Merlo v Global Business College of Australia Pty Ltd (No 2)
[2024] FedCFamC2G 301
•9 April 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Merlo v Global Business College of Australia Pty Ltd (No 2) [2024] FedCFamC2G 301
File number(s): MLG 416 of 2021 Judgment of: JUDGE CAMERON Date of judgment: 9 April 2024 Catchwords: INDUSTRIAL LAW – Fair Work Act 2009 (Cth) – costs – relevant principles. Legislation: Fair Work Act 2009 (Cth) s 570
Federal Circuit and Family Court of Australia Act 2021 (Cth) s 191
Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) rr 1.04, 22.08, 22.09
Cases cited: Merlo v Global Business College Australia Pty Ltd [2022] FedCFamC2G 1011
Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd [2022] HCA 1
ZG Operations Australia Pty Ltd v Jamsek [2022] HCA 2
JMC Pty Limited v Commissioner of Taxation [2022] FCA 750
Trustee for The MTGI Trust v Johnston (No 2) [2016] FCAFC 190 at [8]. In Ryan v Primesafe (2015) 323 ALR 107
JMC Pty Ltd v Federal Commissioner of Taxation (2023) 297 FCR 600
Division: Fair Work Number of paragraphs: 30 Date of last submissions: 27 January 2023 Date of hearing: On the papers Place: Sydney Solicitor for the Applicant: Jewell Hancock Employment Lawyers Counsel for the Respondents: Mr O. Fagir of Counsel Solicitor for the Respondents: Ma & Company Solicitors ORDERS
MLG 416 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: LUCAS MERLO
Applicant
AND: GLOBAL BUSINESS COLLEGE OF AUSTRALIA PTY. LTD. (A.C.N 600 373 859)
First Respondent
CELINA PING YU
Second Respondent
MOHAMMED YASEEN
Third Respondent
ORDER MADE BY:
JUDGE CAMERON
DATE OF ORDER:
9 APRIL 2024
THE COURT ORDERS THAT:
1.The respondents’ application for costs will be 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 CAMERON
INTRODUCTION
This proceeding was commenced by the applicant, Dr Merlo, on 11 March 2021 alleging that he had been denied various entitlements due to him in respect of his work for the first respondent, Global Business College of Australia Pty Ltd (GBCA), and that he had been the subject of unlawful adverse action contrary to the Fair Work Act 2009 (Cth) (FW Act) and of misrepresentations. The second and third respondents were alleged to have been accessories to that conduct.
On 1 December 2022 the application was dismissed: Merlo v Global Business College Australia Pty Ltd [2022] FedCFamC2G 1011 (First Judgment).
On 20 December 2022 the respondents filed an application in a proceeding seeking costs, specifically, the following order:
1.An order that the applicant pay the respondent’s costs as agreed or assessed on the indemnity basis from 2 June 2021 onwards.
The parties agreed that the respondents’ application for costs would be determined on the papers.
For the following reasons the application will be dismissed.
LEGISLATION AND RULES
Fair Work Act
The availability of costs in this FW Act proceeding is governed by s.570 of that Act which relevantly provides:
570 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.
(2)The party may be ordered to pay the costs only if:
...
(b)the court is satisfied that the party’s unreasonable act or omission caused the other party to incur the costs; or
...
Proceedings in this Court
Section 191 of the Federal Circuit and Family Court of Australia Act 2021 (Cth) (Court’s Statute) provides relevantly:
191 Parties to act consistently with the overarching purpose
(1)The parties to a civil proceeding before the Federal Circuit and Family Court of Australia (Division 2) must conduct the proceeding (including negotiations for settlement of the dispute to which the proceeding relates) in a way that is consistent with the overarching purpose.
…
(4)In exercising the discretion to award costs in a civil proceeding, the Federal Circuit and Family Court of Australia (Division 2) or a Judge must take account of any failure to comply with the duty imposed by subsection (1) or (2).
…
Rule 1.04 of the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) (Rules) provides relevantly:
1.04 Overarching purpose
(1) The overarching purpose of these Rules, as provided in section 190 of the Act, is to facilitate the just resolution of disputes according to law and as quickly, inexpensively and efficiently as possible.
(2) To assist the Court, the parties must:
(a) avoid undue delay, expense and technicality; and
…
Rules 22.08 and 22.09 of the Rules provide between them that the Court has power to order that costs be taxed on the indemnity basis.
BACKGROUND FACTS
The affidavit of Ronald Ma filed in support of the application for costs discloses that the respondents made the following offers of settlement over the course of the proceeding:
(a)on 12 February 2021 it offered to pay $25,000;
(b)on 3 June 2021 it offered to pay $37,500;
(c)on 5 August 2022 it offered to pay $40,000;
(d)on 7 September 2022 it offered to pay $50,000; and
(e)on 9 September 2022 it offered to pay $55,000.
The respondents submitted that each of these offers was made in accordance with the Calderbank principle.
Dr Merlo made the following offers of settlement over the course of the proceeding:
(a)on 9 February 2021 he offered to accept $115,000;
(b)on 3 June 2021 he offered to accept $125,000;
(c)on 15 July 2021 he offered to accept $125,000;
(d)on 2 September 2022 he offered to accept $100,000;
(e)on 7 September 2022 he offered to accept $95,000; and
(f)on 12 September 2022 he offered to accept $65,000; and
(g)on 13 September 2022 he offered to accept $55,000.
The trial was held over 14 and 15 September 2022.
SUBMISSIONS
Respondents
The respondents submitted that s.570(2)(b) of the FW Act was satisfied because Dr Merlo’s rejection of several “substantial offers of settlement” constituted a relevantly unreasonable act.
The respondents submitted that at each point they made a settlement offer to Dr Merlo the objective facts were that:
(a) there was obvious doubt about Dr Merlo’s employment status;
(b) there was doubt about Dr Merlo’s permanent employment status;
(c) there was no evidence which could make good Dr Merlo’s claims for public holiday or annual leave payments;
(d) Dr Merlo’s claim for superannuation was misconceived and his adverse action claim suffered from fundamental flaws; and
(e) the value of the claim was modest: at hearing the value of the claim was particularised as $54,755 together with any award for general damages and penalties (“stand down” $31,680, annual leave $17,555 and public holidays $5,520).
The respondents submitted that the two key factors were, first, that Dr Merlo’s offers of settlement were unreasonable. They argued that the offers were unreasonable because a number of them significantly exceeded the value of his claim or were equal to his best case, including offers made in the period leading up to the hearing after both parties had submitted their evidence and written submissions, when those matters should have been obvious. The respondents submitted that their “various substantial offers” had not been reasonably responded to by Dr Merlo as his only compromise was made one business day before the hearing when the bulk of costs had already been incurred.
The respondents submitted, secondly, that Dr Merlo had “willingly embraced the benefits of contractor status” and had never previously suggested that he had been misclassified or mistreated. The respondents submitted that the claim had been an attempt to secure both the higher hourly rate and tax benefits of contractor status and obtain employee entitlements.
The respondents submitted that as Dr Merlo had rejected a Calderbank offer unreasonably, an indemnity costs order was justified and that such costs should be awarded from the date of the offer of settlement made on 12 February 2021 or, alternatively, on 3 June 2021 or on 7 September 2022.
Applicant
Dr Merlo submitted that to obtain an order for costs, it was insufficient that the respondents prove an unreasonable act or omission meeting the s.570 test; he argued that they also had to convince the Court that the circumstances warranted an exercise of its discretion to make such an order.
Dr Merlo submitted that it was not unreasonable for him to refuse the respondents’ offers of settlement as, while such action might constitute an unreasonable act in some circumstances, the respondents had not proven that it had been so in his case. He also contended that his own offers of settlement throughout the proceeding had not been objectively unreasonable and in any event had not caused the respondents to incur any additional costs.
Dr Merlo submitted that the criteria for the engagement of the test in s.570(2)(b) of the FW Act would not be satisfied by mere doubt or uncertainty about the claim at the time of the offer. He argued that his rejection of the offer of $37,000 made on 3 June 2021 was not unreasonable because his application involved eight claims which each had varying prospects of success and the total expected value of his claims, as set out in the statement of claim, was $139,221.60 (excluding damages and penalties). Dr Merlo submitted that the offer was made when the indicia of employment weighed “heavily” in favour of him having been an employee, namely prior to the High Court decisions of Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd [2022] HCA 1 and ZG Operations Australia Pty Ltd v Jamsek [2022] HCA 2 on 9 February 2022 which:
… saw a drastic move away from the orthodox ‘multi-factorial test’ in assessing whether a person was an employee or independent contractor.
Dr Merlo submitted that his rejections of the respondents’ offers made on 5 August 2022, 7 September 2022 and 9 September 2022 were not unreasonable either because they had been made following JMC Pty Limited v Commissioner of Taxation [2022] FCA 750, delivered on 29 June 2022, which found for the applicant and gave him confidence that his case was not “totally hopeless”.
Dr Merlo submitted that if the Court were to find that the criteria for the making of a cost order under s.570(2)(b) of the FW Act had been satisfied, it should still not exercise its discretion to award costs because he had made an offer on 13 September 2022 to accept $55,000 three business days after the respondents made an offer to pay the same amount. He argued that if the respondents submitted that he had acted unreasonably in refusing their offer on 9 September 2022, the respondents must also be found to have acted unreasonably in refusing his putting of the same offer on 13 September 2022.
CONSIDERATION
Relevant principles
Section 191 of the Court’s Statute requires parties to proceedings in the Court to conduct their litigation consistently with the overarching purpose of the Court’s civil practice and procedure provisions, namely the facilitation of the just resolution of disputes according to law as quickly, inexpensively and efficiently as possible. When awarding costs in a proceeding the Court is to take into account any failure by a party to comply with those duties: s.191(4). Those considerations are part of the statutory background against which the present application is to be determined.
The next matter to consider is whether the applicants’ rejections of the respondents’ offers were unreasonable, thus engaging a right to costs under s.570. The discretion to order costs under s.570 of the FW Act must be exercised with caution because of the exceptional nature of the power in an otherwise no-costs jurisdiction and the case for its exercise should be clearly demonstrated: Trustee for The MTGI Trust v Johnston (No 2) [2016] FCAFC 190 at [8]. In Ryan v Primesafe (2015) 323 ALR 107 Mortimer J discussed considerations which may be taken into account when, relevantly, an applicant is unsuccessful in a FW Act proceeding after having rejected a Calderbank offer and the Court is called on to determine:
(a)whether costs should be ordered under the FW Act and, if so,
(b)whether any such costs should be assessed on a basis other than the party and party basis.
Drawing on her Honour’s reasoning concerning the engagement of s.570 and incorporating adjustments to reflect this Court’s Statute and Rules, considerations relevant to the present matter may be summarised as:
(a)parties before the Court have an obligation to facilitate the just resolution of disputes by avoiding undue delay, expense and technicality;
(b)the legislative policy behind a provision such as s.570(1) is not inconsistent with requirements that proceedings be conducted reasonably, fairly and efficiently. As an access to justice provision, s.570 contemplates that parties and their legal representatives will access the Court responsibly;
(c)when exercising its costs discretion, the Court must take into account failure by the relevant party to comply with the duty to avoid undue delay, expense and technicality;
(d)the limitations and conditions which are respectively imposed on the Court’s general costs discretion by s.570(1) of the FW Act are not a licence to parties to ignore the requirements of r.1.04 or the Court’s power under rr.21.09 and 21.10 to order costs against parties who fail to comply with such obligations;
(e)the content of r.1.04 and parties’ obligations under it must be reconciled with access to justice provisions such as s.570(1). Justice Mortimer described the process of reconciliation in the following terms:
That reconciliation occurs through a focus on the reasonableness of parties’ conduct, the appropriateness of the Court processes undertaken by them, the timeliness of their compliance with Court orders or steps in the proceeding, and the existence of a substantive legal and factual basis for the claims made and arguments put. (at 123 [66])
(f)although s.570(1) of the FW Act constrains the Court’s power to order costs against a party and s.570(2) directs attention to the conduct of a party, neither purports to affect the Court’s power under rr.22.08 and 22.09 which is engaged once the Court has formed the view that there should be an order under s.570 that a party pay the costs of another; and
(g)rr.22.08 and 22.09 enable the Court in an appropriate case to order that one party pay another’s costs on an indemnity basis.
Unreasonable act or omission
At the outset it should be noted that the sums which were offered to Dr Merlo were not tokenistic. That fact is significant given his total failure in the proceeding.
Secondly, once the High Court’s reasons for judgment in the Personnel Contracting and Jamsek cases were published, it should have been apparent to Dr Merlo, having regard to the terms of his contract with GBCA, that his prospects of success were not as great as they might have seemed at the time of filing. Further, any reliance he might have placed on JMC v Commissioner of Taxation seems to have been based on little more than a superficial factual similarity between it and this case and the trial judge’s finding that the taxpayer’s purported contractor had been an employee.
Even so, the application of the newer approach to the test of employment is not necessarily a matter on which reasonable minds will always think alike, as is demonstrated by the fact that the decision in JMC v Commissioner of Taxation was the subject of a successful appeal on the finding that the person in question had been an employee: JMC Pty Ltd v Federal Commissioner of Taxation (2023) 297 FCR 600. In this matter, the facts did not point to an outcome that was necessarily certain. On the central question of the extent to which the parties’ contract gave GBCA control over Dr Merlo’s work for it, I said in the First Judgment:
73.Overall, the terms of the April 2016 Contract point in opposing directions. For instance, the contract did not require Dr Merlo to seek GBCA’s approval of his lesson plans, subject outlines, handouts or assignments. Clause 2(d) simply stated that that material was to be “submitted to the Training Manager at the conclusion of each subject” which would, presumably, give GBCA the information necessary for it to meet its compliance obligations under the 2015 Standards. The contract made no reference to Dr Merlo possibly delegating his duties to someone else and appears not to have contemplated the possibility that anyone other than Dr Merlo would be providing the relevant training services. However, it is also to be noted that the scheduling of classes was a matter for discussion and agreement and that the contract did not empower GBCA to impose a timetable on Dr Merlo. The contract also did not make express provision for Dr Merlo to provide his own equipment but, given the nature of the role and the work it involved, it might be anticipated that, in addition to whatever IT facilities might have been available at GBCA’s premises, he would use his own computer and research materials to design and present his courses and to, at least from time to time, do so at home. Apart from the implied pre-pandemic expectation found in cl.2(e) that lessons would be delivered at GBCA’s premises, the terms of the April 2016 Contract did not require Dr Merlo to do any work at GBCA’s premises and did not say when his tasks ancillary to the presentation of lessons ought to be undertaken.
That being so, it was not unreasonable of Dr Merlo to have believed in his case and to have rejected offers that provided him only a smallish portion of what he claimed by way of compensation. I infer that his awareness of the risks of litigation and the desirability of effecting a negotiated settlement is well enough shown by the history of the parties’ offers to each other and I think it particularly significant that he unsuccessfully re-put the respondents’ last offer to them which, for whatever reason, was not taken up.
I conclude thtat the criteria for an order for costs under the FW Act have not been made out. In those circumstances, the issue of indemnity costs does not arise.
CONCLUSION
The application for costs will be dismissed.
I certify that the preceding thirty (30) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Cameron. Associate:
Dated: 9 April 2024
0
7
3