Barkhazen v Conair Australia Pty Ltd T/A Conair Australia

[2017] FWC 1382

[2017] FWC 1382

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.604—Appeal of decision

Barkhazen
v
Conair Australia Pty Ltd T/A Conair Australia
(C2016/6056)

COMMISSIONER SAUNDERS NEWCASTLE, 23 MARCH 2017

Costs application against lawyer for the applicant – application partially successful – costs ordered

Background

[1] Ms Inessa Barkhazen lodged an unfair dismissal application in the Fair Work Commission (the Commission) against her former employer, Conair Australia Pty Ltd (Conair). Commissioner Cambridge found that Ms Barkhazen’s dismissal was not harsh, unjust or unreasonable. 1 Ms Barkhazen applied for permission to appeal in relation to Commissioner Cambridge’s decision. A Full Bench of the Commission refused to grant permission to appeal and dismissed the appeal.2

[2] Ms Barkhazen has filed an application in the Federal Court of Australia, seeking judicial review in relation to the decision by the Full Bench to refuse permission to appeal and dismiss the appeal.

Costs application by Conair

[3] Conair seeks an indemnity costs order against Ms Barkhazen’s lawyer, Mr Bruno Gelonesi. Permission was granted for Mr Gelonesi to represent Ms Barkhazen at first instance and before the Full Bench of the Commission. No application for costs is made against Ms Barkhazen.

[4] The Full Bench handed down its decision refusing permission to appeal and dismissing the appeal on 1 December 2016. Conair filed its application for costs against Mr Gelonesi on 15 December 2016. Accordingly, Conair’s application for costs was made within the time prescribed by s.402 of the Fair Work Act 2009 (Cth) (the Act).

[5] The Full Bench referred Conair’s costs application against Mr Gelonesi to me to be dealt with.

[6] The parties consent to Conair’s costs application against Mr Gelonesi being determined “on the papers”. Those “papers” are comprised of the following:

(a) Conair’s Application for Costs dated 15 December 2016;

(b) Conair’s written submissions in chief dated 25 January 2017, together with the documents annexed thereto;

(c) Mr Gelonesi’s written submissions dated 20 February 2017, together with the documents annexed thereto; and

(d) Conair’s written submissions in reply dated 27 February 2017.

Basis for costs application

[7] Conair does not press its application for costs against Mr Gelonesi pursuant to s.401(1A)(a) or s.611 of the Act. The sole basis for Conair’s application for costs against Mr Gelonesi is that he allegedly engaged in unreasonable acts or omissions in connection with the conduct or continuation of the matter pursuant to s.401(1A)(b) of the Act which caused Conair to incur costs.

[8] Section 401(1A)(b) provides as follows:

“401 Costs orders against lawyers and paid agents

…

(1A) The FWC may make an order for costs against the representative for costs incurred by the other party to the matter if the FWC is satisfied that the representative caused those costs to be incurred because:

…


(b) of an unreasonable act or omission of the representative in connection with the conduct or continuation of the matter.”

[9] In Rohan Veal v Sundance Marine Pty Ltd, 3 a Full Bench of the Commission stated (at [15]):

“… because the section applies to the actions taken or not taken by a legal representative of a party it seems to us to follow that these actions or omissions by legally qualified and trained people should be measured against a higher standard than that which would apply to an unrepresented party, by virtue of the representative’s training and expertise.”

[10] The unreasonable acts or omissions alleged by Conair are as follows:

● Mr Gelonesi continued to act for Ms Barkhazen in circumstances in which there was a clear conflict of interest between Ms Barkhazen’s interests and those of Mr Gelonesi; and

● Mr Gelonesi unreasonably failed to advise Conair in a timely manner that the reason Ms Barkhazen’s notice of appeal was lodged out of time was solicitor error.

Delay in determining costs application

[11] Mr Gelonesi submits that his client has appealed the “Commission’s finding”, and given the matter is before the Federal Court it would be inappropriate to determine the costs application while the “matter is alive and may be returned to the Commission for adjudication.”

[12] Conair points out that there is no “appeal” before the Federal Court; Ms Barkhazen has made an application to the Federal Court for judicial review. Conair submits that its costs application should be determined by the Commission now.

[13] In my view, there is no good reason to delay the determination of Conair’s costs application until after the Federal Court has heard and decided Ms Barkhazen’s application for judicial review. I am satisfied that it is appropriate to proceed to determine Conair’s costs application now, for the following reasons:

(a) First, for the reasons set out below, even if Ms Barkhazen’s application for judicial review was successful, that decision would not have an impact on my finding that Mr Gelonesi engaged in an unreasonable omission in connection with Ms Barkhazen’s application for permission to appeal to the Full Bench of the Commission. Conair could have made its application for costs against Mr Gelonesi on the ground that he unreasonably failed to advise Conair in a timely manner that the reason Ms Barkhazen’s notice of appeal was lodged out of time was solicitor error even if the Full Bench had granted permission to appeal and quashed the decision of the Commissioner at first instance. Had such an application been made in those circumstances, I would have reached the same conclusion as I have below in relation to Conair’s application for costs; and

(b) Secondly, either or both parties may appeal my costs decision and there may be a subsequent application for judicial review. Depending on timing, such an application may be joined to the current Federal Court application. To delay a determination of the costs application would further prolong the litigation between the parties. The Commission has an obligation to perform its functions and exercise its powers in a manner that is fair, just, and quick. 4

Conflict of Interest

[14] Conair submits that Mr Gelonesi had a conflict of interest in connection with the fact that his conduct when acting for Ms Barkhazen in the period leading up to her dismissal was criticised by the Commissioner at first instance. 5 Conair contends that it was in Mr Gelonesi’s interest to have the Full Bench make a finding that the Commissioner at first instance had made an appealable error so as to reduce or negate the impact Mr Gelonesi’s negligence had on the termination of Ms Barkhazen’s employment. Conversely, Conair submits that it was in Ms Barkhazen’s interests to pursue Mr Gelonesi for his professional negligence that resulted in her dismissal and the finding that her dismissal was not unfair.

[15] Conair points to the Solicitors Conduct Rules in New South Wales, including rule 12.1 which states that a “solicitor must not act for a client where there is a conflict between the duty to serve the bests interests of a client and the interests of the solicitor or an associate of the solicitor.”

[16] Conair’s solicitors put Mr Gelonesi on notice that he would have a conflict of interest if he continued to act for Ms Barkhazen in the appeal. Conair submits that Mr Gelonesi should have immediately ceased acting for Ms Barkhazen and advised her to seek independent legal advice.

[17] Conair accepts that it is not the role of the Commission to make determinations as to whether Mr Gelonesi has breached the Solicitors’ Conduct Rules. However, Conair submits that a deliberate failure to follow the Solicitors’ Conduct Rules by a representative which caused the other party to incur costs is likely to be an unreasonable act or omission for the purposes of s.401(1A)(b) of the Act.

[18] Conair submits that if Mr Gelonesi had ceased acting for Ms Barkhazen and advised her to seek independent legal advice, it is “extremely likely that Ms Barkhazen would not have pursued the Appeal and instead, have taken action directly against Mr Gelonesi for his conduct in relation to the loss of her employment.” Conair goes on to submit that, as a result of Mr Gelonesi’s failure to cease acting as Ms Barkhazen’s solicitor, Conair has been forced to incur legal costs in defending the appeal and making its costs application.

[19] I do not intend to make any finding as to whether Mr Gelonesi breached the Solicitors’ Conduct Rules. Even accepting (without finding) for the purposes of Conair’s argument that Mr Gelonesi had a conflict of interest and engaged in an unreasonable act or omission in not ceasing to act for Ms Barkhazen and advising her to seek independent legal advice, I am not satisfied that any such unreasonable act or omission caused Conair to incur legal costs. I make that finding for the following reasons:

(a) If Mr Gelonesi ceased to act for Ms Barkhazen and advised her to seek independent legal advice, she may have sought and obtained such advice or she may have made her decision about pursuing an appeal against Conair on her own without the benefit of any further legal advice. If Ms Barkhazen had taken the latter course, I am satisfied, on the balance of probabilities, that it is likely she would have pursued her appeal to the Full Bench of the Commission and Conair would have incurred legal costs in connection with such an appeal. I have reached that conclusion because it is apparent from the evidence given by Ms Barkhazen before the Commissioner at first instance, the submissions put on her behalf at both first instance and on appeal before the Full Bench of the Commission, together with the fact that she has instructed her lawyers to file an application for judicial review of the decision of the Full Bench of the Commission in the Federal Court, that Ms Barkhazen feels very strongly about what she perceives to be the unfairness and injustice associated with her dismissal by Conair; and

(b) If Ms Barkhazen had obtained advice from a different lawyer after Mr Gelonesi ceased acting for her, she may have been advised to (i) take action against Mr Gelonesi, (ii) pursue her appeal to the Full Bench of the Commission, (iii) take no action against Mr Gelonesi and not pursue her appeal to the Full Bench of the Commission, or (iv) pursue her appeal to the Full Bench of the Commission and if that did not succeed, then make an application to the Federal Court for judicial review and/or consider taking action against Mr Gelonesi. In my view, the last of these four alternatives is the most likely, because an application for permission to appeal before the Full Bench of the Commission is a relatively quick and inexpensive exercise, the applicant’s prospects of success in relation to such an appeal were not, in my view, manifestly untenable or groundless, 6 and this course of action left open the options of either making an application for judicial review and/or taking action against Mr Gelonesi. Although the Full Bench ultimately found that it was not in the public interest to grant permission to appeal, the fact that an argument proves unsuccessful does not necessarily mean that the appeal was launched without reasonable cause or had no reasonable prospects of success.7 That the arguments presented on behalf of Ms Barkhazen on appeal were not unworthy of consideration and had reasonable prospects of success is apparent from the view expressed by the Full Bench that there were arguable errors in relation to the test applied by the Commissioner to determine the recusal application and whether regard should have been had to Mr Barkhazen’s preparedness to pay any costs associated with a recusal by the Commissioner.8 Further, the fact that Ms Barkhazen was represented by counsel at the hearing of the application for permission to appeal (and it is not suggested that counsel was negligent or otherwise had a conflict of interest), adds some weight to the likelihood that Ms Barkhazen would have pursued her appeal before the Full Bench of the Commission even if she had sought advice from an alternative lawyer. Counsel for Ms Barkhazen had an obligation to “promote and protect fearlessly and by all proper and lawful means”9 Ms Barkhazen’s best interests, and to do so “without regard to his or her own interest or to any consequences to the barrister or to any other person”.10 That counsel for Ms Barkhazen also appeared for her at first instance, instructed by Mr Gelonesi, does not alter my view in relation to these matters.

[20] Mr Gelonesi made a number of serious allegations against Ms Carter, solicitor, and Mr Howells, director of Conair, in his submissions opposing the costs order sought by Conair. However, those allegations are not relevant to the question of whether Mr Gelonesi engaged in any of the unreasonable acts or omissions alleged by Conair. Accordingly, I do not need to, and will not, make any findings in relation to those allegations.

Appeal lodged out of time

[21] Mr Gelonesi filed Ms Barkhazen’s notice of appeal in the Commission three days outside the time prescribed by rule 56 of the Fair Work Commission Rules 2013. 11 Despite this, the notice of appeal filed by Mr Gelonesi stated that it was filed within 21 days of the decision the subject of the appeal.

[22] By letter dated 25 October 2016, Conair’s solicitors put Mr Gelonesi on notice that the notice of appeal had been filed out of time and “no application for an extension of time has been made by Ms Barkhazen, which requires her to set out the reason for the delay and the grounds on which an extension of time should be granted.”

[23] The application for permission to appeal was heard by the Full Bench on 9 November 2016. At 5:11pm on 8 November 2016, Mr Gelonesi filed and served a statutory declaration made by him in relation to the reasons for the delay in filing the notice of appeal. The Full Bench made the following comments in relation to Mr Gelonesi’s statutory declaration: 12

“[5] Ms Barkhazen relies on a statutory declaration made by her solicitor, Mr Bruno Gelonesi, in support of her application to extend time for the institution of the appeal. Conair did not require Mr Gelonesi for cross examination. Although Mr Gelonesi does not say so in express terms, the effect of his statutory declaration is that representative error is the reason for the delay in instituting the appeal, and Ms Barkhazen is not responsible for that delay. That is a satisfactory reason for the delay and it weighs in favour of granting an extension of time.”

[24] The Full Bench extended the time for filing the notice of appeal, principally on the basis of Mr Gelonesi’s statutory declaration. 13

[25] The filing of Mr Gelonesi’s statutory declaration was the first time that any reasons for the delay in lodging the notice of appeal were communicated to Conair or the Commission.

[26] Conair submits that Mr Gelonesi’s failure, prior to 5:11pm on 8 November 2016, to inform it that representative error was the reason for the delay in lodging the notice of appeal was an unreasonable act or omission of Mr Gelonesi which caused Conair to incur costs. In particular, Conair says that because it had no knowledge of the reasons for the notice of appeal being lodged out of time it was required to prepare submissions in relation to the out of time issue. Had Conair been informed at an earlier time of the reasons for the delay in filing the notice of appeal, Conair submits that its solicitors could have advised, and sought instructions from, it not to oppose the application for an extension of time. In my opinion, these submissions have considerable force. I am satisfied that if Mr Gelonesi had responded to the letter from Conair’s solicitors dated 25 October 2016 within a reasonable time and explained the reasons for the delay in filing the notice of appeal, Conair’s solicitors would likely have advised Conair not to oppose the application for an extension of time and Conair would have been likely to accept such advice, with the result that Conair would not have incurred legal costs in preparing submissions in relation to the out of time question.

[27] Accordingly, I find that Mr Gelonesi’s failure to inform Conair’s solicitors within a reasonable time of receipt of the letter dated 25 October 2016 of the reasons for the delay in lodging the notice of appeal was an unreasonable omission in connection with the conduct or continuation of the matter which caused Conair to incur costs.

Indemnity costs

[28] Conair seeks costs on an indemnity basis from Mr Gelonesi. The Commission has the discretion to order indemnity costs. 14

[29] Indemnity costs can properly be awarded in appropriate cases where “there is some special or unusual feature in the case to justify the court exercising its discretion in that way”. 15 The authorities often refer to such cases as involving some “relevant delinquency” on the part of the costs respondent.16

[30] The following approach to indemnity costs in cases concerning unreasonable acts or omissions has been applied in a number of cases: 17

“It would seem almost axiomatic that an unreasonable act or omission that causes a party to incur costs in a proceeding would provide a basis for an order being made not for party and party costs but for costs on a ‘solicitor and client’ basis or on an indemnity basis.”

[31] In the present case, I have found that Mr Gelonesi engaged in an unreasonable omission. He has not provided any explanation for his omission in this regard. In those circumstances, I am satisfied that his conduct involved some “relevant delinquency” and the costs should be awarded on an indemnity basis.

Costs of the costs application

[32] Conair submits that Mr Gelonesi engaged in a further unreasonable act or omission by failing to accept Conair’s offer that he pay Conair $10,000 on account of the costs it incurred in defending Ms Barkhazen’s appeal to the Full Bench of the Commission as a result of Mr Gelonesi’s conduct in exchange for Conair withdrawing its costs application against him.

[33] The amount Mr Gelonesi will be required to pay Conair pursuant to the costs order I will make against him will be substantially less than $10,000. It follows that Mr Gelonesi did not engage in an unreasonable act or omission by not accepting Conair’s offer that he pay Conair $10,000 on account of costs. I am satisfied that Mr Gelonesi did not engage in any unreasonable act or omission in connection with the determination of the costs application filed by Conair. Accordingly, I will not make any order that Mr Gelonesi pay Conair any costs of the costs application.

Conclusion

[34] For the reasons set out above, I am satisfied that Conair incurred costs in connection with the preparation of submissions on the question of whether an extension of time should be granted to lodge the notice of appeal and Mr Gelonesi caused Conair to incur those costs because of an unreasonable omission on Mr Gelonesi’s part in connection with the conduct or continuation of the matter. Accordingly, I will issue an order pursuant to s.401(1A)(b) of the Act for Mr Gelonesi to pay such costs. They must be paid on an indemnity basis.

[35] The parties have 14 days to confer and attempt to reach agreement on the quantum of costs to be paid by Mr Gelonesi. In the event that the parties cannot agree on quantum within 14 days, Conair must inform my Associate, at which time directions will be issued in relation to the assessment of costs.

COMMISSIONER

 1   Barkhazen v Conair Australia Pty Ltd[2016] FWC 6520

 2   Barkhazen v Conair Australia Pty Ltd[2016] FWCFB 8129

 3   [2013] FWCFB 8960

 4   s.577(a) & (b) of the Act

 5   Barkhazen v Conair Australia Pty Ltd[2016] FWC 6520 at [64], [67], and [80]

 6   Deane v Paper Australia PR932454 at [7]

 7   Rohan Veal v Sundance Marine Pty Ltd [2013] FWCFB 8960 at [24]

 8   Barkhazen v Conair Australia Pty Ltd[2016] FWCFB 8129 at [22]

 9   Rule 35, Legal Profession Uniform Conduct (Barristers) Rules 2015

 10   Ibid

 11   Barkhazen v Conair Australia Pty Ltd[2016] FWCFB 8129 at [3]

 12   Barkhazen v Conair Australia Pty Ltd[2016] FWCFB 8129 at [5]

 13   Barkhazen v Conair Australia Pty Ltd[2016] FWCFB 8129 at [5]-[9]

 14   Stanley v QBE Management Services Pty Ltd[2012] FWA 10164

 15   Goffett v Recruitment National Pty Ltd [2009] AIRCFB 626 at [49]

 16   Ibid at [50]

 17   Johnston v The Trustee for the MTGI Trust[2015] FWC 996 at [42]; Goffett v Recruitment National Pty Ltd [2009] AIRCFB 626 at [52]

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