Mr David Armstrong v Taxation Management Services Pty Ltd ATF TMS

[2015] FWC 226

[2015] FWC 226

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.394 - Application for unfair dismissal remedy

Mr David Armstrong
v
Taxation Management Services Pty Ltd ATF TMS
(U2014/1566)

COMMISSIONER CLOGHAN PERTH, 13 JANUARY 2015

Application for order for security for payment of costs.

[1] On 2 May 2014, Mr David Armstrong (Mr Armstrong or Applicant) made application to the Fair Work Commission (Commission) seeking a remedy for alleged unfair dismissal from his former employer, Taxation Management Services Pty Ltd ATF TMS (Employer).

[2] The application was made pursuant to s.394 of the Fair Work Act 2009 (FW Act).

[3] On 15 August 2014, Commissioner Williams delivered a decision in which he made a finding that the Employer was a national system employer and the Commission has jurisdiction to deal with Mr Armstrong’s application.

[4] As a consequence of Commissioner Williams’ decision, the application was referred to conciliation.

[5] On 28 August 2014, the Employer made application for security for payment of costs.

[6] On 29 August 2014, the Applicant declined to be involved in conciliation and requested that the application proceed to arbitration on its substantive merits.

[7] On 1 September 2014, the Employer requested that the application for security for payment of costs be considered prior to arbitration.

[8] On 10 September 2014, I issued Directions for a hearing into the Employer’s application for security for payment of costs.

[9] At the hearing, Mr Armstrong represented himself. The Employer was represented by Mr Hoff.

[10] This is my decision and reasons for decision in relation to the Employer’s application for security for payment of costs.

RELEVANT LEGISLATIVE FRAMEWORK

[11] The power for the Commission to make an order directing a party to furnish security for costs, is found in s.404 of the FW Act which provides:

404 Security for costs

The procedural rules may provide for the furnishing of security for the payment of costs in relation to matters arising under this Part.

[12] Rule 16 provides:

16 Security for the payment of costs

16.1 FWC may, on application, make an order directing a person to furnish security for the payment of costs in respect of a matter or part of a matter arising under Part 3-2 of the Act.

Note   FWC will not ordinarily make such an order before the conclusion of conciliation.

16.2 The security must be of such amount, and furnished at such time and in such manner and form, as FWC directs.

16.3 FWC may, on further application:

(a) reduce or increase the amount of security directed to be given; and
(b) vary the time at which, or manner or form in which, the security is to be furnished.

16.4 Without limiting any other power which FWC may exercise, if FWC directs a person to furnish security for costs in respect of a matter or part of a matter arising under Part 3-2 of the Act, it may order that the matter be:

(a) adjourned until security is furnished; or
(b) adjourned indefinitely.

[13] The power of the Commission to make an order for security for payment of costs is discretionary.

CONSIDERATION

[14] In Zornada v St John Ambulance Australia (Western Australia) Inc[2013] FWCFB 8255, a Full Bench of the Commission considered the exercise of the Commission’s discretion in an application for security for payment of costs as follows:

“[34] Commissioner Asbury, as she then was, outlined the principles to be considered in assessing whether to grant an order for security for costs in Harris v Home Theatre Group t/as Home Theatre Group:

‘[7] Principles relevant to the making of orders for security of costs can be summarised as follows. There is no absolute rule to control the exercise of the discretion to order security for costs, and what should be done in each case depends on the circumstances of the case with the governing consideration being what is required by the justice of the matter. The making of an order for security for costs should not be oppressive in that it would stifle a reasonably arguable claim.

[8] The financial position of the party against whom the order is sought, will be relevant in a number of circumstances. There is no absolute rule that impecuniosity of a party will entitle its opponent to an order for security for costs. There is also a general rule that poverty should not be a bar to a person prosecuting a claim at first instance. On appeal, the question of security is to be determined differently on the basis that the appellant has had his or her day in court, and should not be given a “free hit”, particularly in circumstances where the costs of a proceeding below had not been paid by the appellant.

[9] In cases where the impecuniosity of the party against whom the order for security for costs is sought, it is relevant that the impecuniosity is itself a matter which the litigation may help to cure or arises from the conduct the party is complaining of. In such circumstances the party against whom the order is sought should not be shut out of litigation.

[10] The prospects of success and the strength of the case of the party resisting the order is relevant. In Merribee (Supra) Kirby J said (citations omitted):

“Another consideration that has sometimes been judged to be relevant is the strength of the case of the party resisting an order that it provide security for costs and evaluation (necessarily tentative) of its prospects of success. Thus, the fact that a party has secured special leave to argue its case on appeal has been thought a relevant consideration in some circumstances. Similarly, if a proceeding appeared hopeless and such as was bound to fail, the lack of apparent merit in a party’s case might be a reason for ordering it to provide security for the costs to which, it appears, it is needlessly putting its opponent. Such a consideration would need to be exercised with care, given that the real merits of a case might not emerge until the final hearing or might not sufficiently emerge in the necessarily brief proceedings typically involved in an application for security of costs. Furthermore, if a party asserts that its opponent’s proceedings are manifestly lacking in legal merit, other remedies are available to it to protect it from needless vexation.”

[11] In relation to costs, it is relevant that the nature of a proceeding is such that, even if successful, an order for costs might not be made or might be limited. The inability of a party to meet the costs of an unsuccessful proceeding, or the risk that a cost order will not be satisfied is also relevant to the exercise of the discretion. Other related considerations are that a party is, or is likely to be absent from the jurisdiction when a decision is made and has no, or few assets within the jurisdiction.

[12] There may also be aspects of public interest which are relevant to the exercise of the discretion to make an order for security for costs, such as an application raising matters of general public importance, quite apart from the interests of the parties. Other matters that have been considered relevant are that a hearing of the proceedings is close at hand, or the party seeking the order has delayed its application for such an order. It may also be relevant that the parties, or some of them, are legally aided.”

(original references omitted)

[35] We agree with the summary provided by her Honour. We further note that costs orders in this jurisdiction are extraordinary, and security for costs orders even more so. This is because the Act reflects the longstanding principle that costs will not be awarded against parties in industrial proceedings, other than in exceptional circumstances. Costs are limited to circumstances where the proceedings have been commenced vexatiously, without reasonable cause, or in circumstances where it should have been reasonably apparent that the application had no reasonable prospect of success. It should be noted that a proceeding is not to be 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.

[36] Accordingly, the Commission should award security for costs only in the rarest of circumstances, once the Commission has balanced the merits of the application, the financial position of the parties, and what is just in the circumstances.

Grounds for application for security for payment of costs

[15] The Employer’s grounds for the application for security for payment of costs are due to its belief that the Applicant’s application is:

• frivolous, vexations or made without reasonable cause;



• has no reasonable prospects of success;



• “reference to a potential criminal case in which the Applicant is the main suspect”;



• cost to its business; and



• “in my opinion, the applicant cannot afford these costs and even if he is able is unlikely to comply with the court’s decision”.

[16] At the hearing, Mr Hoff made the following submission:

“Yes, okay, that’s fine. I’m going to simply say that there’s no real just reason for this application to proceed. There’s no major facts that have been contended. I believe that due to the police involvement in this case, that there is enough evidence for the police to search the applicant’s home, which I think should be enough evidence for this Commission to say that the applicant was fired, sorry bad terminology, with reasonable cause. Everything put in this application is fictitious and I should be protected from the costs in relation to this application for future costs.” 1

Relevant background to application alleging unfair dismissal

[17] The Employer provides taxation management services.

[18] The Applicant commenced employment on 9 October 2011 as a Tax Consultant.

[19] The Employer is a small business.

[20] Just prior to the dismissal, the following events occurred:

• Mr Hoff stated, on 3 April 2014, that Mr Armstrong no longer worked at the office due to his dismissal with notice either on that day or 11 March 2014;



• in the Employer’s amended response to the application, Mr Hoff advised that the:

“Applicant was removed from the office and told he can serve the remainder of his notice period at home. He was also advised that he was not allowed to contact any clients or represent himself as part of the business in any way plus was banned from coming into office”;

• the Applicant was requested to return missing documents on 4 April 2014;



• the Applicant was requested to return missing documents on 7 April 2014;



• on 8 April 2014, the Applicant’s wife returned some missing documents;



• on 8 April 2014, the Applicant provided his resignation to the Employer and requested a separation from work certificate;



• on 9 April 2014, attempts to organise two meetings between the Employer and the Applicant on that day, and 10 April 2014, failed;



• on 9 April 2014, the Employer’s office was the subject of a break and enter. The Employer asserts that material was stolen from its premsies; and



• on 11 April 2014, a letter of termination of employment was sent to the Applicant.

Letter of termination of employment

[21] The Employer’s letter of termination dated 11 April 2014 relevantly reads:

“In my email this morning I identified that you had:

(a) Failed to return company property, including complete client files which had been specifically requested from you in my letter to you of 8 April 2014;

(b) Failed to attend at a meeting scheduled to discuss the return of such property and files.

As a consequence of the above I set out that you had breached your obligations to:

(a) Serve the company faithfully and diligently;

(b) Act in the company’s best interests; and

(c) Refrain from acting or giving the appearance of acting contrary to the company’s interest.
...
The retention of company property, including client files and / or documents from those files is clearly a serious and wilful breach of your contractual obligations.

...I herein notify you that your employment with the Company is terminated, effective immediately...”

[22] Both parties agree that there are a significant number of facts in dispute. One party describes the circumstances as a “saga”.

Principles

[23] The financial position of the Applicant is not an issue; he has the means to provide the security for payment of costs. The Applicant asserts that this ground has been included by the Employer as a gratuitous insult.

[24] The facts, evidence and conclusions drawn from the facts are widely divergent between the parties. As is normal in these circumstances, the characterisation of actions or events respectively, serves to advance one party’s position and weaken the other party’s case. However, on the material supplied by the Employer, I am unable to come to the conclusion that the Applicant’s application is “hopeless and...bound to fail’. In reaching this conclusion, I make it absolutely clear that I have not adopted the view that the Applicant was unfairly dismissed, I am simply stating that to reach a determination of whether Mr Armstrong was unfairly dismissed, it is necessary to hear the evidence and have that evidence tested.

[25] Finally, with respect to the Employer’s “ground” and submission that, because the Western Australia Police searched the Applicant’s home, it should be enough evidence for the Commission to find the dismissal reasonable - I cannot agree. There is no causal effect of the action by the Western Australia Police and my determination of the matter.

CONCLUSION

[26] A large proportion of the material supplied to the Commission consisted of matters not relevant to my consideration of the application for security for payment of costs. It is not the Commission’s role to speculate of the actions taken by the Western Australia Police or any conclusion it has reached.

[27] Having considered all the circumstances in the documentary material submitted and the oral submissions, I am satisfied that the cessation of Mr Armstrong’s employment was acrimonious and followed by a police investigation. However, I am satisfied that the application, on the Applicant’s material, was not made vexatiously, without reason, cause or with no reasonable prospect of success.

[28] Having considered the total situation as set out by the parties, and for the reasons above, I am satisfied that the circumstances do not meet the principles in Home Theatre Group which was endorsed in Zornada. I am not satisfied that the circumstances of this application is not a situation where the Commission should exercise its discretion to make an order for security for payment of costs. Accordingly, an order to this effect is issued with this Decision.

[29] My Associate will contact the parties to arrange a conference of the parties to consider how the application should now be progressed.

COMMISSIONER

Appearances:

D Armstrong, the Applicant.

J Hoff on behalf of the Employer.

Hearing details:

2014:

Perth,

20 October.

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