Gonzalez-Barbosa v Go to Court Franchising Pty Ltd & Anor (No.2)
[2017] FCCA 910
•5 May 2017
FEDERAL CIRCUIT COURT OF AUSTRALIA
| GONZALEZ-BARBOSA v GO TO COURT FRANCHISING PTY LTD & ANOR (No.2) | [2017] FCCA 910 |
| Catchwords: COSTS – Fair work proceedings – respondents successful in obtaining summary dismissal of applicant’s substantive claims – whether the costs order should be made in favour of either party – solicitor who is self-represented claiming costs – premature disclosure of Calderbank offer – privilege – order for costs as to so much of claim as was dismissed. |
| Legislation: Fair Work Act 2009 (Cth), ss.45, 357, 550, 570 Federal Circuit Court of Australia Act 1999 (Cth), s.79 Federal Circuit Court Rules 2001 (Cth), r.21.10 |
| Cases cited: Attorney General v Wentworth (1988) 14 NSWLR 481 CGU Insurance Ltd v Corrections Corporation of Australia Staff Superannuation Pty Ltd [2008] FCAFC 173 Construction, Forestry, Mining and Energy Union v Clarke [2008] FCAFC 143 Cheng v Western Pursuits Trust (No.2) [2017] FCCA 659 Gonzalez-Barbosa v Go to Court Franchising Pty Ltd & Anor [2017] FCCA 361 Gore v Australian Securities and Investments Commission [2017] FCAFC 311 Kanan v Australian Postal and Telecommunications Union [1992] FCA 366 MTGI Trust v Johnson (No.2) (2016) FCAFC 190 |
| Applicant: | JACQUELINE GONZALEZ-BARBOSA |
| First Respondent: | GO TO COURT FRANCHISING PTY LTD (ACN 150 865 802) |
| Second Respondent: | JAMES TERENCE ALEXANDER STEVENS |
| File Number: | BRG 1015 of 2016 |
| Judgment of: | Judge A Kelly |
| Hearing date: | Decided “on the papers” |
| Date of Last Submission: | 16 March 2017 |
| Delivered at: | Melbourne |
| Delivered on: | 5 May 2017 |
ORDERS
The applicant pay 50% of the respondents’ costs of their application for summary dismissal of the proceeding, including the costs of the costs application, such costs to be taxed failing agreement.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
BRG 1015 of 2016
| JACQUELINE GONZALEZ-BARBOSA |
Applicant
And
| GO TO COURT FRANCHISING PTY LTD (ACN 150 865 802) |
First Respondent
| JAMES TERENCE ALEXANDER STEVENS |
Second Respondent
REASONS FOR JUDGMENT
Introduction and Background
On 9 March 2017, I delivered reasons for judgment and made orders in relation to the respondents’ application for summary judgment: Gonzalez-Barbosa v Go to Court Franchising Pty Ltd & Anor [2017] FCCA 361. In short compass, the respondents succeeded in their application for dismissal of three claims brought by the applicant but was not successful in their application for summary judgment for the balance of claims brought in this proceeding. The claims upon which the respondents were successful in obtaining summary judgment hinged upon the application of the Legal Services Award 2010 (Cth) (“award”). I held that that award did not apply to the applicant and that the applicant had no reasonable prospect of prosecuting claims which depended upon that award providing coverage for lawyers who were admitted to practice: [2017] FCCA 361, [51].
As a consequence, the applicant's claims in respect of which summary judgment was granted were those relating to claims for non-payment of wages, superannuation and a breach of that award: see s.45, Fair Work Act 2009 (Cth) (“Fair WorkAct”).
The application for summary dismissal of other claims was not successful. To the contrary, the applicant’s claim for the imposition of penalties pursuant to ss.357 and 550 of the Fair Work Act remain on foot. So too, I did not dismiss the claim for recovery of compensation for hurt or distress (which claim would depend in the first instance on a contravention of s.357 of the Fair Work Act).
Each party now applies for costs.
Applicable principles
By force of s.79 of the Federal Circuit Court of Australia Act 1999 (Cth), the general power conferred on the court to award costs under that provision does not apply to proceedings in relation to a matter arising under the Fair Work Act. This is such a matter.
Instead, s.570 of the Fair Work Act relevantly provides as follows:
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.
Note: The Commonwealth might be ordered to pay costs under section 569.
(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) . . . . (emphasis added)
Section 570 lies within Chapter 4 (Compliance and Enforcement), Part 4–2 (Jurisdiction and Powers of Court), Division 3 (Jurisdiction and Powers of the Federal Circuit Court) of the Fair Work Act.
One purpose of s.570 is to ensure that a fear of the making of a costs order does not discourage genuine litigants from pursuing cases with reasonable cause. The provision is concerned with notions of access to justice: see Hutchinson v Comcare (No.2) [2017] FCA 370, [7]-[8] (Bromberg J). In Hutchinson, his Honour stated that the occasions upon which costs would be awarded under s.570 were likely to be exceptional: 2017 FCA 370, [8], citing Council ofKangan Batman Institute of Technology and Further Education v Australian Industrial Relations Commission [2006] FCAFC 119; 156 FCR 275, [60] (Black CJ, North and Mansfield JJ). His Honour further stated that the fact a party had conducted litigation inefficiently, made late concessions, or adopted a misguided approach would be relevant to, but not conclusive of, the party having acted unreasonably in a sense relevant to s.570(2)(b); 2017 FCA 370 at [8] citing Construction, Forestry, Mining and Energy Union v Clarke [2008] FCAFC 143; 170 FCR 574 at [29] (Tamberlin, Gyles and Gilmore JJ).
The Full Court of the Federal Court has stated principles which inform the operation of s.570(2) as follows. First, the policy and purpose of the section is to free parties from the risk of having to pay their opponent’s costs in matters arising under the Fair Work Act, while at the same time protecting those parties who are forced to defend proceedings that have been instituted vexatiously or without reasonable cause. Secondly, accordingly, a person will rarely be ordered to pay the costs of a proceeding. Thirdly, it is not necessary to prove that there are exceptional circumstances warranting the making of such an order. Fourthly, the relevant question is whether the proceeding had reasonable prospects of success at the time it was instituted; not whether it ultimately failed: AustralianWorkers Union v Leighton Contractors Pty Ltd (No.2) [2013] FCAFC 23 at [7].
In Leighton Contractors (No.2) the Full Court also endorsed a statement by Wilcox J in Kanan v Australian Postal and Telecommunications Union [1992] FCA 366 at [29] in which his Honour said that:
If success depends on 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 applicants 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. (emphasis added)
Recognition of this principle is important in the present context.
The bringing and continuing of proceedings in which allegations of contravention of the Fair Work Act are made ought not to be discouraged: see Harpham v Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia (No.2) (2017) FCA 140, [40] (Tracey J) citing Ryan v Prime Safe (2015) 323 ALR 107 at [64] (Mortimer J). Her Honour’s reasoning was endorsed in MTGI Trust v Johnson (No.2) (2016) FCAFC 190. I note that in Ryan v Prime Safe, Mortimer J granted an order for costs, including the costs of the costs application.
Absent an order for costs made in the exercise of discretion in favour of a party, there is no entitlement to costs.
A range of factors quite apart from the overall success of the proceeding may have a significant bearing upon the court’s discretion with respect to costs. It follows that where it can be shown there are competing considerations to be brought into account, the court’s order as to costs will reflect a broad evaluative judgment of what the justice of the case requires: Gray v Richards (No.2) (2014) 315 ALR 1 at [2] (French CJ, Hayne, Bell, Gageler and Keane JJ); Gore v Australian Securities and Investments Commission [2017] FCAFC 311 (Dowsett, Rares, and Gleeson JJ).
Consideration
The applicant’s primary submission was that an order for costs should be made in relation to the summary dismissal application on a pro rata basis being in favour of the applicant as to 75% and the respondents as to 25%. The applicant relied upon s.79 of the Federal Circuit Court Act 1999 (Cth) and r.21.10 of the Federal Circuit Court Rules 2001 (Cth). For the reasons above, reliance on s.79 was misplaced.
Somewhat surprisingly, the applicant further submitted that the respondents’ application for summary dismissal had been instituted vexatiously or without reasonable cause. The applicant submitted that the applicable test for whether a proceeding had been instituted vexatiously was where the predominant purpose in instituting the proceeding was to harass or embarrass the other party or to gain a collateral advantage: citing Attorney General v Wentworth (1988) 14 NSWLR 481, 491. The applicant submitted that the relevant question was whether there were facts apparent to the applicant at the time of instituting the proceeding that, viewed objectively, would demonstrate that there were no reasonable prospects of success: citing Baker v Patrick Project Pty Ltd (No.2) [2014] FCAFC 166 at [10]
I do not accept that the respondents’ application for summary dismissal was instituted vexatiously or without reasonable cause. Indeed, the result of the application demonstrates that the respondents enjoyed a significant measure of success. Insofar as I determined that the balance of the applicant’s claim should not be dismissed summarily, I determined that those claims should be permitted to go forward to trial. I abstained from expressing a view as to the merit of the claims: [2017] FCCA 361 at [65] and [71].
As a general rule, in civil proceedings, costs follow the event with the result that costs will be awarded in favour of the successful party. Not infrequently parties will fall into dispute about who it was that enjoyed success. The present case is an illustration. The respondents contend that it succeeded in achieving the dismissal of three causes of action. By contrast the applicant contends that she has successfully defeated the application for summary dismissal of those causes of action which had not been summarily dismissed. However, it must be recognised that the general rule in civil proceedings is conditioned in the present case by s.570 of the Fair Work Act.
The applicant’s submission that the court has a broad discretion to apportion costs even where it cannot identify separate costs in respect of distinct or severable issues or enquiries on which the successful litigant failed, but that the matters on which the party failed must at least be capable of separation from the matters on which the litigant was successful: citing BHP Billiton Iron Ore Pty Ltd v National Competition Council (No.2) [2007] FCA 557, [13], [27] (Middleton J) citing Hughes v Western Australian Cricket Association (Inc) [1986] ATPR 40-748, 48,136 (Toohey J).
The applicant submitted that the respondents had failed to achieve summary dismissal of her claims for the alleged contraventions of ss.357 and 550 of the Fair Work Act and the claim for hurt and distress. On that footing, the principle in BHP Billiton above was relied upon.
The principal as extracted by the applicant from BHP Billiton in fact formed part of a more extensive summary of the applicable principles. Middleton J considered the approach to be taken where a successful party might lose some or all of its costs where it had lost distinct or severable issues or enquiries. In such circumstances, his Honour regarded it as necessary to consider case management principles, the significance of the issue or enquiry in proportion to the proceeding as a whole and whether the issue or enquiry had any relative strength or merit. Applying those principles, Middleton J made an order for costs in favour of the successful party but framed the order in terms which would exclude from recovery that part of the successful party’s costs which related solely to particular issues on which it had failed.
The applicant referred also to a series of authorities which may be said to support the principle that a solicitor who is self-represented in a proceeding may be entitled to an order for costs. While the principle remains contentious, I will assume without deciding, the availability, and potential application, of that principle to the present case.
The applicant mounted an alternative submission that if the court was not disposed to exercise its discretion by making an order as to 75% of the costs in her favour then it was appropriate that there be no order as to costs. The alternative submission was pressed on the basis that the applicant’s “application for general protections was not commenced vexatiously or without a reasonable cause.” The applicant’s further alternative submission was that there should be no order as to costs on the basis that each party was partially successful in the application.
In support of this submission the applicant relied upon para’s.570(2)(a) and (b) of the Fair Work Act. The applicant relied upon the principles stated earlier concerning the policy and purpose of s.570 of the Fair Work Act. The applicant’s written submission contended that at the time of instituting the proceeding alleging contravention of s.45 of the Fair Work Act “she honestly believed she came under the Legal Services Award 2010.” Again, I will assume in favour of the applicant that she held such a belief and that she did so honestly. So too, it may be assumed in favour of the applicant that insofar as the causes of action for s.357 and 550 of the Fair Work Act and the claim to general damages for hurt and distress survived the application for summary judgment this also supports a conclusion that the applicant did not institute the proceeding vexatiously or without reasonable cause.
I conclude that the requirements of para.570(2)(a) are not satisfied. It follows that if the power to make an order for costs is available, it must be found pursuant to para.570(2)(b).
While the applicant relied upon s.570(2)(b) of the Fair Work Act in support of the submission that there be no order as to costs, the whole of that provision was not referred to. Paragraph 570(2)(b) provides that a party may be ordered to pay costs only if the court is satisfied that the party’s unreasonable act or omission caused the other party to incur the costs. The text of para.(2)(b) includes a requirement of causation. For this reason, it is not decisive that a person who initiated a proceeding under the Fair Work Act held an honest belief in the validity of their claim when doing so. The question posed by para.570(2)(b) is whether the court is satisfied that the party’s unreasonable act or omission caused the other party to incur the costs. If that question is answered affirmatively, the discretion reposed in the court to make a costs order is then engaged.
In my view the applicant does not meet the respondents’ submission that three substantive claims have been summarily dismissed. In my opinion the power conferred by para.570(2)(b) may be engaged where – in relation to the causes of action which have been summarily dismissed – the court is satisfied that the applicants unreasonable act or omission caused the party the respondents to incur the costs associated with the summarily dismissed causes of action.
The respondents pointed up the procedural history of the matter, submitting that the claims which relied upon contravention of the award (non-payment of wages, non-payment of superannuation and breach of s.45 of the Fair Work Act), were unsustainable. They submit, correctly, that their Response put the applicant on notice that the Award had no application to the terms of the applicant’s engagement. The respondents had put the applicant squarely on notice that the application of the award was directly in contest.
The respondents also identify the procedural history in the matter whereby the applicant amended the claim so as to reduce the quantum from $26,293 to $2,545 (and general damages). The applicant assigned this substantial reduction to a clerical error on her part. By contrast, the respondents drew particular attention to the applicant’s decision, when effecting substantial amendments to the claim, to nonetheless maintain each of the claims under the award which have now been dismissed summarily.
I do not find it necessary to consider whether the applicant instituted the proceeding vexatiously. It is sufficient, in my opinion, to hold that the claims for non-payment of wages, non-payment of superannuation and breach of s.45 of the Fair Work Act were claims that were instituted without reasonable cause. It is the costs associated with those claims which attract the court’s power under sub-s.570(2)(b).
As noted, the relevant question is whether the proceeding had reasonable prospects of success at the time it was instituted. In my view, it clearly did not have reasonable prospects of success. Of decisive significance in my opinion is that, even on the applicant’s own version of the facts, it was clear that the proceeding must fail. For those reasons, it may properly be said that the proceeding lacked a reasonable cause when it was instituted. That being so I consider that the applicant’s decisions to institute those claims and further, to maintain them after the Response put the claims squarely in issue support a conclusion that the applicant acted unreasonably and those acts caused the respondents to incur costs in this proceeding.
It is appropriate to consider whether, properly advised, the applicant would have recognised that the unsuccessful claims had no reasonable prospect of success. In my opinion, the determination whether the court should be satisfied that the applicant instituted the proceeding without reasonable cause (insofar as it included claims which have been summarily dismissed), should be determined objectively.
On one view, on the proper construction of sub-s.570(2), at this stage the court has no power to order costs in favour of the respondents upon the application for summary judgment in respect of those causes of action which have survived. Those surviving claims are extant and for that reason alone it cannot be concluded those claims were instituted vexatiously or without reasonable cause or that any act or omission on the part of the applicant has yet caused the respondents to incur costs. For those reasons, the conditions stipulated by sub-para’s.570(2)(a) and (b) cannot (at this stage) be satisfied in relation to those surviving claims. Any order for costs of those claims should await trial.
Once that conclusion is reached, the limits of any entitlement in the respondents to costs is confined to the costs incurred in connection with those causes of action that have been summarily dismissed.
The question then arises whether the court should exercise its discretion to award costs in respect of the claims which have been summarily dismissed. In my opinion, the respondents are entitled to the costs of the application for summary dismissal of the proceeding. For the reasons above, the respondents are entitled to an order in respect of some of the costs incurred on this application.
However, to adapt the reasoning of Middleton J in BHP Billiton Ore, the order for costs in favour of the respondents should exclude costs solely related to the application for summary dismissal of the claims for breach of ss.357 and 550 of the Fair Work Act and for general damages for hurt and distress. Adopting a broad brush approach to the matter, I allow the respondents 50% of their costs on the application for summary judgment and of this application.
Calderbank offer
Indemnity costs may be granted in proceedings under the Fair Work Act: MTGI Trust v Johnson (No.2) (2016) FCAFC 190.
The respondents submitted that the power conferred by sub-s.570(2) extends to the making of orders on an indemnity basis where it can be demonstrated by the party seeking costs that the other party’s refusal of a Calderbank offer was unreasonable. The respondents submitted, correctly, that the matter of unreasonableness fell to be determined by reference to the circumstances facing the offeree at the time that the offer was made, rather than by reference to the ultimate outcome of the case (which might also be relevant): citing CGU Insurance Ltd v Corrections Corporation of Australia Staff Superannuation Pty Ltd [2008] FCAFC 173, [75] (Moore, Finn and Jessup JJ). The courts holding in CGU Insurance emphasised that it would be a mistaken view to assume that the failure of the party who has rejected a Calderbank offer ultimately to achieve a better outcome than that contained by in the offer leads “to a presumptive entitlement to indemnity costs with respect to the period subsequent to the offer.” I agree. The Full Court concluded that the applicant for indemnity cost’s had “fallen some distance short of showing that CGU acted unreasonably in not accepting their offer”: [2008] FCAFC 173 at [88]; see also LFDB v SM (No.2) [2015] FCA 1013, [12 –13] (Gleeson J).
The respondents also submitted, correctly, that considerations relevant to an application for indemnity costs included the state of the proceeding when the offer was made, the time afforded to the offeree to choose the to consider the offer, the extent of the compromise involved, the offeree's prospects of success assessed at the date of the offer, the clarity of the terms of the offer in which the offer was expressed and whether the offer foreshadowed an application for indemnity costs in the event of refusal: citing Veda Advantage Ltd v Malouf Group Enterprises Pty Ltd (No.2) [2016] FCA 470, [31]. Consideration of the facts in Veda Advantage are useful if only because they serve to illustrate that in some cases it is be entirely inappropriate to award costs on an issue by issue basis because the same facts and circumstances may have been relevant to the whole of the proceeding. In that matter Katzman J concluded that while the successful party should be entitled to recover some costs, where the assessment was neither easy nor capable of precise mathematical calculation an award of costs on an issue by issue evaluation would be inappropriate.
In support of the respondents’ application for indemnity costs an affidavit was sworn by a partner of the first respondent which exhibited two letters dated 20 December 2016 and 13 January 2017 respectively. Each of those letters was marked “without prejudice” save as to costs. The respondents’ submissions identified the time at which those letters were dispatched and that each of them predated by a period of at least four weeks the issue of the application for summary judgment. Each of the letters stated that the respondents would seek additional costs, alternatively indemnity costs, if the offers were not accepted. It may be noted that the two offers are expressed in slightly different terms.
In this case, the structure of each offer was framed by reference to a settlement of the entirety of the proceeding. Conversely, neither without prejudice offer was made upon terms which provided for the compromise of so much of the proceeding as has been summarily dismissed. It cannot be ignored that the remainder of the applicant’s claims have been allowed to go forward to trial.
In my opinion it was not open to the respondents to adduce evidence of privileged communications with the applicant in connection with an attempt to negotiate a settlement of the entire proceeding: s.131(1) of the Evidence Act 1995 (Cth). I decline to take into account the contents of the affidavit sworn 17 March 2017 on behalf of the respondents or the Calderbank offer’s that were exhibited thereto.
In Cheng v Western Pursuits Trust (No.2) [2017] FCCA 659 Driver J observed that while s.570 provides a measure of cost protection to an applicant it does not provide “a free kick without consequences.” It may be that the respondents will seek to rely on their attempts to compromise the litigation at a later stage: see Cheng at [27] – [28]; Johnson v Monti-Haitsma Enterprises (No.2) (2014) FCA 1020 at [16] (Edmonds J). Nothing in these reasons should preclude the respondents from relying upon evidence of those negotiations once the proceeding is concluded. For those reasons, I do not address whether the offers were reasonable or proposed a genuine compromise.
Conclusion
In my judgment an appropriate exercise of discretion in relation to the costs of the application for summary judgment does not support a conclusion that I should make an order for costs in favour of the applicant notwithstanding the availability of a power to award costs in favour of a self-represented solicitor.
The respondents succeeded in achieving the summary dismissal of the substantive claims which were brought against them and it would conflate the principles identified above to suggest that the respondents have failed in relation to such claims as remain on foot. True it is that I have not granted summary dismissal of those remaining claims; however, I have not determined that an order for the costs associated with the causes of action that have survived the summary dismissal application should be made in favour of the applicant. At most, the circumstances may support a conclusion, which in my view is appropriate to reach in this case, that the respondents should be disallowed such costs as are associated with the application for summary dismissal of those claims which remain on foot.
The applicant should pay 50% of the respondents’ costs as indicated above by reason that the proceeding did not have reasonable prospects of success at the time it was instituted. On the applicant’s own version of the facts, it was clear that those claims in the proceeding would fail. I find that those claims were wholly lacking in a reasonable cause when the proceeding was instituted. The applicant’s decisions to institute and maintain those claims support my conclusion that the applicant acted unreasonably and those acts have caused the respondents to incur costs in this proceeding.
I certify that the preceding forty-four (44) paragraphs are a true copy of the reasons for judgment of Judge A Kelly
Date: 5 May 2017
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