Bostik (Australia) Pty Ltd v Gorgevski (No 2)

[1992] FCA 492

Re: BOSTIK (AUSTRALIA) PTY. LTD.
And: DIMITRJA GORGEVSKI
No. V I29 of 1992
FED No. 492
Industrial Law
(1992) 108 ALR 254

COURT

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY
INDUSTRIAL DIVISION
Sheppard(1) Gray(2), and Heerey(3) JJ.

CATCHWORDS

Industrial Law - costs - appeal dismissed - whether costs recoverable by successful respondent - claims for penalty for breach of award and for damages for breach of contract - whether a proceeding in a matter arising under Industrial Relations Act - whether appeal instituted vexatiously or without reasonable cause.

Words and Phrases - "proceeding...in a matter arising under this Act" - "vexatiously or without reasonable cause".

Industrial Relations Act 1988 s. 347, s.178.

Conciliation and Arbitration Act 1903 s.197A.

Industrial Relations (Consequential Provisions) Act 1988.

Conciliation and Arbitration Act 1903 s.197A.

Conciliation and Arbitration Act 1903 s.197A.

Geneff v Peterson (1986) 19 IR 40, 90.

Standish v University of Tasmania (1989) 28 IR 129.

Thompson v Hodder (1989) 21 FCR 467.

Gregory v Philip Morris (1988) 80 ALR 455.

Poulos v Waltons Stores (Interstate) Ltd (1986) 68 ALR 537.

R. v Commonwealth Court of Conciliation and Arbitration; Ex parte Barrett (1945) 70 CLR 141.

Fencott v Muller (1983) 152 CLR 570.

Re Polites Ex parte The Hoyts Corporation Pty. Ltd. (No.2) (1991) 101 ALR 698.

B.P. Refinery (Westernport) Pty. Ltd. v Hastings Shire Council (1977) 52 ALJR 20.

LNC Industries Ltd. v BMW (Australia) Ltd. (1983) 151 CLR 575.

HEARING

MELBOURNE

#DATE 3:7:1992

Solicitors for the appellant: Sly and Weigall

Counsel for the appellant: Dr C. Jessup QC with Mr N. Green

Solicitors for the respondent: Goulopoulos Shiels and Mangopoulos

Counsel for the respondent: Mr J. Bourke

ORDER

THE COURT ORDERS THAT the application for costs is dismissed.

Note: Settlement and entry of orders is dealt with by O.36 of the Federal Court Rules.

JUDGE1

The appeal in this matter was dismissed on 14 May last. We reserved to the parties liberty to make written submissions on the question of whether the respondent was entitled to an order for the costs of the appeal. The matter was dealt with by written submissions. There was no further oral argument.

1. The submissions give rise to a question of the construction of s.347 of the Industrial Relations Act 1988. Subsection 347(1) of that Act is as follows:-
   

"A party to a proceeding (including an appeal) in a matter arising under this Act shall not be ordered to pay costs incurred by any other party to the proceeding unless the first-mentioned party instituted the proceeding vexatiously or without reasonable cause."

1. I am satisfied that this is not a case in which the appeal was instituted vexatiously or without reasonable cause. Although the appellant was unsuccessful, the appeal raised substantial questions relating both to liability and damages.

2. The problem arises because the respondent, who was the successful applicant below, relied on two distinct claims. The first was a claim made pursuant to s.178 of the Industrial Relations Act for a penalty for breach of an award. The proceedings were brought by the respondent pursuant to para.178(5)(c), he being a member of an organisation who was affected by the breach of the award in question. That claim was clearly a proceeding in a matter arising under the Industrial Relations Act within the meaning of s.347. If there were no more, the Court would plainly have no power to make an order that a party to the proceedings pay the costs incurred by another party thereto. But in addition to the claim made under the Act, there was the claim made by the respondent for damages for wrongful dismissal. The Court was able to entertain that claim because it had accrued or attached jurisdiction to do so. The claim for wrongful dismissal was a common law claim for breach of contract. But the claim depended upon there being a term of the contract of service which included the relevant provisions of the award of which the appellant was found to be in breach. The award owed its existence to the Industrial Relations Act and its predecessor, the Conciliation and Arbitration Act 1904; see s.7 of the Industrial Relations (Consequential Provisions) Act 1988. The decision of the Full Court of this Court in Gregory v. Philip Morris Ltd. (1988) 80 ALR 455 (referred to in the principal judgments herein) established that the relevant provisions of the award in that case formed part of the contract of employment. That case, the correctness of which was not challenged before us, was indistinguishable from the present case and was applied by us in the course of reaching our conclusion that the appeal should be dismissed.

3. For the purposes of the question now to be decided, it becomes important to understand how the Court in the Gregory case reached its conclusion. The majority (Wilcox and Ryan JJ.) formulated two distinct and independent reasons for their decision. The first, upon which the Court was unanimous, was expressed by Wilcox and Ryan JJ. as follows (pp 478-9):-
   

"It has long been recognised that an employee is entitled to sue at law to recover the moneys payable to him or her under an award, notwithstanding that no independent express agreement has been made about those moneys: see Mallinson v. Scottish Australian Investment Co. Ltd. (1920) 28 CLR 66. As we understand it, that is because the award provision imports a term into the contract of employment independently of the intention of the parties: see Amalgamated Collieries of WA Ltd v. True (1938) 59 CLR 417 per Dixon J. at 431. Similarly, Windeyer J. in R. v. Gough; Ex Parte Meat and Alllied Trades Federation of Australia (1969) 122 CLR 237 at 246 described the award provision as operating to 'create new rights as between master and servant superimposed on the common law incidents of their relationship'."

1. Jenkinson J. was of the same opinion. He said (p 461):-
   

"In my opinion the reasoning of the High Court in Mallinson's case supports the conclusion, which I draw, that breach of a provision of an award made under the Act causing damage to a person bound by the award may give rise to a cause of action for damages at the suit of that person. Persons who are parties to employment contracts, whether employer or employee, and who become bound by an award made under the Act, fall within a class on whose members the Act evinces, in my opinion, the intention to confer the protection of legal enforceability of award provisions. A primary mode of such enforcement is the compensatory remedy of damages."

1. The second reason for the conclusion reached by Wilcox and Ryan JJ. (Jenkinson J. dissented on this aspect of the case) that the provisions of the award were part of the contract of employment in Gregory was because they thought that in the circumstances of that case an agreement to that effect ought to be implied. They pointed out that there was not any evidence that anything was said, at the time the applicant was employed, about the grounds on which the employment might be terminated or the period of notice of termination to be given on either side. The position was similar here. Wilcox and Ryan JJ. continued (p 479):-
   

" ... the parties did intend to create a contract of employment under which each would undertake obligations towards the other. At the time there was in existence an industrial award governing the industry in which Gregory was to be employed and which conferred benefits upon persons working in his proposed classification. That award contained a detailed and comprehensive code of rights and obligations including a prescription headed 'Contract of Employment' which provided, inter alia, for termination of employment by a week's notice on either side subject only to a right in the employer to dismiss summarily any employee for malingering, inefficiency, neglect of duty or misconduct: see eg (1977) 191 CAR 598 at 604. We cannot doubt that, if at the time of the interview which led to his employment, Gregory and the interviewer had been asked whether it was intended that the award would govern the terms of the contract into which he and Philip Morris proposed to enter, subject to any express agreement as to terms more beneficial to Gregory, each would have unhesitatingly answered in the affirmative. Moreover, each would have known that industrial awards are subject to frequent variation. Each would have affirmed an intention that variations of the award should operate automatically to vary the contract of employment accordingly."

1. Their Honours went on to refer to the decision of the Privy Council in BP Refinery (Westernport) Pty. Ltd. v. Hastings Shire Council (1977) 52 ALJR 20 and concluded (p 480) that "it must go without saying" that both parties intended that their contract should incorporate the provisions of the award as in force from time to time.

2. In my opinion, substantial assistance in the resolution of the present case is to be found in the decision of the High Court in LNC Industries Ltd. v. BMW (Australia) Ltd. (1983) 151 CLR 575. It is necessary to refer to the way in which the matter came to the High Court. The question was whether the provisions of subsec.39(2) of the Judiciary Act 1903 operated to deny the applicant a right to appeal to the Privy Council from a decision of the Supreme Court of New South Wales. So far as relevant, subsec. 39(2) of the Judiciary Act is as follows:-
   

"The several Courts of the States shall within the limits of their several jurisdictions, whether such limits are as to locality, subject-matter or otherwise, be invested with federal jurisdiction in all matters in which the High Court has original jurisdiction or in which original jurisdiction can be conferred upon it, except as provided in section 38, and subject to the following conditions and restrictions:-

(a) A decision of a Court of a State, whether in original or in appellate jurisdiction, shall not be subject to appeal to Her Majesty in Council, whether by special leave or otherwise."

A class of matter in which original jurisdiction can be conferred upon the High Court is any matter arising under any laws made by the Parliament; see s.76(ii) of the Constitution.

1. The question in the LNC case was whether the Supreme Court of New South Wales was exercising federal jurisdiction under subsec.39(2) of the Judiciary Act when it made the orders which were the subject of the intended appeal. The subject matter at issue consisted of import licences granted under regulations known as the Customs (Import Licensing) Regulations. LNC held import licences to import a number of motor vehicles. It brought an action in the Supreme Court alleging that it was a term of a contract under which it agreed to transfer part of its quota to BMW that BMW would hold on trust for it any benefit accruing as a result of or related to the utilisation of the transferred quota units. The defendant successfully defended the action.

2. It was held by the High Court that the claim arose under a law of the Commonwealth Parliament within the meaning of s.76(ii) of the Constitution with the consequence that the decision of the Supreme Court was not subject to appeal to the Privy Council. In the course of its judgment, the Court said (p 581):-
   

"It is true to say that a matter does not arise under a law made by the Parliament merely because the interpretation of the law is involved: Felton v. Mulligan (1971) 124 CLR 367, at pp 374, 382, 396, 408, 416. On the other hand, a matter may arise under a law of the Parliament although the interpretation or validity of the law is not involved: R. v. Commonwealth Court of Conciliation and Arbitration; Ex parte Barrett (1945) 70 CLR 141, at p 154. The conclusion reached by Latham C.J. in that case, and stated in a passage that has often been cited with approval, is 'that a matter may properly be said to arise under a federal law if the right or duty in question in the matter owes its existence to federal law or depends upon federal law for its enforcement, whether or not the determination of the controversy involves the interpretation (or validity) of the law'. Equally, there is a matter arising under a federal law if the source of a defence which asserts that the defendant is immune from the liability or obligation alleged against him is a law of the Commonwealth: Felton v. Mulligan (1971) 124 CLR, at p 408. When it is said that a matter will arise under a law of the Parliament only if the right or duty in question in the matter owes its existence to a law of the Parliament that does not mean that the question depends on the form of the relief sought and on whether that relief depends on federal law. A claim for damages for breach or for specific performance of a contract, or a claim for relief for breach of trust, is a claim for relief of a kind which is available under State law, but if the contract or trust is in respect of a right or property which is the creation of federal law, the claim arises under federal law. The subject matter of the contract or trust in such a case exists as a result of the federal law."

1. The incorporation of the relevant provisions of the award in this case, upon the basis of the way in which the matter was first put by Wilcox and Ryan JJ., and also by Jenkinson J., in Gregory's case, did not depend upon agreement. It depended upon the award operating upon the contract which the parties made so as to insert into it a term containing the relevant provisions. If that basis alone be looked at, it seems to me that this case is indistinguishable from the LNC case. Although the action was an action for breach of contract, the claim was in reality one to enforce a right conferred by an award which was in force by reason of the operation of the Industrial Relations Act. The common law claim, no less than the claim for a penalty, was therefore a proceeding in a matter arising under the Industrial Relations Act within the meaning of s.347 thereof.

2. It may be that, if one had regard only to the second basis upon which Wilcox and Ryan JJ. thought the term was incorporated - really implied - one would reach a different conclusion because it could then be said that the term arose not in a proceeding in a matter arising under the Industrial Relations Act, but by reason of the consensual incorporation or implication of a term, which although statutory in origin, did not become part of the contract because of the operation of the statute. The case would be distinguishable from the LNC case because the subject matter of the litigation would be a contract the totality of the terms of which had been agreed upon.

3. In a sense the consensual approach relied upon by the majority in the Gregory case as an alternative presents the Court in this case with a difficulty. If the view were taken that that approach were correct, and the operation of law approach were not, the Court would have jurisdiction to make an order providing for at least part of the respondent's costs of the appeal. I think, however, that the majority in the Gregory case did not intend their two quite different approaches to be true alternatives. Each approach provided an independent and comprehensive reason for their conclusion. But it was not a case where only one of two possible approaches was the correct one and it was not necessary to decide which was correct because upon either approach the same conclusion would be reached. Here both approaches were correct. Thus this was a case where the contract of employment contained a term which derived its force and effect from the operation of a law, namely, the award and the statute which authorised the making of it.

4. For these reasons I regard this matter as covered in its entirety by s.347 of the Industrial Relations Act with the consequence that there can be no order made in relation to the costs of any party to the appeal.

5. My conclusion in this regard makes it unnecessary for me to consider the implications of the decision of Lockhart J. in Standish v. University of Tasmania (1989) 28 IR 129; see particularly p 139. I think that this case is distinguishable from that considered by his Honour and that the correctness or otherwise of the decision can await the day when that matter arises directly for determination.

6. In the course of considering the matter I have given consideration to the decisions of this Court in Poulos v. Walton's Stores (Interstate) Ltd. (1986) 15 IR 335 and Thompson v. Hodder (1989) 21 FCR both of which are referred to by the High Court in Re Polites; Ex parte The Hoyts Corporation Pty. Limited (No. 2) (1991) 65 ALJR 609. In the view that I take it is unnecessary to consider what significance these decisions should have for the outcome of the matter.

JUDGE2

On 14th May 1992, this Court dismissed an appeal in this proceeding from the judgment of a single judge of the Court. Among the orders made on that date was an order giving leave to the parties to argue by way of written submissions on the question whether an order for the costs of the appeal should be made. Both parties have filed written submissions. The respondent seeks an order for costs. The appellant resists such an order.

1. In the normal course, costs would follow the event, and an order would be made in favour of the successful respondent. In the present case, however, the question depends upon the applicability of s.347 of the Industrial Relations Act 1988 ("the Act"), which provides:
   

"(1) A party to a proceeding (including an appeal) in a matter arising under this Act shall not be ordered to pay costs incurred by any other party to the proceeding unless the first-mentioned party instituted the proceeding vexatiously or without reasonable cause.

(2) In subsection (1):

"costs" includes all legal and professional costs and disbursements and expenses of witnesses."

Two issues arise. The first is whether some of the claims on which the respondent succeeded at first instance and on appeal were claims which cannot be described properly as proceedings in a matter arising under the Act. The second is whether the appeal was instituted vexatiously or without reasonable cause.

1. The respondent persuaded the Court at first instance and on appeal that the appellant was in breach of a term of an award made under the Act, when it dismissed him from his employment. Because of that breach, the appellant was ordered to pay a penalty, pursuant to s.178 of the Act. It is not disputed that the claim for a penalty arose under the Act. In addition to that claim, the respondent made a successful claim for damages for breach of his contract of employment. It was conceded by the appellant that the term of the award, under which the appellant was bound not to dismiss its employees harshly, unjustly or unreasonably, was a term of the contract of employment between the parties. This claim appears to have been made in reliance on Gregory v. Philip Morris Ltd. (1988) 80 ALR 455. In that case, the majority of the Full Court (Wilcox and Ryan JJ.) held (at pp 478-480) that a similar term of an award had become an implied term of a contract of employment between an employer and an employee bound by the award, and (at pp 480-481) that a claim for damages for breach of that term of the contract could be joined with a statutory claim for a penalty, relying on the accrued jurisdiction of the Court.

2. The contention of the respondent in the present case is that the claim for damages for breach of contract depended entirely on the common law, and might have been brought separately in any court of competent jurisdiction in a State. It was therefore put that that claim did not arise under the Act.

3. It is important to note that s.347 of the Act is not expressed so as to restrict the making of an order for costs against a party in a matter arising under the Act. It is expressed to place such a restriction on a party "to a proceeding (including an appeal) in a matter arising" under the Act. There is only one relevant proceeding, namely the appeal to this Court. If that proceeding is in a matter arising under the Act, then the section is applicable to the proceeding as a whole. In Geneff v Peterson (1986) 19 IR 40, at p 90, it was held to be impossible to split the claims within a proceeding for the purpose of the application of s.197A of the Conciliation and Arbitration Act 1904, a provision indistinguishable for present purposes from s.347 of the Act. So far as Standish v University of Tasmania (1989) 28 IR 129, at p 139 suggests to the contrary, or suggests that in some way the proceeding may be characterised by attempting to determine which is the predominant claim in a proceeding, it was decided incorrectly. See Thompson v. Hodder (1989) 21 FCR 467, at p 471, where the Full Court doubted that it was possible to split the various elements of a proceeding for the purposes of s. 347. There is no warrant in s.347 for treating several claims brought together in the one proceeding as if they were separate proceedings. Apart from other considerations, the practical difficulty of separating those costs attributable to establishing that the dismissal was harsh, unjust or unreasonable for penalty purposes from those attributable to establishing the same conclusion for damages purposes would be enormous. Both in law and in fact, there was one proceeding.

1. On the question whether the proceeding was a proceeding in a matter arising under the Act, there is a deal of authority. In Poulos v Waltons Stores (Interstate) Ltd. (1986) 68 ALR 537, the Full Court held by a majority that the question whether a matter arises under the Act is to be determined by reference to a test similar to that applied in deciding whether a matter is one "arising under" a law of the Commonwealth, for the purposes of s.76(ii) of the Constitution. In the words of Latham C.J. in R v Commonwealth Court of Conciliation and Arbitration; Ex parte Barrett (1945) 70 CLR 141, at p 154, "a matter may properly be said to arise under a Federal law if the right or duty in question in the matter owes its existence to Federal law or depends upon Federal law for its enforcement, whether or not the determination of the controversy involves the interpretation (or validity) of the law." The word "matter" is to be construed as it was construed by the High Court of Australia in Fencott v Muller (1983) 152 CLR 570, at p 603, per Mason, Murphy, Brennan and Deane JJ., namely as "a justiciable controversy, identifiable independently of the proceedings which are brought for its determination and encompassing all claims made within the scope of the controversy". See Poulos, at pp 542-543 in the judgment of Gray J. A similar approach was taken by the Full Court in Thompson v Hodder, at p 469. The approach was approved, and those authorities were followed, by the High Court of Australia in Re Polites; Ex parte The Hoyts Corporation Pty. Ltd. (No.2) (1991) 101 ALR 698.

2. Applying these principles, it is plain that the subject of the appeal was a single "matter", being a justiciable controversy between the parties over the dismissal of the respondent by the appellant and the legal consequences of that dismissal. The matter manifested itself in the claims for a penalty and for damages, both of which depended upon precisely the same facts. That matter arose under the Act, because it depended for its existence upon the making of a binding award by an arbitral tribunal, exercising power under the Act. The enforcement of that Award depended upon s.178 of the Act. Leaving aside any effect which legislation relating to cross-vesting of jurisdiction may have, the only way in which this Court derived its jurisdiction to deal with the matter was because the controversy depended upon the Act. It is clear that, in those circumstances, the proceeding was one in a matter arising under the Act.

3. Even if it were possible to separate the claim for damages for breach of contract and to treat it as a separate proceeding, or if that claim had been brought in a State court, separately from the penalty claim, it would still be clear that the relevant proceeding would be in a matter arising under the Act. In L.N.C. Industries Ltd. v B.M.W. (Australia) Ltd. (1983) 151 CLR 575, the High Court of Australia dealt with the question whether an appeal lay to the Privy Council from a judgment in which a claim for breach of contract had been dismissed. The question depended on whether the proceeding was in a matter arising under a law of the Commonwealth, within s.76(ii) of the Constitution and s.39(2) of the Judiciary Act 1903. The contract concerned the transfer from the plaintiff to the defendant of import quota units, allowing the import of motor vehicles, and an allegation that the defendant held those quota units in trust for the plaintiff. The import quota units had been created under a law of the Commonwealth. The court held that no appeal lay to the Privy Council. At p 581, the Court said:
   

"When it is said that a matter will arise under a law of the Parliament only if the right or duty in question in the matter owes its existence to a law of the Parliament that does not mean that the question depends on the form of the relief sought and on whether that relief depends on federal law. A claim for damages for breach or for specific performance of a contract, or a claim for relief for breach of trust, is a claim for relief of a kind which is available under State law, but if the contract or trust is in respect of a right or property which is the creation of federal law, the claim arises under federal law. The subject matter of the contract or trust in such a case exists as a result of the federal law."

In the present case, relief of a kind available under State law, namely damages for breach of contract, was sought in respect of a right which is the creation of federal law, namely an award made under the Act. The respondent cannot escape from the proposition that the term of his contract of employment upon which he relied was a term which arose only because it had been created as a term of an award made under the Act. Had there been no award applicable, or had the particular term not been found in the relevant award, there could have been no equivalent term of the contract of employment without express agreement. The respondent's claim in contract therefore depended on a right or duty owing its existence to the Act, even if it did not depend upon the Act for its enforcement. It would not have been open to the respondent to obtain an order for costs if he had proceeded in any other court, relying solely upon the contract and its implied term. The argument put on behalf of the respondent bears some resemblance to that which commended itself to Smithers J., but not to the majority of the Full Court in Poulos.

1. It is therefore clear that s.347 of the Act applies and an order for costs can only be made in favour of the respondent if the appeal was instituted vexatiously or without reasonable cause. It is to be noted that attention is directed by the section to the institution of the appeal, and not to the manner of its conduct. The appeal must have been vexatious or without reasonable cause from the outset if the respondent is to succeed. The construction of the phrase "vexatiously or without reasonable cause" is not free from difficulty; see Geneff v Peterson (at pp 87-89). It is plain, however, that "an applicant who has the benefit of the protection of s.347 will only rarely be ordered to pay the costs of a proceeding in exceptional circumstances." See Thompson v Hodder, at p 470. The proper approach is reflected in the statement of Gibbs J. (as he then was) in R v Moore; Ex parte Federated Miscellaneous Workers' Union of Australia (1978) 140 CLR 470, at p 473:
   

"In my opinion a party cannot be said to have commenced a proceeding "without reasonable cause", within the meaning of that section, simply because his argument proves unsuccessful. In the present case the argument presented on behalf of the prosecutor was not unworthy of consideration and it found some support in the two decisions of this Court to which I have referred. The fact that those decisions have been distinguished, and that the argument has failed, is no justification for ordering costs in the face of the prohibition contained in s.197A."

1. It could not be said that the appeal in the present case was doomed to fail at the outset. It involved difficult issues, which were argued over two days, with considerable force, by counsel on both sides. The appeal was from an award of damages which, by any standards, was a large one. The judgment of the Court was reserved, and the appellant's arguments were rejected after mature consideration. In those circumstances, it cannot be said that the appeal was instituted vexatiously or without reasonable cause.

2. For these reasons, the respondent's application for costs must be dismissed.

JUDGE3

I agree with the judgment of Sheppard J.