Belcher v Scruton Property Pty Ltd (No 2)
[2022] FedCFamC2G 676
Federal Circuit and Family Court of Australia
(DIVISION 2)
Belcher v Scruton Property Pty Ltd (No 2) [2022] FedCFamC2G 676
File number(s): BRG 222 of 2020 Judgment of: JUDGE TONKIN Date of judgment: 18 August 2022 Catchwords: INDUSTRIAL LAW – Application for costs under section 570 (2) Fair Work Act 2009 (Cth) – whether costs should be awarded – order that applicant pay the respondents costs on a party/party basis – application for indemnity costs dismissed Legislation: Fair Work Act 2009 (Cth) Cases cited: Australian Securities and Investment Commission v Mitchell (No 4) [2021] GCA 1387
Calderbank v Calderbank [1975] 3 All ER 333
Construction, Forestry, Mining and Energy Union and Others v Clark (2008) 170 FCR 574
Melbourne Stadiums Ltd v Sautner (2015) 229 FCR 221
Nield v Mathison (No 2) [2014] FCAFC 86
Rahman v Commonwealth of Australia as represented by the Australian Taxation Office [2013] FCCA 388
Richens v Commonwealth of Australia (as represented by the Commissioner of Australian Federal Police) [2018] FCA 1276
Saxena v PPF Asset Management Ltd [2011] FCA 395
Wellington v Offermans Partners (No 2) [2021] FCCA 1846
Division: Division 2 General Federal Law Number of paragraphs: 39 Date of last submission/s: 10 June 2022 Date of hearing: 14 June 2022 Place: Brisbane Counsel for the Applicant: Mr Amerena Solicitor for the Applicant: Workplace Law Group Counsel for the Respondent: Mr Hogg Solicitor for the Respondent: McInnes Wilson Lawyers
Table of Corrections 25 August 2022 In Order 1 the date 5 October 2022 has been replaced with 5 October 2021. 25 August 2022 In paragraph 38 the date 1 October 2022 has been replaced with 5 October 2021 ORDERS
BRG 222 of 2022 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: GUY ANDREW BELCHER
Applicant
AND: SCRUTON PROPERTY PTY LTD
Respondent
order made by:
JUDGE TONKIN
DATE OF ORDER:
18 August 2022 Amended 25 August 2022
THE COURT ORDERS THAT:
1.The applicant is to pay the respondents costs on a party/party basis as and from
5 October 20225 October 2021 as agreed or taxed.2.The application for indemnity costs is dismissed.
Order 1 has been amended pursuant to r.17.05(2)(e) Federal Circuit and Family Court (Division 2)(General Federal Law) Rules 2021 to show “5 October 2021” in lieu of “5 October 2022”
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
JUDGE TONKIN
The applicant filed an originating application on 16 April 2020 seeking declarations alleging that the respondent Scruton Property Group Pty Ltd (“Scruton Property”) contravened the Fair Work Act 2009 (Cth) (“FWA”) in failing to pay the applicant for work performed between June 2017 and 29 June 2018 and additional entitlements. He sought to recover all accrued salary and bonuses in accordance with section 323 (1) of the FWA $80,769 plus interest, his leave entitlements of $5769.23 plus interest, payment in lieu of notice of $2884.61 plus interest and superannuation contributions of $7673.
The respondent Scruton Property filed its response on 20 May 2020 seeking the application be dismissed pursuant to rule 4.03 (1) (c) of the Federal Circuit Court Rules 2001 as to the whole of the relief claimed by the applicant on the basis that the application was without reasonable cause. The respondent asserted that the applicant was not an employee and had never been an employee of the respondent. On 26 February 2021 the respondent filed a Defence and further amended Defence 21 October 2021 seeking the application be dismissed.
The matter proceeded to trial for 3 days on 19, 20 and 21 October 2021. Written submissions were filed and judgment delivered on 19 April 2022 dismissing the application.
On 17 May 2022 the Court ordered the respondent file written submissions on the question of costs and the applicant file written submissions within 14 days of the receipt of the respondent’s submissions. On 14 June 2022 judgment with respect to costs was reserved to be determined on the papers.
Legal principles
Section 570 of the FW Act provides:
s 570
(1)A party to proceedings (including an appeal) in a court (including a court of a State or 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 proceedings only in accordance with subsection (2) or section 569 or 569A.
Note:The Commonwealth might be ordered to pay costs under section 569. A State or Territory might be ordered to pay costs under section 569A.
(2) The party may be ordered to pay the 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 the 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.
In Wellington v Offermans Partners (No 2) [2021] FCCA 1846 Judge Jarrett said at [28] that the threshold set by subsection 570 (2) of the FW Act is high in that the Court’s discretion to award costs should only be exercised in a clear case: see Saxena v PPF Asset Management Ltd [2011] FCA 395 at [5] – [6] and Construction, Forestry, Mining and Energy Union and Others v Clark (2008) 170 FCR 574 at [29].
In Rahman v Commonwealth of Australia as represented by the Australian Taxation Office [2013] FCCA 388 (12 July 2013) Driver J referred to the principles applicable to the exercise of the discretion under section 570 (2) (b) of the FW Act and said at [4] – [8] (citations omitted):
[4] In ordinary circumstances, the Court is not empowered to order costs in matters arising under the FW Act. The power is enlivened by a party’s unreasonable act or omission. Once the power is enlivened, the Court has a broad discretion. What is an unreasonable act or omission will depend upon the facts of the particular case. A procedural failure may, prima facie, be unreasonable and a pleading failure (by which I mean something put in or left out of a pleading) which is unreasonable may also enliven the power. A finding of an unreasonable act or omission must be the exception rather than the rule. It follows that a reasonably high bar needs to be set for a party alleging an unreasonable act or omission.
[5] In Construction, Forestry, Mining and Energy Union v Clarke, the Full Court of the Federal Court said:
The exception applies when two criteria are satisfied. The first criterion is that one party must have engaged in "an unreasonable act or omission". As the reasoning of Tracey J in Australian and International Pilots Association v Qantas Airways Ltd (No 3) [2007] FCA 879; (2007) 162 FCR 392 and Siopis J in McAleer v The University of Western Australia (No 2) [2007] FCA 247; (2007) 161 IR 151 demonstrates, whether a party has conducted itself or its litigation in such a way as to cross this threshold will depend on the particular circumstances of the case. The second criterion is that the act or omission of one party must have "caused another party to the proceeding to incur costs in connection with the proceeding". Once both criteria are satisfied, then the Court "may" in its discretion order the party which has engaged in the unreasonable act or omission to pay some or all of the costs of the other party.
See also Larne-Jones v Human Synergistics Australia Limited & Ors.
[6] In Dowling v Fairfax Media Publications Pty Ltd Moore J said the task involves “a qualitative assessment of the proceeding in its entirety, focussing of course on the party that ‘instituted’ the proceeding.
…
[8] As to the meaning of ‘unreasonable’, the Full Federal Court (Black CJ Emmett & Hely JJ) in National Mutual Life Association of Australasia Ltd v Campbell said:
There was some discussion during the hearing of the appeal about the meaningof "unreasonable " and "unfair". Reference was made to decisions of the Court in which dictionary definitions of these broad concepts had been adopted. Although the question does not arise for decision in this case, we would comment that attempts to achieve a precise definition of words such as "unreasonable" and "unfair" are likely to run into difficulty. The legislature has quite deliberately used words of broad content. Concepts such as "unreasonable" can be unduly restricted by the use of synonyms and definitions. For example, in ordinary usage conduct may be referred to as "unreasonable" which is not really beyond the bounds of reason at all - it is just "unreasonable". As Kitto J cautioned in Federal Broom Co Pty Ltd v Semlitch [1964] HCA 34; (1964) 110 CLR 626 at 633: "Fallacy lurks in paraphrase". See also Kumar v Minister for Immigration and Ethnic Affairs (1997) 144 ALR at 445, 446.
In Richens v Commonwealth of Australia (as represented by the Commissioner of Australian Federal Police) [2018] FCA 1276 at [23] Mortimer J said:
...the discretion in s 570(2) should be exercised cautiously and the case for its exercise should be clear, in part to avoid discouraging parties from completely and robustly pursuing claims of contravention under the Fair Work Act, or in equally robustly pursuing their defence of such claims. However, I also observed that s 570 was an access to justice provision in the sense that the ordinary position would be that parties may pursue these claims without the apprehension of adverse costs orders if they are unsuccessful.
The respondents contend that the applicant’s conduct was unreasonable in failing to accept Calderbank offers which would have placed the applicant in a more favourable position upon judgment being delivered and avoided both parties incurring the costs of the trial.
Submissions
The respondent seeks costs of the proceeding from the applicant on the indemnity basis and contends that the applicant’s claim was for payment on the bases of a contract (the respondent’s constitution being the contract relied upon)[1] or alternatively a quantum meruit. The applicant also sought declarations that the respondent had breached various provisions of the Fair Work Act 2009 (Cth) and the Superannuation Guarantee (Administration) Act 1992 (Cth) and consequential penalty orders under the Fair Work Act.
[1] Amended statement of claim paragraph [23]
The respondent argued that the applicant only relied on the Fair Work Act for some of the relief in the proceeding, the rest being based on common law actions in contract and restitution. However the entirely of the applicant’s claim would form part of a single justiciable controversy under the Fair Work Act.[2] This means that s 570 of the Fair Work Act precludes the respondent from recovering costs from the applicant unless one or more of the criteria set out in subsection (2) is satisfied.
[2] Nield v Mathison (No 2) [2014] FCAFC 86 at [5]
The criterion the respondent relies on is that the applicant’s unreasonable act or omission caused the other party to incur the costs: s 570(2) (b). That omission is his failure to accept the respondent’s Calderbank offers.
In Melbourne Stadiums Ltd v Sautner (2015) 229 FCR 221; 247 IR 74; [2015] FCAFC 20 the Full Federal Court stated at [166] that “[i]t is well established that a failure to accept a reasonable offer of compromise may constitute an unreasonable act for the purposes of s 570(2) and its predecessors: see, for example, McDonald v Parnell Laboratories (Aust) (No 2) (2007) 164 FCR 591 at 598-9 (Buchanan J).”.
The respondent sent the applicant three offers to settle:[3]
[3] Affidavit of Andrew Orr solicitor for the respondent filed 30 May 2022
On 21 September 2021 for $20,000 for principal and $3,246.69 for interest, which was open until 1 October 2021. The applicant rejected this offer by making a counteroffer on 23 September 2021.
On 28 September 2021 for $22,000 for principal and $3,512.04 in interest which it restated that same day in response to an offer from the applicant which was open until 5 October 2021.
Both were expressly stated to be Calderbank offers. Rejection of a Calderbank offer can be unreasonable.[4]
[4] Stratton Finance Pty Ltd v Webb [2014] 245 IR 223; FCAFC 110 at [77] – [82]
The respondent submits that the applicant’s rejection of its offers was unreasonable in the circumstances[5] because:
a)The respondent made its offers close to trial so the applicant knew the strength of the case against him. He was able to file an outline of submissions on 28 September 2021. The respondents did file an amended defence on 11 October 2021, but this only included further legal arguments. The respondent also filed some further affidavits after their offers lapsed but these were not comprehensive and largely responded to allegations in the applicant’s affidavit of 11 January 2021;
b)The week granted to the applicant to accept the offers was a reasonable amount of time;
c)The respondent’s offer to pay money was a significant and genuine attempt at compromise in light of the applicant’s total failure at trial.
[5] Hazeldene’s Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2) [2005] 13 VR 435 at [440 – 441]
The respondent argued that it should have its costs of the entire proceeding on the indemnity basis, given that the applicant has not succeeded on any of his causes of action. Alternatively, the Court could order the applicant pay the respondent’s costs on the indemnity basis from 1 October 2021, being the date the respondent’s first offer expired.
The applicant opposed an award of costs and argued that the rejection of an offer of compromise can, but does not necessarily constitute an ‘unreasonable act or omission’ under s570(2)(b).[6] Further, even if an offer is deemed reasonable, its rejection does not necessarily constitute an ‘unreasonable act’.[7]
[6] Melbourne Stadiums Ltd v Saunter [2015] 317 ALR 665; [2015] FCAFC 20 at [16] per Tracey, Glimour, Jagot and Beach JJ, White J agreeing
[7] Ibid [167]
The applicant observed that the Full Court of the Federal Court observed that whether the rejection of an offer is found to ‘unreasonable’ in the circumstances of s 570 is a question for holistic consideration:[8]
…whether the rejection of an offer to compromise proceedings can be impugned as unreasonable will be a question of impression and degree, to be informed by all of the circumstances that surround it. At the least, those circumstances will include the objective attractiveness of the offer, whether a more beneficial result was realistically possible and whether the effort required to achieve a more beneficial result was proportionate to any marginal benefit.
[8] PIA Mortgage Services Pty Ltd v King (No 2) [2020] FCAFC 53 at [20] per Rangiah, Charlesworth and Snaden JJ
The applicant contends though offers were rejected which subsequently proved more favourable to him, the context of those offers was important. He argued that the respondent’s first offer of $20,000 was in the context of reliance on affidavits filed in the proceedings up to 21 September 2021. The second offer of $22,000 was made on 28 September 2021 and closed on 5 October 2021.
The applicant contends he was taken by surprise by the filing of further affidavits by Margaret Scruton on 14 October 2021 without the Court’s leave and Kate Scruton on 15 October 2021 without the Court’s leave given the trial commenced on 19 October 2021. He argued that the new material added a different complexion to the respondent’s evidence including introducing issues regarding the applicant’s preoccupation with golf, his preoccupation with criminal proceedings, inaccurate estimates of time for meetings and an issue surrounding Chris Lindeman’s scope of work and remuneration for that work which the applicant contends were either implicitly or explicitly taken into account by the Court. I note that Chris Lindemann was the applicant’s witness. No records were kept of any meetings. The Court ultimately rejected the applicant’s contentions finding that the applicant was not an employee of the respondent nor had he ever been employed by the respondent and as a consequence the respondent had not contravened the Fair Work Act. Further and abandoned his claim in quantum meruit.
The applicant contends that at the time the offers were rejected a more beneficial result was realistically possible for the applicant. The quantum sought was $70,965 plus interest or a partial award and that whilst unsuccessful his case was not without merit. On the basis that the Court found that he performed work and the respondents benefitted from “the project” it was not unreasonable for him to reject the offers. In the alternative he argued that there was no proper basis for the respondent to receive costs on an indemnity basis for the entire proceedings but rather any award of costs should be directly related to the refusal to accept an offer.
Regarding an award of indemnity costs the applicant argued that the discretion to depart from “a standard costs order” requires some special or unusual feature such as a party knowing that they had no chance of success. The applicant submitted that should costs be awarded costs should be “standard” from the date of the first offer lapsing being 1 October 2021.
Discussion
I accept the respondent’s contention that the applicant’s claim for relief under the Fair Work Act and common law actions in contract and restitution would form part of a single justiciable controversy under the Fair Work Act.[9] Thus section 570 of the Fair Work Act precludes the respondent from recovering costs from the applicant unless one or more of the criteria set out in subsection (2) is satisfied.
[9] Nield v Mathison (No 2) [2014] FCAFC 86 at [5]
The respondents pleaded from the outset that the application should be dismissed on the basis that the whole of the relief claimed by the applicant was without reasonable cause arguing that the applicant was not an employee and had never been an employee of the respondent. I found that the applicant failed to establish that he was an employed by Scruton Property but rather performed work for Scruton Property as a volunteer. The applicant took it upon himself to perform that work during the period he was on long service leave and though he performed work on the property development his primary focus was to provide suitable accommodation for a business he had an interest in and to expand the facilities available for that business to continue to operate in the future. I found he exaggerated the work he claimed he performed. Further his focus was on ensuring premises were ready to accommodate a family business for which he was managing director and in which he held a one third interest.
I found there was no intention on the part of the directors of the respondent to create legal relations with the applicant, no written or oral contract of employment between the applicant and respondent and no evidence of any terms or conditions oral or written imposed on the applicant with respect to any engagement for or on behalf of Scruton Property. The applicant took control of a development project though he was not requested to do so nor was he directed by any director to perform work. The applicant failed to establish that the respondents contravened the Fair Work Act. Further he failed to establish any breach of statutory duty under the Company’s constitution giving him any contractual right to be remunerated for work performed. In that regard I found that he made no request for remuneration for any work performed, there was no general meeting held to resolve what constituted remuneration for other work performed nor was he entitled as a director to be remunerated for other work nor was I able to quantify “other work” performed by him nor determine what would constitute “reasonable wages.” Further the applicant abandoned his claim in quantum meruit and the conclusion of the proceedings.
The respondents contend under section 570 of the Fair Work Act the power of the Court is enlivened by the applicant’s unreasonable act or omission in rejecting the Calderbank offers. Once that power is enlivened the Court has a broad discretion. What is an unreasonable act or omission will depend upon the facts of the particular case.
In Australian Securities and Investment Commission v Mitchell (No 4) [2021] GCA 1387 Beach J said:
[33] Was there an unreasonable refusal of the Calderbank offer? Now it is well established that a court considering a submission that the rejection of a Calderbank offer was unreasonable should usually have regard to at least the following matters:
(a) the stage of the proceeding at which the offer was received;
(b) the time allowed to the offeree to consider the offer;
(c) the extent of the compromise offered;
(d) the offeree’s prospects of success assessed as at the date of the offer;
(e) the clarity with which the terms of the offer were expressed; and
(f) whether the offer foreshadowed an application for indemnity costs in the event of the offeree rejecting it.
[34] Further I think it important to note …the unreasonableness calculus may include other factors such as the public interest and any public policy considerations that might apply …
In the Calderbank offer dated 21 September 2021[10] the respondent’s solicitor advised the respondent did not propose to restate their defence noting reliance on the affidavits of Mark Scruton, Kate Scruton Belcher and Margaret Scruton but advised “in order to avoid costs of preparing and appearing at the three day trial set down to commence on 19 October 2021 the respondent offered to settle the matter on the basis that the respondent pay the applicant $23,246.69 with respect to $20,000 for relief of the SOC and $3246.69 in interest” within 28 days and otherwise each bear costs of and incidental to the proceedings. The offer was open to 1 October 2021 and made pursuant to established principles in Calderbank v Calderbank [1975] 3 All ER 333.
[10] Affidavit of Andrew Orr filed 30 May 2022 AO1
On 28 September 2021 the respondent’s solicitor advised the applicant “we are instructed to reject your client’s offer and submit a counter – offer that the respondent pay the applicant $25,512.04 (“the settlement sum) with respect to $22,000 for relief of the SOC and $3512.04 in interest” within 28 days and otherwise each bear costs of and incidental to the proceedings. The offer was open to 5 October 2021.
On 28 September 2021 the respondents solicitor advised the applicant that the respondent “rejected the applicant’s offer of 28 September 2021 and re-stated” the previous offer.
I am satisfied that a reasonable time frame was provided to the applicant to consider the Calderbank offers. Indeed he appears to have responded as indicated in the letters annexed to the affidavit. The offers were clear in their terms and were primarily intended to avoid the costs likely to be incurred by both parties proceeding to trial.
The applicant contends that he considered it was possible at the point when the offers were made that he may achieve an outcome better than the offers. The applicant was in the best position to consider whether he was likely to succeed in his application. There was no independent evidence at all to support the existence of an employee / employer relationship between the applicant and respondent. There were no records or notes about any terms and conditions and no contract of employment. The applicant was aware from the outset that the respondent claimed that he was not an employee and had never been employed. Indeed on his own evidence the applicant had never received any remuneration from the respondent. I am satisfied that the applicant unreasonably failed to accept the offers contained in the Calderbank offers in September 2021 which would have placed the applicant in a superior financial position to that achieved at trial. On that basis I am satisfied that an order for costs against the applicant is justified.
With respect to any application for indemnity costs the onus is on the respondent to satisfy the Court that it was appropriate to make that order. None of the Calderbank offers raised the issue of indemnity costs should the applicant refuse an offer of compromise and the matter proceed to trial.
An order for the payment of indemnity costs should only be made where the conduct of a party warrants it. In Jaros v Calden (No 2) [2020] FCCA 2059 at [27] Judge Heffernan noted the “exceptional nature of an order for costs on an indemnity basis.” Shepherd J in Colgate-Palmolive v Cussons Pty Ltd (1993) 118 ALR 248 at [24] reviewed relevant authorities and summarised the applicable principles with respect to indemnity costs which I adopt. I am not satisfied that the respondent has established a basis for an order for costs on an indemnity basis.
Conclusion
I am satisfied that there are justifying circumstances to make an order that the applicant pay the respondent’s costs on a party/party basis as and from 5 October 2021 as agreed or taxed.
The application for indemnity costs is dismissed.
I certify that the preceding thirty-nine (39) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Tonkin. Associate:
Dated: 18 August 2022
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