FAIR WORK OMBUDSMAN v LOVERS OF PROPERTY & ORS
[2012] FMCA 1025
•9 November 2012
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| FAIR WORK OMBUDSMAN v LOVERS OF PROPERTY & ORS | [2012] FMCA 1025 |
| INDUSTRIAL LAW – Costs – unreasonable act or omission – delivery of seriously deficient pleading. |
| Fair Work Act 2009, ss.357(1), 570, 570(2)(b) Federal Magistrates Court Rules 2001, r. 21.10(2)(b) |
| Cugura v Frankston City Council (No. 2) [2012] FMCA 530 |
| Applicant: | FAIR WORK OMBUDSMAN |
| First Respondent: | LOVERS OF PROPERTY PTY LTD |
| Second Respondent: | ICS REAL ESTATE PTY LTD (ACN 122 697 652) |
| Third Respondent: | WILLIAM NICHOLAS FRASER |
| Fourth Respondent: | DIANA SYLVIA CARTWRIGHT |
| File Number: | BRG 1137 of 2011 |
| Judgment of: | Jarrett FM |
| Hearing date: | 30 August 2012 |
| Date of Last Submission: | 30 August 2012 |
| Delivered at: | Brisbane |
| Delivered on: | 9 November 2012 |
REPRESENTATION
| Counsel for the Applicant: | Mr Pratt |
| Solicitors for the Applicant: | Office of the Fair Work Ombudsman |
| Solicitor for the First, Third and Fourth Respondents: | Ms Richardson |
| Solicitors for the First, Third and Fourth Respondents: | M & K Lawyers |
| Counsel for the Second Respondent: | Ms Moody |
| Solicitors for the Second Respondent: | Herbert Geer Lawyers |
ORDERS
The applicant pay the second respondent’s costs thrown away by the amendments made to the statement of claim filed on 19 December, 2011 by the amended statement of claim filed on 15 May 2012 to be taxed in accordance with rule 21.10(2)(b) of the Federal Magistrates Court Rules 2001.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT BRISBANE |
BRG 1137 of 2011
| FAIR WORK OMBUDSMAN |
Applicant
And
| LOVERS OF PROPERTY PTY LTD |
First Respondent
| ICS REAL ESTATE PTY LTD (ACN 122 697 652) |
Second Respondent
| WILLIAM NICHOLAS FRASER |
Third Respondent
| DIANA SYLVIA CARTWRIGHT |
Fourth Respondent
REASONS FOR JUDGMENT
On 19 December, 2011 the applicant commenced these proceedings by way of an application and statement of claim. On 15 May, 2012 the applicant filed an amended statement of claim. On 22 June, 2012 the applicant filed a further amended statement of claim.
By this application the second respondent seeks an order that the applicant pay its costs thrown away by the amendments to the applicant’s statements of claim. It seeks an order for costs in either a fixed sum or to be assessed.
By the original statement of claim the applicant alleged that by an agreement between the first and second respondents, the second respondent agreed to provide certain services to the first respondent in return for a fee. The services appear to be certain “human resources” services that would enable the first respondent to engage workers on contracts for services as independent contractors, rather than as employees.
It is alleged that a particular person was engaged by the first respondent. The nature of the engagement is in issue in the proceedings. The applicant contends that the person, one Tehvand, was told that the engagement was in the nature of a contract for services whereas in fact and in law he was engaged under a contract of employment with the first respondent. The third and fourth respondents, directors of the first respondent, are alleged to be knowingly concerned in the misrepresentations.
It is said that the misrepresentations about the nature of the engagement was a breach of s.357(1) of the Fair Work Act 2009 and that by reason of Tehvand being an employee, there were certain other contraventions of the Fair Work Act 2009 relating to his terms and conditions.
The second respondent filed a defence to the first statement of claim on 5 April, 2012. The first, third and fourth respondents filed a defence on 10 April, 2012.
On 30 April, 2012 I made orders by consent between the parties that the applicant file and serve an amended statement of claim by 4:00pm on Tuesday 15 May, 2012.
On 15 May, 2012 the applicant filed and served an amended statement of claim. The amended pleading added a reference to one Statham who was alleged to be an agent of the second respondent, the primary contact person for the first respondent’s contact with the second respondent and who at all times was acting within the scope of his actual or apparent authority on behalf of the second respondent. Further, it is alleged that Statham was engaged in conduct which is, later in the pleading, said to lead to the conclusion that the second respondent was involved in the first respondent’s contravention of s.357(1) of the Fair Work Act 2009 and had thereby aided the contravention, or was directly or indirectly knowingly concerned in the contravention by the first respondent.
On 29 May, 2012 the first, third and fourth respondents filed an amended defence in response to the amended statement of claim. On 30 May, 2012 the second respondent filed an amended defence in response to the amended statement of claim. That amended defence points out a number of difficulties with the statement of claim in terms of incorrect numbering and inaccurate internal references within the pleading.
On 19 June, 2012 the Court made further orders by consent which included an order that the applicant have leave to file and serve a further amended statement of claim by 4:00pm on 22 June, 2012. The matter was referred to mediation.
On 22 June, 2012 a further amended statement of claim was filed by the applicant. An amendment was made to paragraph 27 of the document, and further amendments attempted to introduce some clarification to paragraph 48 of the pleading by introducing an allegation that “the engagement by the second respondent under the employment authority was invalid meaning it was void ab initio because of a common mistake of fact made by both of the parties to the employment authority concerning Tehvand’s capacity to perform the duties and obligations of the employment authority which was so fundamental to the employment authority that the parties regarded it as a condition precedent to the employment authority coming into existence.” That allegation is attempted to be explained in particulars that are added to the pleading.
On 6 July, 2012 the second respondent filed and served a further amended defence to the further amended statement of claim as did the first, third and fourth respondents.
The parties agree that because this is an application which arises from the provisions of the Fair Work Act 2009 the provisions of s.570 of that Act are relevant. Specifically, the second respondent relies upon s.570(2)(b) of the Act. Section 570 is in the following terms, is in the following terms:
570 Costs only if proceedings instituted vexatiously etc.
(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.
Note: The Commonwealth might be ordered to pay costs under section 569. A State or Territory might be ordered to pay costs under section 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
(c) the court is satisfied of both of the following:
(i) the party unreasonably refused to participate in a matter before FWA;
(ii) the matter arose from the same facts as the proceedings.
The second respondent argues that the applicant’s unreasonable act or omission has caused the second respondent to incur costs associated with the amendments to the statement of claim. The second respondent seeks that its costs thrown away by the applicant’s amendments be paid by it. The second respondent submits that the applicant’s conduct has been unreasonable in the sense required by s.570(2)(b) of the Act in that:
a)The applicant has now filed three versions of the statement of claim requiring the respondent to file a defence and two amended defences; and
b)The applicant’s amended statement of claim was in all respects an embarrassing pleading because of the inconsistent and inaccurate internal references within it and unless amended, the document was liable to mislead and to be struck out.
The evidence reveals that on 27 April, 2012 the solicitors for the second respondent wrote to the applicant in relation to the first statement of claim pointing out a number of difficulties with the various allegations that were raised against the second respondent. That seems to have lead to the orders made 30 April, 2012 providing for the applicant to file and serve its statement of claim.
On 12 June, 2012 the solicitors for the second respondent again wrote to the solicitors for the applicant making complaint about the amended statement of claim. In particular it is said:
“As you would have noted from our client’s amended defence filed on 30 May 2012 our client has taken issue with the numerous objectionable pleadings, errors and inconsistencies that are contained within the FWO’s amended statement of claim.
Would you kindly advise whether the FWO intends correcting these matters by filing an application for leave to further amend its statement of claim?
In our view the FWO (as the purported model litigant) should act promptly in seeking leave to file an amended pleading which properly sets out the case which each of the respondents is to meet.
Bearing in mind the listing on 19 June 2012 if on or before 4:00pm Friday 15 June 2012 the FWO does not seek leave to do so, then our client may, without further notice, apply to the Court to have all or part of the amended statement of claim struck out.”
The balance of the letter goes on to provide a request for further and better particulars with respect to certain parts of the amended statement of claim. The amended defence, referred to earlier in the correspondence seeks to “object” to certain pleadings in the amended statement of claim on the basis that they are not supported by particulars. In my view, that is not a proper pleading and is itself liable to be struck out. If a complaint is made that a pleading is not properly particularised then the appropriate course, in my view, is for a request for further and better particulars to be made either formally or informally as occurred in the letter to which I have just referred.
In response, the applicant contends that:
“a. At no time was it the case that the initial pleadings could not be understood or did not make sense.
… the applicant agreed to amend the pleading to make some things clearer …”
Section 67 of the statement of claim was in the following terms:
“At all material times, the Second Respondent was “involved” in the First Respondent’s contravention of subsection 357(1) of the FW Act as pleaded herein within the meaning of “involved” as it appears in subsection 550(2) of the FW Act and is thereby taken to have contravened that provision because the Second Respondent:
(a) aided, abetted, counselled or procured the contravention of the First Respondent as pleaded herein;
(b) induced the contravention;
(c) was by act or omission, directly or indirectly, knowingly concerned in or party to the contravention pleaded herein; or
(d) conspired with others to effect the contravention.
PARTICULARS
(a) The Second Respondent was the architect of the arrangement that was utilised by First Respondent to engage Tehvand under a sham contract for services arrangement;
(b) The Second Respondent possesses significant knowledge and expertise in understanding and identifying the differences between independent contractor and employment relationship.”
The objections taken by the second respondent to paragraph 67 of the statement of claim in their letter of 27 April, 2012 were well taken. Paragraph 67 is not a proper pleading. It does not plead the facts upon which the applicant’s claim against the second respondent is based but rather is a pleading of submission, conclusion and law without setting out the underlying factual contentions. The second respondent was right to take issue with paragraph 67.
The amended statement of claim addresses the deficiencies in paragraph 67 of the original statement of claim in paragraphs 66A–63 of the amended statement of claim. The paragraph numbering does not make sense and the amendments do not seem to have been carried out in the way one would ordinarily expect – by simply amending the underlying precursor document and marking the amendments (usually by underlining or striking through) so that they are readily apparent and are capable of comparison to the original pleading. Nonetheless substantial allegations of fact have been added to the pleading and the offensive parts of the pleading have been omitted.
The applicant points out that it has responded to the complaints made about its pleading in a timely way when raised by the second respondent. In the circumstances, the applicant argues that it cannot be suggested that the applicant instituted the proceedings either vexatiously or without reasonable cause. I agree but, the second respondent’s case is not that the proceedings were instituted vexatiously or without reasonable cause but rather, that the delivery of pleadings that required multiple amendments constitutes an unreasonable act or omission which caused the second respondent to incur costs.
The applicant points to the decision of O’Sullivan FM in Cugura v Frankston City Council (No. 2) [2012] FMCA 530 in support of its opposition to the making of the costs order sought by the second respondent. In that case, his Honour dealt with an application for costs and in particular turned his mind to what constituted an unreasonable act or omission for the purposes of s.570(2)(b) of the Fair Work Act 2009. His Honour did so, however, in the context of the proceedings before him having proceeded to a full hearing and having been determined by his Honour by judgment.
The issues for my determination in this matter are whether the delivery of pleadings which required amendment were, in the circumstances of this case:
a)An unreasonable act or omission; and
b)Whether the unreasonable act or omission has caused another party to incur costs in connection with the proceeding.
In my view the delivery of the first pleading containing paragraph 67 in its original form was an unreasonable act or omission on behalf of the applicant. The pleading was an improper pleading and demonstrably it did not plead the facts upon which the claim against the second respondent was advanced. It required significant and wholesale amendment. The second respondent was right to take complaint with that pleading. It was not merely an inefficient way to conduct litigation. It was not merely that the applicant might have acted in a different or a more timely way, it was more than a mere misguided approach, it was the lynchpin of the applicant’s case against the second respondent and it did nothing to set out the facts upon which that claim was based. In my view it was an unreasonable act to deliver the pleading in that form. Moreover, it is an unreasonable omission on the part of the applicant to properly plead a case against the second respondent in those circumstances.
The second respondent has been put to cost as a result of that unreasonable act or omission. It has delivered a pleading which is of no particular utility in the proceedings against the second respondent. It has also led the second respondent to engage in correspondence with the applicant about the deficient pleading. In my view the second respondent ought to have its costs thrown away by the amendments to the original statement of claim.
The complaints made by the second respondent against the applicant in respect of the second amended statement of claim are not in my view, complaints of unreasonable acts or omissions by the applicant. Whilst I accept that the further amended statement of claim may well be deficient in the sense that there is internal inconsistency and inaccurate references in relation to paragraph numbers, those matters ought to have been addressed by the parties in correspondence prior to the delivery of a formal pleading by the second respondent which, in my view, opportunistically picked up on those issues in its further amended defence. So to, the question of particulars should have been, and was addressed by way of correspondence between the parties rather than in the way in which it was addressed in its own pleading.
Even if my view that the delivery of the further amended statement of claim was not an unreasonable act or omission by the applicant is wrong, nonetheless I am not satisfied that having regard to the way in which the second respondent conducted itself, the delivery of such a pleading caused the second respondent any additional cost.
Accordingly, in my view the applicant ought to pay the second respondent’ costs thrown away by the amendments to the first statement of claim. The parties have attempted to engage in negotiation about the quantum of those costs. In my view the basis upon which the second respondent has sought to recover those costs is erroneous. An allowance ought to be permitted for the appearance at Court on the first Court date on 30 April, 2012 and some allowance ought to be made for the drawing and engrossing of the defence to the first statement of claim which became wasted once the amended statement of claim was delivered. There is no item which responds appropriately to such costs in the Federal Magistrates Court scale and accordingly those costs should be taxed in accordance with rule 21.10(2)(b) of the Federal Magistrates Court Rules yes .
I order accordingly.
I certify that the preceding twenty-nine (29) paragraphs are a true copy of the reasons for judgment of Jarrett FM
Date: 9 November 2012
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