Loukis v Compaction Soil Testing Services Pty Ltd (No 2)
[2021] FedCFamC2G 185
•5 November 2021
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Loukis v Compaction Soil Testing Services Pty Ltd (No 2) [2021] FedCFamC2G 185
File number(s): SYG 505 of 2020 Judgment of: JUDGE DRIVER Date of judgment: 5 November 2021 Catchwords: INDUSTRIAL LAW – COSTS – claim for costs under general legislative provision and Court Rules and under the Fair Work Act 2009 (Cth) – whether the principal proceeding was commenced unreasonably or whether the applicant made an unreasonable act or omission considered – claim for costs dismissed. Legislation: Fair Work Act 2009 (Cth) s 570
Federal Circuit Court of Australia Act 1999 (Cth) (repealed) s 79
Federal Circuit Court Rules 2001 (Cth) (repealed)
Cases cited: Australian Workers Union v Leighton Contractors Pty Ltd (No 2) [2013] FCAFC 23
Celand v Skycity Adelaide Pty Ltd [2017] FCAFC 222
Fair Work Ombudsman v Valuair Ltd (No 3) [2014] FCA 1182
Health Services Union v Jackson (No 5) [2015] FCA 1467
Loukis v Compaction & Soil Testing Services Pty Ltd [2021] FCCA 281
McDonald v Parnell Laboratories (Aust) (No 2) (2007) 164 FCR 591
Murphy v Innovior Pty Ltd (No 2) [2021] FCCA 258
R v Moore; Ex parte Federated Miscellaneous Workers’ Union of Australia (1978) 140 CLR 470
Ryan v Primesafe [2015] FCA 8
Saxena v PPF Asset Management Ltd [2011] FCA 395
Shea v EnergyAustralia Services Pty Ltd (No 2) [2015] FCAFC 14
Trustee for The MTGI Trust v Johnston (No 2) [2016] FCAFC 190
Division: Division 2 General Federal Law Number of paragraphs: 31 Date of hearing: 25 October 2021 Place: Sydney Counsel for the Applicant: Ms U Okereke-Fisher Solicitor for the Applicant: The Australian Workers’ Union Solicitor for the Respondent: Kennedys (Australasia) Counsel for the Respondent: Ms J Steele SC ORDERS
SYG 505 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: STEPHANIE LOUKIS
Applicant
AND: COMPACTION & SOIL TESTING SERVICES PTY LTD
Respondent
ORDER MADE BY:
JUDGE DRIVER
DATE OF ORDER:
5 NOVEMBER 2021
THE COURT ORDERS THAT:
1.The Application in a Case filed on 11 August 2021 is dismissed.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
JUDGE DRIVER:
INTRODUCTION AND BACKGROUND
On 8 July 2021 I gave judgment in the principal proceedings in this matter. I ordered that the principal application be dismissed.[1] The respondent company, Compaction & Soil Testing Services Pty Ltd (the company), foreshadowed an application for costs. The company filed an Application in a Case on 11 August 2021 seeking orders for costs under s 79 of the Federal Circuit Court of Australia Act 1999 (Cth) (repealed) and rule 21.02 of the Federal Circuit Court Rules 2001 (Cth) (repealed) and, in the alternative, an order under s 570 of the Fair Work Act 2009 (Cth) (Fair Work Act) for costs.
[1] Loukis v Compaction & Soil Testing Services Pty Ltd [2021] FCCA 281
In support of the costs application, the company relies upon the affidavit of Ms Persephone Forster made on 11 August 2021 and the affidavit of Mr Neil Brodrick Groat made on 11 August 2021. The applicant in the principal proceedings, Ms Loukis, relies upon the affidavit of James Lachlan Shaw made on 7 September 2021.
It is common ground that s 570 of the Fair Work Act applies to the costs application. The company asserts that the principal proceeding was instituted vexatiously or without reasonable cause[2] and that the applicant, Ms Loukis, engaged in unreasonable acts in the proceedings which caused the company to incur costs.[3]
[2] Fair Work Act, s 570(2)(a)
[3] Fair Work Act, s 570(2)(b)
Relevant principles
There is no contest between the parties as to the relevant principles.
Proceedings in relation to civil penalty provisions of the Fair Work Act are penal in nature and “allegations of contravention of the general protections provisions are inherently serious”.[4]
[4] Celand v Skycity Adelaide Pty Ltd [2017] FCAFC 222 at [102] (Bromberg J)
The principles relating to the imposition of costs in the context of s 570 of the Fair Work Act are well established.
Section 570(1) provides that a party may be ordered by a court to pay costs incurred by another party only in accordance with subsection (2). Relevantly, pursuant to subsection (2)(a) the threshold is met only if the Court is satisfied that the party instituted the proceedings vexatiously or without reasonable cause or subsection (2)(b) permits a costs order to be made if the Court is satisfied that a party’s unreasonable act or omission caused the other party to incur the costs.
The “power to order costs, once a criterion in s 570(2) has been satisfied, is discretionary and should be exercised, not so as to impose a penalty or punishment on the losing party, but to provide an appropriate means of compensating the successful party having regard to all of the circumstances”.[5]
[5] Shea v EnergyAustralia Services Pty Ltd (No 2) [2015] FCAFC 14 at [11]
Whilst s 570 of the Fair Work Act limits the circumstances in which costs may be awarded, the purpose of the provision’s policy extends to protect “those parties who are forced to defend proceedings that have been instituted vexatiously or without reasonable cause”.[6]
[6] Australian Workers’ Union v Leighton Contractors Pty Ltd (No 2) [2013] FCAFC 23 at [7(1)] (Dowsett, McKerracher and Katzmann JJ)
Costs incurred after the refusal of a reasonable offer to settle the case can constitute an unreasonable act within the meaning of s 570(2)(b) of the Fair Work Act.[7] Whether such refusal constitutes unreasonable conduct is to be assessed in light of all the circumstances which existed at the time of the rejection.[8]
[7] McDonald v Parnell Laboratories (Aust) (No 2) (2007) 164 FCR 591 at [30] and [31]
[8] Health Services Union v Jackson (No 5) [2015] FCA 1467 at [47]
In Murphy v Innovior Pty Ltd (No 2),[9] Judge Baird summarised the principles regarding the award of costs under s 570 of the Fair Work Act, being:
(a)the discretion should be exercised cautiously, and the case for its exercise should be clear;[10]
(b)section 570 operates to ensure parties are not discouraged from advancing genuine grievances (emphasis added);[11]
(c)the determination of whether a party’s conduct is unreasonable is to be determined with regard to the particular circumstances of each case;[12]
(d)the relevant question (with respect to s 570(2)(a)) is whether the proceedings had reasonable prospects of success at the time they were instituted;[13]
(e)though it is “not necessary that a party prove exceptional circumstances, the case for the exercise of the discretion to award costs is rare, and is likely to be exceptional”;[14] and
(f)“the Court must be satisfied that one of the statutory preconditions in s 570(2) is made out before the Court’s discretion to make an order for costs is enlivened”.[15]
[9] [2021] FCCA 258
[10] Innovior at [20]
[11] Innovior at [21]
[12] ibid
[13] ibid
[14] Innovior at [54]; emphasis in original
[15] Innovior at [25]
In summary, the company submits that Ms Loukis ought not have instituted the proceedings. Her claim is said to have been tenuous and not sufficiently serious to warrant penal allegations. Moreover, the company submits that when considering the particular circumstances of this case, Ms Loukis’ dispute cannot be described as a genuine grievance. Ms Loukis is said to have engaged in unreasonable conduct which caused the company to incur costs. Accordingly, the costs discretion of the Court is said to have been enlivened and the Court ought to exercise its discretion to award costs.
Ms Loukis refers to various authorities in support of the general principles that the discretion to award costs pursuant to s 570 of the Fair Work Act should be exercised cautiously. In Ryan v Primesafe,[16] Mortimer J noted that s 570 was an access to justice provision and the discretion conferred by the confined terms of s 570(2) should be exercised cautiously, and the case for its exercise should be clear. Mortimer J stated that:
The reason for caution is the potential for discouraging parties’ pursuit in a complete and robust way of the claims for contravention which they seek to make under the Fair Work Act, or the defence of such claims.
[16] [2015] FCA 8 at [64], citing Saxena v PPF Asset Management Ltd [2011] FCA 395 at [6] per Bromberg J
The need for caution is also due to the “exceptional nature of the power in an otherwise no‑costs jurisdiction”.[17]
[17] Trustee for The MTGI Trust v Johnston (No 2) [2016] FCAFC 190 at [8]
A party’s conduct must rise significantly above unsatisfactory prior to a Court being inclined to exercise its jurisdiction to award costs, as mere weakness in a position on arguable points of law is insufficient to justify an order.[18]
[18] Fair Work Ombudsman v Valuair Ltd (No 3) [2014] FCA 1182 at [8]-[11]
The “limited discretion conferred on the Court by [s 570(2)] ought not become the basis for arguments about costs in relation to any and every transgression in the conduct of a case”.[19]
[19] Saxena at [6]
Ms Loukis submits that it follows from the protection offered by s 570(2) that a person will rarely be ordered to pay the costs of a proceeding.
The relevant question is whether the proceeding had reasonable prospects of success at the time it was instituted, not whether it ultimately failed.[20]
[20] R v Moore; Ex parte Federated Miscellaneous Workers’ Union of Australia (1978) 140 CLR 470 at 473 per Gibbs J
CONSIDERATION
The parties have filed extensive written submissions on the issue of costs and also made oral submissions through their counsel at the hearing of the Application in a Case on 25 October 2021. The contest over costs is in my view a continuation of the hard fought nature of the principal proceedings and what I described as the “take no prisoners” approach of both parties.[21] With reference to s 570(2)(a) of the Fair Work Act, I am not persuaded that the principal proceedings were instituted vexatiously or without reasonable cause. The company relies upon the affidavit of Mr Groat who deposes as to a telephone call he received in around November 2019 from Mr James Shaw of the Australian Workers Union, which was representing Ms Loukis. Mr Groat deposes that Mr Shaw invited the company to settle Ms Loukis’ claim for 25 weeks pay or face the cost of the matter going to court. This was described by counsel for the company as an attempted “shakedown”. In contrast, Mr Shaw deposes that Mr Groat telephoned him rather than the other way around and that there was no proposal put to settle for 25 weeks pay. Mr Shaw recalls that Mr Groat invited Ms Loukis to discontinue her claim as it was unmeritorious and Mr Shaw told Mr Groat that if a settlement offer was to be made, he could get instructions on it.
[21] principal judgment at [223]
The witnesses thus have quite different recollections as to the telephone conversation, except for the approximate time of it in November 2019. Neither made any written record of the conversation.
The conversation occurred while the matter was before the Fair Work Commission and well before proceedings were instituted in this Court in March 2020. If a substantial monetary claim was made on behalf of Ms Loukis at that point, it could only have been an ambit claim and would have been so treated. It would have been addressed in the conciliation process before the Fair Work Commission. The matter only came before the Court because conciliation failed. I do not regard the asserted conversation as significant as to the costs of proceedings instituted months later.
The proceedings in the Court, when they were instituted, were commenced out of time and Ms Loukis sought an extension of time. As is pointed out by counsel for the company, Ms Loukis’ claim hinged on the wording of the termination letter she received, specifically the reference to “unsatisfactory attendance”. In considering whether to grant an extension of time, I had regard to the ambiguity in the termination letter. It could have referred to lateness or it could have referred to absences, whether explained or unexplained. Ms Loukis relied on s 352 of the Fair Work Act to assert that she was dismissed because she had been temporarily absent due to illness. Given the ambiguity in the termination letter, I found that the claim was arguable.
With the benefit of my judgment in the principal proceedings, it now apparent that the termination letter referred to lateness, not absences due to illness. That is why Ms Loukis’ claim failed. Her claim was, however, arguable as I found in granting an extension of time and I reject the assertion that the claim was instituted vexatiously or unreasonably.
The company also asserts that Ms Loukis committed unreasonable acts or omissions which caused costs to be incurred by the company. The company refers to a “without prejudice” offer of settlement made by it on 25 May 2020 which was not accepted. That offer was made before the extension of time decision. While the company asserted that Ms Loukis’ claim would fail even if an extension of time were granted (which proved to be an accurate prediction) it was a simple invitation for Ms Loukis to discontinue.
At the extension of time hearing, I invited the parties to confer on the question of whether Ms Loukis would accept a reformulation of the termination letter. That offer was made and rejected.
Later, the company’s evidence had been filed and I made certain observations about it. This stimulated the company to again invite Ms Loukis to discontinue.
It is noteworthy, in my view, that at no stage did the company offer Ms Loukis a monetary settlement. The company appears to have taken the position that the proceedings could only have been resolved in one of two ways, namely a discontinuance by Ms Loukis or a dismissal following a full hearing. In my view, it was not unreasonable for Ms Loukis to reject or fail to accept any of the offers from the company which would, in effect, have required her to walk away with nothing. Her claim was not manifestly hopeless and, having received an extension of time, she was entitled to have her claim tested.
For her part, Ms Loukis, through her solicitor, made an offer to settle the proceedings on 26 May 2020 for a payment equal to five weeks pay[22] and recognition of her dismissal as a resignation. That offer was rejected by the company, consistently with its position throughout the proceedings that no money would be paid to Ms Loukis.
[22] less than $5,000 according to counsel for Ms Loukis in oral submissions
It is not uncommon in this jurisdiction for employers to adopt a commercial attitude to claims under the Fair Work Act and to make a modest financial settlement in order to bring the dispute to an end and avoid the cost and uncertainty of court proceedings. The process of conciliation before the Fair Work Commission facilitates that opportunity. So does mediation in the Court. In the present case, the company was resolute that no money would be paid to Ms Loukis. While there were numerous invitations to her to discontinue, those offers should in my view be seen as an indication of the clear preference of the company for an early resolution, but one which did not involve the payment of any money. As I have already noted, Ms Loukis had an arguable case and she was entitled to have that case heard and determined by the Court. I ordered the parties to mediation early in the proceedings, which was not successful. As already noted, I also made observations at the interlocutory stage which were intended to stimulate further consultation which in fact occurred. Again, however, the company was resolute in refusing any settlement which involved the payment of money. That was the company’s right but the company cannot expect Ms Loukis to now be the insurer of its choice of position.
As matters turned out, the hearing of this case was characterised by its hard fought nature of the case. Numerous allegations were made against both parties and witnesses were examined at length to explore asserted failings on their part. As I pointed out in my judgment, however, despite all of the allegations from both sides, the case was a simple one concerning the meaning of the termination letter which reflected the real reason for Ms Loukis’ termination. The blame for the zealous way in which the hearing was conducted does not all lie on one side or the other.
CONCLUSION
I conclude that the principal proceedings were reasonably and properly instituted in this Court and the conduct of proceedings, while unusually hard fought, was not such as to constitute an unreasonable act or omission. I conclude that the costs of the proceedings as a whole should lie where they fall. I will dismiss the Application in a Case with no order as to costs.
I certify that the preceding thirty-one (31) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Driver. Associate:
Dated: 5 November 2021
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