Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Southern Air (Tas) Pty Ltd

[2017] FWC 1072

[2017] FWC 1072

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.739—Dispute resolution

Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia
v
Southern Air (Tas) Pty Ltd
(C2016/944)

COMMISSIONER CIRKOVIC MELBOURNE, 22 FEBRUARY 2017

Application for costs.

Introduction

[1] On 10 October 2016, I issued a decision 1 concerning an application by the Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia (CEPU) under s.739 of the Fair Work Act 2009 (Act) in which I decided that the relevant provisions of the Southern Air (Tas) Pty Ltd Enterprise Agreement 2015 (Agreement) set out comprehensively the operation of rostered days off (RDO) and entitlements of employees when on various forms of leave, in particular that those provisions do not provide for the accrual of a credit towards RDOs when on paid leave. On 19 October 2016, Southern Air (Tas) Pty Ltd (Costs Applicant) applied for an order under s.611.

The originating application

[2] The originating application was filed in the Fair Work Commission (Commission) on 26 April 2016 by the CEPU. The application was subject of an initial conference before me on 2 June 2016 and was listed for arbitration on 10 October 2016.

[3] The issue in dispute in the originating application was whether the Agreement provides for employees to accrue a credit towards a rostered day off (RDO) when on paid leave. This required an interpretation of various clauses in the Agreement. 2

[4] The parties agreed that the principles that apply to the interpretation of enterprise agreements are settled and the parties were in agreement as to the principles to be applied.

The costs application

[5] The Costs Applicant applies for a costs order on the basis that:

• The Respondent’s application was made without reasonable cause for the purposes of Section 611(2)(a) of the Act; and/or in the alternative



• That it should have been reasonably apparent to the Respondent that its application had no reasonable prospect of success for the purposes of Section 611(2)(b) of the Act.

Legislation

[6] Section 611 of the Act is as follows:

“611 Costs

(1) A person must bear the person’s own costs in relation to a matter before the FWC.

(2) However, the FWC may order a person (the first person) to bear some or all of the costs of another person in relation to an application to the FWC if:

(a) the FWC is satisfied that the first person made the application, or the first person responded to the application, vexatiously or without reasonable cause; or

(b) the FWC is satisfied that it should have been reasonably apparent to the first person that the first person’s application, or the first person’s response to the application, had no reasonable prospect of success.

(3) A person to whom an order for costs applies must not contravene a term of the order.”

Submissions

[7] Directions were issued on 24 October 2016 for the filing of submissions. The Costs Applicant filed submissions on 14 November 2016. The Costs Respondent filed submissions on 7 December 2016 and subsequently filed amended submissions on 8 December 2016. The Costs Applicant elected not to file submissions in reply and the parties requested the submissions be considered on the papers without a hearing for the purpose of making oral submissions.

Submissions of Costs Applicant

[8] In its Form F6 Costs Application, the Costs Applicant noted that its legal representatives wrote to the Costs Respondent’s legal representatives on the 7 June 2016 putting the Costs Respondent on notice that the Costs Applicant would seek to recover costs ‘on a solicitor and own client basis’ if they were successful. The Costs Applicant no longer relies upon that correspondence in support of its costs application, and as such, I have not considered this correspondence in coming to my conclusion.

s.611(2)(a)

[9] Section 611(2)(a) of the Act prescribes that a costs order can be made if the Commission is satisfied that the Costs Respondent made the application vexatiously or without reasonable cause. The Costs Applicant submits that the Costs Respondent made the application without reasonable cause. The Costs Applicant quoted the Full Bench of the Commission in E. Church v Eastern Health 3:

“[30] We now turn to the expression “without reasonable cause”. A party cannot be said to have made an application “without reasonable cause”, within the meaning of section 611(2)(a) simply because his or her argument proves unsuccessful. The test is not whether the application might have been successful, but whether the application should not have been made. In Kanan v Australian Postal & Telecommunications Union Wilcox J put it this way:

“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 proceedings as being “without reasonable cause”. But where, on the applicant’s own version of the facts, it is clear that the proceedings must fail, it may properly be said that the proceedings lack a reasonable cause”.”

[10] The Costs Applicant submits that upon any consideration of the facts which were apparent to the Costs Respondent at the time of instituting the proceeding there was no reasonable prospects of success.

[11] The Costs Applicant relies on paragraph 45 of my decision:

“[45] The evidence before me is that both parties to the bargaining process were represented, negotiations were protracted and various versions of the Agreement were exchanged. The most telling feature of the evidence in my mind was that the Applicant did in fact put forward a version of the Agreement that supports its current position, but what was ultimately voted upon was the Agreement minus the very terms the Applicant now seeks to insert.”

[12] The Costs Applicant submits that no questions of law were argued or determined. The Costs Applicant submits that the parties agreed upon the principles that apply to the interpretation of enterprise agreements and to the circumstances in which extrinsic evidence could be considered.

[13] The Costs Applicant submits that the matter was determined entirely in its favour and relies on paragraph 38 of my decision:

“[38] On the basis of the above, I am satisfied that having regard to the plain and ordinary meaning of the words in the Agreement and applying the principles of interpretation as set out by the full bench in Golden Cockerel, employees of the Respondent are not entitled to accrue hours towards RDOs whilst on various forms of paid leave.”

s.611(2)(b)

[14] Section 611(2)(b) of the Act prescribes that a costs order can be made if the Commission is satisfied that it should have been reasonably apparent to the Costs Respondent that the application it filed had no reasonable prospects of success. The Costs Applicant submits that the Costs Respondent’s application had no prospect of success, that it was doomed to fail from the outset and was so obviously untenable that it could not possibly succeed. The Costs Applicant quoted Vice President Catanzariti in Meys v Sawtell Hotel 4:

“[49] Section 611(2)(b) of the Act prescribes that a costs order can be made if the FWC us satisfied that it should have been reasonably apparent to Miss Meys that the application had no reasonable prospects of success. The authorities confirm that this section imports an objective test and should be enlivened only with extreme caution. In Clothier v Ngaanyatjarra Media, the Full Bench considered the meaning of the phrases “should have been reasonably apparent” and “had no reasonable prospect of success.” The Full Bench in that case cited Baker v Salva Resources Pty Ltd (Baker) with approval. In Baker it was said:

“[10] The concepts within s.611(2)(b) “should have been reasonably apparent” and “had no reasonable prospect of success’ have been well traversed:

● “should have been reasonably apparent” must be objectively determined. It imports an objective test, directed to a belief formed on an objective basis, rather than a subjective test; and

● A conclusion that an application “had no reasonable prospect of success” should only be reached with extreme caution in circumstances where the application is manifestly untenable or groundless or so lacking in merit or substance as to be not reasonably arguable.”

Submissions of Costs Respondent

s.611(2)(a)

[15] The Costs Respondent relies upon the judgement of Barwick CJ in General Steel Industries Inc v Commissioner for Railways (NSW) 5 in which he set out the test to be applied in the exercise of the power to summarily dismiss actions.

[16] The Costs Respondent relies on the judgement of Justice Gibbs in R v Moore; Ex Parte Federated Miscellaneous Workers Union of Australia 6 to submit that in determining whether proceedings have been brought without reasonable cause the relevant question is whether the proceeding had reasonable prospects of success at the time they were instituted, not whether they ultimately failed.

[17] The Costs Respondent submits that its primary submission in the originating application does not fall within the test set out in General Steel Industries Inc v Commissioner for Railways (NSW) 7. The Costs Respondent submits that the Agreement was silent as to whether RDOs accrued on annual leave, was absent an express term dealing with it and that it was open to the Costs Respondent to form the view that, taking into account clause 9, RDOs accrue on annual leave. The Costs Respondent submits that this was not a case where the subject matter of the dispute was expressly provided for in the Agreement and that it cannot be said that the Costs Respondent’s contention was obviously untenable.

[18] The Costs Respondent submits that at the time of making the application it cannot be said that there was no substantial prospect of success regarding the Costs Respondents primary submission.

[19] The Costs Respondent submits that its secondary submission, that the Agreement contains ambiguity, was in part due to the absence of a definition of ordinary time. The Costs Respondent relies on paragraph 37 of my decision:

“[37] The Agreement contains specific terms as to the entitlements of employees whilst they are on various forms of paid leave and how and when RDO hours are to accrue. These terms do not include any provision for the accrual of RDO hours whilst on paid leave. Whilst there is no definition of ordinary hours, ultimately, the plain meaning of the Agreement read in totality provides for ordinary hours of work to be 38 with an additional 2 hours of work to go towards the accrual of RDOs. The provisions relating to various forms of leave contemplate payment based on ordinary hours of 38 per week.”

[20] The Costs Respondent submits that its evidence demonstrates that it genuinely believed based on the custom and practice in the industry, that its contention was correct. The Costs Respondent relies on the fact that no findings inconsistent with its evidence of industry custom and practice were made.

[21] The Costs Respondent submits that simply because the Commission rejected its arguments it does not follow that its application was without reasonable cause. The Costs Respondent submits that the threshold required for the Commission to order costs pursuant to s.611(2)(a) is not reached and costs should not be awarded.

s.611(2)(b)

[22] The Costs Respondent quoted the Full Bench in Baker v Salva Resources Pty Ltd 8:

“[10] The concepts within s.611(2)(b) “should have been reasonably apparent” and “had no reasonable prospect of success” have been well traversed:

● “should have been reasonably apparent” must be objectively determined. It imports an objective test, directed to a belief formed on an objective basis, rather than a subjective test; and

● a conclusion that an application “had no reasonable prospect of success” should only be reached with extreme caution in circumstances where the application is manifestly untenable or groundless or so lacking in merit or substance as to be not reasonably arguable.”

[23] The Costs Respondent relies on the decision in Wodonga Rural City Council v Lewis 9to submit that the correct approach is to consider whether it would have been reasonably apparent to a reasonable person that there was no reasonable prospect of success.

[24] The Costs Respondent submits that the power under s.611(2)(b) of the Act is not enlivened and no order as to costs can be made.

Consideration

[25] The principles relevant to determining an application under s.611 were summarised in the Full Bench decision of Keep v Performance Automobiles Pty Ltd 10:

“[17] The proper construction of s.611(2)(a) was recently considered by a Full Bench in Church v Eastern Health t/as Easter Health Great Health and Wellbeing (Church). Church is authority for the following propositions:

(i) The power to order costs pursuant to s.611(2) should be exercised with caution and only in a clear case.

(ii) A party cannot be said to have made an application ‘without reasonable cause’ within the meaning of s.611(2)(a), simply because his or her argument proves unsuccessful.

(iii) One way of testing whether a proceeding is instituted ‘without reasonable cause’ is to ask whether upon the facts known to the applicant at the time of instituting the proceeding, there was no substantial prospect of success.

(iv) The test imposed by the expression ‘without reasonable cause’ is similar to that adopted for summary judgement, that is, ‘so obviously untenable that it cannot possibly succeed’.

[18] As to s.611(2)(b), the FWC may make a costs order against a person if satisfied that ‘it should have been reasonably apparent’ to that person that their application had ‘no reasonable prospect of success’. The expression ‘should have been reasonably apparent’ in s.611(2)(b) imports an objective test, directed to a belief formed on an objective basis as opposed to the applicant’s subjective belief.

[19] There is Full Bench authority for the proposition that the Commission should exercise caution before arriving at the conclusion that an application had ‘no reasonable prospects of success’. In Deane v Paper Australia Pty Ltd a Full Bench made the following observation about this expression in the context of enlivening a power to award costs under s.170 CJ(1) of the Workplace Relations Act 1996:

“unless upon the facts apparent to the applicant at the time of instituting the [application], the proceeding in question was manifestly untenable or groundless, the relevant requirement in s.170CJ(1) is not fulfilled and the discretion to make an order for costs is not available”.”(my emphasis)

[26] Having considered the submissions of the parties in this matter, together with the authorities obliging me to exercise caution in making a positive finding under s611(2)(a) and (b), I am not satisfied that it should have been apparent on an objective analysis that the Costs Respondent ‘had no reasonable prospect of success’ or that the originating application was made ‘without reasonable cause’.

Conclusion

[27] For the reasons given above the application for costs made under s.611 is dismissed.

COMMISSIONER

 1   [2016] FWC 7266

 2   [2016] FWC 7266 at [8].

 3   [2014] FWCFB 810 at 30.

 4   [2016] FWC 5561.

 5 (1964) 112 CLR 125.

 6 (1978) 112 CLR 125.

 7 (1964) 112 CLR 125.

 8   [2011] FWAFB 4014.

 9   [2003] PR956243.

 10   [2015] FWCFB 1956

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