Cheng v Western Pursuits Trust (No.2)

[2017] FCCA 659

FEDERAL CIRCUIT COURT OF AUSTRALIA

CHENG v WESTERN PURSUITS TRUST (No.2) [2017] FCCA 659

Catchwords:
FAIR WORK – COSTS – Fair Work proceedings – whether the unsuccessful applicant had made an unreasonable act or omission – consideration of a “walkaway” Calderbank offer which was not accepted – rejection of such an offer not generally unreasonable in Fair Work proceedings.

Legislation:

Fair Work Act 2009 (Cth), ss.342, 351, 570

Federal Circuit Court of Australia Act 1999 (Cth), s.79

Federal Circuit Court Rules 2001 (Cth)

Cases cited:

Australian Licensed Aircraft Engineers Association v International Aviation Service Assistance Pty Limited (No.2) (2011) 205 IR 465
Calderbank v Calderbank [1975] 3 All ER 333
Cheng v Western Pursuits Trust trading as Vauxhall Inn [2016] FCCA 3275

Clifford v The Trustee for Healthy Hearing & Balance Care [2016] FCCA 1637

Cugura v Frankston City Council [2012] FCA 1299

Donnelly v Edelsten (1994) 49 FCR 384

Govan v Health Services Union (No.1) Branch (No.2) [2015] FCCA 1244

Hutchinson v Comcare (No.2) [2017] FCA 370

Johnson v Monti-Haitsma Enterprises (No.2) [2014] FCA 1020

McDonald v Parnell Laboratories (No.2) (2007) 164 FCR 591
Melbourne Stadiums Ltd v Sautner (2015) 229 FCR 221
Muzzicato  v New Aged  Cleaning Services Pty Ltd [2011] FMCA 1044

Rickard Constructions  v Rickard Hails  Moretti and Ors [2005] NSWSC 481

Ryan  v Primesafe  [2015] FCA 8

Sagacious Legal v Wesfarmers General Insurance (No.5) [2010] FCA 630
Sagacious Legalv Wesfarmers General Insurance [2011] FCAFC 53

Sagona v R & C Piccoli Investments Pty Ltd & Ors(No.2) [2014] FCCA 2925

Trustee for The MTGI Trust v Johnston (No.2) [2016] FCAFC 190

Tsilibakis v Transfield Services (Australia) Pty Ltd (No.2) [2015] FCA 1048

Applicant: TAMMIE CHENG

Respondent: WESTERN PURSUITS TRUST trading as VAUXHALL INN

File Number: SYG 470 of 2014

Judgment of: Judge Driver

Hearing date: Decided without oral hearing

Date of Last Submission: 27 February 2017

Delivered at: Sydney

Delivered on: 13 April 2017

REPRESENTATION

The Applicant appeared in person

Counsel for the Respondent: Ms P Thew

Solicitors for the Respondent: Australian Hotels Association (NSW)

ORDERS

1. There be no order as to costs.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT SYDNEY

SYG 470 of 2014

TAMMIE CHENG

Applicant

And

WESTERN PURSUITS TRUST TRADING AS VAUXHALL INN

Respondent

REASONS FOR JUDGMENT

Introduction and background

1. On 1 December 2016 I gave judgment for the respondent (Western Pursuits) in this matter in an ex tempore judgment[1]. At that time Western Pursuits sought costs of and incidental to the proceedings, pursuant to s.570(2) of the Fair Work Act 2009 (Cth) (Fair Work Act).

   [1] Cheng v Western Pursuits Trust trading as Vauxhall Inn [2016] FCCA 3275 (principal judgment)

2. In support of the costs application, Western Pursuits rely upon two affidavits by Mr Sean Morrissey made on 30 November 2016 and 30 January 2017 and the affidavit of Ms Tammie Cheng made on 8 November 2016.  Western Pursuits also filed submissions on 1 February 2017.  Ms Cheng filed nothing other than a short e-mail to the Court (which was made available to Western Pursuits), the effect of which was to oppose a costs order in somewhat colourful terms.

3. The parties agreed that the Court could deal with the issue of costs on the papers.

Consideration

Relevant legal principles

1. I accept Western Pursuits’ submissions on the relevant legal principles to be applied.

2. Under s.79 of the Federal Circuit Court of Australia Act 1999 (Cth), the Court has general power to award costs which is relevantly qualified as follows:

   (1) This section does not apply to family law or child support proceedings or proceedings in relation to a matter arising under the Fair Work Act 2009.

   Note: See section 117 of the Family Law Act 1975 in relation to family law or child support proceedings. See section 570 of the Fair Work Act 2009  for proceedings in relation to matters arising under that Act.

3. Section 570 of the Fair Work Act relevantly provides:

   (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.

   …

   (2)     The party may be ordered to pay the costs only if:

   …

   (b)  the court is satisfied that the party's unreasonable act or omission caused the other party to incur the costs; …

4. As Bromberg J stated in Hutchinson v Comcare (No.2)[2] the purpose of s.570 of the Fair Work Act is to ensure that fear of a costs order does not discourage genuine litigants from pursuing cases with reasonable cause. The provision is concerned with access to justice. His Honour continued at [8]:

   With this in mind, the occasions upon which costs will be awarded under s.570 are likely to be exceptional: Council of Kangan Batman Institute of Technology and Further Education v Australian Industrial Relations Commission [2006] FCAFC 199; 156 FCR 275 at [60] (Black CJ, North and Mansfield JJ). The fact that a party has conducted litigation inefficiently, made late concessions, or adopted a misguided approach will be relevant to, but not conclusive of, the party having acted unreasonably in a sense relevant to s 570(2)(b): Construction, Forestry, Mining and Energy Union v Clarke [2008] FCAFC 143; 170 FCR 574 at [29] (Tamberlin, Gyles and Gilmour JJ).

   [2] [2017] FCA 370 at [7]

5. In the present case, the unreasonable act or omission is said to be the failure by Ms Cheng to accept an offer of settlement made by Western Pursuits in a letter dated 28 July 2016, as described below.

6. In Melbourne Stadiums Ltd v Sautner[3] at [166] their Honours Tracey, Gilmour, Jagot and Beach JJ observed that “it is well established that a failure to accept a reasonable offer of compromise may constitute an unreasonable act for the purposes of subsection 570(2)(b) and its predecessors”, citing his Honour Buchanan J in McDonald v Parnell Laboratories[4].

   [3] (2015) 229 FCR 221

   [4] (No 2) (2007) 164 FCR 591. See also for instance Australian Licensed Aircraft Engineers Association v International Aviation Service Assistance Pty Limited (No.2) (2011) 205 IR 465 at [29], citing Parnell (No.2)

7. In McDonald, Buchanan J found at [24] to [25] that the applicant’s refusal of the settlement offer in that case was “imprudent”[5] and “unreasonable”[6] notwithstanding the applicant having withstood a strike out application at the time the offer was made and notwithstanding a transfer from the Federal Magistrates Court, as it then was, to the Federal Court made by the respondent in that case being predicated on the claim raising “important issues of law”.  His Honour nonetheless concluded the applicant’s rejection to be unreasonable because the offer was a “very reasonable one” and that the majority of the applicant’s claims were “ambitious”[7].

   [5] at [23]

   [6] at [30]

   [7] At [24]-[25]

8. In Tsilibakis v Transfield Services (Australia) Pty Ltd (No.2)[8] his Honour White J observed the following principles at [8] in respect of conduct constituting “an unreasonable act or omission”:

   [8] [2015] FCA 1048

   …

   The questions of whether a party’s act or omission was unreasonable and whether such an act or omission has caused the other party to incur costs are to be determined having regard to the particular circumstances of each case: Australian and International Pilots Association v Qantas Airways Ltd (No 3) [2007] FCA 879; (2007) 162 FCR 392 at [27][28]. The fact that a party has conducted the litigation inefficiently, has made concessions relatively late, may have acted in a different or more timely fashion, or has adopted a genuine but misguided approach will be relevant to, but are not conclusive of, the party having acted unreasonably in the relevant sense: Clarke at [29][30]. A party’s failure to comply with the duties imposed by s 37N of the Federal Court Act is also a relevant consideration: Specsavers Pty Ltd v The Optical Superstore Pty Ltd [2012] FCAFC 183; (2012) 208 FCR 78 at [57][58]. (emphasis added)

9. In Muzzicato  v New Aged  Cleaning Services Pty Ltd[9] O’Dwyer FM (as he then was) held at [16] that the applicant’s rejection:

   …out of hand, is what attracts costs in this particular proceeding because at [the time of the offer] a critical examination of the strength of the Applicant’s case should have disclosed that the offer was generous in all of the circumstances, and the unreasonable act of not accepting that offer, in my view does attract an order for costs from that day…

   [9] [2011] FMCA 1044

10. In Sagona v R & C Piccoli Investments Pty Ltd & Ors[10] Judge Whelan at [40] observed:

    - The rejection of a favourable settlement offer at a time when the party had ample time to assess a claim can be unreasonable in circumstances where it would be unfair to require another party to bear costs for which it was not reimbursed.

    [10] (No 2) [2014] FCCA 2925

11. In making this observation, Judge Whelan in Piccoli applied the finding in Donnelly v Edelsten[11] per Neaves, Ryan and Lee JJ at [61], which was as follows:

    It may be said that such a [costs] order is not intended to punish a party who has failed to obtain judgment in terms as favourable as those contained in a rejected offer of compromise. The foundation for the order is the need for the costs order to do equity where a party who has succeeded in the proceeding has made a reasonable attempt to terminate the proceeding by an offer to compromise shown to have been a fair offer in all the circumstances and to have provided appropriate opportunity for the offeree to consider and deal with the offer. (See Messiter v Hutchinson (1987) 10 NSWLR 525.) (emphasis added)

    [11] (1994) 49 FCR 384

12. In a decision not dissimilar to the instant case, in Clifford v The Trustee for Healthy Hearing & Balance Care[12] Judge Altobelli ordered costs pursuant to s.570(2)(b) of the Fair Work Act, in that case to the unsuccessful respondent employer, by reason of the employer’s “emotional” response to the termination, the “consequent lack of clear thinking” and the failure to “make concessions when they should have been made” or to accept a more advantageous settlement offer[13].  In Clifford, Judge Altobelli relevantly observed in respect of the applicant’s costs application[14]:

    [12] [2016] FCCA 1637

    [13] at [41]

    [14] at [32]-[41]

    [The Applicant] was entirely successful on her application, and the Respondent entirely unsuccessful. The amount ultimately ordered in her favour is greater than the amount she sought in her original application that came before the Court in July 2015; is comparable to the amount awarded to her in the Court’s Orders of 12 February 2016, and is consistent with the amount sought in her Further Amended Application filed 9 September 2015.

    The amount awarded to her significantly exceeds an offer of settlement made 23 February 2015.

    All the relevant findings of contentious facts went in favour of the Applicant. Indeed, some of Dr McNeil’s own evidence supported those findings.

    …

    Ultimately the emotional response to the Applicant’s cessation of employment with the Respondent resulted in a totally unnecessary and protracted case. An example of the emotional response of Dr McNeil is plainly evident in the way she gave her evidence, but also in Exhibit ‘A4’, her email of 22 November 2014.

    …

    Section 570(2 )(b) empowers the Court to order costs “only if” the Court is satisfied that, in this case, the Respondent’s “ unreasonable act or omission caused the other party to” incur the costs. The focus is on the Respondent’s “act or omission ” – in other words Dr McNeil’s conduct at the time of termination and subsequently. Her own evidence indicates she was angry and emotional, and the consequent lack of clear thinking pervaded the Respondent’s subsequent actions. She failed to make concessions when they should have been made. She failed to accept offers of settlement that were far more advantageous to the Respondent than the present outcome of the case. As a consequence the Applicant was indeed forced to incur costs. (emphasis added)

13. Western Pursuits submits that the circumstances in Clifford are analogous to those in the present case, although applicable to Ms Cheng’s conduct rather than that of Western Pursuits. In the present case, it was Western Pursuits that was wholly successful on every point and Ms Cheng’s evidence on each contentious matter was rejected or found to provide no “evidentiary basis for any part of the action”. In this respect, in my principal judgment I found at [4]:

    Save for the allegation of dismissal on the basis of a false accusation of theft, the affidavit does not provide any evidentiary basis for any part of the action. Western Pursuits, on the other hand, have filed affidavits from five witnesses and also prepared detailed written submissions. Attached to these reasons are the submissions which I accepted. None of the deponents were required for cross-examination. (emphasis added)

14. Western Pursuits submits that it was, in addition, Ms Cheng’s response to being investigated for failing to return the correct change to a customer and her ultimate resignation, which then continued for a period of almost three years after the termination of employment and the filing of the initial application with the Fair Work Commission in January 2014, and her consequent “lack of clear thinking”, that caused her to fail to make concessions when they ought to have been made and fail to accept the settlement offer made.  In my principal judgment I found at [2]:

    At numerous interlocutory hearings, it was apparent to me, as I believe it was apparent to Judge Nicholls, that the applicant, Ms Cheng , was struggling to deal with the case that she had instituted. At every directions hearing she was emotional and the Court attempted to direct her in a way that might progress her case, if indeed she wanted to pursue it. On a number of occasions I can recall asking Ms Cheng  whether she wanted to press on with the case because of the impact it appeared to be having on her, and she insisted that she did want to continue with it…

15. Western Pursuits in addition points to Ms Cheng’s own evidence, at [5] of page 6 of the unmarked annexure to the Cheng Affidavit, which consists of a letter from Ms Cheng addressed to the Court dated 20 October 2016.  This letter states relevantly:

    I have been told by countless lawyers that my battle is futile. The amount I have asked for is unreasonable…If I couldn’t get them to understand that they needed to be sorry at 20,000, I guess 100,000 will definitely get their attention….

16. There was no evidentiary basis for any amount of compensation sought, let alone an amount of $100,000, particularly given Ms Cheng’s evidence that she is now engaged in full time employment[15].

    [15] Fourth paragraph of page 5 of the unmarked annexure to the Cheng Affidavit which consists of a letter from Ms Cheng to the Court

17. It is therefore said to be Ms Cheng’s own evidence that she has at least taken some form of advice from “countless lawyers”, each of whom have advised her to the effect that her “battle is futile” and in addition that the compensation that she sought was is in any event unreasonable. Western Pursuits submits that the only inference available is that Ms Cheng deliberately chose to ignore the advice of the “countless lawyers” and continue with a claim that she was advised was “futile”, including ultimately in particular because of her failure to file any evidence capable of substantiating any contravention of s.351 of the Fair Work Act, as described below and found by me in my principal judgment at [4].

18. Western Pursuits says that it was this continuation of conduct that caused it to incur costs and which meets the criteria under and warrants a costs order pursuant to s.570(2)(b) of the Fair Work Act.

The Calderbank offer

1. In the present case, by letter dated 28 July 2016[16] Western Pursuits made an offer to settle the proceedings contained in a letter expressed to be in accordance with the principles set out in Calderbank v Calderbank[17] (the Calderbank letter) in the following terms:

   a)Ms Cheng would discontinue the proceedings;

   b)each party would bear their own costs of the proceedings to that date.

   [16] Annexed at A to the Second Morrissey Affidavit

   [17] [1975] 3 All ER 333

2. Western Pursuits sent the Calderbank letter to the email address nominated by Ms Cheng on each of her filed documents, which was the email address used by the Fair Work Commission, the Court and Western Pursuits in all communications with Ms Cheng and was the email address that Mr Morrissey understood was Ms Cheng’s preferred means of receiving communications[18].  It is the evidence of Mr Morrissey that he received no bounce back or error messages at any point from this email address, or was made aware of any received by the Fair Work Commission or the Court, throughout the proceedings[19].  By email also dated 28 July 2016, Ms Cheng replied to Mr Morrissey’s email forwarding her the Calderbank letter (see below)[20].

   [18] Second Morrissey Affidavit, [3]-[17], [20]

   [19] Second Morrissey Affidavit, [8], [17], [23]

   [20] Second Morrissey Affidavit, annexure F.

3. Western Pursuits’ Calderbank letter was open for acceptance for 28 days, until 25August 2016[21].

   [21] Page 6 of the Second Morrissey Affidavit

4. In addition, the Calderbank letter set out in clear terms that Western Pursuits was of the view that the offer was reasonable in the circumstances and the reasons that Western Pursuits had formed that view, including that Ms Cheng’s application failed to establish that she had been subject to any adverse action primarily because it failed to show any dismissal by the employer, given that Ms Cheng had in fact resigned of her own volition without duress and had been told at the meeting of 2 December 2013 that she was not to be dismissed[22]. In the absence of any evidence adduced by Ms Cheng to the contrary, this was ultimately the finding in my principal judgment at [6].

   [22] Page 5

5. The Calderbank letter in addition explained how Ms Cheng’s application failed to identify any other adverse action and/or any causal nexus between any of the grounds in s.351 of the Fair Work Act and any alleged adverse action[23]. The Calderbank letter therefore put Ms Cheng on notice of the statutory tests that she needed to satisfy to show a breach of s.351 of the Fair Work Act, at (a) to (b) on page 6[24], and explained to Ms Cheng unambiguously the potential implications, including pursuant to s.570(2)(b) of the Fair Work Act, of a failure by Ms Cheng to accept what Western Pursuits saw as a reasonable offer of settlement[25].

   [23] Page 6

   [24] Accepted as the relevant statutory test in my principal judgment at [4], and at [16]-[17] of Western Pursuits’ written submissions annexed to that decision, by reason of Western Pursuits’ written submissions being accepted in full

   [25] At pages 6-7

6. The Calderbank letter also explained that it was established that s.570(1) of the Fair Work Act does not provide an applicant with a “free kick without consequences”, referring to the decision in Johnson v Monti-Haitsma Enterprises (No.2)[26], in which Edmonds J observed at [16] that:

   While s 570 [of the Fair Work Act] provides some cost protection to an applicant, it does not provide a “free kick”, without consequences. From the time of the receipt of the decision of Judge Driver, the applicant was aware of the fundamental deficiencies in her case that precluded any reasonable prospects of success. The agitation of the application for extension of time to appeal was therefore pursued without reasonable cause, and the applicant should pay the respondent‘s costs.

   [26] [2014] FCA 1020

1. While that decision involved a costs application pursuant to s.570(2)(a) of the Fair Work Act rather than s.570(2)(b), in Western Pursuits’ submission the principles are relevantly applicable. Section 570 as a whole does not provide a “free kick” to an applicant where there are opportunities to discontinue the proceedings with no order as to costs. In Western Pursuits’ submission, it was or ought to have been obvious to Ms Cheng, at least from the date of the Calderbank letter on 28 July 2016, and particularly in light of the Western Pursuits’ response filed on 3 May 2016, that her pleadings failed to disclose any reasonable cause of action and that the failure to accept the offer contained in the Calderbank letter was an unreasonable omission that caused Western Pursuits to incur costs.

2. On 30 August 2016, after the Calderbank letter was sent to Ms Cheng, the parties attended a directions hearing before me[27].

   [27] See transcript dated 30 August 2016, at [24] and annexure G to the Second Morrissey Affidavit.

3. At this directions hearing, Western Pursuits made submissions in respect of Ms Cheng’s failure to serve the application on Western Pursuits within the 12 month period required under rule 6.17 of the Federal Circuit Court Rules 2001 (Cth) (Federal Circuit Court Rules), requesting that this procedural deficiency remain as a matter of record, to which I agreed, observing that the failure could have an impact on any costs assessment[28]:

   [28] at page 4 from line 26 of the transcript dated 30 August 2016

   MS THEW:   And I was going to request that the failure to file within the 12-month period – if that is dealt with in effect by a fresh application, but from our perspective, from the  respondent’s perspective it really ought to remain as a matter of record that it hasn’t actually occurred for procedural reasons, the first fairly significant procedural breach – if you like.

   HIS HONOUR:   Yes.  And that might ultimately have an impact on any costs assessment.

4. Ms Cheng ought therefore have been aware, at least from the date of the directions hearing on 30 August 2016, that it was within the contemplation of the Court that any failures on her behalf (in that instance, Ms Cheng’s failure to comply with rule 6.17) could ultimately impact on a potential costs order.

5. In Ryan  v Primesafe[29] her Honour Mortimer J observed:

   Section 570, and the conditions it imposes on the Court’s general costs discretion under s 43 of the Federal Court Act, is not a licence to parties to ignore the requirements of s 37M of the Federal Court Act, nor the Court’s power to order costs against parties who fail to comply with their obligations under s 37N. The content of ss 37M and 37N, and parties’ obligations to assist the Court in achieving the objectives set out in s 37M, must be reconciled with access to justice provisions such as s 570(1). That reconciliation occurs through a focus on the reasonableness of parties’ conduct, the appropriateness of the Court processes undertaken by them, the timeliness of their compliance with Court orders or steps in the proceeding, and the existence of a substantive legal and factual basis for the claims made and arguments put. (emphasis added)

   [29] [2015] FCA 8 at [66]

6. In Western Pursuits’ submission, the principles enunciated in Primesafe are equally applicable to the Federal Circuit Court as to the Federal Court.  As in Primesafe, the focus in the exercise of discretion under s.570(2) of the Fair Work Act in the present case ought to be on the reasonableness or otherwise of Ms Cheng’s conduct, the appropriateness of the Court processes undertaken by her, the timeliness of her compliance with steps under the Federal Circuit Court Rules and the absence of a substantive legal and factual basis for the claims made, as ultimately found.

7. By email dated 28 July 2016, at 6.56pm, Ms Cheng replied to Western Pursuits’ email attaching the Calderbank letter sent to her[30].  Ms Cheng’s email contained the words “You were instructed to send me your offer.” [31]  These words appear to be a reference to the request by Registrar Morgan at the mediation on 26 July 2016 that Western Pursuits issue any offer of settlement to Ms Cheng in writing[32].  These words also appear to be a rejection of the offer contained in the Calderbank letter[33], it appears because the offer did not contain a monetary component (discussed below). There is no doubt that Ms Cheng received the Calderbank letter attached to Mr Morrissey’s email dated 28 July 2016 and sent at 3.39pm, given the attachment clearly appears in jpeg form on the face of the email[34].

   [30] Second Morrissey Affidavit at [21] and annexure F

   [31] Second Morrissey Affidavit at annexure F

   [32] Second Morrissey Affidavit at [22]

   [33] Second Morrissey Affidavit at [22]

   [34] Second Morrissey Affidavit at [20]-[21]

8. Ms Cheng’s own evidence, contained in the final paragraph of page 6 of the unmarked annexure to the Cheng Affidavit, consisting of the letter from Ms Cheng addressed to the Court dated 20 October 2016, shows that Ms Cheng was aware of the costs implications of failing to accept Western Pursuits’ offer contained in the Calderbank letter. At the conclusion of page 6 of that annexure Ms Cheng states “Instead of an apology I have been threatened with legal costs.”

9. Western Pursuits does not agree that the Calderbank letter constituted a “threat” to Ms Cheng; rather Western Pursuits by way of the Calderbank letter was attempting to convey to Ms Cheng the legal and factual statutory tests she had to overcome and the costs implications for her, as well as the cost to Western Pursuits, if she continued with her claim in the absence of material capable of supporting it and was ultimately unsuccessful, as occurred.

10. In Govan v Health Services Union (No.1) Branch (No.2)[35] Judge O’Sullivan observed at [13] that:

    For the purposes of s.570(2)(b) of the FW Act, the Court must be satisfied that two criteria have been fulfilled, as set out in Construction, Forestry, Mining and Energy Union v Clarke (2008) 170 FCR 574 (“Clarke”) they are:

    (a) that a party must have engaged in an unreasonable act or omission; and

    (b) that the unreasonable act or omission must have caused another party to incur costs in connection with the proceedings.

    [35] [2015] FCCA 1244

11. Judge O’Sullivan went on to observe in Govan at [19] that “usually a deliberate decision to refuse a reasonable offer of settlement is a factor which would weigh in favour of a finding of unreasonable action”[36].

    [36] citing Cugura v Frankston City Council [2012] FCA 1299 at [31]

12. In Cugura Tracey J made the following observation at [31] about a “deliberate decision” to reject an offer of settlement:

    A deliberate decision to refuse a reasonable offer of settlement is a factor which would normally weigh more heavily in favour of a finding of unreasonable action than would a mere failure to respond by an unrepresented litigant.

13. It is clear that Ms Cheng received and responded to the Calderbank letter[37].  She did not ignore, fail to read or fail to understand Western Pursuits’ Calderbank letter. Ms Cheng’s emailed response at 6.56pm on 28 July 2016[38] demonstrates that Ms Cheng made a “deliberate decision” to reject Western Pursuits’ offer contained in the Calderbank letter, after having considered the contents of that letter.  Western Pursuits submits that, in line with Judge O’Sullivan’s observations in Govan at [19] and Tracey J’s observations in Cugura at [31], this “weighs in favour of a finding of unreasonable action” and “weighs more heavily” in favour of such a finding by reason of Ms Cheng’s deliberate course of conduct.

    [37] Second Morrissey Affidavit at [20]-[23]

    [38] Second Morrissey Affidavit at annexure F

“Walkaway” offers

1. While Western Pursuits’ Calderbank letter does not contain a monetary offer of settlement, Western Pursuits submits that the “walkaway” offer contained therein constitutes a genuine compromise and a reasonable offer.

2. It is established that a “walkaway” offer will be treated as constituting a compromise where the offeror has a strong case and the compromise is found to be the offer to give up pursuing costs which would in likelihood be payable if the offeree continues[39]. The stronger the merits of the offeror’s case, the more compelling is the conclusion that the “walkaway” offer constituted a true compromise[40]. Such findings have been made in the context of applications pursuant to s.570(2)(b) of the Fair Work Act[41].

   [39] See for instance Dal Pont, Law of Costs, 3^rd ed, LexisNexis Butterworths Australia, 2013, [13.69]

   [40] Sagacious Legal v Wesfarmers (No 5) [2010] FCA 630 at [21], affirmed on appeal in Sagacious Legal [2011] FCAFC 53 at [125], [129]- [132]

   [41] Eg see Trustee for The MTGI Trust v Johnston (No.2) [2016] FCAFC 190 [19]-[24]

3. In Trustee for The MTGI Trust, their Honours Siopis, Collier and Katzmann JJ observed:

   Further, we note that on 1 March 2016 Mr Laxon, the lawyer for Mr Johnston, wrote to applicant’s Counsel, and placed MTGI on notice that Mr Johnston considered the application to be frivolous, vexatious and without merit. On 5 July 2016 Mr Laxon again wrote to MTGI’s Counsel, materially in the following terms:

   Offer

   
   

   On a without prejudice basis, we invite your client to discontinue its Application within 21 days, with each party paying its own costs (Offer). The Offer is made pursuant to the principles in Calderbank v Calderbank [1975] 3 All ER 333, and will be relied upon in support of an application for indemnity costs. ….

   It is well-established that a failure to accept a Calderbank offer may justify the exercise of the Court’s discretion to award costs on an indemnity basis. Principles referable to Calderbank offers are well-known. As the Full Court explained in Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd (No 2) [2011] FCAFC 141:

   ... The purpose of the principles governing Calderbank offers and offers of compromise in accordance with court rules is to ensure that, when one party makes another an offer that contains a genuine element of compromise, the recipient of the offer is compelled to give real consideration to the costs and benefits of prosecuting its claim by reason of the prospect of suffering an indemnity costs order should its failure to accept the offer prove unreasonable.

   In determining whether the Court should exercise its discretion and order indemnity costs in light of a rejection by the unsuccessful party of a Calderbank offer, a key question for consideration by the Court is whether the Calderbank offer was reasonable and proposed a genuine compromise of a case brought without a realistic prospect of success: Sagacious Legal Pty Ltd v Wesfarmers General Insurance Ltd [2011] FCAFC 53 at [125].

   In our view Mr Johnston’s offer was reasonable, and did propose a genuine compromise of MTGI’s case which, as we have found, had no realistic prospect of success at that time. The fact that Mr Johnston’s offer envisaged both parties “walking away” and bearing their own costs falls within the parameters of a reasonable offer: Sagacious Legal [2011] FCAFC 53 at [129]- [132]. …

   Further, we consider that the failure of MTGI to accept Mr Johnston’s offer of 5 July 2016 was an unreasonable omission which caused Mr Johnston to incur costs in these proceedings, within the meaning of s 570(2)(b) of the FW Act (cf Ashby v Slipper (No 2) [2014] FCAFC 67 at [2]- [3]). (emphasis added)

4. Similarly in Western Pursuits’ submission, the “walkaway” offer contained in the Calderbank letter constituted a genuine compromise of Ms Cheng’s case, given her case had no realistic prospect of success as at the date of the Calderbank letter, being 28 July 2016, given her failure to particularise in any meaningful sense how there had been a “dismissal” for the purposes of the meaning of adverse action in s.342, which had been made apparent not only in the terms of the Calderbank letter but also in Western Pursuits’ response filed on 3 May 2016.

5. The timing of the Calderbank letter is also said to be relevant in this respect, given the parties had attended a mediation on 26 July 2016[42], had prepared and provided mediation papers[43] and had to consider their respective positions in preparation for that mediation[44].

   [42] Second Morrissey Affidavit, [12]-[15], [18]

   [43] Second Morrissey Affidavit, [12]-[15], [18]

   [44] Eg see Rickard Constructions  v Rickard Hails  Moretti and Ors [2005] NSWSC 481 at [47]

6. In Rickard Constructions McDougall J observed at [47]:

   …I have concluded that the offer was a genuine offer of compromise, and that it was a reasonable offer of compromise. The circumstances in which it was made, and the circumstances to which I have referred, demonstrate, in my view, that the rejection of the offer was unreasonable. At the time the offer was made, the parties must be taken to have been fully apprised of the strengths and weaknesses of their respective cases. This is so partly because of the advanced stage of preparation at the time when the offer was made, and partly because preparation for the mediation must have required each party to consider its own position both in the light of its own analysis of the relevant facts and circumstances and in the light of its analysis of the positions advanced by the opposing parties in their mediation position papers and at the mediation. (emphasis added)

Resolution

1. Notwithstanding the submissions by Western Pursuits, I am not persuaded that the circumstances of this case warrant a costs order. First, the termination of the complaint by the Fair Work Commission was on the basis of an inability to conciliate the dispute, rather than any lack of substance in it. By reason of that termination, Ms Cheng was entitled to bring her case to court. Additional costs were incurred because of a common mistake that the termination had been issued under the wrong section of the Fair Work Act, whereas in fact the termination had been properly issued under a now repealed section of the Fair Work Act. Those additional costs were not caused by an unreasonable act or omission by any party.

2. It is true that there was a very lengthy delay in Ms Cheng serving her process on Western Pursuits. Under rule 6.17 of the Federal Circuit Court Rules, time for service had expired and Western Pursuits sought to rely upon that expiry as a procedural barrier to a hearing. I nevertheless granted leave for the originating process to be served out of time because I was satisfied that Ms Cheng had not been in a stable state of mind to enable her to make proper decisions about the conduct of her case and she had been unable to obtain legal assistance. I reasoned (after the failure of mediation) that the best way to resolve the case was to prepare it for hearing and hear it. I remain of the view that that was the correct approach to take in the circumstances of the case. While Western Pursuits has been put to significant expense in dealing with a case which ultimately collapsed, because of a lack of evidence to support it, the late service of process was not an unreasonable act or omission.

3. As noted above, the case against Western Pursuits ultimately collapsed due to a near complete absence of supporting evidence.  Ms Cheng had been given time to prepare affidavit evidence but virtually nothing material had been filed by the time of the trial.  Western Pursuits, on the other hand, had filed and relied upon a significant body of evidence to support its version of the circumstances pertaining to the cessation of Ms Cheng’s employment.  Most of the costs of Western Pursuits would have been incurred in preparing for trial and attending the trial.   Those steps were undertaken in accordance with procedural orders made by the Court.  Ms Cheng’s failure to prepare properly for the trial was unfortunate, not least for her, but I am unable to conclude that it was an unreasonable act or omission.  The reality is that Ms Cheng was in no fit emotional state to prepare and run her case and she had been unable to obtain legal assistance.  I had, on several occasions during the interlocutory stage of the proceedings, invited Ms Cheng to consider terminating the proceedings given her emotional state.  She declined to do so.  As I understand it, this was because she wanted her “day in court”.  Ultimately, she was unable to take advantage of that day in court but it was not unreasonable for her to make the attempt, however ineffectual it ultimately was.  Her case failed, not because she was found to be untruthful or because her claim was found to be a sham but, rather, because she presented nothing to support it.  It is impossible to say whether the outcome might have been any different if her case had been properly prepared and presented. 

4. Neither does Ms Cheng’s rejection of the Calderbank offer constitute an unreasonable act or omission.  As noted above, the Calderbank offer was a “walkaway” offer.  In my view, in the Fair Work jurisdiction which is, in principle, a no costs jurisdiction, the rejection of a “walkaway” offer is not, of itself, unreasonable.  Something more would need to be demonstrated in order to establish that the rejection of the offer was unreasonable in the circumstances of the particular case.  The case of The MGTI Trust, referred to above at [42], is the only Fair Work precedent I have been taken to.  That was a truly exceptional case, involving an indemnity costs order against a non party in vexatious proceedings.  The present case is distinguishable.  In my view, the particular circumstances of this case, and the circumstances of the case overall, while unfortunate and expensive for Western Pursuits, do not point to any clear unreasonable act or omission by Ms Cheng, who is a vulnerable and troubled young woman.

Conclusion

1. In all of the circumstances described above, an order for costs is not warranted.  I will order that there be no order as to costs.

I certify that the preceding fifty-one (51) paragraphs are a true copy of the reasons for judgment of Judge Driver

Associate: 

Date:  13 April 2017