Larne-Jones v Human Synergistics Australia Limited
[2013] FMCA 206
•26 March 2013
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| LARNE-JONES v HUMAN SYNERGISTICS AUSTRALIA LIMITED & ORS | [2013] FMCA 206 |
| INDUSTRIAL LAW – Costs in proceedings under the Fair Work Act 2009 – whether an interlocutory application to restrain the Respondents’ solicitors from acting is subject to the restriction on costs in s.570 of the Fair Work Act. |
| Fair Work Act 2009 (Cth), ss.44, 117, 560, 562, 566, 570 Fair Work Amendment Act 2012 (Cth) Federal Court of Australia Act 1976 (Cth), ss.4, 19, 24, 31A, 43 Federal Magistrates Act 1999 (Cth), ss.5, 17, 79 Industrial Relations Act 1998 (Cth), s.347 Judiciary Act 1903 (Cth), s.39B Workplace Relations Act 1996 (Cth), ss.170CP, 170CS, 824 Federal Court Rules 2011 (Cth), r.40.13 Federal Magistrates Court Rules 2001 (Cth), rr.21.02, 21.15, 21.16 |
| Alfred v Wakelin (No 3) (2009) 179 IR 76; [2009] FCA 224 Colgate-Palmolive Company and Another v Cussons Pty Ltd (1993) 46 FCR 225; (1993) 118 ALR 248 Commonwealth of Australia v Construction, Forestry, Mining and Energy Union (2003) 129 FCR 271; [2003] FCAFC 115 |
| Applicant: | MARGHERITA LARNE-JONES |
| First Respondent: | HUMAN SYNERGISTICS AUSTRALIA LIMITED (ACN 093 428 098) |
| Second Respondent: | SHAUN MCCARTHY |
| Third Respondent: | MICHAEL GOURLEY |
| File Number: | SYG 2736 of 2011 |
| Judgment of: | Barnes FM |
| Hearing date: | 14 February 2013 |
| Delivered at: | Sydney |
| Delivered on: | 26 March 2013 |
REPRESENTATION
| Counsel for the Applicant: | Mr S. Meehan |
| Solicitors for the Applicant: | Kemp Strang |
| Counsel for the Respondents: | Ms K. Nomchong SC |
| Solicitors for the Respondents: | FCB Workplace Law |
ORDERS
Within 7 days of today’s date the parties are to either:
(a)bring in short minutes of orders to give effect to these reasons in which the amount of the Respondent’s costs in relation to the hearing of the Application in a Case filed on 25 June 2012 and of the Application for Costs is calculated in accordance with Schedule 1 to the Federal Magistrates Court Rules; or
(b)file submissions in relation to calculation of such costs under Schedule 1.
Such costs are to be payable forthwith after determination of the amount.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 2736 of 2011
| MARGHERITA LARNE-JONES |
Applicant
| HUMAN SYNERGISTICS AUSTRALIA LIMITED ACN 093 428 098 |
First Respondent
| SHAUN MCCARTHY |
Second Respondent
| MICHAEL GOURLEY |
Third Respondent
REASONS FOR JUDGMENT
These proceedings
The Applicant commenced proceedings on 30 November 2011 alleging that she was dismissed from her employment with the First Respondent in contravention of the general protection provisions in the Fair Work Act 2009 (Cth) (the FW Act). She also alleged contraventions of ss.44 and 117 of the FW Act, breach of contract and that the Second and Third Respondents were involved in the FW Act contraventions.
By Application in a Case filed on 25 June 2012 the Applicant sought orders restraining Fisher Cartwright Berriman Pty Limited (referred to as FCB) from acting as solicitors for the Respondents in these proceedings. The Application in a Case was dismissed (see Larne-Jones v Human Synergistics Australia Limited & Ors [2012] FMCA 1209). The Respondents now seek orders that:
(1) The Applicant shall pay the Respondents’ costs of the Application in a Case filed 25 June 2012, including the costs application:
(a) on an indemnity basis; or
(b) in the alternative, such costs to be taxed or assessed in accordance with the Federal Court of Australia Act 1976 (Cth) and the Federal Court Rules 2011 and paid at the Federal Court scale;
(c) in the alternative, in accordance with Schedule 1 of the Federal Magistrates Court Rules.
(2) The costs so ordered are payable forthwith.
In essence, the Respondents’ primary submission was that the limitation on costs in s.570 of the FW Act did not apply to the costs of the Application in a Case because the Court was not exercising jurisdiction under the FW Act in determining that interlocutory application. It was contended that the interlocutory application was brought pursuant to the inherent jurisdiction of the Court over its officers and to control its processes in aid of the administration of justice and suggested that the jurisdiction the court was exercising had “nothing to do with” the FW Act or any exercise of jurisdiction under the FW Act. It was stressed that the Application in a Case was an “isolated” proceeding. On this basis, it was submitted that the Court had the power to award costs.
In the alternative, the Respondents submitted that if the Court determined that the Application in a Case was subject to s.570 of the FW Act, then costs ought nonetheless to be awarded on the basis that the proceedings were instituted without reasonable cause within s.570(2)(a) or the Applicant’s conduct in persisting with the Application in a Case was an unreasonable act that caused the Respondents to incur the costs of fully defending the application within s.570(2)(b) of the FW Act.
It was also submitted that while costs may usually be limited to those prescribed in Schedule 1 to the Federal Magistrates Court Rules (the FMC Rules) plus disbursements, the Court had the discretion to make other costs orders (see r.21.02 of the FMC Rules) and that in this case it should award indemnity costs or, in the alternative, that the costs be taxed in accordance with the Federal Court Rules and paid at the Federal Court scale.
It was sought that any such costs should be payable forthwith on the basis that the interlocutory application had involved the determination of a discrete or separate aspect of the proceedings, there had been some unreasonable conduct on the part of the Applicant and/or because the substantive proceedings were unlikely to be finally determined in the near future.
The Applicant submitted that s.570(1) of the FW Act was applicable to the Application in a Case and that none of the conditions in s.570(2) were satisfied. It was further submitted that even if the Court was of the view that its discretion to award costs was enlivened, indemnity costs were not appropriate. There were said to be no proper grounds to go outside the usual method of fixing costs pursuant to Schedule 1 to the FMC Rules. The Applicant also opposed any order that costs be payable forthwith.
Section 570(1) of the Fair Work Act 2009
It is appropriate to consider first the application of s.570(1) of the FW Act which limits the circumstances in which costs may be awarded against a party to proceedings in a court exercising jurisdiction under the FW Act.
It is not in dispute that the amendment to s.570(1) of the FW Act under the Fair Work Amendment Act 2012 (Cth) (which refers to proceedings in a court in relation to a matter arising under the FW Act) is not applicable. It applies only in relation to proceedings commenced after 1 January 2013. The applicable form of s.570 is as follows:
(1) A party to proceedings (including an appeal) in a court (including a court of a State or Territory) exercising jurisdiction under this Act may be ordered by the court to pay costs incurred by another party to the proceedings only in accordance with subsection (2) or section 569 or 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 FWA;
(ii) the matter arose from the same facts as the proceedings.
Jurisdiction under the FW Act is conferred on this Court by s.566 of the FW Act “in relation to any civil matter arising under” the Act.
When the Application in a Case was before the Court, it was not disputed that this Court had jurisdiction to restrain solicitors from acting in a particular case. While the parties’ submissions referred generally to the Court having an “inherent jurisdiction”, in the context of a federal court this is more accurately described as the implied incidental power of a statutory court to make orders necessarily incidental to express powers (see DJL v The Central Authority (2000) 201 CLR 226; [2000] HCA 17 at [25] per Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ; Temby & Anor v Chambers Investment Planners Pty Ltd & Anor [2010] FMCA 783; Schueler & Anor v Smith & Ors [2010] FMCA 777; Western Australia v Ben Ward & Ors [1997] FCA 585; Re Read and Another (2007) 164 FCR 237; [2007] FCA 1985 at [40] per French J and cases cited therein and Larne-Jones at [18]).
The Applicant submitted that the substantive proceeding was only within the jurisdiction of this Court because of s.566 of the FW Act. On this basis it was contended that, notwithstanding that the Court was being invited to exercise what in submissions was described as the Court’s implied incidental power in resolution of the Application in a Case, the Court was nonetheless exercising jurisdiction under the FW Act for the purposes of s.570 of the Act. In contrast, the Respondents submitted that because the interlocutory application was dealt with under the inherent jurisdiction or within the implied incidental power of the Court, it was not a proceeding in which the Court was exercising jurisdiction under the FW Act. For the reasons which follow I am satisfied that s.570 of the FW Act is applicable to the costs of the Application in a Case.
The applicable version of s.570(1) is not in the same form as its predecessors. As Jessup and Tracey JJ explained in Australasian Meat Industry Employees’ Union v Fair Work Australia and Another (No 2) (2012) 203 FCR 430; [2012] FCAFC 103 (AMIEU v FWA) (at [4]):
In an important respect, s 570 of the FW Act departs from the formula by reference to which the relevant provision had operated since 1973. Traditionally, the limitation upon the award of costs had applied to a proceeding “in a matter arising under” the legislation concerned. As may be seen from the terms of s 570, that formula has now been abandoned, and the limitation applies “to proceedings … in a court … exercising jurisdiction under” the FW Act. That was a change deliberately made, and was explained in the relevant Explanatory Memorandum in 2008 as follows:
2229. As noted above, the ‘matters arising’ language has been interpreted broadly. A proceeding not brought under the WR Act could still arise under the WR Act. The broad application of the costs provision has given rise to technical arguments that the provision does not apply in a range of proceedings not involving exercise of jurisdiction under the WR Act and its predecessors (see, eg, Tristar Steering and Suspension v Industrial Relations Commission (NSW) (No 2) [2007] FCAFC 95; 159 FCR 274). Given the nature and complexity of ‘matters arising’ that are determined before State Supreme Courts, the Federal Court and the High Court, it is not appropriate that the limitation on costs orders apply to matters arising under the Bill which do not involve the exercise of jurisdiction under the Bill.
It is clear from this passage that the legislature was well aware that there might be proceedings in matters which arose under the FW Act which did not involve the exercise of jurisdiction under that Act, and that it intended to confine s 570 to proceedings which did.
In AMIEU v FWA proceedings had been commenced in the High Court and remitted to the Federal Court pursuant to the Judiciary Act 1903 (Cth) and were in the original jurisdiction of that Court. The Full Court of the Federal Court found that the Federal Court was invested with jurisdiction by both s.39B(1) of the Judiciary Act and by s.562 of the FW Act (which confers jurisdiction on the Federal Court in relation to any matter arising under the FW Act). Relevantly their Honours concluded however that the Federal Court was exercising jurisdiction under the FW Act for the purposes of s.570 notwithstanding that it was also exercising jurisdiction under the Judiciary Act. Hence the limitation on costs applied.
Counsel for the Respondents referred to paragraph [2229] of the Explanatory Memorandum in relation to the introduction of the applicable version of s.570 of the FW Act referred to in AMIEU v FWA at [4] in which it was suggested that it was “not appropriate that the limitation on costs orders apply to matters arising under the [FW] Bill which do not involve the exercise of jurisdiction under the Bill”. However what was in issue in the case cited in the Explanatory Memorandum (Tristar Steering and Suspension Australia Ltd and Another v Industrial Relations Commission of New South Wales and Another (No 2) (2007) 159 FCR 274; [2007] FCAFC 95) was the validity of an inquiry by the Industrial Relations Commission of NSW in circumstances where there was an inconsistency between the Industrial Relations Act 1996(NSW) and the Workplace Relations Act 1996 (Cth). Buchanan J (with whom Gyles J agreed) addressed the “technical” argument later referred to in the Explanatory Memorandum as follows (at [16]):
In my view, it cannot correctly be maintained that the relief which was granted by the orders earlier made in the present matter was a vindication of a right or duty conferred or created by the WR Act. Rather the right or duty (if that is the correct way to regard the absence of jurisdiction in the IRC) arose from the operation of s 109 of the Constitution. The proceedings were brought to enforce the duty upon the IRC not to act outside its jurisdiction, in circumstances where the IRC had made plain its intention to do so. The fact that s 109 of the Constitution was engaged by reason of the terms of the WR Act does not signify, in my view, that the proceedings were ‘in a matter arising under’ the WR Act within the meaning of s 824 of the WR Act.
The circumstances of the present case are not comparable to those in Tristar. The jurisdiction of this Court to restrain solicitors from acting is within the implied incidental power of this Court to make orders necessarily incidental to the carrying out of its jurisdiction pursuant to express statutory powers. Such jurisdiction is dependent on there being statutory jurisdiction, which in this case is the jurisdiction conferred on this Court by s.566 of the FW Act.
The Explanatory Memorandum in relation to the introduction of s.570 of the FW Act in the form applicable in this case does not support the narrow interpretation contended for by the Respondents. While the change in the wording of s.570 of the FW Act has excluded matters in which the jurisdiction of the Court arose independently of the FW Act (see Construction, Forestry, Mining and Energy Union v CSBP Ltd (No 2) (2012) 202 FCR 149; [2012] FCAFC 64 (CFMEU v CSBP (No 2)) that is not the situation in the present case.
It is the case that in CFMEU v CSBP (No 2), the Full Court of the Federal Court held that s.570 of the FW Act had no application in circumstances where that court was exercising appellate jurisdiction in relation to a decision of a single judge of the Federal Court. However that decision was reached on the basis that in such circumstances the Federal Court was exercising jurisdiction only under s.24 of the Federal Court of Australia Act 1976 (Cth), not original jurisdiction vested by both s.19 of that Act and s.562 of the FW Act. In contrast, in Construction, Forestry, Mining & Energy Union v Mammoet Australia Pty Ltd (No 2) [2012] FCA 1404 it was held that s.570 applied to the costs of an appeal from this Court to the Federal Court.
While CFMEU v CSBP (No 2) highlights the limitations inherent in the notion of “proceedings in a court exercising jurisdiction under” the FW Act, the circumstances of the present case are not analogous (and see paragraphs [305] – [308] of the Explanatory Memorandum to the Fair Work Amendment Bill 2012 which make it clear that the Bill was intended to address the decision in CFMEU v CSBP (No 2) and to “confirm” that the FW Act was generally a “no costs” jurisdiction).
Moreover there is Federal Court authority in Hill v Compass Ten Pty Ltd (No 3) [2012] FCA 993 to the effect that the limitation on the award of costs in s.570 of the FW Act extends to the ancillary matters with which the Court must deal in resolving the claim under the Act, since the ancillary matters are part of the federal jurisdiction which the Act confers upon the Court (see Cowdroy J at [6]).
In the context of proceedings commenced under the FW Act Cowdroy J held in Hill v Compass that s.570 applied to the costs in relation to a decision dismissing a claim for damages resulting from a purported breach of a contract of employment. His Honour was of the view that while the Federal Court had exercised its accrued jurisdiction in determining the breach of contract claim, it could nonetheless be said that the exercise of its jurisdiction was dependent on the existence of the claim under a federal statute (at [4]). As his Honour pointed out, had no claim been made under the FW Act, the Federal Court would have had no jurisdiction (at [4]). Similarly, it is clear that if the claim in the substantive proceedings was not based on a statutory jurisdiction (in this case under the FW Act) this Court would have had no jurisdiction to determine a matter within its implied incidental power.
I note that this Court had previously reached a similar conclusion to that reached in Hill v Compass in Stuke v Rost Capital Group Pty Ltd (2011) 202 IR 442; [2011] FMCA 79 in relation to the costs of an interlocutory application which the parties accepted was related to matters within the Court’s accrued and/or associated jurisdiction where the substantive proceedings were brought under the FW Act (albeit in response to somewhat limited submissions from the parties).
More generally, in Hill v Compass (at [6]) Cowdroy J referred to the decision of the Full Court of the Federal Court in Goldman Sachs JBWere Services Pty Ltd v Nikolich (2007) 163 FCR 62; [2007] FCAFC 120 in relation to s.170CS of the Workplace Relations Act which was said to be in similar terms to s.570 of the FW Act.
In Goldman Sachs (at [372] – [380]) Jessup J took a broad view of the notion “proceeding” in concluding that the expression “a proceeding under s170CP” in s.170CS was a reference to a proceeding that had its statutory basis under that section. His Honour found that the limitation on costs “extended to every part of a proceeding whose statutory basis was s 170CP of the WR Act, including claims in the accrued jurisdiction which, save for being part of a single matter in the constitutional sense, were unrelated to rights and obligations arising under federal statutory law”. Such a broad approach supports the view that s.570 of the FW Act is applicable to every part of the present proceeding.
Jessup J made the point in Goldman Sachs (at [379]) that “the 1996 legislature must be assumed to have been aware of the existence of the accrued jurisdiction” of the Federal Court and “of the potential … for non-statutory causes of action to be litigated in proceedings where the court had a statutory jurisdiction which arose under particular provisions of the WR Act”. The same may be said about the 2009 legislature in relation to s.570 of the FW Act. It must be assumed to have been aware of the implied incidental power of the federal courts given jurisdiction under that Act.
As Cowdroy J pointed out in Hill v Compass (at [7]), there are sound general policy considerations supporting the view that the limitation on costs in s.570 of the FW Act is to apply to all aspects of proceedings where the exercise of the court’s jurisdiction is dependent on the existence of a claim under the FW Act. Moreover, such an interpretation is consistent with the ordinary words of s.570(1). The Applicant is a party to proceedings in a court exercising jurisdiction under the FW Act. While the court was being invited to exercise its implied incidental power to make orders necessarily incidental to the carrying out of its jurisdiction pursuant to the express statutory powers under the FW Act the proceedings were in a court exercising jurisdiction under the FW Act. As Flick J stated in AMIEU v FWA (at [35]) in relation to s.562 of the FW Act (which confers jurisdiction under the FW Act on the Federal Court) and s.570 in the form in which it applies in this case:
The terms of ss 562 and 570 of the Fair Work Act are not to be given any narrow construction or applied in a manner which denies parties the protection afforded by s 570(1) when the Court is resolving matters “arising under” the Fair Work Act.
Such an approach is also in conformity with the jurisprudence in relation to the predecessor to s.570 of the FW Act. Thus in Commonwealth of Australia v Construction, Forestry, Mining and Energy Union (2003) 129 FCR 271; [2003] FCAFC 115 it was accepted that an interlocutory application was a proceeding in the principal matter to which such a costs limitation applied. It has also been held that the expression “proceeding in a matter” in s.824(1) of the Workplace Relations Act extended to an application made by motion in the course of the principal action (see Shackley v Australian Croatian Club Limited (1996) 141 ALR 736 at 744; Paras v Public Service Body Head of the Department of Infrastructure and Another (No 3) (2006) 152 FCR 534; [2006] FCA 745; Alfred v Wakelin (No 3) (2009) 179 IR 76; [2009] FCA 224; Sydney Ferries Corporation v Australian Maritime Officers Union (No 3) [2008] FCA 960 and Liquor, Hospitality & Miscellaneous Union v The Roman Catholic Archbishop of Perth [2008] FCA 457). These authorities do not support the view that a provision such as s.570 of the FW Act should be narrowly construed.
The Court has jurisdiction under s.566 of the FW Act and also implied incidental power to make orders necessarily incidental to the carrying out of such jurisdiction. The fact that the Application in a Case involved the exercise of such implied incidental power does not mean that these are not proceedings in a court exercising jurisdiction under the FW Act within s.570 of the FW Act. In my view, s.570(1) of the FW Act as it stood at the relevant time applied in respect of the totality of the proceedings, including the Application in a Case. Hence the discretion to make a costs order against the Applicant will only enlivened if one of the conditions in s.570(2) of the Act is met. It is necessary to consider whether the circumstances are within either (a) or (b) of s.570(2). Paragraph s.570(2)(c) is not relevant.
Section 570(2)(a) of the Fair Work Act
Section 570(2)(a) of the FW Act permits the award of costs if the Court is satisfied that the party (in this case, the Applicant) instituted the proceedings vexatiously or without reasonable cause.
It was suggested that s.570(2)(a) was confined to the institution of the substantive proceedings. In any event, while there is no definition of “proceeding” or “proceedings” in the FW Act, under s.5 of the Federal Magistrates Act 1999 (Cth) “proceeding”:
…means a proceeding in a court, whether between parties or not, and includes an incidental proceeding in the course of, or in connection with, a proceeding, and also includes an appeal.
On this basis the Application in a Case can be seen as a “proceeding” in its own right. In Thompson and Others v Hodder and Others (1989) 21 FCR 467; [1989] FCA 493 the Full Court of the Federal Court took such an approach having regard to a similar definition in s.4 of the Federal Court of Australia Act. It is not however necessary to determine that issue in these proceedings.
Section 570(2)(a) is only engaged if the court is satisfied that the party instituted the proceedings vexatiously or without reasonable cause. There is no suggestion that the Applicant instituted the proceedings vexatiously.
In Kanan v Australian Postal and Telecommunications Union (1992) 43 IR 257; [1992] FCA 539 (at 264; [27]) Wilcox J held in relation to a similar provision in s.347 of the Industrial Relations Act that “a proceeding is not to be classed as being launched ‘without reasonable cause’ simply because it fails” (and see Khiani v Australian Bureau of Statistics [2011] FCAFC 109 at [52]).
As Wilcox J suggested in Kanan (at [29]):
… 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, 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.
See also the remarks of Barker J in Reeve v Ramsay Health Care Australia Pty Ltd (No 2) [2012] FCA 1322 (at [10]) adopted (albeit without attribution) in the Applicant’s written submissions.
Under s.570(2)(a) it is necessary to consider whether the Application in a Case was without reasonable cause at the time it was instituted, not when it failed (Nimmo, in the matter of an application for an inquiry relating to an election for an office in the Australian Education Union (NT Branch) (No 2) [2011] FCA 728 at [28] per Reeves J referred to with approval in Khiani at [51]). Hence what occurred while the Application in a Case was on foot (discussed further below in relation to s.570(2)(b)) is not in issue under s.570(2)(a).
Reeves J expressed the view in Nimmo (at [30]) that the test to be applied in relation to “without reasonable cause” was “similar to that adopted in an application for summary judgment” as it stood prior to the introduction of s.31A of the Federal Court of Australia Act (and see s.17A of the Federal Magistrates Act and Reeve v Ramsey at [9]).
Counsel for the Respondents contended generally that the Application in a Case had no reasonable prospects of success having regard to the stringent test applicable to an application for removal of solicitors because the Applicant never had a sufficient case to meet that test.
As considered in more detail in the judgment dismissing the Application in a Case, in the substantive proceedings the Applicant alleged that following an investigation into allegations that she had engaged in bullying and harassment conducted for the First Respondent by Ms Fisher (an FCB partner) her employment was summarily terminated. She claimed she was dismissed in contravention of the general protection provisions of the FW Act, i.e. because she had and had exercised a workplace right (to claim worker’s compensation), because she had a mental disability and/or because she was married to the former Managing Director of the First Respondent who had also been dismissed. She also claimed that the First Respondent breached ss.44 and 117 of the FW Act (and the Long Service Leave Act 1955 (NSW)) in relation to her entitlements and period of notice on termination. In addition, she alleged a breach of implied terms of her contract of employment in relation to payment of a bonus and reasonable notice of termination.
Relevantly, it was also said that Mr Robinson, another FCB partner, had provided the Applicant (and the First Respondent) with advice in relation to performance management of certain employees whose account of events was investigated by Ms Fisher.
The substantive proceedings were commenced on 30 November 2011. The Respondents filed a response on 27 January 2012. The Applicant filed a Statement of Claim on 25 June 2012. On the same day she filed the Application in a Case seeking that FCB cease to act as solicitors for the Respondents in these proceedings.
In the Application in a Case the Applicant sought to invoke the principle that the “proper administration of justice” required that FCB “should be prevented from acting, in the interests of the protection of the integrity of the judicial process and the due administration of justice, including the appearance of justice” (Kallinicos and Another v Hunt and Others (2005) 64 NSWLR 561; [2005] NSWSC 1181 at [76] per Brereton J).
In essence, this was put on the basis that there was a real possibility that FCB had an interest in the outcome of the proceedings beyond its interest in doing the best for its clients to succeed and that two partners of FCB (Ms Fisher and Mr Robinson) were potential witnesses in the proceedings in which another partner of FCB acted for the Respondents. It was asserted that because Ms Fisher had prepared the investigation report into allegations of bullying and harassment by the Applicant, the Applicant would challenge and FCB would be required to defend the “veracity” of the investigative process and report, thus giving rise to a likelihood that the case would involve the personal or reputational interest of Ms Fisher. It was also suggested that the Respondents may assert legal professional privilege over the investigation report prepared by Ms Fisher. The Applicant relied in particular on the possibility that Ms Fisher and Mr Robinson would give evidence relevant to the substantive proceedings and any claim of privilege in relation to the investigation report. It was asserted that a reasonably informed member of the public would entertain a “serious reservation” as to whether decisions by FCB about the conduct of the case would be made exclusively in the interests of the Respondents.
As explained in the judgment dismissing the Application in a Case, I was not satisfied that the matters relied on by the Applicant warranted the orders sought. In so finding I had regard to the need to exercise the discretion to restrain a solicitor from acting with caution. However the stringency of the test applicable does not lead to the conclusion that the Application in a Case was “misconceived or unsupportable” or that there were no reasonable prospects of success at the time it was instituted (see Australian and International Pilots Association v Qantas Airways Ltd (No 3) [2007] FCA 879 at [36]), at least insofar as at that time there was some possibility (albeit not as great as the Applicant appeared to suggest) that Ms Fisher and/or Mr Robinson may be witnesses. That is so notwithstanding that some of the arguments in support of the application to restrain FCB from acting were clearly untenable, in particular the suggested relevance of the validity of the steps before dismissal in relation to an adverse action claim (see Khiani and Larne-Jones at [87] – [88]).
For the reasons set out in detail in Larne-Jones I was not persuaded that there was a real prospect of Ms Fisher or Mr Robinson being called as witnesses in the substantive proceedings or that there was otherwise a reason to restrain FCB from acting in the interests of the due administration of justice. However that conclusion was reached having regard to the pleadings as they stood at the time of the hearing (including not only the Statement of Claim but also the subsequent Defence) and the evidence at that time. In particular, after the Application in a Case had been filed the Respondents had met certain of the Applicant’s monetary claims and had confirmed (in Mr Gee’s affidavit of 10 July 2012 as well as in subsequent correspondence) that on the basis of the Statement of Claim filed on 25 June 2012 they did not intend to call Ms Fisher or Mr Robinson and that the investigation report was likely to be tendered by the Respondents and hence unlikely to be the subject of any claim of legal professional privilege.
On balance, while the Applicant had only limited prospects of success in relation to the application she brought and, indeed, was ultimately unsuccessful, I am not satisfied that on the facts apparent to the Applicant at the time of institution of the Application in a Case it was clear that it must fail, that it was misconceived or insupportable or that there was no substantial prospect of success such that the Application in a Case lacked a reasonable cause within s.570(2)(a) of the FW Act (see Pilots Association v Qantas at [36]).
Section 570(2)(b) of the Fair Work Act
As discussed in Stuke v Rost at [28], costs may also be awarded at the discretion of the Court if it is satisfied that the Applicant’s “unreasonable act or omission caused the” party seeking costs to incur the costs within s.570(2)(b) of the Act. Observations made in relation to the predecessor to s.570(2)(b) are in point. Thus, as the Full Court of the Federal Court stated in Construction, Forestry, Mining and Energy Union and Others v Clarke (2008) 170 FCR 574; [2008] FCAFC 143 at 582; [28] in relation to the equivalent provision in s.824(2) of the Workplace Relations Act:
The exception applies when two criteria are satisfied. The first criterion is that on party must have engaged in “an unreasonable act or omission”. As the reasoning of Tracey J in Australian and International Pilots Association v Qantas Airways Ltd (No 3) [2007] FCA 879; (2007) 162 FCR 392 and Siopsis J in McAleer v The University of Western Australia (No 2) [2007] FCA 247; (2007) 161 IR 151 demonstrates, whether a party has conducted itself or its litigation in such a way as to cross this threshold will depend on the particular circumstances of the case. The second criterion is that the act or omission of one party must have “caused another party to the proceeding to incur costs in connection with the proceeding”. Once both criteria are satisfied, then the Court “may” in its discretion order the party which has engaged in the unreasonable act or omission to pay some or all of the costs of the other party. (emphasis added)
Their Honours referred to the reasoning of Tracey J in Pilots Association v Qantas, in which his Honour made the point that an “objective analysis” of the particular circumstances of the case was necessary (at [32]). In determining whether an act was unreasonable for the purposes of s.824(2) of the Workplace Relations Act, his Honour found helpful the distinction between the pursuit of an argument which did not succeed and the institution of a proceeding which was misconceived, in the sense of being incompetent. Tracey J stated (at [36]):
The prosecution of any incompetent or hopeless case can be regarded as "an unreasonable act" within the meaning of s 824(2). Conversely, in my opinion, the pursuit of a contentious, and ultimately unsuccessful, argument is not an unreasonable act.
Under s.570(2)(b) regard may be had to circumstances occurring after the institution of the proceedings. However as the Full Court stated in Clarke (at [29]): “[s]imply because a party does not conduct its litigation in the most efficient way … does not mean that the Court should exercise its discretion … to make a costs order”. In the particular circumstances of that case their Honours rejected the contention that a particular concession that was made late could be characterised as unreasonable, indicating that the fact that a party may have acted “in a different or timelier fashion” did not suffice to warrant the making of an adverse costs order in circumstances “where the usual practice in litigation arising under the .. Act [was] to make no order as to costs” (at [30]).
Their Honours explained that courts should “use the discretion” in such a provision “to ensure that parties to litigation arising from the … Act [in question] do not engage in unreasonable acts and omissions which put the other party to undue expense”, although “they should also be careful not to exercise the discretion with too much haste, given that such haste may discourage parties, for fear of an adverse costs order, from pursuing litigation under [the Act] in the manner which they deem best” (at [29]).
The Respondents submitted that the Applicant’s conduct in persisting with the Application in a Case at all or on all the bases relied on was an unreasonable act that caused the Respondents to incur the costs of fully defending the application. In particular it was contended that once the Applicant had received written confirmation from the Respondents that they had no intention to call Ms Fisher or Mr Robinson as witnesses in the substantive proceedings (in the affidavit of Mr Gee sworn 10 July 2012 and in correspondence from FCB dated 17, 25 and 30 July 2012) and that the investigation report was likely to be tendered by the Respondents and therefore unlikely to be the subject of any claim of legal professional privilege, the Applicant’s conduct in persisting with the Application on these grounds, or at all, constituted an unreasonable act which caused the Respondents to incur the costs associated with the hearing of the Application.
The Applicant submitted that this contention failed to recognise that it was not necessary for the Applicant to demonstrate that Ms Fisher or Mr Robinson would or might be called as witnesses and might be subject to cross-examination, as the test the Court had to apply could be satisfied where the subject matter of the litigation was likely to involve an evaluation of the conduct of the solicitor (in this instance the conduct of and conclusions reached in Ms Fisher’s investigation) or where the efficacy of documents prepared by the solicitor was likely to be in issue. It was pointed out that the evidence of Mr Gee was not that the First Respondent waived its right to claim privilege in relation to the investigation report, but rather that it was unlikely to claim privilege. On this basis it was submitted that the Respondents had not established that the Applicant had engaged in an unreasonable act or omission in maintaining the Application in a Case.
While the Applicant’s case was not solely dependent on satisfying the Court that Ms Fisher or Mr Robinson would or might be called as witnesses and would be subject to cross-examination, the claim that it was likely that either or both of the FCB partners would be a material witness was a significant part of the basis for the contention that the circumstances would give rise to an objective perception of want of independence (see Kallinicos at [76]). Certainly it appeared from the affidavit of Mr Godding (solicitor for the Applicant) of 25 June 2012 that this was the focus of the Applicant’s concern, albeit as ultimately argued in relation to the Application in a Case the Applicant’s concerns were expressed more broadly.
However any “likelihood” that either of the FCB partners would be a material witness as the pleadings stood was addressed by the July 2012 correspondence from the Respondents’ solicitors and must also be seen in light of the subsequent payments to the Applicant and basis for the Defence. Relevantly, in the letters of 17, 25 and 30 July 2012 (and the affidavit of Mr Gee sworn 10 July 2012) the Respondents confirmed that they had no intention to call Ms Fisher or Mr Robinson as witnesses in the proceedings (based on the Statement of Claim which was filed on 25 June 2012) and advised that it was likely that the Respondents would themselves produce and seek to tender the investigation report in their defence and therefore it was “unlikely” any claim of privilege would be maintained. As outlined in my earlier judgment in Larne-Jones such advice was consistent with the issues raised by the pleadings. Moreover, the Respondents’ solicitors undertook to give notice if their instructions changed and invited the Applicant to withdraw the Application in a Case on the basis that each party pay their own costs. They also suggested that it would be “common ground” that should the pleadings be amended all parties’ rights with respect to the Application in a Case would be reserved.
Given the basis for the grounds relied on in the Statement of Claim, the nature of the Respondent’s defence and the fact that the Respondents had made it clear that they did not intend to call Ms Fisher or Mr Robinson as a witness as the pleadings stood, at least from the time the Respondents filed their Defence the likely outcome of the Application in a Case was manifest. By then it should have been clear to the Applicant that the Application in a Case had no prospects of success insofar as it was based on an asserted likelihood that either Ms Fisher or Mr Robinson would be a material witness who was likely to be called to give evidence.
Beyond this, the Applicant’s reliance on a general contention that she intended to challenge the “veracity” of the investigative process and Ms Fisher’s findings has to be seen in light of the pleadings and the First Respondent’s conduct in meeting part of the Applicant’s claim by payment to her and the advice from the Respondents’ solicitors.
Importantly, as discussed in Larne-Jones, the substantive proceedings are not in the nature of unfair dismissal proceedings. Ms Fisher did not make the decision to terminate the Applicant’s employment. Insofar as an issue may arise as to whether Ms Larne-Jones in fact engaged in misconduct that would be a factual inquiry and would not be determined by a consideration of the adequacy of Ms Fisher’s investigation and report (Larne-Jones at [60] – [64]). Importantly, there is clear authority (see Khiani) that an adverse action claim of this nature does not involve an inquiry into the validity of the steps taken before a dismissal, such as the “veracity” of Ms Fisher’s report and/or her integrity (as distinct from the causal relationship between the termination and one or more of the factors mentioned in Pt 3.1 of the FW Act (Larne-Jones at [87]). Moreover, prior to the filing of the Defence, the Respondents met part of the Applicant’s other claims in relation to payment in lieu of notice and statutory entitlements on termination. Ms Fisher and Mr Robinson had no salient role in the Applicant’s claims in relation to a reasonable period of notice and non-payment of a bonus. It was, by then, objectively apparent that pursuit of the Application in a Case was misconceived.
After the Respondents had made their intention not to call Ms Fisher or Mr Robinson clear, had met part of the Applicant’s claim as pleaded and had made the basis of their Defence clear, considered objectively in the particular circumstances of this case, maintenance of the Application in a Case by the Applicant demonstrated a misapprehension of the evidentiary case she was required to meet having regard to the matters that remained in issue between the parties on the pleadings. The Respondents had invited her to withdraw the Application in a Case on the basis that should the pleadings be amended all parties’ rights would be reserved.
By that time, the Applicant’s initial concerns about the likelihood of Ms Fisher and/or Mr Robinson giving evidence or their conduct or documents being evaluated in the substantive proceedings had been addressed and should have been allayed. In the particular circumstances of the case it was objectively clear that the outstanding matters to be determined in the substantive proceedings were not such as to be likely to involve a consideration of the advice, investigation or report by a partner of FCB or any evaluation of the conduct of the solicitor concerned or the efficacy of documents prepared by an FCB partner.
These are not circumstances in which the Applicant simply pursued a contentious and ultimately unsuccessful argument. While I am not satisfied that it was unreasonable for the Applicant to institute the proceedings to seek the removal of the Respondents’ solicitors, there was no proper basis to maintain such proceedings in light of the Respondent’s correspondence and concession and once the issues in dispute were clarified by the pleadings. The pleadings themselves demonstrated and were consistent with there not being any real likelihood either that the FCB partners would be called as witnesses, that there would be an evaluation of their conduct, advice or report in the proceedings or that either of them (or FCB) would have a need to justify or defend themselves in the particular proceedings before the Court (see Larne-Jones at [60] – [91]). The Applicant thereafter conducted the litigation in a way that crossed the threshold as discussed in Clarke (at [28]).
I am satisfied that, assessed objectively, maintenance of the Application in a Case by proceeding to a hearing, at least after the Defence filed on 20 August 2012 was served on the Applicant, was an unreasonable act on the part of the Applicant which caused the Respondents to incur the costs associated with the hearing of 28 August 2012 within s.570(2)(b) of the FW Act. Hence the Court has a discretion to order that the Applicant pay the costs that her unreasonable act caused the Respondents to incur.
Quantification of Costs
Notwithstanding that there has been an unreasonable act within s.570(2)(b) of the FW Act, costs do not necessarily have to ordered on an indemnity basis (see Pilots Association v Qantas at [38]).
In Pilots Association v Qantas Tracey J acknowledged (at [38]) that costs might be awarded on an indemnity basis under s.824(2) of the Workplace Relations Act “in appropriate cases” but stated that this was because if the requirements of that section were satisfied the “fetter” imposed by s.824(1) (the predecessor to s.570(1)) was removed. In such circumstances the Federal Court was said to “enjoy” the same wide discretionary power conferred by s.43 of the Federal Court of Australia Act. Similarly in this Court the costs are to be determined in the exercise of the Court’s discretion under s.79 of the Federal Magistrates Act. As Tracey J stated in Pilots Association v Qantas at [39]:
Where costs are ordered by the Court they will ordinarily be paid on a party and party basis. Any departure from this usual practice, according to the authorities collected by Sheppard J in Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225 at 230-4, will only occur in a limited range of cases. The "tests" used to identify such cases have been couched in general terms such as "when the justice of the case might so require" or whether there exists "some special or unusual feature on the case to justify the Court in departing from the ordinary practice." These "tests" have, for example, been found to have been met in cases in which unwarranted allegations of fraud have been made, proceedings have been prosecuted for some ulterior motive or in wilful disregard of known facts or clearly established law or where there has been an imprudent refusal of an offer of compromise.
Although Tracey J found that the Applicant had acted unreasonably, his Honour nonetheless considered it appropriate to award costs on a party and party basis. Similarly, in this case, on balance, I am not persuaded that the Applicant’s action in persisting with the Application in a Case warrants an order of indemnity costs. Objectively the Applicant’s unreasonable act in pursuing this action caused the Respondents to incur costs. However I am not satisfied that this is one of those “rare” cases in which a party must be presumed to have done so for some ulterior motive or because of “wilful” disregard of the known facts or the law (as discussed in Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd & Ors 81 ALR 397; [1988] FCA 202 at [21]; Rouse v Shepherd and Others (No 2) (1994) 35 NSWLR 277 at 282; and in Colgate-Palmolive Company and Another v Cussons Pty Ltd (1993) 46 FCR 225; (1993) 118 ALR 248) or that the Applicant’s conduct was otherwise of the character that would warrant a departure from the ordinary rule (see Cann v Commonwealth Bank of Australia (No.6) [2011] FMCA 912 at [13] – [25]) in the context of proceedings under the FW Act.
It is thus necessary to address what order for costs should be made. The Applicant submitted that if costs were awarded the Court should adopt the event-based scale in Schedule 1 to the Federal Magistrates Court Rules and that no proper grounds had been advanced to go outside this scale. The Respondents submitted that even if indemnity costs were not ordered, the factors they relied on in support of an order for indemnity costs (in particular what was said to be the Applicant’s conduct in bringing and persisting with a case where, properly advised, she ought to have known there was no justifiable prospect of success) warranted a departure from Schedule 1 costs and taxation under the Federal Court Rules.
However there is a distinction between the issue of whether indemnity costs should be awarded and the quantification of costs in circumstances where costs on a party and party basis are appropriate. In that context, once it has been determined that there should be no departure from the normal rule that costs are payable on a party and party basis, the issue as a matter of general principle is to determine the most just and reasonable method of reimbursement of costs reasonably and properly incurred in a reasonable and proportionate amount.
The Court has a range of options in relation to the quantification of party/party costs (see s.79 of the Federal Magistrates Act and r.21.02 of the Federal Magistrates Court Rules). What is in issue is whether the costs scale in Schedule 1 to the Rules is appropriate in the context of this matter or whether the circumstances are such that an application of the Federal Court Rules would provide the most just method for determining the costs having regard to the nature of the proceedings.
The Schedule 1 event-based costs scale is intended to provide simplicity and certainty in determining costs. In the absence of evidence that the relevant costs of the hearing and the present costs application would not properly be met by an application of Schedule 1 (consistent with the object of indemnification on a party and party basis) and given the limited nature of the award of costs in these proceedings I am of the view that the amount payable under Schedule 1 would provide a lump-sum award that is appropriate in a discrete confined matter of this nature.
The Applicant should pay the costs of the Respondents in relation to the hearing of the Application in a Case calculated in accordance with Schedule 1 to the Rules. However, notwithstanding that the possibility of an order of costs in accordance with Schedule 1 to the Rules was canvassed by the parties in submissions, I was not addressed on the calculation of the amount payable under Schedule 1. My preliminary calculation in such circumstances is that Stage 1 costs should not be included, but that the costs should include:
a)Schedule 1, Part 1, Stage 2 lump sum of $1,617 plus daily hearing fee for 1 day of $1,942;
b)advocacy loading (as I certify under r.21.15 that it was reasonable for the Respondents to employ an advocate to appear and see r.21.16) in the sum of $971; and
c)hearing fee of $264 for attendance to take judgment.
In addition, the Applicant should pay the Respondents’ costs of the costs application. In the absence of submissions to the contrary, my preliminary calculation of these costs would include a Stage 2 lump sum of $1,617 and a hearing fee calculated to amount to the sum of $792 (which is more than the amount specified for a short mention but less than that for a half-day hearing) together with an advocacy loading of $396 and a hearing fee for attendance to take judgment of $264. This would give a total amount of $7,863.
I intend to order the parties to bring in short minutes of orders calculating a fixed amount of costs under Schedule 1 to the FMC Rules. In the event that any party takes issue with the suggested calculation, the parties may agree on the amount or make submissions on the amount for the Court to determine on the papers. In the unlikely event that a party sees a need to make oral submissions on the calculation of Schedule 1 costs it would be open to them to exercise the liberty to apply granted on 13 December 2012.
Finally the Respondents seek an order that the costs be payable forthwith. I have had regard to the particular circumstances of this case (see Fiduciary Ltd and Another v Morningstar Research Pty Ltd and Others (2002) 55 NSWLR 1; [2002] NSWSC 432 at [11] – [13]). The Application in a Case was a discrete application unconnected with the matters directly in issue in the substantive proceedings. The costs are to be fixed. Assessed objectively, the Applicant engaged in unreasonable conduct as discussed above in relation to s.570(2)(b) of the FW Act. It is unlikely that the substantive proceedings will be finalised in the near future. The parties have not yet filed their evidence (although directions have been made). No hearing date has been fixed. While the general practice is that the costs of interlocutory proceedings are not payable until the conclusion of the proceedings (and see r.40.13 of the Federal Court Rules 2011 (Cth)), the Court may order that such costs be payable forthwith in the particular circumstances of this case. I am satisfied that the demands of justice require a departure from the general practice, such that the costs should be payable forthwith after the amount of costs is determined by further order of the court.
I certify that the preceding seventy-one (71) paragraphs are a true copy of the reasons for judgment of Barnes FM.
Date: 26 March 2013
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