Ianni v Platinum Estore Pty Limited (No 2)
[2022] FedCFamC2G 993
Federal Circuit and Family Court of Australia
(DIVISION 2)
Ianni v Platinum Estore Pty Limited (No 2) [2022] FedCFamC2G 993
File number(s): SYG 2935 of 2020 Judgment of: JUDGE HUMPHREYS Date of judgment: 28 November 2022 Catchwords: INDUSTRIAL LAW – Fair Work Act – application for costs. Legislation: Fair Work Act 2009 (Cth) ss 570.
Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) r 1.04. 13.02. 22.02. 22.03
Federal Circuit Court Rules2001 (Cth) r 21.02
Cases cited: Australian and International Pilots Association v Qantas Airways Ltd (No 3) [2007] FCA 879
Australian and International Pilots Association v Qantas Airways Ltd (No 3) [2007] FCA 879
Australian Workers Union v Leighton Contractors Pty Limited (No 2) [2013] FCAFC 23
Baker v Patrick Projects Pty Ltd (No2) [2014] FCAFC 166
McDonald v Parnell Laboratories(Aust) (No 2) (2007) 164 FCR 591
Melbourne Stadiums Ltd v Saunter (2015) 229 FCR 221
Palmer v McGowan(No 6) [2022] FCA 927
Shea v Energy Australia Services Pty Ltd (No 2) [2015] FCAFC 14
Torpia v Zarfati [2009] FMCA 166
Trustee for The MTGI Trust v Johnston (No 2) [2016] FCAFC 190
Division: Division 2 General Federal Law Number of paragraphs: 49 Date of last submission/s: 14 November 2022 Date of hearing: 14 November 2022 Place: Parramatta Solicitor for the Applicants: Mr Clarke of Marrickville Legal Centre Solicitor for the Respondents: Self-Represented ORDERS
SYG 2935 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: ROCCO IANNI
First Applicant
ISABELLA IANNI
Second Applicant
MADELEINE SNOXALL
Third Applicant
AND: PLATINUM ESTORE PTY LIMITED (ACN 168 825 321)
First Respondent
AZADEH ASHRAFINA
Second Respondent
order made by:
JUDGE HUMPHREYS
DATE OF ORDER:
28 NOVEMBER 2022
THE COURT ORDERS THAT:
1.The Respondents are to jointly and severally pay the Applicants’ legal costs in the fixed sum of $12,000.00 within 28 days of the date of these orders.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
JUDGE HUMPHREYS
introduction
This judgement deals with an application by the plaintiffs for the award of costs against the respondents following judgement against the respondents in Ianni v Platinum eStore Pty Limited [2022] FedCFamC2G 611 (“Ianni”).
In that judgement, the Court found in favour of each of the applicants in relation to some, but not all of their claims against the first and second respondents in relation to breaches of the Fair Work Act 2009 (Cth) (“the Act”). The Court dismissed in its entirety a Cross-Claim brought by the respondents against each of the applicants.
The matter had an unfortunate pre-trial history, including non-compliance by the respondents for the filing and serving of amended pleadings, a failure by the respondents to answer a request for particulars, and on 6 July 2022, being the week before the scheduled hearing, the Court denied a request by the respondents to file and serve further evidence.
At the hearing, the second respondent appeared unrepresented. The second respondent also represented the first respondent.
The Law
The relevant law in relation to the award of costs in a Fair Work matter is contained in s 570 of the Act, which reads 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) 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.
The Court now operates under new rules contained within the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) (“the Rules”). In so far as they relate to General Federal Law, the new Rules to a large extent replicate the previous Federal Circuit Court Rules2001 (Cth) (“FCC Rules”).
Rule 1.04 of the Rules states as follows:
Overarching Purpose
(1)The overarching purpose of these Rules, as provided in section 190 of the Act, is to facilitate the just resolution of disputes according to law and as quickly, inexpensively and efficiently as possible.
(2)To assist the Court, the parties must:
(a) avoid undue delay, expense and technicality; and
(b) consider options for primary dispute as early as possible
Rule 13.02(2) of the Rules provides that a party may apply to the Court for an order for costs where the other party discontinues an application. Rule 21.02 of the FCC Rules, as it was previously, is now reproduced as r 22.02 of the Rules. It and r 22.02 reads as follows:
Order for costs
(1)An application for an order for costs may be made:
(a) at any stage in a proceeding; or
(b) within 28 days after a final decree or order is made; or
(c) within any further time allowed by the Court.
(2)In making an order for costs in a proceeding, the Court may:
(a) set the amount of the costs; or
(b) set the method by which the costs are to calculated; or
(c) refer the costs for taxation under Part 40 of the Federal Court Rules; or
(d) set a time for payment of the costs, which may be before the proceeding is concluded.
Rule 22.03 of the Rules reads as follows:
Determination of maximum costs
(1)The Court may specify the maximum costs that may be recovered on a party and party basis:
(a) by order at the first court date; and
(b) on its own initiative or on the application of a party.
(2)However, an amount specified must not include an amount that a party is ordered to pay because the party:
(a) has failed to comply with, or has sought an extension of time for complying with, an order or any of these Rules; or
(b) has sought leave to amend a document; or
(c) has otherwise caused another party to incur costs that were not necessary for the economic and efficient progress of the proceeding or hearing of the proceeding.
(3)The Court may vary the maximum costs specified if, in the Court’s opinion, there are special reasons and it is in the interests of justice to do so.
Where an order is made for the payment of costs, the manner in which the amount of those costs may be set is a discretionary matter for the Court. Three methods are available.
The first being, an amount fixed by reference to the relevant Scales of Costs contained within Schedule 2 of the Rules. The second method, would be to refer the matter for an assessment/taxation of costs on a party-party basis. The third method would be to allow costs on an indemnity basis.
The discretion to award costs pursuant to s 570 of the Act should be exercised with some caution. In Trustee for The MTGI Trust v Johnston (No 2) [2016] FCAFC 190 at [8] the following was said:
Section 570 of the FW Act confers discretion on the Court to order costs in Fair Work matters where proceedings were instituted vexatiously or without reasonable cause. Not only must this discretion be exercised judicially according to the terms defining it, it must be exercised with caution because of the exceptional nature of the power in an otherwise no-costs jurisdiction. The case for its exercise should be clearly demonstrated: Saxena v PPF Asset Management Ltd [2011] FCA 395 at [6].
The relevant principles were summarised in Australian Workers Union v Leighton Contractors Pty Limited (No 2) [2013] FCAFC 23 at [7]:
(1) The purpose or policy of the section is to free parties from the risk of having to pay their opponents’ costs in matters arising under the Act, while at the same time protecting those parties who are forced to defend proceedings that have been instituted vexatiously or without reasonable cause.
(2) It follows from the protection offered by s 570(2) that a person will rarely be ordered to pay the costs of a proceeding. But it is not necessary to prove that there are exceptional circumstances warranting the making of an order.
The relevant question is whether the proceeding had reasonable prospects of success at the time it was instituted, not whether it ultimately failed.
That can be tested by asking whether the party bringing the action, on the facts apparent to the party and its lawyers, properly advised, should have known the claim had no reasonable prospects of success: Baker v Patrick Projects Pty Ltd (No2) [2014] FCAFC 166 at [9]-[10].
In relation to s 570(2)(b) of the Act, whether a party engaged in an ‘unreasonable act or omission’ will depend upon the particular circumstances of the case. In Australian and International Pilots Association v Qantas Airways Ltd (No 3) [2007] FCA 879 at [36] it was held that “prosecution of any incompetent or hopeless case can be regarded as ‘an unreasonable act’ … Conversely… the pursuit of a contentious, and ultimately unsuccessful, argument is not an unreasonable act”. In Melbourne Stadiums Ltd v Saunter (2015) 229 FCR 221 the Full Federal Court held at [166] that “[i]t is well established that a failure to accept a reasonable offer of compromise may constitute an unreasonable act for the purposes of s 570(2) and its predecessors: (see, for example; McDonald v Parnell Laboratories(Aust) (No 2) (2007) 164 FCR 591 (“Parnell Laboratories”) at 598-9, per Buchanan J). In that case at [21] the following is said:
In Coshott v Learoyd [1999] FCA 276 (‘Coshott’) Wilcox J reviewed a number of cases discussing the circumstances in which rejection of an offer of compromise (whether pursuant to O 23 or a Calderbank offer), followed by complete failure at trial, should lead to the award of indemnity costs against an unsuccessful applicant. His Honour doubted that an applicant’s conduct in rejecting the offer must be ‘plainly unreasonable’ before indemnity costs will be ordered. Observing that the Court must look at the whole situation, including the circumstances that applied at the time of non-acceptance of the offer, his Honour also said:
‘whether or not it is correct to talk about a “prima facie presumption”, non-acceptance of an Order 23 offer should at least be regarded as providing to the offeror a good start in the task of persuading the court to award more than party-party costs’.
Once the power to award costs is enlivened under s 570(2) of the Act, the Court can make an order for costs to be paid on an indemnity basis, as it could, and often would, in litigation with the general law principles as to the award of such costs applied: (see; Shea v Energy Australia Services Pty Ltd (No 2) [2015] FCAFC 14 at [10]). In Torpia v Zarfati [2009] FMCA 166, Barnes FM noted at [14] that:
There is also authority … that indemnity costs should not be ordered in the absence of a presumption that the action was commenced for some ulterior motive or because of a wilful (as distinct from inadvertent) disregard of known facts or established law.
The test as to whether indemnity costs should be awarded is, whether the justice of the case might so require or, whether there exists some special or unusual feature of the case to justice for the Court in departing from the ordinary practice: (see; Australian and International Pilots Association v Qantas Airways Ltd (No 3) [2007] FCA 879).
Grounds for the Costs application by the Applicants
The applicants rely upon three matters as the basis in support of their costs application.
Calderbank Offer Rejected
First, it was submitted that the respondent unreasonably rejected a Calderbank offer made on 3 November 2021.
On 1 November 2021, the respondent’s then legal representatives, Clark Kann Lawyers, made a without prejudice, save as to costs, offer to the applicants to settle the matter on the following terms:
a. Judgement in favour of the respondent’s in respect to the application filed on 22 December 20;
b. Judgement in favour of the cross claimant with respect to the cross-claim filed on 15 April 21; and
c. There be no order as to costs, with the intent that each party will bear its own legal costs.
On 3 November 2021, the applicants rejected the offer set out above and made a counter offer on a without prejudice, save as to costs, basis on the following terms:
a. Within seven days of the acceptance of the offer, the applicants are to file a notice of discontinuance in respect of the application filed 22 December 20;
b. Within seven days of the acceptance of this offer, the respondent to file a notice of discontinuance in respect of the cross-claim filed 16 April 21;
c. Each party to bear their own costs; and
d. Within three days of acceptance of the offer, the parties are to executed deed that confirms the parties have agreed to resolve the proceedings SYG2935/2020 on the basis outlined above, with the deed to include mutual release, mutual confidentiality and mutual non-disparagement and obligations.
It was submitted that no response was received from the respondent’s or their legal representatives as to the counter offer set out above. As the respondents have had the benefit of advice from several legal firms and Counsel, it was submitted that the respondents should have known or been made aware of that there failure to accept the applicant’s offer could constitute an unreasonable act that would cause the applicants to incur costs.
Cross Claim against the Third Applicant
Second, it was submitted the cross-claim against the third applicant was clearly initiated vexatiously and without reasonable cause. First, the respondents’ Response failed to name the applicant in the orders sought.
Second, the cross-claim alleged that the third applicant was employed as a ‘casual’ employee at the Broadway premises of the first respondent. This was factually incorrect and in direct conflict with the evidence of the second respondent contained in her Affidavit at Court Book pages 321-323.
Third, the second respondent at no time cross examined the third applicant in respect of the allegations made in the cross claim. Rather it was put to the second applicant she trained the third applicant to manipulate the work time recording system. This was not found to be substantiated.
Fourth, the respondents’ position has changed on several occasions, in relation to the third applicant. Originally, the Defence relied upon by the respondents alleged that a payment had been made to the third applicant in respect of all accrued leave. The Defence stated that the third applicant “has been paid in full by agreed payment in the sum of $850.16 in full and final settlement of all claims and demands”. This paragraph was subsequently struck out on 5 May 2021 in an amended Defence and replaced by a broad denial of the third applicant’s entitlements as claimed. The second amended Defence then restated what was originally stated. The second amended Defence confuses the respondents’ position further in relation to the third applicant by stating that at no time did the third applicant advise the respondents that she had resigned and that all amounts due and payable to her were paid on the termination of employment. At the hearing, the second respondent abandoned all of the above and gave evidence that she had “forgotten” to pay annual leave and thought that the third applicant was still an employee. The Court rejected this evidence as not credible: (see; Ianni at [81]).
Having regard to the amount of time spent on her case in the hearing, the third applicant claims a percentage of 20% of the schedule costs of a two day hearing with Counsel being $941.00 and $470.00 and items 9 and 10 of Part 1 of Schedule 2 to the Rules, or a total of $1411.00.
Factors Relevant to all Applicants
Thirdly, it was submitted that the respondents acted unreasonably in the way they conducted the proceeding, such as to incur additional costs to the applicants. This included being compelled to file an Application in the Case on the basis of the respondents’ failure to comply with Court orders and a failure to respond or engage with the applicants’ open correspondence of 19 February 2021.
Further, the respondents failed to comply with an extension of time granted on 5 March 2021. Although, by then the notice of cross-claim had been filed against all three applicants, Judge Obradovic struck out eight paragraphs of the Defence with leave to re-plead and reserve costs. The respondents eventually filed the cross-claim on 16 April 2021, but reinserted the struck out paragraphs in the amended Defence in identical wording but with new numbers. It was submitted the respondent should pay the applicants’ costs reserved on 5 May 2021 in the amount of $1,178.00. Reserved costs of the 7 October 2021 interlocutory hearing should also be paid. On 16 July 2021, Judge Obradovic made consent orders following mediation. In her Affidavit affirmed 17 August 2021, the second respondent affirmed as follows:
a. She never agreed to the settlement of 12 July 2021 “because I wanted the matter to be publicly recorded so any future employers of the Applicants could access to this information and be aware of what they are capable of”.
b. On 16 July 2021 she spoke with and emailed to then solicitor, the Registrar and the Court’s Legal Case Manager, requesting the orders be withdrawn or corrected.
c. On 19 July 2021, she instructed new lawyers to prepare and file an application to set aside the consent orders.
The Applicant’s submitted that they took issue with the 17 August 2021 Affidavit and its accompanying ‘without prejudice save as to costs’ letters for the following reasons:
a. It included a remark “as you are aware from subsequent correspondence to which you were copied those consent orders were sent to you without our clients instructions or knowledge” which was unsupported by any evidence or inference available included in the affidavit
b. The supporting Affidavit disclosed wide range of issues that were previously unknown to the applicants.
The matter was ultimately resolved after the respondents filed submissions, three hours prior to the matter being listed on 7 October 21, accepting all objections raised by the applicants. These actions caused the applicant’s additional legal costs amounting to $1,178.00.
It was further submitted that the applicants’ costs of the final hearing amounting to $4,704.00 under item 9 of Part 1 of Schedule 2 and $2,352 under item 10 of Part 1 of schedule 2of the Rules should be paid by the respondents pursuant to s 570(2)(a) of the Act. This claim is based on the following:
a. The failure of the respondents to provide particulars request on 18 February 2022.
b. The failure of the respondent is to provide further evidence or submissions within the time limit set by consent on 25 January 2022.
c. Respondents producing and seeking to rely material produced without notice, and in breach of consent orders on the morning of the hearing of 11 July 2022.
d. Respondents effectively abandoning any defence to failing to pay wages and entitlements to the first and second applicants within the period prescribed by the Act and/or Award.
e. The respondents effectively abandoning any defence to failing to pay the third was applicant her annual leave entitlements within the period prescribed in the act and/or award
f. The respondents effectively abandoning any defence to continued failure to pay or account annual leave loading.
g. Respondents effectively abandoning any defence to deducting $2,353.52 from the first applicant’s wages on or about 10 February 2020
h. The respondent is continuing to challenge, subvert and evade the judgment and orders made by the Court on 4 August 2022 and 24 August 2022.
It was further submitted that the cross-claim, on its own evidence, had no reasonable prospect of success. It was doomed to fail and should have been apparent to the respondents based on the refusal to provide particulars or file further evidence by 30 April 2022. Reliance was placed on Palmer v McGowan(No 6) [2022] FCA 927 at [31] where Lee J had the following to say:
All parties must conduct negotiations for settlement in a way that is consistent with the overarching purpose: see s 37N(1) of the Act. Mr Palmer may not be unduly troubled about spending his money on litigation, but he had an obligation to facilitate the just resolution of the dispute according to law, and as quickly, inexpensively and efficiently as possible. The interests at stake go beyond the individual parties and extend to the responsible use of the Court system generally. The cost of the litigation was disproportionate to any benefit it was likely to produce, and this should have been evident in December last year.
Conduct of proceedings
Fourthly, it was submitted that the respondents had consistently breached the Court’s orders, delayed the proceedings and hindered the progression of the matter. This included by failing to file a cross-claim within time such of the applicants were required to make an Application in a Case to remedy the deficiencies in the Defence, which was opposed by the respondents’ then Counsel. Each time the respondents amended that Defence, allegations changed, admissions were made and then withdrawn. Ultimately, the second amended Defence raised a number of serious matters, notably, the allegation that the second applicant had stolen MacArthur Square’s weekly takings.
A request for particulars made by the applicants to the respondents on 18 February 2022 remained unanswered at the hearing on 11 and 12 July 2022. Lastly, the respondents failed to file any additional material in the proceedings prior to the hearing 11 and 12 July 2022. Serious allegations were raised during the hearing in relation to the procedural fairness being afforded to the second respondent. In cross-examination, the second respondent conceded that the MacArthur Square theft allegations against the second applicant had never been raised with the second applicant.
In terms of the total amount payable, it was submitted that an amount of $9,412.00 should be paid by the respondents in respect of the two hearing days, together with two Applications in a Case. If costs were to be ordered on a party-party basis, these would be $12,000.00 in total. In relation to the third applicant, the amount sought is $1,421.00, being 20% of the total costs, or $2,000.00 on a party-party basis.
The Respondents’ Submissions
The respondents’ submissions in relation to costs were very brief. In respect of the considerations under s 570(2) of the Act, the following was submitted:
a. The respondents did not commence the primary proceedings and commence the cross-claim unreasonabley because;
b. The respondents were not granted additional leave to vacate the hearing or have additional material admitted in evidence, such that the normal course of the proceedings was not delayed;
c. The respondents did not participate in the matter before the Fair Work Commission prior to these proceedings.
It was submitted that the third applicant did not file a Defence to the amended cross-claim and, therefore, had been put to very limited costs if at all filing pleadings or defending the proceedings.
Lastly, it was suggested that as the solicitors were from a Community Legal Centre, which is a not-for-profit Legal Centre and provides free legal services, the applicants have not been put to the actual expense of paying legal fees and they are not entitled to a costs
.Consideration
It is perhaps convenient to deal with the last issue raised by the respondents first. No statute or case law has been put forward to support the submission that a Community Legal Centre is unable to seek costs where they are successful. Community Legal Centres are like any other firm of solicitors and where they are successful, they are entitled to seek the payment of legal fees incurred on behalf of their clients. What arrangements may be in place between the legal Centre and its clients in terms of the payment of fees is a matter for the retainer between the Community Legal Centre and its clients.
Whilst it is true that the respondents did not commence the primary proceedings, the cross-claim has been entirely unsuccessful. It is true that the respondents were not granted additional leave to vacate the hearing, and have additional material admitted into evidence, however this arose due to the repeated failure of the respondents to file material on time and in accordance with the Court’s orders. Further, the basis of the Defence relied upon changed and this occasioned additional costs to the applicants.
The latest attempt to file fresh material occurred in the week prior to the time set for the final hearing. Had leave been granted, it would have been necessary to adjourn the hearing and fresh dates to have been set for final hearing. Any prejudice that was occasioned to the respondents was entirely due to the problematic preparation of the matter for hearing and the repeated changes in the issues they sought to ventilate and rely upon.
The Court has difficulty understanding the submission that the respondents were not involved in the Fair Work proceedings, and that therefore this is an argument as to why costs should not be paid in the proceedings before this Court. What happened at the Fair Work Commission is not relevant to the proceedings before the Court.
What is clear is that an open Calderbank offer was made to the respondents on 3 November 2021. That offer was effectively that the proceedings be discontinued and each party pay their own costs. At final hearing, while the applicants had not been entirely successful in all of their claims, the respondents have been entirely unsuccessful in their cross-claim. In oral submissions to the Court, the second respondent stated that she was not prepared to settle the matter, as by that stage he had spent $45,000.00 on legal costs. Given this jurisdiction is a no costs jurisdiction and that costs are clearly limited to the circumstances outlined in s 570 of the Act, this was a mistaken and ill-advised basis upon which to refuse to accept the settlement offer.
The Court is of the view that it was very imprudent of the respondents not to have accepted the offer of settlement made on 3 November 2021. As noted by Buchanan J in Parnell Laboratories, the Court does not need to decide whether it was “plainly unreasonable” not to do so. The Court is satisfied that the offer of settlement was a reasonable offer of compromise and in the circumstances of this case, the failure to accept that offer constituted an unreasonable act for the purposes of s 570(2) of the Act such that costs should be awarded against the first and second respondent’s jointly and severally as and from 10 November 2021. Those costs should be on a party-party basis.
In addition, the Court is satisfied that costs in relation to the two Applications in a Case should be paid by the first and second respondents. Those costs were occasioned by the unreasonable act or omission of the respondents to comply with Court orders or respond to reasonable correspondence and requests from the applicants, including for particulars. The Court is not satisfied that it would be appropriate to order costs on an indemnity basis. The circumstances of this case do not meet the very high test for such an order
The Court is further satisfied that the amounts claimed by the applicants of $12,000.00, on a party-party basis, are reasonable by reference to the relevant Court’s Schedule, being in respect of the final hearing and two Applications in a Case.
Conclusion
The first and second respondents are ordered to pay jointly and severally the applicants’ legal costs in the fixed sum of $12,000.00. These costs are to be paid within 28 days of the date of these orders.
I certify that the preceding forty-nine (49) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Humphreys. Deputy Associate:
Dated: 28 November 2022
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