Hepburn v Beauty Services Holdings Pty Ltd & Ors

[2018] FCCA 1206

FEDERAL CIRCUIT COURT OF AUSTRALIA

HEPBURN v BEAUTY SERVICES HOLDINGS PTY LTD & ORS [2018] FCCA 1206

Catchwords:
INDUSTRIAL LAW – Costs – whether proceedings instituted vexatiously – indemnity costs order made.

Legislation:

Fair Work Act 2009 (Cth), s.570

Federal Court of Australia Act 1976 (Cth), s.37AM

Applicant: RODNEY HEPBURN

First Respondent: BEAUTY SERVICES HOLDINGS PTY LTD (ACN 086 990 785)

Second Respondent: JOSEPH LATTOUF

Third Respondent: GAVIN NIXON

File Number: BRG 911 of 2017

Judgment of: Judge Vasta

Hearing date: 4 May 2018

Date of Last Submission: 4 May 2018

Delivered at: Brisbane

Delivered on: 4 May 2018

REPRESENTATION

Counsel for the Applicant: Mr M. Rawlings

Solicitors for the Applicant: Gall Stanfield & Smith

Counsel for the Respondents: Ms S. Moody

Solicitors for the Respondents: Mills Oakley Lawyers

ORDERS

1. That the Applicant pay the Respondent’s costs of and incidental to this application from the date the Respondent became aware of this application until the date of discontinuance (4.39pm on 9 February 2018) on an indemnity basis.

2. That in relation to this application for costs the Applicant pay costs on a party and party basis to be determined under Schedule 1 of Federal Circuit Court Rules 2001 (Cth) as assessed.

IT IS NOTED:

A.That the Court declares that the costs assessed in this matter be certified for counsel.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT BRISBANE

BRG 911 of 2017

RODNEY HEPBURN

Applicant

And

BEAUTY SERVICES HOLDINGS PTY LTD (ACN 086 990 785)

First Respondent

JOSEPH LATTOUF

Second Respondent

GAVIN NIXON

Third Respondent

REASONS FOR JUDGMENT

(Ex tempore)

1. This is an application for costs. 

2. The Applicant, Rodney Hepburn, instituted proceedings in this Court on 13 September 2017.  Before the matter came to me for a first date, the parties contacted my Chambers and asked that I make certain orders by consent to obviate the need for an appearance in Court.  I made those orders on 9 October 2017. 

3. Part of those orders indicated that the parties were to have a mediation before a Registrar of my Court.  The parties were contacted that the mediation would occur on 13 February this year before one of the Registrars.  That was a Tuesday. 

4. On Friday 9 February at 4.39 pm a Notice of Discontinuance was filed in this Court.  That brought those proceedings to an end. 

5. The Respondents now are seeking costs. Section 570 of the Fair Work Act 2009 (Cth) states this:

   “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) in relation to a matter arising 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 the FWC;

   (ii) the matter arose from the same facts as the proceedings.”

6. In short compass, the background of this matter is that the Applicant was employed as the legal counsel for the Respondent company. That employment commenced on 17 October 2016.  On 29 March 2017, there was an appointment of the Applicant as the CEO of the company. 

7. However, there were questions as to the validity of that appointment.  Following a board meeting, the Applicant was directed, on 12 April 2017 by Mr Lattouf and Mr Nixon, the Second and Third Respondents, to return to his role as in-house counsel.  The Applicant emailed the Second and Third Respondents indicating that he proposed to get legal advice in relation to that direction given to him.  Such email was sent on 21 April 2017. 

8. On 2 May 2017, the Applicant placed a small recording device under a desk in an office. That office was to later be used that day by the Third Respondent. There is conflicting evidence as to whether the Applicant knew that the Third Respondent was going in there to conduct business for the day.  And there is conflicting evidence as to whether the Applicant was actually given some permission or some form of tacit approval to do so by someone else in the company. 

9. In any event, he did do this, and secreted the listening device underneath the desk.  Early on the morning of 3 May, an employee of the company noticed the listening device attached, and the Third Respondent spoke to the Applicant about his conduct in placing the recording device in the office. 

10. The Applicant admitted to the conduct, and, according to the sworn evidence of the Third Respondent, he provided conflicting explanations for his conduct, to which the Third Respondent put to him that he was changing his story.  The Third Respondent left the room to attend a board meeting leaving the recording device on the table. 

11. When he returned to the room after the meeting, the recording device was gone.  The security camera footage showed that the Applicant removed that recording device without authorisation.  The Applicant’s conduct was reported to the police and the Applicant was stood-down from his position. 

12. A complaint was made to the Queensland Police on 4 May. 

13. On 12 May, the company wrote to the Applicant to inform him that they considered that he engaged in serious misconduct, and directed him to return the recording device. 

14. Five days later, on 17 May, the Applicant responded to that show cause letter via his legal representative. 

15. On 23 May, the directors of the First Respondent held a board meeting at which it was resolved to terminate the employment of the Applicant on the basis that he engaged in severe misconduct. 

16. He was then terminated and given a letter to that effect.  I note that there was some consternation with the board about what they had done, and one of the members went and engaged another firm to look at the aspect of this behaviour constituting “misconduct”. 

17. On 13 September, the Applicant filed this application in Court.  Now, that application was alleging, at paragraph 12:

    “12. The real reason that the first respondent dismissed the Applicant effective on 23 May 2017, was because the respondent (sic) proposed to exercise the workplace right, as described at paragraphs 6-8 herein, namely proposing to make an inquiry, by seeking legal advice, in relation to his employment, and thereby the First Respondent contravened section 340(1)(a)(iii) of the Fair Work Act 2009.”

18. The Applicant, in effect, was claiming, in the application, that the board meeting regarding his termination was merely a smokescreen.  This was because what he had done, in secreting the listening device, was not serious misconduct. It was claimed that the report that was commissioned by the director, in her private capacity, it would seem, exonerated the Applicant of engaging in the alleged serious misconduct. 

19. In my view, those claims are an incredible overstatement of what had happened.  And I cannot see that there could have been any form of exoneration of that behaviour. 

20. That behaviour, in and of itself, is despicable.  And anyone who thought it was not serious misconduct really would not be utilising any common sense.  Notwithstanding that, the Applicant, being a lawyer himself, knowing what he had actually done, and realising the serious nature of his conduct, still chose to pursue this action. 

21. The action itself was seemingly met with some incredulity by the Respondents who gave to the Applicant a copy of an affidavit, and I’m not too sure if it was sworn or unsworn.  That affidavit was meant for proceedings in some other matter but its contents were relevant simply to show to the Applicant what the state of affairs was for him; to consider the futility of the application that he was undertaking. 

22. Nevertheless, the Applicant decided to still maintain his position. It has been explained to me that that was because there was still no discovery, and the Applicant needed to see all of the documents and so on before it was that he could make any form of proper assessment. 

23. The list of documents for both parties were filed on 10 November 2017. 

24. So certainly from that time, the Applicant was aware of all documents.  Notwithstanding that, he still chose to continue with this matter. 

25. On 22 November 2017, the parties were advised of the mediation date, and that meant that all proceeded towards that mediation date. 

26. On 24 January 2018, the Applicant suggested vacating the mediation by consent if there was no prospect of settlement. 

27. But on 29 January, the Respondents confirmed that they proposed to attend the mediation for the purpose of exploring options for settlement. 

28. On 6 February, the Applicant offered to discontinue the matter on the basis that there were no costs consequences to the Applicant. 

29. And on 8 February, the Applicant, again, offered to discontinue on the basis that there were no costs consequences. 

30. On 9 February, the Respondents confirmed that they were prepared to agree to that discontinuance on the basis that each party bear their own costs, if the Applicant provided a statutory declaration in which he was honest about the events leading to his termination.  It was said that he should not sign any statutory declaration if he knew it to not be true. 

31. He was asked to give notification of his intentions by a particular time.  He did not meet that deadline, but then discontinued later that day. 

32. The question for me to look at is whether these proceedings were issued vexatiously or without reasonable cause. 

33. Section 37AM of the Federal Court of Australia Act 1976 (Cth) defines “vexatious proceedings” as:

    “37AM Definitions

    vexatious proceeding includes:

    (a) a proceeding that is an abuse of the process of a court or tribunal; and

    (b) a proceeding instituted in a court or tribunal to harass or annoy, to cause delay or detriment, or for another wrongful purpose; and

    (c) a proceeding instituted or pursued in a court or tribunal without reasonable ground; and

    (d) a proceeding conducted in a court or tribunal in a way so as to harass or annoy, cause delay or detriment, or achieve another wrongful purpose.”

34. It seems to me that the Applicant, on these facts, knew exactly why it was that he was dismissed.  He knew exactly what he had done.  And he knew the serious misconduct in putting a listening device, even if on the best view of the facts, it was under the express approval of some other person in the company. 

35. Such conduct could never be seen as anything other than serious misconduct.  The Applicant knew at all times that that is what he had done.  And the letter that was sent to him dismissing him made that fact abundantly clear. 

36. For him to then allege that this was not serious misconduct is bad enough.  But to then refer to a previous decision by the board (to stand him down from the position of CEO and return him to his original position), and to say that he was dismissed because he had said that he would get some legal advice as to that, is, at the very least, disingenuous.

37. In these circumstances, such an institution of proceedings, could only be described as an abuse of process of this Court; and it could have only have meant to be harassing or annoying to the company knowing, as he would, what the company would have to do to meet such a claim. It would seem to me that he was hoping that he could get some form of settlement from the company. 

38. These proceedings were instituted without reasonable ground, and then conducted in a combative way by refusing to engage in meaningful discussion with the other side. 

39. It seems to me that such is vexatious. 

40. For those reasons the pre-requisites of s.570(2) have, in my view, been met. It is then a question as to what form of costs should be awarded.

41. I have taken into account all the principles with regard to indemnity costs.  The Respondents should have their costs on an indemnity basis up until the time of the discontinuance.  After that date, the Respondent should have their costs on a party and party basis.

I certify that the preceding forty-one (41) paragraphs are a true copy of the reasons for judgment of Judge Vasta

Date:  21 May 2018