Jonsson v Theodore Hotel Co-Operative Associate Ltd - [2007] FMCA 1199

FEDERAL MAGISTRATES COURT OF AUSTRALIA

JONSSON v THEODORE HOTEL CO-OPERATIVE ASSOCIATION LTD

[2007] FMCA 1199

INDUSTRIAL LAW – Termination of employment – costs – proceedings which are vexatious – without reasonable cause – unreasonable act or omission causing costs to be incurred – failure to provide particulars – late withdrawal.

Workplace Relations Act 1996 (Cth)

De Silva v Benro Industries Pty Ltd Print T2359 AIRC
Four Trade Only Business Forms v Damman 74 IR 315
Hanrahan v Westfarmers Dalgety Limited (1996) 36 AILR (950627)
Imogen Pty Ltd v Sangwin (1996) 74 IR 315
In RV Moore; Ex Parte FMWU (1978) 140 CLR 470
Kanan v Australian Postal and Telecommunications Union (1992) 43 IR 257
Nilsen v Loyal Orange Trust IRCA (970042)

Applicant:

OLE JONSSON

Respondent:

THEODORE HOTEL CO-OPERATIVE ASSOCIATION LTD

File number:

BRG194 of 2007

Judgment of:

Burnett FM

Hearing date:

31 May 2007

Delivered at:

Brisbane

Delivered on:

1 August 2007

REPRESENTATION

Solicitors for the Applicant:

BEI Duells

Counsel for the Respondent:

Ms K. Garner

Solicitors for the Respondent:

Deacons Lawyers

ORDERS

That the Applicant pay the Respondent’s costs of and incidental to the hearing thrown away to be assessed.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
BRISBANE

BRG194 of 2007

OLE JONSSON

Applicant

And

THEODORE HOTEL CO-OPERATIVE ASSOCIATION LTD

Respondent

REASONS FOR JUDGMENT

Introduction

In this proceeding Ole Jonsson (the Applicant) sought relief against the Theodore Hotel Cooperative Limited (the Respondent) for alleged breaches of section 659 of the Workplace Relations Act1996 (the Act). In particular the Applicant sought a declaration that on 22 December 2006 the Respondent contravened section 659 of the Workplace Relations Act by unlawfully terminating his employment and not providing him with reasonable notice of termination of employment.
The application was made on 14 March 2007 and listed for trial commencing 30 May 2007. On 28 May 2007 the Applicant informed the Respondent that it intended to withdraw its application. Subsequently a notice of discontinuance was filed and when the matter came on for hearing the only issue to be resolved concerned the matter of costs.
Concerning costs, section 666 of the Act relevantly provides,

“Costs
(1) Subject to this section, a party to a proceeding under section 663 must not be ordered to pay costs incurred by any other party to the proceeding unless the court hearing the matter is satisfied that the first-mentioned party:
(a) instituted the proceeding vexatiously or without reasonable cause; or
(b) caused the costs to be incurred by that other party because of an unreasonable act or omission of the first-mentioned party in connection with the conduct of the proceeding.

(2) Subsection (1) does not empower a court to award costs in circumstances specified in that subsection if the court does not have the power to do so.
(3) In this section:
“costs” includes all legal and professional costs and disbursements and expenses of witnesses.”

In broad terms it was submitted by the Respondent (which sought costs) that it should be entitled to a costs order because:
a)the proceeding had been instituted vexatiously or without reasonable cause; and/or
b)the Applicant caused costs to be incurred by the Respondent by unreasonable acts or omissions on its part in connection with the conduct of the proceedings.
The Applicant resisted the Respondent’s contentions in that regard and in its response to the Respondent’s application for costs also claimed for costs pursuant to section 666(1)(a) or (b).

Proceedings which are vexatious

The Respondent contended that the Applicant had no prospects of success in the proceeding as there was no basis for the claim and that this was known by the Applicant prior to him bringing the proceeding and the preceding claim made in the Australian Industrial Relations Commission (AIRC). It was contended that the Applicant failed to produce any evidence to support his assertion that his employment was terminated for a prohibited reason with the only supporting evidence being an allegation that the Chairman of the Respondent informed the Applicant that the reason for his termination was that he “did not fit in” and that the Respondent wanted to employ someone local. The Respondent contended that such circumstances, even if true, would not be sufficient to give rise to any basis for termination in contravention of section 659 of the Act. In effect the Respondent asserted that the Applicant’s claim was doomed to fail in limine.
The Applicant submitted that the proceeding was not vexatious and that in order to determine whether the proceeding was instituted vexatiously it was necessary to look at his motive in instituting the proceedings. It was submitted on his behalf that a proceeding would only be instituted vexatiously where the predominant purpose in instituting the proceeding was to harass or embarrass a party or to gain collateral advantage; Nilsen v Loyal Orange Trust[1]. Further the Applicant relied upon dicta by Wilcox CJ in Hanrahan v Westfarmers Dalgety Limited[2] where His Honour said “the word “vexatiously” has a connotation of action taken to harass or annoy another party, an element of malicious being involved.”
[1] IRCA (970032), North J, 11 September 1997 a case which illustrates the application of this principle.
[2] (1996) 39 AILR (950627) at pg 8 of 8..
It is clear from the evidence in this case that there was no element of maliciousness involved in the institution of the proceeding. Nor do the facts of the case lend support to any suggestion that the proceeding was designed to “harass” or “annoy” the Respondent.
In my view the proceeding was not one which was prosecuted vexatiously. Costs cannot be awarded on this basis.

Without Reasonable Cause

Further or alternatively, the Respondent in its submissions contended that in assessing whether the proceeding was instituted without reasonable cause regard must be had as to whether the Applicant had sufficient justification for making the allegation of termination due to a proscribed reason pursuant to section 659.
It was submitted that the Respondent provided incontrovertible and corroborated evidence that the Applicant’s nationality was not a reason for termination of employment and that his employment was terminated because of his poor performance and conduct in the role. It was also submitted by it that the Applicant ought reasonably have been aware of these matters by reason of exchanges between he and representatives of the Respondent during the course of employment and for reasons given to him at the termination meeting together with correspondence subsequent to termination. Of particular significance in the Respondent’s submission was its assertion that as a consequence of section 664 of the Act the Respondent bore the onus of disproving the allegation that the Applicant’s employment was terminated for a lawful reason and this matter particularly should bear upon the approach to be adopted when determining the issue of costs.
It was submitted a relevant consideration for determining whether the proceedings were instituted without reasonable cause for the purposes of section 666 must be whether there was justification for the allegation that the dismissal was unlawful in contravention of section 659. It was submitted that to interpret the scheme of these provisions otherwise would mean that a claim arising from contravention of section 659 would never be capable of being instituted vexatiously or without reasonable cause purely as a consequence of the reversal of the onus of proof contained in section 664 of the Act[3]. For reasons which follow I do not agree.
[3] Respondent’s submissions paragraph 5.4 and 5.5.
The terms of section 659 and section 664 of the Act are expressly related as section 659 proscribes certain conduct and section 664 deals with evidentiary matters relating to proceedings instituted in respect of proscribed conduct. Applications in respect of section 659 contraventions are thereafter subject to section 666 concerning the matter of costs. Each of those provisions are clear in their expression and do not give rise to ambiguity.
Section 666 by its language is generic. In its opening words it refers to “a party to a proceeding” later identified as the “first mentioned party”. The other party to the proceeding is identified as “the other party”.
It can be seen from the language that the legislature contemplated that generally the provision could be advanced by either an applicant or a respondent on the matter of costs.
Within its body however some provision was made for specific parties. For instance, section 666(1)(a) concerns proceedings instituted “vexatiously or without reasonable cause”. Clearly this provision could only apply to an applicant. Indeed if it was intended to apply generally its language would have required broader expression so as to include proceedings “defended” vexatiously or without reasonable cause.
In my view section 666(1)(a) can only apply for the benefit of a respondent and be directed to the conduct of an applicant in the institution of an application.
By way of contrast section 666(1)(b) is clearly available to either an applicant or respondent. Its terms seize upon the generic description of “party to a proceeding” being the “first mentioned party” and the “other party”, each identified in the opening sentence of section 666(1).
In my view section 666(1)(b) can apply for the benefit of either party to a proceeding against the other.
An appreciation of the proper construction of section 666 is necessary in order to consider the question of whether the Respondent’s contention summarised above at paragraph 12 has merit.
Section 666(1)(a) focuses solely upon an applicant’s basis for commencing a proceeding. That being so the evidentiary provision contained in section 664 does not immediately bear upon that matter. While section 664 will bear upon the later conduct of a proceeding it is not rendered irrelevant on the matter of costs under section 666(1)(a). For instance, despite section 664(a) providing it is not necessary for an employee to prove the termination was for a proscribed reason, if it could be demonstrated the application was fraudulently initiated the question of a defence under section 659(b) may never arise. An example of such a case would be one where the employee voluntarily terminated his employment but sought to initiate an application alleging a section 659(2) contravention in order to improperly secure a compensation order. No section 664(b) defence would ever be available in that case because the employer would never have terminated the Applicant’s employment. In my view those circumstances would clearly justify a costs order in favour of the respondent pursuant to section 666(1)(a).
Likewise if an applicant was terminated but fraudulently alleged a section 664(2) contravention for termination the respondent employer would have available a basis to raise a defence under section 664(b). In such circumstances it would be open to make a finding that the proceeding was instituted vexatiously or without reasonable cause in circumstances where the employer discharged the section 664(b) onus. Again it would be a likely outcome that the respondent would be awarded costs pursuant to s666(1)(a).
Accordingly, in my view, it cannot be said that an examination of the reason for instituting proceedings is rendered meaningless in the context of these provisions unless section 666(1)(a) is read down in the manner contended for by the Respondent.
If in dismissing a claim, fraud or lack of good faith is established it would be reasonable to expect a s666(1)(a) basis established in respect of the “institution” of the proceeding.
No doubt the “conduct” in the prosecution of an application would in those circumstances also lead to an entitlement to costs pursuant to s666(1)(b).
Likewise it is not inconceivable that a proceeding may not be instituted vexatiously or without reasonable cause but that by reason of matters subsequently identified by a respondent further conduct of the proceeding is unreasonable and results in the incurring of unnecessary costs. It seems to me that for that reason the expression contained in s666 requires discrete consideration of both the initiation of proceedings and conduct later relevant to their prosecution.
It follows, in my view, that the appropriate approach to an application for costs under section 666 is first to determine whether the proceeding was instituted vexatiously or without reasonable cause. At this point consideration should be given as to whether the proceeding was instituted fraudulently or with bad faith. If so, those circumstances should be subject to detailed consideration to determine whether those matters demonstrate the proceedings were instituted vexatiously or without reasonable cause.
In circumstances where there was in fact voluntary termination that would be the end of the matter, the circumstance would probably warrant a costs order under s6649(1)(a). However if the termination was not voluntary then irrespective of fraud or bad faith consideration of whether the termination was for a lawful basis would still require consideration. Assuming a proper basis for termination was made out an order for costs may be made under section 666(1)(a) because the underlying fraud or bad faith would be evidence of vexatiousness or bad faith.
If there has been no fraud or bad faith associated with the institution of the proceedings then costs remedies are only available in respect of the conduct of the proceeding pursuant to section 666(1)(b). That necessitates enquiry as to whether the conduct of the proceeding has caused costs to be incurred by the other party because of an unreasonable act or omission.
Concerning reasonable cause there is abundant authority as to the appropriate test. In the Applicant’s submissions the Court was referred to In RV Moore; Ex Parte FMWU[4] and Kanan v Australian Postal and Telecommunications Union[5]. In particular in Kanan Wilcox J said:
“It seems to me that one of testing whether the proceedings are instituted without reasonable cause is to ask whether, upon the facts apparent to the Applicant at the time of instituting proceedings there were no substantial prospects of success. If such depends upon 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” where on the Applicant’s own version of the facts, it is clear that the proceeding must fail, it may properly be said that the proceedings lacks reasonable cause”.[6]
[4] (1978) 140 CLR 470.
[5] (1992) 43 IR 257.
[6] At 264 – 265.
With respect His Honour’s words were in my view clear and I adopt them. It follows that in order to determine whether the proceeding was commenced without reasonable cause it is necessary to consider whether or not on the Applicant’s material alone a proper basis for the proceeding can be made out. If not then it could be said the proceeding was commenced without reasonable cause.
In his affidavit filed in support of the application the Applicant deposed to the circumstances of his employment and the conditions thereof. He swore that when he pressed the Respondent for a reason for his termination he was told that his termination was because he “did not fit in” with the local townspeople or the local culture. He was told that the Respondent wanted to employ a local person in the role. He stated that as he was of Danish extraction he believed that when he was told he did not fit in it was because of his heritage and the fact that he was not an Australian.[7]
[7] Affidavit Ole Jonsson filed 8 May 2007 paragraph 24.
The matters identified by the Applicant in his affidavit identified the prescribed grounds of “national extraction or social origin”. If at trial it was to be accepted that his employment was terminated because of his “national extraction or social origin” then that termination would have been in contravention of section 659(2)(f) of the Workplace Relations Act and would have enlivened the Applicant’s rights to make his application pursuant to section 663 of the Workplace Relations Act.
In response to the Applicant’s application the Respondent refers to the evidence filed by it in the proceeding. The Respondent contended that national extraction or social origin was not the basis for termination but that the basis for termination related only to the Applicant’s performance and conduct.[8]
[8] Affidavit Gordon Ross Muirhead filed 28 May 2007 paragraph 120 and 121; Affidavit Keith Edwin Shoecraft filed 28 May 2007 paragraphs 73 to 85.
Broadly the Respondent identified other issues also as giving rise to the Applicant’s termination. They included the reliance by the Respondent upon a probation period and discussions within counselling of the Applicant by representatives of the Respondent during the course of his employment. All of those matters were deposed to in various affidavits filed in the Respondent’s case.
The affidavits themselves however simply serve to put in issue numerous factual matters. For instance in the Applicant’s affidavit he denied ever having a probation period provided for in his contract of employment.[9] Further he swore that he was only ever counselled on one occasion in respect of one complaint.[10]
[9] Affidavit Ole Jonsson filed 8 May 2007 paragraph 22.
[10] Affidavit Ole Jonsson filed 8 May 2007 paragraphs 15 to 21.
In all of the circumstances given the factual issues raised by the parties in the material there was clearly an issue to proceed to trial concerning whether or not the Applicant’s termination of employment was based upon “national extraction or social origin” as contended for by the Applicant or for other reasons, the most predominant of which was unsatisfactory employment performance, as contended for by the Respondent. In the circumstances I do not consider that the proceeding was one instituted without reasonable cause.

Unreasonable act or omission causing costs to be incurred

The initiating application was filed on 13 March 2007. It was listed for directions on 4 April 2007 and at that time directions were made concerning the exchange of material. In summary the relevant directions were:
a)that the Applicant file and serve his material by 4 pm on 26 April 2007;
b)that the Respondent file and serve its material in response by 17 May 2007; and
c)the matter be listed for hearing for two days commencing 30 May 2007.
In fact the Applicant’s material was not filed and delivered until 8 May 2007 and in turn the Respondent’s material was not filed until 28 May 2007.
After commencing the application the Respondent caused its solicitors to write on 23 April 2007 on a without prejudice basis noting that the Respondent had “repeatedly requested that (the Applicant) provide details of the alleged unlawful reasons for termination of his employment”.[11]
[11] Affidavit Martin Francis Osborne, exhibit MFO-11.
It should be noted that from at least 2 January 2007 the Respondent’s contention, as informed by it through its various agencies to the Applicant, was that the Applicant’s employment was terminated due to unsatisfactory work performance. However, the Respondent had no real basis to understand the Applicant’s complaints until some time after the proceeding was instituted. So much is evident from the application and the associated absence of any supporting affidavit filed with the application or of any other document particularising the Applicant’s claim. An extension of time was granted for the Applicant to file and serve its material from 26 April 2007 to 4 May 2007. Although the Applicant’s material was filed on 8 May 2007 it was faxed to them on 4 May 2007. In any event in later correspondence the Respondent complained that “it is still unclear what the alleged ground of unlawful dismissal is and the basis of your client’s reported claim for notice where he has already been provided in excess of the required statutory notice”.[12]
[12] Affidavit Martin Francis Osborne, exhibit MFO-16.

In its submissions the Respondent contends two bases in support of a claim for costs under section 666(1)(b) namely,
a)failure to provide particulars of the alleged initial unlawful dismissal application; and
b)late withdrawal of the application.

Failure to provide particulars

In its correspondence and in its submissions the Respondent complained vociferously of the Applicant’s failure to provide adequate particulars of its application. As it noted in its written outline “it is difficult at the best of times for a Respondent to disprove an allegation. That task becomes even more difficult, and consequently time consuming and expensive, where, as here, the specific nature of the allegation is unknown, until some considerable time into the proceeding.”[13]
[13] Respondent’s submission at paragraph 6.3.
It was submitted by the Respondent that the first notice they had of the specific nature of the allegation and circumstances relied upon in support of the allegation was contained in correspondence from the Applicant’s solicitors to its solicitors dated 9 May 2007 but received on 11 May 2007. As was submitted, the Respondent and its solicitors had already commenced and invested significant resources in preparing the Respondent’s defence to the proceedings as best they could without any specific details as to the nature of the allegations being made and available to them at that time. It was submitted that the Applicant’s delay in providing details of the nature of the alleged unlawful dismissal and the justification and purported circumstances supporting that allegation caused the Respondent to incur considerably greater expense in instructing its representatives and preparing its material to defend the proceedings than it would have if it had had earlier notice of the specific nature of the allegation and circumstances. It was submitted that if it had had that notice avenues of enquiry, investigation and materials such as affidavits could have been more narrowly focused and prepared with a consequent reduction in time and expense.
Whilst the Respondent’s submission on this point has superficial appeal, with respect, it does not withstand scrutiny. It is clear from section 664 that the Respondent in any application of this kind bears an onus to prove that the termination was for a reason or reasons that do not include a proscribed reason if it wishes to defend the proceedings. That necessarily would require evidence concerning the circumstances of termination to demonstrate that the termination was not for a proscribed reason but rather for a reason or reasons that did not include a proscribed reason. An examination of the material filed by the Respondent in response to the application, namely the affidavits of Penelope Gaye Anderson[14], affidavit of Gordon Ross Muirhead[15], affidavit of Keith Edwin Shoecraft[16] and affidavit of Christopher David Holmes[17], details matters which one would reasonably expect to have been included in affidavits from a person in the position of the Respondent addressing matters required to be addressed by section 664(b). In addition those affidavits also respond to the material which was filed earlier by the Applicant.
[14] Filed 28 May 2007.
[15] Filed 28 May 2007.
[16] Filed 28 May 2007.
[17] Filed 28 May 2007.
The “act” precipitating the Respondent’s preparation of material was the commencement of its application. For reasons that I have earlier expressed I do not consider the application was unreasonably commenced. Given the material filed by the Respondent addresses the merits of the application and its defence the costs caused to be incurred by the Respondent in connection with that part of the conduct of the proceeding were not incurred because of an unreasonable act. It follows that the cost of the preparation of affidavits should in my view not be the subject of a costs order.

Late withdrawal

The second matter contended for by the Respondent concerns the Applicant’s late Notice of Discontinuance of the application.
The Applicant gave the Respondent notice that it did not intend to proceed with the application by notice given on 28 May 2007. That was approximately two days prior to the due commencement time for the hearing. The Respondent contends that that conduct caused it to incur further considerable expense in finalising its material and preparing for the hearing that would otherwise have been the case if the Applicant had discontinued at an earlier date.
It was contended for by the Applicant that nothing should be imputed into a decision to discontinue such as for instance an imputation that the Applicant realised his application was destined to fail; De Silva v Benro Industries Pty Ltd.[18] It is clear that having regard to the facts of this case particularly and the reality of legal costs associated with its prosecution that there may have been little commercial utility in prosecuting its claim once the Applicant was aware of the evidence mounted against him and due consideration was given to the risks of litigation; Imogen Pty Ltd v Sangwin[19].
[18] Print T2359 – AIRC at paragraph 16 and noted at paragraph 32 of the Applicant’s Outline.
[19] (1996) 74 IR 315.
It was further submitted by the Applicant that his withdrawal could only be classified as unreasonable if it was in fact the case that there was an earlier time in the proceedings where it would have been reasonable for the Applicant to discontinue his application; Four Trade Only Business Forms v Damman[20].
[20] 74 IR 315.
In that regard it is in my view necessary to give consideration to the general chronology of the proceeding and in particular the Applicant’s adherence to the Court’s directions. It is because of the Applicant’s failure to adhere with the initial timetable for delivery of material that the Applicant was only positioned to consider his overall position on 28 May 2007. Had he adhered to the timetable and delivered his material by 26 April 2007 then he could have expected the Respondent to deliver its material by 17 May 2007. Had such events transpired and, on 17 May 2007, the Applicant had given his notice of intention to discontinue the costs which would have been incurred by the Respondent in preparing for trial would not have been unnecessarily incurred. I do not think the Applicant was unreasonable in rejecting the Respondent’s offer contained in its letter of 23 April 2007 because at the time of that letter it was not armed with the information which would have enabled it to consider the offer in any meaningful way. However the act or omission of the Applicant in failing to deliver its material in accordance with the Court’s directions meant it was unable to consider any offers of compromise prior to 28 May 2007 rather than 17 May as might have occurred if there had been compliance with the timetable.
As I have earlier determined the Respondent’s material had to be prepared in any event for it to answer the Applicant’s claim in the proceeding. However costs were caused to be incurred in relation to the arrangement of matters for trial. They would have included costs associated with organising witnesses and briefing Counsel. They were costs incurred by reason of the Applicant’s failure to comply with the directions issued in connection with the conduct of the proceedings. There has been no explanation provided as to why the Applicant omitted to comply with the Courts directions and the only reasonable inference available to be drawn is that no reasonable explanation is available. In that regard the Applicant’s conduct was unreasonable and it follows that I consider the Applicant should pay the respondents costs of the proceeding which were thrown away. Such costs would not include the costs of preparing the affidavit material but, I would expect be largely limited to costs associated with organising witnesses to attend for the trial and to the briefing of Counsel for the trial. I expect the costs of Counsel appearing to argue the matter of costs would be included within Counsel’s fee on brief.

Summary

In summary I do not consider that the Applicant ought to be ordered to pay costs in accordance with section 666 of the Workplace Relations Act save for the costs thrown away for the conduct of the hearing on 29 May 2007 as
a)I do not consider the proceeding was instituted vexatiously or without reasonable cause ; and
b)all costs incurred by the Respondent in connection with the proceeding save for those costs associated with the aborted trial were costs which were caused to be incurred by the reasonable conduct of the Applicant in prosecuting the proceeding.

Applicant’s Claim for Costs

Nothing in the manner of the Respondent’s prosecution of its response lends support to any allegation that its response has been vexatious or prosecuted without reasonable cause. Furthermore nothing on the part of the conduct of the Respondent in the course of the proceeding could be said to have caused costs to be incurred because of an unreasonable act or omission by the Respondent in connection with the conduct of the proceeding. I dismiss any cross claim for costs made by the Applicant.

Orders

I order that the Applicant pay the Respondent’s costs thrown away for the hearing conducted on 29 May 2007.

I certify that the preceding fifty-five (55) paragraphs are a true copy of the reasons for judgment of Burnett FM

Associate: Bev Schmidt

Date: 1 August 2007