Doyle v Emperor Energy Limited (No.2)
[2017] FCCA 3088
•8 December 2017
FEDERAL CIRCUIT COURT OF AUSTRALIA
| DOYLE v EMPEROR ENERGY LIMITED (No.2) | [2017] FCCA 3088 |
| Catchwords: INDUSTRIAL LAW – Costs application – application summarily dismissed – whether substantive application instituted vexatiously or without reasonable cause – whether unreasonable act or omission – whether caused respondent to incur costs – what costs order should be made – costs order. |
| Legislation: Fair Work Act 2009 (Cth), ss.570, 570(2)(a) Federal Circuit Court Rules 2001 (Cth), r.21.02 |
| Doyle v Oil Basins Limited [2017] FCCA 2758 Ryan v Primesafe [2015] FCA 8 Rentuza v Westside Auto Wholesale [2009] FMCA 1022 Australian and International Pilots Association v Qantas Airways Ltd (No.3) [2007] FCA 879 Construction, Forestry, Mining and Energy Union v Clarke (2008) 170 FCR 574 Ashby v Slipper (No.2) [2014] FCAFC 67 Saxena v PPF Asset Management Ltd [2011] FCA 395 Kanan v Australian Postal and Telecommunications Union [1992] FCA 539 Baker v Patrick Projects Pty Ltd (No.2)[2014] FCAFC 166 Construction, Forestry, Mining and Energy Union v Corinthian Industries (Aust) Pty Ltd (No.2)[2014] FCA 351 R v Moore; Ex parte Federated Miscellaneous Workers Union of Australia[1978] HCA 51 Spotless Services Australia Ltd v Marsh [2004] FCAFC 155 Construction, Forestry, Mining and Energy Union v BHP Coal Pty Ltd (No.2)[2015] FCAFC 97 Colgate Palmolive Company & Anor v Cussons Pty Ltd (1993) 46 FCR 225 |
| Applicant: | NEIL FRANCIS JAMES DOYLE |
| Respondent: | EMPEROR ENERGY LIMITED (ACN 006 024 764) |
| File Number: | MLG 2174 of 2017 |
| Judgment of: | Judge O'Sullivan |
| Hearing date: | 8 December 2017 |
| Date of Last Submission: | 8 December 2017 |
| Delivered at: | Melbourne |
| Delivered on: | 8 December 2017 |
REPRESENTATION
| Counsel for the Applicant: | Ms A. Robertson |
Solicitors for the Applicant | Hall & Wilcox |
| Counsel for the Respondent: | Mr A. Broadfoot QC |
| Solicitors for the Respondent | Hopgood Ganim Lawyers |
ORDERS
Within 21 days the applicant should pay the respondent’s costs fixed at $5,322.50.
The name of the respondent be changed to Emperor Energy Limited.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLG 2174 of 2017
| NEIL FRANCIS JAMES DOYLE |
Applicant
And
| EMPEROR ENGERY LIMITED (ACN 006 024 764) |
Respondent
REASONS FOR JUDGMENT
(Revised from Transcript)
Introduction
These reasons concern an application for costs by Oil Basins Limited (as it was then known).
On 10 October 2017 Neil Francis James Doyle (“the applicant”) commenced proceedings in this Court against Oil Basins Limited (as it was then known) (ACN 006 024 764) (“the respondent”).
The applicant alleged inter alia the respondent was in breach of various provisions of the Fair Work Act 2009 (Cth) (“the FW Act”) arising from the applicant’s employment with the respondent.
After filing a response and defence on 16 October 2017 the respondent also filed an application in a case on 17 October 2017.
The respondent’s application in a case was heard on 30 October 2017 and the Court reserved its decision.
Against the background and for the reasons set out in Doyle v Oil Basins Limited [2017] FCCA 2758 on 14 November 2017 the following orders were made:
“1. Pursuant to s.17A of the Federal Circuit Court of Australia Act 1999 and r.13.10(a) of the Federal Circuit Court Rules 2001 there be judgment for the respondent and the applicant’s application and statement of claim filed 10 October 2017 be summarily dismissed.
2. Any application for costs along with brief written submissions (no more than 4 pages) be filed and served within 14 days of this order.
3. Any response to an application for costs along with brief written submissions (no more than 4 pages) be filed and served 14 days thereafter.
AND THE COURT NOTES:
A. Any application for costs will be determined on the papers unless otherwise requested in submissions.”
On 22 November 2017 the respondent filed an application in a case, submissions and an affidavit sworn by Ms Sarah Rose O’Brien-Smith. The respondent sought the following orders:
“1. The Applicant pay the Respondent’s costs of and incidental to the proceeding on an indemnity basis, alternatively on a solicitor and own client basis.
2. Alternatively to order 1, the Applicant pay the Respondent’s costs of the proceeding, such costs to be taxed in default of agreement.
3. The court certifies pursuant to Rule 21.15 of the Federal Circuit Court Rules 2001 (Cth) that it was reasonable to employ senior and junior counsel to appear for the Respondent in this proceeding.”
On 6 December 2017 the applicant filed a response and submissions on costs. The applicant sought the following orders:
“1. The Applicant opposes the application in a case of the Respondent dated 22 November 2017 and seeks in relation to costs as follows:
(a) No order as to costs.
(b) Alternatively, the Applicant pay the Respondent’s costs of and incidental to the Respondent’s application in a case dated 17 October 2017 pursuant to Part 1 of Schedule 1 of the Federal Court Rules 2001.
(c) The Respondent’s costs not include:
i. the costs of the preparation of the Defence;
ii. other miscellaneous costs of the proceeding; or
iii. costs on an indemnity basis or on a solicitor and own client basis.
(d) Such further and other order as the Court deems appropriate.”
Submissions on costs
The respondent’s written submissions were:
“Summary of application for costs
1. By its Application in a Case dated 17 October 2017, the respondent (being the applicant in the Application in a Case) sought orders that, inter alia, the proceeding be dismissed pursuant to r 13.10 of the Rules of Court.
2. On 14 November 2017 the Court gave judgment for the respondent and dismissed the applicant’s application and statement of claim filed 10 October 2017 summarily, having been satisfied that the applicant had no reasonable prospect of successfully prosecuting the claims against the respondent and that the respondent was entitled to enforce the deed of settlement and release executed by the parties on 23 December 2016 (Deed). The Court found that the effect of the release provisions in the Deed was that there was a complete bar to the applicant’s claim.
3. Pursuant to the orders of Judge O’Sullivan dated 14 November 2017 and by a further Application in a Case dated 22 November 2017, the respondent is seeking orders that:
(a) the applicant pay the respondent’s costs of and incidental to the proceeding on an indemnity basis, alternatively on a solicitor and own client basis;
(b) alternatively to order 1, the applicant pay the respondent’s costs of the proceeding, such costs to be taxed in default of agreement; and
(c) the Court certifies pursuant to r 21.15 that it was reasonable to employ senior and junior counsel to appear for the respondent in this proceeding.
4. The applicant may only be ordered to pay the respondent’s costs incurred in this proceeding in accordance with s 570 of the Fair Work Act 2009 (Cth) (FWA). That provision contemplates costs orders being made if, and only if, as presently relevant:
(a) a party instituted the proceedings “vexatiously or without reasonable cause”: s 570(2)(a); or
(b) a party’s “unreasonable act or omission caused the other party to incur the costs”: s 570(2)(b).
5. For the reasons developed below, the principles derived from the authorities support the proposition that in this case, the applicant instituted the proceedings without reasonable cause, and the applicant’s unreasonable acts or omissions caused the respondent to incur the costs.
6. In Australian Workers Union v Leighton Contractors Pty Ltd (No 2) the Full Court of the Federal Court considered the application of s 570 of the FWA and summarised the principles which the Court considered the relevant authorities establish. Relevantly to this case, Leighton Contractors recognised, inter alia, that:
(a) it is not necessary to prove that there are exceptional circumstances warranting the making of an order [under s 570(2)]; and
(b) the relevant question is whether the proceeding had reasonable prospects of success at the time it was instituted, not whether it ultimately fails. (emphasis added)
7. The Full Court referred to the decision of Kanan v Australian Postal and Telecommunication Union where Wilcox J considered that “where, on the applicant’s own version of the facts, it is clear that the proceeding must fail, it may properly be said the proceeding lacks a reasonable cause.” Additionally in Kanan, Wilcox J stated 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.”
8. The test for whether proceedings have been instituted “without reasonable cause” has thus been considered to be analogous to the test for whether a proceeding ought to be dismissed summarily (that is, having “no reasonable prospect of success”). The Court having found as such on the respondent’s application here, it is submitted that the discretion within s 570 of the FWA is enlivened and ought to be exercised. Parties who institute proceedings without reasonable cause should pay costs.
9. In addition, the respondent submits that the applicant has caused the respondent to incur costs in this proceeding unreasonably by reason of the following:
(a) his claims were made in circumstances where he knew of and admitted to having signed the Deed, and took the benefits of the Deed;
(b) the applicant pressed grounds of opposition to the respondent’s application for summary dismissal that were not pleaded, and failed to make any application to amend.
10. The expansion of the applicant’s case without proper amendment caused the respondent to undertake considerable work in addressing not only the absence of merit in the case reflected in the statement of claim, but also the claims that were anticipated as being made (and which were in fact advanced at the hearing), all of which were ultimately found to have no reasonable prospect of success at trial.
11. The respondent further submits that the orders the applicant has foreshadowed he will seek in his response to the Application in a Case dated 22 November 2017 are another example of the applicant causing the respondent to incur costs in this proceeding unreasonably. If costs orders are to be made in favour of the respondent there is no basis to exclude particular costs, such as the costs of preparation of the defence or the costs of the mention hearing. Those costs were necessarily incurred in responding to the proceeding that, as has now been determined, had no reasonable prospect of success. The respondent has been completely successful and should be entitled to a complete form of costs order. In the event that the Court is minded to consider restricting the scope of any costs orders as the applicant requests, the respondent requests a hearing to enable the matter to be argued fully.
12. We now turn to the nature of the costs orders that are submitted to be appropriate.
Indemnity costs appropriate
13. For the reasons that follow, this is a case in which, in the exercise of discretion, it is submitted that the court should order the applicant to pay the respondent’s costs on an indemnity basis.
14. The applicant’s case consisted of allegations that ought never to have been made, which were made in wilful disregard of known facts (namely that he had signed the Deed and taken the benefits under it) and clearly established law (including the principle that parties can compromise litigation on foot and in contemplation, and the principles relating to waiver and estoppel), and caused the undue prolongation of the case by reason of claims which were not reasonably arguable. Further the applicant submitted that litigation was not in contemplation when the Deed was executed, when the Deed itself and exhibits R1 and R2 (which the applicant omitted to mention) demonstrated to any reasonable observer that litigation was obviously in contemplation. Those circumstances justify the costs order being made on an indemnity basis: see Colgate Palmolive Co v Cussons Pty Ltd [1993] FCA 536 at [24]; (1993) 46 FCR 225 at 233.5. Although Mr Doyle’s claim as filed relied on the “counterpart” clause, he made no submissions to the Court that addressed the construction of that clause. Section 570 of the FWA is no impediment to awarding indemnity costs: see Trustee for The MTGI Trust v Johnston (No 2) [2016] FCAFC 190 at [16] to [18].
15. As well as raising arguments that were never pleaded, and not making any submissions about the construction of the counterpart clause that was pleaded, the applicant pursued his claims in the knowledge of the terms of the Deed that he had signed, including clause 13 which provides, relevantly, that:
13 Default
If Mr Doyle defaults in respect of his obligations to OBL or any OBL Related Person, as contemplated by this Deed, Mr Doyle agrees that he will pay the sum of $40,000 by way of liquidated damages to OBL on demand and in addition, without limitation, will indemnify OBL and each OBL Related Person for any and all further Loss any of them may have, or may in the future have, suffered or incurred in relation to any such breach.
16. The respondent notes that, although it has not issued a counterclaim seeking indemnity pursuant to that clause in respect of its costs, which would be “Loss” as defined, the fact that the applicant agreed to indemnify the respondent is a further factor that weighs, in the exercise of discretion, in favour of the costs award being made on an indemnity basis.
17. It was reasonable to retain two counsel in this case, particularly given the applicant’s conduct of the case which evolved during the hearing. Accordingly, it is submitted that the Court should make orders as sought in the Application in a Case dated 22 November 2017.” (footnotes omitted)
The applicant’s written submissions were:
“Jurisdiction to award costs
1. The general power to award costs, pursuant to s 79 of the Federal Circuit Court of Australia Act 1999 (Cth)(FCC Act) is expressly qualified by the provisions of s 570 of the Fair Work Act 2009 (Cth) (FW Act). The discretion conferred by the terms of s 570(2) of the FW Act should be exercised judicially according to the terms defining it and cautiously because of:
[64]… the potential for discouraging parties’ pursuit in a complete and robust way of the claims for contravention which they seek to make under the Fair Work Act, or the defence of such claims. The policy behind s 570 is to ensure that the spectre of costs being awarded if a claim is unsuccessful does not loom so large in the mind of potential applicants (in particular, in my opinion) that those with genuine grievances and an arguable evidentiary and legal basis for them are put off commencing or continuing proceedings. It is an access to justice provision.
2. In Fair Work Ombudsman v Skilled Offshore (Australia) Pty Ltd (No 2), Gilmour J noted that:
Even if a party has a “self-evidently weak case” this is not enough to warrant a costs order. There must be “a higher level of criticism or disapprobation”: Clarke v Dixie Cummings Enterprises Pty Ltd [2013] FCA 987 at [14]. Indeed, costs were not awarded against the FWO in Fair Work Ombudsman v Valuair Limited (No 3) [2014] FCA 1182 even though elements of the FWO’s case were “artificial and unsatisfactory” and “potentially bizarre”: at [12]–[17]…
3. Even if s 570(2) applies, the award of costs remains discretionary. Costs orders are not designed to punish litigants even if an unreasonable course of action is taken.
The Applicant did not institute proceedings vexatiously or without reasonable cause
4. In Baker v Patrick Projects Pty Ltd (No 2) the Full Federal Court considered the phrase “without reasonable cause” and, endorsed the meaning and application of this phrase by Pagone J in Construction, Forestry, Mining and Energy Union v Corinthian Industries (Aust) Pty Ltd (No.2):
… To exercise the discretion conferred by s 570(2)(a) of the FW Act the Court must be satisfied that the claims were, relevantly, instituted without reasonable cause. … costs will rarely be awarded unless justified by exceptional circumstances: see Kangan Batman Institute of Technology and Further Education v Australian Industrial Relations Commission (2006) 156 FCR275; 237 ALR 672; [2006] FCAFC 199 at [60]. In Kangan Batman Institute it was said by the Full Court at [60] that “a proceeding will be instituted without reasonable cause if it has no real prospects of success, or was doomed to failure”. In Kanan v Australian Postal and Telecommunications Union (1992) 43 IR 257 Wilcox J indicated at 264 that one way of testing whether a proceeding was instituted “without reasonable cause” was to ask whether, upon the facts apparent to the applicant at the time of instituting the proceeding, there was no “substantial prospect of success”. His Honour went on to say that a proceeding lacks a reasonable cause where it is clear that it must fail on the applicant’s own version of the facts. [emphasis added]
5. The Court has found that the Applicant had no reasonable prospect of successfully prosecuting the proceeding. This is a prospective finding and does not mean that the proceedings were, when instituted, “without reasonable cause”. As found, the Applicant signed the Deed and took its benefits. Notwithstanding this, the Applicant had genuine arguments about the effectiveness of the Deed including its proper construction, interpretation of the Counterpart clauses and whether the Deed was a bar to the Applicant’s proceedings. These were legal arguments which required resolution. At the point of institution, the proceeding had some prospects of success. The proceeding was not necessarily doomed to fail or “without reasonable cause” until determined.
The applicant did not cause the respondent to incur costs in this proceeding unreasonably
6. Whether a party has engaged in an unreasonable act or omission depends upon an objective analysis of the particular circumstances of the case. For the purposes of s 570(2)(b) of the FW Act, the court must be satisfied that: (a) that a party engaged in an unreasonable act or omission; and (b) that the unreasonable act or omission caused another party to incur costs in the proceeding. As outlined in Rentuza v Westside Auto Wholesale, the exercise of the discretion in s 570(2)(b) of the FW Act is not necessarily engaged because a party has adopted a genuine but misguided approach.
7. Commencing legal proceedings was not itself unreasonable. The Applicant had legitimate claims against the Respondent. He had not been paid all the money to which, but for execution of the Deed, he would otherwise have been entitled. There was, even if limited, some prospect that upon proper construction of the Deed, actual receipt of a counterpart Deed by the Applicant was required before the Respondent could rely upon it; and that the Deed did not operate as a bar to the proceedings (at that stage, to be determined). Any question of the application of the Deed only arose when the Defendant took the point by way of Defence. In that sense it was not unreasonable for the Applicant to start the proceeding.
8. Having instituted the proceeding, it was also not unreasonable for the Applicant to raise the matters it did by way of opposition to the application for summary dismissal and, at least partially, in order to address all the matters raised by the Court at the mention hearing, including with respect to the application of Atkins Freight Services Pty Ltd v Fair Work Ombudsman and Kowalski v Trustee, Mitsubishi Motors Australia Limited Staff Superannuation Pty Ltd. Even if, as conceded, the written submissions extended beyond the pleaded case, it was not unreasonable for the Applicant to address those matters even if the Applicant was not also permitted at the hearing to seek leave to amend.
9. Further, even if it was unreasonable to have raised those matters, they did not cause the Respondent to incur additional costs. The Respondent had filed its written submissions. The oral argument was required in any event and it was not prolonged; taking little more than an hour in total.
10. Seeking exclusion of particular costs (such as the Defence) is not unreasonable. Such costs should not have been incurred at all. Further, the Respondent is seeking indemnity costs.
Residual discretion
11. Even if the jurisdiction to award costs is enlivened under s570(2)(a) or (b), this does not mean ipso facto that the Respondent is entitled to an award of costs. The Court may refrain from exercising the discretion. The Court should not award costs because:
(a) even though the Applicant was ultimately unsuccessful, there were legitimate arguments to be made with respect to the effectiveness of the Deed at the time the proceeding was issued;
(b) an award of costs, given the substantial entitlements the Applicant has already foregone, will have a substantial punitive effect upon the Applicant who is already struggling financially; and
(c) the Deed was signed by the Applicant in circumstances where he could not afford lawyers and had not received legal advice about its effect and where he was also under substantial financial and emotional stress.
12. Further, although the Applicant did not plead that the Deed was an impermissible agreement because of: the terms of the ASX Listing Rules (LR 10.1.1) and the NES (because it is not permitted under Chapter 2, Part 2-3 of the FW Act); or because it and the implemented arrangements sought to prevent or significantly reduce the recovery of entitlements of the Applicant contrary to s596AB of the Corporations Act 2001 (Cth); these are nevertheless factors which weigh against exercising the discretion to award costs against the Applicant. In all the circumstances the Court should decline to exercise discretion to award costs against the Applicant.
No indemnity costs, allowance for Senior and Junior Counsel or the costs of Defence
13. If the court is minded to exercise discretion to award costs, the Applicant contends, consistently with r 21.10 of the Federal Circuit Court Rules (Rules), that the costs which ought to be ordered should be costs in accordance with Pt 1 and 2 of Schedule 1 to the Rules and disbursements properly incurred (as opposed to costs of and incidental to the proceeding on an indemnity basis or a solicitor and own client basis) to be taxed in default of agreement. The behaviour of the Applicant in this case was not sufficiently egregious to warrant costs to be assessed on the indemnity basis. The Applicant did not act in a high-handed manner or vexatiously. Nor did he unduly prolong the litigation. On the contrary, the Applicant met all timetabling requirements and did not oppose the Respondent’s summary dismissal application being heard earlier than foreshadowed. The most that can be said, it is submitted, is that the Applicant lost the case.
14. Further, such costs should not include the costs of preparation of the Defence because the application for summary dismissal could have been issued when the Claim was received (as foreshadowed by the Respondent) without the need for a Defence to be filed.
15. Additionally, any award of costs should not allow for the retention of Senior and Junior counsel generally, but in any event not for the mention hearing.”(footnotes omitted)
Relevant provisions
The respondent’s application for costs falls to be determined by reference to the provisions of s.570 of the FW Act which provides:
“(1)A party to proceedings (including an appeal) in a court (including a court of a State or Territory) exercising jurisdiction under this Act may be ordered by the court to pay costs incurred by another party to the proceedings only in accordance with subsection (2) or section 569 or 569A.
(2)The party may be ordered to pay the costs only if:
(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; or
…”
In Ryan v Primesafe [2015] FCA 8, Justice Mortimer dealt with an application for costs arising from proceedings under the FW Act. In relation to the provisions in s.570 of the FW Act generally it was said:
“64.I accept the general import of the authorities relied on by the applicant and Mr McDonald in their written submissions about the significance of the threshold set by s570(2) of the Fair Work Act. Although some of the authorities relied on dealt with the predecessor provisions to s570, there is no difference in substance in the way the threshold is expressed. The discretion conferred by the confined terms of
s570(2)should be exercised cautiously, and the case for its exercise should be clear: see Saxena v PPF Asset Management Ltd [2011] FCA 395at [6] per Bromberg J. The reason for caution is the potential for discouraging parties’ pursuit in a complete and robust way of the claims for contravention which they seek to make under the Fair Work Act, or the defence of such claims. The policy behind
s570 is to ensure that the spectre of costs being awarded if a claim is unsuccessful does not loom so large in the mind of potential applicants (in particular, in my opinion) that those with genuine grievances and an arguable evidentiary and legal basis for them are put off commencing or continuing proceedings. It is an access to justice provision. Insofar as it operates to the benefit of respondents, it is designed to ensure respondents feel free to pursue arguable legal and factual responses to the claims made against them. There is an almost identical provision in s611 of the Fair Work Act, giving the Fair Work Commission a similar costs power, conditioned by similarly-worded considerations. The predecessor provisions, and the conscious broadening of the statutory terms used in s570, are traced by the Full Court in Australasian Meat Industry Employees’ Union v Fair Work Australia (No 2) (2012) 203 FCR 430; [2012] FCAFC 103 at [3]- [4] per Jessup and Tracey JJ.65.None of those propositions deny the Court’s ability to find that one or both of the two preconditions expressed in
ss570(2)(a) and (b) exist where the factual circumstances warrant it. The legislative policy behind a provision such as s570(1) is not inconsistent with the requirements for proceedings to be conducted reasonably, fairly and efficiently. As an access to justice provision, it contemplates parties and their legal representatives will access the Court responsibly.”In Melbourne Stadiums Ltd v Sautner [2015] FCAFC 20 the Full Court held:
“140 Section 570 [of the Fair Work Act] operates as an express limitation on the broad discretion to award costs which is conferred on this Court by s 43 of the Federal Court of Australia Act 1976 (Cth) and on the County Court by s 78A of the County Court Act 1958 (Vic).”[1]
[1] See also Ryan v Primesafe [2015] FCA 8 at [66] (Mortimer J) (Ryan), Fair Work Ombudsman v Skilled Offshore (Australia) Pty Ltd (No.2) [2015] FCA 1509 at [7] (Gilmour J); King v Patrick Projects Pty Ltd (No.2) [2017] FCA 388 at [8] (Gilmour J).
The effect of s.570 of the FW Act is to limit the Court’s power in relation to any order for costs in respect of proceedings under the FW Act. As a result the Court may only order a party to such proceedings to pay the costs of another party only if the Court is satisfied that the party instituted the proceedings vexatiously or without reasonable cause, or that the party’s unreasonable act or omission caused the other party to incur costs.
No order for costs can be made unless it is demonstrated one or more of the abovementioned exceptions in s.570(2) of the FW Act has been established. Even then, the award of costs remains within the discretion of the Court (cf Ashley v Slipper (No.2) [2014] FCAFC 67). Given the submissions of the parties both in writing and supplemented by oral submissions today, I now turn to consider the grounds upon which the respondent relies in light of the approach to the relevant provisions set out above.
Consideration of claim for costs
The respondent claims costs under s.570(2)(a) and, in the alternative, under s.570(2)(b) of the FW Act.
In relation to the claim under s.570(2)(a) of the FW Act, the respondent said that the proceedings were issued without reasonable cause.
The relevant test for the purposes of these proceedings was explained by Justice Wilcox in Kanan v Australian Postal and Telecommunications Union [1992] FCA 539 at [29] as follows:
“whether, upon the facts apparent to the applicant at the time of instituting proceedings, there was no substantial prospect of success.”
His Honour went on to explain in the same paragraph that:
“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, 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.”
The particular requirements of s.570(2)(a) were the subject of a Full Court decision in Baker v Patrick Projects Pty Ltd (No.2)[2014] FCAFC 166. In that case, the Full Court considered the phrase “without reasonable cause” and, at [9], endorsed the following summary of authorities relating to the meaning and application of this phrase by Justice Pagone in Construction, Forestry, Mining and Energy Union v Corinthian Industries (Aust) Pty Ltd (No.2)[2014] FCA 351 at [8]:
“... To exercise the discretion conferred by s.570(2)(a) of the FW Act the Court must be satisfied that the claims were, relevantly, instituted without reasonable cause. That is not established merely because a party fails in the claims: R v Moore; Ex parte Federated Miscellaneous Workers Union of Australia [1978] HCA 51; (1978) 140 CLR 470 at 473; [1978] HCA 51.”
In Kanan v Australian Postal and Telecommunications Union [1992] FCA 539 Justice Wilcox indicated at [264] that one way of testing whether a proceeding was instituted “without reasonable cause” was to ask whether, upon the facts apparent to the applicant at the time of instituting the proceeding, there was no “substantial prospect of success”. His Honour went on to say that a proceeding lacks a reasonable cause where it is clear that it must fail on the applicant’s own version of the facts.
It is worth also noting that courts have accepted that cost orders made pursuant to s.570(2)(a) of the FW Act and which relate to proceedings instituted “without reasonable cause” are not restricted to exceptional cases. Although an award for costs under s 570 will generally be ‘an exceptional order’ in that it is a divergence from the usual course, it is now accepted that there is no need to demonstrate exceptional circumstances in order to enliven the Court’s jurisdiction to award costs: (see Spotless Services Australia Ltd v Marsh [2004] FCAFC 155 at [12] affirmed in Construction, Forestry, Mining and Energy Union v BHP Coal Pty Ltd (No.2)[2015] FCAFC 97 at [15]–[17]).
Costs orders made pursuant to protective provisions such as s 570(2) of the FW Act are not designed to punish litigants for undertaking an unreasonable course of action: (see Kanan v Australian Postal and Telecommunications Union [1992] FCA 539). Rather, a cost order is made on the basis that a measure of indemnity should be conferred upon respondents for the costs incurred in responding to unreasonably instituted proceedings.
The respondents submissions on this ground were set out earlier and at paragraphs [7] to [9] and also possibly paragraph [14] of submissions filed 22 November 2017. The applicant’s submissions were at paragraphs [1] to [5] of the submissions filed on 6 December 2017.
The other basis for an award of costs against the applicant under s.570(2)(b) of the FW Act that is sought by the respondent is unreasonable acts or omissions by the applicant that caused it to incur costs.
Whilst pursuant to s.570(2)(b) of the FW Act the Court may order a party to pay costs if the Court is satisfied that the party’s unreasonable act or omission caused the other party to incur the costs such an order is discretionary and only if the Court is satisfied that is the case.
In Rentuza v Westside Auto Wholesale [2009] FMCA 1022 (“Rentuza”) Lucev FM (as His Honour then was) considered the issue of whether an unreasonable act or omission had caused a party to incur costs for the purposes of s.570(2)(b) of the FW Act.
At paragraphs [26] to [28] in Rentuza His Honour said:
“26. For the purposes of s.570(2)(b) two criteria must be fulfilled. They are:
(a)that a party must have engaged in an unreasonable act or omission; and
(b)that the unreasonable act or omission must have caused another party to incur costs in connection with the proceeding.
27. Whether a party has engaged in an unreasonable act or omission depends upon an objective analysis of the particular circumstances of the case.
28. The exercise of the discretion in s.570(2)(b) is not necessarily engaged because:
(a) a party does not conduct litigation efficiently;
(b) a concession is made late;
(c) a party may have acted in a different or timelier fashion;
(d) a party has adopted a genuine but misguided approach.” [Footnotes from original omitted]
For the purposes of s.570(2)(b) of the FW Act, the Court must be satisfied that two criteria have been fulfilled, as set out in Construction, Forestry, Mining and Energy Union v Clarke (2008) 170 FCR 574 (“Clarke”) they are:
“(a) that a party must have engaged in an unreasonable act or omission; and
(b) that the unreasonable act or omission must have caused another party to incur costs in connection with the proceedings.”
Whether a party has engaged in an unreasonable act or omission depends upon an objective analysis of the particular circumstances of the case (see Australian and International Pilots Association v Qantas Airways Ltd (No.3) [2007] FCA 879).
The provisions on which the respondent relies to ground its application for costs are one of the exceptions to the general rule that in proceedings under the FW Act each party bears its own costs. Moreover as the decision in Clarke (supra) makes clear the Court still retains a discretion on the question of costs.[2]
[2] See Clarke at [29].
The respondents’ submissions on this ground were set out earlier and at paragraphs [9] to [11] and possibly paragraph [15] of the submissions filed 22 November 2017. The applicant’s submissions were at paragraphs [6] to [12] of submissions filed on 6 December 2017.
Conclusion on claim for costs
In relation to the first ground the parties submissions referred to the principles in Australian Workers Union v Leighton Contractors Pty Ltd (No.2) [2013] FCAFC 23 (“Leighton Contractors”) which are relevant and were:
·the purpose or policy of the section is to free parties from the risk of having to pay their opponents’ costs in matters arising under the Act, while at the same time protecting those who are forced to defend proceedings that have been instituted vexatiously or without reasonable cause;
·it follows from the protections offered by s 570(2), that a person will rarely be ordered to pay the costs of the proceeding. But it is not necessary to prove that there are exceptional circumstances warranting the making of an order;
·the relevant question is whether the proceeding had reasonable prospects of success at the time it was instituted, not whether it ultimately failed.
In Construction, Forestry, Mining and Energy Union v BHP Coal Pty Ltd(No.2) [2015] FCAFC 97, by reference to the decision in Leighton Contractors, the Full Court observed, at [17], that although the principle had been expressed differently in earlier cases, the approach that has been adopted is that set out in Spotless Services Australia Ltd v The Honourable Senior Deputy President Jeanette Marsh [2004] FCAFC 155, where the Full Court said, at [13], that the usual position is there will be no costs, and to that extent, a costs order is an exceptional one, but there is no warrant for applying “an exceptional circumstances test”. The question is whether the proceedings was commenced without reasonable cause, and that is relevantly established “as a matter of objective fact”.
It is clear enough from the material the applicant filed that he was aggrieved by the conduct of the respondent (albeit only largely after the Deed was signed and then only largely long after that). Applying the test set out by Justice Wilcox in Kanan and referred to with approval in Leighton Contractors the case he sought to make must fail on his own version of the facts.
Whilst the submissions for the applicant sought to maintain the proceedings were not instituted vexatiously, or without reasonable cause for the reasons set out therein, those submissions should be rejected as on the facts known to the applicant at the time the proceedings were instituted there was no reasonable prospect of success.[3]
[3] See Construction Forestry Mining and Energy Union v Corinthian Industries (Australia) Pty Ltd (No. 2) [2014] FCA 351 at [8]
In the circumstances on the evidence before the Court, the findings in Doyle v Oil Basins (supra), and mindful that the onus for an application under s. 570 rests with the party seeking to establish that what had been instituted was “without reasonable cause”, I am satisfied the respondent’s case to that effect has been made out and is not rebutted by the submissions made by the applicant to the contrary and it is otherwise appropriate to exercise my direction to make an order on this basis.
However, given the approach in Rentuza (supra), the particular circumstances of this matter, the way the hearing on 30 October 2017 ran, and notwithstanding the respondent’s submissions, I am not satisfied the applicant separately by act or omission caused the respondent to incur costs.
Should an order for indemnity costs be made?
The respondent submitted this was a matter where an order for indemnity costs was appropriate. The respondent’s submissions as to why that was the case have been referred to earlier. In Colgate Palmolive Company & Anor v Cussons Pty Ltd (1993) 46 FCR 225, Sheppard J considered the cases on costs and confirmed the ordinary rule or practice that such orders are to be on a party and party basis. His Honour held that the Court must not make an order on another basis unless the circumstances of the case warrant it departing from the usual practice. In exercising its discretion the Court would look to the particular facts and circumstances of the case and consider whether they warrant the making of an order other than on a party and party basis.
In Colgate-Palmolive v Cussons Pty Ltd, Sheppard J held that there should be some “special or unusual feature in the case to justify the court in departing from the ordinary practice.”
The nub of the submissions made on behalf of the respondent in support of an order for indemnity costs appeared to be based on the nature of the application, that it was summarily dismissed, the conduct of the applicant and that he was wholly unsuccessful. However, even though I am satisfied the application was obviously unmeritorious I am not satisfied the justice of the case requires, or that there are special or unusual features of the case, that would justify a very great departure from the normal standard for costs.
What order for costs should be made?
In relation to what order for costs should be made section 79 of the Federal Circuit Court Act 1999 (the FCC Act) provides in subsections (2) and (3) as follows:
“(2) The Federal Circuit Court or a Judge has jurisdiction to award costs in all proceedings before the Federal Circuit Court (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 or Judge.”
Costs are dealt with in Part 21 of the Federal Circuit Court Rules 2001 (“the Rules”). Rule 21.02(2) provides:
“(2) In making an order for costs in a proceeding, the Court may:
(a) set the amount of the costs; or
(b) set the method by which the costs are to be calculated; or
(c) refer the costs for taxation under Order 62 of the Federal Court Rules or under Chapter 19 of the Family Law Rules; or
(d) set a time for payment of the costs, which may be before the proceeding is concluded.”
Rule 21.10 provides:
“Unless the Court otherwise orders, a party entitled to costs in a proceeding (other than a proceeding to which the Bankruptcy Act applies) is entitled to:
(a) costs in accordance with Part 1 and 2 of Schedule 1; and
(b) disbursements properly incurred.”
Schedule 1 of the Rules is an event based costs scale under which a party receives a fixed sum in respect of specified events which is appropriate for litigation in this Court have regard to the role and mode of operation of this Court set out in ss. 3 and 42 of the FCC Act and rule 1.03 of the Rules.
There are no circumstances that warrant the matter being determined on any other basis than in accordance with Schedule 1 of the Rules and that is appropriate in the context of this matter. Such a sum may be varied by the Court in the exercise of its discretion.[4] It is open to the Court to set the amount of the costs under rule 21.02(2)(a) as well as to set a time for the payment of costs.[5]
[4] see s.79(3) of the Federal Circuit Court Act 1999
[5] see rule 21.02(2)(a) of the Federal Circuit Court Rules 2001
In the particular circumstances of this matter a measure of estimation is required having regard to the nature of the proceedings, the operation of s.570 of the FW Act, and that the matter is not such as to warrant the Court exercising its discretion to make an order that the applicant pay the respondent’s actual costs or even a percentage of them.
Given the conclusion reached above the issue of what costs order should be made arises. In Pierson’s Pro-Health Pty Ltd & Ors v Silvex Nominees Pty Ltd & Anor (No.3) [2010] FMCA 250 (Pierson’s) Federal Magistrate Lucev, as His Honour then was, said:
“...that it is well established and well known that the primary source used for fixing costs in general federal law proceedings (other than, arguably, in bankruptcy) in this Court is the event-based scale in Schedule 1 of the FMCA Rules. Whilst there is discretion to depart from the event-based scale, that is the exception rather than the norm. The event-based scale under Schedule 1 of the FMCA Rules exists to provide simplicity and certainty in determining costs…”
Therefore, within 21 days the applicant should pay the respondent’s costs calculated as follows:
Stage 2 Initiating or opposing an application
$3,674.00
Half Day-hearing fee
$1,099.00
Advocacy loading
$ 549.50
Total
$5,322.50
Conclusion
Finally, at today’s hearing and by agreement the respondent filed an affidavit of Elizabeth Wreck sworn 7 December 2017 dealing with the respondent’s name change to Emperor Energy Limited. By consent there will be an order to that effect. Otherwise and for the reasons set out above there will be orders as set out at the beginning of these reasons for decision.
I certify that the preceding fifty (50) paragraphs are a true copy of the reasons for judgment of Judge O'Sullivan
Associate:
Date: 11 December 2017
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