegation, that was included at the eleventh hour;
(c)the late abandonments at the trial of substantial and substantive counterclaims relating to alleged uncollected electricity payments, receivers’ fees, and approximately $2.1m in alleged unauthorised payments (all of which were apparently always unsupported by any evidence and should never have been pleaded and therefore should attract indemnity costs; likewise the unsustainable failed claim for damages for the debt owed to the defendant by Ms Eobob which was forgiven by the Chairman);
(d)the substantial amount of trial time taken up by the mostly unsuccessful remaining counterclaim; and
(e)the lack of utility of the evidence called by the defendant to support it (which was only that of Mr Fitzgerald, and which occupied the bulk of that time),
it is submitted that the defendant should pay the plaintiff’s costs of the counterclaim to the extent at least 90% plus indemnity costs for the hopeless and late withdrawn items noted above; or alternatively (using a broad brush) the defendant should pay all of the plaintiff’s costs of the counterclaim on a standard basis.[22]
[22]‘Plaintiff’s submissions on interest and costs consequent upon judgment’, 1 October 2018, [25] (footnotes omitted).
As to the matters set out in paragraph [25](b) set out above, I reject the submission that NPRT’s entitlement to costs should be reduced because Mr Bannon was not given adequate notice of NPRT’s contention that:
(xiii) he received significantly more by way of upfront reimbursement of expenses than he actually expended; and
(xiv) he was liable to repay to the trust the difference between the amount which he received and the amount which he expended on behalf of the trust.
On the second day of hearing, the court directed that Mr Bannon’s evidence-in-chief was not required to address the allegations of unauthorised payments in paragraph [42A] of the amended defence and counterclaim. The court directed that Mr Bannon lead any evidence in respect of paragraph [42A] by way of rebuttal to evidence led on behalf of NPRT in respect of the unauthorised payments claim. In his opening submissions, Mr Millar foreshadowed NPRT‘s intention to rely upon a report of Mr Fitzgerald dated 1 February 2018 in support of the unauthorised payments claim pleaded in paragraph [42A]. I accepted Mr North’s submission that there was inconsistency between Mr Fitzgerald’s report and the allegation of unauthorised payments pleaded in paragraph [42A]. When this exchange took place, paragraph [42A] claimed a total of $2,102,861. I accepted Mr North’s submission that it was unclear how NPRT contended that this claim was supported by Mr Fitzgerald’s report. I accepted Mr North’s submission that it was appropriate to split the unauthorised payments issue in accordance with the principle in Protean (Holdings) Ltd v American Home Assurance Co.[23]When giving directions regarding Mr Bannon’s evidence, I observed that it would be necessary for Mr Millar to seek leave to amend paragraph [42A] such that it aligned with the contents of Mr Fitzgerald’s report.
[23][1985] VR 187; see also Clayton Utz (a firm) v Dale (2015) 47 VR 48.
When the trial commenced on 16 April 2018, NPRT’s unauthorised payments claim was poorly pleaded. However, Mr Bannon was placed squarely on notice by the way in which Mr Millar opened the case, that NPRT would be relying upon the report of Mr Fitzgerald in support of its unauthorised payments claim. The gravamen of Mr Fitzgerald’s report was that, during the period 2011 to 2014, Mr Bannon had been advanced funds by the Trust substantially in excess of the amounts which he had actually expended.
Further, on the fifth day of hearing, Exhibit A was tendered during Mr Bannon’s re-examination. From the time Exhibit A was tendered there was a document before the court, of which Mr Bannon was the author, which put squarely in issue the question of whether Mr Bannon had received payments from NPRT in excess of amounts which he had actually spent on the Trust’s behalf. This issue consumed a great deal of the court’s time during the remaining 13 hearing days. Mr Bannon had ample opportunity to address the contents of Exhibit A. In particular, he had ample opportunity to account for the difference between the funds advanced to him during the course of the 2014 financial year ($426,178.15) and the amount of expenditure evidenced by Exhibit A ($263,188.09).
I reject the submission that particulars to paragraph [42A] did not support any pleaded allegation. Paragraph [42B] pleads that the payments made to Mr Bannon were in breach of fiduciary obligations. Those obligations include the obligations pleaded at paragraph [5](b) that Mr Bannon was not to make unauthorised profit from or incidental to the performance of his role as secretary. The retention by Mr Bannon of large amounts of money advanced to him by the Trust over and above the amounts which he actually expended on behalf of the Trust constituted a breach of fiduciary obligations as pleaded.
As to the limited extent of success of NPRT in pursuing its counterclaim, the same observation can be made in respect of Mr Bannon. The award of $511,275.58 is less than 15 per cent of the amount of his claim. Mr Bannon’s principal claim for Secretary/Director fees was in the sum of $3,111,000. This claim has been rejected.
As to the late abandonment at trial of ‘substantial and substantive claims’, the same criticism can be levelled at Mr Bannon. Mr Bannon resisted an application by NPRT to strike out his claim for GST on Secretary/Director fees in the sum of $311,100.[24] Mr Bannon then abandoned this claim on the first day of hearing. On the first day of hearing, he abandoned his claim for the imposition of penalties to be imposed on NPRT, with such penalties to be paid directly to him, for breach by NPRT of s 44 of the FWA. Further, Mr Bannon abandoned his claim for $40,000, being the cost of his motor vehicle, in the course of cross-examination.
[24]Bannon v Nauru Phosphate Royalties Trust (No 3) [2017] VSC 214 [81]−[83].
As regards paragraph [25](e), I have taken into account the time consumed by Mr Fitzgerald’s evidence in concluding that it is not appropriate to apportion costs based on the amount of time consumed by the respective claims.
Notice to Admit
Mr Bannon served a notice to admit dated 10 December 2015. NPRT disputed the facts sought to be admitted therein by notice of dispute dated 23 December 2015. Mr Bannon submits that he proved, in substance, each of the annual leave, 50 per cent sick leave, long service leave and redundancy pay claims which were the subject of the facts sought to be admitted in paragraphs [5](a), (b), (c) and (e) of the notice to admit. He submits that in accordance with rr 35.06 and 63.18 of the Rules, the costs of such proof should be ordered to be paid by NPRT. He further submits that this should be on an indemnity basis, as the disputing of basic contractual employment entitlements was contrary to NPRT’s obligations under s 23 of the Civil Procedure Act to narrow the issues in dispute.
Paragraph [5] of the notice to admit facts contended:
5. That the plaintiff is entitled to the following payments from the defendant:
(a)accrued but untaken annual leave of 291 days, totalling $223,846.15;
(b)50% of his accrued sick leave entitlements of 137.55 days totalling $105,807.69;
(c)accrued long service leave of 17.2 weeks $66,153.85;
(d)12 weeks of pay in lieu of notice of termination totalling $46,153.85;
(e)12 weeks of redundancy pay totalling $46,153.85;
(f)director/secretarial fees totalling $3,422,100;
(g)superannuation payable on the plaintiff’s notice of termination period, based on the current superannuation charge percentage of 9.5 per cent, totalling $4,384.62;
(h)superannuation payable on the director/secretarial fees, totalling $282,028.13; and
(i)leave loading of 17.5 per cent in respect of the plaintiff’s accrued but untaken annual leave, totalling $39,173.08.
Mr Bannon failed in his claims in respect of five of the nine entitlements referred to in paragraph [5] of the notice to admit. As to annual leave, NPRT succeeded in reducing the quantum of the claim. Mr Bannon did establish his claim in respect of long service leave, sick leave and redundancy pay. The only issue in dispute in respect of these matters was whether Mr Bannon’s salary rate after calculating the entitlement was $200,000 or $140,000 per annum. NPRT failed in its contention that Mr Bannon’s salary as at 30 June 2014 was $140,000. However, NPRT had a legitimate basis for disputing Mr Bannon’s contention that his salary was $200,000. There will be no order that NPRT pay the costs proving the matters alleged in 5(b), (c) and (e) of the notice to admit dated 10 December 2015.
Having regard to all of the matters set out above:
(xv)NPRT should pay 50 per cent of Mr Bannon’s costs of the trial; and
(xvi) Mr Bannon should pay 50 per cent of NPRT’s costs of the trial.
These costs are to be quantified on a standard basis, to be taxed in default of agreement. In the calculation of costs of both parties, costs are to be limited to counsels’ fees, in accordance with the prescribed scale, and the attendance of one instructing solicitor for each day of the trial. I accept that the issues raised in the proceeding justified Mr Bannon engaging senior and junior counsel. I do not accept that either party is entitled to recover costs for the daily attendance of more than one instructing solicitor.
Reserved costs
Costs were reserved in the proceeding by the following orders:
(a) Order of Lansdowne AsJ made on 7 December 2015;
(b) Order of Ierodiaconou AsJ made on 13 May 2016;
(c) Order of Ierodiaconou AsJ made on 16 August 2016;
(d) Orders of Ierodiaconou AsJ made on 28 September 2016;
(e) Order of Ierodiaconou AsJ made on 8 December 2016;
(f) Order of Ierodiaconou AsJ made on 27 January 2017;
(g) Order of Ierodiaconou AsJ made on 3 May 2017;
(h) Order of Ierodiaconou AsJ made on 10 August 2017;
(i) Order of Ierodiaconou AsJ made on 9 October 2017;
(j) Order of Ierodiaconou AsJ made on 5 March 2018; and
(k) Order of McDonald J made on 14 May 2018.
With the exception of the matters specifically dealt with below, I propose to order that the costs of Mr Bannon and the NPRT in respect of the matters set out above, be payable on the same basis as the costs of the trial.
Order of Ierodiaconou AsJ made on 28 September 2016
These orders related to proceedings heard on 12 and 16 August 2016. A ruling was delivered on 21 September 2016.[25] The ruling concerned an application by NPRT to amend its defence and counterclaim. Both parties filed written submissions in addition to the hearings which took place. The application to amend was substantially allowed. Her Honour’s decision records a number of criticisms of the manner in which the application was opposed by Mr Bannon:
[25]Bannon v Nauru Phosphate Royalties Trust (No 2) [2016] VSC 558.
·Advancing a submission that the defence and counterclaim should be struck out in their entirety, thereby objecting to paragraphs which were not the subject of any application for amendment.[26]
·Advancing lengthy oral and written submissions on the question of whether the counterclaim had been properly authorised. Her Honour considered it inappropriate for Mr Bannon to raise these issues in response to an application by NPRT to amend its pleadings.[27]
·Advancing submissions on the question of authorisation which were misconceived.[28]
·Advancing submissions in respect of discovery and particulars notwithstanding her Honour’s statement at the outset of the hearing that directions would be dealt with after the defendant’s application for leave to amend.[29]
·Unnecessarily lengthy affidavit material containing 49 exhibits, with no reference having been made to most of those exhibits during oral submissions.[30]
·The preparation of a 42 page ‘pleading matrix’ which was not helpful to the court.[31]
·Mr Bannon’s response to the applications was disproportionate to the issues in controversy with the consequence that costs were unnecessarily incurred by both parties.[32]
[26]Ibid [9].
[27]Ibid [10].
[28]Ibid [11].
[29]Ibid [12].
[30]Ibid [13].
[31]Ibid [14].
[32]Ibid [15].
Having regard to the matters set out above, it is appropriate that Mr Bannon be ordered to pay NPRT’s costs of and incidental to the summons filed on 27 July 2016 on a standard basis.
Order of Ierodiaconou AsJ made on 3 May 2017
On 26 April 2017 Ierodiaconou AsJ published two separate rulings in respect of applications heard by her on 27 February 2017. Orders giving effect to the rulings were made on 3 May 2017. The first ruling concerned an application to set aside a subpoena served on Ms Bannon seeking production of various bank and credit card statements.[33] Her Honour upheld the application to set aside the subpoena. The second ruling concerned applications brought by both parties.[34] Her Honour summarised the questions to be determined and their answers as follows:
[33]Bannon v Nauru Phosphate Royalties Trust (Subpoena Objection) [2017] VSC 213.
[34]Bannon v Nauru Phosphate Royalties Trust (No 3) [2017] VSC 214.
5.(a) The Trust’s further and better particulars were served one week late. Mr Bannon says they are inadequate. Should this have the consequence that:
(i)the Trust’s amended counterclaim be struck out? No.
(ii)the amended counterclaim be summarily dismissed? No.
(iii)the amended defence be limited in its non-admissions and denials and judgment be entered in respect of admissions? No.
(b)Should there be summary dismissal of the Trust’s amended counterclaim because there is no real prospect of it succeeding in its claims for payment (or re-payment) of the director/secretary fees, receiver/agent fees, electricity charges and for unauthorised back pay? No.
(c)On the basis it is statute-barred, should the Trust’s claim for repayment of unauthorised back-pay be summarily dismissed? No.
(d)On the basis it is statute-barred, should Mr Bannon’s claim for director/secretary fees (and superannuation on them) for any period before 1 July 2009 be struck out? No.
(e)Should Mr Bannon’s claim for GST on director/secretary fees be struck out on the basis that GST is not payable on remuneration for employment? No.
(f)Should Mr Bannon’s claim for unpaid and accrued long service leave pursuant to the Long Service Leave Act 1992 (Vic) be struck out on the basis that this Court has no jurisdiction to hear such a claim? No.
(g)Should Mr Bannon’s claim for a civil penalty to be imposed on the Trust be struck out on the basis that he has no standing under the Long Service Leave Act to seek that relief? Yes.
(h)Should Mr Bannon be required to deliver up documents that are owned by the Trust and that he has in his possession, custody or control? Yes.[35]
[35]Ibid [5].
All of the matters the subject of the two rulings published on 26 April 2017 were heard on 27 February 2017. The same counsel appeared in respect of the matters the subject of separate rulings. It is appropriate to approach the costs of the hearing on 27 February 2017 on the basis that the application to set aside the subpoena was one of a number of matters for determination. Mr Bannon’s success in setting aside the subpoena should be viewed alongside his success in respect of the questions set out at 5(d), (e) and (f). As against this, NPRT was successful in respect of questions 5(a), (b), (c), (g) and (h). As each party enjoyed a similar measure of success, it appropriate to make an order that each party is to bear its own costs of and incidental to the hearing on 27 February 2017.
Order of McDonald J made on 14 May 2018
On 26 April 2018, the eighth day of the trial, the court heard a full day of argument in respect of two issues:
(xvii) An application by NPRT for leave to amend its defence and counterclaim;
(xviii) Objections to the admissibility of a report and supplementary report of Mr Fitzgerald.
The effect of the proposed amendments was to reduce the quantum of the counterclaim in conformity with Mr Fitzgerald’s reports. This application had been foreshadowed on the second day of hearing in the context of the court’s direction that Mr Bannon would not be required to give evidence-in-chief in respect of the unauthorised payments allegations in paragraph [42A] of the defence.
The application for leave to amend was vigorously resisted. Voluminous documentary material was filed in support of lengthy oral submissions. The length of the submissions and the volume of material filed in support thereof necessitated the court reserving its decision. The hearing scheduled for 27 April 2018 was vacated. NPRT filed written submissions on 7 May 2018 to which Mr Bannon replied on 10 May 2018. The court delivered its ruling on 14 May 2018.[36]
[36]Bannon v Nauru Phosphate Royalties Trust (No 4) [2018] VSC 237.
Mr Bannon submits that the costs of the hearing on 26 April 2018 including the written submissions filed thereafter, should be costs in the cause. I reject this submission. The ruling of 14 May 2018 speaks for itself. Shortly stated, all of the arguments advanced on behalf of Mr Bannon were rejected. Mr Bannon was entitled to oppose the application for leave to amend. However, as noted at paragraph [39] of the court’s ruling, he sought to strike out numerous paragraphs in the defence and counterclaim which were not the subject of the application for leave to amend. This approach was misconceived. Mr Bannon was also entitled to object to the admissibility of Mr Fitzgerald’s report. However, significant costs were incurred by NPRT in having to respond to Mr Bannon’s submissions and the voluminous material filed in support. It is appropriate that Mr Bannon bear the costs incurred by NPRT of the hearing on 26 April 2018 and the written submissions which it filed on 7 May 2018. Mr Bannon will be ordered to pay these costs on a standard basis.
Conclusion
I propose to make a global costs order, subject to 3 specific rulings in respect of the interlocutory applications set out above. The court will order as follows:
(1) Paragraphs [36] to [38] and [D] and [E] of the prayer for relief of the statement of claim are struck out with effect from 29 June 2015.
(2) The defendant is to pay the plaintiff damages in the sum of $370,222.67 together with interest in the sum of $120,489.57.
(3) Subject to the specific costs orders set out in paragraphs [4](a), (b) and (c) below:
(a)the defendant is to pay 50% of the plaintiff's costs of the proceeding on a standard basis, to be taxed in default of agreement; and
(b)the plaintiff is to pay 50% of the defendant's costs of the proceeding on a standard basis, to be taxed in default of agreement.
(4) (a) The plaintiff is to pay the defendant's costs of and incidental to the defendant's summons filed on 27 July 2016 on a standard basis, to be taxed in default of agreement.
(b) The plaintiff and the defendant are to bear their own costs in respect of the applications heard by Ierodiaconou AsJ on 27 February 2017, being:
(i) the plaintiff's application to set aside the subpoena addressed to Ms Bannon; and
(ii) the various applications as detailed in paragraph [5](a) to (h) of Bannon v Nauru Phosphate Royalties Trust (No.3) [2017] VSC 214.
(c)The plaintiff is to pay the defendant's costs of and incidental to the hearing on 26 April 2018 and the written submissions filed on 7 May 2018 on a standard basis, to be taxed in default of agreement.
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