Mr John Robert Dean v Sybecca Pty Ltd T/A Sleepy Lagoon Hotel
[2011] FWA 1010
•17 FEBRUARY 2011
[2011] FWA 1010 |
|
DECISION |
Fair Work Act 2009
s.394 - Application for unfair dismissal remedy
Mr John Robert Dean
v
Sybecca Pty Ltd T/A Sleepy Lagoon Hotel
(U2010/7072)
SENIOR DEPUTY PRESIDENT RICHARDS | BRISBANE, 17 FEBRUARY 2011 |
Summary - can a cost application be against parties who made an earlier cost application under s.401 of the Act? - jurisdiction re: s.596 precondition - meaning of “matter” in s.401 of the Act - jurisdiction to seek costs against legal firm - when is a matter “determined” for purposes of s.402 of the Act - s.611 of the Act.
[1] This application for costs is made both under s.611 of the Fair Work Act 2009 (“the Act”) (as set out below) and s.401 of the Act (as set out below) by Mr Adrian Carroll and Harpsull Holdings Pty Ltd T\As Carroll and Associates, acting as paid agent for Mr John Robert Dean (“the Applicant”). The application is against Sybecca Pty Ltd T/As Sleepy Lagoon Hotel (“the first party”) on grounds of s.611(2)(a) and (b) of the Act. The application is also against Mr Christopher Campbell (“the second party”) who is a solicitor, on grounds of s. 401(1)(a)(i) and (ii) of the Act. Finally, the application also seeks costs against Aitken Legal - a Law Firm as represented by Mr Christopher Campbell (“the third party”) on grounds of s. 401(1)(a)(i) and (ii) of the Act.
[2] This is the second costs application (and I will refer to it as such below) arising from proceedings in the matter of John Robert Dean (“the Applicant”) v Sybecca Pty Ltd (“the Respondent”) in U2010/7072 (“the substantive matter”). The first costs application was made on the 19 November 2010 (“the first costs application”) by the first party and sought costs against the Applicant in the substantive matter and his paid agent (Adrian Carroll and Harpsull Holdings Pty Ltd T\As Carroll and Associates). This application was withdrawn on 24 January 2011, which was some weeks prior to the hearing date of 10 February 2011. There is some discussion of this below.
[3] The Applicant (in this second costs application) now seeks costs arising from the conduct of the first, second and third parties in relation to the first costs application.
[4] Because of the protracted nature of the various applications involving these parties and the multiplicity of claims which have been made, I will attempt to deal comprehensively with the various applications and the issues they have raised, if only to bring some hopeful finality for all the parties involved, or at least properly frame any further action they might contemplate.
[5] At the outset, a number of jurisdictional issues arise which must be dealt with before further dealing with the second costs application. The first of these concerns is whether the application in respect of both its parts (under s.611 of the Act and s.401 of the Act) has been validly made.
The Application for Costs under s.401 of the Act
[6] It appears to me that the second costs application faces jurisdictional difficulties in respect of s.401 of the Act. This is because there are various preconditions to an application being made under s.401 of the Act.
[7] Section 401 of the Act reads as follows:
401 Costs orders against lawyers and paid agents
(1) If FWA has granted permission in accordance with section 596 for a person to be represented by a lawyer or paid agent in a matter arising under this Part before FWA, FWA may make an order for costs against the lawyer or paid agent if FWA is satisfied:
(a) that:
(i) the lawyer or paid agent caused costs to be incurred by the other party to the matter because the lawyer or paid agent encouraged the person to start or continue the matter; and
(ii) it should have been reasonably apparent that the person had no reasonable prospect of success in the matter; or
(b) that the lawyer or paid agent caused costs to be incurred by the other party to the matter because of an unreasonable act or omission of the lawyer or paid agent in connection with the conduct or continuation of the matter.
(2) FWA may make an order under this section only if the other party to the matter has applied for it in accordance with section 402.
(3) This section does not limit FWA’s power to order costs under section 611.
Section 401: permission for a person to be represented by a lawyer or paid agent
[8] The initial precondition to a valid application being made under s.401 of the Act is that “FWA has granted permission in accordance with section 596 for a person to be represented by a lawyer or paid agent in a matter arising under this Part before FWA”.
[9] As I mentioned above, this application concerns the first costs application (not the substantive matter). That is, the focus of the conduct about which costs are sought relates to the first costs application (not the substantive matter, being the original arbitral proceedings). There was no hearing in relation to the first costs application because the application was withdrawn.
[10] It follows that FWA did not grant permission “in accordance with section 596 for a person to be represented by a lawyer or paid agent in a matter arising under this Part before FWA”, for the purposes of the first cots application which is the subject of this application.
[11] Consequently, there can be no valid costs application under s.401 of the Act, and I must dismiss the application so far as it agitates an application under s.401 (in respect of the second and third parties). I add that the work done by s.401 of the Act in these respects is also suggestive of the wider intent of the section, which I will consider further below.
Section 401: the application against the third party - Aitken Legal
[12] In my view, if the application had not failed for want of jurisdiction in the above respect, it faced further jurisdictional challenges in two other respects. The first of these concerns the application against the third party Aitken Legal, a Law Firm.
[13] Section 401 of the Act concerns costs applications against “the lawyer or paid agent”.
[14] A lawyer and a paid agent are both defined terms under the Act. In this regard s.12 of the Act provides the following definitions:
“lawyer means a person who is admitted to the legal profession by a Supreme Court of a State or Territory.”
“paid agent, in relation to a matter before FWA, means an agent (other than a bargaining representative) who charges or receives a fee to represent a person in the matter.”
[15] The definition of a “lawyer” for purpose of s.12 of the Act appears to me to be exhaustive. The focus of the application, therefore, is upon the discrete conduct of “the lawyer” as a natural person who is admitted to the legal profession by a Supreme Court of a State or Territory, and not otherwise. There is no scope for a lawyer to be a natural person in a wider meaning of a body corporate as a body corporate cannot be admitted to the legal profession for the purposes of the definition at s.12 of the Act.
[16] Consequently, I see no basis for an application to be made against such an entity or partnership as Aitken Legal (the third party), or in any vicarious sense either.
[17] Had the application otherwise been a valid application, for these reasons I would have been disposed to dismiss the application so far as it relates to the third party (a course of action about which the Applicant in the second costs application appears to have concurred at the hearing).
Section 401: jurisdiction to make a costs application in relation to an earlier costs application
[18] I make a further point about the jurisdiction to make a costs application under s.401 of the Act in relation to an earlier costs application (made under s.401 of the Act) that arose in relation to a substantive matter heard under Part 3-2 of the Act.
[19] It appears to me, albeit without the benefit of full argument though, that as a matter of construction a costs application made under s.401 of the Act and which accords with the requirements of s.402 of the Act may only be made against a matter arising under Part 3-2. That is, the application is a singular opportunity (albeit it for both parties) to seek costs in response to a matter arising under Part 3-2 of the Act.
[20] Section 401 of the Act, therefore, does not appear to me to afford an opportunity for parties to engage in a continuous, circular process of making cost applications against prior costs applications (as if the prior cost application itself had been re-characterised as a matter arising under Part 3-2 in relation to which a further costs application may apply, which it is not in its own right).
[21] For this additional reason, the application under s.401 of the Act against the second and third parties would have fallen into jurisdictional doubt.
Section 401(1)(a): the lawyer or paid agent caused costs to be incurred by the other party to the matter because the lawyer or paid agent encouraged the person to start or continue the matter and it should have been reasonably apparent that the person had no reasonable prospect of success in the matter
[22] For completeness, I add that the further claim against the second party (the lawyer) and arguably as well the third party (Aitken Legal), is that in making the first costs application they (or at least the second party) failed to comply with the requirement of s.402(a) of the Act, and did not make the first application for costs within 14 days of the matter being determined.
[23] I make a number of observations about this claim.
[24] Firstly, the claim itself requires that both s.401(1)(a)(i) and s.401(1)(a)(ii) of the Act be satisfied in relation to both the first and second parties (given that the application did not agitate grounds under s.401(b) of the Act).
[25] For this costs application to be a valid application the lawyer or paid agent against whom the costs application is made must have fulfilled all the conditions in both s.401(1)(a)(i) and s.401(1)(a)(ii) of the Act. That is:
(a) the lawyer must have encouraged the person; and
(b) have done so in circumstances where there was no reasonable prospect of success; and
(c) to have done (a) and (b) above in relation to the matter.
[26] I should initially indicate that in relation to (c) above, I am not of the view that the “matter” in relation to which the alleged conduct by the lawyer (and perhaps also the law firm) is said to have occurred (for purposes of s.401(1)(a)(i) and s.401(1)(a)(ii) of the Act) was in relation to the actual substantive “matter”. The “matter” in this second costs application is the first costs application (not the substantive matter).
[27] Consistent with my reasoning above, the matter referred to in respect of which a costs application can be brought under s.401(1)(a)(i) and s.401(1)(a)(ii) of the Act (or s.401(1)(b) of the Act) is a matter arising under Part 3-2 of the Act, and not the costs application itself.
[28] I add that in respect of (a) above, there is nothing before me from an evidentiary perspective as to whether or not the second party “encouraged” the Applicant to make an application, as opposed to providing legal advice in the ordinary manner. The applicant in this second costs application did not seek to adduce any evidence in this regard or call any person or party.
[29] Even if I am incorrect in these respects and it was permissible for the Applicant in this second costs application to seek costs against the second party, I do not consider that the condition stipulated at (b) above was satisfied.
Section 402 of the Act: was the application made within 14 days of FWA determining the matter?
[30] The Applicant’s contention in this regard was that it should have been reasonably apparent to the second party as a lawyer and the third party representing the first party that the first application for costs had no reasonable prospect of success, as the application was not made within 14 days of FWA “determining” the substantive matter for purposes of s.402 of the Act.
[31] Section 402 of the Act provides that an application for costs under s.401 of the Act is conditional upon it being made within a stipulated period of time:
“402 Applications for costs orders
An application for an order for costs under section 611 in relation to a matter arising under this Part, or for costs under section 401, must be made within 14 days after:
(a) FWA determines the matter; or
(b) the matter is discontinued.”
[32] In my decision of 4 November 2010 regarding the substantive matter I found as follows:
“[148] In light of this reasoning, the Respondent is ordered to pay 4 weeks’ salary (subject to ordinary taxation) and an additional further amount equivalent to $1,100.00 net (to be grossed up as salary and then subject to ordinary taxation).
[...]
[150] Given the financial circumstances of the Respondent, I will afford it a period of seven working days in which it may propose a reasonable schedule of payments in order to discharge the amount in compensation identified above.
Section 393 of the Act reads in these regards as follows:
393 Monetary orders may be instalments
To avoid doubt, any order by FWA under subsection 391(3) or 392(1) may permit the employer concerned to pay the amount required in instalments specified in the order.
[151] To avoid doubt, an order by FWA under subsection 391(3) or 392(1) may permit the employer concerned to pay the amount required in instalments specified in the order.
[152] In the event that a reasonable schedule of instalment payments is provided, I will give effect to this schedule by way of an order.
[153] In the event no reasonable schedule of payments is put to me within the requisite time period, I will order that the Respondent make full payment to the Applicant in 14 working days from the date of this decision.
[33] I subsequently received a schedule of payments that I considered to be reasonable and on 12 November 2010 ordered that payments be made by the Respondent over a five week period. The first four payments were to be paid at $1,000 gross per week with tax deducted and the fifth week deposit to be based on the grossed up sum of $1,100.00, being $1,426 less tax of $326 1. The further grossed up sum represented the substituted earnings arising from the provision of accommodation on site.
[34] I also ordered that the timing of the schedule of payments was for the first payment to be made on Tuesday 16 November 2010 and each instalment on each successive Tuesday thereafter with the final fifth payment being made on Tuesday 14 December 2010.
[35] The first costs application was made on 19 November 2010.
[36] The Applicant in the first costs application claimed the relevant date upon which FWA “determined the matter” for the purposes of s.402 of the Act was 12 November 2010, the date on which the order was issued. The Respondent to the first costs application and the Applicant in the second costs application contends that the first costs application was made more than 14 days after my decision of 4 November 2010. It is this contention that is the basis of the second costs application in relation to s.401(1)(a)(ii) of the Act in relation, it appears, to both the second and third parties.
[37] It seems to me that the action by which FWA determines the matter is a reference to the action that brings the matter to finality.
[38] In this case, it was the order made pursuant to s.392 of the Act on 12 November 2010 that brought the matter to finality. Indeed, s.392 of the Act refers to an “order for the payment of compensation to a person must be an order that the person’s employer at the time of the dismissal pay compensation [...] in lieu of reinstatement.” Until such time as the order was issued there was no obligation upon the original Respondent in the substantive matter to do anything.
[39] I add further that I left for determination in the final order a consideration as to whether a proposed schedule of payments was appropriate or not. That is, the matter had not been determined, or brought to finality, until I issued the order obligating the Respondent to do certain things (pay certain monies) and determined whether the schedule of payments it proposed was appropriate.
[40] This aside, the effect of s.392 of the Act is that a matter is not determined (in so far as it is brought to finality) for purposes of compensation until an order is issued. Similarly, an order is required for the purposes of s.390, s.391 and s.392 of the Act, all which relate to unfair dismissal remedies (reinstatement and\or compensation).
[41] It is difficult to consider, as a matter of construction, that the substantive matter before me (in which the Applicant had been successful in an application for an unfair dismissal remedy) could be determined (or brought to finality) other than by the action on FWA’s part in making the relevant order (for reinstatement and\or compensation), which has the requisite binding effect (s.405).
[42] In my view, therefore, the application for costs was compliant with the time requirements set out at s.402 of the Act. No costs application therefore can be made (putting aside my earlier comments on the validity of the second cost application) against the second party on grounds of s.401(1)(a) of the Act on these grounds.
The Application for Costs under s.611 of the Act
[43] As mentioned above, the second costs application included an application for costs against the first party under s.611(2)(a) of the Act and s.611(2)(b) of the Act.
[44] Section 611 of the Act reads as follows:
611 Costs
(1) A person must bear the person’s own costs in relation to a matter before FWA.
(2) However, FWA may order a person (the first person) to bear some or all of the costs of another person in relation to an application to FWA if:
(a) FWA is satisfied that the first person made the application, or the first person responded to the application, vexatiously or without reasonable cause; or
(b) FWA 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: FWA can also order costs under sections 376, 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).
[45] The essential claim in this regard is that the first costs application under s.401 was without merit and as such, an inference can be drawn that the first party (Sybecca Pty Ltd) acted vexatiously etc.
[46] Essentially, the argument put in support of the first costs application is that the second party (the paid agent representing the Applicant) caused costs to the Respondent (in the substantive matter) for reasons of:
- having encouraged the Applicant to continue the matter when he should have compromised his expectations (s.401(1)(a)(i) of the Act); and
- it should have been apparent to the second or third parties that the Applicant had no reasonable prospects of success in relation to the compensation sought (which was six months of salary posited as a net amount of $15,000.00) (s.401(1)(a)(ii) of the Act); or
- that there were costs caused by an unreasonable act or omission by the paid agent in connection with the conduct or continuation of the matter (s.401(1)(b) of the Act). The unreasonable act or omission being the provision of advice to the Applicant that he could obtain six months or his salary in compensation.
[47] I should further add that the reason the Respondent contended that the Applicant's position for purposes of settlement was unachievable was because the Applicant had been paid two week’s salary in lieu of notice, which was an amount that would be deducted from any order of an amount to be paid in lieu of reinstatement. Further, the Respondent contended that the Applicant's performance and conduct was capable of being demonstrated as such that an order of the scale sought by the Applicant was unrealistic.
[48] It appears that the Respondent made three express offers to settle the matter on a commercial basis after a conciliation conference conducted on 16 April 2010 had been unsuccessful in resolving the matter,.
[49] The Respondent’s evidence was that for the entirety of the matter, the Applicant had sought a net payment of $15,000.00, which was equivalent to six months’ salary gross.
[50] The first of these offers was on 21 April 2010, and amounted to $2,000.00 (gross) in addition to a two week notice period paid upon termination.
[51] This offer (which was accompanied by a lengthy case review from the Respondent's solicitor) was rejected in particularly acrimonious terms by the Applicant's paid agent or lawyer 2. The Applicant's paid agent again expressly stated that his client was uninterested in any settlement offer less than six months of salary3.
[52] A second offer was made by the Respondent on 1 July 2010.
[53] On that occasion, the Respondent’s solicitor directed correspondence to the Applicant’s paid agent or lawyer and indicated that :
We hold our client’s instructions to offer a sum of eight thousand dollars ($8,000.00) gross (being equivalent to a further eight (8) weeks wages).
[...]
The offer of settlement is open for a period of 14 days from the date of this letter.
[...]
If your client fails to accept the offer then at the conclusion of the hearing of this matter, on your client receiving a compensation in a sum less than the offer as made (including bringing to the attention of Fair Work Australia the two (2) week notice period paid), then our client will seek from Fair Work Australia an order for costs against your client (or any other costs order available under the Act) for the failure to accept the monies offered in settlement by our client. 4
[54] On 5 July 2010 the Applicant's paid agent indicated that the offer was rejected and that his client’s “counter offer” was his earlier position - $15,000.00 net 5.
[55] As indicated above, I ordered the Respondent to pay the Applicant $5,426.00 (gross).
[56] Various performance issues facing the Applicant were put to him, if not at the conciliation conference, then subsequently by detailed correspondence from the Respondent's solicitor. The articulation of these issues should have placed the paid agent on notice that the matter was contested on substantive grounds which presented actual risks for his client. Some of these issues were to become salient in my eventual decision because they had bearing on my estimation of duration of the Applicant's employment.
[57] It is evident on the materials before me that the Respondent made the issue of costs front and centre to its efforts to resolve the application. It brought to the attention of the Applicant’s paid agent, in quite detailed written correspondence, the unlikelihood (given the various circumstances of the Applicant's case as it believed them to be at the time) that it would result in a payment of $15,000 net to the Applicant in the substantive matter.
[58] Further, given the acrimonious rejection of the offer of $8000.00 (gross), the personalised engagement by the paid agent in the matter and the degree of recalcitrance to move from the demand for $15,000.00 net, the Respondent formed a view, it appears, that the paid agent had encouraged the Applicant on a course that had no prospect of success.
[59] On an objective evaluation of the circumstances as they were at the time the first costs application was made, the Applicant in relation to that application for costs (the Respondent in the substantive matter) had not acted vexatiously or without reasonable cause in making the first costs application. The circumstantial milieu in which the Respondent found itself upon the substantive matter being determined gave the Respondent some material grounds on which to file against the Applicant for costs.
[60] Of course, the circumstantial milieu changed. On 6 January 2011, the Applicant in the substantive matter filed a witness statement in response to the first costs application. In that witness statement the Applicant, amongst other things, stated that he at all times gave instructions to his paid agent to act as he (the paid agent) did and that the paid agent never held out the prospect that he might achieve the so-called maximum entitlement under the Act.
[61] On 24 January 2011, and some weeks before the hearing date scheduled for 10 February 2010, the Applicant in the first costs application filed a notice of discontinuance in relation that application.
[62] There appears to be no scope for me to draw an adverse inference from the conduct of the first party (or even the second party) in the first costs application, such that the conduct would attract the jurisdiction of s.611(2)(a) of the Act and s.611(2)(b) of the Act in respect of a second costs application. The circumstances in which the first application for costs was initiated and discontinued appear to me to be reasonable in the circumstances, or certainly not indicative of any vexatious intention.
Section 401(1) of the Act: Discretion
[63] Section 401(1) of the Act preserves for FWA a discretion to award costs, subject to the various preconditions set out further in that section (most of which have been dealt with above) being satisfied. It relevantly reads as follows:
[...] FWA may make an order for costs against the lawyer or paid agent if FWA is satisfied [...]
[64] For the reasons I have given above, none of the preconditions necessary to the exercise of discretion have been satisfied in this application, and because of this, the discretion is not available to me.
CONCLUSION
[65] For all the reasons I have given above, the second costs application as I have defined it above is dismissed.
SENIOR DEPUTY PRESIDENT
Appearances:
Mr. J. Fuhrman-Luck for the Applicant
Mr. J. Merrell for the Respondent
Hearing details:
2011.
Fair Work Australia, Brisbane.
February 10.
1 PR503376
2 Exhibits CJC3 and CJC4 to the Affidavit of Christopher James Campbell sworn 15 December 2010.
3 Exhibit CJC4 to the Affidavit of Christopher James Campbell sworn 15 December 2010
4 Exhibit CJC6 to the Affidavit of Christopher James Campbell sworn 15 December 2010
5 Exhibit CJC7 to the Affidavit of Christopher James Campbell sworn 15 December 2010
Printed by authority of the Commonwealth Government Printer
<Price code C, PR506793>
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