Kerry Derham v Jenny Craig Weight Loss Centres Pty Ltd

[2012] FWA 9448

[2012] FWA 9448

FAIR WORK AUSTRALIA

DECISION

Fair Work Act 2009
s.394—Unfair dismissal

Kerry Derham
v
Jenny Craig Weight Loss Centres Pty Ltd
(U2012/7438)

COMMISSIONER BISSETT MELBOURNE, 15 NOVEMBER 2012

Costs application.

[1] On 24 April 2012 Kerry Derham (the Applicant) made an unfair dismissal application pursuant to s.394 of the Fair Work Act 2009 (the Act). The Applicant alleged that she had been dismissed from her employment with Jenny Craig Weight Loss Centres Pty Ltd (the Respondent).

[2] On 7 May 2012 the Respondent notified a jurisdictional objection to the application alleging that the application was frivolous, vexatious and/or without reasonable prospects of success because the Applicant had signed a Termination and Release Agreement (TRA). On these grounds the Respondent sought that the application be dismissed prior to hearing or otherwise that the jurisdictional issue be dealt with prior to a hearing of the merits of the application or conciliation of the matter.

[3] On 30 August 2012 a hearing was held to determine the jurisdictional objection of the Respondent.

[4] At the conclusion of the hearing I issued my decision ex tempore. That decision said, in part:

It was agreed that there were a number of workplace issues involving the applicant and other employees over a period of time from early 2012. And I don’t think we need to go into the details of those here. Relevantly, on 10 April 2012 the applicant went on sick leave. Just prior to the applicant’s return to work, and...Ms Senior from the respondent spoke to the applicant and proposed a meeting on 11 April. During that meeting on 11 April Ms Senior says that the applicant verbally advised that she would resign her employment and it was in her own interests that she move on. Ms Senior noted that the applicant was calm and considered that she fully intended to resign. The applicant says that she felt that she was under duress at the meeting and she was under some pressure to sign the agreement and that her options were to sign the document and receive the money, or not to sign the document and have no money and no job, or possibly to return to work and be placed under the microscope.

Ms Senior, however, told the applicant that she accepted her resignation and gave the applicant the TRA offering six weeks’ pay in exchange for a full release from any further claims arising from her employment. The applicant was given until 5 pm the following day to consider if she wanted to accept the terms of the settlement. The applicant was given the terms of the settlement at around about two, maybe 2.30 on 11 April.

Later that day Ms Senior rang the applicant with respect to some matters missing from the form. At that time the applicant said nothing about being under duress or feeling stressed about the need to sign the document or about needing more time to consider the document.

Just before 5 pm on 12 April 2012 Ms Senior received a copy of the signed TRA from the applicant.

On 13 April the applicant says that she spoke to the Fair Work Ombudsman who told her that she potentially had a constructive dismissal claim. The applicant says that she told the Fair Work Ombudsman that she had signed agreement with the employer.

On 24 April the applicant lodged her application with Fair Work Australia under section 394 of the Act.

The question that’s necessary for me to determine is whether there’s a binding agreement between the parties and whether there is or not is a matter of fact to be determined. In this case I conclude that there is a binding agreement between the parties. The document, the TRA, has been duly signed by both parties. The applicant was given over a day in which to consider the document. The applicant did sign and return the TRA the day after the meeting held with Ms Senior. She did not seek an extension of time or raise concerns about how short a period she had to consider the document. In signing the TRA the applicant agreed that she understood the consequences of signing the document. In signing the TRA and accepting payment as part of its execution, the applicant has no claim to make against the respondent. The applicant in accepting payment has released the respondent from all future claims with respect to her employment save those matters with respect to superannuation and worker’s compensation as allowed for.

In this respect my decision is consistent with the authority in Australia Post v Brett Gorman. In Zoiti-Licastro v Australian Taxation Office the full bench of the Australian Industrial Relations Commission held that...:

Where the Commission finds that there is a complete answer to the applicant’s claim and dismisses the claim, there is no substance in any suggestion that the Commission has breached its duty to hear the application. And subject to the observance of the rules of natural justice, it is highly undesirable that the parties should be put to the expense of a full hearing when it is clear at the outset that the claim cannot succeed. Take a case in which there is a duly executed settlement agreement in evidence. Subject to the resolution of any argument about the binding nature of the agreement, the settlement would provide a complete answer to the claim and there would be no point in hearing the other evidence.

In this case the executed TRA is a complete answer to the claim and in this respect dismisses the applicant’s claim.

Section 587 of the Act gives Fair Work Australia the power to dismiss an application. Fair Work Australia may dismiss an application for reasons other than those given paragraphs (a) to (c) in that section. In this matter I dismiss the applicant’s claim for relief from unfair dismissal in the circumstances where there is a binding agreement between the parties. I do not need to make a finding as to whether the application is frivolous or vexatious or has no reasonable prospect of success because I’m not limited by those matters in section 587. The application is therefore dismissed. An order to this effect shall be made. 1

[5] On 12 September 2012 the Respondent made an application for costs pursuant to s.611 of the Act on the grounds that the application for relief from unfair dismissal was made vexatiously and without reasonable cause.

[6] Directions were issued by me for filing submissions with respect to the costs application. Each of the parties agreed that a decision could be made on the basis of the written submissions.

Legislation

[7] Section 611 of the Act sets out those matters relevant to the determination of a costs application.

611 Costs

(1) A person must bear the person’s own costs in relation to a matter before FWA.

(2) However, FWA may order a person (the first person) to bear some or all ofthe costs of another person in relation to an application to FWA if:

(a) FWA is satisfied that the first person made the application, or the first person responded to the application, vexatiously or without reasonable cause; or

(b) FWA is satisfied that it should have been reasonably apparent to the first person that the first person’s application, or the first person’s response to the application, had no reasonable prospect of success.

Note: FWA can also order costs under sections 376, 401 and 780.

(3) A person to whom an order for costs applies must not contravene a term of the order.

Note: This subsection is a civil remedy provision (see Part 4-1).

[8] The general proposition is that, in matters before FWA, a party bears its own costs.

[9] The decision to issue an order for costs is a discretionary decision to be made following a consideration the matters in s.611(2).

Submissions

Respondent

[10] The Respondent submits that the Applicant lodged an unfair dismissal application in circumstances where the Applicant had signed an agreement with the Respondent that released the Respondent from all further claims relating to her employment (the TRA). Having signed the TRA the Applicant proceeded to make an application to FWA. The Respondent subsequently wrote to the Applicant on 7 May 2012 raising its jurisdictional objection and stating that it was likely to seek costs should the matter proceed to hearing.

[11] The Respondent referred me to the decisions in Australian Postal Corporation v Gorman; 2 B Mijaljica v Venture DMG Pty Ltd;3and Mr Stephen John Conrad v Thiess Pty Ltd t/a Thiess Degremont.4

[12] Relying on these authorities and based on the fact that she signed the TRA and received the letter dated 7 May 2012 from the Respondent, it must be concluded that the Applicant made her application vexatiously and without reasonable cause and it should have been reasonably apparent to her that the application had no reasonable prospects of success.

[13] The Respondent submits that there is no evidence to support the Applicant’s assertion that she considered the TRA non-binding, that at the jurisdictional hearing she agreed she took no steps, having signed the TRA, to tell the Respondent that she did not want to proceed with the TRA and that there is no evidence that she took any steps to renege on the TRA.

[14] The Respondent says that the relevant question to be answered with respect to s.611(2)(b) is not whether it was apparent to the Applicant that there were no reasonable prospects of success but rather whether FWA is satisfied that it should have been reasonably apparent to the Applicant that the application had no reasonable prospects of success.

[15] The Respondent submits that: given the Applicant admits she spoke about the TRA and her dismissal to the Fair Work Info Line prior to making the application; 5 given the Applicant says she received some advice from a solicitor;6 and given she was sent a letter by the Respondent identifying deficiencies and problems with the application; it should have been reasonably apparent to the Applicant that her s.394 application had no reasonable prospects of success.

Applicant

[16] The Applicant submits that the proceedings instigated by her were not vexatious as she held an honest and reasonable belief that the agreement entered into between the parties was not binding having regard to the circumstances in which the agreement was entered into. Further the Applicant submits that there is no evidence that the proceedings were brought for any purpose but to have FWA adjudicate on the issues and the proceedings were not obviously untenable. On this issue the Applicant referred me to the decision of the Queensland Court of Appeal in Re Cameron. 7

[17] As to whether the proceedings were instituted without reasonable cause the Applicant relies on the decision in Hamilton James and Bruce Pty Limited v Michelle Gray 8 and Kanan v Australian Postal and Telecommunications Union9 and submits that while ultimately the Applicant was not successful there was reasonable cause to have the argument relating to the circumstances surrounding the entry of the agreement between the parties such that it was not binding on the Applicant adjudicated upon. This argument had a reasonable prospect of success.

[18] The Applicant submits it was at no stage apparent that the application had no reasonable prospects of success in relation to the argument. The argument that the circumstances surrounding the entry into the agreement were such to render the agreement unenforceable was not manifestly untenable or groundless or so lacking in merit or substance as to not be reasonably arguable. The Applicant relies on the decision in Baker v Salva Resources Pty Ltd 10and the decision in Gray.11

Consideration

[19] The TRA states:

4.1 The Employee warrants that:

a) the terms of this Agreement are reasonable in all of the circumstances;

b) she has read carefully and fully understands the provisions and the legal significance and effect of executing this Agreement;

c) she has had a reasonable opportunity prior to the execution of this Agreement to obtain independent legal advice as to the nature, effect and extent of this Agreement; and

d) she is aware that the Employer is relying on these warranties in executing this Agreement.

...

6.1 Except by way of enforcement of this Agreement, this Agreement will operate as an absolute bar to all claims, suits, demands and actions of whatsoever kind threatened or brought or attempted to be brought by or in the name of the Employee against the Employer arising out of or in connection with the Employment and the Termination.

[20] My findings as to the circumstances surrounding the TRA and the binding nature of the TRA are set out in my decision of 30 August 2012 set out above.

[21] The Applicant agrees that she received the six weeks’ pay specified in the TRA as part of the settlement agreement. She did not, after signing the TRA, ring the Respondent to say she had changed her mind.

[22] The following exchange took place between the Bench and the Applicant:

THE COMMISSIONER: Ms Derham, what do you think the agreement means?

MS DERHAM: I read the agreement and I do – and I understand it but it’s just the state of mind that I was in and the agreement was already pre-written before we even got to have any conversation, which means that there was really no way I was going back to work ever. It was always preconceived before it even happened and the offer was already written up before we even had this meeting. So really - - -  12

[23] Even if the Applicant honestly held a belief that she would not be returning to the workplace, she took the TRA and, more than 24 hours later, she signed it and returned it to the Respondent. At no time did she indicate she would not sign it and in fact was concerned that it may be taken off the table at 5.00 pm the next day with no offer in its place. 13

[24] I am satisfied that:

• The terms of the TRA were clear when the Applicant signed it;



• The Applicant did have over 24 hours in which to consider the terms of the TRA;



• The Applicant signed and returned the TRA;



• The Applicant at no stage indicated she had changed her mind about the TRA and its terms;



• The terms of the TRA were clear and understood by the Applicant at the time she made her application to Fair Work Australia.

Section 611(2)(a)

[25] The meaning of the term ‘vexatious’ was considered by Asbury C in Mokomoko v Zennforce Protection Group Pty Ltd: 14

[13] The circumstances in which an application will be found to have been made vexatiously were discussed by Justice North in Nilsen v Loyal Orange Trust as follows:

“The next question is whether the proceeding was instituted vexatiously. This looks to the motive of the applicant in instituting the proceedings. It is an alternative ground to the ground based on lack of reasonable cause. It therefore may apply where there is a reasonable basis for instituting the proceedings. This context requires the concept to be narrowly construed. A proceeding will be instituted vexatiously where the predominant purpose in instituting the proceeding is to harass or embarrass the other party, or to gain a collateral advantage.”

[14] In Attorney-General v Wentworth Roden J observed that litigation may be regarded as vexatious on objective or subjective grounds and that the test could be expressed as follows:

“1. Proceedings are vexatious if they are instituted with the intention of annoying or embarrassing the person against whom they are brought;

2. They are vexatious if they are brought for collateral purposes, and not for the purpose of having the Court adjudicate on the issues to which they give rise.

3. They are also properly to be regarded as vexatious if, irrespective of the motive of the litigant, they are so obviously untenable or manifestly groundless as to be utterly hopeless...”

[footnotes omitted]

[26] The application of this approach to the facts in this case indicates that there are no grounds on which to conclude that the Applicant brought these proceedings for any reason other than a desire that her claim be adjudicated by FWA. Whilst she may have been wrong in her belief concerning the ability of the matter to be adjudicated because of the existence of the TRA this does not, of itself, indicate that she made the application vexatiously.

[27] I do not find that the application for unfair dismissal was made vexatiously.

[28] The question of what constitutes ‘without reasonable cause’ was considered by Justice Wilcox in Kanan v Australian Postal and Telecommunications Union 15 who said:

It seems to me that one way of testing whether a proceeding is instituted ‘without reasonable cause’ is to ask whether, upon the facts apparent to the applicant at the time of instituting the proceeding, there was no substantial prospect of success. If success 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’. But where it appears that, on the applicant’s 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.

[29] In this case the Applicant signed a binding agreement which she agreed would operate as an absolute bar to all claims. 16 The TRA specified that she had resigned from her employment.17 The Applicant admits that she read and understood the agreement. Whilst she claims that if she did not sign the TRA she would have no job to go to, she agrees that she was not told that if she didn’t sign it she would not have a job.18

[30] The Applicant says she was advised by the Fair Work Ombudsman that she had a claim for constructive dismissal. There is no evidence of this conversation or evidence of any other steps taken by the Applicant to obtain advice as to the effect of the TRA. Whilst she might complain that she did not have time to obtain advice in the 24 hours or so that she had to consider the TRA, she had 14 days in which to obtain advice as to the effect of the TRA on an application for relief from unfair dismissal. She failed to seek such advice.

[31] Whilst the Applicant may have held a belief that she had an arguable case I must consider whether the application was made without reasonable cause. It is the tribunal’s experience that most applicants in unfair dismissal matters believe they have an arguable case. Such a subjective assessment by an applicant cannot take the place of a proper consideration of the basis on which an order for costs might be made.

[32] Nothing was put during the hearing that suggests that, at the time the application was made, it had any real prospects of success. There is nothing about the TRA that makes it difficult to understand - it is written in plain English such that a reading of it would make it clear that the signing of it precluded the Applicant from bringing any other claim. There is nothing that suggests the Applicant was pressured into signing the TRA - had she been required to decide to sign the TRA on the spot there may be an argument to be had but she was given the opportunity to take it away.

[33] For the Applicant to succeed in her application for unfair dismissal she would have to show that she signed the TRA under duress such that it was no longer binding on her or the Respondent. I have found that the TRA was not signed under duress and that it is a binding agreement. The existence of that binding agreement in such circumstances gives weight to a finding that there was no arguable case for unfair dismissal.

[34] The Applicant had an opportunity to seek advice on the implications of having signed the TRA prior to making her application. She did not do so. Any reasonable research by the Applicant on this matter or even preliminary advice would have revealed that the application for unfair dismissal would fail. I am therefore satisfied that the application was made without reasonable cause.

Section 611(2)(b)

[35] The question of whether it should have been reasonably apparent to the Applicant that the application had no reasonable prospects of success was considered in Baker v Salva Resources Pty Ltd 19 where the Full Bench found:

[10] The concepts within s.611(2)(b) ‘should have been reasonably apparent’ and ‘had no reasonable prospect of success’ have been well traversed:

• ‘should have been reasonably apparent’ must be objectively determined. It imports an objective test, directed to a belief formed on an objective basis, rather than a subjective test; and



• a conclusion that an application ‘had no reasonable prospect of success’ should only be reached with extreme caution in circumstances where the application is manifestly untenable or groundless or so lacking in merit or substance as to be not reasonably arguable.




[footnotes omitted]

[36] The consideration of the criterion in s.611(2)(b) does not appear to be constrained to the time at which the application was made but rather can include a consideration of what should have been reasonably apparent to the Applicant as the Respondent’s material in response to her application became available.

[37] An objective assessment of the circumstances surrounding the signing of the TRA and the receipt by the Applicant of the letter of 7 May 2012 from the representative of the Respondent should have alerted the Applicant to the implications of having signed the TRA. This was further reinforced in the Respondent’s submissions of 26 June 2012. The Applicant had a number of opportunities to seek advice on the implications of having signed the TRA prior to the hearing of her application for relief from unfair dismissal on 30 August 2012 but she did not do so.

[38] In Australian Postal Corporation v Gorman Besanko J observed:

There is nothing in the Act which suggests that an accord and satisfaction should not be recognised. At a general level the object of Chapter 3 Part 3-2 and the general statements of the manner in which FWA is to perform its functions and the matters to which it is to have regard are consistent with the recognition of an accord and satisfaction. Furthermore, the words of subsection 587(1) are wide enough to include the recognition of an accord and satisfaction. As I have said, a valid and effective accord and satisfaction extinguishes the pre-existing cause of action and continued pursuit of an application based on such cause of action is clearly capable of being considered to be frivolous or vexatious or without reasonable prospects of success. 20

[39] That the TRA exists and is a valid agreement lends weight to the claim that the application for unfair dismissal had no reasonable prospects of success.

[40] Whilst it may be true that the Applicant considered that the circumstances surrounding the signing of the TRA were such to render it unenforceable and that such an argument was, in her view, not groundless does not mean, on an objective assessment, that this was so.

[41] Taking into account all of the circumstances I am satisfied that it should have been reasonably apparent to the Applicant that her application had no reasonable prospects of success.

Conclusion as to costs

[42] As I observed above, even if the provisions of s.611(2) are satisfied the decision to award costs is a discretionary decision. Such a decision should not be made lightly given the presumption inherent in s.611 that each party should bear its own costs.

[43] It seems to me that there is a tension between the requirement implicit in the capacity to seek costs that a party should not institute a claim vexatiously, without reasonable cause or without reasonable prospects of success, the object of Part 3-2 of the Act that procedures and remedies with respect to unfair dismissal cases should afford a fair go all round to both the employer and employee, and the intention that those appearing before the tribunal should generally represent themselves. 21

[44] The Applicant in this matter did represent herself in proceedings but the Respondent seeks costs because it decided to be represented by an employer organisation of which it is a member that apparently charges additional amounts for its services. Those costs will be payable because the Applicant did not, for reasons unknown but perhaps associated with the cost, seek legal or other such advice. This would seem to put a party able to fund external advice always at an advantage in seeking the award of costs.

[45] In deciding to award costs I have taken all of these matters into account.

[46] I have therefore decided that it is appropriate that the Applicant bear some of the costs incurred by the Respondent after its submissions were lodged on 26 June 2012. In these circumstances I have decided the Applicant should meet the lesser of $2500 or 25% of the costs incurred by and invoiced to the Respondent after 26 June 2012 up until and including activity associated with the Respondent submissions as to costs (but excluding costs associated with the time taken to travel to and from the hearing in Ballarat). 22

[47] The Respondent is to provide a schedule of costs taking into account the restrictions set out herein. A final order as to costs will be issued following receipt of the Respondent’s material.

COMMISSIONER

Final written submissions:

Applicant, 16 October 2012.

Respondent, 19 October 2012

 1  

Transcript PN280-9.

 2 [2011] FCA 975.

 3   [2012] FWA 2800.

 4   [2011] FWA 6689.

 5   Transcript PN103.

 6   Transcript PN133.

 7 (1996) 2 Qd R 218.

 8   [2011] FWAFB 9235.

 9 (1992) 43 IR 257.

 10   [2011] FWAFB 4014.

 11   [2011] FWAFB 9235.

 12   Transcript PN150-1.

 13   Transcript PN163.

 14   [2011] FWA 1217.

 15 (1992) 43 IR 257 at 264-5; [1992] FCA 366 at [29].

 16   Save for any statutory claim for workers’ compensation or superannuation.

 17   Recitals, paragraph B.

 18   Transcript PN214.

 19   [2011] FWAFB 4014.

 20 [2011] FCA 975, [33].

 21   Explanatory Memorandum, Fair Work Bill 2009 (Cth) 2291.

 22   The Respondent originally sought to attend the hearing by video link. I directed that they attend in person. The Applicant should not be liable for a direction of the tribunal.

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