Desmond Lock v Aged Care & Housing Group Inc T/A ACH Group

[2013] FWC 4717

[2013] FWC 4717

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.394—Unfair dismissal

Desmond Lock
v
Aged Care & Housing Group Inc T/A ACH Group
(U2013/7541)

SENIOR DEPUTY PRESIDENT O’CALLAGHAN ADELAIDE, 16 JULY 2013

Application for unfair dismissal remedy - costs application - party and party costs - indemnity costs - no termination of employment - relevant delinquency.

[1] On 22 May 2013 I issued a decision 1 in which I dismissed an unfair dismissal application made by Mr Lock pursuant to s.394 of the Fair Work Act 2009 (the FW Act). In that application, Mr Lock asserted that Aged Care and Housing Group Inc T/A ACH Group (ACH) had unfairly dismissed him. In my decision, I found that Mr Lock’s employment had not been terminated by ACH. In that matter Mr Lock was represented by Ms Milen, of counsel and ACH by Mr Luke of counsel. Grants of permission pursuant to s.596 were made in both cases.

[2] On 3 June 2013 ACH lodged an initial costs application in which it sought costs under s.401 of the FW Act against Ms Milen who represented Mr Lock. On 26 June 2013 ACH lodged an amended application in which it foreshadowed that expanded indemnity costs were also sought.

[3] The costs application was the subject of a hearing on 26 June 2013. Mr Luke, of counsel represented ACH and Ms Milen appeared for herself.

[4] My conclusions relative to Mr Lock’s s.394 application are set out in the decision of 22 May 2013. Suffice to say that Mr Lock worked as a gardener with ACH from December 2008. In November 2011 he had various discussions with ACH management over difficulties relative to his work tasks. He was suspended, initially with pay pending medical advice. Amongst other things, Mr Lock and ACH disputed issues associated with access to Mr Lock’s medical information. On 30 November 2011 ACH advised Mr Lock that, as a consequence of the position he had taken relative to the provision of medical advice, it regarded him as unfit for work due to a non-compensable illness and payments to him were stopped.

[5] ACH subsequently advised Mr Lock of organisational changes and a request that he undertake a functional assessment before any return to work. In February 2012 ACH advised Mr Lock that, in the absence of either a further medical certificate or a request for leave of some description, it would dismiss him. Mr Lock subsequently lodged a workers compensation claim which has not yet been resolved. He has continued to provide medical certificates to ACH confirming his incapacity. 2

[6] In his evidence, Mr Lock agreed that no advice of the termination of his employment had been given to him and that he had received two payments from ACH in June 2012 and March 2013. While Mr Lock’s own evidence was that he still regarded himself as an employee, 3 he had been advised, in late February 2013 by another ACH employee, whom he declined to name, that ACH had replaced him with another permanent employee.

[7] The ACH position was that it had never dismissed Mr Lock and had not replaced him with a permanent employee. ACH had not paid out Mr Lock’s accrued leave, it still regarded him as an employee and was anticipating that, when medically cleared to return to work, he would do so.

The Costs Application

[8] ACH asserted that Mr Lock’s evidence in the s.394 hearing was that he acted on Ms Milen’s advice. ACH assert that it was put to the completely unnecessary expense of incurring costs in this matter. ACH argued that it had consistently asserted that it had not dismissed Mr Lock but that no enquiries of it in this respect had been made. Further, had those enquiries been made they would have disclosed that there was no basis upon which an application could be made. ACH asserted that Ms Milen’s involvement in Mr Lock’s concurrent workers compensation dispute should also have made clear the futility of this unfair dismissal application.

[9] ACH asserted that Ms Milen encouraged Mr Lock to start, and to continue the application, when it should have been reasonably apparent that he had no reasonable prospect of establishing that he had been dismissed. Further, that Ms Milen omitted to act to clarify Mr Lock’s standing as an employee and that this omission represented an unreasonable act.

[10] ACH also relied on the alternative argument put by Ms Milen on behalf of Mr Lock in written submissions provided to the Commission in the following terms:

“7. Alternatively in the circumstances the Applicant has resigned from his employment with ACH.”

[11] In this regard ACH asserted that this represented an illogical position relative to the application and referred to my decision in the following terms:

“[20] Given that Mr Lock’s position is that his actions in refusing to comply with the instructions contained in the 7 February 2012 letter did not reflect any intention to resign his employment and the ACH position that it did not take this as a resignation, I have disregarded the almost inexplicable alternative position put by Ms Milen to the effect that Mr Lock resigned his employment.”

[12] Finally, ACH referred to the final paragraph of that decision in support of its costs application:

“[22] One other issue requires comment. As I indicated in the course of the hearing of this matter I am profoundly concerned about the calibre of the advice and representation provided to Mr Lock by his lawyer, Ms Milen.”

[13] Ms Milen’s position was that whilst she consented to an order for costs being made on a party and party basis, she was strongly opposed to any order for costs on an indemnity basis.

[14] In his evidence at the initial hearing Mr Lock declined to disclose the name of the person whom he asserted had advised him that ACH had replaced him with a permanent employee. Ms Milen’s advice was that she had expected Mr Lock to disclose that name.

[15] Ms Milen advised that approximately one week before the initial hearing she had written to the ACH legal representatives seeking clarification of the termination of Mr Lock’s employment. Ms Milen had subsequently received the ACH witness statement which confirmed that Mr Lock had not been dismissed. Ms Milen was unable to provide a copy of that letter. Mr Luke advised that he had no record of any such letter ever being received.

[16] Ms Milen’s position was that her actions or omissions as Mr Lock’s representative were not of a magnitude that justified an award of costs on an indemnity basis.

Findings

[17] Section 401 states:

“401 Costs orders against lawyers and paid agents

(1) This section applies if:

(a) an application for an unfair dismissal remedy has been made under section 394; and

(b) a person who is a party to the matter has engaged a lawyer or paid agent (the representative) to represent the person in the matter; and

(c) under section 596, the person is required to seek the FWC’s permission to be represented by the representative.

(1A) The FWC may make an order for costs against the representative for costs incurred by the other party to the matter if the FWC is satisfied that the representative caused those costs to be incurred because:

(a) the representative encouraged the person to start, continue or respond to the matter and it should have been reasonably apparent that the person had no reasonable prospect of success in the matter; or

(b) of an unreasonable act or omission of the representative in connection with the conduct or continuation of the matter.

(2) The FWC may make an order under this section only if the other party to the matter has applied for it in accordance with section 402.

(3) This section does not limit the FWC’s power to order costs under section 611.”

[18] The ACH costs application was made within the time specified in s.402.

[19] Ms Milen’s consent to the making of a costs order could logically be taken as an admission that her behaviour met the requirements of s.401(1A) for the making of a costs order and that the only issue then goes to whether the extent of that representative behaviour warranted the making of a costs order on an indemnity basis.

[20] As a matter of fairness to Ms Milen, I have not adopted that approach and have instead considered whether, irrespective of her concession, the totality of Ms Milen’s behaviour warrants an indemnity costs order pursuant to s.401. In this respect I am concerned that Ms Milen may not, or may not have been able to appreciate the potential import of her admission to costs on a party and party basis.

[21] Section 401 does not refer to the form of a costs order which may be granted. The power to award costs against Ms Milen is a discretionary power. That discretion is enlivened, initially, by a grant of permission being made under s.596. That grant was made in this instance.

[22] Section 401(1A)(a) requires that I be satisfied that Ms Milen’s actions constituted encouragement to Mr Lock to commence, or to continue to pursue the application when it should have been reasonably apparent to Mr Lock that he had no reasonable prospect of success.

[23] Mr Lock’s evidence was that he still regarded himself as an employee, and that he obtained and followed Ms Milen’s advice in this proceeding. Mr Lock advised that by January 2012 all communications with ACH were being conducted on his behalf through Ms Milen. 4 Mr Lock further advised that Ms Milen prepared the s.394 application5 and that he disagreed with the content of that application in so far as it asserted a termination of employment date.6 Notwithstanding Ms Milen’s reticence to disclose anything that would breach entitlements to professional privilege, the two occasions upon which Ms Milen asserts that Mr Lock was dismissed both give rise to substantial doubt.

[24] Firstly, Ms Milen has argued that Mr Lock’s failure to respond to the ACH request that he either provide a further medical certificate or sick leave, occurred in February 2012. In the application, Ms Milen asserts that the termination of Mr Lock’s employment occurred a year later, on 26 February 2013. In the s.394 application, Ms Milen asserts that no reason was given for the termination of Mr Lock’s employment and that it was a “Constructive dismissal by way of a person employed on a casual basis to replace the applicant on a temporary basis given a permanent position. Therefore no position available for applicant to return to workplace”. 7

[25] Not only did Mr Lock’s evidence not establish a constructive dismissal, the assertion itself does not go to establishing a termination of employment as such.

[26] I have recited Ms Milen’s alternative submissions in support of the application at paragraph 10 of this decision to the effect that Mr Lock resigned his employment.

[27] Literally interpreted, this submission is fundamentally inconsistent with a s.394 application which alleges a termination of employment.

[28] Notwithstanding this, I have accepted Ms Milen’s subsequent advice to me that she intended to argue that Mr Lock was forced, by the ACH behaviour, presumably in February 2012, to resign his employment by not complying with the request that he either provide a further medical certificate or request a form of leave. That acceptance requires a very broad interpretation of the submission but is itself inconsistent with the assertion of a 26 February 2013 termination of employment date.

[29] Mr Lock’s evidence was that Ms Milen prepared the application, 8 that, from January 2012, she was the communication conduit with ACH.9 Ms Milen’s advice10 was that the application documents were prepared on Mr Lock’s instructions. Notwithstanding this, I have concluded that, in terms of the application, Mr Lock acted on advice given to him by Ms Milen.

[30] Consequently, in terms of s.401(1A)(a I have concluded that it should have been reasonably apparent to Ms Milen that, without evidence to support the contentions she made, Mr Lock’s application had no reasonable prospect of success. Evidence in this respect was simply not provided. Accordingly, I am satisfied that costs should be awarded against Ms Milen pursuant to s.401(1A)(a).

[31] Section 401(1A)(b) represents an alternative basis upon which a costs order can be made against Ms Milen. This goes to whether Ms Milen’s behaviour as a lawyer constitutes an unreasonable act or omission in connection with the conduct, or continuation of the application.

[32] The application was lodged on 15 March 2013. The ACH response was lodged on 3 April 2013 and was provided to Ms Milen. In that response, ACH stated: 11

“2. What were the reasons for dismissal?

The Applicant has not been dismissed.”

[33] Further, in that Form F3, ACH continued, to refer to the outstanding workers compensation dispute before stating:

“3. The Applicant claim for compensation for workplace stress has been rejected by the Employer (who is a self-insured employer) and there is a formal dispute as between the Applicant and the Employer, before the South Australian Workers Compensation Tribunal.

4. The Applicant claims that he is unable to return to employment with the Employer due to his alleged workplace stress.

5. The Respondent has hired someone to undertake the Applicant’s pre-claim duties of employment whilst the Applicant is absent from the workplace. This person is engaged on a fixed term basis with the understanding that his position is temporary and that he is only covering the Applicant’s permanent position.

6. The Applicant’s position is still available to him in the event that he makes himself available to return to work.” (sic)

[34] ACH declined to participate in conciliation proceedings on the basis of its fundamental jurisdictional position that Mr Lock had not been dismissed.

[35] There is no evidence before me that establishes that Ms Milen took any steps to clarify Mr Lock’s employment status. Despite her assertion in the costs hearing that she wrote to the ACH lawyers about a week before the jurisdictional hearing, no copy of that letter has been provided, either at the costs hearing or subsequent to that hearing. Consequently, I am not satisfied that any such letter was ever sent. Further, a week before the jurisdictional hearing Ms Milen had the ACH submissions including a witness statement made out by Ms Burns, the Senior Consultant, Residential Division, ACH. Ms Burns’ statement makes it patently clear that ACH had not terminated Mr Lock’s employment. Again, Ms Milen has not satisfied me that she then took any actions to review the continued conduct of the application. In this respect, on the evidence before me, her inaction is simply inexplicable.

[36] Consequently, I am also satisfied that, in terms of s.401(1A)(b) Ms Milen’s failure to demonstrate that she either recommended discontinuance of the matter, or her failure to challenge the ACH assertions or even to withdraw from representation is indicative of a serious omission which resulted in additional costs relative to the jurisdictional hearing.

[37] In reaching my conclusions in these respects I have not considered Mr Lock’s ongoing workers compensation claim against ACH because I am not satisfied that sufficient evidence is available to me in this regard so as to establish any conclusion relevant to costs.

[38] These findings mean that I am satisfied that the jurisdiction to award costs is established. Further, Ms Milen’s conduct means that I consider that an award of costs pursuant to either, or both s 401(1A) (a) and (b) is appropriate in these circumstances.

The nature of the Costs Order

[39] The predominant form of costs order made by the Fair Work Commission is a party and party costs order. In this respect, the assessment is on the basis of the costs incurred by the affected party rather than by its legal representatives. Party and party costs generally only represent a proportion of the total costs in a matter.

[40] On the material before me it is abundantly clear that a costs order on a party and party basis is appropriate for the duration of this application.

[41] I have then considered whether a more extensive indemnity costs order is appropriate in these particular circumstances. Indemnity costs may include all costs including fees, charges, disbursements, expenses and remuneration considered to be reasonable in a particular matter.

[42] The FWC has long had the capacity to award costs on an indemnity basis. Section 401 is not specific in terms of the character of a particular costs order. Indemnity costs are awarded only relatively rarely. In Anita Goffett v Recruitment National Pty Ltd 12 a Full Bench of the AIRC discussed the principles generally adopted relative to indemnity costs in the following terms:

“[49] In Australian Transport Insurance Pty. Ltd. v Graeme Phillips Road Transport Insurance Pty. Ltd 9 Woodward J dealing with a costs application in the Federal Court of Australia isolated the following principle in relation to indemnity costs:

“Courts in both the United Kingdom and Australia have long accepted that solicitor and client costs can properly be awarded in appropriate cases where 'there is some special or unusual feature in the case to justify the court exercising its discretion in that way' (Preston v Preston (1982) 1 All ER 41 at 58). It is sometimes said that such costs can be awarded where charges of fraud have been made and not sustained; but in all the cases I have considered, there has been some further factor which has influenced the exercise of the court's discretion - for example, the allegations of fraud have been made knowing them to be false, or they have been irrelevant to the issues between the parties: see Andrews v Barnes (1888) 39 Ch D 133; Forester v Read (1870) 6 LR Ch App Cases 40; Christie v Christie (1873) 8 Ch App Cases 499; Degmam Pty Ltd (In Liq) v Wright (No 2) (1983) 2 NSWLR 354.”

[50] In Oshlack v Richmond River Council 10, Gaudron and Gummow JJ said:

“It may be true in a general sense that costs orders are not made to punish an unsuccessful party. However, in the particular circumstance of a case involving some relevant delinquency on the part of the unsuccessful party, an order is made not for party and party costs but for costs on a ‘solicitor and client’ basis or on an indemnity basis. The result is more fully or adequately to compensate the successful party to the disadvantage of what otherwise would have been the position of the unsuccessful party in the absence of such delinquency on its part.”

[51] We note that the cases cited above speak in terms of indemnity costs of the successful party. Cases in which a successful party is required to pay the costs of the unsuccessful party are unusual but not unheard of. In Cretazzo v Lombardi 11 Bray CJ in the South Australian Supreme Court gives some guidance in this regard:

"It follows, therefore, that there is now jurisdiction to order a successful party, even a wholly successful party and whether plaintiff or defendant, to pay his opponent's costs in part or in whole. Of course, it by no means follows that it would be a judicial exercise of the discretion to do so and it may well be that in many cases it would not, since there must be some reason for departing from the settled practice whereby the successful party receives his costs from his opponent; see Donald Campbell & Co. v Pollak [[1927] A.C. 732.], per Viscount Cave L.C., at p. 812.”

[43] In adopting this approach I have considered whether Ms Milen’s conduct meant that a case which was hopeless, in that it had no chance of success as distinct from a weak chance, was pursued to the point of the jurisdictional hearing. Whilst I think Ms Milen’s actions or inactions fell into this category, I am not satisfied that this alone represents a basis for an indemnity costs award. 13

[44] Of greater significance is the question of whether Ms Milen’s conduct as Mr Lock’s representative was a “relevant delinquency” in the terms referenced in Oshlack v Richmond River Council. 14 In this respect, I have determined that Ms Milen’s failure to act to either withdraw the claim, or withdraw from representation, or provide evidence to support her contentions after she received the ACH submissions and material on 14 May 2013, must be described as a delinquent act. Those submissions and witness material made a review of the basis for Mr Lock’s application an absolute necessity and Ms Milen’s failure to take any form of appropriate action in that respect is again simply inexplicable and represents a delinquent act as a legal representative. Whilst it is arguable that indemnity costs should apply from the date of receipt of the initial ACH response to the application, I have applied the benefit of any doubt to Ms Milen. I am simply unable to do that after the 14 May 2013 when her inaction as Mr Lock’s legal representative became an inexcusable approach.

Conclusion

[45] For the reasons I have set out above, I am satisfied that costs, on a party and party basis, should be awarded for the entirety of this matter. In addition, I am satisfied that costs, assessed on an indemnity basis, should be awarded from 14 May 2013 up to, and including the jurisdictional hearing on 25 May 2013. The matter will be referred to Senior Deputy President Drake for assessment of those costs. An Order [PR538959] to this effect will be issued.

SENIOR DEPUTY PRESIDENT

Appearances:

J Milen counsel for the Applicant.

K Luke counsel for the Respondent.

Hearing details:

2013.

Adelaide:

June 26.

 1   [2013] FWC 3195

 2   Transcript, 21 May 2013, 11:29 am

 3   Ibid, 11:34 am

 4   Ibid, 11:21 am

 5   Ibid, 11:37 am

 6   Ibid

 7   Form F2, para 2

 8   Transcript, 21 May 2013, 11:37 am

 9   Ibid, 11:21 am

 10   Ibid, 10:38 am

 11   Form F3, para 2

 12   [2009] AIRCFB 626

 13   In this respect I have adopted the position set out in Wentworth v Rogers (No 5) (1986) NSWLR 534

 14 (1998) 193 CLR 72

Printed by authority of the Commonwealth Government Printer

<Price code C, PR538958>