Mr James Green v Toll Holdings Ltd

[2016] FWC 2790

[2016] FWC 2790

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
ss.400A, 611 – Application for costs

Mr James Green
v
Toll Holdings Ltd
(U2015/8793)

DEPUTY PRESIDENT GOSTENCNIK MELBOURNE, 9 MAY 2016

Application for costs; s.611 considered and discussed; without reasonable cause; vexatious; whether costs should be ordered on an indemnity basis.

Introduction

[1] James Green (Costs Respondent) was employed as a Yard Truck Driver by Toll Holdings Ltd (Costs Applicant) until his dismissal on 4 June 2015.On 24 June 2015, the Costs Respondent applied for an unfair dismissal remedy under s.394 of the Fair Work Act 2009 (Act). On 29 October 2015, the Costs Respondent discontinued his application following the giving of certain medical evidence in those proceedings. At the conclusion of those proceedings, Counsel for the Costs Applicant indicated that he did not then have instructions to pursue a costs application, but anticipated receiving those instructions.

[2] Subsequently on 12 November 2015, the Costs Applicant purported to apply for an order for costs. That application was irregularly made and pursuant to my decision on 15 March 2016, I determined that the irregularity should, in the circumstances, be waived. 1

[3] The Costs Applicant relies on both ss.400A and 611 of the Act to found its application for costs. It also seeks costs on an indemnity basis. The Costs Respondent has been given ample, and some might say extra ordinary, opportunities to respond to the costs application but has either failed, refused or neglected to respond. 2

Background

[4] The Costs Respondent was dismissed from his employment with the Costs Applicant on 4 June 2015, after he had tested positive at work for drugs in his system on 1 June 2015. The test was conducted pursuant to the Costs Applicant’s Drug and Alcohol Policy. The test was administered by taking an oral fluid sample from the Costs Respondent. Once tested, the result returned showed that there was a positive reading indicating that the Costs Respondent had in his system amphetamine recorded at 320 ug/L and methamphetamine recorded at greater than 1000 ug/L.

[5] The Costs Respondent had told his employer prior to his dismissal that he had attended his medical practitioner immediately after the test was administered at work and that the medical practitioner took a urine sample from the Costs Respondent which was sent for testing. The test apparently returned a negative result showing no traces of any drugs detected in the urine sample tested. In evidence before me the Costs Respondent produced and adopted, under oath, a witness statement 3 in which the Costs Respondent gave evidence to the same effect as the explanation given to his employer prior to his dismissal, and he attached to the witness statement the purported results of the urine drug screening test.4

[6] Throughout the cross examination of the Costs Respondent, he maintained this story.

[7] Dr Naeem Chaudhry was the medical practitioner who collected the urine sample from the Costs Respondent and sent it off for testing. Dr Chaudhry had also communicated to the Costs Respondent the results of the test. Dr Chaudhry gave evidence on 29 October 2015 that the test results that the Costs Respondent had attached to his witness statement were not the test results Dr Chaudhry had given to the Costs Respondent, and it is apparent that the document sought to be relied upon by the Costs Respondent had been manipulated, with the original, which was produced by Dr Chaudhry, showing a positive rather than a negative result.  5

[8] After a short adjournment, the Costs Respondent’s representative advised that he had instructions to discontinue the matter. 6 The Costs Respondent had left the courtroom prior to Dr Chaudhry completing his evidence and did not return.

[9] On the basis of the material available to me, I am satisfied that the Costs Respondent knowingly and deliberately attached a drug test result to his witness statement which he knew to be false, and that he knowingly and deliberately gave false evidence under oath during the hearing before me about the drug test facilitated by Dr Chaudhry and its result.

Consideration

[10] Section 611 of the Act sets out some of the circumstances in which an order for costs might be made in relation to a matter before the Fair Work Commission (Commission). 7 The primary position in relation to costs of a matter before the Commission is that each person involved in a matter must bear their own costs.8 The policy which underpins this provision seems clear. It is designed to enable a person to make or defend an application without being burdened with the risk that an order for costs might be made against the person.

[11] In Church v Eastern Health, 9 a Full Bench of this Commission said of s.611 of the Act the following:

“Ascertaining the meaning of s.611 necessarily begins with the ordinary and grammatical meaning of the words used. These words must be read in context by reference to the language of the Act as a whole and to the legislative purpose.

There are some similarities between s.611 and s.570 of the FW Act. Section 570 deals with the circumstances in which a party to proceedings in a court in relation to a matter arising under the FW Act may be ordered to pay costs incurred by another party to the proceedings.

Section 570 states:

‘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.

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:

the court is satisfied that the party instituted the proceedings vexatiously or without reasonable cause; or

the court is satisfied that the party’s unreasonable act or omission caused the other party to incur the costs; or

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.”

Given the similarities between s.611 and s.570, in particular the common use of the expression ‘vexatiously or without reasonable cause’, judgements which have construed s.570 and its legislative antecedents are relevant to our consideration of s.611.”

In Heidt v Chrysler Australia Ltd Northrop J said of s.197A of the Conciliation and Arbitration Act 1904 (Cth), a predecessor provision to s.570 of the FW Act:

“The policy of s.197A of the Act is clear. It is designed to free parties from the risk of having to pay the costs of an opposing party. At the same time the section provides a protection to parties, defending proceedings which have been instituted vexatiously or without reasonable cause. This protection is in the form of conferring a power in the court to order costs against a party who, in substance, institutes proceedings which in other jurisdictions may constitute an abuse of the process of a court.

The application of these observations to the construction of s.611 requires some qualification. Section 570 deals with the ordering of costs in court proceedings in relation to matters arising under the FW Act. In court proceedings the usual practice is that an order for costs follows the outcome of the substantive proceedings. As we have mentioned the Commission context is different. The Commission’s power to order costs only arises in the context of ss.376, 400A, 401, 611 and 780 of the FW Act. There is no general practice of cost following the event. Despite these differences the observations of Northrop J in Heidt are apposite to s.611.

Section 611 sets out a general rule - that a person must bear their own costs in relation to a matter before the Commission (s.611(1)) - and then provides an exception to that general rule in certain limited circumstances. The Explanatory Memorandum confirms this interpretation of the section, it is in the following terms:

“2353. Subclause 611(1) provides that generally a person must bear their own costs in relation to a matter before FWA.

2354. However, subclause 611(2) provides an exception to this general rule in certain limited circumstances. FWA may order a person to bear some or all of the costs of another person where FWA is satisfied that the person made an application vexatiously or without reasonable cause or the application or response to an application had no reasonable prospects of success.

2355. A note following subclause (2) alerts the reader that FWA also has the power to order costs against lawyers and paid agents under clauses 376, 401 and 780 which deal with termination and unfair dismissal matters.

2356. Subclause 611(3) provides that a person to whom a costs order applies must not contravene a term of the order.”

In the context of s.570 and its legislative antecedents courts have observed that an applicant who has the benefit of the protection of a provision such as s.570(1), (ie the general rule that parties bear their own costs), will only rarely be ordered to pay costs and that the power should be exercised with caution and only in a clear case. In our view a similarly cautious approach is to be taken to the exercise of the Commissions powers in s.611 of the FW Act.” 10 [Endnotes omitted]

[12] However, the legislature has recognised that there will be circumstances in which an order for costs directed to a person might be appropriate. Therefore, the Commission may exercise discretion to make an order that a person bears some or all of the costs of another person in relation to an application to the Commission, if the Commission is satisfied that:

(a) a person made an application, or responded to an application, vexatiously or without reasonable cause; or

(b) it should have been reasonably apparent to a person that that person’s application or response to an application had no reasonable prospect of success. 11

[13] Before the Commission begins to consider whether to exercise its discretion to make an order for costs, it must first be satisfied that one of the circumstances set out in the preceding subparagraphs are engaged in relation to an application or a response. Subparagraph (a) above is directed to an examination made of the circumstance at the time the application or response is made, while the existence of a circumstance in subparagraph (b) above may be discerned at various points in time during the conduct of a matter before the Commission and is not confined to the time at which a person makes, or responds to an application.

Vexatiously

[14] A person will make or respond to an application vexatiously if the person’s predominant purpose or motive is to harass or embarrass another person, or to gain a collateral advantage. 12 The issue which must be examined in determining whether a person acted vexatiously in making, or responding to, an application, is the person’s purpose or motive. In my view, it is not sufficient to point to a weakness in a person’s application or response and to conclude from this weakness that the application or response was made vexatiously. Evidence must be led or elicited which is directed to the person’s purpose and from which it can be concluded that a person was motivated to make, or respond to, an application by an intention or desire to harass or embarrass another person, or to gain some collateral advantage.

[15] As to “vexatiously”, the Full Bench in Church observed as follows:

“The question of whether an application was made ‘vexatiously’ looks to the motive of the applicant in making the application. It is an alternative ground to the ground that the application was made ‘without reasonable cause’ and may apply where there is a reasonable basis for making the application. In Nilsen v Loyal Orange Trust (Nilsen) North J observed that this context requires the concept of vexatiousness to be narrowly construed. His Honour went on to state that an application will be made vexatiously ‘where the predominant purpose ....is to harass or embarrass the other party, or to gain a collateral advantage’. Deane and Gaudron JJ made a similar observation in Hamilton v Oades in which they said:

‘The terms ‘oppressive’ and ‘vexatious’ are often used to signify those considerations which justify the exercise of the power to control proceedings to prevent injustice, those terms respectively conveying, in appropriate context, the meaning that the proceedings are ‘seriously or unfairly burdensome, prejudicial or damaging’ and ‘productive of serious and unjustified trouble and harassment’.” 13 [Endnotes omitted]

Without reasonable cause

[16] An application or response will not have been made without reasonable cause simply because it fails or is not accepted. 14 Considering whether an application or response was made without reasonable cause requires an examination of the nature and strength of the application or response. In Hatchett v Bowater Tutt Industries Pty Ltd (No 2)15 von Doussa J described the test that is imposed by the expression “without reasonable cause” as similar to that applied by a court on an application for the exercise of summary power to stay or to strike out a proceeding. His Honour said that, to illustrate the test in that context, expressions such as “frivolous”, “so obviously untenable that it cannot possibly succeed”, “manifestly groundless” and “bad beyond argument” had been used.16 In my opinion, these expressions are also apt to describe the test to determine whether an application or response has been made “without reasonable cause” within the meaning of s.611(2)(a) of the Act, but the test is by no means limited to these expressions.

[17] The phrase “without reasonable cause” has been engaged to support costs orders against an applicant whose application was “misconceived”, 17 although an application or response need not be properly described as “misconceived” for it to have been made without reasonable cause.18 In Kanan v Australian Postal and Telecommunications Union,19 Wilcox J considered that one 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 preceding, there was no substantial prospect of success. If success depends upon the resolution in the applicant’s favour one or more arguable points of law, it is inappropriate stigmatise the preceding as being “without reasonable cause”. But where, on the applicant’s own version of the facts, it is clear that the proceeding must fail, it may properly be said that the preceding lacks a reasonable cause”. 20 

[18] I respectfully adopt His Honour’s formulation as an appropriate means by which to determine whether an application or response has been made “without reasonable cause” for the purposes of s.611(2)(a) of the Act. Fundamentally, the decisions to which I have referred, show that careful scrutiny is required by the Commission of an application or response in order to ascertain whether that application or response was made without reasonable cause. Ultimately, “it is a matter of judgment, sometimes of fine judgment, in all the circumstances of a particular case whether a proceeding is brought without reasonable cause”. 21

[19] In similar vein, the Full Bench in Church said:

“We now turn to the expression ‘without reasonable cause’. 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 test is not whether the application might have been successful, but whether the application should not have been made. In Kanan v Australian Postal and Telecommunications Union, Wilcox J put it this way:

“It seems to me that one 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. If success depends upon the resolution in the applicant’s favour of one or more arguable points of law, it is inappropriate to stigmatise the proceeding as being ‘without reasonable cause’. But where, on the applicant’s own version of the facts, it is clear that the proceeding must fail, it may properly be said that the proceeding lacks a reasonable cause.”

In the context of an appeal the question becomes whether, having regard to the arguments available to the appellant at the time of instituting the appeal, there was no substantial prospect of success. As Wilcox CJ (with whom Madgwick J agreed) observed in Imogen Pty Ltd v Sangwin: 

“The prospect must be evaluated in the light of the facts of the case, the judgment appealed from and the points taken in the notice of appeal. If having regard to those matters, there was not insubstantial prospect of the appeal achieving some success, albeit not necessarily complete success, then it would seem to me it cannot be fairly described as having been instituted ‘without reasonable cause’. This is so even if, in the result, the appeal proved unsuccessful.” 

In the same matter Ryan J said:

“The existence of ‘‘reasonable cause’’ within the meaning of s 347 falls to be determined at the time when the relevant proceedings were instituted. The fact that the party instituting the proceedings later discontinues them is therefore not a matter to be taken directly into account in the application of the section. However, an appeal stands in somewhat different case from proceedings at first instance in that discontinuance may bear indirectly on the discretion conferred by s 347 by tending to confirm an impression derived from the grounds of appeal and the reasons for judgment below that the prospects of success on the appeal were slight.

Not without significance to an assessment of the reasonableness of the institution of an appeal are the amount at issue and the nature of the points raised by the notice of appeal. Where, as here, the appeal is essentially against findings of fact made by the trial judge after a two day hearing resulting in a judgment for $16,900 and raises no important or distinctive point of law or principle, the Court may more readily conclude that it was not reasonable in the circumstances to have instituted it. On a fairly fine balance of the relevant considerations and not without hesitation, I have been led to reach that conclusion in this case and agree with the Chief Justice and the orders which he has proposed. 

In construing s.570 and its legislative antecedents, courts have observed that the test imposed by the expression ‘without reasonable cause’ is similar to that adopted for summary judgement, that is ‘so obviously untenable that it cannot possibly succeed’, ‘manifestly groundless’ or ‘discloses a case which the Court is satisfied cannot succeed’.” 22 [Endnotes omitted] 

It should have been reasonably apparent to a person

[20] An assessment of whether the circumstance described in s.611(2)(b) existed is not limited to the time at which a person makes an application or response, although it may arise at that time. Knowledge gained by a person during the course of a proceeding and after making an application or response might lead to a conclusion that it should have been reasonably apparent to a person that the person’s application or response had no reasonable prospect of success. This knowledge could be gained, for example, at a time after the person has received an opposing party’s evidentiary material, or during the course of the hearing.

[21] Section 611(2)(b) directs attention to that which should have been “reasonably apparent to a person”. In this context, whether something should have been “reasonably apparent to a person”, is not to be determined by reference to the subjective views of the person. Rather, the question must be objectively determined. 23

No reasonable prospects of success

[22] Section 611(2)(b) also directs attention to the substance of an application or response. A conclusion that a particular application or response “had no reasonable prospect of success” is one that should only be reached with extreme caution in circumstances where the application or response is manifestly untenable or groundless, or so lacking in merit or substance, so as to be not reasonably arguable. 24

[23] In Spencer v The Commonwealth of Australia, 25 the majority (Hayne, Crennan, Kiefel and Bell JJ) of the High Court of Australia considered the meaning of the phrase, “no reasonable prospect,” in the context of s.31A of the Federal Court of Australia Act 1976. In that case, their Honours said the following:

“In many cases where a plaintiff has no reasonable prospect of prosecuting a proceeding, the proceeding could be described with or without the additional intensifying epitaphs like “clearly”, “manifestly” or “obviously” as “frivolous”,” untenable”, “groundless” or “faulty” but none of these expressions alone or in combination should be understood as providing a sufficient chart of the metes and bounds of the powers given by section 31A nor can the content of the word “reasonable” in the phrase, “no reasonable prospect” be sufficiently, let alone completely illuminated by drawing some contrast with what would be a frivolous, untenable, groundless or faulty claim.

Rather, full weight must be given to the expression as a whole. The Federal Court may exercise power under section 31A if, and only if, satisfied that there is no reasonable prospect of success. Of course it may readily be accepted that the power to dismiss an action summarily is not to be exercised lightly but the elucidation of what amounts to no reasonable prospect can best proceed in the same way as content has been given through a succession of decided cases to other generally expressed statutory phrases such as “just and equitable” when it is used to identify the ground for winding up of a company. At this point in the development of the understanding of the expression and its application, it is sufficient but important to emphasise that the evident legislative power as revealed by the text of the provision would be defeated if its application is read as confined to cases of a kind which fell within the earlier different procedural regimes.” 26 

[24] In Spencer, the High Court was saying that one should not make the mistake of only concluding that a proceeding has no reasonable prospect of success if it is frivolous, untenable, groundless or faulty and that full expression should be given to that phrase. It seems to me that the observations in Spencer are apt to apply to the construction and application of the phrase “had no reasonable prospect of success” as it appears in s. 611 of the Act.

[25] It seems to me that the circumstances of this case can aptly be described as involving the Costs Respondent making the unfair dismissal remedy application without reasonable cause. The Costs Respondent’s whole case was founded upon a lie designed by him even before his employment was terminated. The Costs Respondent told his employer that he had obtained a test of a urine sample supplied by him to his medical practitioner, and that the test showed a negative result. This was a lie.

[26] This lie carried over into the unfair dismissal remedy application lodged by the Costs Respondent in which he alleged that his dismissal was unfair because his employer did not take into account the clean result that he had obtained from an independent source prior to the dismissal. This assertion was false and the Costs Respondent knew it to be false. The lie was so central to the unfair dismissal remedy application that when it was uncovered as a lie during the proceedings, the case crumbled and the Costs Respondent, to use the colloquial, “did a runner” leaving his representative to clean up the mess and discontinue the proceeding.

[27] The lie continued in the witness statement that he filed in support of his application and in his evidence given under oath. I consider that the Costs Respondent did not have reasonable cause to commence the application. It seems to me also, that in the circumstances described above, it should, at the outset, have been apparent to the Costs Respondent, that his application had no reasonable prospect of success.

[28] As the application was based almost exclusively on the lie and the fabricated drug test result, I also consider that making the application in those circumstances, was vexatious. It seems to me that the application made was seriously and unfairly burdensome upon the Costs Applicant. It was required to respond to an application that was wholly based on a lie and fabricated evidence.

[29] I am therefore satisfied that the preconditions to the making of a costs order under s.611 are met and moreover, I am not aware of any compelling consideration which would weigh against the exercise of my discretion to make a costs order, and I propose to do so.

[30] Although it is strictly not necessary for me to do so, I should indicate that I am satisfied, for the purposes of s.400A of the Act, that the Costs Respondent caused all of the costs of the proceedings incurred by the Costs Applicant and it did so by an unreasonable act on his part, namely, making an application to the Commission and maintaining it until discontinued:

● in which a false assertion was made as to the results of the drug test undertaken through his medical practitioner; and
● filing of a witness statement which gave a false account of the result of the drug test undertaken; and
● attaching to the statement a fabricated drug test result showing a negative result; and
● the continuation of this deception in his evidence given under oath.

[31] The Costs Applicant urged that I should make an order for costs on an indemnity basis. In Stanley v QBE management services Pty Ltd 27, Commissioner Jones, as she was then, considered the power to order and the circumstances in which such an order might be made under s.611 of the Act.28 I adopt the Commissioner’s analysis, without repeating it.

[32] In my view, this is plainly a case in which indemnity costs are warranted. This is a case where the Costs Respondent posited a case as to his dismissal from the very beginning which he knew from the very beginning to be false. He persisted in his lie until he was finally caught out by the evidence of Dr Chaudhry. It seems to me that the case for an indemnity costs order against the Costs Respondent is plainly a fortiori. A costs order on an indemnity basis will be made.

[33] The Costs Applicant relied upon a statement of Mr Jason Fraumano, the Costs Applicant’s Southern Regional HR Manager (which because of the Costs Respondent’s failure to attend any hearing or to make submissions in relation to the costs application, was uncontested) to verify the costs that have been incurred by the Costs Applicant in relation to the Costs Respondent’s unfair dismissal application. On reviewing that statement, together with the legal costs and witness expenses incurred, I am satisfied that the costs incurred are reasonable and were necessarily incurred in response to the unfair dismissal remedy application. The total legal costs and expert witness disbursements incurred by the Costs Applicant is in the amount of $18,618.31. An order for the payment of costs in that amount will be made.

Conclusion

[34] I am satisfied that an order pursuant to s.611(2) that the Costs Respondent pay all of the costs of the Costs Applicant in relation to the Costs Respondent’s application for an unfair dismissal remedy should be made.

[35] An order giving effect to this decision is separately issued in PR580056.

DEPUTY PRESIDENT

 1   See reasons for decision at [[2016] FWC 1675] and order in PR578082.

 2   The Costs Respondent failed to attend the hearing listed on 19 January 2016, 26 February 2016 and 15 March 2016, Costs Respondent was due pursuant to directions earlier made to file his materials in opposition of the costs application by 15 April 2016 but failed to comply with directions. The Costs Respondent allowed a further period and so was required to file his materials by 3 May 2016 but again failed to comply with directions.

 3   Exhibit 1; Transcript 17 September 2015 PN 27 – PN 30.

 4   Exhibit 1 at [9] – [10] and attachment B thereto.

 5   Transcript 29 October 2015 PN 39 – PN 84.

 6   ibid at PN 95 – PN 97.

 7 The Commission may also make an order for costs under sections 376, 400A, 401 and 780.

 8 Section 611(1).

 9   [2014] FWCFB 810.

 10   Ibid at [21]-[27].

 11 Section 611(2)(a) and (b).

 12   See Qantas Airways Limited v Carter[2013] FWCFB 1811; Nilson v Loyal Orange Trust (1997) 76 IR 180 at 181.

 13   [2014] FWCFB 810 at [29].

 14   See R v Moore; Ex parte Federated Miscellaneous Workers’ Union of Australia (1978) 140 CLR 470 at 473.

 15 (1991) 28 FCR 324.

 16   Ibid at 327.

 17   See Standish v University of Tasmania (1989) 28 IR 129.

 18   See Thompson and Ors v Hodder and Ors (1989) 31 IR 300.

 19 (1992) 43 IR 257.

 20   Ibid at 264-265.

 21   See Council of Kangan Batman Institute of Technology and Further Education v Australian Industrial Relations Commission and Anor (2006) 156 FCR 275 at 290.

 22   Ibid at [30]-[33].

 23   See Baker v Salva Resources Pty Ltd (2011) 211 IR 374; Wodonga Rural City Council v Lewis (2005) 142 IR 188.

 24   See Baker v Salva Resources Pty Ltd (2011) 211 IR 374; Smith v Barwon Region Water Authority (2009) 187 IR 276 at [48].

 25 (2010) 241 CLR 118.

 26   Ibid at [59] - [60].

 27   [2012] FWA 10154.

 28   ibid at [15] – [30].

Printed by authority of the Commonwealth Government Printer

<Price code C, PR579992>