Dinh Duc Nguyen v Morf Dynamics Pty Ltd
[2013] FWC 9774
•12 DECEMBER 2013
[2013] FWC 9774 |
FAIR WORK COMMISSION |
DECISION |
Fair Work Act 2009
s 394 - Application for unfair dismissal remedy
Dinh Duc Nguyen
v
MORF Dynamics Pty Ltd
(U2012/16551)
DEPUTY PRESIDENT SAMS | SYDNEY, 12 DECEMBER 2013 |
Unfair dismissal application - applicant not dismissed at initiative of employer - application dismissed - order for costs sought - whether application vexatious - whether application made without reasonable cause - whether application had reasonable prospects of success - applicant genuinely believed that he was dismissed at initiative of the employer - both parties un represented - employer withheld statutory entitlements - application not vexatious or instituted without reasonable cause - costs application dismissed.
[1] By decision of 24 October 2013 in Dinh Nguyen v MORF Dynamics Pty Ltd[2013] FWC 8324, I dismissed an application brought by Mr Dinh Duc Nguyen (the respondent to the costs application), pursuant to s 394 of the Fair Work Act 2009 (the ‘Act’), in which he sought a remedy from his alleged unfair dismissal by MORF Dynamics Pty Ltd (the applicant to the costs application, ‘MORF Dynamics’ or the ‘Company’). The basis for that decision was a finding that the respondent had not been dismissed at the initiative of the employer (s 385(a)) and consequently, there was no jurisdiction under which the Fair Work Commission (the ‘Commission’) could consider the merits of his claim. I note that neither party was represented in the proceedings before me, although in earlier proceedings before Roberts C in respect to the application being ‘out of time’, Mr T Dixon of Counsel was granted permission to appear for the Company.
[2] MORF Dynamics now seeks an order from the Commission seeking costs against Mr Nguyen on the grounds that his unfair dismissal application:
(a) was vexatious;
(b) was brought without reasonable cause; and
(c) had no reasonable prospects of success.
[3] As MORF Dynamics provided invoice entries for costs prior to 5 April 2013, I presume the costs now sought relate to advice and/or preparation for both the substantive proceeding before me on 2 September 2013 and the earlier hearing on the ‘out of time’ application determined by Roberts C on 5 April 2013. If that is so, it is a little difficult to see how costs would be awarded against Mr Nguyen in respect to any advice, preparation or legal representation for the ‘out of time’ hearing in which he was wholly successful.
SUBMISSIONS
[4] Following my issuance of directions for the filing of submissions as to costs (the parties declining a further hearing on the matter), both parties provided short submissions.
[5] Mr Fong, the Company’s director, submitted that it had always been the intention of the Company to settle the matter in conciliation. The Company had produced sufficient evidence and had ‘done everything within our expected obligations as an employer.’ The Company had sought legal advice because it had never dealt with a similar case before.
[6] Mr Fong said that Mr Nguyen had ‘vexatiously insisted on proceeding to a hearing without reasonable cause’ in spite of attempts to settle the matter during conciliation. During the hearing, the evidence was not found to be sufficient to support Mr Nguyen’s application for unfair dismissal. Accordingly, his case did not have reasonable prospects of success.
[7] Mr Fong claimed that at a conciliation conducted on 10 January 2013, a Conciliator of the Commission had advised the parties that there ‘could possibly be no reasonable prospect of a successful outcome on either side’. The Company had followed this advice and applied itself to settle the claim on the basis of whatever the applicant would ordinarily be owed as an outgoing employee. However, Mr Nguyen had held firm to his demand for 9 weeks pay and proposed to proceed to hearing to pursue this claim.
[8] Mr Fong said that not long after the failed conciliation, Mr Nguyen had sent a circular email attacking Mr Fong’s honesty. This embarrassed Mr Fong and the Company’s Management. This was the point that the Company first sought legal advice. A letter was drafted which directed Mr Nguyen to cease and desist sending such emails and to forward an apology. While Mr Nguyen never apologised or responded, the Company abandoned plans for defamation proceedings. Mr Fong believed this behaviour demonstrated the vexatiousness of Mr Nguyen’s application.
[9] Mr Fong noted that the Company had written to Mr Nguyen on 1 February 2013 offering to pay ‘4 weeks’ pay in lieu, accrued leave entitlements of 12 days plus statutory 9% contribution outstanding superannuation’. The letter set out that the Company believed that this was the sum total of its obligations to him. Mr Nguyen then proceeded to a hearing.
[10] Mr Fong submitted that the respondent was a small Company and legal costs totalling $16,962.27 represented a significant impost. I note the copies of the invoices from the Company’s legal representative, Russells Solicitors, included fees for Counsel’s advice from Mr Dixon.
[11] Mr Nguyen responded to the costs application as follows:
‘1) The reason for my unfair dismissal application was because I believed my employment was terminated due to a repeated salary increase request. I believed I had not resigned.
2) It was also my intention to settle this matter fairly and amicably through the conciliation session to keep cost low as possible [sic].
MORF Dynamics did not do “everything within our expected obligations as an employer”. This is an outrageous claim. MORF Dynamics dishonestly did not intend to pay my outstanding entitlements. This is evident during the conciliation when they initially offered a sum, a sum covering outstanding entitlements, of $2,692.30 (two weeks). This is in contrast to MORF Dynamics earlier confirming my outstanding entitlements was $9,616.57. MORF Dynamics final offer was $5384.61, this is below what I was already entitled to.
MORF Dynamics autonomously and silently paid the entitlement of $9,616.57 on the 4th of April 2013, one day before the extension of time hearing.
The simple obligation of a pay slip was not even met.
I have submitted the email chain subject “Final Pay” between myself and MORF Dynamics as Appendix A. This is evidence for the above.
MORF Dynamics used the unfair work conciliation to reduce my annual leave and notice in lieu entitlements. This is why the conciliation failed and a hearing was listed.
3) The Fairworks conciliator [sic] did not advise that there was no reasonable prospect of a successful outcome on either side. Their advice was to continue communication. This claim is a fabrication.
4) I did not receive the offer letter claimed by MORF Dynamics in early February. I believe this is also a fabrication.
5) If it is found that I was vexatious, had no reasonable cause or had no prospect of success. I do not see any evidence or justification of the claimed amount being the result of the hearing.’
[12] The attached email exchanges to Mr Nguyen’s submission, make clear that the Company was withholding Mr Nguyen’s statutory entitlements in the context of the conciliation before the Commission’s Conciliator. Apparently, it continued to do so until the day before the ‘out of time’ application hearing.
CONSIDERATION
[13] Consistent with the longstanding principle that costs are not ordinarily awarded against parties in industrial proceedings, the general provisions of the Act are to the effect that each party bears its own costs. However, s 611 prescribes the circumstances which, if made out, provide the Commission with a discretion to award costs. S 611 is expressed 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 ofthe 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.’
[14] Section 402 deals with the making of applications for costs orders in matters arising under Part 3-2 (Unfair Dismissals) of the Act:
‘402 Applications for costs orders
An application for an order for costs under section 611 in relation to a matter arising under this Part, or for costs under section 400A or 401, must be made within 14 days after:
(a) the FWC determines the matter; or
(b) the matter is discontinued.’
Recent amendments inserting s 400A - Costs orders against parties - are not relevant to this application.
[15] Neither party relied on any of the authorities of the Commission or the general courts as to the principles to be applied in costs applications in the Commission’s unfair dismissal jurisdiction. Nevertheless, this application must be determined with these principles in mind. Accordingly, I refer to the relevant authorities as follows.
[16] The circumstances in which an application will be found to have been made ‘vexatiously’ were discussed by North J in Nilsen v Loyal Orange Trust [1997] IRCA 32as follows:
‘The next question is whether the proceeding was instituted vexatiously. This looks to the motive of the applicant in instituting the proceedings. It is an alternative ground to the ground based on lack of reasonable cause. It therefore may apply where there is a reasonable basis for instituting the proceedings. This context requires the concept to be narrowly construed. A proceeding will be instituted vexatiously where the predominant purpose in instituting the proceeding is to harass or embarrass the other party, or to gain a collateral advantage.’
[17] In Attorney-General v Wentworth(1988) 14 NSWLR 481, Roden J observed that litigation may be regarded as ‘vexatious’ on objective or subjective grounds and that the test could be expressed as follows:
‘1. Proceedings are vexatious if they are instituted with the intention of annoying or embarrassing the person against whom they are brought;
2. They are vexatious if they are brought for collateral purposes, and not for the purpose of having the Court adjudicate on the issues to which they give rise.
3. They are also properly to be regarded as vexatious if, irrespective of the motive of the litigant, they are so obviously untenable or manifestly groundless as to be utterly hopeless...’
[18] Other grounds upon which an application could be said to have been instituted ‘vexatiously’ were identified in Re Cameron (1996) 2 Qd R 218as:
● the legitimacy or otherwise of the motives of the applicant;
● the existence or lack of reasonable grounds for the claims sought to be made;
● the repetition of non-compliance with or disregard for the Court’s practices, procedures and rulings;
● persistent attempts to use the Court’s processes to circumvent its decisions or other abuse of process;
● wastage of public resources and funds; and
● the harassment of those who are subject of the litigation which lacks reasonable basis.
[19] Specifically, in A Baker v Salva Resources Pty Ltd [2011] FWAFB 4014, a Full Bench of Fair Work Australia (as it then was) summarised the approach to be taken in relation to subsection 611(2)(b) of the Act as follows:
- ‘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.’
‘[10] The concepts within s.611(2)(b) ‘should have been reasonably apparent’ and ‘had no reasonable prospect of success’ have been well traversed:
[1] Also on the question of what constitutes ‘without reasonable cause’, Wilcox J in Re Joseph Michael Kanan v Australian Postal and Telecommunications Union[1992] FCA 366 (‘Kanan’) said:
“[29] It seems to me that one way of testing whether a proceeding is instituted "without reasonable cause" is to ask whether, upon the facts apparent to the applicant at the time of instituting the proceeding, there was no substantial prospect of success. If success depends upon the resolution in the applicant's favour of one or more arguable points of law, it is inappropriate to stigmatise the proceeding as being "without reasonable cause". But where it appears that, on the applicant's own version of the facts, it is clear that the proceeding must fail, it may properly be said that the proceeding lacks a reasonable cause.”
[2] The test of what constitutes ‘without reasonable cause’ has been applied by the Commission in numerous other cases involving costs applications; for example, Thatcher C in Walter v Mittagong Sands Pty Ltd T/A Cowra Quartz[2011] FWA 2225 put the proposition this way:
‘[44] In relation to the criteria ‘without reasonable cause’ and ‘no reasonable prospect of success’, I have concluded that:
(a) the criteria ‘no reasonable prospect of success’ in paragraph 611(2)(b) is lower and wider than the term ‘without reasonable cause’ referred to in paragraph 611(2)(a), which is similar to the test traditionally applied by a court to summarily dismiss actions. Circumstances which satisfy the ‘without reasonable cause’ test would be likely to satisfy the ‘no reasonable prospect of success’ criterion, but the reverse would not necessarily apply.
(b) when FWA is required to form an opinion as to whether the application had a reasonable prospect of success, it is not to undertake an assessment of whether a certain and concluded determination could be made that the proceedings would necessarily fail. The test in paragraph 611(2)(b) is not about whether there is no ‘real’ prospect of success and does not of necessity require that the proceedings were hopeless or bound to fail (by applying a test such as whether an application is manifestly untenable or groundless).
(c) a similar approach should be taken by FWA to the construction of the expression ‘no reasonable prospect of success’ as was adopted by the majority of members of the High Court in Spencer in respect of the term ‘no reasonable prospect’, namely:
“No paraphrase of the expression can be adopted as a sufficient explanation of its operation, let alone definition of its content. Nor can the expression usefully be understood by the creation of some antinomy intended to capture most or all of the cases in which it cannot be said that there is ‘no reasonable prospect’. The judicial creation of a lexicon of words or phrases intended to capture the operation of a particular statutory phrase like ‘no reasonable prospect’ is to be avoided. ... Rather, full weight must be given to the expression as a whole.”
(d) it is a matter of judgement, sometimes of fine judgement, in all of the circumstances of a particular case whether an application or response had no reasonable prospect of success.
(e) an assessment of whether an application or response was made without reasonable cause or had no reasonable prospect of success should be undertaken with caution, particularly when the matter had not been determined by FWA and questions of fact and issues of law are important and in dispute.’
CONCLUSIONS
[3] Notwithstanding my earlier findings as to the failure of Mr Nguyen to establish that he was dismissed, it does not necessarily follow that his application for a remedy from unfair dismissal was ‘vexatious’, ‘instituted without reasonable cause’ or had ‘no reasonable prospects of success’. I am satisfied that he genuinely, but mistakenly, believed he had been dismissed at the initiative of the employer. Given that the termination of employment occurred prior to the expiry of a notice period which had been agreed between the parties for ending his employment, this belief was perhaps, understandable.
[4] There is no doubt that immediately after the applicant received the notice bringing forward his termination of employment, he took issue with the Company setting out that he believed he had been dismissed and that it was unfair. He emailed Mr Fong on 8 November as follows:
‘Hi Rob,
In response to receiving the Notice of Termination of Employment, I’ve submitted an Unfair Dismissal Claim to Fair Work Australia.
The dismissal is unfair because:
- I remain committed to the project on which I am a high performer and a dirver of performance in colleagues.
- It is not due to misconduct.
- it is the response to a reasonable salary request.
As a professional, I would like to see the project to the end.
To avoid a Fair Work Australia conciliation and/or hearing I offer these resolutions:
1) Retract the termination
OR
2) A three month severance package. This is in addition to completion of the current notice period and the annual leave balane [sic].’
[5] As is also apparent from this email and subsequent exchanges, there was a robust approach adopted by both parties in an effort to settle the matter, although I hasten to add Mr Nguyen had legitimate grounds for believing the Company was deliberately ‘playing games’ with his outstanding statutory entitlements by withholding them for many months. It was not until the day before the jurisdictional hearing on 4 April 2013 that Mr Nguyen received his outstanding entitlements of $6,443.85 made up of notice, outstanding wages, annual leave and superannuation (The termination of employment was on 9 November 2012).
[6] In my opinion, it is also relevant that the only offers to settle the matter from Mr Fong were simply ‘bartering’ with Mr Nguyen’s outstanding legal entitlements, including unpaid wages. It should not be forgotten that these were entitlements which Mr Fong was required to pay to Mr Nguyen as a matter of law, irrespective of any claim for unfair dismissal. Mr Nguyen was being asked to bargain away some of his legal entitlements. Viewed in this light, I am surprised Mr Fong was not advised that his was not a genuine attempt to make offers to settle the unfair dismissal claim.
[7] In my substantive decision, I commented on what happened when the applicant informed Mr Fong he had lodged an unfair dismissal application. At paras [50]-[52], I said:
‘[50] Unsurprisingly, the respondent’s reaction was swift and final. It revoked the notice period, but withheld the notice payment and had the applicant escorted off the premises. The applicant explained that he had not already submitted an unfair dismissal claim prior to the night of 7 November, but was in the process of doing so (This must strictly be correct because the application was not lodged until 10 December 2012). However, the respondent was entitled to take the view that the applicant had already done so, by the express use of the past tense expression, ‘I’ve submitted an unfair dismissal claim to Fair Work Australia’.
[51] It is also possible that the wording was deliberately intended to convey the impression the claim had been lodged and the respondent would be required to react. This possibility seems consistent with the offers in the email to settle the claim made immediately thereafter. Given the seemingly early understanding of what was to take place, while the respondent’s hostile reactions were perhaps to be expected, it was nevertheless wrong for it to withhold the applicant’s notice payment or any other outstanding statutory entitlements.
[52] On one view of it, the meeting of 9 November 2012, reinforced by the applicant being escorted off site, had all the hallmarks of a dismissal. However, I do not consider it was anything more than the respondent moving the agreed position reached between itself and the applicant forward, for which it was required to pay the notice period earlier advised. It was also consistent with the contract of employment. It was not a dismissal in the conventional sense. That said, it was regrettable that it reacted angrily to what it believed was the applicant himself bringing his employment to an end, by lodging an unfair dismissal claim [my emphasis].’
[8] In light of these circumstances, I do not accept that Mr Nguyen’s filing of his unfair dismissal application was ‘vexatious’ or instituted ‘without reasonable cause’. Accepting that Mr Nguyen was unrepresented and did not have the benefit of any advice, it is understandable that he was unaware of the legal distinction between termination at the initiative of the employer and the mutual termination of employment by both parties (which I found had occurred). He had received a letter couched in language suggesting to him that he had been dismissed and, in reality, the termination of employment had been brought forward by the employer.
[9] This situation does not derogate from the primary conclusion I made as to the mutuality of the termination of employment. Indeed, as I noted, even if I am wrong about the respondent’s conduct of 9 November 2012 not constituting a termination of employment at the employer’s initiative, I have no doubt the contract would have been mutually brought to an end at the expiry of the notice period (7 December 2012). As the notice period was eventually paid in lieu, it would be difficult to establish a foundation for a successful unfair dismissal claim.
[10] Mr Fong claimed a Commission Conciliator had told them at the conciliation ‘that both parties should try and work things out amicably given that if the case proceeded to a hearing, there could possibly be no reasonable prospect of a successful outcome on either side’. Firstly, I do not accept that a Commission Conciliator would have given such advice. Perhaps Mr Fong misunderstood what had been said. Secondly, if such specific advice was offered, it should not have been. It is simply not the role of the Conciliators to give such definitive advice. Thirdly, accepting Mr Fong was, at this point receiving legal advice, including advice from a barrister, it would be highly unlikely that any legal practitioner would have told Mr Fong to accept a Conciliator’s opinion, given in private and on a ‘without prejudice’ basis.
[11] Mr Fong also relied on an allegedly defamatory email sent by Mr Nguyen to the Company’s director and employees as a basis for concluding that Mr Nguyen’s claim was ‘vexatious’. I would observe the emails were not produced and, had they been, the material would clearly have been new evidence which, in the ordinary course, Mr Nguyen would be entitled to respond to. But, in any event, any question of defamation leading to other proceedings is entirely irrelevant to the objective test of whether Mr Nguyen’s application here was ‘vexatious’.
[12] It is likely Mr Nguyen may well have been buoyed by Commissioner Roberts’ finding that his application was filed within time or, alternatively, he had established ‘exceptional circumstances’ (including based, in part, on the merits of his claim) for his application to be accepted ‘out of time’. As Wilcox J said in Kanan:
‘If success depends upon the resolution in the applicant's favour of one or more arguable points of law, it is inappropriate to stigmatise the proceeding as being "without reasonable cause".’
Given that an arguable point of law was whether Mr Nguyen’s application should be accepted ‘out of time’ and Mr Nguyen was successful on that point, it is not open to conclude that his application was brought ‘without reasonable cause.’
[13] Accordingly, I am not persuaded that the applicant’s original claim was one which had no reasonable prospects of success. It could not be said to ‘be manifestly untenable or groundless or so lacking in merit or substance as to be not reasonably arguable’. In light of all the relevant considerations, this is not a case where I would exercise my discretion to award costs against the losing party. The application for costs against Mr Nguyen is therefore dismissed.
DEPUTY PRESIDENT
Final written submissions:
Applicant - 21 November 2013
Respondent - 5 December 2013
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