Marion v Claric Sixty Three Pty Ltd
[2024] FedCFamC2G 804
•3 September 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Marion v Claric Sixty Three Pty Ltd [2024] FedCFamC2G 804
File number: MLG 796 of 2021 Judgment of: JUDGE CHAMPION Date of judgment: 3 September 2024 Catchwords: INDUSTRIAL LAW – Costs – Application for costs following the Applicant filing a Notice of Discontinuance – Application for costs dismissed Legislation: Fair Work Act 2009 (Cth) ss. 323, 545, 546, 570
Federal Circuit and Family Court of Australia(Division 2)(General Federal Law)Rules 2021 r. 13.01
Cases cited: ASIC v Aust-Home Investments Ltd (1993) 44 FCR 194; [1993] FCA 585
Kanan v Australian Postal and Telecommunications Union (1992) 43 IR 257
Melbourne Stadium Limited v Sautner (2015) 229 FCR 221; [2015] FCAFC 20
Re Minister for Immigration and Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6
Ryan v Primesafe [2015] FCA 8
Division: Division 2 General Federal Law Number of paragraphs: 35 Date of last submissions: 1 July 2024 Date of hearing: On the papers Place: Melbourne Solicitor for the Applicant: Marshall & Dent & Wilmoth Lawyers Solicitor for the Respondents: Garland Hawthorn Brahe Lawyers ORDERS
MLG 796 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: ADRIAN MARION
Applicant
AND: CLARIC SIXTY THREE PTY LTD ACN 006 802 213
First Respondent
FHF AUSTRALIA PTY LTD ACN 167 929 875
Second Respondent
ORDER MADE BY:
JUDGE CHAMPION
DATE OF ORDER:
3 SEPTEMBER 2024
THE COURT ORDERS THAT:
1.The Respondents’ application for costs is dismissed.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
JUDGE CHAMPION:
WHAT IS THE ISSUE?
The issue for decision is whether I am satisfied that the Applicant, Mr Adrian Marion, instituted proceedings “vexatiously or without reasonable cause” under s. 570(2)(a) of the Fair Work Act 2009 (Cth) (FW Act), or if I am satisfied that the Applicant’s “unreasonable act or omission caused the other party to incur the costs” under s. 570(2)(b) is such that I should exercise my discretion to make an order for costs in favour of the Respondents, namely Claric Sixty-Three Pty Ltd (First Respondent) and FHF Australia Pty Ltd (Second Respondent).
There was not a trial of the Applicant’s underlying claim on the merits. Before any trial, on 6 May 2024, the Applicant filed a Notice of Discontinuance. He did not require leave to file a Notice of Discontinuance because the matter was not then listed for final hearing (see: Federal Circuit and Family Court of Australia(Division 2)(General Federal Law)Rules 2021, r. 13.01(2)).
WHAT IS THE NECESSARY BACKGROUND?
On 23 April 2021 the Applicant instituted proceedings seeking compensation under s. 545(2)(b) of the FW Act because of the Respondents’ alleged contraventions of the FW Act. He sought compensation for unpaid wages, unpaid superannuation, unpaid accrued and unused annual leave and a payment in lieu of notice. In his Statement of Claim dated 23 April 2021, the Applicant claimed compensation of $82,635.80. He also sought pecuniary penalties under s. 546 of the FW Act and that the Respondents pay any penalties to him.
On 7 June 2022 the Applicant filed a trial affidavit ahead of a trial then scheduled on 1 July 2022. The trial scheduled on 1 July 2022 was adjourned, and on 1 July 2022 the court ordered costs in favour of the Applicant. Mr Walmsley, the director of each of the Respondents, filed his trial affidavit on or about 24 October 2023. In November 2023, at the parties’ initiative, and on the basis of consent orders, the court vacated a three-day trial fixed in December 2023. In the absence of the matter progressing satisfactorily towards a new trial date, a directions hearing on 3 May 2024, at which the court required an update as to the matter’s status, acted as the apparent catalyst for the Applicant’s Notice of Discontinuance filed three days later on 6 May 2024.
Following the Applicant’s filing of a Notice of Discontinuance, the First and Second Respondents on 31 May 2024 filed an application for costs, seeking costs of and incidental to the proceeding on a solicitor/client basis up until 6 May 2024, or alternatively on a party/party basis, to be taxed in default of agreement. Neither party sought an oral hearing as to costs. In the absence of the application for an oral hearing, I indicated that I would determine the costs application on the papers. I note that the parties have both relied on affidavits in the costs application which have not been tested by cross-examination.
Section 570
Section 570 of the FW Act operates as an express limitation on the court’s broad discretion to award costs (Melbourne Stadium Limited v Sautner (2015) 229 FCR 221; [2015] FCAFC 20, [140]). Because of s. 570, the general law which entitles an applicant to discontinue a legal proceeding on payment of a respondent’s costs has no application in a proceeding in relation to a matter arising under the FW Act.
The usual position under s. 570 is that each party will pay their own costs. In Ryan v Primesafe [2015] FCA 8 at [64], Mortimer J (as she then was) said:
…the policy behind s. 570 is to ensure that the spectre of costs being awarded if a claim is unsuccessful does not loom so large in the mind of potential applicants (in particular, in my opinion) that those with genuine grievances and an arguable evidentiary and legal basis for them are put off commencing or continuing proceedings. It is an access to justice provision.
Section 570(2)(a) provides that a party may be ordered to pay costs only if “the court is satisfied that the party instituted the proceedings vexatiously or without reasonable cause”. Section 570(2)(b) provides that a party may be ordered to pay costs only if “the court is satisfied that the party’s unreasonable act or omission causes the other party to incur the costs”.
The Respondents rely on both s. 570(2)(a) and (b).
Section 570(2)(c) is not currently relevant.
The provisions operate in two stages: first, I must be satisfied that one of the enlivening conditions in paragraphs (a) or (b) exists; second, I have a residual discretion as to whether and to what extent to order costs even once satisfied that my power is enlivened.
MATERIAL FILED
The Respondents’ material in support of the costs application
The Respondents filed submissions dated 19 June 2024. The Respondents also relied on an affidavit of Mr Jonathan Walmsley, a director of both companies, made on 31 May 2024.
Mr Walmsley deposed that the Applicant’s claim for unpaid wages was “entirely baseless and without merit” (Mr Walmsley, [41]).
He said that the Applicant’s claim for unpaid superannuation is also “without merit” (Mr Walmsley, [44]).
As to annual leave, Mr Walmsley deposed that as of 27 November 2020, the Applicant owed FHF a “leave debt” and his claim for annual leave was not maintainable (Mr Walmsley, [50]).
Importantly, for the purposes of the current application, Mr Walmsley says the following at [52] of his affidavit that there was some late payment of wages by the Respondents to the Applicant during his employment:
Prior to the Applicant abandoning his employment, FHF was late in making payment to the Applicant for the months of June 2020, August 2020 (although part payment was made early and the subsequent payment was 5 days late), September 2020 (although part payment was made early), October 2020 (by 4 days) and November 2020. As deposed to at paragraphs 60 to 68 of my Trial Affidavit I was in regular communication with the Applicant in relation to the late payment of his wages, and, as far as I was aware, the Applicant at all times understood and accepted the situation.
Mr Walmsley continues that there was “no basis [for Mr Marion] to allege a repudiation of contract” and in fact he abandoned his employment (Mr Walmsley, [52]–[53]).
Mr Marion’s material opposing the costs application
The Applicant relied on his Statement of Claim, his trial affidavit made on 7 June 2022, and an affidavit of Mr Alex Di Blasi, Mr Marion’s lawyer, made on 1 July 2024 in opposing the costs application.
In his Statement of Claim at [10], among other matters, the Applicant alleged that there were late paid or unpaid wages across periods ranging from 1 July 2020 until 4 March 2021.
Section 323(1)(a)–(c) of the FW Act provides as follows:
Method and frequency of payment
(1) [Manner of payment] An employer must pay an employee amounts payable to the employee in relation to the performance of work:
(a) in full (except as provided by section 324); and
(b) by one, or a combination, of the methods referred to in subsection (2); and
(c) at least monthly.
Mr Marion deposed that in the period ranging from July 2020 until March 2021, he only received part payments of his wages from the Respondents. Having regard to the content of Mr Walmsley’s own affidavit made on 31 May 2024, by reference to paragraph 52 of his affidavit extracted above, there is some level of concession that FHF was late in making wage payments to Mr Marion.
In his affidavit, Mr Marion said that he commenced the proceeding as a result of unpaid salary payments (Mr Marion, 7 June 2022, [17]–[21]).
He also asserted that he had a bona fide claim as to superannuation. In his affidavit at paragraph 42.2, Mr Marion asserted that as of 7 June 2022 “there remains an unpaid balance of approximately $2135” in superannuation.
Should the court award costs?
There has been no hearing on the merits because of the Applicant’s filing of a Notice of Discontinuance.
There is a contest in the affidavit material between Mr Marion’s affidavit dated 7 June 2022 and Mr Walmsley’s affidavit made in support of the costs application made on 31 May 2024. The conflict in the affidavit material has not been able to be tested by cross-examination in the usual way by the trial process.
Putting s. 570 of the FW Act to one side for a moment, as McHugh J observed in Re Minister for Immigration and Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6 at 624, ordinarily a successful party in litigation is entitled to his or her costs. Success controls the exercise of the costs discretion. The situation is different, however, where the court is deprived of hearing on the merits. The court cannot try a hypothetical action between the parties for the purposes of the costs application. In Qin McHugh J continued at 624-625:
When there has been no hearing on the merits, however, a court is necessarily deprived of the factor that usually determines whether or how it will make a costs order.
In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The court cannot try a hypothetical action between the parties (3). To do so would burden the parties with the costs of a litigated action which by settlement or extracurial action they had avoided. In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action
…
If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings. This approach has been adopted in a large number of cases.
[Emphasis added]
The case McHugh J footnoted in the passage above was ASIC v Aust-Home Investments Ltd (1993) 44 FCR 194; [1993] FCA 585. In Aust-Home Hill J referred to a number of propositions emerging from the authorities including the proposition that (at FCR 201):
It will rarely, if ever, be appropriate, where there has been no trial on the merits, for a Court determining how the costs of the proceeding should be borne to endeavour to determine for itself the case on the merits or, as it might be put, to determine the outcome of a hypothetical trial: [authority omitted] This will particularly be the case where a trial on the merits would involve complex factual matters where credit could be an issue.
In line with the authorities of Qin and Aust-Home, I ought not to run hypothetical trial on the merits to determine the costs application.
As noted, the Respondents rely on both s. 570(2)(a) and (b) of the FW Act.
As to paragraph (a), the test for whether a proceeding was 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”. A proceeding is instituted without reasonable cause where it is clear that it must fail on the applicant’s own version of the facts (Kanan v Australian Postal and Telecommunications Union (1992) 43 IR 257 at 264 (Wilcox J)).
I cannot conclude on the basis of competing material in the affidavits that it ought to have been apparent to the Applicant on his commencement of the application that it must fail on his own version of the facts. Even on Mr Walmsley’s affidavit, given his concession as to late payments of wages, and the inflexible requirements of s. 323(1) of the FW Act that an employer must pay an employee wages “in full” at least monthly, even if late payments were subsequently caught up, once there was a failure to pay wages “in full” at least monthly, at least arguably, a contravention of s. 323(1) of the Act is proved. The Respondents pressed their costs application on the basis that the totality of the claim was commenced without reasonable cause. The Respondents did not differentiate between different claims in the proceeding. In any event, my power under s. 570(2)(a) requires me to draw a conclusion as to the whole of the proceeding – that is, that the whole of the proceeding was instituted without reasonable cause – rather than to differentiate between different component parts of the proceeding some of which may have been commenced with reasonable cause and some without reasonable cause. It will be insufficient to order costs of a proceeding under s. 570(2)(a) if only some parts of the proceeding are commenced without reasonable cause. On the concessions in Mr Walmsley’s own affidavit, it cannot be said that it must have been apparent to the Applicant that his case must fail on his own version of the facts and therefore was commenced without reasonable cause.
I also cannot draw an inference that the Applicant’s discontinuance of his claim before trial is a concession that his claim was without merit. He has put evidential material before the court that there was an uncertainty about the solvency of the Respondents and their ability to satisfy any judgment. I repeat that no party sought an oral hearing as to costs in which the evidential material might be tested by way of cross-examination. All I say for the purposes of the present application, is that on the material before me, I cannot conclude the Applicant’s professed concern that the continued pursuit of this action might be an uncommercial proposition was a statement unreasonably made. Such a conclusion would require testing of the evidence.
Noting McHugh J’s observations in Qin (in a case where a notice of discontinuance had been filed and there had been no trial on the merits) the matter before me is not a case in which, without the testing of evidence which would only occur by way of cross-examination at trial — at least as to the late paid wages claim which is one component part of the proceeding — in which I can “conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action”.
The Respondents’ reliance on s. 570(2)(b) was advanced on the basis that if a claim was commenced without reasonable cause under s. 570(2)(a), the subsequent maintaining of that same claim constituted an unreasonable act or omission under s. 570(2)(b). The Respondents have not established that the proceeding was commenced without reasonable cause. Therefore, the premise underpinning their claim under s. 570(2)(b) that the claim was also unreasonably maintained has not been made good. Because I am not satisfied that the claim was commenced without reasonable cause under s. 570(2)(a), it follows that I am also not satisfied that the maintaining of the same action was an unreasonable act or omission under s. 570(2)(b).
The Respondents’ application for costs is dismissed.
I certify that the preceding thirty-five (35) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Champion. Associate:
Dated: 3 September 2024
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