Brinsmead v Perfection Dairies Pty Limited
[2009] FMCA 1028
•22 October 2009
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| BRINSMEAD & ORS v PERFECTION DAIRIES PTY LIMITED | [2009] FMCA 1028 |
| INDUSTRIAL LAW – Costs in relation to interlocutory application under the Independent Contractors Act2006 (Cth). |
| Federal Magistrates Act 1999 (Cth), s.79 Independent Contractors Act 2006 (Cth), ss.11, 13, 17 Workplace Relations Act 1996 (Cth), s.824 Independent Contractors Regulations 2007 (Cth), reg.5 |
| Attorney-General v Wentworth (1988) 14 NSWLR 481 Construction, Forestry, Mining and Energy Union and Others v Clarke (2008) 170 FCR 574; [2008] FCAFC 143 |
| First Applicant: | THOMAS WILLIAM BRINSMEAD |
| Second Applicant: | MARGARET BRINSMEAD |
| Third Applicant: | TOMEIRE PTY LIMITED (ACN 104 443 987) |
| Fourth Applicant: | BARRY RODGERS |
| Fifth Applicant: | EDITH RODGERS |
| Sixth Applicant: | SIBENI PTY LIMITED (ACN 002 778 681) |
| Seventh Applicant: | ROSETHORN PTY LIMITED (ACN 003 967 495) |
| Respondent: | PERFECTION DAIRIES PTY LIMITED (ACN 000 691 396) |
| File Number: | SYG2889 of 2008 |
| Judgment of: | Barnes FM |
| Hearing date: | 3 September 2009 |
| Delivered at: | Sydney |
| Delivered on: | 22 October 2009 |
REPRESENTATION
| Counsel for the Applicants: | Mr B Cross |
| Solicitors for the Applicants: | Robinson Legal |
| Counsel for the Respondent: | Mr R Kaye SC |
| Solicitors for the Respondent: | Binetter Vale Lawyers Pty Ltd |
ORDERS
The respondent’s application for costs be dismissed.
The applicants’ application for costs be dismissed.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG2889 of 2008
| THOMAS WILLIAM BRINSMEAD |
First Applicant
| MARGARET BRINSMEAD |
Second Applicant
| TOMEIRE PTY LIMITED (ACN 104 443 987) |
Third Applicant
| BARRY RODGERS |
Fourth Applicant
| EDITH RODGERS |
Fifth Applicant
| SIBENI PTY LIMITED (ACN 002 778 681) |
Sixth Applicant
| ROSETHORN PTY LIMITED (ACN 003 967 495) |
Seventh Applicant
And
| PERFECTION DAIRIES PTY LIMITED (ACN 000 691 396) |
Respondent
REASONS FOR JUDGMENT
In these proceedings the respondent seeks costs in relation to an interlocutory application it filed that was dismissed by consent save as to costs, while the applicants seek the costs of responding to the costs application.
On 7 November 2008 the applicants filed an application seeking review under the Independent Contractors Act 2006 (Cth) (the Act) of a standard form milk delivery contract said to have been entered into between each of the applicants and the respondent. They allege that the contract is unfair and/or harsh.
The respondent did not file a response to the original application. Instead, on 13 January 2009 it filed an application in a case seeking dismissal of the application on the basis that the contracts ceased before 1 March 2007 (the date Part 2 of the Act came into force) or more than 12 months prior to the date of the application (see s.13 of the Act and reg.5 of the Independent Contractors Regulations2007 (Cth)).
In the alternative, orders were sought dismissing the claim of the first applicant, Mr Thomas Brinsmead, on the ground that he never contracted with the respondent after March 2006; the claim of the second applicant, Margaret Brinsmead, on the ground that the respondent never contracted with her; and/or the claim of Rosethorn Pty Ltd, the seventh applicant, on the ground that the relevant work which was the subject matter of the contract was not “wholly or mainly performed by a director” of Rosethorn “or a member of the family” of any such director within the meaning of s.11(1)(b) of the Act.
On 5 February 2009 directions were made for the filing of evidence in respect of the interlocutory application. It was listed for hearing on 1 July 2009. Further orders were made on 12 February 2009 modifying the dates for the filing of evidence.
However on 13 March 2009 the court made consent orders on terms sought by the parties, which included an order that the respondent’s interlocutory application filed on 13 January 2009 be dismissed “save as to any order for costs”. The applicants were granted leave to file and serve an amended application and points of claim. The consent orders noted that the respondent “neither consents nor objects to the amended application and points of claim save as to any order for costs”. It was also ordered by consent that the applicants’ notice to produce dated 21 January 2009 be dismissed save as to any order for costs. The applicants filed an amended application and points of claim on 13 March 2009.
The respondent now seeks that the applicants pay its costs of and incidental to the application in a case filed on 13 January 2009 on the basis that by reason of what was said to be defective pleading in the original application the respondent incurred unnecessary costs referable to its application in a case, the applicants’ notice to produce, requests for particulars, court appearances and matters consequential to the amendments.
Under s.79 of the Federal Magistrates Act 1999 (Cth) the court has jurisdiction to award costs in proceedings before the Federal Magistrates Court other than in proceedings in respect of which any other Act provides that costs must not be awarded. Except as provided by the rules of court or any other Act, the award of costs is in the discretion of the court (s.79(2)).
However, the Independent Contractors Act, like the Fair Work Act 2009 (Cth) and its predecessors, contains a limitation on costs orders. Section 17 of the Act is as follows:
(1) A party (the first party) to a proceeding (including an appeal) in a matter arising under this Part must not be ordered to pay costs incurred by any other party to the proceeding unless the first party instituted the proceeding vexatiously or without reasonable cause.
(2) Despite subsection (1), if a court hearing a proceeding (including an appeal) in a matter arising under this Part is satisfied that a party (the first party) to the proceeding has, by unreasonable act or omission, caused another party to the proceeding to incur costs in connection with the proceeding, the court may order the first party to pay some or all of those costs.
(3) In this section:
"costs" includes all legal and professional costs and disbursements, and expenses of witnesses.
It is not in dispute that s.17 of the Act is applicable. The respondent seeks costs on the basis either that the applicants instituted the substantive proceeding without reasonable cause within s.17(1) or that the applicants have, by unreasonable act, caused the respondent to incur costs in connection with the proceedings within s.17(2).
The applications
It is necessary first to refer briefly to the claims made in the original application and the claims in the amended application filed after the respondent’s application in a case was dismissed by consent.
The original application filed on 7 November 2008 was made on behalf of seven applicants. In the points of claim it was pleaded that each applicant was a party to a standard form contract with the respondent for services within the meaning of the Act in relation to the distribution of milk to supermarkets. It was claimed that by termination letter dated 22 February 2008 the respondent advised the applicants that its business had been sold and that their services would no longer be required after 14 March 2008. The applicants sought review and consequential variation of certain terms of the contract on the grounds that it was unfair and/or harsh in specified respects. Claims were also made for goodwill, payment in lieu of notice and, in the alternative, for damages for breach of contract.
The amended application filed on 13 March 2009 includes as an additional applicant, Mark Brinsmead, who is said to be the son of the first and second applicants and, with them, a contracting party with the respondent. The amended points of claim contain additional paragraphs in relation to Mark Brinsmead’s claimed involvement.
The amended application and amended points of claim otherwise maintain all the grounds and matters pleaded in the original application and points of claim but add, in the alternative, a claim for relief in relation to what is described as “the Alternative Contract outlined at paragraph 35 of the Points of Claim”. In paragraph 35 it is pleaded in the alternative that: “if, as the Respondent contends, the Contract terminated in November, 2006 the Applicants say that on and from 19 March 2007, the Applicants were engaged by the Respondent on contractual terms (“the Alternative Contract”) that were identical to those provided by the Contract.” Review and relief in relation to such “Alternative Contract” is sought as specified.
In other words, the applicants maintained their original claims but, in the alternative, if the original contract terminated in November 2006, they seek review of any alternative contract that came into effect on 19 March 2007.
Whether the applicant “instituted the proceeding vexatiously or without reasonable cause” within s.17(1)
The proceeding instituted by the applicants in issue in these proceedings is the application filed on 7 November 2008. There is a clear distinction between institution of proceedings vexatiously and institution of proceedings without reasonable cause, as North J pointed out in Nilsen v Loyal Orange Trust (1997) 76 IR 180 at 181. The respondent’s primary contention was that the applicants instituted the proceedings without reasonable cause. In any event, there is nothing in the material before the court to suggest that the proceeding was instituted vexatiously with the predominant purpose of harassing or embarrassing the other party or to gain a collateral advantage as discussed in Attorney-General for Victoria v Wentworth (1988) 14 NSWLR 481 at 491 (and see Williams and Others v Spautz (1992) 174 CLR 509 at 522; [1992] HCA 34).
Counsel for the respondent referred to the principles considered by Northrop J in Heidt v Chrysler Australia Ltd (1976) 26 FLR 257 in relation to s.197A of the Conciliation and Arbitration Act, which was in terms akin to s.17(1) of the Independent Contractors Act. After pointing out that the application of that provision was to be considered when proceedings had been completed and dismissed, Northrop J stated at 274 – 275:
Great care must be exercised to ensure that in finding that a party has instituted proceedings vexatiously or without reasonable cause, that party is not improperly deprived of his freedom from liability to pay costs to an opposing party. The test is a substantial one.
In considering this matter the court must have regard to all the material properly before it. The test is not subjective to the party instituting the proceedings as at the time of the institution of the proceedings. The conduct of the opposing party prior to the institution of the proceedings may be relevant in deciding whether the proceedings were instituted vexatiously or without reasonable cause. The conduct of the opposing party both prior and subsequent to the institution of proceedings may be relevant to the discretion remaining in the court. It may be difficult to satisfy the test where disputed questions of fact arise and the proceedings eventually are dismissed because the court finds facts adverse to the party instituting the proceedings. Where the test is satisfied, having regard to the general policy of the section, the court may, nevertheless, in the exercise of its discretion, make no order as to costs.
It is notable that in this instance the court has not determined the substantive proceedings. Nor has the substance of the application in a case been determined as it was dismissed by consent. The respondent contends that the amended application “acknowledges” the issue which the respondent submits it raised at the directions hearings and in correspondence. In effect it seems to be contended that it is clear that the applicants could not have succeeded on the application in its original form (notwithstanding that the court did not determine the application in a case which was dismissed by consent).
It was acknowledged that the notion “without reasonable cause” does not simply mean unsuccessful (see R v Moore and others; Ex parte Federated Miscellaneous Workers' Union of Australia (1978) 140 CLR 470 at 473; [1978] HCA 51 per Gibbs J). As Wilcox J stated in Re Kanan v Australian Postal and Telecommunications Union [1992] FCA 366 at [29]:
It seems to me that one way of testing whether a proceeding is instituted "without reasonable cause" is to ask whether, upon the facts apparent to the applicant at the time of instituting the proceeding, there was no substantial prospect of success. If success depends upon the resolution in the applicant's favour of one or more arguable points of law, it is inappropriate to stigmatise the proceeding as being "without reasonable cause". But where it appears that, on the applicant's own version of the facts, it is clear that the proceeding must fail, it may properly be said that the proceeding lacks a reasonable cause.
As Wilcox J pointed out in Kanan, whether a proceeding has been instituted without reasonable cause requires consideration of the facts apparent to the applicant at the time of institution of the proceeding and whether on those facts there was no substantial prospect of success. A relevant issue in this case will clearly be whether the court has jurisdiction. The time at which the contracts in question were terminated will be relevant. The issue of whether the contracts ceased more than 12 months prior to the date of the application is also relevant, but not determinative, in relation to the time limit on applications for review of services contracts, having regard to s.13 of the Act and reg.5 of the Independent Contractors Regulations 2007 (see reg.5(2)). However these issues have not been determined.
Insofar as the respondent contends that the pleadings were deficient either in relation to identification of the relevant contract or contracts or in relation to identification of the applicants, the fact that the pleadings were subsequently amended is not such as to persuade me that the test in s.17(1) is made out. The applicants have maintained the original pleadings in substance, adding an alternative pleading expressed on the basis of the possibility that (as the respondent contends) the contracts relied in the original application terminated in November 2006. The fact that Mark Brinsmead was added as an applicant is not such as to establish that the proceeding instituted by the application of 7 November 2008 was without reasonable cause. Even if the applicants’ success would depend in part on resolution of the effect of the so-called “suspension” of milk deliveries in November 2006 it cannot, at this stage, be said that the proceeding in its original form must have failed. There has been no determination of whether the events of November 2006 involved a termination of the contracts. Such issue remains arguable.
The applicants do not concede that the contracts relied on in the original application terminated in 2006. I am not satisfied that the fact that the applicants filed the amended application either of itself or having regard to the other material before the court establishes that on the facts apparent to the applicants at the time of institution of the proceedings there was no substantial prospect of success.
While it is open to the court to have regard to the conduct of the opposing party prior to the institution of the proceedings in deciding whether the proceedings were instituted without reasonable cause, there is no evidence in that respect before the court. The evidence of what occurred thereafter (discussed further below) does not establish that the applicants instituted the proceedings without reasonable cause. The conduct of the respondent after institution of the proceedings would be relevant to the issue of the discretion remaining in the court if the test for the award of costs under a section such as s.17(1) was satisfied (see Heidt at 275 per Northrop J)). However, as I am not persuaded that on the facts apparent to the applicants at the time of instituting the proceedings there was no substantial prospect of success, that issue does not arise.
Whether the applicants by “unreasonable act” caused the respondent to incur costs
The respondent’s main argument is that the applicants have, by unreasonable act, caused the respondent to incur costs in connection with the proceeding. It was contended that, by reason of their defective pleading, the applicants caused the respondent to incur unnecessary costs referable to the application in a case, the notice to produce served by the applicants on the respondent in January 2009, the request for particulars, court appearances and matters consequential to the amendments.
It was contended (and not disputed by the applicants) that s.17 applied to interlocutory matters such as the application in a case (see Shackley v Australian Croatian Club Ltd (1996) 141 ALR 736 at 744; Commonwealth of Australia v Construction, Forestry, Mining and Energy Union (2003) 129 FCR 271 at 274; [2003] FCAFC 115 and Paras v Public Service Body Head of the Department of Infrastructure and Another (No 3) (2006) 152 FCR 534; [2006] FCA 745 at [10] – [16]). As Young J noted in Paras at [16] in relation to the s.824(2) of the Workplace Relations Act 1996 (Cth) (which is in similar terms to s.17(2)), that subsection: :
… is not confined to costs associated with the institution of the proceedings or a step in the proceedings; it extends more broadly to costs incurred as a result of any unreasonable act or omission. On a plain and natural meaning of s 824(2), there is no reason why the reference to an unreasonable act or omission that has caused another party to incur costs in connection with the proceeding should not extend to unreasonable acts or omissions in connection with an interlocutory application.
His Honour also suggested that the power conferred by s.824(2) could be exercised irrespective of the outcome of the particular application in question or of the proceedings as a whole. The same may be said in relation to s.17(2) of the Independent Contractors Act.
As to the scope of the concept “unreasonable act or omission”, in Paras Young J rejected a submission that s.824(2) was concerned only with acts or omissions “in the practical sense of things done or omitted to be done which do not accord with reasonable notions of the conduct of proceedings, such as failing to turn up at a hearing, failing to meet deadlines laid down in court directions and not giving timely notice” (at [8]). His Honour found that it extended more broadly to costs incurred as a result of “any unreasonable act or omission” (at [16]).
This is not a case in which the initiating application was struck out for reasons advanced by the respondent (cf Australian and International Pilots Association v Qantas Airways Ltd (No 3) (2007) 162 FCR 392; [2007] FCA 879). In any event, as Tracey J pointed out in that case at [32], it is relevant that while a pleading which discloses no reasonable cause of action may be struck out, it does not necessarily follow that the party whose pleading has been struck out “acted unreasonably by seeking to rely on the deficient pleading. An objective analysis of the particular party’s conduct will be necessary in each case”. Similarly while a party may seek to amend a pleading, it does not necessarily follow that the party had acted unreasonably in seeking to rely on that pleading.
The respondent submitted that the applicants acted unreasonably by maintaining their initial pleading and not addressing the respondent’s concerns and that this was not a case where an applicant had simply sought to amend its initiating process. It was contended that the respondent had gone to what counsel for the respondent described as “inordinate lengths”, both by way of correspondence and oral submissions to the court, to persuade the applicants to clarify the basis of their claim. It was submitted that acknowledgement of the possibility of two contracts rather than one had serious repercussions, as a contract which had ceased in November 2006 would not attract the operation of the Act, and an arrangement involving a second contract raised fundamental issues concerning the terms of such contracts, particularly in the absence of any written evidence. It was submitted that the respondents were, at all material times, entitled to understand and deal with this fundamental issue and it was not until it had incurred considerable costs that the applicants “chose” to acknowledge the problem by way of their pleading. This was also said to apply to the joinder of the eighth applicant.
Counsel for the respondent referred in some detail to transcripts of directions hearings of 2 December 2008, 5 and 12 February 2009 and to correspondence between the solicitors for the parties in support of the contention that the applicants instituted their original pleading without reasonable cause or acted unreasonably. In particular, reference was made to the fact that in the original application the applicants had alleged that the contracts in question were entered into in or about June 1998 and ceased in March 2008. The respondent was of the view that the relevant contractors ceased to work for it in November 2006. It was conceded that these contractors resumed work for the respondent on some basis in March 2007. However reference was made to the absence in the applicants’ original application and points of claim of anything relating to the question of whether or not the contracts were in some way suspended or terminated in about November 2006.
For their part, the applicants contended that the history of the proceedings did not support the respondent’s claims, that when the respondent alleged the existence of an alternative contract on 5 February 2009 the applicants promptly amended their application to address the alternative but unspecified contract and that the respondent’s application for costs should be dismissed. It was submitted that the respondent should pay the applicants’ costs of the costs application on the basis that such application had been “made unreasonably”.
History of proceedings
Counsel for the respondent submitted that at the directions hearing on 2 December 2008 the solicitor for the respondent had foreshadowed the grounds the respondent intended to rely on for the purposes of its response. It was said to be central to the proposed defence that the contracts on which the applicants relied ceased no later than November 2006 and that on this basis the Act did not apply as it came into force after cessation of the contracts. Alternatively, the contracts on which the applicants relied were said to have ceased more than 12 months prior to the date of the application. It was also said to have been foreshadowed that the respondent intended to rely on a contention that it ceased to deal with the first applicant in or about March 2006 and hence that the Act did not apply to any contract with that applicant.
It is apparent from the transcript of the directions hearing of 2 December 2008 that the respondent sought that further and better particulars be provided in relation to the applicants’ points of claim before it filed a response. The solicitor for the respondent raised issues about the identification of the first three applicants, such as whether the first applicant had contracted with the respondent after March 2006, and stated that the respondent was of the view that contracts with the applicants terminated in November 2006 and were “not renewed”. It was suggested that the Act did not apply or that the application was out of time.
The solicitor for the respondent also raised an issue in relation to the application of the Act to the seventh applicant on the basis that the person who performed the work was neither a director nor member of family of a director and hence outside the application of the Act.
Counsel for the applicants stated that, from the applicants’ perspective, the termination of the relevant contract was in February 2008, but that it had been put to him at the bar table that there were some issues to clarify. It was said that the issues of whether there had been misidentification of some applicants and the suggestion that the contracts may have terminated in 2006 had been put clearly only for the first time that day. Orders were made in the terms sought by the respondent, including an order for the respondent to file and serve a reply on or before 23 January 2009. There is no evidence before the court of any prior correspondence between the parties.
As counsel for the applicants pointed out, the respondent did not, at this stage, suggest that a new contract came into effect in March 2007, or at any other time. Rather, the parties appeared to be in dispute as to when the contracts of which review was sought terminated.
On 4 December 2008 the respondent’s solicitors wrote to the applicants’ solicitors referring to the proceedings on 2 December 2008 and reiterating that, as stated before the court, the respondent intended to contend in its response that the contracts on which the applicants relied had ceased no later than in November 2006, so that the Act did not apply either because the relevant parts of that Act came into force after cessation of the contracts or because the contracts ceased more than 12 months prior to the date of the application. It was also suggested that the respondent ceased to deal with the first applicant in or about March 2006; that it had never contracted with the second applicant; that the third applicant did not come into existence until April 2003; and that the work the seventh applicant relied upon was not performed within the scope of s.11(1)(b) of the Act. No reference was made to the possibility of any other contract coming into existence or effect. Again, at this stage, apart from the issue of clarification of the identity of all of the applicants, it appeared that there would be a dispute as to when the contracts relied on terminated.
In accordance with the directions of 2 December 2008, by letter of 10 December 2008 the respondent’s solicitors sought further and better particulars in relation to the points of claim, including confirmation that it was alleged that both the first and second applicants were parties to a contract with the respondent, particulars of the respective dates of commencement and termination of the contracts and whether it was alleged that the second applicant (Mrs Brinsmead) had purchased and supplied milk.
As provided for in the directions of 2 December 2008, on 23 December 2008 the applicants’ solicitors provided a reply to the request for further and better particulars, advising that it was alleged that the first and second applicants were parties to a contract with the respondent and that the contract commenced in May or June 1998 and was purportedly terminated on 14 March 2008 by way of letter dated 22 February 2008. It was also clarified that the milk runs operated by the first respondent prior to 1997 were conducted on behalf of the family partnership and that in respect of the second applicant it was alleged that the first applicant purchased the milk on behalf of the family partnership and on-sold the milk to his customers.
While the request for particulars of 10 December 2008 sought clarification of certain matters, including proper identification of the applicants (in particular the first and second applicants) and asked the applicants to specify the respective dates of commencement and termination of the alleged contract, it does not reveal that the respondent was maintaining that the applicants’ claim that the contract that was entered into in 1998 terminated in March 2008 was incorrect on the basis that a new contract came into effect in March 2007 that concluded in or about March 2008. Moreover, consistent with their initial stance, and also the stance maintained in the first part of the amended application, the applicants stated their view of the relevant termination date of each contract in their response to the request for particulars dated 23 December 2008, referring to the contract commencing in approximately May or June 1998 purportedly terminated on 14 March 2008 by way of a letter dated 22 February 2008.
On 30 December 2008, the solicitors for the respondent requested further particulars, said to have arisen from the replies of 23 December 2008, in particular the date of termination of the alleged contract in relation to each applicant. Further particulars were also sought as to the relevance of the business name and the first registration of that business name in relation to the first and second applicants. Confirmation was sought that the first and second applicants were said to be parties to a contract entered into in 1998 to which the only parties were the first and second applicants and the respondent. Particulars were sought of the second applicant’s involvement in the purchase and operation of milk delivery runs prior to 1997. Particulars were also sought of the facts, matters and circumstances giving rise to the allegation that the relevant contracts were manifestly unfair.
As indicated above, the applicants have indicated that they do not intend to respond to the further request for particulars, as they consider that their amended application is appropriately particularised and no order for such particulars was sought in the subsequent consent orders of 13 March 2009.
The respondent did not file a response. It filed the application in a case of 13 January 2009 seeking orders striking out or dismissing the application, together with an affidavit of Steven Charles Lester affirmed on 12 January 2009, which, among other things, raised the issues of the involvement of Mark Brinsmead and the events of November 2006 at which time it was suggested that Australian Co-Operative Foods Limited (Dairy Farmers) had purported to terminate the agreement it had with the respondent for delivery of its dairy products. Mr Lester’s affidavit contains an account of a meeting with certain of the applicants or their representatives in November 2006 and alleges that, some time after 24 November 2006, the applicants commenced work for the delivery contractor for Dairy Farmers or for Dairy Farmers itself.
Mr Lester’s affidavit does not address the period of time after November 2006. While it was not necessary for the respondent to alert the applicant to such matters, it is relevant that it was contended in these proceedings that the respondent had maintained, and continued to maintain, that a new contract came into effect in March 2007 that concluded in March 2008. It was in those circumstances that it was said to be incumbent upon the applicants to replead and clarify whether there had been some form of suspension of the original contract or the entering into of a fresh contract in or about March 2007.
However, while prior to filing the application in a case the respondent did seek clarification from the applicants of the basis of their claim, the possibility of two contracts was not raised in the proceedings before the court, or in the correspondence relied on in these proceedings at that time.
On 21 January 2009 the applicants served on the respondent a notice to produce returnable on 5 February 2009, seeking production of three categories of documents.
On 29 January 2009 the solicitors for the respondent wrote to the applicants’ solicitors referring to correspondence of 21 and 27 January 2007 (that is not in evidence) claiming that the matters referred to in the notice to produce were not relevant to the respondent’s application in a case, that production would be onerous and costly as there were tens of thousands of documents that were all in storage, that as the only employee of the respondent was a caretaker people would need to be employed to review the documents to identify those the subject of the notice and that the documents would not be provided by 5 February 2009. There was, however, no explanation in that letter of why these matters were not relevant, other than a reference to the earlier letter not in evidence before the court.
It is notable that the notice to produce sought documents that related to work allegedly performed by the applicants for the respondent for the period of March 2006 to February 2008, being the period in which the applicants alleged that there were continuing contractual relations pursuant to one continuous contract, but the respondent subsequently suggested that a new oral contract had apparently been entered into.
On 5 February 2009, in a further directions hearing, the solicitor for the respondent suggested that the applicants’ response to the request for further and better particulars had not provided sufficient information in relation to the termination date in respect of the contracts the applicants were relying on, advised that further particulars had been sought to which there had been no response and stated that it appeared to the respondent that, on the information provided, the only contracts upon which the applicants relied were contracts entered into in 1998.
Mr Binetter, the solicitor for the respondent, stated that it was clear to the respondent “that those contracts terminated and the relationship between the parties terminated no later than November 2006” (transcript page 2) and that on that basis, the applicants’ case was misconceived.
Mr Cross, for the applicants, submitted that there was no doubt that the termination date alleged by the applicants was 14 March 2008 and advised that the applicants sought to put on evidence-in-reply in response to Mr Lester’s affidavit, which went no further than November 2006. It was Mr Cross for the applicants who explained to the court that it was the applicants’ case that in March 2007 all the applicants recommenced providing services the respondent on the same basis and continued to work for the respondent until the termination date asserted and that it would be necessary to put evidence to this effect before the court in relation to the respondent’s application in a case.
Mr Cross stated (transcript page 12) that in the applicants’ view the contract was not terminated in November 2006, although it was “in part suspended for a period until certain proceedings in the Supreme Court were dealt with, upon which Perfection was successful and, thereafter, immediately, the applicants recommenced – that word seems to have agitated some concern – their driving duties for exactly the same people, for exactly the same money.” It was reiterated that Mr Lester had not averted to anything after November 2006 in his affidavit, but that it would be necessary to consider the period of time up to when the applicants said the contracts were terminated in 2008. The applicants sought production of documents in relation to that later period and production of any contract, if there was a written contract other than the contract signed in 1998.
In light of issues in relation to the applicants’ notice to produce the matter was adjourned until 12 February 2009. Counsel for the respondent contended that it would require three months to comply with the notice to produce, but also that there was little or no utility in complying with the notice. Counsel for the respondent then clarified the respondent’s concern, explaining that the gravamen of the strikeout application, as he described it, was premised on the proposition that, amongst other things, the Act did not apply because the contract expired in November 2006, so that there was a hiatus (as Mr Cross for the applicant was said to have effectively conceded) between November 2006 and March 2007, and that either fresh contracts were entered into in March 2007, or there was a “suspension” on some other basis of the contract in that period. It was also submitted that the purpose of the production could only be to support the contention that there was one continuous contract through the period. The respondent was prepared to concede, for the purposes of the strikeout application, that the payments made to the contractors up until November 2006 were consistent with the rates of payment made after March 2007.
It was contended that there was a fundamental problem in that the pleading did not deal with the alleged “suspension” of the contract between 2006 and 2007 and the respondent was entitled to know how it was put that the contracts continued, notwithstanding the fact that they were “suspended” and “resurrected”.
Counsel for the respondent referred to the fact that counsel for the applicant had referred to a “suspension” of the contract for the first time before the court on 5 February 2009, notwithstanding that there was no suggestion or hint of suspension in the original points of claim. It was argued that this was not simply an esoteric pleading point because any suspension had to be founded upon some proper basis, whether that be statute, contract or otherwise. It was submitted in those circumstances that it was incumbent upon the applicants to replead their claim and clarify whether it was alleged that there had been some form of suspension of the original contract or the entry into a fresh contract in or about March 2007.
It was after this directions hearing, when Mr Kaye explained clearly the concern of the respondent, that the applicants then prepared an amended application provided to the solicitors for the respondent on 18 February 2009. By that letter the solicitors for the applicants sought the respondent’s consent to a proposed amended application and points of claim.
The amended application was subsequently filed by consent on 13 March 2009. That amended application, in essence, maintained the pleading in the original application, save for modification of the pleading in relation to the first and second applicants and joinder of a proposed eighth applicant, Mark Brinsmead, the son of the first and second applicants. It also pleaded an alternative contract “if, as the Respondent contends, the Contract terminated in November, 2006”, then the applicant said that, on and from 19 March 2007, they “were engaged by the Respondent on contractual terms (“the Alternative Contract”) that were identical to those provided by the Contract”, and sought a review and relief in relation to any such alternative contract.
Counsel for the respondent also referred to the fact that on 31 March 2009 the respondent’s solicitor reiterated its request of 30 December 2008 for a response to the further and better particulars and sought additional particulars in relation to aspects of the amended points of claim. The respondent filed a response on 6 April 2009. The applicants’ solicitor responded to the letter of 31 March 2009 on 17 April 2009 pointing out that there were no orders for, or any request for, further particulars, that they were of the view that the amended pleading was properly particularised and that they would not be providing a response to the request for particulars. Subsequently leave was granted to the respondent to file an amended response.
In the context of the costs application the respondent contended that it was not until the amended application was prepared that there was an explicit acceptance by the applicants’ solicitors that the eighth applicant should be joined and that the applicants at least partly clarified that which had been the subject of what were described as numerous requests.
It has not been established that the applicants sought to maintain an incompetent or hopeless case such as could be regarded as an unreasonable act, bearing in mind that, as Tracey J stated in Australian and International Pilots Association at [36]:
… the pursuit of a contentious, and ultimately unsuccessful, argument is not an unreasonable act.
Again, it is important to note that the original application was not struck out. The application in a case was not determined by the court. It was dismissed by consent. The issue of whether or not the concerns raised by the respondent as to the jurisdiction of the court or, indeed, whether there was one contract or two, have not been resolved. That will be a matter for the final hearing, given that the application in a case was not pursued and the form of the amended application.
In Construction, Forestry, Mining and Energy Union and Others v Clarke (2008) 170 FCR 574; [2008] FCAFC 143, the Full Court of the Federal Court indicated the limited nature of the provision for an order of costs under the equivalent to s.17(2) of the Act (s.824(2) of the Workplace Relations Act), stating at [29]:
As the authorities indicate, there is a distinction between a party who pursues arguments which are ultimately abandoned or rejected by the Court and a party who commences a proceeding which is misconceived in the sense of being incompetent or unsupportable: Australian and International Pilots Association 162 FCR at 402; Standish v University of Tasmania (1989) 28 IR 129 at 138-139. Simply because a party does not conduct its litigation in the most efficient way does not mean that the Court should exercise its discretion in s 824(2) of the WR Act to make a costs order. In our view, neither the late abandonment of some of its defence, nor the use of a notice of contention to advance a previously minor and ultimately unsuccessful argument, crosses the threshold of being “an unreasonable act or omission” for the purposes of s 824(2). True it is that the concession ultimately given by the respondent that it regarded the decision of Nicholson J as erroneous could have been given earlier. However, it was a concession which was, in light of the decision of this Court on the substantive appeal, properly made and beneficial to the appellants. Although it is arguable that the lateness of the concession may have put the appellants to some extra costs, we are of the view that it cannot be characterised as “unreasonable” in the circumstances of this case. Indeed, while courts should use the discretion in s 824(2) to ensure that parties to litigation arising from the WR Act do not engage in unreasonable acts and omissions which put the other party to undue expense, they should also be careful not to exercise the discretion with too much haste, given that such haste may discourage parties, for fear of an adverse costs order, from pursuing litigation under the WR Act in the manner which they deem best.
Such reasoning is in point. I have borne in mind that even if a pleading which discloses no reasonable cause of action is struck out, an applicant will not necessarily have acted unreasonably by seeking to rely on such deficient pleading. (Australian and International Pilots Association at [32].) Having regard to the conduct of the applicants in this case, given the nature of the concern expressed by and on behalf of the respondent, in particular prior to 12 February 2009, and to the form of the amended application, I am not persuaded that the applicants ignored or disregarded the respondent’s concerns in a manner constituting an unreasonable act. When the respondent’s concern was, in fact, clarified, that concern was addressed by the applicants’ proposed amended application.
It has not been established that the applicants maintained their previous pleading without reasonable cause in such a manner as to constitute an unreasonable act or omission. I note that the previous pleading is maintained in the amended application with an accommodation for the contentions of the respondent by the pleading of an oral contract in the alternative. Whether there is any merit in the respondent’s contentions about a second contract will be determined at the final hearing. At this time, the respondent’s claim that the contracts relied on in the original application terminated in November 2006 is not made out. It cannot be said that the applicants did not have any basis for its claims in either the original or the amended application based on the allegation of one contract between 1998 and 2008. Even if the “suspension” issue might best have been addressed in the original pleading I am not satisfied in this case that the circumstances prior to the filing of the amended application involved an unreasonable act or omission by the applicants within s.17(2) of the Act.
I am not persuaded that the respondent went to inordinate lengths (ignored by the applicants) to seek clarification of their suit, having regard to the evidence before the court of the history of the proceedings. While the respondent did assert that the contracts on which the applicants relied in the original points of claim terminated no later than November 2006, the applicants clearly asserted on numerous occasions that the contracts were terminated in early 2008 and that issue has yet to be determined by the court.
In relation to the identity of the applicants, the respondent did seek clarification in relation to whether it was alleged that the first and second applicants were parties to a contract and whether there had been dealings with the second applicant, but this fact and the fact that the applicants saw fit to join a further applicant is not such as to indicate that they had in any way engaged in an unreasonable act or omission in not having done so earlier. As in CFMEU v Clarke, the fact that the applicants might have responded to the initial concerns raised by the respondent in a different or even a timelier fashion is not sufficient in itself to warrant the making of an adverse costs order against them, bearing in mind that the starting point under s.17 is that a party to a proceeding in a matter arising under the Act must not be ordered to pay costs unless one of the exceptions in subsection (1) or (2) applies and the discretion urged by the Federal Court in relation to exercise of such a discretion.
In these circumstances, as I am not satisfied that there was an unreasonable act or omission by the applicants, it is not necessary to consider whether the respondent incurred any costs caused by any such unreasonable act or omission, or whether the discretion to make the costs order sought by the respondent should be exercised. The respondent’s application for costs should be dismissed.
The applicants’ application for costs.
The applicants submitted that the respondent’s costs application was made unreasonably and that they are entitled to an order for their costs in responding to the application under s.17. That submission was put on the basis that the application was unreasonable having regard to the failure by the respondent to place the factual materials it referred to before the court (although I note that these materials have since been tendered), the alleged mischaracterisation of factual materials and the fact that the respondent was said to have erroneously asserted that it had sought to persuade the applicants to clarify the basis of their claim, when it had only put in issue the termination date of the asserted contract. It was submitted that the respondent filed its application in a case without being candid about the factual background of that claim.
Having regard to the principles considered above, I am not persuaded that the costs order sought should be made in favour of the applicants.
First, I am not persuaded that the respondent instituted its application in a case vexatiously or without reasonable cause. The application in a case was not determined. It was nonetheless not unreasonable for the respondent to raise the issue of jurisdiction if the contracts had, in fact, ceased prior coming into force of the Act. Having regard to the facts apparent to the respondent at the time of instituting those proceedings (and bearing in mind that the dispute about the time of termination of the contracts has not been determined), it has not been established that there was no substantial prospect of success. The respondent’s success in its application in a case would have been dependent upon resolution in its favour of arguable points of law and also, indeed, of factual matters (see Kanan). It has not been established that the proceeding was instituted without reasonable cause.
Nor am I satisfied that the maintenance of the costs application in relation to the application in a case constituted an unreasonable act on the part of the respondent within s.17(2) of the Act. While the factual material relied on by the respondent was not placed before the court until tendered in the course of the proceedings, I do not consider that this amounts to an unreasonable act in circumstances where the submissions of the respondent clearly identified the matters the respondent regarded as relevant to the proceedings, in particular correspondence between the parties and the events that occurred in directions hearings which were attended by representatives of both the respondent and the applicants. In relation to the alleged mischaracterisation of factual materials, the fact that the respondent had a particular perspective on what occurred which was contrary to that of the applicant and, indeed, contrary in some respects, to that which I consider was the case, is not such as to establish that it was acting unreasonably in pursuing the costs application in circumstances where it was of the view that the application in a case would not have been necessary had the applicant addressed the issues it raised with some clarity on 5 and, more particularly, on 12 February 2009. The respondent did earlier seek to persuade the applicant to clarify the basis of its claim, albeit there is no evidence that it disclosed the precise nature of its concerns in relation to the possibility that there were two contracts rather than one contract prior to February 2009.
It is not entirely clear what is intended by the suggestion that the respondent filed its strikeout application without being “candid about the factual background of that claim”. While there may have been other ways in which the issues about the pleadings could have been resolved, I am not persuaded that the manner in which the respondent conducted itself or its litigation crossed the threshold such as to amount to an unreasonable act within s.17(2). It has not been established either that the application in a case was misconceived in the sense of being incompetent or unsupportable or that the respondent’s costs application was misconceived in the sense of being incompetent or unsupportable. Moreover, as pointed out in CFMEU v Clarke at [29], simply because a party does not conduct its litigation in the most efficient way that does not mean that the court should exercise its discretion pursuant to a provision such as s.17(2) to make a costs order.
In any event, on balance, I am not satisfied that the costs order sought should be made in favour of the applicants.
Accordingly, both of the costs applications made under s.17 of the Independent Contractors Act should be dismissed.
I certify that the preceding seventy-four (74) paragraphs are a true copy of the reasons for judgment of Barnes FM
Associate:
Date: 22 October 2009
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