McAlister v Yara Australia Pty Ltd
[2022] FedCFamC2G 174
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
McAlister v Yara Australia Pty Ltd [2022] FedCFamC2G 174
File number(s): SYG 463 of 2016 Judgment of: JUDGE OBRADOVIC Date of judgment: 16 March 2022 Catchwords: INDUSTRIAL LAW – Costs – application for costs pursuant to s.570(2)(b) of the Fair Work Act 2009 (Cth) – – whether costs incurred because of an unreasonable act or omission – whether unreasonable failure to accept offer of compromise – no costs order made. Legislation: Fair Work Act 2009 (Cth), ss.117, 570
Federal Court of Australia Act 1976 (Cth), ss.37M, 37N
Federal Circuit Court Act 1999 (Cth)Cases cited: Adamczak & Alsco Pty Ltd (No.4) [2019] FCCA 7
Bywater v Appco Group Australia Pty Ltd [2019] FCA 799
Celand v Skycity Adelaide Pty Ltd [2017] FCAFC 222
Construction, Forestry, Mining and Energy Union v Clarke [2008] FCAFC 143
Hutchinson v Comcare (No.2) [2017] FCA 370
McAlister v Yara Australia Pty Ltd [2021] FCCA 1409
Patrick Stevedores Holdings Pty Limited v Construction, Forestry, Maritime, Mining and Energy Union (No.5) [2021] FCA 1645
Ryan v Primesafe [2015] FCA 8
Shea v Energy Australia Services Pty Ltd (No 2) [2015] FCAFC 14
Trustee for the MTGI Trust v Johnston (No 2) [2016] FCAFC 190Division: Division 2 General Federal Law Number of paragraphs: 50 Date of hearing: 28 February 2022 Place: Parramatta Counsel for the Applicant: Mr Cassimatis Solicitors for the Applicant: Petrine Costigan Lawyers Counsel for the Respondent: Ms Andelman Solicitors for the Respondent: HFW Australia ORDERS
SYG 463 of 2016 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: JANELLE MCALISTER
Applicant
AND: YARA AUSTRALIA PTY LTD
Respondent
ORDER MADE BY:
JUDGE OBRADOVIC
DATE OF ORDER:
16 MARCH 2022
THE COURT ORDERS THAT:
1.The Application for Costs filed on 27 August 2021 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 OBRADOVIC:
These are reasons for judgment with respect to a costs application made pursuant to s.570(2)(b) of the Fair Work Act 2009 (Cth) (“the FWA”).
On 25 June 2021, the Court made orders and delivered its reasons for judgment in McAlister v Yara Australia Pty Ltd [2021] FCCA 1409.
The applicant had been employed by the respondent for almost 19 years before her dismissal, on 16 October 2015. The applicant had commenced proceedings on 2 March 2016, alleging breach of contract and contraventions of the FWA. The final hearing commenced on 12 August 2017 and took seven days that spanned over a year and a half.
The Court held that the respondent had not been entitled to terminate the applicant’s employment summarily, and that her employment had been wrongfully terminated. The Court also held the applicant’s claim for redundancy and adverse action were not made out. The applicant was ultimately successful in her breach of contract claim, but unsuccessful in respect of the alleged contraventions of the FWA. She was awarded damages in the amount of $173,842.20 including interest.
The respondent now seeks an order that the applicant pay its costs of the proceedings from 9 August 2019 on an indemnity basis, or in the alternative on a party-party basis as agreed or assessed.
The respondent submits that the applicant’s refusal to accept the respondent’s offer of settlement made on 9 August 2019 was an unreasonable act or omission that caused the respondent to incur costs, and/or in the alternative, that the applicant’s maintenance of aspects of her claim that were ultimately unsuccessful and the conduct of her case were unreasonable acts or omissions that caused the respondent to incur costs.
Relevant Legal Principles Relating to Costs in Fair Work Proceedings
Section 570 of the FWA provides as follows:
Costs only if proceedings instituted vexatiously etc.
(1) A party to proceedings (including an appeal) in a court (including a court of a State or Territory) in relation to a matter arising 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.
Note: The Commonwealth might be ordered to pay costs under section 569. A State or Territory might be ordered to pay costs under section 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;
c) the court is satisfied of both of the following:
i)the party unreasonably refused to participate in a matter before the FWC;
ii)the matter arose from the same facts as the proceedings.
The respondent applies for costs pursuant to s.570(2)(b) of the FWA.
The authorities speak of the intersection between s.570 of the FWA and the overarching purpose of the civil practice and procedure provisions. This Court, at the time of the hearing and when judgement was delivered, under its previous name and subject to the Federal Circuit Court Act 1999 (Cth) (“the FCC Act”) did not have such provisions enshrined in the legislation, but rather in the then Court rules. The object of the Court rules was to assist the just, efficient and economic resolution of the proceedings. The object of the FCC Act was inter alia, to enable the Court to operate as informally as possible.
However, s.570 of the FWA is not a licence to parties to ignore their obligations to avoid undue delay, expense and technicality (see Ryan v Primesafe [2015] FCA 8 in the context of the Federal Court of Australia Act 1976 (Cth) (“the FCA Act”) and the obligations imposed by ss.37M and 37N of that act).
It has been said that a lack of compliance with the overarching purpose provisions set out in ss.37M and 37N of the FCA Act inform the assessment of whether one of the pre-conditions for the exercise of the costs discretion mandated by s.570 of the FWA exists (Bywater v Appco Group Australia Pty Ltd [2019] FCA 799 at [10] per Lee J). Notwithstanding that no such legislative purpose existed at the time of hearing and delivery of judgment in the substantive proceedings, there is no reason in principle as to why this Court would not consider itself (in light of the objects of the then relevant Act and Rules of Court) to be bound by an obligation to avoid undue delay, expense and technicality. After all, this Court was created for the express purpose of operating as informally as possible in the exercise of judicial power, using streamlined procedures and encouraging the use of appropriate dispute resolution processes.
Even so, the discretion to award costs pursuant to s.570 of the FWA should be exercised with some caution so as to avoid parties being discouraged, for fear of an adverse costs order, from pursuing litigation under the FWA in the manner which they deem best (Construction, Forestry, Mining and Energy Union v Clarke [2008] FCAFC 143 (“Clarke”) and with reasonable cause (Hutchinson v Comcare (No.2) [2017] FCA 370 (“Hutchinson”).
The basis of the respondent’s application is that the Court should be satisfied that the applicant’s rejection of their offer to settle the proceedings was an “unreasonable act”, and further that the applicant’s prosecution of her redundancy and adverse action claims were unreasonable “acts or omissions” all said to be within the meaning of s.570(2)(b) of the FWA.
In Patrick Stevedores Holdings Pty Limited v Construction, Forestry, Maritime, Mining and Energy Union (No.5) [2021] FCA 1645, Tree J dealt with an application for costs arising from proceedings under the FWA, and summarised the principles in respect of rejection of offers to settle relevant to the provisions of s.570(2)(b) as follows (at [6]):
…
(3) The Court has adopted the following principles in connexion with this provision:
(a) a failure to accept a reasonable offer of compromise is capable of constituting an unreasonable act or omission for the purposes of s 570(2) and its predecessors: see Melbourne Stadiums Ltd v Sautner [2015] FCAFC 20; (2015) 317 ALR 665 (at 697 [166] per Tracey, Gilmour, Jagot and Beach JJ);
(b) “unreasonable” does not equate to “exceptional”: Australian Workers Union v Leighton Contractors Pty Limited (No 2) [2013] FCAFC 23; (2013) 232 FCR 428 (at 430 [7] per Dowsett, McKerracher and Katzmann JJ); and
(c) whether an act is “unreasonable” is informed by its context and requires an evaluative assessment of all the circumstances: Celand v Skycity Adelaide Pty Ltd [2017] FCAFC 222; (2017) 256 FCR 306 (at 342 [164] per Bromberg J, and at 344 [171] per Charlesworth J).
(4) In considering whether it is unreasonable for a settlement offer to be rejected, the following matters are should ordinarily be considered:
(a) the stage of the proceeding when the offer was made;
(b) the time afforded to the offeree to consider the offer;
(c) the extent of compromise involved;
(d) the offeree’s prospects of success, assessed as at the date of the offer;
(e) the clarity with which the terms of the offer were expressed; and
(f) whether the offer foreshadowed an application for indemnity costs in the event of refusal,
Veda Advantage Ltd v Malouf Group Enterprises Pty Ltd (No 2) [2016] FCA 470; (2016) 118 IPR 156 (at [31] per Katzmann J).
…
In the context of the use of the word “unreasonable” in s.570(2)(b), taking into account the underlying purpose of that provision which includes the promotion of access to justice (Trustee for the MTGI Trust v Johnston (No 2) [2016] FCAFC 190 at [8] per Siopis, Collier and Katzmann JJ), a higher standard of unreasonableness is to be adopted. The fact that a party has conducted litigation inefficiently or adopted a misguided approach will be relevant to, but not conclusive of, the party having acted unreasonably in a sense relevant to s.570(2)(b) (Hutchinson at [8] per Bromberg J, citing Clarke at [29] per Tamberlin, Gyles and Gilmour JJ).
Once the power to award costs is enlivened under s.570(2) of the FWA, the Court can make an order for costs to be paid on an indemnity basis with the general law principles as to the award of such costs applied (Shea v Energy Australia Services Pty Ltd (No 2) [2015] FCAFC 14 at [10]).
DETERMINATION
The claims made by the Applicant
The substantive proceedings before the Court involved complex questions of fact and law. Ms McAlister’s claim comprised of alleged contraventions of the FWA, namely that Yara had taken adverse action against Ms McAlister on the basis of disability, age and the making of complaints and enquiries; and that Yara had contravened the redundancy provisions of the FWA.
There were significant factual disputes between the parties, including whether Yara’s conclusion that Ms McAlister had engaged in serious misconduct was made out on the facts, the reasons for the dismissal and the question of whether Ms McAlister’s job had been made redundant at the relevant time.
The reason for the dismissal itself was a hotly contested issue, and Yara had at all times maintained that Ms McAlister had engaged in conduct warranting the summary dismissal from her employment after 19 years. Yara maintained to the conclusion of the hearing that the applicant was lawfully terminated for serious misconduct.
It was not until after the respondent’s evidence had concluded that all of the facts were revealed.
The parties’ oral submissions were detailed, supplemented by lengthy outlines of submissions.
The Court’s deliberation took careful note of the evidence, and the reasons for judgment largely focus on factual findings, many of which were against the respondent.
Ms McAlister’s actions in continuing with the adverse action claim and redundancy claim, have to be understood and considered in the context of all of her claims. Ms McAlister was unsuccessful in her claims for contraventions of the FWA, but successful in her breach of contract claim.
The adverse action claim
In respect of the claim for adverse action, the Court was required to examine the reasoning process employed by each person whose involvement had a material effect on the ultimate decision to terminate Ms McAlister’s contract. If one or more of the reasons employed by one or more of them had been for a prohibited reason, that would have impugned the ultimate decision.
While the Court held at [254] that the applicant’s claim for adverse action was inconsistent with Ms McAlister’s own evidence of Ms Magnussen taking an instant dislike to her, such dislike was however, not conceded by Yara. The Court found:
[that the decision to terminate] … was a decision [Ms Magnussen] … made based on an erroneous understanding of Ms McAlister’s role and responsibilities, and with a view tainted by her mistrust of Ms McAlister. Ms Magnussen formed the view that Ms McAlister had engaged in serious misconduct and for that reason terminated her employment.
In finding that ultimately the decision to terminate Ms McAlister’s employment was Ms Magnussen’s alone, informed by her discussions with relevant personnel at Yara, the Court found that none of those discussions featured Ms McAlister’s age, back problems or complaints. Such evidence only became clear after careful cross-examination of Yara’s witnesses.
Claim for Redundancy
In the substantive proceedings, the Court held:
235. Ms McAlister’s claim for redundancy is based on a premise that her employment ended on 16 October 2015.
…
243. Prior to April 2015, Ms McAlister’s role of Administration, Logistics and HR Manager and had wide and varied responsibilities as described earlier in these reasons. Yara did not terminate Ms McAlister’s employment in April 2015. It offered her a new role which she accepted, by electing to continue her employment with Yara. The “job” which Ms McAlister performed until 13 April 2015, ceased to exist after that date. It was as at 13 April 2015, Ms McAlister’s job as Administration, Logistics and HR Manager was effectively made redundant. However, her employment was not then terminated.
…
245. At the time of the termination of her employment on 16 October 2015, there was no redundancy of Ms McAlister’s job. Her employment was terminated for reasons other than redundancy. Yara made no decision to terminate Ms McAlister’s employment in April 2015 or at any time afterwards on the basis of redundancy.
In coming to these conclusions, the Court had already determined what the reasons for termination of Ms McAlister’s employment in October 2015 were. It also found that her job as at 13 April 2015, was effectively made redundant, but that her employment continued.
As noted, the facts were complicated and the actions of the respondent required some unpacking. The reasons put forward by Yara for the termination of Ms McAlister’s employment were ultimately rejected by the Court, as was Ms McAlister’s claim for redundancy.
Breach of contract claim
The Court held that Ms McAlister had acted with authority and that there were only minor infractions on her behalf. The Court held that Ms McAlister was a loyal employee who was wrongfully terminated, and that the disciplinary interview was simply a motion which Yara went through as a matter of formality because the decision to terminate Ms McAlister’s employment had already been made for reasons which were held to be wrongful.
Not only was the alleged serious misconduct a hotly contested issue, but so was the legal argument as to whether Ms McAlister’s contract of employment included an implied term of reasonable notice in light of s.117 of the FWA.
Once again, at all times Yara had maintained that Ms McAlister’s contract was not the subject of an implied term of reasonable notice, but that the notice period she was entitled to was as set out in the National Employment Standards (“NES”).
On both of these issues Ms McAlister was successful.
The offer to settle
On Friday, 9 August 2019 at 3.55pm, counsel for the respondent sent an email to counsel for the applicant, relaying an offer of settlement. The email read:
I have instructions to make an offer of $200,000 (settlement amount) payable within 28 days on the usual Deed undertakings but we want a written agreement by 4pm on Saturday 10 August 2019 so that we do not keep incurring costs. If you want to discuss call me on …
We are open to discuss the manner in which the settlement amount is characterised.
We will rely on this notice of the purpose of a claim for legal costs.
To put the offer into context, the final hearing was to start the following Monday, 12 August 2019 at 10.15am. The matter was set down for 4 days at that stage. Lengthy affidavit had been filed and served by each of the parties, and lengthy and detailed opening submissions had been prepared. Documents were still to be produced by Yara.
On Saturday, 10 August 2019 at 2.46pm, counsel for the applicant sent an email to counsel for the respondent, rejecting the respondent’s offer and making a counter offer. That email read:
I am instructed that my client offers to settle these proceedings upon payment of $350,000 being made to her within 14 days of today’s date, with Ms McAlister characterising the components that make up that payment.
I’m in chambers so … is the best number if you would like to discuss.
Ms McAlister’s claim was for a much larger amount than her offer of settlement.
The offer Ms McAlister received from Yara on the Friday afternoon was for more than she ultimately received by way of judgment. She would have been better off had she accepted the offer.
The first day of hearing
On the first day of hearing, Ms McAlister sought to again amend her claim. The application to amend took up the better part of the first day, and it was ultimately dismissed. The application was made after the production of documents by Yara in the week leading up to hearing.
What also took up time on the first day of hearing, was an argument by the respondent claiming privilege over documents which had been the subject of a Notice to Produce returnable on the first day of hearing issued on 7 August 2019. Parts of the Notice to Produce were struck out after Yara successfully argued that some of the documents sought to be produced were really sought by nature of discovery.
The documents which privilege was claimed over were sought by the applicant as they were said to be relevant to the adverse action claim. Yara’s privilege argument was ultimately dismissed after some cross-examination, and the documents produced after the hearing had commenced.
Did Ms McAlister act unreasonably?
The respondent submits that the applicant was fully aware of the case she was required to meet at the time the offer was made on 9 August 2019. By this time, the applicant had been served with the evidence in chief of each of the respondent’s witnesses for at least 13 months. The respondent says that the offer for settlement was made in circumstances where the respondent communicated to the applicant, specifically by correspondence dated 9 November 2017, 6 December 2018 and 19 July 2019, about her prospects of success, the obstacles which arose from her claims for adverse action and redundancy and the respondent’s arguments regarding those claims.
The breach of contract claim was hotly contested, not only in terms of the disputed facts but also in terms of the applicable law. The reasons for the applicant’s termination were central to all of the actions Ms McAlister brought. Her claims were not without merit.
In all of the circumstances, the conduct of the applicant to continue pursuing her claim for breaches of the FWA in circumstances where the respondent terminated the applicant’s employment for reasons which did not become clear until after all of the evidence was given, and which the Court held were not the reasons put forward by the respondent, was not sufficiently unreasonable to justify the making of a costs order against her.
As held in Adamczak & Alsco Pty Ltd (No.4) [2019] FCCA 7 (“Adamczak”) at [131]:
The authorities make it plain that the Fair Work jurisdiction is primarily a no costs jurisdiction. In Clarke the Full Court indicated that the discretion, arising under section 570(2), was to be exercised carefully and not invoked merely because a party had not conducted its litigation efficiently or made an inevitable concession late. Bromberg J, in Saxena, indicated the discretion was a limited one to be exercised very carefully and, as such, was not one to be engaged in each and every case involving some transgression by a party.
The issue of whether the rejection of the offer was unreasonable and whether this action also occasioned costs to the respondent is an issue that is to be determined by reference to the situation of each of the parties concerned assessed prospectively, when the relevant offer was made (Celand v Skycity Adelaide Pty Ltd [2017] FCAFC 222 at [86] – [89]; Adamczak at [104]).
The offer was made on a late afternoon on the last business day before the hearing was due to commence. It was open for a very limited period of time. It was made in circumstances where there was a Notice to Produce that was issued which was returnable on the first day of hearing. The respondent still had documents to produce, which were ultimately produced and which were the subject of some cross-examination.
In all of the circumstances, the rejection of the offer does not amount to an unreasonable act or omission on the applicant’s part.
Ultimately, the Court has a broad discretion and in all of the circumstances, the Court is not persuaded that this is a case where costs should be ordered.
For all those reasons, the respondent’s application for costs is dismissed.
I certify that the preceding fifty (50) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Obradovic. Associate:
Dated: 16 March 2022
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