Mr James Mott v Diocese of Lismore T/A Diocese of Lismore

[2016] FWC 6385

[2016] FWC 6385

FAIR WORK COMMISSION

DECISION

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

Mr James Mott
v
Diocese of Lismore T/A Diocese of Lismore
(U2016/4035)

COMMISSIONER RIORDAN SYDNEY, 14 SEPTEMBER 2016

Application for costs.

[1] Mr James Mott was employed by the Trustees of the Roman Catholic Church for the Diocese of Lismore (the Diocese) as an IT Administrator commencing on 12 November 2007.

[2] Mr Mott resigned from his employment on 6 January 2016.

[3] Mr Mott made application to the Fair Work Commission (FWC) for an unfair dismissal remedy in accordance with section 394 of the Fair Work Act, 2009 (the Act) on 22 January 2016, claiming that he was forced to resign due to a restructure of the IT Department that was introduced by the Diocese.

[4] Mr Mott was represented by Mr Allan Cowley from S+P Lawyers. The Diocese was represented by Mr James Harmon from Hannigans Solicitors.

[5] Both parties had briefed Counsel for the hearing, Mr Mott had briefed Ms Anderson and the Diocese had briefed Mr Cross.

[6] Apart from the normal conciliation that was conducted by a FWC Conciliator, the parties agreed to participate in a further conciliation, conducted by Her Honour, Senior Deputy President Drake, following a discussion between the parties at the Directions Conference convened by the FWC as presently constituted.

[7] The hearing was scheduled for 12-13 July 2016 in Byron Bay. Her Honour conducted the conciliation conference by telephone on 5 July 2016. The matter did not settle at this conference.

[8] On the afternoon of 11 July 2016, Mr Cowley contacted my Chambers at 4.20pm to advise that Mr Mott was withdrawing his unfair dismissal application. A Notice of Discontinuance was filed at 4.24pm.

[9] On 12 July 2016, Mr Harmon wrote to Mr Cowley requesting that he be provided with the reasons why Mr Mott discontinued his claim, within 24 hours, whilst the Diocese was considering its position in relation to Costs.

[10] Mr Cowley responded on 13 July 2016, by way of a two page letter with 14 separate points explaining the rationale for Mr Mott’s decision and the advice that Mr Mott had received from Counsel.

[11] On 22 July 2016, the Diocese submitted an application for Costs totalling $55,793.93 in accordance with sections 400A and 611 of the act.

[12] Mr Cowley filed a form F54 Notice of Representative Ceasing to Act on 27 July 2016.

[13] Mr Mott filed submissions in relation to the Diocese Costs Application on 1 August 2016.

[14] Mr Cross, of Counsel, prepared submissions in reply that were filed by the Diocese on 18 August 2016.

[15] This decision relates to the Costs Application by the Diocese against Mr Mott.

Statutory Framework

[16] In its application for Costs, the Diocese has relied on sections 611 and 400A of the Act:

Section 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.

Section 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.

[17] Section 402 of Act provides that an application for Costs must be made within 14 days after the matter has been discontinued. The Diocese has satisfied this requirement.

Submissions

[18] The Diocese posited that Mr Mott’s unfair dismissal application was instituted vexatiously with the primary purpose to harass and/or embarrass the Catholic Church.

[19] The Diocese submitted that the application was instituted without reasonable cause because it was clear on the facts that Mr Mott could not satisfy the evidentiary requirement in relation to onus, ie, that the Catholic Church through its’ actions intended to bring the employment relationship to an end or any action which would probably result in the employment relationship coming to an end.

[20] Further, the Diocese argued that it should have been apparent to Mr Mott that he had no reasonable prospect of success and should have discontinued his application earlier. The Diocese claimed that discontinuing the matter on the eve of the hearing, was an unreasonable act or omission by Mr Mott.

[21] Relevantly, Mr Mott submitted that he is not familiar with workplace law. Mr Mott engaged S+P Lawyers to act on his behalf.

[22] Mr Mott posited that he received legal advice which said that he had a valid claim with a good prospect of success.

[23] Mr Mott argued that the Diocese had access to his workplace emails and therefore his legal advice, which they tendered in its evidence.

[24] Mr Mott claims that this email shows that he was acting on legal advice and that he was not out to seek revenge against the Diocese.

[25] Mr Mott posited that after the restructure of the IT Department, the Diocese offered him a role that was a demotion in duties and title, a reduction in remuneration and a new list of duties and work locations that were not suitable due to his physical impairment that had been caused by a non-work related motor bike accident in 2014.

[26] Further, Mr Mott claimed that the Diocese agreed to participate in two conciliation conferences, thereby necessitating increased legal expenses to both parties, yet the Diocese refused to make any offer to settle the matter at either conference.

[27] Mr Mott submitted that, following the unexpected unavailability of one of his key witnesses to give evidence, four days before the hearing, that he became concerned that he could not satisfy the “onus” hurdle, as explained by his legal representatives.

[28] Mr Mott also advised that he was struggling to pay his mounting legal costs after being unemployed for a number of months and that this situation would be compounded by him taking leave without pay from his new employment for two days to attend the hearing.

[29] Mr Mott claimed that he was placed under additional stress when, whilst meeting with his legal team, his wife contacted him to advise him that his dog had been badly injured and would have to be put down.

[30] Mr Mott posited that after discussing all of his concerns with his lawyers, he moved quickly to discontinue the matter rather than wait until the day of the hearing, thereby saving additional costs and inconvenience to the parties, the witnesses and the FWC.

[31] In reply, the Diocese argued that the explanations provided by Mr Mott for discontinuing his application “lacked plausibility”.

[32] Further, the Diocese posited that the Applicant did not bring any evidence to suggest that the Catholic Church wanted to bring the employment relationship to an end. The Diocese referred to Mr Mott’s Statutory Declaration where he said that he would not have resigned if he had been offered more money. Therefore, the Diocese submitted, “that it should have been reasonable apparent to Mr Mott that the matter had no reasonable prospect of success and should have been discontinued (s611) and/or it was an unreasonable act or omission not to discontinue the matter earlier (s400A).”

[33] Finally, the Diocese suggested that Mr Mott had shown no concern about the Church incurring on-going legal costs. The Diocese submitted that the failure to discontinue the matter was “possibly” an unreasonable omission on the part of Mr Mott.

Consideration

[34] I have taken into account the submissions and carefully considered all of the precedents that have been submitted by the parties. I cannot determine the facts in this matter, on the basis that the case did not proceed to hearing.

[35] I have taken into account that section 611(1) of the Act, basically stipulates that each party must bear their own costs in relation to a matter before the FWC. Section 611(2) provides a discretion to the FWC Member to override this stipulation, but only if the application was made:

• Vexatiously or without reasonable cause (s611(2)(a)); or



• In circumstances where it should have been apparent to Mr Mott that his application had no reasonable prospect of success. (s611(2)(b)

[36] In Nilsen v Loyal Orange Trust (Nilsen), North J held:

“The next question is whether the proceeding was instituted vexatiously. This looks to the motive of the applicant in instituting the proceeding. It is an alternative ground to the ground based on a lack of reasonable cause. It therefore may apply where there is a reasonable basis for instituting the proceeding. This context requires the concept to be narrowly construed. A proceeding will be instituted vexatiously where the predominant purpose in instituting the proceeding is to harass or embarrass the other party, or to gain a collateral advantage.”  1

[37] In Hamilton v Oades, Deane and Gaudron JJ 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 and unfairly burdensome, prejudicial or damaging" and "productive of serious and unjustified trouble and harassment."” 2

[38] In Church v Eastern Health, (Church) a Full Bench of the FWC held that:

“[29] 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 Nilson v Loyal Orange Trust (Nilsen) North J observed that this context requires the concept of vexatiousness to be narrowly construed.” 3

[39] The Diocese has submitted that Mr Mott has made his application primarily to harass and embarrass the Catholic Church. I am not aware of any evidence which identifies any harassment or embarrassment that has been inflicted upon the Church or the Diocese. In my view, the only way that the Church could have been embarrassed as a result of this process is if I had determined the substantive proceeding in favour of Mr Mott and concluded that the conduct of the Diocese was inappropriate. On the basis that this did not occur, I struggle to see how the Church could have been harassed or embarrassed by Mr Mott’s application. I accept that the Diocese may be embarrassed, having spent nearly $56,000 in legal fees, when Mr Mott was only seeking a remedy of $39,000 and agreed to participate in a conciliation conference to negotiate a settlement. I have taken this into account.

[40] The Diocese referred me to the Full Bench decision in Church in relation to determining whether Mr Mott’s application was initiated without reasonable cause:

“[30] 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.” 4

[41] In Keep v Performance Automobiles Pty Ltd 5(Keep) a Full Bench of the FWC endorsed the approach in Church and provided the following summary in relation to the appropriate principles in determining whether an application was made without reasonable cause:

“The proper construction of s.611(2)(a) was recently considered by a Full Bench in Church v Eastern Health t/as Easter Health Great Health and Wellbeing (Church). Church is authority for the following propositions:

(i) The power to order costs pursuant to s.611(2)(a) should be exercised with caution and only in a clear case.

(ii) 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.

(iii) One way of testing whether a proceeding is instituted ‘without reasonable cause’ is to ask whether upon the facts known to the applicant at the time of instituting the proceeding, there was no substantial prospect of success.

(iv) 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.’’

[42] I have taken into account that Mr Mott is an IT specialist, not an expert in industrial/workplace law. I have taken into account that Mr Mott sought legal advice from a highly experienced legal practitioner. I have taken into account that Mr Mott’s legal advice was that he had an arguable case in relation to the concept of constructive dismissal.

[43] Based on the obiter in Keep, I do not regard Mr Mott’s application as being manifestly groundless or without prospect of success. In fact, having read all of the materials that had been submitted before the hearing date, I was of the view that Mr Mott had a difficult but arguable case.

[44] In Deane v Paper Australia Pty Ltd a Full Bench of the AIRC said that the Commission should exercise caution before arriving at the conclusion that an application had no reasonable prospect of success. I have taken this into account.

[45] In Baker v Salva Resources Pty Ltd (Baker), a Full Bench said:

““[10] The concepts within s.611(2)(b) “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.” 6

[46] Following Baker, I am required to consider two issues. Firstly, did Mr Mott’s application have a reasonable prospect of success and secondly was Mr Mott’s application manifestly untenable or groundless or so lacking in merit or substance as to be not reasonable arguable.

[47] In PN43 above, I indicated that having viewed all of the materials that had been submitted that I was of the view that Mr Mott had a difficult but arguable case. An obvious issue which would have required a great deal of qualification was how the Diocese could suggest that a payment of $12,000 (gross) could be regarded as compensation for the loss of a company provided vehicle. Such a proposition appears “light” in the circumstances. Clearly the cross examination of the witnesses would have proven pivotal. As a result of my view that Mr Mott had an arguable case, I cannot find that Mr Mott’s application was manifestly untenable or lacking in merit. I have taken this into account.

[48] The Diocese made the following submissions in relation to section 400A:

“Section 400A of the Act requires a finding that the first party caused costs to be incurred by the second party by some unreasonable act or omission on the part of the first party.

The phrase unreasonable act or omission was considered by the Full Bench in Roy Morgan Research Ltd v Baker. The following principles can be taken from the authorities cited in Roy Morgan Research:

• a failure to inform another party of an inability to attend proceedings would be, if intentional, unreasonable and if accidental, an unreasonable omission; and



• a failure to advise the other party of the first party’s intentions if deliberate or reckless would be unreasonable and, if an omission, could be equally unreasonable;

Section 400A was inserted into the Act by virtue of the Fair Work Amendment Act 2012. In relation to S. 400A of the Act, the Explanatory Memorandum to the Fair Work Amendment Bill 2012 stated:

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. …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 application 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.” 7

[49] In Stagno v Frews Wholesale Meats (Stagno), a Full Bench said:

“This last extract introduces a point of distinction between s 170CJ(1) and (2). The former refers to ‘‘without reasonable cause’’, the latter to ‘‘acted unreasonably’’. This anomaly, as it was described, is noted by a full bench in Lloyd v International Health and Beauty Aids Pty Ltd t/as Elly Lukas Beauty College (1998) 83 IR 458; Print Q5446 and, by inference, the bench is of the view that the tests are different in s 170CJ(1) and (2). That there is a different formula is clear but we are of the view that the formulations are based on the stage of proceedings at which they occur. Section 170CJ(1) relates to the initiation of proceedings. Section 170CJ(2) relates to the failure to discontinue or the discontinuance of the matter. In each case what attracts the discretion to award costs is unreasonable action or the absence of sufficient reason for the action taken. What is considered to be without reason is determined by reference to the stage that the proceeding has reached. We note that this leaves open the possibility that proceedings may commence which are with reasonable cause but may, in particular circumstances at a later stage, be further prosecuted unreasonably.

We are of the view that a party to a proceeding commenced under s 170CE of the Act in which the Commission has begun arbitrating has acted unreasonably in failing to discontinue the matter if when, at the relevant time, upon the facts apparent to the applicant there was not substantial prospect of success.” 8

[50] Based on the obiter in Stagno, I am drawn to the time at which Mr Mott believed that his case had become unlikely to succeed. This occurred on the day before the scheduled hearing when Mr Mott explained to his Counsel that one of his key corroborating witnesses, Mr Atkins, was not available to give evidence. The advice from his legal team at this point was, that the jurisdictional issue that needed to be determined had become very difficult. Appropriately, Mr Mott discontinued the matter that afternoon. I have taken this into account.

[51] I have also taken into account the unrefuted accusation from Mr Mott that the Diocese, after agreeing to participate in a telephone conciliation conference under the auspices of Senior Deputy President Drake, refused to put an offer to settle the matter. Such deliberate inactivity was clearly a waste of time and money for the parties and the FWC. Such behaviour cannot be condoned, nor should it be repeated. If the Diocese simply wanted to go to hearing then they should not have agreed to participate in the conciliation before Her Honour.

Conclusion

[52] I am satisfied that Mr Mott’s application was not vexatious. There is no evidence that Mr Mott to commenced proceedings and incurred substantial legal costs simply to harass or embarrass the Diocese. I find that Mr Mott, by acting in accordance with his legal advice in making his application, did not act vexatiously.

[53] I am not satisfied that Mr Mott’s application did not have a reasonable prospect of success. I accept that Mr Mott believed that he had been demoted and was financially disadvantaged as a result of the restructuring of the IT Department. As I have said previously, I believe that Mr Mott had a difficult but arguable case. I find that Mr Mott’s case was not lacking in merit or manifestly untenable.

[54] Mr Mott did not deliberately cause the Diocese to incur additional costs. The decision to employ legal representation was one made by the Diocese. The decision to not participate in good faith during the second conciliation was made by the Diocese. The decision to have Counsel attend the day before the hearing was, once again, made by the Diocese. Appropriately, Mr Mott withdrew his application based on the advice that he received from his legal advisors the day before the hearing. I find that Mr Mott did not participate in an unreasonable act or omission.

[55] The application for Costs is dismissed.

COMMISSIONER

 1 (1997) 76 IR 180.

 2   Hamilton v Oades (1989) 166 CLR 486.

 3   [2014] FWCFB 810

 4   Ibid n 25

 5   [2015] FWCFB 1956

 6   [2012] FWAFB 4014

 7   Respondent submissions on Costs – 18 August 2016

 8   Ibid.

Printed by authority of the Commonwealth Government Printer

<Price code C, PR585121>