Fair Work Ombudsman v Northcoast Security Services Group Pty Ltd & Anor
[2016] FCCA 2499
•28 September 2016
FEDERAL CIRCUIT COURT OF AUSTRALIA
| FAIR WORK OMBUDSMAN v NORTHCOAST SECURITY SERVICES GROUP PTY LTD & ANOR | [2016] FCCA 2499 |
| Catchwords: COSTS – Application by second respondent that applicant pay costs thrown away by reason of the joinder of an additional respondent – whether any costs incurred by the second respondent will be thrown away by reason of the joinder – whether applicant engaged in any unreasonable act or omission by not having sought to join the additional respondent as a party earlier than it did – no order for costs. |
| Legislation: Fair Work Act 2009 (Cth), ss.45, 570(2)(b) Federal Circuit Court Rules 2001 (Cth), rr.7.01, 11.01(1), 11.01(2), 11.02, 11.02(2), 11.03(1), 11.03(2) |
| Cases cited: Benjamin v Endeavour Industries Pty Ltd [2012] FMCA 488 Fair Work Ombudsman v Step Ahead Security Services Pty Ltd & Anor [2016] FCCA 1482 Fewin Pty Ltd v Burke [2016] FCA 503 McLaren v Retail Information Systems Pty Ltd [2011] FMCA 716 News Ltd v Australian Rugby League [1996] FCA 870; (1996) 64 FCR 410 Qantas Airways Ltd v A F Little Pty Ltd [1981] 2 NSWLR 34 Vine v Diepeveen & Ors [2015] FCCA 1807 |
| Applicant: | FAIR WORK OMBUDSMAN |
| First Respondent: | NORTHCOAST SECURITY SERVICES GROUP PTY LTD ACN 145 984 032 |
| Second Respondent: | KULDEEP COUHAN |
| File Number: | SYG 3576 of 2014 |
| Judgment of: | Judge Manousaridis |
| Hearing date: | 13 September 2016 |
| Delivered at: | Sydney |
| Delivered on: | 28 September 2016 |
REPRESENTATION
| Counsel for the Applicant: | Mr Y Shariff and Ms V Bulut |
| Solicitors for the Applicant: | Fair Work Ombudsman |
| No appearance by or on behalf of the First Respondent. | ||
| Solicitor for the Second Respondent: | Mr F Gutierrez of Avondale Lawyers | |
| Counsel for Mr Nelson: | Mr A Britt | |
| Solicitors for Mr Nelson: | Williamson Legal | |
ORDERS
The applicant have leave to file and serve an amended application and an amended statement of claim in the form or substantially in the form of the draft amended application and draft amended statement of claim that is annexed to the application in a case filed by the applicant on 31 May 2016.
The applicant file and serve the amended application and amended statement of claim by 5 October 2016 or by such further time as the Court may order.
The second respondent’s application for costs made at the hearing of 13 September 2016 is dismissed.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 3576 of 2014
| FAIR WORK OMBUDSMAN |
Applicant
And
| NORTHCOAST SECURITY SERVICES GROUP PTY LTD ACN 145 984 032 |
First Respondent
| KULDEEP CHOUHAN |
Second Respondent
REASONS FOR JUDGMENT
Introduction
Before the Court is an application by the applicant (FWO) for an order under r.7.01 and r.11.02 of the Federal Circuit Court Rules 2001 (Cth) (FCC Rules) that she be granted leave to file an amended application and an amended statement of claim in which Mr Nelson is sought to be included as an additional respondent.
Background
On 22 December 2014 the FWO commenced proceedings against the first respondent (Northcoast) and one of its directors and shareholders, Mr Chouhan. In the statement of claim filed at the time she commenced proceedings, the FWO alleged:
a)Northcoast was the true employer of a number of employees who were purportedly employed by a company called Marsters Entourage Pty Ltd and, later, a company called Collateral Damage Pty Ltd;
b)the employees were employed as security guards who, from time to time, provided security services at various locations;
c)the employees and Northcoast were bound by the Security Services Industry Award 2010 (Modern Award), but Northcoast contravened the Modern Award by failing to pay the employee amounts as required by the Modern Award, and, therefore, Northcoast contravened s.45 of the Fair Work Act 2009 (Cth) (FW Act); and
d)Mr Chouhan was involved in Northcoast’s contraventions of s.45 of the FW Act.
On 14 April 2015 I made directions that the FWO respond to Mr Chouhan’s request for further and better particulars of the statement of claim, and that the respondents file a defence. I also referred the matter for mediation pursuant to s.34 of the Federal Circuit Court of Australia Act 1999 (Cth). Apparently for the purposes of the mediation, Mr Chouhan provided to the FWO an affidavit he made on 4 March 2016. In that affidavit, Mr Chouhan deposed to the circumstances in which he became a director and shareholder of Northcoast. Mr Chouhan deposed to conversations he had with Mr Nelson in early 2012 when Mr Nelson was the sole shareholder and director of Northcoast that led to Mr Chouhan becoming a director and shareholder in Northcoast. Mr Chouhan also deposed to his role in the operations of Northcoast. The affidavit appears to have been given to the FWO to persuade her that Mr Chouhan was subordinate to Mr Nelson’s role in those operations.
The FWO’s claims were not resolved at the mediation, and the matter was relisted before me. In the meantime, in the circumstances set out in the affidavits of Ms Skelding, the FWO formed the view there were grounds for claiming Mr Nelson was also involved in Northcoast’s contraventions of the Modern Award and, hence, of s.45 of the FW Act. The FWO, therefore, filed an application in a case seeking an order that it be granted leave to file and serve an amended statement of claim and an amended application.
Mr Chouhan does not oppose the Court allowing the FWO to file the amended application and the statement of claim in the form of the drafts with which he has been served. Mr Chouhan seeks, however, an order for costs. Mr Nelson, on the other hand, who, by his counsel, appeared on the hearing of the application, opposed my permitting the FWO from filing an amended statement of claim. Mr Nelson opposed the application because, in his submission, the power to join a party can only be made if there is cogent evidence of a prima facie case against the party that is sought to be joined, but there is no evidence before the Court which would support such a case. I did not, however, understand Mr Nelson to have submitted the proposed amended statement of claim does not plead reasonable causes of action against Mr Nelson. Mr Nelson also opposes his being joined as a respondent because he submits he will suffer prejudice if he is joined.
In these reasons for judgment, therefore, I consider three questions. The first is whether it is necessary that there be cogent evidence of a prima facie case against a person who is sought to be joined before the Court may order the joinder of that person as a party. The second is whether Mr Nelson will suffer any relevant prejudice that ought lead me not to make an order joining him as a respondent. The third is whether I should order that the FWO pay Mr Chouhan’s costs.
Joinder of Mr Nelson
The rules governing the joinder of persons as parties to a proceeding brought in this Court are contained in Division 11.1 of Part 11 of the Federal Circuit Court Rules 2001 (Cth) (FCC Rules). The scheme of Division 11.1 is as follows. First, a party may include a person as a party to the proceeding before the first court date by naming that person as a party in the application, or response, or reply, and serving a copy of the application, response, or reply on the person named.[1] The Court may, however, at any time, require the party who has so named a person as a party to file and serve on each other party in the proceeding an affidavit setting out the basis on which the person has been included. Second, after the first court date, a party may apply for an order to join a person as a party who had not, before the first court date, been included as a party in an application, response, or reply. That follows from r.11.02(2) of the FCC Rules which provides that a person may not include a person as a party after the first court date without the leave of the Court. Third, subject to any order of the Court, a person “whose participation is necessary for the Court to completely and finally determine all matters in dispute in a proceeding must be included as a party in the proceeding”,[2] and the Court may “require a person to be included as a party”.[3] Fourth, a person who is not a party may apply to be included as a party to a proceeding.[4] That person must support his or her application with an affidavit stating his or her interests in the proceeding or any matter in dispute between the person applying and the existing parties, and the orders, if any, such person will seek if he or she were to be included as a party.[5]
[1] FCC Rules, r.11.02(1)
[2] FCC Rules, r.11.01(1)
[3] FCC Rules, r.11.01(2)
[4] FCC Rules, r.11.03(1)
[5] FCC Rules, r.11.03(2)
It will be seen that these rules, and in particular r.11.02(2) of the FCC Rules, confer on the Court a broad discretion to decide whether to include a person as a party. The discretion is certainly broader than permitting the Court to order the joinder of “necessary” parties, as that expression has been understood in the cases.[6] The rules are at the very least sufficiently wide to include circumstances provided for in rules of other courts for the joinder of parties who are not necessary parties. One such set of circumstances would be where all rights of relief that are claimed against the person that is sought to be joined arise out of the same transaction or event or series of events that give rise to the claims for relief the person seeking the joinder has against an existing party.[7]
[6] See, for example, the judgment of Mahoney JA in Qantas Airways Ltd v A F Little Pty Ltd [1981] 2 NSWLR 34 at page 45 ff. See also News Ltd v Australian Rugby League [1996] FCA 870; (1996) 64 FCR 410 at pages 523 – 25
[7] See, for example, r.9.02 of the Federal Court Rules 2011 (Cth).
The approach that should be taken to applications for joinder under Division 11 of the FCC Rules was considered by Barnes FM (as her Honour then was) in McLaren v Retail Information Systems Pty Ltd.[8] Her Honour said:[9]
[14] Whether or not to grant the leave sought in this case is a matter within the discretion of the court having regard to all the circumstances of the case. The discretion to join a new party is “a wide one” . . . . It is relevant to have regard to the objects of the Federal Magistrates Act 1999 (Cth) in s.3, the requirement in s.42 that in proceedings before it the court “must proceed without undue formality and must endeavour to ensure that the proceedings are not protracted” and the objects of the Rules (see r.1.03) (see Hogan v Riley & Ors [2008] FMCA 794 at [7] – [12]). As Lucev FM pointed out in Swevenings Pty Ltd v Ferguson Consolidated Holdings Pty Ltd & Anor (No.4) [2009] FMCA 291 at [31], read together these provisions make it apparent that this court is intended to operate in as informal a manner as possible in the exercise of judicial power, that it is not to be protracted in its proceedings, that it is to resolve proceedings justly, efficiently and economically using streamlined procedures and that it is to avoid undue delay, expense and technicality.
[15] Section 14 of the Federal Magistrates Act is of particular relevance. It recognises the obligation on the court to grant such remedies as the court thinks just “to which any of the parties appears to be entitled in respect of a legal or equitable claim properly brought forward by him or her in the matter, so that, as far as possible”, all matters in controversy between the parties “may be completely and finally determined” and, importantly “all multiplicity of proceedings concerning any of those matters may be avoided”. This provision in similar to s.22 of the Federal Court of Australia Act 1976 (Cth) which, as the Full Court of the Federal Court observed in McLeish v Faure (1979) 25 ALR 403; [1979] FCA 38 at 413, is to be “construed liberally in order to achieve the object of the Act in attempting to prevent the necessity of a multiplicity of legal proceedings to be entered into by a party seeking relief”.
[8] [2011] FMCA 716
[9] [2011] FMCA 716 at [14]-[15] (some references omitted)
Also relevant is the following passage from the reasons for judgment of Judge Jarret in Fair Work Ombudsman v Step Ahead Security Services Pty Ltd & Anor:[10]
[10] [2016] FCCA 1482 at [69], [70]
[69] The discretion conferred by s.545(1) is plainly unfettered but, no doubt, must be exercised judicially. In that respect, it seems to me that the following matters are likely to be relevant matters for consideration in most cases:
a)whether such an order is unnecessary given the capacity of the employer to make the compensation payments;
b)the nature and extent of the accessory’s involvement in the contravention;
c)any relevant public policy reasons; and
d)the nature of the order sought, including whether the accessory is to be made solely liable, or jointly liable.
[70] That list is not intended to be exhaustive. It will vary from case to case depending on the circumstances of each.
One matter that is relevant, and may be considered to be necessary, to making an order joining a person as a respondent is whether the applicant has a sufficiently arguable case against the person sought to be joined as a respondent to justify the joinder. That has been regarded as a requirement in applications for joinder made under rules of other courts; and the words used to describe the merits required of a proposed claim against the person who is sought to be joined before that person may be joined have varied. Thus, it has included the expressions “no prospect of success”, or “an arguable case”, or “sufficiently arguable case”, or “a prima facie case”.[11]
[11] The first three expressions are to be found in the cases referred to by Markovic J in Fewin Pty Ltd v Burke [2016] FCA 503 at [42]; and the third expression was used by Judge Jarrett in Benjamin v Endeavour Industries Pty Ltd [2012] FMCA 488 at [17] and Vine v Diepeveen & Ors [2015] FCCA 1807 at [6]
As I have already noted, counsel for Mr Nelson does not submit the proposed amended statement of claim does not plead reasonable causes of action against Mr Nelson; nor does counsel submit that the alleged facts, assuming there was evidence to establish them on a prima facie basis, would not justify this Court making an order permitting the joinder. What counsel submits is that, before an order for joinder may be made, it is necessary for there to be before the Court “cogent evidence that support” the facts alleged in the proposed amended statement of claim, but there is no such evidence.
Counsel relies on two cases. The first is the following passage from Judge Jarrett’s reasons for judgment in Vine v Diepeveen & Ors:[12]
[7] I directed that Ms Vine file a statement of claim that she proposed to rely upon against the proposed respondents. She filed a document titled Statement of Claim – Joinders on 7 October, 2014. In that document she has pleaded a number of allegations against the proposed respondents. In support of her application for joinder she relies on some evidence from herself, Raymond Charles Harris and Sharon Lee Holt. The evidence does not establish, or go anywhere near establishing, the allegations that she has included in the Statement of Claim – Joinders against the proposed respondents. The evidence that she has filed does not establish that any of the proposed respondents were involved in, as that phrase is defined in s.550(1) of the Fair Work Act, the contraventions that she alleges in her Statement of Claim – Joinders. The Statement of Claim – Joinders filed on 7 October 2014 pleads a number of facts against the proposed respondent Congues but ultimately, there is no evidence that supports those facts.
[8] Whilst I am cognisant that at the moment this case has not progressed beyond the close of pleadings, given that the applicant is applying to join more parties to the proceedings, she must comply with the requirements of the Rules and, as I have indicated, that requires the demonstration of a prima facie case. There is no prima facie case. Even more so with respect to the members of the executive, there is simply no evidence that would suggest that the members of the executive were knowingly concerned in the contraventions or were involved in the contraventions as required by s.550(1) of the Fair Work Act.
[12] [2015] FCCA 1807 at [7]-[8]
The second case on which counsel is the judgment of Jarrett FM (as his Honour then was) in Benjamin v Endeavour Industries Pty Ltd.[13] In that case, an application was made to join as respondents persons against each of whom the applicant intended to allege had been involved in a contravention of provisions of the FW Act. Judge Jarrett refused the application because the evidence on which the applicant relied did not establish a prima facie case.
[13] [2012] FMCA 488
It is true that in each of Vine and Benjamin, Judge Jarrett decided that the party seeking to join additional parties did not, on the evidence on which the party relied, establish a prima facie case and, for that reason, refused to make an order for joinder. That does not mean, however, that it is a necessary precondition to the Court making an order under r.11.02(2) of the FCC Rules that there be evidence of a prima facie case. Whether it is appropriate to look at a party’s evidence to determine whether there is a prima face case is a matter that falls within the discretion of the Court having regard to the particular circumstances of the case. In Vine, it appears that the applicant, who does not appear to have been legally represented, was directed to file a statement of claim after she had already filed her affidavit evidence. In those circumstances, Judge Jarrett considered it appropriate to consider the evidence in the light of the allegations that were made in the statement of claim; and his Honour dismissed the application for joinder because the facts deposed in the affidavit did not support the allegations made in the statement of claim. In the case of Benjamin, the application to join additional parties was not supported by any draft statement of claim, but was instead supported by affidavits. In those circumstances, the affidavits afforded the only material by reference to which the Court could have assessed whether the party seeking to join additional respondents had a sufficiently arguable case against them to justify their being joined as respondents.
In my opinion, in circumstances where the FWO relies for its application for joinder on a draft amended statement of claim which alleges facts which Mr Nelson does not submit do not raise reasonable causes of action against Mr Nelson under the FW Act, and where no submission is made that there are no reasonable prospects the FWO will be in a position to establish those allegations by evidence at the hearing, the FWO’s not also filing cogent evidence that supports those allegations at the time she has applied for an order for joinder is not a reason which ought to lead me, and which does not lead me, to conclude that Mr Nelson should not be joined as a respondent.
Mr Nelson opposes his being joined as a respondent because he will suffer prejudice if he is joined. The relevant prejudice is alleged to consist in Mr Nelson’s not having the benefit of the FWO litigation guidelines, the FWO’s delay in bringing proceedings against Mr Nelson, and the impact of the delay on Mr Nelson’s ability to defend these proceedings, given he no longer is a director of Northcoast, and, if joined, Mr Nelson’s being joined in proceedings in which there will be a co-respondent who would be “blaming” Mr Nelson.
None of the matters constitute relevant prejudice, or prejudice to a sufficient degree that ought lead me to exercise my discretion against making an order for joinder in circumstances where Mr Nelson has not submitted the FWO has not pleaded reasonable causes of action against Mr Nelson, and in circumstances where Mr Nelson has not submitted that if the FWO were not to succeed in joining Mr Nelson as a respondent, it would not be open to the FWO to commence separate proceedings against Mr Nelson. The FWO would be able to commence separate proceedings against Mr Nelson in which she pleads the same causes of action against Mr Nelson.
In these circumstances, I am satisfied the FWO should be granted leave to file an amended application and statement of claim in the form, or substantially in the form of the drafts annexed to the application in a case. Although it is not submitted Mr Nelson is a necessary party, nevertheless, the causes of action the FWO proposes to plead against him arise out of the same contraventions in which the current statement of claim alleges Mr Chouhan was involved. There is likely to be, therefore, a high degree of overlap of factual and legal issues that arise out the claims the FWO currently makes against Mr Chouhan, and which are likely to arise out of the causes of action alleged against Mr Nelson in the proposed amended statement of claim. The determination of those issues in the one proceeding advances the purpose underlying s.14 of the FCCA Act, and it avoids the risk of the Court making inconsistent findings if there were to be two separate hearings of claims arising out of the one series of transactions. It is true that Mr Chouhan may face additional costs, because the hearing is likely to be longer. On the other hand, it may be advantageous to Mr Chouhan to have Mr Nelson participate in the hearing. If Mr Nelson chooses to give evidence, Mr Chouhan will have the opportunity to cross examine him and be in a position to strengthen the matters on which he relies in his affidavit of 4 March 2016.
Costs
Mr Chouhan seeks an order that the FWO pay costs that he has incurred that have been wasted because of the FWO’s decision to apply to have Mr Nelson joined as a respondent. The largest item of costs appears to be the costs Mr Chouhan incurred in connection with the mediation. Mr Chouhan submits those costs have been “thrown away”.[14] They have been “thrown away”, Mr Chouhan submits, because the joining of an additional party will require a fresh mediation.[15] Mr Chouhan submits this is compounded by the FWO’s having been put on notice that the mediation was bound to fail because it was being held prematurely.[16] Mr Chouhan submits that his costs were thrown away because the FWO failed to join Mr Nelson earlier in circumstances where it had available information to do so, because the FWO failed to have Northcoast available at the mediation, and because the FWO failed “to include the joint liability issue which is now an amendment sought in this motion”. In addition, Mr Chouhan submits that the proposed amendment that specifically relates to Mr Chouhan “will logically imply that part of work performed to date will be thrown away”.
[14] Second Respondent’s Outline of Submissions in Relation to Costs in Response to the Applicant’s Second Submissions Handed up in Court, (Second Respondent’s Second Submissions on Costs) [9]
[15] Second Respondent’s Second Submissions on Costs, [9]
[16] Second Respondent’s Second Submissions on Costs, [9]
There are two broad issues. The first is whether Mr Chouhan has incurred any costs that will be thrown away because of the proposed amendment, or because of any other act or omission of the FWO. The second issue arises if the first issue is answered in the affirmative; and that is whether the relevant act or omission of the FWO was unreasonable.[17] As to the first issue:
a)I am not satisfied the costs Mr Chouhan incurred in the mediation were due to any act or omission of the FWO. To the extent the mediation was held prematurely, the FWO cannot be held to have been responsible for that. The mediation was conducted because the Court had made an order referring the matter to mediation. If there was any particular difficulty with the mediation taking place, it was open to Mr Chouhan or the FWO to apply to the Court for an order that the order for mediation be set aside or varied.
b)I am not satisfied that had Mr Nelson been joined earlier, there would have been better prospects of the mediation succeeding. There is nothing in the material that could support this submission.
c)I do not accept that Mr Nelson’s being joined as an additional respondent will require Mr Chouhan to participate in a further mediation. Unless Mr Chouhan himself is willing to participate in a further mediation, the only way he will otherwise participate in a further mediation is if he is ordered to do so. There is nothing to suggest that Mr Chouhan will be ordered to participate in another mediation. It is also not necessarily the case that the Court will order that Mr Nelson participate in a mediation; and even if the Court were to make such order, there would be no reason why it would be necessary or even convenient for Mr Chouhan to participate in such mediation. Although the FWO alleges both Mr Chouhan and Mr Nelson were involved in the same contravention, their liability to a civil penalty, if established, would not be a joint liability. They would each be separately liable to an order to pay a pecuniary penalty for their contraventions of the FW Act.
d)I do not accept the FWO was responsible for ensuring that Northcoast attended the mediation.
e)I am not satisfied that the proposed amendment will lead to costs being thrown away. The proposed amendments, to the extent they specifically relate to Mr Chouhan are minor. It is true that the addition of a respondent is likely to increase Mr Chouhan’s costs because the addition of a respondent is likely to lengthen the hearing time. That, however, does not represent a cost thrown away because of the proposed amendment. And as I have already observed, there might be advantages to Mr Chouhan if Mr Nelson does participate at the hearing.
[17] FW Act, s.570(2)(b)
Given I am not satisfied that any act or omission of the FWO has caused costs that Mr Chouhan has incurred to be thrown away, it is not necessary to consider whether the FWO acted unreasonably. I do wish to record, however, that I am not satisfied the FWO had sufficient information in relation to Mr Nelson to have made it unreasonable for the FWO not to have commenced proceedings against Mr Nelson before the FWO was entitled to use the information contained in Mr Chouhan’s affidavit of 4 March 2016. I also wish to record that I am satisfied the FWO decided to apply to join Mr Nelson as a party only after the FWO received Mr Chouhan’s affidavit of 4 March 2016 and after the FWO was satisfied she could legitimately consider information contained in that affidavit for the purpose of determining whether the FWO had reasonable grounds for commencing proceedings against Mr Nelson.
Conclusions and disposition
I am satisfied I should make an order permitting the FWO to file an amended application and amended statement of claim in the form of the drafts annexed to the application in a case. I am not satisfied that Mr Chouhan is entitled to any order for costs against the FWO. I will make orders to give effect to these conclusions.
I certify that the preceding twenty-three (23) paragraphs are a true copy of the reasons for judgment of Judge Manousaridis
Date: 28 September 2016
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