Dr Michaela Hou v Inner West Periodontics Pty. Ltd., Dr Fiona Little
[2024] FWC 1513
•11 JUNE 2024
| [2024] FWC 1513 |
| FAIR WORK COMMISSION |
| DECISION |
Fair Work Act 2009
s.365—General protections
Dr Michaela Hou
v
Inner West Periodontics Pty. Ltd., Dr Fiona Little
(C2023/6307)
| DEPUTY PRESIDENT BOYCE | SYDNEY, 11 JUNE 2024 |
Application for costs by corporate respondent to general protections involving dismissal claim – corporate respondent asserts that the applicant was an independent contractor and not an employee for the purposes of Part 3-1 of the Fair Work Act 2009 – corporate respondent filed and served evidence and submissions in support of its jurisdictional objection that the applicant was not its employee – corporate respondent applied for orders for production against applicant – orders for production issued – shortly prior to the time for compliance with the production orders, the applicant discontinued her application – costs application subsequently made by corporate respondent under ss. 375B, 376 and 611 of the Fair Work Act 2009 against the applicant and/or her lawyers – costs application dismissed.
Introduction
On 13 October 2023, Dr Michaela Hou (Costs Respondent) filed a general protections involving dismissal application (Originating Application) under s.365 of the Fair Work Act 2009 (Act), against Inner West Periodontics Pty Ltd (Costs Applicant).[1]
In the Originating Application, the Costs Respondent alleges that she was dismissed by the Costs Applicant in contravention of ss. 340 and 351 of the Act on 23 September 2023.
In the Employer Response filed on 3 November 2023, the Costs Applicant raised a jurisdictional objection to the Originating Application, asserting that the Costs Respondent was never an “employee” of the Costs Applicant.
The named legal representative for the Costs Respondent has at all times been Harmers Workplace Lawyers (Harmers), with Ms Emma Pritchard, Executive Counsel and Team Leader, and Ms Sandra Marks, Executive Counsel, having carriage of the matter. The named legal representative for the Costs Applicant has at all times been Kingston Reid Lawyers, with Ms Lucy Shanahan, Partner, having carriage of the matter. Both parties were granted permission to be legally represented generally in these proceedings.
On 7 November 2023, the matter was allocated to my Chambers. On 8 November 2023, directions were issued to program to hearing the resolution of the Costs Applicant’s jurisdictional (not an employee and thus no dismissal) objection.
On 17 November 2023, the Costs Applicant filed a Form F52 seeking orders for the production of documents by the Costs Respondent.
On 21 November 2023, a short hearing was conducted to resolve the disputed documents, or categories of documents, sought by the Costs Applicant. Orders for Production were subsequently issued by the Commission to the Costs Respondent that day, with documents returnable at 9:30AM on Thursday, 30 November 2023 (Production Documents).
The Costs Applicant filed its evidence and submissions in support of its jurisdictional objection on 22 November 2023 (in accordance with Directions issued on 8 November 2023).
At 9:31AM on 30 November 2023, Harmers emailed Chambers and the Costs Applicant, advising that the Costs Respondent would be filing a Form F50 Notice of Discontinuance that day. A Notice of Discontinuance was subsequently filed with Chambers at 6:05PM on behalf of the Costs Respondent.
On 13 December 2023, the Costs Applicant filed a Form F1, making an application for costs against the Costs Respondent and/or Harmers under ss. 375B, 376 and/or 611 of the Act (Costs Application). Directions were subsequently issued to program the Costs Application for hearing. Both parties complied with these directions.
At the hearing of the Costs Application on 28 February 2024, Mr Peter Willink, Senior Associate, Kingston Reid Lawyers, appeared for the Costs Applicant, and Ms Tammy Wong, of Counsel, instructed by Ms Sandra Marks, Executive Counsel, Harmers, appeared for the Costs Respondent and Harmers.
Relevant legislation
The power to award costs under s.611 of the Act is limited. It reads:
“611 Costs
(1) A person must bear the person’s own costs in relation to a matter before the FWC.
(2) However, the FWC may order a person (the first person) to bear some or all of the costs of another person in relation to an application to the FWC if:
(a) the FWC is satisfied that the first person made the application, or the first person responded to the application, vexatiously or without reasonable cause; or
(b) the FWC is satisfied that it should have been reasonably apparent to the first person that the first person’s application, or the first person’s response to the application, had no reasonable prospect of success.
Note: The FWC can also order costs under sections 376, 400A, 401 and 780.
(3) A person to whom an order for costs applies must not contravene a term of the order.
Note: This subsection is a civil remedy provision (see Part 4-1).”
Sections 375B and 376 of the Act, read:
“375B. Costs orders against parties
(1) The FWC may make an order for costs against a party (the first party) to a dispute for costs incurred by the other party to the dispute if:
(a) an application for the FWC to deal with the dispute has been made under section 365; and
(b) the FWC is satisfied that the first party caused those costs to be incurred because of an unreasonable act or omission of the first party in connection with the conduct or continuation of the dispute.
(2) The FWC may make an order under subsection (1) only if the other party to the dispute has applied for it in accordance with section 377.
(3) This section does not limit the FWC’s power to order costs under section 611.”
…
“376. Costs orders against lawyers and paid agents
(1) This section applies if:
(a) an application for the FWC to deal with a dispute has been made under section 365 or 372; and
(b) a person who is a party to the dispute has engaged a lawyer or paid agent (the representative) to represent the person in the dispute; and
(c) under section 596, the person is required to seek the FWC’s permission to be represented by the representative.
(2) The FWC may make an order for costs against the representative for costs incurred by the other party to the dispute 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 dispute and it should have been reasonably apparent that the person had no reasonable prospect of success in the dispute; or
(b) of an unreasonable act or omission of the representative in connection with the conduct or continuation of the dispute.
(3) The FWC may make an order under this section only if the other party to the dispute has applied for it in accordance with section 377.
(4) This section does not limit the FWC’s power to order costs under section 611.”
Case law
In the general sense, the power to award costs under the Act is only exercised where there is clear evidence of unreasonable conduct by a party. What is unreasonable will depend upon the particular circumstances of the case. Where costs are said to arise for consideration based upon an act/s or omission/s, the identification of the specific act/s or omission/s is essential so as to make the relevant connection to the asserted costs that have been incurred.
The point in time for an evaluation under s.611(2) of the Act is the time that an applicant has filed his or her application, or the time that a Respondent filed its response. The evaluation is conducted on the basis of the facts objectively apparent at the time of filing.[2]
The relevant principles concerning the interpretation and application of s.611(2)(a) of the Act were comprehensively stated in Church v Eastern Health t/as Eastern Health Great Health and Wellbeing[3] (Church). They can be summarised as follows:
a) An application is made vexatiously when the predominant motive or purpose of the applicant is to harass or embarrass the other party or to gain a collateral advantage.
b) An application is not made without reasonable cause simply because it does not succeed.
c) Whether an application is made without reasonable cause may be tested by asking, on the facts apparent to the applicant at the time the application was made, was there was no substantial prospect of success.
d) If success depends upon the resolution in the applicant’s favour of one or more arguable points of law, it is inappropriate to characterise the application as having been made without reasonable cause.
e) An application will have been made without reasonable cause if it can be characterised as so obviously untenable that it cannot possibly succeed, is manifestly groundless, or discloses a case where the Commission is wholly satisfied that it cannot succeed.[4]
On the issue of vexatious applications, and the expression “without reasonable cause”, the Full Bench in Church stated:
“[29] The question of whether an application was made ‘vexatiously’ looks to the motive of the applicant in making the application. It is an alternative ground to the ground that the application was made ‘without reasonable cause’ and may apply where there is a reasonable basis for making the application. In Nilsen v Loyal Orange Trust (Nilsen) North J observed that this context requires the concept of vexatiousness to be narrowly construed. His Honour went on to state that an application will be made vexatiously ‘where the predominant purpose ....is to harass or embarrass the other party, or to gain a collateral advantage’. Deane and Gaudron JJ made a similar observation in Hamilton v Oades in which they said:
“The terms ‘oppressive’ and ‘vexatious’ are often used to signify those considerations which justify the exercise of the power to control proceedings to prevent injustice, those terms respectively conveying, in appropriate context, the meaning that the proceedings are ‘seriously or unfairly burdensome, prejudicial or damaging’ and ‘productive of serious and unjustified trouble and harassment’.”
[30] We now turn to the expression ‘without reasonable cause’. A party cannot be said to have made an application ‘without reasonable cause’, within the meaning of s.611(2)(a), simply because his or her argument proves unsuccessful. The test is not whether the application might have been successful, but whether the application should not have been made. In Kanan v Australian Postal and Telecommunications Union, Wilcox J put it this way:
“It seems to me that one way of testing whether a proceeding is instituted ‘without reasonable cause’ is to ask whether, upon the facts apparent to the applicant at the time of instituting the proceeding, there was no substantial prospect of success. If success depends upon the resolution in the applicant’s favour of one or more arguable points of law, it is inappropriate to stigmatise the 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.”” (citations omitted)
In relation to s.611(2)(b) of the Act, the relevant principles were summarised by the Full Bench in Baker v Salva Resources Pty Ltd[5] (footnotes omitted):
“[10] The concepts within s.611(2)(b) ‘should have been reasonably apparent’ and ‘had no reasonable prospect of success’ have been well traversed:
• ‘should have been reasonably apparent’ must be objectively determined. It imports an objective test, directed to a belief formed on an objective basis, rather than a subjective test; and
• a conclusion that an application ‘had no reasonable prospect of success’ should only be reached with extreme caution in circumstances where the application is manifestly untenable or groundless or so lacking in merit or substance as to be not reasonably arguable.”
In the case of Matthew Leathem v Skrinnikoff, Phillip T/A Jaymak Central West & Jaymak Australia Pty Ltd,[6] Deputy President Anderson outlined the relevant legal principles that apply to a costs application brought under s.375B and 376 of the Act, as follows:
“[46] Making an order for costs under either ss 375B or 376 is a two-step process. First, the Commission must be satisfied that jurisdiction exists to award costs. The relevant jurisdictional facts need to be established. Secondly, the Commission must consider whether it is appropriate to exercise its discretion to make an order for costs.
…
[48] Whether the conduct of a party is “an unreasonable act or omission” is to be objectively assessed. Although decided under an earlier statutory regime, the observation that “what attracts the discretion to award costs is unreasonable action or the absence of sufficient reason for the action taken” remains apposite. Each case will turn on its own facts.” (citations omitted)
In Keep v Performance Automobiles Pty Ltd,[7] a Full Bench of the Commission said the following in relation to s.375B of the Act:
“[11] Section 375B was inserted into the FW Act by the Fair Work Amendment Act 2013 (Cth). The new provision came into effect on 1 January 2014 and applies to dismissals which took effect from that date.
[12] The Supplementary Explanatory Memorandum to the Fair Work Amendment Bill 2013 (Cth) states as follows:
‘New section 375B allows the FWC to order costs against a party to a general protections dismissal dispute (the first party) if it is satisfied that the first party caused the other party to the dispute to incur costs by an unreasonable act or omission in connection with the conduct or continuation of the dispute. New section 375B is similar to the costs orders that are available against parties in relation to unfair dismissal matters (see section 400A).
57. This power to award costs is in relation to the dispute before the FWC and does not include costs associated with a general protections court application.
58. The power to award costs under new section 375B is not intended to prevent a party from robustly pursuing or defending a general protections dispute before the FWC. Rather, the power is intended to address the small proportion of litigants who pursue or defend disputes in an unreasonable manner. The power is only intended to apply where there is clear evidence of unreasonable conduct by the first party.
59. The FWC’s power to award costs under subsection 375B(1) is discretionary and is only exercisable where the first party (whether the applicant or respondent) causes the other party to incur costs because of an unreasonable act or omission.
60. However, the power to award costs is only available if the FWC is satisfied that the act or omission by the first party was unreasonable. What is an unreasonable act or omission will depend on the particular circumstances but it is intended that the power only be exercised where there is clear evidence of unreasonable conduct by the first party.
61. New subsection 375B(2) provides that the power to award costs against one party in these circumstances is only exercisable if the other party to the dispute makes an application in accordance with section 377. New subsection 375B(3) makes it clear that the new power to award costs under subsection 375B(1) operates in addition to subsection 611(2), which enables the FWC to make costs orders against a person in certain circumstances, such as where an application is made vexatiously or without reasonable cause.’
[13] It is apparent from the Supplementary Explanatory Memorandum that the legislature intended that the power to order costs provided by s.375B only be exercised where there is clear evidence of unreasonable conduct. Such an approach is entirely consistent with the jurisprudence relating to the other costs provisions in the FW Act (such as s.611).
[14] As stated in s.375B(3), the power to make an order for costs pursuant to s.375B(1)
does not limit the FWC’s power to order costs pursuant to s.611.”[8]
Costs Applicant’s case
As best I can understand it, the Costs Applicant seeks costs on one or more of the following grounds:
a) s.375B(1)(b) of the Act – the Costs Respondent’s unreasonable act or omission in failing to consider the Production Documents at all prior to filing the Originating Application, being an unreasonable act or omission that crystallised at some point in time after the Originating Application was filed (causing the Costs Applicant to incur costs from that relevant point in time in connection with the conduct or continuation of the proceedings);[9]
b) s.376(2)(b) of the Act – Harmers’ unreasonable act or omission in failing to consider the Production Documents at all prior to filing the Originating Application, being an unreasonable act or omission that crystallised at some point in time after the Originating Application was filed (causing the Costs Applicant to incur costs from that relevant point in time in connection with the conduct or continuation of the proceedings);[10]
c) s.611(2)(a) and (b) of the Act – the Costs Respondent’s unreasonable act or omission in filing the Originating Application, in that she:
i)failed to consider the Production Documents at all prior to filing,[11] and/or
ii)should have known prior to filing, from other cases decided before the High Court’s decision in Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd[12] (Personnel Contracting), that her circumstances were ‘on all fours’ with the relationship of the parties to these proceedings being that of principal and independent contractor (as opposed to employer and employee).[13]
I use the phrase “as best I can understand it” in circumstances where the Costs Applicant’s position meandered around at the hearing (including as to the manner in which, and the time at which, the costs provisions of the Act were triggered). In this regard, the Costs Applicant’s position seemed to pivot around:
a) in respect of the Costs Respondent, the Originating Application being vexatious and/or instituted without reasonable cause and/or having no reasonable prospects of success, as at the time it was filed; and
b) in respect of the Costs Respondent and Harmers, the Costs Respondent and/or Harmers engaging in some type of unreasonable act or omission (not succinctly articulated or identified) at an unidentified point in time, or at various different points in time, including as at the time that the Originating Application was filed, and/or as at the time that the Notice of Discontinuance was filed, or anywhere in between.[14]
Indeed, the Costs Applicant’s case as against Harmers was ultimately summarised in oral submissions by Mr Willink (for the Costs Applicant), as follows:
“What is it that Harmers are said to have done? The suggestion was made there was silence in response. We clearly set out that it’s not what they – we’re not taking issue with what they did. We’re taking issue with what they didn’t do. Did not properly consider the material, the documents. That is what we’re saying.”[15]
The problem with the foregoing submission is that the Cost Applicant’s case, as against Harmers, is made under s.376(2)(b) of the Act, not s.376(2)(a).[16] Section 376(2)(b) goes to Harmers’ purported conduct after the Originating Application was filed, as opposed to the time that the Originating Application was filed.
Whatever the Costs Applicant’s case as to costs might be, it centres upon the following allegations:
a) the Costs Respondent discontinued the Originating Application at the exact moment she was required to produce the Production Documents;
b) the timing of the Costs Respondent’s discontinuance constitutes a sufficient basis for the Commission to infer that she did so as a result of information she identified in one or more of the Production Documents;
c) there is thus a sufficient, or a reasonably apparent, basis to find that:
·the Costs Respondent did not consider the Production Documents prior to filing the Originating Application; and/or
·if she did consider the Production Documents, she would not have filed the Originating Application;
d) the act of filing the Originating Application, and/or the omission in not considering the Production Documents prior to filing, enlivens the costs provisions under s.611 of the Act, and the costs discretion that is thereafter activated ought to be exercised in favour of Costs Applicant by making an order that the Costs Respondent pay the Cost Applicant’s costs; and
e) Harmers is essentially guilty of the same conduct as the Costs Respondent, in that it had no regard to the Production Documents prior to the filing the Originating Application, did not request the Costs Respondent to provide it with the Production Documents (or some of them) prior to the filing the Originating Application, and/or did not ask relevant questions of the Costs Respondent when taking instructions so as to illicit production to Harmers (by the Costs Respondent) of relevant documents that would have made it apparent that the Costs Respondent’s case was manifestly hopeless, or that it was about to be commenced on an improper basis.[17]
Pulling together the various strands of the Costs Applicant’s case (from its Form F1, written submissions, and oral submissions), and putting that case as best I can in relation to s.611(2) of the Act, I take the Costs Applicant’s case to be as follows:
‘The presumption under s.611(1) of the Act (that a person must bear their own costs in relation to a matter before the FWC) does not apply, in that the Costs Respondent, at the time she filed the Originating Application, did so:
a) vexatiously or without reasonable cause (s.611(2)(a)); or
b) in circumstances where it was reasonably apparent that it had no reasonable prospects of success (s.611(2)(b)).’
Taking the same approach to the Costs Applicant’s case under ss. 375B and 376 of the Act, and putting that case as best can, I work on the basis that the Costs Applicant’s case, at its highest, is to be expressed as follows:
a) the Costs Respondent did not consider the Production Documents at all prior to filing the Originating Application, and this was (or became) an unreasonable act or omission in connection with the conduct or continuation of the proceedings (i.e. after the proceedings had already been commenced). It is a matter for the Commission to choose the particular point in ‘time’ (being a time post the filing of the Originating Application, all the way up to the time of its discontinuance) at which the Costs Respondent’s unreasonable act or omission crystallised, such that her conduct, or the continuation of the proceedings thereafter, caused costs (by virtue of her unreasonable act/s or omission/s) to be incurred by the Costs Applicant.
b) Harmers did not consider, or did not make relevant inquiries about, the Production Documents (or their existence) at all prior to filing the Originating Application, and this was (or became) an unreasonable act or omission in connection with the conduct or continuation of the proceedings (i.e. after the proceedings had already been commenced). Again, it is a matter for the Commission to choose the particular point in ‘time’ (being a time post the filing of the Originating Application, all the way up to the time of its discontinuance) at which Harmers’ unreasonable act or omission crystallised, such that Harmers’ conduct, or the continuation of the proceedings thereafter, caused costs (by virtue of Harmers’ unreasonable act/s or omission/s) to be incurred by the Costs Applicant.
The case for the Costs Respondent and Harmers
The Costs Respondent gave the following evidence (that was not challenged during her cross-examination):
“4. On 14 March 2016, I entered into a verbal agreement with Dr Fiona Little to commence work as a Periodontist at Inner West Periodontics Pty Ltd (ACN:133 471 637) [the Costs Applicant]. [The Costs Applicant] operated two practices, one at Leichhardt and one at Campbelltown.
5. During the period in which I worked at [the Costs Applicant], I was:
a. engaged in my personal capacity;
b. engaged on a permanent and ongoing basis;
c. paid on a regular fortnightly basis;
d. paid on a commission basis determined by Dr Little and calculated at a flat percentage of 50% of gross patient fees generated (initially 45%, then 48%, then 50% in November 2021);
e. not required, and did not issue, invoices to [the Costs Applicant] for any work performed;
f. required to perform my work personally and could not delegate or subcontract work to others;
g. required to wear a uniform supplied by the business;
h. provided with tools and equipment, including a chair, light, dental instrument and periodontal speciality items, with the exception of dental loupes;
i. required to perform work at hours and times determined and controlled by Dr Little;
j. heavily integrated into the business and responsible for undertaking managerial and ‘Second-in-Charge’ duties. By way of example and without being exhaustive, I:
i. was provided with keys to both practices and was required to open the practice if staff were late or if I arrived early;
ii. was required to deal with and mediate conflicts between dental assistants and receptionists and report back to Dr Little, including in afterhours discussions about staff members and their performance;
iii. was required to transport dental stock and equipment (local anaesthesia, toothbrushes, sterilisation and cleaning agents) between the Leichhardt and Campbelltown practices;
iv. was required to perform administrative work during staff shortages, including confirming the availability of dental assistants and receptionists, booking or cancelling patients, and printing day sheets and treatment plans;
v. was granted security access to amend staff clock in and clock out times;
vi. assisted Dr Little in hiring a new receptionist for the business in or around May 2020.
k. held out to third parties as being part of the business. My name appeared on the door at the Campbelltown Practice, and my name, photograph and biography were added to [the Costs Applicant’s] website in August 2016. Dr Little also supplied me with [the Costs Applicant’s] branded referral pads and business cards with my name and credentials.
Events leading to 23 September 2023
6. In or around November 2022, I disclosed to Dr Little that I was pregnant and due to have my first child in late April 2023.
7. On 13 April 2023, I commenced a period of unpaid absence to have my baby.
8. On 18 April 2023, my baby was born.
9. On 22 September 2023, I sent an email to Dr Little stating that I was ready to transition back to work.
10. On 23 September 2023, Dr Little sent me an email stating that returning to work at the Leichhardt or Campbelltown practices was no longer possible, that she would not go into the reasons why, and that her decision was not negotiable.
Commencement of the Application
11. On 13 October 2023, after receiving legal advice, I commenced a general protections application alleging unlawful termination against the Respondent (GP Application).
…
Reasons why I decided to file a notice of discontinuance
26. On 28 November 2023 at 1.29pm and after I provided the Documents to Ms Marks [Solicitor], I received an email from Harmers which included an increased estimate of costs involved with my defence against the jurisdictional objection by reason of the involvement of Counsel. A copy of the email, which has been redacted in relation to information that is not related to the increased estimate in legal costs, is attached and marked MH-8. By annexing this email to my affidavit, I do not intend to waive privilege over it.
27. I was surprised by the increase in the estimate of costs and it made me think whether I could afford the ongoing litigation.
28. I made the decision to discontinue the GP Application for the following reasons:
(a) I had not generated any income from periodontal work since 13 April 2023, a period of 7 months, and my family had been and was living on substantially less income than if I had been working;
(b) I had not budgeted for the increased costs and those unforeseen costs would cause financial strain on my family;
(c) I was uncertain about when I would be able to find work and what arrangements any new place of work might offer to me as a new mother;
(d) I was sleep deprived and time poor as the primary carer of my first child who was a 7-month-old infant baby at the time;
(e) neither I, nor my solicitors, could predict with any certainty whether the Respondent might file other interlocutory applications as the proceeding went on and each application would cost me additional money beyond what I expected to originally expend on this litigation;
(f) there was no way I could control the way that the Respondent could conduct this litigation or the time or energy that I would ultimately have to devote to it;
(g) the witness statement of Dr Fiona Little was lengthy, detailed and contained information which I did not previously know about (such as the contract of Dr Luo, the details of which had not previously been provided to me) and would require a lot of time and concentration on my part to generate a statement in response;
(h) I had been suffering from increasing stress and anxious thoughts as the proceeding continued and I was required to spend more time with my solicitors to prepare a statement and submissions at the expense of my baby;
(i) the hearing was listed on 18 December 2023 and I would be required to attend and suffer the stress of being cross-examined when my priority was the welfare of my baby and being present for her as her mother; and
(j) the hearing was scheduled for 18 December 2023, just before my baby’s first Christmas, and I did not want to deal with the distress of a hearing rather than focusing on my baby during that period and creating family memories with her and our extended family in our first Christmas together.
29. On the basis of the matters set out in [the foregoing] paragraph, I made the decision to discontinue the GP Application.
30. Accordingly, on the morning of 30 November 2023, I instructed Harmers to lodge a Notice of Discontinuance on my behalf, and they did so later that day.”[18]
Ms Wong, on behalf of the Costs Respondents, relevantly made the following closing oral submissions:
“The evidence that was filed by the Costs Respondent went to the case that was put by the costs applicant as in that document [i.e. the Costs Application set out in the Form F1], but even more importantly, just now, despite repeated questioning, my friend was unable to properly answer the actual time in which the act is said to have occurred, or the omission.”[19]
…
“Alongside each of those submissions [of the Costs Applicant] was a clear concession - because it was clearly said in the witness box - that in fact there was consideration of the documents. The parties are together that Dr Hou [Costs Respondent] communicated the contents of the documents – that is, their meaning and effect – to her solicitors [Harmers] [and] she did this prior to seeking legal advice. That as a result of receiving legal advice she became unconcerned in her belief as to the propositions that she was putting in her general protections application. She said that numerous times. And she said also that she felt because of the legal advice she had received she had a legitimate claim. That is the antithesis factually of the scenario that the [Costs Applicant] now seeks to put.
In a nutshell, what the [Costs Applicant] concedes is Dr Hou was aware of the documents, she knew about them prior to lodging the application. She knew about them at all times. She communicated the contents to her lawyers; they knew about those documents or the contents therein at all times. However, despite that knowledge and despite that understanding of the contents, Dr Hou and her solicitors made a decision about the prospects of this case which is not the same as the decision or the conclusion that the [Costs Applicant] would have made. That’s essentially the case that’s brought before the Commission.
This was conceded that there was consideration, but it was not adequate, was not proper consideration. No evidence as to what that means, but it must not have been proper because it did not agree with the [Costs Applicant’s] own view of the case, which is that there should be no reasonable prospects of success.
In terms of the principles there, Commissioner – pardon me, Deputy President, you traversed this earlier. There is of course in a case where there is no written contract of employment a ripe area for dispute in terms of the nature of the employment as between the parties. My friend sidestepped that question neatly, but it cannot be avoided.
And here I will stray into some submissions about section 611, because insofar as prospects are concerned and reasonable or adequate consideration of documents is concerned, this goes to that point. The case of Personnel Contracting v CFMMEU, as well as ZG Operations Australia v Jamsek [2022] HCA 2. Personnel of course was [2022] HCA 1. Those are the most recent High Court authorities in relation to the employment relationship. They are very clear that where a party’s relationship is comprehensively committed to a written contract, the validity of which is not challenged as a sham – and then there’s various discussions about an estoppel – the question of whether a person is employee or independent contractor is to be resolved solely by consideration of the terms of the contract, not by reference to the performance of the contract. That is clearly not the case here.
The case here is that none of the relationship was committed comprehensively to a written agreement, and therefore the characterisation of the relationship is to be done by reference to the totality of the relationship between the parties. And what that means is relevant matters should be assessed such as whether or not the work was subordinate to the employer’s business, whether or not it can be seen to be done as an employee of the business rather than as part of an independent enterprise, the existence of a right of control, provision and maintenance of equipment. - I won’t go on.
In this case which the respondent has not mentioned at all and seems to have overlooked, there is a central part of this general protections claim which arose out of a claim for misrepresentation under section 357(1). It was always part of Dr Hou’s claim that the reason why she had certain indicia as a contractor was because she was made to carry out her work with that – excuse me – with those particular parameters in place. That was clear as early as the application itself which I will now take, Deputy President, you to. If you may please turn to the application which is dated 13 October 2023.
…
Deputy President, you will see that there is a scheduled general protections application at the very – so after the page of 10, which is the form provided by the Fair Work Commission, there is a schedule and it’s numbered 1. This sets out a comprehensive statement known to the [Costs Applicant] at the point of application of the types of claims that were intended to be brought. And I’ll take, Deputy President, you to 6.16. Perhaps I’ll take you to 6.16, but in bypassing I will also refer to 1.5 which sets out all of the indicia or at least a substantial amount of the indicia which are asserted by Dr Hou to go to a conclusion that she was an employee.
…
Yes, I won’t labour that. But 6.16 is where I want to take you, Deputy President. It says clearly there, ‘In the absence of a written contract of employment’ – et cetera – ‘Dr Hou was an employee.’ And then at 6.17:
During the period between April 2016 and September 2023 IWP represented to Dr Hou that she performed work as an independent contractor. IWP made the representations by, inter alia, purporting to engage Dr Hou as an independent contractor, not withholding income tax, requiring her to maintain her own professional indemnity insurance, not providing her with employee entitlements including annual leave –
and therefore there’s a claim for annual leave –
and also not making superannuation contributions.
This paragraph is very important in the context of the application. It shows a number of things. Firstly, it shows that there is no doubt that both Harmers and the [Costs Respondent] were aware of the documents which comprise Exhibit 1 through to Exhibit 4 or I believe it’s Exhibit 4 – yes, that’s right – which is a Certificate of Currency. It shows clearly that there was consideration of those documents or the contents of those documents, and there was a decision made by Harmers and the [Costs Respondent] that, notwithstanding those documents, the claim could be made. And that is partly because it’s Dr Hou’s position that she was made by way of representation of her employer to be engaged as an independent contractor.
We are not here today to ascertain the fact of whether or not that is true. The matter discontinued before Dr Hou could even file evidence around that, but there was plenty of evidence as there always is in these types of claims. So my submission is that this paragraph makes it abundantly clear that the allegation put by the respondent in relation to 375B and 376 cannot be sustained.
The allegation is that there failed to be proper consideration of documents prior to lodging the application, and yet if there had been a failure to do so there would not be such a well-reasoned dealing with precisely those documents and what they mean for the case, nor would there be a case advanced under 357(1) which negates the effect of those documents. So the idea that the existence of those documents ought to have annihilated all consideration of prospects of success is simply untenable.
It’s not only about a failure to consider – that is the act which is alleged by the applicant - a failure to consider, it’s twofold. It’s not only is there a failure to consider, but that if there were an adequate consideration, it would have then led to the application not being filed. As I said, there are issues around whether or not 375B, 376 can even sustain an initiation type of claim. But assuming that they can, that case cannot stand because, firstly, there was consideration, but secondly, even if there wasn’t consideration, the second step which the Commission has to consider on the respondent’s case is whether or not had a person considered those documents they would have understood that there would be no prospects of success. For the reasons I’ve explained in terms of Personnel and ZG and also the misrepresentation claim, that’s an untenable submission and it cannot be accepted.”[20]
Some of the references in foregoing submissions of Ms Wong to the ‘Schedule’ (annexed to the Originating Application) are worth setting out, relevantly, as follows:
“1.5 Throughout her employment with [the Costs Applicant], Dr Hou was:
(a) engaged in her personal capacity;
(b) engaged on a permanent and ongoing basis;
(c) paid on a regular fortnightly basis;
(d) paid on a commission basis determined by Dr Little [Director of the Costs Applicant] and calculated at a flat percentage of 50% of gross patient fees generated (initially 45%, then 48%, then 50% in November 2021);
(e) not required, and did not issue, invoices to [the Costs Applicant] for any work performed;
(f) required to perform the work personally and could not delegate or subcontract work to others;
(g) required to wear a uniform supplied by the business;
(h) provided with tools and equipment, including a chair, light, dental instruments and periodontal speciality items, with the exception of dental loupes;
(i) required to perform work at hours and times determined and controlled by Dr Little;
(j) heavily integrated into the business and responsible for undertaking managerial and ‘Second-in-Charge’ duties. By way of example and without being exhaustive, Dr Hou:
i. was provided with keys to both practices and was required to open the practice if staff were late or if Dr Hou arrived early.
ii. was required to deal with and mediate conflicts between dental assistants and receptionists and report back to Dr Little, including in afterhours discussions about staff members and their performance.
iii. was required to transport dental stock and equipment (local anaesthesia, toothbrushes, sterilisation and cleaning agents) between the Leichhardt and Campbelltown practices.
iv. was required to perform administrative work during staff shortages, including confirming the availability of dental assistants and receptionists, booking or cancelling patients, and printing day sheets and treatment plans.
v. was granted security access to amend staff clock in and clock out times.
vi. assisted Dr Little in hiring a new receptionist for the business in or around May 2020.
(k) held out to third parties as being part of the business. Dr Hou’s name appears on the door at the Campbelltown Practice, and her name, photograph and biography were added to [the Costs Applicant’s] website in August 2016. Dr Little also supplied Dr Hou with [the Costs Applicant’s] branded referral pads and business cards with her name and credentials.
…
4.4 On 28 September 2023, Dr Hou sent an email to Dr Little to convey her disappointment and understanding that her employment was terminated on 23 September 2023 with immediate effect. A copy of Dr Hou’s email is attached and marked “F”.
4.5 Later the same day, Dr Little responded to Dr Hou’s email stating, among other things, that:
(a) she provided no assurance to Dr Hou that her return to work at [the Costs Applicant] could be accommodated;
(b) Dr Hou is not and has never been an employee of [the Costs Applicant]; and
(c) restated that she would not go into the reasons for her decision. A copy of Dr Hou’s email is attached and marked “G”.
…
Misrepresenting employment as an independent contracting arrangement
6.16 In the absence of a written contract of employment and by reason of the indicia identified at paragraph 1.5 above, Dr Hou was an employee of [the Costs Applicant].
6.17 During the period between April 2016 and September 2023, [the Costs Applicant] represented to Dr Hou that she performed work as an independent contractor. [the Costs Applicant] made the representations by, inter alia:
(a) purporting to engage Dr Hou as an independent contractor;
(b) not withholding income tax from Dr Hou’s remuneration;
(c) requiring Dr Hou to maintain her own professional indemnity insurance;
(d) not providing Dr Hou with employment entitlements, including annual leave and personal/carer’s leave; and
(e) not making superannuation contributions on Dr Hou’s behalf.
6.18 In the premises, [the Costs Applicant] has breached section 357(1) of the FW Act for misrepresenting Dr Hou’s employment as an independent contracting arrangement.”
Consideration
No matter what way/s the Costs Applicant puts its case, it is unsustainable. It’s case is either contrary to the evidence, or unsupported by the evidence.
The Costs Applicant accepts that there are significant gaps in respect of direct evidence supporting its case as to costs, but asks me to take what are essentially circumstantial pieces of evidence, and draw inferences from those pieces of evidence in making ultimate findings of fact that are detrimental to the Costs Respondent and Harmers.
A fact can be proved by inference if according to common experience the relevant fact is the more probable inference from unexplained primary facts. But inferences are not to be drawn where to do so would give rise to conflicting inferences of equal degree of probability so that the choice between them is mere conjecture. The Court cannot choose between guesses, where the possibilities are potentially unlimited, on the ground that one guess seems more likely than another, or the others.[21]
To draw inferences of the type suggested by the Costs Applicant would be to draw inferences against the Costs Respondent and Harmers that are directly contrary to the Costs Respondent’s evidence (which she was tested on, or the opportunity was available for her to be tested upon, during cross-examination at the hearing).
I concur with the reasons articulated by Ms Wong in her oral submissions as to why the Costs Application in this matter, as against both the Costs Respondent and Harmers, must be dismissed.[22] To that end, I make the following findings and conclusions based upon the evidence:
a) the Applicant considered the Production Documents prior to filing her Originating Application;
b) the Applicant provided, or communicated the substance of, the Production Documents to Harmers, and sought legal advice as to her position, prior to her Originating Application being filed;
c) the Originating Application specifically deals with, in an unambiguous and upfront manner, the anticipated assertion by the Costs Applicant that the Costs Respondent was an independent contractor and not its employee (see paragraph [30] of this decision);
d) there was no written agreement between the parties setting out the specific terms and conditions of the Costs Respondent’s engagement by the Costs Applicant. In short, the cases relied upon by the Costs Applicant that pre-date the High Court’s decision in Personnel Contracting are not on all fours with the circumstances of this case, or the law that is to be applied post Personnel Contracting;[23]
e) there is no basis upon which the inferences sought by the Costs Applicant can, or ought to, be made, especially having regard to my findings at subparagraphs (a) to (d) above, and the evidence of the Costs Respondent as to her reasons and basis for commencing, continuing, and discontinuing the proceedings;[24]
f) there is no evidence to suggest that the Originating Application, at the time that it was filed, was made vexatiously or without reasonable cause (s.611(2)(a)), especially having regard to my findings at subparagraphs (a) to (d) above, and the evidence of the Costs Respondent as to her reasons and basis for commencing, continuing, and discontinuing the proceedings;[25]
g) there is no reason to find in these proceedings that the Originating Application, at the time that it was filed, had no reasonable prospects of success (s.611(2)(b)), especially having regard to my findings at subparagraphs (a) to (d) above. There are clearly arguable points of fact and law to the Costs Respondent’s case (as articulated in the Originating Application);[26] and
h) the grounds for the Costs Applicant’s claims under ss. 375B and 376 of the Act are contrary to the evidence, including by reference to of my findings at subparagraphs (a) to (d) above. Further, even if the Costs Applicant’s claims under ss. 375B and 376 of the Act are supported by some evidence, the Costs Applicant has failed to appropriately identify the unreasonable act/s or omission/s said to constitute the Costs Respondent’s relevant conduct, or the time at which the specific unreasonable act/s or omission/s crystallised such that the conduct or continuation of the proceedings caused costs thereafter (or from that point in time) to be incurred by the Costs Applicant. It is not for the Commission to speculate or randomly pick a time that has not been adequately articulated by a moving party to a costs application, such that a costs respondent does not have a genuine opportunity to engage with it.
The Costs Applicant tendered all of the Production Documents at the costs hearing, and sought to cross-examine the Applicant as to those documents. In circumstances where the respective merits of the Costs Applicant’s defence, and the Costs Respondent’s case, were not open to be determined in these costs proceedings, such cross-examination was essentially pointless (i.e. the Costs Respondent’s evidence established early on in her cross-examination that she had considered the Production Documents prior to filing her Originating Application).
The Costs Applicant also raises the fact that when discontinuing her Originating Application, the Cross-Respondent ticked a box on the Form F50 which reads: “Wholly discontinues the matter to pursue an alternate application”. Whilst the Costs Applicant raises this fact, its purpose in doing so is unexplained.[27] The fact itself means nothing, and I am not aware of what inference is to be drawn from same (i.e. beyond the fact that the Applicant has discontinued the proceedings). The Applicant’s evidence on the issue is wholly unextraordinary.[28] I have no reason to not accept her evidence in this regard, and its characterisation by Ms Wong in her oral submissions.[29]
Conclusion
Because I am not satisfied that any of the jurisdictional preconditions to the making of a costs order under ss.375B, 376 or s.611 of the Act have been made out, the Costs Application must be dismissed. An order to this effect will be issued contemporaneously with this decision.
DEPUTY PRESIDENT
Appearances:
Mr Peter Willink, Senior Associate, Kingston Reid Lawyers, appeared for the Costs Applicant (Inner West Periodontics Pty Ltd).
Ms Tammy Wong, of Counsel, instructed by Ms Sandra Marks, Executive Council, Harmers, appeared for the Costs Respondent (Dr Michalea Hou) and Harmers Workplace Lawyers.
[1] The Originating Application also names Dr Fiona Little, Director, Inner West Periodontics Pty Ltd, as a second respondent (being a person knowingly concerned in the alleged contraventions of Inner West Periodontics Pty Ltd).
[2] Baker v Salva Resources Pty Ltd[2011] FWAFB 4014, 211 IR 374, at [42]-[43].
[3] [2014] FWCFB 810, 240 IR 377.
[4] Ibid, at [23]-[33].
[5] [2011] FWAFB 4014, 211 IR 374.
[6] [2022] FWC 2499.
[7] [2015] FWCFB 1956.
[8] Ibid, at [11]-[14].
[9] Costs Applicant’s Submissions, 19 January 2024, at [1.8].
[10] Ibid.
[11] Transcript, PN528, PN550-PN554, PN570-PN571, PN635, and PN638.
[12] [2022] HCA 1: (2022) 275 CLR 165.
[13] Costs Applicant’s Submissions, 19 January 2024, at [5.2].
[14] Transcript, PN528, PN550-PN554, PN570-PN571, PN573-PN600, PN635, PN638, PN696 and PN698.
[15] Ibid, PN698.
[16] Costs Applicant’s Submissions, 19 January 2024, at [4.2].
[17] Costs Applicant’s Submissions, 19 January 2024, at [3.1]. Costs Applicant’s Reply Submissions, 9 February 2024, at [1.2] and [2.8]-[2.12].
[18] Statement of Dr Michalea Hou, 1 February 2024, at [4]-[11], and [26]-[30].
[19] Transcript, PN657.
[20] Ibid, PN660-PN677.
[21] Jones v Dunkel (1959) 101 CLR 298, at 304-305, per Dixon CJ.
[22] See paragraph [29] of this decision.
[23] Costs Applicant’s Submissions, 19 January 2024, at [5.2], and footnote 4.
[24] See paragraph [28] of this decision: Statement of Dr Michalea Hou, 1 February 2024, at [4]-[11], and [26]-[30].
[25] Ibid.
[26] Church v Eastern Health t/as Eastern Health Great Health and Wellbeing[2014] FWCFB 810, 240 IR 377.
[27] Transcript, PN697.
[28] Ibid, PN322-PN328.
[29] Ibid, PN684-PN685, PN688, and PN697.
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