Michael Morrison v Aximill Pty Ltd

[2019] FWC 4856

[2019] FWC 4856

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.394—Unfair dismissal

Michael Morrison
v
Aximill PTY LTD
(U2018/10963)

COMMISSIONER WILSON MELBOURNE, 12 JULY 2019

Application for costs.

[1] Through an application for unfair dismissal remedy to the Fair Work Commission lodged on 24 October 2018, Mr Michael Morrison alleged both that he had been dismissed from employment by Aximill Pty Ltd (Aximill) on 12 October 2018 and that such dismissal was unfair within the meaning of the Fair Work Act 2009 (the Act).

[2] In accordance with usual practice the Commission staff made contact with Aximill and its nominated representative, Mr Axel Andre, and invited a formal response from the company via the Form F3. The response was received by the Commission on 9 November 2018 with it indicating numerous jurisdictional objections to the continuation of Mr Morrison’s application, including that Mr Morrison had never been employed by the company and that it had not dismissed him. The matter was also set down in accordance with usual practice for a conciliation before a staff conciliator on 21 January 2019.

[3] The conciliation was not successful and the matter did not settle. As a consequence, on 30 January 2019, Mr Morrison’s application was listed for a jurisdictional hearing for the purposes of determining the threshold question of whether Mr Morrison was an employee of Aximill. The jurisdictional hearing was originally listed for 1 March 2019 and, at the same time as the Notice of Listing was issued the parties were advised that material relevant to determination of the jurisdictional objection was required to be filed, with Aximill being required to file its material by 11 February 2019 and Mr Morrison by 21 February 2019.

[4] In early February, Mr Peter Kerin, paid agent on behalf of Aximill, sought an adjournment of the jurisdictional hearing. After exchanges between the Commission staff and parties, it was determined on 19 February 2019 that the hearing date would be moved to 8 March 2019 and allocated to me for hearing with a consequential variation to the filing Directions. In this regard Aximill was given until 21 February 2019 to file the material upon which it relied and Mr Morrison until 4 March 2019. Aximill complied with the filing Directions and filed its material on 21 February 2019, with additional documents filed on 26 and 28 February 2019.

[5] On Monday, 4 March 2019 Mr Morrison communicated with the Commission indicating that he desired to withdraw his application. On 5 March 2019 after this communication was brought to my attention I advised the parties that I accepted the advice as a Discontinuance pursuant to Rule 10 the Fair Work Commission Rules 2013 and that the application was at an end and that the date for the hearing of the jurisdictional matter on 8 March 2019 was vacated.

[6] On Wednesday, 6 March 2019, correspondence from Mr Kerin advised that Aximill made an application to the Commission for indemnity costs in relation to Mr Morrison’s application. After traversing the reasons for doing so, Mr Kerin’s advice was that an order was sought against Mr Morrison “in favour of the respondent - but to be paid to its director, Mr Andre, who has personally incurred all costs in this regard”. 1 Following this advice the Commission invited Mr Kerin and Aximill to formally resubmit the application on a Form F6—Application for costs, which was done on 26 March 2019. The application discloses that the application is made under two parts of the Act, namely s.400A (Costs against parties in unfair dismissal matters) and s.611 (General provision in relation to costs). The application form also identifies that the Costs Applicant is Mr Axel Andre and makes clear that he seeks indemnity costs against Mr Morrison. I accept Aximill’s initial notification on 6 March 2019 of intention to pursue costs means its application is made within the time allowed for in s.402.

[7] This decision concerns Mr Andre’s Costs Application.

[8] A telephone hearing in relation to the Costs Application was held by me on 15 May 2019, at which Mr Andre appeared, represented by Mr Kerin. Mr Morrison also attended, represented by Counsel, Ms Paszkiewicz. Each party sought and was granted permission for representation in the hearing because I was satisfied of each of the criteria within s.596(2) of the Act. Mr Andre and his wife, Mrs Lee Andre, both gave evidence in the proceedings, as did Mr Morrison. 2

[9] In addition to the oral evidence of the witnesses I have had before me, I have taken into account all of the documents that have been filed in this matter to date, including those filed by each party before Mr Morrison’s application for unfair dismissal remedy was discontinued. Those documents include Mr Morrison’s originating application, on the Form F2, and the Aximill Employer Response, on the Form F3; the submissions filed by Aximill in preparation for the jurisdictional hearing; as well as written submissions and supporting material provided by each party specifically in respect of the Costs Application. I have had regard to all of this material in determining the Costs Application.

BACKGROUND TO THE COSTS APPLICATION

[10] After a nine-year business relationship Mr Morrison and Mr Andre incorporated a company, Aximill Pty Ltd, on 23 April 2010. In broad terms the company was to commercially exploit patents it developed and registered and was especially involved in engineering machinery, including milling equipment. The company received some income from the performance of contract milling and the obtaining of some Government Research and Development and Export Grants. Mr Morrison and Mr Andre were equal shareholders of Aximill, until late in 2018, and were co-directors.

[11] Evidence provided to the Commission in the form of a witness statement from Mr Andre in preparation for the jurisdictional hearing in March 2019 advises of a wildly deteriorating relationship between the two in the last few months prior to the severing of the relationship.

[12] Since the matters asserted within the written witness statement were tested in cross examination in the Cost Application hearing only to the most basic degree, and in any event are contested by Mr Morrison, I do not consider it proper to publicly detail the full extent of the allegations.

[13] In summary, the allegations within Mr Andre’s witness statement indicates that after a potential investor was introduced and made an offer to Aximill, Mr Morrison moved assets without the knowledge of Mr Andre. The assertion is made that Mr Morrison then took action both with the potential investor and the South Australian Government detrimental to Aximill’s interests. 3 The same statement refers to what appears to be an alleged fraud on the part of Mr Morrison. It also relates that on 11 October 2018, the day prior to that which Mr Morrison asserts is the date of his dismissal, Mr Morrison is alleged to have attended the Aximill premises with a “police officer friend”4 and exhibited hostile behaviour toward Mr Andre and the director of another company and made what are referred to by Mr Andre as improper demands about payments for machinery.5

[14] The same witness statement then indicates that Mr Andre changed the locks of the Aximill factory in the belief that if he did not do so he would not be able to access his work premises, since Mr Morrison lived there and that he soon expected an intervention order in favour of Mr Morrison and against himself. 6 An intervention order in favour of Mr Morrison was actually served on Mr Andre a few days later. The witness statement also accuses Mr Morrison of having cancelled a mobile phone contract which incurred costs for Aximill, as well as arranging for bank accounts to be frozen.7 Mr Andre also alleges Mr Morrison arranged for shares to be issued by Aximill in favour of Mr Morrison’s solicitor without the transaction having been approved at a meeting of directors.8

LEGISLATION

[15] Section 400A of the Act provides as follows:

“400A Costs orders against parties

(1) The FWC may make an order for costs against a party to a matter arising under this Part (the first party) for costs incurred by the other party to the matter if 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 matter.

(2) The FWC may make an order under subsection (1) only if the other party to the matter has applied for it in accordance with section 402.

(3) This section does not limit the FWC’s power to order costs under section 611.” 9

[16] Relevantly, section 400A was inserted into the Act by virtue of the Fair Work Amendment Act 2012. The Explanatory Memorandum to the Fair Work Bill 2012 provides;

“168. Item 4 inserts a new section 400A to enable the FWC to order costs against a party to an unfair dismissal matter (the first party) if it is satisfied that the first party caused the other party to the matter to incur costs by an unreasonable act or omission in connection with the conduct or continuation of the matter.

169. As with the new power to dismiss applications under section 399A, the power to award costs under section 400A is not intended to prevent a party from robustly pursuing or defending an unfair dismissal claim. Rather, the power is intended to address the small proportion of litigants who pursue or defend unfair dismissal claims in an unreasonable manner. The power is only intended to apply where there is clear evidence of unreasonable conduct by the first party.

170. The FWC’s power to award costs under this provision 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. This is intended to capture a broad range of conduct, including a failure to discontinue an unfair dismissal application made under section 394 and a failure to agree to terms of settlement that could have led to the application being discontinued.

171. 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.” 10

[17] Section 611 of the Act provides as follows:

“611 Costs

(1) A person must bear the person’s own costs in relation to a matter before the FWC.

(2) However, the FWC may order a person (the first person) to bear some or all of the costs of another person in relation to an application to the FWC if:

(a) the FWC is satisfied that the first person made the application, or the first person responded to the application, vexatiously or without reasonable cause; or

(b) the FWC is satisfied that it should have been reasonably apparent to the first person that the first person’s application, or the first person’s response to the application, had no reasonable prospect of success.

Note: The FWC can also order costs under sections 376, 400A, 401 and 780.

(3) A person to whom an order for costs applies must not contravene a term of the order.

Note: This subsection is a civil remedy provision (see Part 4 1).” 11

CONSIDERATION

[18] Other than is allowed for under s.400A and s.611 of the Act, the general rule is that each party must bear their own costs in proceedings before the Commission. 12 In cases where the statutory criteria may be enlivened, the Commission’s power to award costs under this provision of the Act is discretionary. There is also a requisite causal link between the act or omission and the costs incurred.

[19] Section 400A of the Act allows for costs orders to be made if the Commission is satisfied that costs were incurred because of an unreasonable act or omission of a party in connection to the conduct of the case. An unreasonable act or omission includes one which was either deliberate or reckless. 13 A failure to consider the possible settlement of a matter may be unreasonable, but is not necessarily so,14 as may be unreasonably failing to discontinue an unfair dismissal application.15 A “warning” provided to a party about the prospects of their case may be relevant to the assessment of whether the continuation of a matter was reasonable.16

[20] Section 611 of the Act allows for an order to be made for the payment of costs if the Commission is satisfied that a party’s application or response to an application was vexatious, without reasonable cause or if the Commission is satisfied that the application or a party’s response to an application had no reasonable prospect of success. 17

[21] It has been held in respect of s.611(2)(a) of the Act that the legislative intention under the section was for the power to order costs to be exercised where there is clear evidence of unreasonable conduct and that the power to order costs under the section should be exercised with caution and only in clear cases. 18 Further, a party cannot be said to have made an application “without reasonable cause” within the meaning of s.611(2)(a) simply because his or her argument proves unsuccessful. The Full Bench has indicated that the test imposed by the expression “without reasonable cause” is similar to that adopted for summary judgment, that is, “so obviously untenable that it cannot possibly succeed”, “manifestly groundless” or “discloses a case which the Court is satisfied cannot succeed”.19 An application will have been made vexatiously “where the predominant purpose ... is to harass or embarrass the other party, or to gain a collateral advantage”.20

[22] Mr Andre seeks an order that the costs order, if granted, be in his personal favour, rather than that of the Respondent to the original proceedings, Aximill. It has further been advised to the Commission – by Mr Morrison – that since the hearing on 15 May 2019, Aximill Pty Ltd is now in liquidation, with the liquidator having been appointed on 5 June 2019.  21

[23] At the time he made his unfair dismissal application, Mr Morrison’s submission is that he was a shareholder, director and employee of Aximill, 22 having persuaded Mr Andre, through Mrs Andre who was the company’s assistant, to characterise at least part of their working arrangement as involving a contract of employment from September 2015. If nothing else, the arrangement would enable Mr Morrison to be covered by workers’ compensation insurance. Mr Morrison submits that between September 2015 and 16 October 2018, Aximil paid him a weekly wage, paid him superannuation and deducted taxation from his wage.

[24] Mr Andre and Aximill objects to this characterisation and argues Mr Morrison never was an employee. Mr Andre submits Mr Morrison was one of two directors and a 50% shareholder in Aximil. Mr Andre submits the hours worked by Mr Morrison, the nature and characterisation of monies paid to Mr Morrison, and the benefits he derived from being a director of Aximil does not support that of an employee relationship. Namely, Mr Morrison did not work set or regular hours but rather as and when required; and, the characterisation of monies paid to Mr Morrison changed from initially being ‘drawings’ for the period 28 July 2010 – 12 June 2012, to ‘directors fees’ for the period 24 July 2012 – 9 February 2016, and lastly payment of a wage between 11 September 2015 16 October 2018.

[25] So far as the relevant facts of this matter may be discerned, at the time of the application having been made by Mr Morrison:

1. There was a business relationship between all concerned, Mr Morrison, Mr Andre and Aximill that had been in place since at least 2010;

2. From around September 2015, Mr Morrison asserts that he was an employee of Aximill, or at least was characterised as such, either for workers compensation and taxation purposes;

3. The business arrangement did not flourish and came under pressure and by late 2018 was barely functioning;

4. In October 2018, Mr Morrison sent an email to Mr and Mrs Andre, a potential investor/business partner and a public servant, accusing, at least, Mr and Mrs Andre of bad faith dealings against him. Within the correspondence he refers to there having been “secret attacks” on Aximill from Mr and Mrs Andre and warns them that they “will be responsible” for their actions;

5. Mr Morrison is alleged to have attended a workplace with a “police officer friend” on 11 October 2018 and made allegations against Mr Andre in the presence of another person;

6. On 12 October 2018 Mr Andre arranged for the locks to the company’s premises to be changed. That had the effect of preventing Mr Morrison from entering the premises in which he both lived and worked;

7. On 15 October 2018 Mr Morrison sought and obtained from the Ringwood Magistrates’ Court an Interim Intervention Order against Mr Andre. Amongst other things that order prevented stalking of Mr Morrison, attempts to locate or follow him, or to contact or communicate with him, or to be within 10m of him or 200m of a residence. Amongst other matters Mr Morrison laid the following information to the Court against Mr Andre in support of his application for an order;

•  On 26 September 2018 Mr Morrison reported Mr Andre to the police because he “BECAME AWARE THAT THE RESP WAS MAKING FIREARMS”;

•  Since the police report Mr Andre had allegedly sent three threatening emails with one of his associates sending further threatening emails (the threats apparently were threats of litigation); and

8. On 5 December 2018 Mr Andre obtained an Intervention Order against Mr Morrison from the Ringwood Magistrates’ Court, restraining the latter in several respects including coming within proximity of Mr Andre;

9. On an imprecise date, but “prior to Christmas” in 2018 Mr Morrison attended at a bank and withdrew $5,000 from Aximill’s bank accounts without having authorisation from the company for the money to be withdrawn because, as a director, he “required funds over Christmas”; 23

10. Mr Morris made an application for unfair dismissal remedy on 24 October 2018;

11. Aximill responded to the application by filing its Employer Response Form on 9 November 2018;

12. A telephone conciliation in the matter was established as is the usual course. The conciliation was first listed for 19 November 2018, but was adjourned at the request of the Applicant. The conciliation was then relisted for 10 December 2018 but was unable to take place. The conciliation was later rescheduled to 21 January 2019 when it took place but was unsuccessful;

13. After the conciliation was unsuccessful, again in the usual manner, the Commission listed the Respondent’s objection for determination, with Directions being issued for each party to file the material it relied upon. After amendment Directions were issued, Aximill was required to file its material by Thursday 21 February 2019 and Mr Morrison by Monday 4 March 2019. The hearing was listed for 8 March 2019; and

14. The Respondent, Aximill filed material in support of its application in three lots; the first of those being on Thursday 21 February 2019 at 16:22PM, the second being on Tuesday 26 February 2019 at 14:26PM and the third on Thursday, 28 February 2019 at 6:14 PM. Each of those bundles of documents were served on Mr Morrison simultaneously with them being filed in the Commission.

[26] On 4 March 2019 at around 5PM Mr Morrison indicated via email correspondence that he wished to not proceed with the matter with the Commission acquiescing that position as a Discontinuance pursuant to Rule 10 of the Fair Work Commission Rules 2013.

[27] Both ss.400A and 611 of the Act require consideration of the commencement of an action or a response to it, as well as matters associated with the continuation of a matter.

[28] The nature of the circumstances of Mr Morrison, Mr Andre and Aximill include more than the usual number of questions about the reasonableness, etc. of the application and responses to it. As well as matters of fundamental jurisdiction for the application to be made and sustained, there are also matters associated with the application of the Small Business Fair Dismissal Code and s.387 of the Act, dealing the with the fairness of the dismissal if the Code either does not apply or, if it does, has not been complied with.

Was it reasonable for Mr Morrison to believe he was an employee?

[29] Despite the objection of Aximill, it is at least arguable that Mr Morrison was its employee. Mr Morrison argues that he became an employee of Aximill in September 2015 when he commenced being paid wages for his efforts. The arrangement came about as a result of the conversation Mr Morrison had with Mrs Andre. While Mrs Andre did the accounts for the business, she was not a director. Mr Morrison puts his motivation for asking to be paid wages as being his concern to have access to workers compensation in the event he was injured at work. 24 In its defence against Mr Morrison being held to be an employee Aximill put forward that the wages were really only directors fees disguised as wages25 and that Mrs Andre did not have authority to appoint Mr Morrison as an employee. If nothing else, Mr Andre does not deny that he knew of the employment arrangement and the fact that paycheques were regularly drawn by the company in favour of Mr Morrison’s employment arrangement.

[30] There is no prohibition on a director being an employee of a company in which they are involved. The fact that the purported employment arrangement persisted for more than three years, apparently without challenge from the company would suggest that there was an employment relationship between Mr Morrison and Aximill.

[31] While it is certainly unclear from the evidence filed so far that a full hearing of the Respondent’s jurisdictional objection would lead to a finding that Mr Morrison was an employee, there is nonetheless at least an arguable case to the effect that he was. As a result, it was not unreasonable for Mr Morrison to believe that he was an employee, and thereby a person protected from unfair dismissal, at least in relation to his employment duties.

Was it reasonable for Mr Morrison to believe he had been dismissed?

[32] Mr Morrison’s unfair dismissal application was commenced within a fortnight of him being locked out of the company’s premises on 12 October 2018. The change of locks on the workshop gates was instructed by Mr Andre and followed the escalating tensions between the two over the prior month. His written witness statement described his motivations for changing the locks thus:

“as a result of the above particularised actions by Mr Morrison (and in particular Mr Morrison falsely stating to me that he brought his police officer friend for protection, it became obvious to me that Mr Morrison had either then already, or, in the very near future thereafter, intended to take out an Intervention Order against me), I had no alternative but to change the locks of the Aximill Pty. Ltd. factory at 34 Sydney Road, Bayswater - failing which I would not have been able to access my work premises whilst Mr Morrison lived there in a rented caravan. The anticipated Intervention Order obtained by Mr Morrison on false and spurious grounds was served on me only days later.” 26

[33] Not only is there uncertainty about whether Mr Morrison was an employee it is also unclear on the material so far before the Commission whether Mr Andre, as the only other shareholder and director had authority to dismiss Mr Morrison. It is also unclear whether any words of dismissal were ever spoken or communicated to him by Mr Andre. It appears likely from that which is before the Commission that other than the occasion of Mr Morrison’s visit to the workplace on 11 October 2018 that each protagonist conducted their dispute at arms-length, including through the proxy of Interim Intervention Orders; the cancellation of a phone contract; and the unilateral withdrawal of company funds from a bank account. Within none of these interactions may be discerned an actual statement of dismissal as an employee, or actions from which a dismissal may be inferred.

[34] As a result of the lack of clarity about these matters, there is, at the least, a question requiring resolution of whether Mr Morrison was dismissed within the meaning of s.386 of the Act. So far as is relevant to this matter the determination of such a question would surround whether in all the circumstances it may be found that Mr Morrison’s employment, if there was any, had been “terminated on the employers initiative”. 27

[35] While certainly the question must be posed as to whether there was a dismissal, that is not to say that the question is without prospects of success. Determination of the question of whether it was reasonable for Mr Morrison to believe that he had been “dismissed” would hinge not only on the communications by the company and its officers with Mr Morrison, but also the authority of whomsoever communicated.

[36] Within the context of the circumstances referred to above in which Mr Morrison was locked out from premises at which he both resided and worked, then to the extent that the company and its officers had the necessary authority to take those actions, it is at least arguable that he was dismissed. Being locked out of one’s workplace denies a person the opportunity to perform their part of the employment contract and is likely arguable as repudiatory conduct albeit which needs to be accepted by the victim party as a termination of employment. I make no findings on these matters; save to say that the contention that Mr Morrison has been dismissed was one that, at the time his unfair dismissal action was commenced had some prospects of success. The contention was neither unreasonably held, nor recklessly advanced; neither was it without reasonable cause or manifestly groundless. It was not advanced with the predominant purpose to harass or embarrass Aximill or to gain a collateral advantage.

Was it reasonable for Mr Morrison to believe he had been unfairly dismissed?

[37] The matter of whether Mr Morrison was unfairly dismissed would depend upon consideration both of the application of the Small Business Fair Dismissal Code, as well as the criteria within s.387 of the Act.

[38] The Small Business Fair Dismissal Code may have application, and thereby require consideration, in the event that Aximill was a small business employer at the time of any dismissal. The material before the Commission includes a submission from Mr Morrison that during the period of his employment, he was “the sole employee of the Company as both Axel Andre and his wife Lee Andre, have been always employed by Axtrack Pty Ltd”, 28 being another company run by the Andres. The submissions and evidence provided by Aximill and Mr Andre do not directly address the number of employees the company had in October 2018. In any event there is certainly not evidence that would suggest the company employed 15 or more people at the relevant time.

[39] It is necessary to reference the Code for the reason that the test of whether or not a dismissal was unfair will vary in the event that Aximill is a small business employer. Section 396(c) of the Act requires a consideration of whether a small business dismissal was “consistent” with the Code. The Code itself contemplates consistent dismissals as including those for reason of summary dismissal:

“Summary Dismissal

It is fair for an employer to dismiss an employee without notice or warning when the employer believes on reasonable grounds that the employee’s conduct is sufficiently serious to justify immediate dismissal. Serious misconduct includes theft, fraud, violence and serious breaches of occupational health and safety procedures. For a dismissal to be deemed fair it is sufficient, though not essential, that an allegation of theft, fraud or violence be reported to the police. Of course, the employer must have reasonable grounds for making the report.”

[40] It is not necessary in matters involving summary dismissal from small business employers for the Commission to be satisfied that the serious misconduct that is the basis for dismissal actually occurred; and ascertainment of whether an employer had reasonable grounds for their belief is to be determined objectively. 29 The general approach to summary dismissal matters has been laid out by the Full Bench thus:

“[41] In summary, drawing on the conclusions stated above and the ratio in Pinawin, we consider that the “Summary dismissal” section of the Code operates in the following way:

(1) If a small business employer has dismissed an employee without notice – that is, with immediate effect - on the ground that the employee has committed serious misconduct that falls within the definition in reg.1.07, then it is necessary for the Commission to consider whether the dismissal was consistent with the “Summary dismissal” section of the Code. All other types of dismissals by small business employers are to be considered under the “Other dismissal” section of the Code.

(2) In assessing whether the “Summary dismissal” section of the Code was complied with, it is necessary to determine first whether the employer genuinely held a belief that the employee’s conduct was sufficiently serious to justify immediate dismissal, and second whether the employer’s belief was, objectively speaking, based on reasonable grounds. Whether the employer has carried out a reasonable investigation into the matter will be relevant to the second element.” 30

[41] It is likely, on the basis of the evidence presently before the Commission that in the event the Code has application, that the Commission would find any dismissal of Mr Morrison was not consistent with the Code. Such dismissal as may be found would likely be grounded in a determination that it arose from repudiatory conduct on the part of Aximill, to the extent it was authorised conduct. This would be for the reason that the misconduct complained of was not the subject of a reasonable investigation by Aximill.

[42] So far as may be discerned from the available evidence, Mr Morrison attended the workplace on 11 October 2018 with a police officer whom he knew. Mr Andre’s witness statement records that on that day “arrangements had been made for a director of POET System R&D Pty. Ltd. to attend at the Aximill premises and take delivery of the Aximill grinding machine for which POET System R&D Pty. Ltd. had paid approximately $200,000”. 31

[43] In the course of the workplace discussion on 11 October, it is claimed by Mr Andre that Mr Morrison was hostile toward him, and the director of POET System R&D and that in the course of their discussion “improperly demanded that the funds for the machine bought by POET System R&D Pty. Ltd. be placed into the trust account of his lawyer friend [name omitted]” and “despite all of Mr Morrison’s protests and hostility, police officer [name omitted] acknowledged that POET System R&D Pty. Ltd. was the legitimate owner of the Aximill machine and so possession of the machine was taken that day by the director of POET System R&D Pty. Ltd”. 32 Mr Andre then complains of later conduct on the part of Mr Morrison, including on 12 October 2018, in the form of a phone contract cancellation. He also puts forward allegations about Mr Morrison’s conduct in relation to the issue of additional shares to a new shareholder, as well as other matters that would likely be accusations of breaches by Mr Morrison of his director’s duties.

[44] Irrespective of whether the company’s actions were properly authorised, it is evident from that which is before the Commission that the views formed by Mr Andre were not tested through an objectively established and conducted investigation.

[45] The matter then turns to consideration of whether a finding of unfair dismissal under s.387 of the Act may occur. A Member assessing whether or not a particular dismissal may be unfair is required to consider each of the criteria within the section. While it is reasonably likely that the Commission would find a valid reason for Mr Morrison’s termination of employment, if that is what it was, it is potentially likely that there would be difficulties with findings being made in Aximill’s favour in respect of some of the other criteria.

[46] Necessarily consideration of s.387(a), which is concerned with the question of whether there was a valid reason for a person’s dismissal relating to their capacity or conduct, requires determination in the case of a matter involving misconduct, of whether the misconduct as alleged actually occurred. On the material presently before the Commission, it would appear highly likely that the misconduct would be found to have occurred. Whether the significance of the misconduct findings would outweigh any procedural deficiencies if a full consideration of s.387 or undertaken is unable to be indicated on the state of the evidence presently available. Even so, it would be highly unlikely that the Commission would ever find there was not a valid reason for termination. If it found in favour of Aximill on the things the company asserts those matters would likely be found to have been significant misconduct as an employee, going to the very heart of the employment relationship.

[47] The email from Mr Morrison to four recipients; Mr and Mrs Andre, the potential investor and the public servant, dated 1 October 2018 can only be described as an endeavour by Mr Morrison to warn the investor and public servant away from Aximill. He may well argue that the correspondence was sent in his capacity as a director rather than as an employee of the company. If so it reveals a boardroom dispute which should have been kept behind the doors of the boardroom and resolved through such mechanisms as may be available within the company. The sending of the correspondence can only recently be seen as an endeavour to undermine the commercial activities of the company. Someone acting as Chief Executive Officer or Business Development Manager, as Mr Morrison held himself out to be could surely not reasonably be seen to be undermining the commercial position of their employer without an expectation that they would be found to be in breach of their duties as an employee.

[48] The same can be said for the attendance at the workplace with the police officer friend on 11 October 2018. The dispute conducted openly in front of the director of another company and going to a debate about where funds should be deposited would again likely be seen as inimical to one’s duties as an employee.

[49] Mr Morrison’s unfair dismissal application was commenced within 12 days of him being locked out of the company’s premises on 12 October 2018. The change of locks on the workshop gates was instructed by Mr Andre and followed the escalating tensions between the two over the prior month.

[50] While those matters need to be tested on the full evidence, it appears unlikely from that which is presently before the Commission that a finding would be made against Aximill in relation to s.387(a) of the Act. It may be predicted from the evidence seen so far both that the Commission would, in the event there was employment relationship and dismissal, find both that there was serious misconduct as an employee and that there was a valid reason for Mr Morrison’s termination of employment.

[51] Nonetheless, from the material before the Commission, it is reasonably likely, on the basis of the evidence seen so far, that findings may well be made against Aximill in relation to its failure to fairly and objectively investigate the circumstances about which it was concerned as well as a failure to give Mr Morrison an opportunity to respond to any allegations the company chose to make against him in relation to his conduct.

Was commencement of the application an unreasonable act or omission (s.400A(1)) or made without reasonable prospects of success (s.611(2)(b))?

[52] In relation to the apparent prospects of success, the Full Bench has held that:

“The concepts within s.611(2)(b) of the Act “should have been reasonably apparent” and “had no reasonable prospect of success” have been well traversed:

•  “should have been reasonably apparent” must be objectively determined. It imports an objective test, directed to a belief formed on an objective basis, rather than a subjective test; and

•  a conclusion that an application “had no reasonable prospect of success” should only be reached with extreme caution in circumstances where the application is manifestly untenable or groundless or so lacking in merit or substance as to be not reasonably arguable.” 33 (references omitted)

[53] In overall effect, while it is possible that the finding might be made by the Commission upon a full merits hearing that Mr Morrison’s dismissal was procedurally unfair and thereby an unfair dismissal I seriously doubt that that would be the case. In my opinion the requirement of the Commission in s.387(h) of the Act to consider any other relevant matters, together with the likely finding on misconduct, would lead to the conclusion that there was no unfair dismissal. I consider it would be relevant for the Commission to take into account that this was a commercial arrangement between two business people which along the way included an employment relationship which soured and went dreadfully wrong and became terminal at the end of 2018. Since realistically this was an employment relationship involving a small business employer of a single person, who was also an investor and director, I consider that the Commission would be reluctant to engage with a dispute in the way invited which probably should be dealt with through the Corporations Act or another means more directly relevant to the operations of the company.

[54] Beyond these considerations, there is also the question of what would the Commission have done in the event that there was an unfair dismissal? Reinstatement, realistically, would have been inappropriate, if for no other reason that the two directors had taken out Interim Intervention Orders against each other. Compensation would also have been highly problematic including for the same reason of the Interim Intervention Orders. Mr Morrison’s role was to work to the instructions of the company. He could hardly avoid Mr Andre in that process, or vice versa. The anticipated period of employment in all likelihood would at the time of mid-October 2018, be measured likely only in days. There would be a high possibility that compensation, if the Commission even got that far, would be zero, noting that an order for compensation may only be made if both reinstatement as a remedy is inappropriate and compensation is appropriate.

[55] In accumulation of the matters canvassed thus far, and on basis of the authorities referred to earlier, Mr Morrison’s case at the time it was commenced was likely one where the Commission would not be satisfied it could succeed in the sense that the remedy that may be sought under an unfair dismissal application, namely either reinstatement or compensation would be highly unlikely to be granted to him. For that reason, the finding is open to the Commission that commencement of Mr Morrison’s application was an unreasonable act (s.400A(1)) or made without reasonable prospects of success (s.611(2)(b)).

Was the application made vexatiously or without reasonable cause (s611(2)(a))?

[56] For the same reason as well, the matter is also open to a finding that it was commenced vexatiously with the predominant purpose of harassment of the Respondent, Aximill, or without reasonable cause.

[57] Assessment of whether an application has been made vexatiously was considered by the Full Bench in the matter of Church v Eastern Health, in which is it was held:

“[41] As we have mentioned, the question of whether an application was made vexatiously turns on the motive of the applicant in making the application. Motive can be inferred from, among other things, the surrounding circumstances, the applicants conduct and the merits of the application itself.” 34

[58] A proceeding “is not classed as being instituted without reasonable cause simply because it fails, but rather in circumstances where the applicant’s own version of the facts, it is clear that the proceeding must fail”. 35 Another “way of testing whether a proceeding is 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”.36

[59] The surrounding circumstances of Mr Morrison’s application for unfair dismissal remedy are well articulated elsewhere in the decision. Those I particularly take into account are the acrimonious business relationship between the two founders of the business, Aximill; Mr Morrison’s written correspondence to Mr and Mrs Andre, the potential investor, and the public servant; the need of either party, real, imagined or tactical, to seek and obtain intervention orders about the other; the locking out of Mr Morrison from his workplace and his place of residence; and then the claim and counter-claims of each party about the other’s conduct. To seriously think that the Commission would objectively assess the situation, find an unfair dismissal, and then take the restorative step of ordering reinstatement or compensation, or that such order would be accepted as a final determination of the dispute by the national workplace tribunal would be somewhat fanciful. Viewed in such a light, Mr Morrison’s application for unfair dismissal remedy could only be another part of his armoury in his wrestle with Mr Andre. There is little doubt the application was commenced for the purposes of gaining a collateral advantage.

[60] Further, again as already well traversed, the circumstances of Mr Morrison’s application would reasonably lead to the finding that his application was commenced without reasonable cause, since upon the facts apparent to him at the time of instituting the proceeding; there was no substantial prospect of success.

[61] As a result of these findings, it follows that Mr Morrison’s application was made vexatiously or without reasonable cause (s611(2)(a)).

[62] Having made the foregoing findings, it follows that the basis for a determination of costs to be awarded against Mr Morrison is made out.

Considerations for and against exercising the discretion to awarding costs:

[63] A determination of an award of costs is a discretionary one.

[64] Matters in favour of an exercise of discretion awarding costs against Mr Morrison include that Aximill and also, it is claimed Mr Andre, incurred significant costs in not only responding to Mr Morrison’s originating application, but also in preparing and filing submissions and evidence on the matter of its jurisdictional objection. The costs in both cases legitimately went to explaining the circumstances of Mr Morrison’s history with the company and the actions taken by Mr Andre to lock Mr Morrison out from the company’s premises.

[65] Mr Morrison’s demeanour in this proceeding at least is as a person who would likely aim to see his application through to finality. Likely Aximill and Mr Andre perceived this from their past dealings as well, with that perception explaining to some extent at least the extent of the Respondent’s response.

[66] Against an exercise of discretion for the award of costs are the considerations that Mr Morrison’s prospects of success were weak for a number of the reasons referred to in greater detail above. It did not require a response in elaborate detail. Potentially a short written explanation by Mr Andre would have been sufficient at least at the initial response stage in order to have articulated the fundamental problems with Mr Morrison’s case.

[67] On balance, taking account of the obvious fact that Mr Morrison and Mr Andre’s dispute is so much broader than an unfair dismissal application and that the level of their vitriol toward each other is not going to be assuaged either through an unfair dismissal remedy order, or a cost order and that instead it is foreseeable that irrespective of my ruling in this particular stage of the matter, their bitter battle is likely to continue elsewhere for some time, I decline to exercise my discretion for an order for costs.

[68] Accordingly, the cost application is dismissed.

COMMISSIONER

Appearances:

Ms M A Paszkiewicz, Counsel for the Applicant.

Mr P Kerin for the company.

Hearing details:

2019.

Melbourne;

15 May.

Printed by authority of the Commonwealth Government Printer

<PR710260>

 1   Email from Mr Kerin, dated 6 March 2019.

 2   Transcript PN379-444; PN449-498; PN73-236 and PN247-368.

 3   Statement of Evidence of Axel Andre, [11]

 4   Ibid, [11.8].

 5   Ibid, [11.6].

 6   Ibid, [11.8].

 7   Ibid, [11.9].

 8   Ibid, [11.10].

 9   Fair Work Act 2009 (Cth) s. 400A.

 10   Explanatory Memorandum to the Fair Work Bill 2012.

 11 Fair Work Act 2009 (Cth) s. 611.

 12   Fair Work Act 2009 (Cth) s. 611(1); see also Church v Eastern Health[2014] FWCFB 810, [26].

 13   Goffett v Recruitment National Pty Ltd [2009] AIRCFB 626, [47].

 14   Roy Morgan Research Ltd v K Baker[2014] FWCFB 1175, [12]; with reference to Brazilian Butterfly Pty Ltd v Charalambous (2006) 155 IR 36, [39] – [45].

 15   Kube v Dominelli Group Pty Ltd T/A Rockdale Nissan[2016] FWC 8933, [15].

 16   Roy Morgan Research Ltd v K Baker[2014] FWCFB 1175, [21] – [23].

 17   Fair Work Act 2009 (Cth) s. 611.

 18   Keep v Performance Automobiles Pty Ltd[2015] FWCFB 1956, [13], [17].

 19   Ibid [17], with reference to Heidt v Chrysler Australia Limited (1976) 26 FLR 257, [272]–[273].

 20   Church v Eastern Health[2014] FWCFB 810, [29], with reference to Nilsen v Loyal Orange Trust [1997] 76 IR 180 at 181.

 21   Email from Mr Morrison, dated 14 June 2019.

 22 Statement of Evidence of Michael Morrison, [1] – [2].

 23   Transcript, PN 307 – 309; 322.

 24   Transcript, PN 534.

 25   Ibid, PN 443.

 26   Statement of Evidence of Axel Andre, [11.8].

 27   Fair Work Act 2009 (Cth) s. 286(1)(a).

 28   Applicant’s Reply to Form F3, dated 14 November 2018, [6](iii).

 29   Ryman v Thrash Pty Ltd t/a Wisharts Automotive Services[2015] FWCFB 5264, [39] – [40].

 30   Ibid, [41].

 31   Statement of Evidence of Axel Andre, [11.7].

 32   Ibid.

 33   Baker v Salva Resources Pty Ltd[2011] FWAFB 4014, [10].

 34   [2014] FWCFB 810.

 35   Zornada v St John Ambulance Australia (Western Australia) Inc [2013] FWCFB 8255, [35]; with reference to Kanan v Aust Postal Telecommunications (1992) 43 IR 257, p.264; 287.

 36   Kanan v Aust Postal Telecommunications (1992) 43 IR 257, p.264.