Matthew Leathem v Phillip Skrinnikoff T/A Jaymak Central West
[2022] FWC 2499
•16 SEPTEMBER 2022
| [2022] FWC 2499 |
| FAIR WORK COMMISSION |
| DECISION |
Fair Work Act 2009
s.365—General protections
Matthew Leathem
v
Phillip Skrinnikoff T/A Jaymak Central West;
Jaymak Australia Pty Ltd
(C2022/3302)
| DEPUTY PRESIDENT ANDERSON | ADELAIDE, 16 SEPTEMBER 2022 |
Application for costs by first respondent – jurisdictional issue raised by employer – discontinuance following employer materials – order for costs sought against applicant and applicant’s solicitors – costs application dismissed
This decision concerns an application for costs under ss 375B and 376 of the Fair Work Act 2009 (Cth) (FW Act) by Phillip Skrinnikoff trading as Jaymak Central West (the costs applicant, the employer or Jaymak Central West). Jaymak Central West seek an order for costs in the sum of $6,559.85 against Matthew Leathem (Mr Leathem) and Mr Leathem’s legal representative, Gorval Lynch (collectively the costs respondents).
The costs application was made on 4 August 2022.
I issued directions on the costs application on 5 August 2022.
By consent, I determined the costs application on the papers, based on written submissions filed by the parties.
Jaymak Central West and Mr Leathem were granted permission to be represented on the costs application, continuing permission granted on the primary (general protections) application.
The second respondent to the primary application (Jaymak Australia Pty Ltd) was not a party to the costs application.
Facts
General protections application
In April 2022 Mr Leathem was employed by Jaymak Central West as a service operator.
On 2 June 2022 Mr Leathem (via his solicitor Ms Aziz of Gorval Lynch) made a general protections dismissal dispute application (the application) under s 365 of the FW Act.
Mr Leathem’s application alleged that he had been unlawfully dismissed because of the exercise of workplace rights.
The application was made against two respondents; his employer (a franchisee, Phillip Skrinnikoff trading as Jaymak Central West) and a franchisor (Jaymak Australia), who Mr Leathem contended was a “person involved”[1] in the alleged contravention.
Referral to conciliation
On 14 June 2022 administrative staff of the Commission wrote to the parties advising that a conciliation conference had been scheduled for 14 July 2022, and advising the respondents of their obligation to file a form F8A response.
Jurisdictional objection
On 21 June 2022 a response was filed by the employer (Jaymak Central West) under the hand of its solicitors (Baldock, Stacy & Niven).
In response to question 2.2 of its response, Jaymak Central West raised a jurisdictional objection in the following terms:
“1. The First Respondent denies that the Applicant is entitled to make a general protection application because:
a. the Applicant has not been dismissed within the meaning of section 386 Fair Work Act 2009 (Cth) (“FWA”);
b. no adverse action has been taken by the First Respondent within the meaning of section 340(1) FWA.
2. Further and in the alternative, the First Respondent seeks an order under 587(3) that the application is dismissed on the grounds that it does not comply with 587(1)(a) and (c)”.
In response to question 2.4 Jaymak Central West stated:
“1. The Applicant’s first shift was on 19 April 2022 however the Applicant has been employed on a casual basis with the First Respondent since 8 April 2022.
2. The Applicant has not been dismissed.
3. The Applicant has not been given any notification of dismissal.”
That same day (21 June 2022) a response was filed by Jaymak Australia. Jaymak Australia did not specifically raise a jurisdictional objection, but noted, in question 2.4 of its response, that it did not agree that Mr Leathem had been dismissed from his employment with Jaymak Central West.
Referral to a Member
On 22 June 2022 the Commission’s administrative staff wrote to solicitors for Jaymak Central West and advised that in light of the jurisdictional objection, Jaymak Central West had the choice of attending the conciliation or having the case referred directly to a Commission Member for a hearing of the jurisdictional issue.
On 22 June 2022 solicitors for Jaymak Central West advised the Commission and the other parties that they were “instructed to have the case referred to a Commission Member for a hearing of the objection”.
The Commission duly cancelled the conciliation conference.
Directions 7 July 2022
The application came before me for directions on 7 July 2022.
Jaymak Central West was represented by solicitors Baldock Stacy and Niven. Mr Leathem was represented by solicitors Gorval Lynch. Jaymak Australia was self-represented.
By consent, I granted permission to both Mr Leathem and to Jaymak Central West to be represented.
In light of the Federal Court decision in Coles v Milford,[2] I advised the parties that as a jurisdictional issue had been raised and if it continued to be pressed, I would need to conduct a hearing on the jurisdictional issue, and be satisfied as to jurisdiction, before I could convene a conference or issue a certificate under s 368 of the FW Act.
Jaymak Central West advised that the jurisdictional issue was pressed.
I issued directions on 7 July 2022 requiring the filing of materials on the jurisdictional issue by Jaymak Central West by 15 July 2022[3] and, in response, by Mr Leathem by 22 July 2022.
I set the jurisdictional issue down for hearing on 26 July 2022.
Materials filed by the parties
On 14 July 2022 Jaymak Australia filed materials in the Commission.
On 15 July 2022, under the hand of its solicitors, Jaymak Central West filed materials on the jurisdictional issue. These materials included a sworn statement of the owner of the franchisee, Mr Skrinnikoff.
Discontinuance
On 22 July 2022, under the hand of his solicitors, Mr Leathem filed a Form F50 – Notice of Discontinuance in the Commission, formally discontinuing his application.
Costs application
On 4 August 2022 a costs application was filed by solicitors for Jaymak Central West seeking costs against Mr Leathem (under s 375B of the FW Act) and against his solicitors (under s 376 of the FW Act).
An itemised schedule of costs in the sum of $6,559.85 accompanied the application.
Submissions
Jaymak Central West
Jaymak Central West seeks costs against Mr Leathem under s 375B on two grounds.
Firstly, on the ground that the employer was caused to incur costs in defending Mr Leathem’s general protections application by obtaining legal representation, seeking legal advice, filing a defence and preparing evidence.
Secondly, on the ground that the costs were incurred by the employer due to an unreasonable act or omission by Mr Leathem in making and continuing his claim for reasons including that:
· no dismissal occurred;
· it should have been reasonably apparent to Mr Leathem upon the evidence that there were no substantial prospects of success or merit in making such an application;
· an offer was made to Mr Leathem in an attempt to resolve the proceedings prior to Jaymak Central West incurring the costs of preparing and serving evidence, to which no response was received; and
· Mr Leathem discontinued his application on 22 July 2022, the day his evidence was due, and after Jaymak Central West had incurred costs to prepare and serve evidence.
Jaymak Central West sought costs against Mr Leathem’s representatives under s 376 on grounds including that:
· no dismissal had occurred and that should have been reasonably apparent to Mr Leathem’s representatives based on information provided by Mr Leathem;
· as no dismissal had occurred, there were no reasonable prospects of success;
· as there were no reasonable prospects of success:
oit was unreasonable to commence the application and cause Jaymak Central West to incur costs in defending the application; and
oit was an unreasonable act or omission by Mr Leathem’s representatives to act on instructions and continue the claim and cause Jaymak Central West to incur costs in preparing evidence; and
· it was an unreasonable act or omission by Mr Leathem’s representatives to continue the application once an offer to settle the application had been made.
Costs respondents
The costs respondents submit that the application was not instituted vexatiously or to harass or embarrass, nor instituted without reasonable cause. They submit that the threshold to order costs under the FW Act has not been met.
The costs respondents submit that the application outlined a legitimate cause of action under the general protections provisions of the FW Act based on the following facts:
· on 6 May 2022, Mr Leathem was requested for jury duty at Orange Local Court on 9 May 2022 by the Department of Justice of New South Wales. Jaymak Central West, being Mr Leathem’s employer, requested that Mr Leathem ask for an exemption from serving jury duty. Mr Leathem complied, however his request for exemption was denied by the Department;
· Mr Leathem took a period of community service leave for jury duty;
· on 12 May 2022 whilst Mr Leathem was serving on the jury, Mr Leathem sent a text message to Jaymak Central West inquiring as to whether he was working on Sunday. Mr Leathem was previously told he would be working on the Sunday. Jaymak Central West responded “No” and Mr Leathem proceeded to question Jaymak Central West as to why he was not working the upcoming Sunday; and
· the same day, Jaymak Central West allegedly informed Mr Leathem that his employment was to be terminated (this is denied by Jaymak Central West).
The costs respondents submit that the application raised a number of arguable points of law which would have to be determined, including:
· the exercise of a workplace right (being the taking of community service leave); and
· whether adverse action occurred because of the exercise of a workplace right.
The costs respondents submit that there was no unreasonable act or omission with respect to the conduct or continuation of the matter.
Mr Leathem’s legal representatives submit, in relation to the application for costs against them, that there were reasonable merits on which the application was founded and that it could not be said that there were no reasonable prospects of success.
Consideration
Costs application within time
The costs application is within time.
Sections 375B(2) and 376(3) provide that the Commission may only make a costs order if the costs application is made in accordance with s 377. Section 377 of the FW Act requires the costs application to be made “within 14 days after the FWC finishes dealing with the dispute”.
On 22 July 2022 Mr Leathem filed a Form F50 – Notice of Discontinuance, formally discontinuing the matter. The Commission finished dealing with the dispute upon the filing of the Notice of Discontinuance. Being filed on 4 August 2022, the costs application was made within fourteen days.
Statutory provisions
The costs application is advanced against Mr Leathem under s 375B and against Mr Leathem’s solicitors under s 376. It is not advanced under the general costs provisions of the FW Act (s 611).
Section 375B, which is specific to applications under Part 3-1 (General Protections), provides:
“375B Costs orders against parties
(1)The FWC may make an order for costs against a party (the first party) to a dispute for costs incurred by the other party to the dispute if:
(a)an application for the FWC to deal with the dispute has been made under section 365; and
(b)the FWC is satisfied that the first party caused those costs to be incurred because of an unreasonable act or omission of the first party in connection with the conduct or continuation of the dispute.
(2)The FWC may make an order under subsection (1) only if the other party to the dispute has applied for it in accordance with section 377.
(3)This section does not limit the FWC’s power to order costs under section 611.”
Section 376 provides:
“376 Costs orders against lawyers and paid agents
(1)This section applies if:
(a)an application for the FWC to deal with a dispute has been made under section 365 or 372; and
(b)a person who is a party to the dispute has engaged a lawyer or paid agent (the representative) to represent the person in the dispute; and
(c)under section 596, the person is required to seek the FWC’s permission to be represented by the representative.
(2)The FWC may make an order for costs against the representative for costs incurred by the other party to the dispute if the FWC is satisfied that the representative caused those costs to be incurred because:
(a)the representative encouraged the person to start, continue or respond to the dispute and it should have been reasonably apparent that the person had no reasonable prospect of success in the dispute; or
(b)of an unreasonable act or omission of the representative in connection with the conduct or continuation of the dispute.
(3)The FWC may make an order under this section only if the other party to the dispute has applied for it in accordance with section 377.
(4)This section does not limit the FWC’s power to order costs under section 611.”
Relevant legal principles
Making an order for costs under either ss 375B or 376 is a two-step process. First, the Commission must be satisfied that jurisdiction exists to award costs. The relevant jurisdictional facts need to be established. Secondly, the Commission must consider whether it is appropriate to exercise its discretion to make an order for costs.
Costs sought under s 375B
Did Mr Leathem engage in an unreasonable act or omission with respect to the conduct or continuation of the matter?
Whether the conduct of a party is “an unreasonable act or omission” is to be objectively assessed.[4] Although decided under an earlier statutory regime, the observation that “what attracts the discretion to award costs is unreasonable action or the absence of sufficient reason for the action taken”[5] remains apposite. Each case will turn on its own facts.[6]
The application of s 375B was considered by a full bench in Neil Keep v Performance Automobiles Pty Ltd[7] (Keep) which relevantly observed as follows:
“[11] Section 375B was inserted into the FW Act by the Fair Work Amendment Act 2013 (Cth). The new provision came into effect on 1 January 2014 and applies to dismissals which took effect from that date.
[12] The Supplementary Explanatory Memorandum to the Fair Work Amendment Bill 2013 (Cth) states as follows:
‘New section 375B allows the FWC to order costs against a party to a general protections dismissal dispute (the first party) if it is satisfied that the first party caused the other party to the dispute to incur costs by an unreasonable act or omission in connection with the conduct or continuation of the dispute. New section 375B is similar to the costs orders that are available against parties in relation to unfair dismissal matters (see section 400A).
57. This power to award costs is in relation to the dispute before the FWC and does not include costs associated with a general protections court application.
58. The power to award costs under new section 375B is not intended to prevent a party from robustly pursuing or defending a general protections dispute before the FWC. Rather, the power is intended to address the small proportion of litigants who pursue or defend disputes in an unreasonable manner. The power is only intended to apply where there is clear evidence of unreasonable conduct by the first party.
59. The FWC’s power to award costs under subsection 375B(1) is discretionary and is only exercisable where the first party (whether the applicant or respondent) causes the other party to incur costs because of an unreasonable act or omission.
60. However, the power to award costs is only available if the FWC is satisfied that the act or omission by the first party was unreasonable. What is an unreasonable act or omission will depend on the particular circumstances but it is intended that the power only be exercised where there is clear evidence of unreasonable conduct by the first party.
61. New subsection 375B(2) provides that the power to award costs against one party in these circumstances is only exercisable if the other party to the dispute makes an application in accordance with section 377. New subsection 375B(3) makes it clear that the new power to award costs under subsection 375B(1) operates in addition to subsection 611(2), which enables the FWC to make costs orders against a person in certain circumstances, such as where an application is made vexatiously or without reasonable cause.’
[13] It is apparent from the Supplementary Explanatory Memorandum that the legislature intended that the power to order costs provided by s.375B only be exercised where there is clear evidence of unreasonable conduct. Such an approach is entirely consistent with the jurisprudence relating to the other costs provisions in the FW Act (such as s.611).”
The costs applicant asserts two unreasonable acts on Mr Leathem’s part: the bringing of the action in the first place; and a failure to discontinue when a settlement offer was made.
I am not satisfied that bringing the application was an unreasonable act in the relevant statutory sense.
It appears not to be in contention that Mr Leathem was a casual employee of the franchisee. What is in contention is whether he was dismissed within the meaning of the FW Act, and whether a workplace right was breached if so dismissed.
The jurisdictional issue appears to concern whether, as a casual employee with brief service, Mr Leathem was capable of being dismissed within the meaning of the FW Act. Mr Leathem’s application indicated that he was employed as a service operator for a short period (approximately one month). The employer’s response indicated that he worked some nine shifts in this period.
A brief period of service as a casual does not necessarily preclude an application being brought under s 365.
Mr Leathem’s application on its face asserted adverse action in breach of a workplace right. The right relied upon was community service leave in the form of jury duty under s 108 of the FW Act (National Employment Standards).
It does not appear to have been in dispute that Mr Leathem was required for jury duty whilst employed and that he was being rostered shifts at the time he was called to jury duty.
It was Mr Leathem’s contention that he was denied work due to having been on jury duty. The employer’s response clearly put that proposition into question. The employer’s response raised both a legal issue (whether as a casual employee, Mr Leathem had been dismissed) and a factual dispute (whether what was said and done amounted to dismissal). On the merits, the employer also put into issue that its conduct was for other reasons (failure by Mr Leathem to produce a ‘white card’).
Whether a dismissal had occurred is a question of fact. Whether a casual employee is or is capable of being dismissed, and for what purposes, is a widely litigated area of law, and not one with a necessarily straightforward answer.
Whilst the jurisdictional challenge raised by the employer was reasonably foreseeable and not without prospects, Mr Leathem had an ostensible basis to put the employer to proof on that issue given the circumstances that he believed had arisen. His application raised a statutory cause of action supported by his version of the factual narrative. It cannot be said that his application “should not have been made”[8] even though the employer was understandably taken aback at the proposition that Mr Leathem had been dismissed and for an unlawful reason.
There is no evidence that the application was made for vexatious or ulterior purposes.
I do not find that making the application was an unreasonable act by Mr Leathem despite the challenge he faced to establish that he was “dismissed” at law in the relevant sense.
The second unreasonable act asserted by the costs applicant is that Mr Leathem failed to discontinue when a settlement offer was made but before the employer incurred costs in filing its materials.
I do not accept this submission.
On 6 July 2022 a settlement offer was made. It would appear from the costs application and the costs respondents’ submission that it was an offer to “discontinue the proceedings with no order as to costs”.[9] I proceed on that basis.
I do not consider that Mr Leathem acted unreasonably in not discontinuing on that day and in allowing the directions hearing scheduled for the following day to proceed. After all, the directions hearing was a consequence of the employer having raised a jurisdictional issue and then electing to have that issue dealt with by a Member without being preceded by informal conciliation.
Nor do I consider that Mr Leathem acted unreasonably in waiting until the employer filed materials before re-assessing his prospects. Whilst the employer’s F8A response clearly put Mr Leathem on notice that a jurisdictional issue was being raised and provided particulars, it was not unreasonable for Mr Leathem to await receipt of the employer’s materials before making a call on whether to proceed. The employer’s materials advanced a different version of Mr Skrinnikoff’s conversation with Mr Leathem on 12 May 2022 to what Mr Leathem had asserted. Until then, Mr Leathem was not on notice of the employer’s evidence about the content of that conversation.
In this regard, it is relevant to note that it was the Commission which, after the 7 July 2022 directions hearing, directed the employer to provide materials by 15 July 2022 and to do so before Mr Leathem. The employer was put to the cost of preparing its materials by direction of the Commission, not by act of Mr Leathem.
Further, it was the employer that had elected, as was its right, to have the jurisdictional matter listed for hearing in preference to conciliation. That election was consistent with the Federal Court decision in Coles v Milford but necessarily had the effect that directions for a hearing would likely be issued by the Commission. In circumstances where the jurisdictional issue was advanced at the initiative of the employer, it was reasonably foreseeable that directions would put the employer to cost and expense.
Thirdly, it was not unreasonable that Mr Leathem took a week following receipt of the employer’s materials to take advice on his prospects and determine whether he wished to proceed. Mr Leathem’s discontinuance was filed on the final day that the Commission had directed that he file responding materials. Mr Leathem did not act inconsistently with any Commission directions.
For these reasons I do not find that Mr Leathem engaged in an unreasonable act or omission with respect to the conduct or continuation of the matter.
That being so, the jurisdictional preconditions to exercising a discretion to order costs under s 375B do not exist.
No costs can be ordered against Mr Leathem under s 375B.
Costs sought under s 376
Did Mr Leathem’s legal representatives act unreasonably in commencing or continuing the action on his behalf?
I have found that whilst Mr Leathem was likely to encounter some difficulty in establishing that he had been dismissed given his brief tenure as a casual employee, I am not satisfied that there were no reasonable prospects of success such that he ought to have not been advised to litigate his apparently genuinely held view that he had been denied work for an unlawful reason. His version of the 12 May 2022 conversation and related conduct, at least as advanced to his legal representatives and incorporated in the application they filed, was capable of grounding a claim.
In this regard I have observed that a casual employee is not necessarily excluded from being eligible to make a claim under s 365 simply on account of short tenure.
Nor do I consider it unreasonable for Mr Leathem’s solicitors to not have advised him to discontinue his application in advance of seeing the employer’s materials, if this is what occurred.
The employer’s response, whilst stating in general terms the ground on which it asserted the application lacked jurisdiction, was not a basis on which Mr Leathem could have been conclusively advised as to his prospects.
In circumstances where the Commission had directed the employer to file materials on jurisdiction in advance of Mr Leathem, it was not unreasonable that Mr Leathem’s legal advisers would await receipt and consideration of that material before further advising their client.
For these reasons I do not find that it ought to have been reasonably apparent to Mr Leathem’s solicitors that he had no reasonable prospect of success or that they engaged in an unreasonable act or omission with respect to the conduct or continuation of the matter.
That being so, the jurisdictional preconditions to exercising a discretion to order costs under s 376 are not made out.
Conclusion
I have concluded that jurisdictional prerequisites for the making of costs orders under ss 375B and 376 are not established.
The Commission is unable to exercise its discretion on whether it is appropriate to order costs against Mr Leathem or his legal representatives.
For these reasons, the application for costs by Jaymak Central West must be dismissed. An order[10] giving effect to this decision is issued in conjunction with its publication.
DEPUTY PRESIDENT
Hearing Details:
Matter decided on the papers.
[1] Ss 550(2), 558B FW Act
[2] [2020] FCAFC 152
[3] Jaymak Australia was not directed to file materials on the jurisdictional issue but if it elected to do so it was required to file by 15 July 2022
[4] Roy Morgan Research v Baker[2014] FWCFB 1175
[5] Stagno v Frews Wholesale Meats (1998) 84 IR 270
[6] Brazilian Butterfly Pty Ltd v Charalambous PR968915 on 25 August 2006 at [40]
[7] [2015] FWCFB 1956.
[8] Church v Eastern Health Great Health and Wellbeing[2014] FWCFB 810 at [16]
[9] Costs application F6 at item 3.2 paragraph 3; Written Submission of Costs Respondents 12 August 2022 paragraph 32
[10] PR745967
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