BARBIERI v CMP Controls Pty Ltd (No.2)
[2017] FCCA 1955
•22 August 2017
FEDERAL CIRCUIT COURT OF AUSTRALIA
| BARBIERI v CMP CONTROLS PTY LTD (No.2) | [2017] FCCA 1955 |
| Catchwords: INDUSTRIAL LAW – Costs – applicant applying for indemnity costs – application of s 570 of the Fair Work Act 2009 – consideration of Calderbank offers – no orders for costs made. |
| Legislation: Fair Work Act 2009 (Cth), ss.570, 611 Federal Circuit Court Act 1999 (Cth), s.79 Federal Court Rules 2011 (Cth), rr.40.01, 40.02 |
| Alpine Hardwoods (Aust) Pty Ltd v Hardys Pty Ltd (No.2) [2002] FCA 224 Colgate Palmolive Co v Cussons Pty Ltd [1993] FCA 536 Cross v Harbour Ferries Pty Ltd trading as Harbour City Ferries and Others (No.2) [2017] FCCA 1713 Donoghue v Commissioner of Taxation [2015] FCA 301 Lamesa Holding BV v Commissioner of Taxation [1999] FCA 738 McFazdean v Construction Forestry Mining and Energy Union [2007] VSCA 287 Re Wilcox; Ex parte Venture Industries Pty Ltd [1996] FCA 1942 Ryan v Primesafe [2015] FCA 8 Sandini Pty Ltd v Commissioner of Taxation (No.2) [2017] FCA 905 Saxena v PPF Asset Management Ltd [2011] FCA 395 Spotless Group Ltd v Premier Building and Consulting Pty Ltd [2008] VSCA 115 Trustee for The MTGI Trust v Johnston (No.2) [2016] FCAFC 190 |
| Applicant: | JOHN BARBIERI |
| Respondent: | CMP CONTROLS PTY LTD |
| File Number: | MLG 1423 of 2016 |
| Judgment of: | Judge Burchardt |
| Hearing date: | Not Applicable |
| Date of Last Submission: | 24 May 2017 |
| Delivered at: | Melbourne |
| Delivered on: | 22 August 2017 |
REPRESENTATION
| Counsel for the Applicant: | Ms Fitzgerald |
| Solicitors for the Applicant: | McDonald Murholme |
| Counsel for the Respondent: | Ms Jones |
| Solicitors for the Respondent: | PCC Lawyers |
ORDERS
The Applicant’s application for costs is refused.
Each party bear their own costs of this application.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT DANDENONG |
MLG 1423 of 2016
| JOHN BARBIERI |
Applicant
And
| CMP CONTROLS PTY LTD |
Respondent
REASONS FOR JUDGMENT
Introduction
This is a costs dispute. It follows the publication of my reasons for judgment and orders on 26 April 2017. That decision has been the subject of an appeal which is pending in the Federal Court. On 20 May 2017, the applicant filed submissions and an affidavit supporting an application for costs. No formal application has in fact been made and the materials clearly constitute in substance such an application. The respondent has responded on 24 May 2017.
The applicant seeks an order for his costs from either 4 October 2016 or, in the alternative, from 17 February 2017 on an indemnity basis. The respondent submits that each side should bear their own costs.
The approach to costs
It is clear that costs arguments occur frequently as there is a plethora of case law upon the matter. As recently as 7 August 2017, McKerracher J observed in Sandini Pty Ltd v Commissioner of Taxation (No.2) [2017] FCA 905 at [4]:
Relevantly to this costs debate, it is well established that:
(a) ordinarily costs follow the event and are on a party and party basis: Federal Court Rules 2011 (Cth) (FCR), r 40.01 and see Colgate Palmolive Co v Cussons Pty Ltd [1993] FCA 536; (1993) 46 FCR 255 per Sheppard J (at 232);
(b) the Court can order that costs be paid on another basis (r 40.02 FCR), including on an indemnity basis (r 40.02, Note 1 FCR);
(c) the circumstances of the case must be such as to warrant a departure from the ordinary case (Colgate (at 233)). There should be some special or unusual feature in the case (Colgate (at 233)) and while categories of case warranting departure from the usual rule have been listed from time to time, those categories are not closed (Colgate (at 233), Donoghue v Commissioner of Taxation [2015] FCA 301 per Logan J (at [11]));
(d) wilful disregard of known facts or clearly established law, conducting litigation with an ulterior motive, making allegations or contentions that ought never have been made and prolonging a case unnecessarily can attract an indemnity costs order (Colgate (at 233 – 234) and Donoghue (at [12]));
(e) the rationale for an indemnity costs order is not punitive; rather it is compensatory (Donoghue (at [19]));
(f) an indemnity costs order can relate to part of a case (Donoghue (at [19]));
(g) cases (and in light of the above parts of cases) manifestly weak from the outset can attract such an order (Lamesa Holding BV v Commissioner of Taxation [1999] FCA 738 per Sackville J (at [3]));
(h) the phrase ‘costs as between party and party’ as defined in the Dictionary of Sch 1 FCR as ‘only the costs that have been fairly and reasonably incurred by the party in the conduct of the litigation’;
(i) the Court has a broad discretion on the issue of costs: see s 43(2) of the Federal Court of Australia Act 1976 (Cth), which provides that ‘except as provided by any other Act, the award of costs is in the discretion of the Court or Judge’. This discretion is absolute and unfettered, subject to the requirement that it be exercised judicially (Re Wilcox; Ex parte Venture Industries Pty Ltd [1996] FCA 1942; (1996) 72 FCR 151 (at 152));
(j) the Court is explicitly empowered to order the parties to an action to bear costs in specified proportions (s 43(3)(c) of the Act);
(k) the Court can apportion costs between the parties by taking into account the success (or lack of success) of the parties on an issues basis, so as to do ‘substantial justice’ between the parties (McFazdean v Construction Forestry Mining and Energy Union [2007] VSCA 287; (2007) 20 VR 250 (at [153]) and Spotless Group Ltd v Premier Building and Consulting Pty Ltd [2008] VSCA 115 (at [14] – [16])); and
(l) the Court will apportion costs between the parties on a broad basis as a ‘matter of impression and evaluation rather than arithmetic precision’ (Major Engineering Pty Ltd v Helios Electroheat Pty Ltd (No 2) [2006] VSCA 114 (at [5])).
While this court’s power, which derives basally from s 79 of the Federal Circuit Court Act 1999, is not expressed in exactly the same terms as the legislation governing the Federal Court, the above propositions all, in my respectful view, have some capacity to apply here. What is different of course is that this is a proceeding under the Fair Work Act 2009 (“FW Act”). The court’s power to order costs in proceedings under this legislation was recently considered by Smith J in Cross v Harbour Ferries Pty Ltd trading as Harbour City Ferries and Others (No.2) [2017] FCCA 1713. I have regard to his Honour’s conclusions and note that he was of the view, first, that this Court’s Act and the FW Act taken together did provide a capacity for the court to make orders provided the circumstances as set out in s 570 of the FW Act are satisfied and, second, in that case made an order for indemnity costs in favour of the successful party arising out of the rejection of a Calderbank offer made during the currency of the proceedings.
Section 570 has however been considered on a number of occasions by the Federal Court. Relevantly for these purposes, in Ryan v Primesafe [2015] FCA 8, Mortimer J said, at [64] – [66]:
I accept the general import of the authorities relied on by the applicant and Mr McDonald in their written submissions about the significance of the threshold set by s 570(2) of the Fair Work Act. Although some of the authorities relied on dealt with the predecessor provisions to s 570, there is no difference in substance in the way the threshold is expressed. The discretion conferred by the confined terms of s 570(2) should be exercised cautiously, and the case for its exercise should be clear: see Saxena v PPF Asset Management Ltd [2011] FCA 395 at [6] per Bromberg J. The reason for caution is the potential for discouraging parties’ pursuit in a complete and robust way of the claims for contravention which they seek to make under the Fair Work Act, or the defence of such claims. The policy behind s 570 is to ensure that the spectre of costs being awarded if a claim is unsuccessful does not loom so large in the mind of potential applicants (in particular, in my opinion) that those with genuine grievances and an arguable evidentiary and legal basis for them are put off commencing or continuing proceedings. It is an access to justice provision. Insofar as it operates to the benefit of respondents, it is designed to ensure respondents feel free to pursue arguable legal and factual responses to the claims made against them. There is an almost identical provision in s 611 of the Fair Work Act, giving the Fair Work Commission a similar costs power, conditioned by similarly-worded considerations. The predecessor provisions, and the conscious broadening of the statutory terms used in s 570, are traced by the Full Court in Australasian Meat Industry Employees Union v Fair Work Australia (No 2) (2012) 203 FCR 430; [2012] FCAFC 103 at [3] – [4] per Jessup and Tracey JJ.
None of these propositions deny the Court’s ability to find that one or both of the two preconditions expressed in ss 570(2)(a) and (b) exist where the factual circumstances warrant it. The legislative policy behind a provision such as s 570(1) is not inconsistent with the requirements for proceedings to be conducted reasonably, fairly and efficiently. As an access to justice provision, it contemplates parties and their legal representatives will access the Court responsibly.
Section 570, and the conditions it imposes on the Court’s general costs discretion under s 43 of the Federal Court Act, is not a licence to parties to ignore the requirements of s 37M of the Federal Court Act, nor the Court’s power to order costs against parties who fail to comply with their obligations under s 37N. The content of ss 37M and 37N, and parties’ obligations to assist the Court in achieving the objectives set out in s 37M, must be reconciled with access to justice provisions such as s 570(1). That reconciliation occurs through a focus on the reasonableness of parties’ conduct, the appropriateness of the Court processes undertaken by them, the timeliness of their compliance with Court orders or steps in the proceeding, and the existence of a substantive legal and factual basis for the claims made and arguments put.
Her Honour’s observations were expressly approved by a Full Court of the Federal Court in Trustee for The MTGI Trust v Johnston (No.2) [2016] FCAFC 190 at [8] where the Full Court additionally (Siopis, Collier and Katzmann JJ) observed:
Section 570 of the FW Act confers discretion on the court to order costs in Fair Work matters where proceedings were instituted vexatiously or without reasonable cause. Not only must this discretion be exercised judicially according to the terms defining it, it must be exercised with caution because of the exceptional nature of the power in an otherwise no costs jurisdiction.
I note that in the same case the court observed at [21]:
It is well-established that a failure to accept a Calderbank offer may justify the exercise of the Court’s discretion to award costs on an indemnity basis.
At [26], the Court continued:
The usual practice in cases where the Court proposes to order costs against an unsuccessful litigant who has rejected a Calderbank offer is that indemnity costs are awarded from that time, prior to which the successful party is entitled to costs assessed on a party-party basis.
The applicant’s submissions were accompanied by an affidavit of Andrew Cameron Guy Jewell affirmed on 10 May 2017. That affidavit puts before the Court correspondence between the parties about the question of costs. On 14 September 2016, PCC Lawyers, who acted for the respondent, wrote to McDonald Murholme, solicitors for the applicant. The letter runs to five pages and is predominantly constituted by strong assertions as to the strength of the respondent’s case and the corresponding weakness of that of the applicant. For these purposes, it is sufficient to note that the respondent offered the applicant six weeks’ pay in full settlement of the proceedings.
The response from Messrs McDonald Murholme is dated 20 September 2016. Setting to one side the equally confident assertions as to success, the letter made an offer that the applicant would settle his claim for payment of 60 per cent of his redundancy entitlement, being $82,700. The letter put the respondent on express notice that if the offer was rejected and the applicant was successful, he would seek costs pursuant to s 570(2)(b) of the FW Act and would rely upon Calderbank principles. The offer was open for 14 days, a period of time, in my view, reasonable in the circumstances.
That offer was rejected by PCC Lawyers on 4 October 2016. On 17 February 2017, McDonald Murholme wrote again to PCC Solicitors and repeated the offer of settlement of $82,700, the offer being open for seven days.
On 6 March 2017, PCC Lawyers wrote to McDonald Murholme rejecting the offer. A counteroffer of eight weeks’ pay was made. Once again, I will pass over the muscular terms of the correspondence and I note that a threat was foreshadowed to seek costs against McDonald Murholme and “on the basis of its unreasonable acts and omissions the conduct in these proceedings.”
The applicant’s submissions
The applicant initially sets out the history of offers to which I have already referred. It continues by clarifying, at paragraph 9, “the applicant applies for costs pursuant to section 570(2)(b) on the basis that the Rejection was an unreasonable act or omission that caused the applicant to costs.”
The submissions note that the redundancy claim and general protections claim were argued in the alternative, the former being wholly successful and the latter wholly unsuccessful. The submissions assert at paragraph 11, “The Applicant submits that it was evident that the Redundancy Claim was the Applicant’s primary claim and the General Protections Claim was a subsidiary claim.”
The submissions then extract various sections of my judgment to support the proposition that the finding in the applicant’s favour in respect to the redundancy claim was “emphatic.”
At paragraph 17, the submissions relatively extract from the correspondence:
On your client’s own case it did not have the need for a full-time senior buyer.
In paragraph 18(a) of the Defence, it admits that:
Mr Andonovski stated that the applicant was required to obtain a forklift licence and share duties, office and factory duties with Mr Petrovski.
Accordingly our client was directed to perform duties beyond the scope of the senior buyer role meaning that his substantive role was no longer required to be fulfilled and therefore redundant.
That letter went on to refer to the question of alternative employment raised by the respondent. At paragraph 21, the written submissions continue:
Accordingly, the offer of compromise was clear in that it explained the basis for success of the Redundancy Claim, offered a significant compromise for the Redundancy Claim which indicated that the Applicant had assessed the risks of the proceeding, and explained that the Applicant was genuinely attempting to resolve the matter otherwise it would seek to rely upon the offer of compromise in support of an application for costs in the event of success.
The submissions go on to refer to authority and criticise the respondents for allegedly failing to genuinely consider the offer of compromise. The matter is encapsulated at paragraphs 36-37 where the written submissions assert:
Accordingly, by reason of:
(a) the emphatic success of the Redundancy Claim;
(b) the terms of the Offer of Compromise did not include payment in respect of the General Protections claim;
(c) the explanation contained in the Letter;
(d) the matters known to the Respondent at the time of the Rejection;
(e) the Respondent’s unreasonable position as conveyed in its letter of 14 September 2016; and
(f) Policy considerations;
the Applicant submits that the Rejection was an unreasonable act which caused the Applicant to incur costs and accordingly the Respondent should be ordered to pay the applicant’s costs from 4 October 2016.
In the alternative, should the Court reject the submission that the Rejection was unreasonable, the Applicant submits that the Respondent’s rejection of the Offer of Compromise when restated on 17 February 2017 was clearly an unreasonable act because at that time the parties had filed the evidence on which the Decision was ultimately based.
The submissions of the respondent
The respondent’s submissions first addressed the general regime for costs pursuant to the FW Act and, unsurprisingly, emphasised the caution referred to in the judgments of Bromberg J and others.
The written submissions take issue with the applicant’s assertion that the redundancy claim was his primary claim and assert generally that the general protections claim occupied a substantial amount of the case. The submissions assert, at paragraphs 16-17:
The mere fact of making a settlement offer does not entitle the applicant to make a claim under section 570(2)(b) of the Fair Work Act 2009 for costs. To do so would make a mockery of the costs jurisdiction.
Similarly, the mere rejection of an offer is not an unreasonable act. The offeror needs to show that the conduct of the offeree was unreasonable. The reasonableness of that conduct must be viewed in light of the circumstances which existed at the time the offer was rejected. As stated by Weinberg J in Alpine Hardwoods (Aust) Pty Ltd v Hardys Pty Ltd (No.2):
The fact that the applicants ultimately failed to make good their case does not mean that they acted unreasonably in rejecting the initial offer. Nor does the fact that initial offer was itself reasonable mean that it was unreasonable to reject it.
The fact that the applicants ultimately failed to make good their case does not mean that they acted unreasonably in rejecting the initial offer. Nor does the fact that initial offer was itself reasonable mean that it was unreasonable to reject it.
The submissions go on to assert the alleged repeated requests for clarification of the applicant’s claim in response to the assertion that due consideration was not given to the applicant’s offer. They point to the fact that at the time of the first offer no evidence had been served on the respondent in the form of affidavit. Criticism is made of the clarity of the first offer. It is further asserted at paragraph 26:
At the time the Second Offer was made, the Applicant had still not responded to the Respondent’s request for an explanation for the legal basis upon which it had sought to imply the term ‘suitable’ into clause 11 of the employment contract so that it could properly understand and consider the Applicant’s claim. Further, the Applicant had not still provided no particularisation or evidence in support of the claim for damages in respect of the General Protections Claim. In those circumstances, it was not unreasonable to reject the second offer.
The submissions go on to assert the matters to do with the methodology of the amount of the offers made. Finally, the submissions assert that there is no basis for an order for indemnity costs and that (paragraph 32) the applicant has given no reason why it should be entitled to a costs award on an indemnity basis.
The submissions then assert that not an insignificant amount of time was spent in the proceeding advancing the applicant’s unsuccessful general protections claims, addressing the application to amend pleadings and explaining how the redundancy claim and general protections claims could co-exist. In short, it is to be inferred that the unsuccessful part of the applicant’s case should be offset against his successful part (the redundancy claim) and that as both sides had had an element of success, there should be no order as to costs.
Consideration
I accept the submission of the respondents that it is inaccurate to characterise the applicant’s redundancy claim as his primary claim. The amended points of claim filed 2 December 2016 set out at paragraphs 1 to 24 the factual background and narrative so to speak. Thereafter the first claim listed is the general protections claim which runs from paragraphs 25 to 35. Thereafter paragraphs 36 to 40 plead the claim in redundancy which was successful. Both claims were fully pursued at trial. The assertion now that the redundancy claim was always the primary claim is an endeavour to mould past events to suit a particular subsequent thesis.
Further, the respondent is correct to say that the general protections claims did take up a certain amount of time in the proceedings. As earlier indicated, they occupy a substantial amount of the points of claim and although the discrete passages relating to the relevant facts in the applicant’s affidavit are relatively brief, the examination of the underlying facts and the way they fitted into the general protections claim meant that they certainly occupied a more than wholly insignificant amount of time at the trial. At this stage it is not possible for me exactly to recall the precise amount of time these claims took (I have been on long service leave for the entirety of May, June and July) but I have no doubt that I am correct in the generalised observation I have just made. The applicant was of course wholly unsuccessful in those particular claims.
It is of course true that rejection of a Calderbank offer in the ordinary way of things is likely to lead to indemnity costs orders. It needs to be borne in mind however that were the court to adopt any sort of rule (which would in any event represent an inappropriate fettering of the court’s general discretion in this field) to the effect that Calderbank letters should lead to indemnity costs in cases to which s 570 of the FW Act applies, the net effect would be to remove the protection that s 570 represents.
That protection is of course not reserved to applicants alone although the judicial observations made referred to above have tended to concentrate on applicants. Respondents likewise are entitled to conduct their litigation in the relative confidence that they are not likely to be ordered to pay costs. If Parliament had meant the protection to operate only for applicants it would no doubt have said so.
Whether an offer has been rejected unreasonably depends upon a number of factors. One is the amount of time for which it is open to be considered. That is not an issue in this case. The offer was reasonable in that regard. Another relevant consideration is what the respondent may reasonably have been understood to think their position was at the time at which the offer was made. It is, in my view, clear that the respondent’s solicitors did not give any serious consideration to the offer. Their correspondence to McDonald Murholme was at all times extremely assertive, patronising and unattractive. The repeated assertions of their utter incapacity to understand the applicant’s case seems a little strange given that I had no difficulty myself in understanding it. Nonetheless, the successful part of the applicant’s case was about redundancy. To a considerable extent, decisions about redundancy will turn upon factual disputes. True it is that the respondent knew at least by February 2016 what evidence the applicant would be leading. Whatever view is taken about the second offer the applicant made, it was not in my view unreasonable of the respondent not to accept the first offer as the applicant’s evidence was not then to hand.
The second offer needed to be contemplated in circumstances where there was still factual dispute between the parties. Although it is true again that Mr Andonovski’s own evidence, and the respondent’s case generally, made it clear that the factual matters which I have found to have established redundancy were there for all to see, the reality is that the respondent had a very different view of how those facts operated on the law. The respondent’s argument was not hopeless and doomed to fail. It may yet be upheld on appeal. Although I have not acceded to it, it was not an argument that in my view the respondent could reasonably have been said to have regarded as hopeless at the time it was considering the offer.
I bear steadily in mind the caution expressed in the authorities about making costs orders under s 570. It is clear furthermore that the mere rejection of a Calderbank offer does not of itself, in the context of the legislative scheme involving s 570, make it automatically appropriate to contemplate a costs order let alone an indemnity costs order.
This was always a cut-throat case in which the applicant would either succeed in whole or fail in whole. There was at least in the relation to the redundancy case, no midpoint. The offer to settle was in my view a reasonable one. It offered the respondents a considerable reduction upon the applicant’s case if successful. Nonetheless, for the respondents to accept it would have been in effect to accept the force of the applicant’s case, something which they, in my view not unreasonably, were not prepared to do. Their case did not succeed but it was not bound to fail.
Bearing in mind all of these factors, and emphasising again the fact that the applicant was by no means wholly successful, in the particular circumstance of this case I do not think it is appropriate to make an order that the respondent pay the applicant’s costs.
Each party should bear their own costs of the costs application. The application was by no means without force even though it has been unsuccessful.
I certify that the preceding thirty-four (34) paragraphs are a true copy of the reasons for judgment of Judge Burchardt
Associate:
Date: 22 August 2017
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