Construction, Forestry, Maritime, Mining and Energy Union v Precision Painting Contractors Pty Ltd
[2018] FCCA 3209
•16 November 2018
FEDERAL CIRCUIT COURT OF AUSTRALIA
| CONSTRUCTION, FORESTRY, MARITIME, MINING AND ENERGY UNION v PRECISION PAINTING CONTRACTORS PTY LTD & ANOR | [2018] FCCA 3209 |
| Catchwords: COSTS – principles to be applied in relation to whether the Court should make a costs Order against a legal practitioner – legal practitioner failed to comply with Court directions over a significant period of time – actions by legal practitioner needlessly led to proceedings becoming protracted – ultimately Defence filed by legal practitioner on behalf of delinquent Respondents struck out – Lawyer referred to the local Law Society and Bar Association – personal costs Order made. |
| Legislation: Fair Work Act 2009 (Cth), s.570 |
| Cases cited: Caboolture Park Shopping Centre Pty Ltd (in liq) v White Industries (Qld) Pty Ltd (1993) 45 FCR 224 |
| Applicant: | CONSTRUCTION, FORESTRY, MARITIME, MINING AND ENERGY UNION |
| First Respondent: | PRECISION PAINTING CONTRACTORS PTY LTD |
| Second Respondent: | SORAN SHERO |
| File Number: | CAG 18 of 2017 |
| Judgment of: | Judge Neville |
| Hearing date: | Written Submissions |
| Date of Last Submission: | 3 August 2018 |
| Delivered at: | Canberra |
| Delivered on: | 16 November 2018 |
REPRESENTATION
| Solicitors for the Applicant: | Construction, Forestry, Maritime, Mining and Energy Union |
| Solicitors for the Respondents: | R & J Lawyers Pty Ltd |
ORDERS
The Applicant file a Minute of Orders reflecting the determination of the Court within 14 days of the date of these Orders, being by 30 November 2018, regarding (a) penalties and (b) costs.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT CANBERRA |
CAG 18 of 2017
| CONSTRUCTION, FORESTRY, MARITIME, MINING AND ENERGY UNION |
Applicant
And
| PRECISION PAINTING CONTRACTORS PTY LTD |
First Respondent
| SORAN SHERO |
Second Respondent
REASONS FOR JUDGMENT
Introduction
On 18th May 2018, this Court made declarations, by default, adverse to the First and Second Respondents, pursuant to ss.50, 357, and 550 of the Fair Work Act 2009 (Cth) (“the FW Act”) in relation to the under-payment of 5 former employees of the First Respondent, and in relation to certain other failures against the same employees (e.g. failure to pay superannuation contributions).
On the same date, this Court made Orders, also by default, whereby the Respondents were to pay the same former employees of the First Respondent compensation, which was specified in the Orders, pursuant to s.545 of the FW Act.
There was a direction by the Court that a copy of the Court’s reasons and Orders be forwarded to the President of the Australian Capital Territory Bar Association, and to the ACT Law Society.
The Orders of 18th May 2018 (Order 7) provided further that the parties were to file submissions regarding penalty, and per Notation A to those Orders, in the absence of such submissions by the Respondents, there was the risk of the Court accepting and acceding to the Applicant’s submissions in this regard.
A copy of the Applicant’s written submissions regarding penalty was filed on 8th June 2018; they are set out later in these reasons. No submissions were filed on behalf of the Respondents. Accordingly, the Court accepts the Applicant’s submissions regarding penalty and makes the Orders as sought.
On 9th July 2018, Orders were made by consent in relation to the procedural course to determine whether any costs Order should be made, and if so against whom, pursuant to s.570 of the FW Act.
The Applicant seeks a “personal costs Order” against the Respondents’ former solicitor. In accordance with the Orders made on 9th July 2018, the Applicant filed written submissions in support of its Application in this regard. The Respondents’ former solicitor filed an Affidavit on 18th July 2018 (together with a Response opposing any adverse costs Order), but the Respondents’ current solicitor has not filed any submissions as directed (or at all).
The Applicant’s Orders Sought
The Applicant’s Application in a Case, filed 6th July 2018, sought Orders in the following terms:
Orders sought
1) That the Court order the Applicant’s costs incurred in relation to this matter be directly paid by the First and Second Respondents’ representative, Mr Hugh Ford, on the basis that:
a) He caused costs to be incurred by the Applicant because of undue delay, negligence and improper conduct, as per Rule 21.07(1) of the Federal Circuit Court Rules 2001;
b) He caused costs to be incurred by the Applicant by his default when he unreasonably failed to file a valid defence for either the First or Second Respondent in the matter; as per Rule 21.02(b) of the Federal Circuit Court Rules 2001.
2) In addition, or in the alternative, that the Court order that the Representative of the First and Second Respondents, Mr Hugh Ford, pay the costs assigned to the First and Second Respondents by Order 6 of the Orders made in this matter by Neville J on 18th May 2018, on the basis that:
a) He caused costs to be incurred by the First and Second Respondents because of undue delay, negligence and improper conduct, as per Rule 21.07(1) of the Federal Circuit Court Rules 2001;
b) He caused costs to be incurred by the First and Second Respondents by his default when he unreasonably failed to file a valid defence for either the First or Second Respondent in the matter; as per Rule 21.02(b) of the Federal Circuit Court Rules 2001.
The Respondents’ Orders Sought
The Respondents’ Orders sought, set out in the Response filed 18th July 2018, were as follows:
Response to applicant’s claims for final orders
The respondents’ representative oppose the making of the following orders sought in the application:
1) That the Court order the Applicant’s costs incurred in relation to this matter be directly paid by First and Second Respondents’ representative Mr Ford on the basis that:
a) He caused costs to be incurred by the Applicant because of undue delay, negligence and improper conduct, as per Rule 21.07 (1) of the Federal Circuit Court Rules 2001;
b) He caused costs to be incurred by the Applicant by his default when he unreasonably failed to file a valid defence for either the first or second respondent in the matter, as per Rule 21.02 (b) of the Federal Circuit Rules 2001.
2) In addition, or in the alternative, that the court order that the Representative of the First and Second respondents, Mr Hugh Ford, pay the costs assigned to the First and Second Respondents by Order 6 of the Orders made in this matter by Neville J on 18th May 2018, on the basis that:
a) He caused costs to be incurred by the First and Second Respondents because of undue delay, negligence and improper conduct, as per Rule 21.07 (1) of the Federal Circuit Court Rules 2001;
b) He caused costs to be incurred by the First and Second Respondents by his default when he unreasonably failed to file a valid defence for either the first or second respondent in the matter, as per Rule 21.02 (b) of the Federal Circuit Rules 2001
Further orders sought by respondents’ representative
1) The Application in a case seeking orders 1 & 2 be dismissed.
2) A costs order be made against the Applicant.
Grounds of opposition or further orders
1) The Application is not maintainable.
2) The Applicant has failed to provide any particulars of the alleged costs incurred by it.
3) The Applicant has failed to provide any particulars of alleged undue delay, negligence and improper conduct on the part of the representative of the respondents.
4) The court has become functus officio in relation to the costs order made on 18 May 2018.
5) The reliance on r 21.02 (b) of the Federal Circuit Rules 2001 in relation to allegation of invalid defence is incorrect and misconceived.
6) There is no finding of the court that the defence was invalid.
The Applicant’s Submissions
The Applicant filed submissions with respect to penalty on 8th June 2018. These were as follows:
APPLICANT’S SUBMISSIONS ON PENALTIES
A) Introduction
1) These submissions are made by the Applicant pursuant to the orders issued by the Court in this matter on 18 May 2018.
B) Principles relating to penalties in this matter
2) In Mason v Harrington Corporation the court set out a non-exhaustive list of considerations relevant to determining whether particular conduct calls for the imposition of a penalty. These included:
-the nature and extent of the conduct,
-the circumstances in which the conduct took place,
-the nature and extent of any loss or damage,
-the deliberateness of the breaches,
-the involvement of senior management,
-any corrective action or contrition, and
-deterrence.
3) We submit that these remain the relevant principles to be applied in the present matter having been adopted by the court in numerous subsequent matters including most recently in Fair Work Ombudsman v Yenida Pty Ltd and also by Justice Tracey of the Federal Court in Kelly v Fitzpatrick.
4) In relation to the contraventions of s 357 of the Fair Work Act 2009 (the Act) found by the court in this matter, we submit that recent decisions in relation to breaches of s 357 have emphasised the seriousness of this form of contravention. As Katz J has stated:
“Section 357 is an important legislative protection against the exploitation of labour. …
For these reasons it is critically important that the penalty be sufficiently high to deter employers in general, and GPS and its management in particular, from behaving in this way again.”
5) With regard to the contraventions of s 50 found by the court in this matter, we accept that when the various contraventions contain common elements such that they can be said to arise in a single course of conduct the Full Court of the Federal Court has held in Rocky Holdings Pty Ltd v Fair Work Ombudsman, that:
The object and purpose of provisions such as s 557 and its predecessor provisions is to ensure that an “offender is not punished twice for what is essentially the same criminality”.
6) That said, in Fair Work Ombudsman v AJR Nominees Pty Ltd (No 2) Gilmour J concluded that:
…two different contraventions of the NES, like contraventions of two different terms of an award, are to be treated as two separate contraventions.
7) The Applicant submits that taking into account these two principles, for the contraventions of s 50 found by the court in this matter, it is appropriate to group each of the substantially similar breaches found in accordance with s 557. In relation to the contraventions of s 357 they should each be treated as separate contraventions as they are not subject to the s 557, course of conduct rules.
C) Deregistration of the First Respondent
8) In the course of preparing these submissions the Applicant became aware that as of 21 January 2018, the First Respondent has been deregistered by ASIC pursuant to s 601AB of the Corporations Act 2001. ASIC’s notice of proposed deregistration was published on 21 November 2017. A copy of that notice is annexed to this submission as Annexure A and a copy of the current Company Extract is annexed as Annexure B.
9) In the circumstances, no penalty can be ordered against the First Respondent, as they have ceased to exist. However, we submit that it is reasonable to assume that the First and Second Respondent should have been aware of the possibility of deregistration on, or shortly after, 21 November 2017, and we note that neither respondent appears to have taken any step to avoid deregistration, or to advise the court of the change in the First Respondent’s status.
D) Contravention of s 50 of the FW Act
10) Having regard to the relevant considerations identified in Mason v Harrington Corporation and noted above, the Applicant acknowledges that workers affected by the contraventions are not in the most disadvantaged groups of workers, being adults, having a trade, general rights to work in Australia and no peculiar economic or social vulnerabilities. However, in each case the amounts of money not paid by the First Respondent to those workers comprise significant proportion of the wages each worker was entitled to over the relatively short course of their employment with the First Respondent. In each case the engagement was for less than a year with the longest engagement being approximately 9 months in the case of Mr O’Connor.
11) We also submit that the First Respondent was the subject of orders, made by the court as presently constituted, for payment of compensation in matter CAG2/2016 (Shane Moore v Precision Painting Contractors Pty Ltd). A copy of those orders is annexed to this submission as Annexure C. That matter also dealt with underpayment of wages and entitlements owed under the Agreement and the incorporated Award. Although not a respondent in that matter the Second Respondent was the sole shareholder and director of the First Respondent at the time of the orders in that matter and may therefore be taken to be aware of the First Respondent’s obligations in relation to the Agreement and the Award.
12) In relation to the amounts previously ordered in CAG2/2016 we also note that the amounts of compensation ordered were not paid and were eventually the subject of Seize and Sell orders issued by the court on 11 November 2016. Those orders are annexed to these submissions as Annexure D. Taking these matters into account we say that the principle of specific deterrence is of obvious relevance in setting penalties applicable to the Second Respondent.
13) We submit that as the sole shareholder and director of the First Respondent, the Second Respondent was clearly the controlling mind of the First Respondent such that it is appropriate that penalties against the Second Respondent be assessed on the same basis as if they were being assessed against the First Respondent and that the First Respondent should not be allowed to hide behind the corporate veil as the First Respondent was essentially his alter ego. In that respect we say that the observations of Judge Jarrett in Step Ahead Security Services are equally apposite to this case:
“The need for specific deterrence in this case looms large. I have already found that the conduct of both Step Ahead Security Services and Mr Jennings was deliberate. It is deliberate, at least insofar as Mr Jennings is concerned, against a background of similar conduct in the past and against a background of a full appreciation by him of his company’s obligations towards the employees of the companies he controls”
14) The Applicant submits that it is open to the court to conclude that the actions giving rise to the s 50 contraventions were part of a systemic pattern of conduct; and that the court may infer that they were knowingly undertaken, insofar as the Respondents have failed to plead any evidence relating to a contrary state of mind.
15) The Applicant submits that it would be open to the court to apply penalties for each of the contraventions identified at the maximum limit for a contravention of this kind by the Second Respondent. However, we acknowledge that this may produce a result that is disproportionate having regard to the totality principle. Taking this into account we submit that an appropriate approach to penalty is to group together each type of contravention of s 50, although found in relation to multiple individual employees, and deal with each of the groups as a single contravention.
16) We propose the following aggregated penalties which are set at a 70% of the maximum in each case. We submit that this approach is consistent with the approach taken by the Court in Step Ahead Services. We note that, unlike that matter, there is no applicable discount for co-operation.
a) Contravention of s 50 in relation to clause 1 of the Agreement in relation to payment of minimum wages affecting Mr Kushner, Swiderski, O’Connor, McDonald, and Kesina: 42 penalty units ($7,560).
b) Contravention of s 50 in relation to clause 36-37 of the Award in relation to payment of weekend and overtime penalty rates affecting Mr Kushner, Swiderski, O’Connor, McDonald, and Kesina: 42 penalty units ($7,560).
c)Contravention of s 50 in relation to clause 8.1 of the Agreement in relation to failure to make payment of wages on a weekly basis affecting Mr Kushner, Swiderski, O’Connor, McDonald, and Kesina: 42 penalty units ($7,560).
d) Contravention of s 50 in relation to clause 8.4 of the Agreement in relation to failure to provide a written statement of employment affecting Mr Kushner, Swiderski, O’Connor, McDonald, and Kesina: 42 penalty units ($7,560).
e) Contravention of s 50 in relation to clause 14 of the Agreement in relation to failure to make superannuation contributions affecting Mr Kushner, Swiderski, O’Connor, McDonald, and Kesina: 42 penalty units ($7,560).
f) Contravention of s 50 in relation to clause 16 of the Agreement in relation to failure to make ACIRT contributions affecting Mr Kushner, Swiderski, O’Connor, McDonald, and Kesina. 42 penalty units ($7,560).
g) Contravention of s 50 in relation to clause 18 of the Agreement in respect of failure to pay the travel allowance affecting Mr Kushner, Swiderski, O’Connor, McDonald, and Kesina: 42 penalty units ($7,560).
h) Contravention of s 50 in relation to clause 18 of the Agreement in respect of failure to pay the consolidated disability allowance affecting Mr Kushner, Swiderski, O’Connor, McDonald, and Kesina: 42 penalty units ($7,560).
i) Contravention of s 50 in relation to clause 30 of the Agreement in relation to failure to provide personal protective equipment and footwear affecting Mr Kushner, Swiderski, O’Connor, McDonald, and Kesina: 42 penalty units ($7,560).
j) Contravention of s 50 in relation to clause 37of the Agreement by failing to affect an income protection insurance policy affecting Mr Kushner, Swiderski, O’Connor, McDonald, and Kesina: 42 penalty units ($7,560).
17) Finally, as the relevant contraventions occurred before 1 July 2017, we have calculated these amounts by reference to the previous value of $180 per penalty unit, in accordance with the position taken by Katz J [sic – “Katzmann”) in Fair Work Ombudsman v Grouped Property Services Pty Ltd.
E) Contravention of s 357 of the FW Act
18) In relation to the contraventions of s 357, we note that they are not subject to the s 557 grouping rules. While we acknowledge that s 557 does not exhaust the situations in which a course of conduct may be relevant to the imposition of penalties, we maintain our submission that each of the contraventions of s 357 in relation to Mr Kushner, Mr O’Connor and Mr Kesina should be treated as a separate contravention. The separation of each act in time and the other differing facts and circumstances of each set of representations to Mr Kesina, Mr O’Connor and Mr Kushner respectively, strongly indicate that they should not be treated as a single course of action.
19) The Applicant submits that in relation to the actions giving rise to the contraventions against s 357 of the FW Act, neither the First, nor the Second Respondent, led evidence about their state of mind at the time of the contraventions and no mitigating factors have been plead or identified. In the circumstances, is open to the court to infer that the actions were taken in full knowledge of the unlawfulness of the acts.
20) The Applicant submits that there is a wider value in applying a significant penalty in relation to these contraventions on the basis of general deterrence as was noted by Katz J [Sic – “Katzmann”] in Grouped Services (adopting the quote of Gilmour J below) the principal of general deterrence is particularly relevant in relation to s 357:
“The establishment of unlawful sham contract arrangements is objectively serious. Sham contracting, by its nature, provides a company with an unfair advantage over its competitors in that the company’s operating expenses are unlawfully reduced, making it more competitive against its rivals and providing increased company revenue.”
21) With this in mind, the Applicant submits that the penalties for each of the contraventions identified should be at or near the 85% of the maximum limit for this kind of contravention – that is, 51 penalty units ($10,710) for each of the three contraventions of s 357 by the Second Respondent.
22) We submit that it is appropriate to the discretion of the court to impose penalties in the amounts set out above.
The Applicant filed a further Affidavit from one of its “in-house” lawyers, Ms Read, on 4th July 2018, which set out the various attendances and other matters relating to the conduct of the proceeding, with the dates and the costs incurred for each of these items tabulated. I note too that there is no evidence before the Court of Mr Ford ever seeking relevant particulars of the costs sought.
The Applicant filed further submissions with respect to the issue of costs, on 3rd August 2018, which were as follows:
APPLICANT’S SUBMISSIONS ON COSTS
I) Introduction
1) On 18th May 2018, Neville J handed down a default judgement and made orders in this proceeding.
2) Order 6 of the orders made by his Honour was in the following terms:
“6. Costs be granted to the applicant pursuant to s570(2)(b) of the Act.”
3) The Applicant submits that in this matter, it is both appropriate and within the power of the court to make an additional order that the Respondent’s lawyer pay the full costs of the Applicant from the point at which he commenced in the matter; given the Respondent’s lawyer’s conduct in these proceedings.
4) In the alternative, the Applicant submits that it is both appropriate and within the power of the court to make an additional order that the Respondent’s lawyer pay the costs assigned to the First and Second Respondents by Order 6 of the judgement of 18th May 2018.
II) Relevant Principles as to costs against a legal practitioner
5) The Court has a general discretion to award costs in relation to a proceeding. In the exercise of its discretion, the Court may order costs in relation to a particular issue in, or part of, a proceeding. The general principles guiding the exercise of the Court’s discretion are well established. In Hughes v Western Australian Cricket Association (Inc) (1986) ATPR 40-749 (Hughes), Toohey J observed that the starting point for the exercise of the Court’s discretion is that a successful litigant will receive its costs.
6) The Court’s general jurisdiction in relation to costs flows from s.79 of the Federal Circuit Court of Australia Act 1999 (Cth), which notes that the power is governed by s570 in Fair Work cases:
(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 or section 14, 15 or 16 of the Public Interest Disclosure Act 2013.
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. See section 18 of the Public Interest Disclosure Act 2013 for proceedings in relation to matters arising under section 14, 15 or 16 of that Act.
(2) The Federal Circuit Court of Australia or a Judge has jurisdiction to award costs in all proceedings before the Federal Circuit Court of Australia (including proceedings dismissed for want of jurisdiction) other than proceedings in respect of which any other Act provides that costs must not be awarded.
(3) Except as provided by the Rules of Court or any other Act, the award of costs is in the discretion of the Federal Circuit Court of Australia or Judge.
7) Section 570 of the Fair Work Act 2009 (Cth) (Fair Work Act) provides a higher bar to costs, requiring an unreasonable act or omission to have occurred:.
(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)…
(2) The party may be ordered to pay the costs only if:
(a) the court is satisfied that the party instituted the proceedings vexatiously or without reasonable cause; or
(b) the court is satisfied that the party's unreasonable act or omission caused the other party to incur the costs…
8) There is a question whether s.570 confers a power to award costs in Fair Work proceedings or limits any general power to award costs that may be found elsewhere (such as s79(1) of the FCC Act). However, as Judge Smith held in Cross v Harbour City Ferries Pty Ltd (No 2):
Having regard to the note for that purpose, it appears that the intention of the amendment [to s.79(1) of the Federal Circuit Court Act to exclude Fair Work proceedings] was to make the power to award costs of proceedings in matters arising under the FW Act similar to that in proceedings under the Family Law Act, that is, to be governed entirely by the provisions of another enactment. In this case that enactment is the FW Act. This suggests that there was no intention to deprive the Court of the power to award costs in Fair Work proceedings.
…
I reject the argument that the power of the Court to award costs arises from s.570 of the FW Act. That power arises from s.79 of the FCCA Act as construed at [35] above.
9) It is worth noting that s570 of the FW Act does not include a provision for the award of costs against lawyers and paid agents. This is in contrast to provisions at s376, s401 and s780; which permit the making of such orders by the Fair Work Commission in relation to specific types of matters. However, the situation is different, since the power arises from s79, with s570 acting merely as a limiting factor on the exercise of that power – and since s570 makes no mention of lawyers or paid agents, it is open to the court to apply rule 21.07 of the Federal Circuit Court Rules 2001 and issue such an order.
10) Rule 21.07 itself implements a high bar to liability, similar to that of s570:
(1) The Court or a Registrar may make an order for costs against a lawyer if the lawyer, or an employee or agent of the lawyer, has caused costs:
(a) to be incurred by a party or another person; or
(b) to be thrown away;
because of undue delay, negligence, improper conduct or other misconduct or default.
(2) A lawyer may be in default if a hearing may not proceed conveniently because the lawyer has unreasonably failed:
(a) to attend, or send another person to attend, the hearing; or
(b) to file, lodge or deliver a document as required; or
(c) to prepare any proper evidence or information; or
(d) to do any other act necessary for the hearing to proceed.
11) Even should the court be of a mind that s570 acts to impose the same “unreasonable act or omission” test on orders for costs against a legal practitioner as it does for orders for costs against parties, it is difficult to see how any act capable of meeting the standard in rule 21.07 would not qualify.
12) In practice, then, s570 should act as no bar against the court utilising s79 to protect the integrity and processes of the court. As Lee J observed:
Such an order is not calculated to provide compensation to a party for expense incurred in the litigation, but to protect the integrity of the processes and function of the Court by imposing appropriate sanctions where the conduct of a person is inimical to those objects.
III) Functus Offico
13) A pleading has been entered by the respondent that the court is functus officio in relation to the orders made on 18th May.
14) In a real sense, the pleading is irrelevant, since there is no argument from the Applicant that the orders of 18th May be set aside or altered in any way.
15) If the argument from the Respondent is instead that the true or intended effect of the supplemental orders sought would be to vary or set aside the orders of 18th May; then it is relevant to examine the principles relating to supplemental orders.
16) Under the common law, a properly constituted court has the power to issue supplemental orders after a judgement has been entered; so long as the additional orders do not vary or set aside the judgement in any way.
17) There is significant leeway in the application of this principle to an order for costs; which is, after all, an equitable remedy. In Re Scowby; Scowby v Scowby [1897] 1 Ch 741, costs were awarded to a party that itself had failed to comply with previous orders to pay costs. Smith LJ, in making an order that the costs order not be acted upon until the previous order was discharged, stated the position as follows:
“What he did was to make a supplemental order, to the effect that the two orders of February 4 and December 23, 1892, are not to be further acted upon until the trustees who are in default have put themselves out of default”
18) In the current case, given that the power to award costs stems from s79 of the FCC Act; there is an additional question as to whether the statute allows for supplemental orders in this manner. Reference can be had, here, to the jurisdiction of the Federal Court, which possesses a power at s43 of the Federal Court Act functionally identical to that in s79 of the Federal Circuit Court Act.
19) A situation similar to that considered in this matter is set out in Caboolture Park Shopping Centre Pty Ltd (In Liq) v White Industries (Qld) Pty Ltd [1993] FCA 667. In that matter, Lee, Hill and Cooper JJ noted that:
“Once the jurisdiction of the Court has been attracted, the powers available to the Court in the exercise of that jurisdiction are to be found in the common law and the laws of the Commonwealth…”
20) Further, the bench discussed the appropriateness of making an order in similar terms to that sought here:
“There are many cases where supplemental orders will be made and the jurisdiction, while no doubt requiring caution, is not limited merely, as the respondents say, to the making of orders in aid of the enforcement and working out of original orders, although the making of supplemental orders may be appropriate in such cases. Cases such as Ford-Hunt v Raghbir Singh [1973] 1 WLR 738 ; [1973] 2 All ER 700; Universal Homes Ltd v Kloet [1976] 1 NZLR 246; Neylon v Dickens [1987] 1 NZLR 402; and Cowan v Cavanagh [1978] VR 665, are all examples of supplemental orders being made in proceedings where an order for specific performance has initially been made. But it does not follow that the power to make supplemental orders is limited to such a case. That the present case involves the making of a supplemental order is made more apparent when the form of the appropriate order is considered. In our view that order would be that the solicitors pay the costs of White Industries (Qld) Pty Ltd on an indemnity basis and that payment by the solicitors operate to discharge the liability of Caboolture. So framed it is clear that the Court has no need in any way to vary or alter any order previously made by it.
The principle behind denying the right of a court to vary or alter a judgment regularly given and entered is the need for finality of litigation. The Court has adjudicated upon the facts of the claim brought by a plaintiff against a defendant, found for one side and entered the relevant judgment. Neither the facts nor the law are to be agitated again, save on an appeal. But the issues involved where a claim is made against a solicitor for costs by a party to the litigation have not been determined by the judgment which has been entered. They remain yet to be resolved”
21) In this case, as in Caboolture, it is clear that the orders sought are within the power of the court to issue; and fall within a category of order well known to the common law – and which do not raise the issue of functus officio.
IV) Conduct justifying an order for costs against the Respondent’s Representative
22) There has been a pleading made in response that both the alleged costs and the alleged undue delay, negligence and improper conduct are insufficiently particularised.
23) We first note that we have received no request for particulars from the respondent. It is not clear therefore, in which sense the pleadings are inadequate.
24) In relation to the requirement under rule 21.07(1); costs incurred by the Applicant as a result of the conduct are set out in the affidavit of Rosalind Read filed with the court on 4th July, in line with the general law costs set out in Schedule 1 of the Federal Circuit Court Rules.
25) The Applicant submits that the costs listed in that affidavit would not have arisen had the Respondents’ representative advised his client diligently and in so doing effected a settlement to the matter at the point where it was clear that substantial underpayments had been made. In the alternative, even if his client had not agreed to settle, the large number of mentions, the failed mediation and the two applications in the case are clearly not the ordinary course of such a matter, and can be described primarily as the result, or as attempts to deal with the Respondents’ representative’s actions (or failure to act).
26) The conduct complained of is covered at length in the decision issued in this matter on the 18th May 2018; and needs no further elaboration, but to say that the refusal over many months to provide a defence clearly constitutes undue delay, negligence, improper conduct and default (the relevant components of rule 21.07(2)(b)).
27) The Respondent pleads that there was no finding that the defence was invalid – yet orders on the 19th May were made that the defence be struck out; and findings were made that the defence as filed is “embarrassing”, “likely to cause prejudice or delay”, “at such a level of generality as to be embarrassing and an abuse of process”. If “invalid” is considered not an appropriate term to describe a defence subjected to these findings, the Applicant would be pleased to substitute any of the above findings in its pleading.
28) In addition, there is a further consideration relevant to the exercise of this discretion. The First Respondent, Precision Painting Contractors Pty Ltd, was formally deregistered by the Australian Securities and Investment Commission on 18th January 2018; more than 10 months after the commencement of these proceedings. The Second Respondent’s whereabouts are currently unknown to the Applicant. The delays caused or significantly contributed to by the Respondent’s Representative’s refusal to participate in court processes may well have denied the Applicant and the Applicant’s members an opportunity to recover the amounts ordered. Whether the Respondent’s Representative was aware of this or not, their abuse of process has had tangible costs for other parties to the matter.
29) We submit that it is appropriate to the discretion of the court to impose costs in the amounts set out in the affidavit of Rosalind Read, made 4th July 2018.
The Applicant filed submissions “in reply” on the issue of costs on 24th August 2018, despite the fact the Respondents had not filed any submissions in relation to costs. Those submissions were as follows:
APPLICANT’S REPLY SUBMISSIONS ON COSTS
1) At the time of filing, the Applicant has not received any submissions from the Respondent or the Respondent’s Representative in accordance with order 3 of the orders made by consent on 9th July.
2) The listing of the matter on the Commonwealth Courts Portal shows that the most recent filing by the Respondent or the Respondent’s Representative occurred on 18th July.
3) In these circumstances, the Applicant has no reply submissions to make.
4) Should the Respondent or the Respondent’s Representative now seek leave to provide submissions, we provide notice that we would object to their filing; and that if leave were granted we would seek to be provided with a further week to put on reply submissions.
The Respondents’ Submissions
Contrary to the filing directions for submissions contained in the Orders dated 18th May 2018 and 9th July 2018, no submissions were filed by either (a) the Respondents (in relation to either penalty or costs), or (b) the Respondents’ former Solicitor, Mr Ford (or anyone on his behalf).
Mr Ford did file an Affidavit, on 18th July 2018, opposing any Order for costs. That Affidavit essentially repeated what was in the Response, saying that:
(a)The Applicant had failed to provide “any particulars of the alleged costs incurred by it”;
(b)In his view, there was not, as alleged by the Applicants, “undue delay, negligence and or improper conduct” on his part such as to justify an award of costs;
(c)In his view, the Court was “functus officio” by virtue of its Orders of 18th May 2018;
(d)In his view, the Applicant’s reliance upon r.21.02(b) of this Court’s Rules in relation to an “invalid defence” is incorrect and misconceived; and
(e)There was, he averred, no finding by the Court that the Defence was “invalid.”
Consideration and Disposition
Four matters may be noted at the outset, two of which are self-evident.
First, as already noted, the Respondents’ former solicitor has not complied with the direction of the Court to file submissions. Nobody on his behalf has done so including his legal representative. Accordingly, he is in default of Court Orders.
Secondly, Mr Ford’s complaint that no relevant particulars of the costs sought have been provided is not correct. As earlier noted, Ms Read’s Affidavit, filed 4th July 2018 (i.e. before Mr Ford’s Affidavit was filed), provided detail of the costs incurred by the Applicant.
Thirdly, as the Applicant’s submissions make plain, there is Full Federal Court authority, which confirms that a Court may properly entertain an Application dealing with costs even where the substantive litigation has concluded.
In Caboolture Park Shopping Centre Pty Ltd (in liq) v White Industries (Qld) Pty Ltd, the Full Court permitted an Application for costs sought against a solicitor (very much like the present matter).[1] On the basis of this authority, Mr Ford’s contention about the Court being functus officio is unsustainable.
[1] Caboolture Park Shopping Centre Pty Ltd (in liq) v White Industries (Qld) Pty Ltd (1993) 45 FCR 224.
Fourthly, the further contentions by Mr Ford that there were no relevant “findings” regarding (a) the “invalidity” of the Defence filed, and (b) the alleged, but disputed, negligence on his part in the conduct of the litigation, it is sufficient to point out that:
(i)The reasons in toto were provided to the relevant authorities that govern the conduct of legal practitioners in the ACT, thereby indicating that the Court had very significant reservations about Mr Ford’s conduct of the matter;
(ii)The Defence filed by Mr Ford was struck out, thereby indicating the Court’s assessment that it was relevantly defective; and
(iii)In pars.24 – 38 and 59 of the reasons dated 18th May 2018, the Court set out the various failings regarding the conduct of the litigation on behalf of the Respondents.
For the reasons just outlined, the matters propounded by Mr Ford in his Affidavit, filed 18th July 2018, cannot be sustained.
In addition to the matters set out in the Applicant’s submissions regarding costs against a legal practitioner (which I generally accept), I note the brief, instructive comments by Katzmann J in Dahler v Australian Capital Territory (No.2), a matter under the FW Act, where her Honour ordered that costs be paid personally by the Counsel involved in that proceeding.[2]
[2] Dahler v Australian Capital Territory (No.2) [2014] FCA 1154 (“Dahler”).
For present purposes I need only note the comments that Katzmann J referred to, which were taken from an earlier Federal Court decision of Wilcox J in Kanan v Australian Postal and Telecommunications Union (“Kanan”).[3] At [35], Her Honour said:
[35] It follows that I am satisfied that the application for leave to appeal was brought without reasonable cause. The Court therefore has power to make a costs order in this case. There is no apparent discretionary reason not to do so. As Wilcox J put it in Kanan at 265:
It is not a matter of the applicant's motives but, rather, that he has put the respondent to the expense of resisting a claim which was always doomed to failure. There is no question of punishing the applicant for his unreasonable course of action. The rationale for making a costs order is that a measure of indemnity should be conferred upon the respondent for the costs it has been obliged to incur in responding to the unreasonably instituted proceeding.
[3] Kanan v Australian Postal and Telecommunications Union (1992) 43 IR 257.
At [36] in Dahler, Katzmann J noted in particular that it was Counsel’s “poor judgment” that resulted in unnecessary costs being incurred for which that person should be responsible.
The same basic reasoning, in my view, applies here. Accepting that there were other factors as well, nonetheless it was, above all else, the very poor judgment of the Respondents’ then solicitor, the details of which were set out in the principal judgment in May 2018, which ultimately led to the Applicant incurring needless costs.
Should any further authority be required, in Kendirjian v Ayoub (No.2), at [11] – [33], the Court of Appeal of the Supreme Court of New South Wales held that the failure to manage proceedings or to conduct a case according to the objectives of efficiency and expedition – matters sorely lacking in the present matter – provided a relevant ground for a costs Order to be made against the lawyers involved (Counsel and solicitor).[4] Indeed, in that case, the Court of Appeal ordered that costs be paid on an indemnity basis, apportioned 50/50 between the lawyers involved.
[4] See Kendirjian v Ayoub (No.2) [2008] NSWCA 255.
For these reasons, and relying upon the comments of the Federal Court in Kanan and in Dahler, the Applicant’s costs should be paid by the Respondents’ former solicitor. They should be limited only by reference to when he came into the matter, which was on 31st July 2017.
I note that the costs incurred by the Applicant are claimed as being $9070.00, which sum was calculated by reference to the scale costs set out in Schedule 1 of this Court’s Rules. However, in all of the circumstances, in my view, a fixed sum of $5000.00 is appropriate to be paid to the Applicant by the Respondents’ former solicitor, Mr Ford.
The formal Order in relation to costs shall be as sought in the Applicant’s Application in a Case, filed 4th July 2018. And for the reasons already given, the penalties shall also be as set out in the Applicant’s submissions on penalty, filed 8th June 2018 (pars.16 and 21).
The Applicant is directed to file within 14 days a Minute that reflects the determination of the Court regarding (a) penalty and (b) costs.
I certify that the preceding thirty-one (31) paragraphs are a true copy of the reasons for judgment of Judge Neville
Date: 16 November 2018
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