Mr Muhammad Khan v Australian Islamic College of Sydney

[2014] FWC 8902

[2014] FWC 8902

FAIR WORK COMMISSION

DECISION

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

Mr Muhammad Khan
v
Australian Islamic College of Sydney
(U2014/10736)

COMMISSIONER CARGILL SYDNEY, 11 DECEMBER 2014

Application for Costs.

[1] This decision concerns an application for costs (the application). The application has been made by the Australian Islamic College of Sydney (the College) which is the respondent to a claim for an unfair dismissal remedy made by Mr M Khan pursuant to section 394 of the Fair Work Act 2009 (the Act) (the claim). The application was made on 28 October 2014 which is within the 14 day period after Mr Khan lodged a notice of discontinuance of his claim thereby meeting the requirements of section 402 of the Act. The application is made on two bases: section 400A and section 611 of the Act.

[2] The substantive claim was listed for arbitration on 17 October 2014. As required by directions issued on 8 August 2014, both parties lodged outlines of submissions and witness statements for the purposes of the arbitration. The final statement lodged by the College was served on Mr Khan on 29 September 2014.

[3] The arbitration did not take place because the claim was discontinued by Mr Khan. Self-evidently, the witness statements were not put into evidence for the purpose of a hearing on the substantive claim. However both parties tendered affidavits at the hearing of the costs application. The College provided an affidavit by Mr Burke, its solicitor. This became Exhibit AICS1. Mr Khan provided an affidavit which was marked Exhibit Applicant 1. It should be noted that paragraphs 8 and 9 and Annexure F of Mr Khan’s affidavit were struck out.

[4] Mr Khan was cross-examined about the contents of his affidavit. Mr Burke was not. It should be noted that, in his affidavit, Mr Burke deposes that he relies upon the witness statements filed by the College in the substantive matter without necessarily annexing them. Clearly Mr Burke could not give any evidence about the contents of those statements as they were all made by persons other then himself. Similarly, Mr Khan could not give evidence in relation to two statements made by his wife which are attached to his affidavit.

[5] The evidence in the affidavits is dealt with below. In order to provide contextual background to the issues to be determined in the costs application it is necessary to set out some material relating to the substantive claim.

THE CLAIM

[6] Mr Khan was employed by the College as a teacher. On 16 June 2014 the College provided him with a letter setting out allegations that he had sent seven emails to a student. The letter informed Mr Khan that the College had formed a preliminary view that his behaviour amounted to serious misconduct of a sexual nature.

[7] Copies of the seven emails, plus one additional email were provided to Mr Khan on 22 June. A meeting was held with Mr Khan on 1 July. At that meeting Mr Khan provided the College with two statements, one from himself and one from his wife. In his statement Mr Khan denied sending seven of the eight emails. In her statement Mr Khan’s wife stated that she had sent all but one of the emails and noted that she was aware of her husband’s school timetable.

[8] Mr Khan informed the College representatives at the meeting that he wished to rely on the two statements and had nothing further to add. He acknowledged that all of the emails had been sent from his email account.

[9] On 2 July 2014 the College summarily dismissed Mr Khan for serious misconduct. He lodged his claim with the Fair Work Commission (FWC) on 8 July 2014. At some point after the dismissal the College discovered that 17 additional emails had been sent to the student from Mr Khan’s email account.

[10] On 13 October 2014 Mr Singh of counsel filed a notice of representative commencing to act on behalf of the applicant. As has already been mentioned Mr Khan discontinued his claim on 15 October.

EVIDENCE IN THE COSTS APPLICATION

[11] In his affidavit, Exhibit AICS1, Mr Burke deposes to the relevant dates and events leading up to the dismissal and then to the discontinuance of the substantive claim. He specifically deposes as to what took place at the meeting on 1 July and the fact that Mr Khan had stated that he did not wish to add anything to the statements made by his wife and himself which he presented to the College at that meeting. Mr Burke also deposes to the fact that, although Mr Khan’s wife had stated that she was aware of her husband’s school timetable, the emails referred to a range of very specific school-related matters which extended beyond Mr Khan’s timetable.

[12] In his affidavit, Exhibit Applicant 1, Mr Khan attaches copies of the statements from both himself and his wife which were filed in the substantive claim. He also attaches what are in effect statements in reply to the material filed by the College in the substantive claim. I have decided to allow these additional statements, Annexures C and D, into evidence although they do not really assist for present purposes. Mr Khan also provides material from the New South Wales Institute of Teachers concerning his accreditation as a teacher.

[13] Mr Khan deposes as to the reason for his decision to discontinue his claim. He says that, shortly after receiving the respondent’s witness statements, he was informed by Mr Singh that the matter would involve at least one day of preparation and a hearing which would be unlikely to be completed in one day. The estimate of legal costs was $7,500. Mr Khan deposes that he did not have and was unable to borrow that amount of money. Further, he believed he could not competently represent himself.

[14] In his affidavit Mr Khan also deposes as to his present financial situation and the remuneration he has earned since his dismissal.

[15] During cross-examination Mr Khan testified that he engaged Mr Singh round about 6 October. He instructed Mr Singh to try and negotiate a settlement with the College and, to that end, Mr Singh put an offer to the College. That offer was rejected on 13 or 14 October. Mr Khan’s evidence is that it was at this time that he was informed about the estimate of costs. He testified that there had been no previous discussion with Mr Singh about this issue. Mr Khan testified that he had some earlier contact with Mr Singh prior to the meeting with the College on 1 July though he did not retain him at that time.

[16] Mr Khan testified that he had sent only one of the relevant emails and that his wife had sent the rest. He testified that he regularly spoke to his wife about school-related matters including which students were doing especially well and which were not.

[17] Mr Khan testified that his wife was aware of the dates and times of parent/teacher interviews, the number of a particular classroom and tutoring possibilities. He also testified that he put material such as school timetables, rosters, student attendance and contact details in a drawer in his home which was accessible to his wife. Mr Khan testified that he didn’t know if she had accessed the material.

SUBMISSIONS ON BEHALF OF THE COLLEGE

[18] Mr Burke provided written submissions. He supplemented these with oral submissions.

[19] The College submits that much of the detailed school-related material contained in both sets of emails, that is, those discovered before the dismissal and those discovered afterwards, could not have been within the knowledge of Mr Khan’s wife at the time the emails were sent. It notes that Mr Khan’s wife had deposed only that her husband’s timetable was known to her.

[20] The College submits that, in the meeting of 1 July 2014, Mr Khan had been given a fair and proper opportunity to explain to it how his wife had become aware of the detailed information and to have provided reasons for the discrepancies. Mr Khan chose not to engage with the College to refute a valid inference being drawn that he had been the sender of all of the eight emails known to the College at that time. The College submits that Mr Khan’s choice not to defend himself at the meeting should be to his detriment in these proceedings.

[21] The College submits that it is of note that Mr Khan had sought legal advice prior to the 1 July meeting and would have been in a position to determine what evidence would be necessary to present at the meeting. The fact that Mr Khan’s wife had not stated that she was aware of school-related information other than her husband’s timetable was telling.

[22] The College submits that Mr Khan was aware that he had sent the emails and had lodged the substantive claim merely to protect himself from criminal liability and to embarrass the College. The College notes that Mr Khan had been aware prior to the meeting on 1 July that the police were investigating the matter. This is consistent with Mr Khan claiming privilege against self-incrimination.

[23] The College submits that Mr Khan’s failure to cooperate with it in its investigation means he cannot properly claim that his dismissal was harsh, unjust or unreasonable or that he had been denied procedural fairness: Dissanayke v Busways Blacktown Pty Limited[2011] FWAFB 6487.

[24] The College submits that the test time for the purposes of deciding whether an unfair dismissal claim has been made vexatiously or without reasonable cause or has no reasonable prospects of success is at the time of lodgement: McDougall v Health Axis Pty Limited t/as Raymond Hader Clinic[2012] FWAFB 8109.

[25] The College notes that the legislation is clear that an application for costs may be made even when a claim for relief has been discontinued and no oral evidence has been given. The College submits that the terms in section 611(2) should be given their ordinary meaning: Amalgamated Society of Engineers v Adelaide Steamship (1920) 28 CLR 129 @ 161/2.

[26] The College submits that Mr Khan should be ordered to pay its costs pursuant to section 400A as a result of his unreasonable acts or omissions. Reference is made to paragraphs 168ff of the Explanatory Memorandum for the Fair Work Amendment Bill 2012 and the decision in Roy Morgan Research Ltd v Baker[2014] FWCFB 1175 (Roy Morgan). The College notes that the previous legislation included a similar concept: section 170CJ(3) of the Workplace Relations Act 1996 and Goffet v Recruitment National Pty Ltd (2009) AIRCFB 626.

[27] The College submits that Mr Khan had never intended to prosecute his claim and had intentionally prolonged the matter so as to unreasonably cause the College to incur costs. It also submits that Mr Khan’s action in failing to properly defend himself in the meeting of 1 July was a further example of an unreasonable act or omission.

[28] The College submits in the alternative that Mr Khan has been unreasonable, either by his action or omission, in failing to discontinue his claim at an earlier time.

[29] The College submits that Mr Khan’s claim was made vexatiously. It refers to three decisions: Nilsen v Loyal Orange Trust (ACN 004 245 694) (1997) IRCA 267; Attorney General v Wentworth (1988) 14 NSWLR 581; and, Holland v Nude Pty Ltd[2012] FWAFB 6508.

[30] The College submits that Mr Khan made his claim to protect himself against criminal prosecution as, at that time, he did not know if he was going to be charged by the police. It also submits that Mr Khan’s claim was made to embarrass the College by exerting pressure on it to reinstate or compensate him as well as to pressure it into finalising his teaching accreditation.

[31] The College submits that Mr Khan’s claim was “so obviously untenable” at the time it was made because it was highly improbable and implausible that his wife had the detailed knowledge of all of the material in the emails. Mr Khan’s wife had ample time to depose as to her state of knowledge. The fact that she did not do so should lead to a conclusion that she was not the sender of the emails. The College submits that the applicant’s claim was utterly hopeless.

[32] The College submits that the substantive claim was made without reasonable cause. It relies upon: R v Moore: Ex parte Federated Miscellaneous Workers Union of Australia (1978) 140 CLR 470 @ 473; Kanan v Australian Postal and Telecommunications Union (1992) 43 IR 157; and, Spotless Services Australia Ltd v Marsh (2004) FCAFC 155 @ para 13.

[33] The College submits that any objective view of the facts reveals that it is just not tenable that Mr Khan’s wife wrote the emails. Consequently his claim had been made without reasonable cause.

[34] The College also submits that it should have been reasonably apparent that the claim had no reasonable prospect of success. Reliance is placed upon three decisions: Baker v Salva Resources Pty Limited [2011] FWAFB 4014 (Baker); Deane v Paper Australia (PR932454); and Hart v Kangan Batman TAFE (PR958003).

[35] The College notes that the relevant test is an objective one. It submits that, on any objective view, the substantive claim lacks merit and is untenable. It also submits that there is no basis on which it could be said that Mr Khan had been denied procedural fairness. The College relies again on earlier submissions concerning the state of knowledge of Mr Khan’s wife. The College submits that regard should be had to the parties’ statements filed in the substantive matter.

[36] The College seeks the payment of its costs from the commencement of Mr Khan’s claim. It seeks those costs on an indemnity basis: Dowling v Fairfax Media Publications Pty Ltd (No 2) (2010) FCAFC 28 @ 36, 42-44; and Gorsten v Minister for Immigration & Multicultural Affairs (2001) FCA 260.

[37] The College submits that factors in favour of indemnity costs include: Mr Khan’s failure to properly respond during the meeting of 1 July; his failure to avail himself of the opportunity to mount a defence; and, the fact that Mr Khan had received legal advice about the meeting and the presumption that would have included advice about possible outcomes.

[38] In the alternative, the College seeks its costs on a party/party basis.

SUBMISSIONS ON BEHALF OF MR KHAN

[39] Mr Singh provided written submissions. He also made oral submissions.

[40] Mr Singh refers to paragraphs 2353 and 2354 of the Explanatory Memorandum to the Fair Work Bill 2009.He also relies upon Fox v Wilderness Escape Outdoor Adventure Pty Ltd [2011] FWA 8803 @ [12] and [13] and the decision in Baker referred to earlier.

[41] Mr Singh submits that the College bears the onus of proof in the matter which is to be decided on the balance of probabilities. The gravity of the allegations made against Mr Khan are relevant: Briginshaw v Briginshaw (1938) 60 CLR 336 @ 362; Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd 110 ALR 449; Qantas Airways Limited v Gama (2008) 167 FCR 537 @ paras 123-139; and, section 140 (2)(c) of the Evidence Act.

[42] Mr Singh notes that the evidence of the College was untested. He submits that, in order for the College to succeed in its application, I need to be satisfied that both Mr Khan and his wife lied about who sent the emails. Mr Singh submits that, in addition, I need to be satisfied that Mr Khan had engaged in serious misconduct.

[43] Mr Singh notes that Mr Khan’s case had been brought on two bases: his conduct did not justify summary dismissal and he had been denied procedural fairness. Mr Singh submits that, unless the College has disproved either of these grounds, the costs application must fail.

[44] Mr Singh submits that the case against Mr Khan changed. The College initially alleged he had sent seven inappropriate emails, then eight, then more than 20. There was no mention prior to the dismissal that the student in question had sent emails to Mr Khan. Mr Singh submits that other allegations against Mr Khan were not raised until the College filed its material in the substantive claim.

[45] Mr Singh submits that the “post-dismissal” allegations were not put to Mr Khan prior to his dismissal and did not constitute part of the reasons for dismissal. Mr Khan had not responded to these allegations as he has discontinued his claim.

[46] Mr Singh submits that possible explanations for the changing nature of the case against Mr Khan include the incompetence of the initial investigation or a deliberate withholding of evidence. He submits that, whatever the explanation, Mr Khan was denied procedural fairness.

[47] Mr Singh submits that the College approached its investigation with a preconception that Mr Khan was the author of all of the emails. A further aspect of the College’s conduct which is said to be of relevance is its failure to provide particulars of what it considered to be inappropriate in the emails and how Mr Khan was alleged to have breached any legislation or policies.

[48] Mr Singh submits that the College incorrectly claimed that it required police clearance before it could release the emails to Mr Khan.

[49] Further, the College relied on only selected passages from the emails whereas the whole of the evidence must be considered. Mr Singh notes that some of the emails are not in English and the College had not provided translations. Mr Singh also notes that Mr Khan is the only witness who was cross-examined. He denied sending most of the emails. Mr Singh submits that Mr Khan’s evidence should be accepted.

[50] Mr Singh notes that the College had not sought to interview Mr Khan’s wife about her statement. He submits that there is no evidence that Mr Khan brought his claim for some ulterior purpose or to pressure the College to obtain some beneficial outcome. Such a claim should be rejected. Mr Singh notes that no criminal charges have been brought against Mr Khan.

[51] Mr Singh submits that the College’s suggestions as to why Mr Khan discontinued his claim are mere speculation. Mr Khan has provided evidence as to his reasons. Mr Singh submits that, contrary to the submissions of the College, Mr Khan’s conduct and level of engagement at the interview of 1 July was appropriate. He provided the statements from both his wife and himself and, in doing so, met the allegations against him at the time.

[52] Mr Singh submits that I could not be satisfied that the substantive claim had been made vexatiously or without reasonable cause or that it should have been reasonably apparent to Mr Khan that his claim had no reasonable prospects of success. Consequently the costs application insofar as it is based on section 611 should be rejected. Mr Singh submits that section 400A has no application. He notes that Mr Khan had provided evidence to explain any delay between his receipt of the respondent’s material and the filing of the notice of discontinuance.

SUBMISSIONS IN REPLY

[53] Mr Burke submits that the material of the College was admitted into evidence through his affidavit, Exhibit AICS1. He agreed that it had not been tested. Mr Burke submits that it is settled that relevant material which comes to the attention of an employer after a dismissal may be relied upon in an unfair dismissal claim. Mr Burke also submits that whether the student in question sent emails to Mr Khan does not detract from his obligations as a teacher.

CONCLUSIONS

[54] As indicated earlier in this decision the application for costs is brought under both section 400A and section 611 of the Act. Those sections are as follows:

“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.”

“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.

....”

[55] Two recent Full Bench decisions are of particular relevance in considering these provisions. In Church v Eastern Health t/as Eastern Health Great Health and Wellbeing [2014] FWCFB 810 (Church) a Full Bench provided a detailed analysis of section 611. The Full Bench in Roy Morgan dealt extensively with both sections 400A and 611. I adopt and follow the approach of both Full Benches in dealing with the present application.

[56] In essence, the claim under section 400A is threefold. The College says that: Mr Khan never intended to prosecute his claim and unreasonably prolonged the matter; he also acted unreasonably by failing to properly defend himself in the meeting on 1 July; and, Mr Khan’s failure to discontinue his claim soon after receiving the material from the College on 29 September was also unreasonable.

[57] There is no evidence before me that Mr Khan did not intend to prosecute his claim to finality or that he unnecessarily prolonged the matter. He made his claim, apparently participated in the conciliation process and lodged the witness statements and outline of submissions as required in the directions from this Commission. The fact that he didn’t engage Mr Singh or instruct him to pursue a possible settlement until after he received the material from the College is not, in my view, an unreasonable act or omission.

[58] I consider that the second basis for the claim under section 400A is misconceived. The words of the section are relatively clear. It is an unreasonable act or omission “in connection with the conduct or continuation of the matter” which will enliven the power to make an order. In my view Mr Khan’s actions or omissions at the meeting of 1 July, even if they are considered to be unreasonable, were not in connection with the conduct or continuation of the matter. The matter did not exist at that time. Indeed, not only had Mr Khan not lodged his claim at that point, he was not dismissed until 2 July so could not have made his claim until after that date.

[59] The next question is whether Mr Khan acted unreasonably in failing to discontinue his claim at an earlier time. The evidence is that Mr Khan received the final statement from the College on 29 September 2014. He engaged Mr Singh approximately a week later and instructed him to attempt to negotiate a settlement with the College. The College rejected the settlement offer on 13 or 14 October and also at about this time Mr Khan first became aware of the likely legal costs in continuing his claim. He lodged his notice of discontinuance on 15 October.

[60] In my view Mr Khan’s actions in this regard were not unreasonable. I shall now turn to consider the second limb of the costs application which is based on section 611 of the Act. As indicated earlier, the College relies on both paragraphs (a) and (b) of subsection (2) of the section namely that the substantive claim was made vexatiously, or without reasonable cause and that it should have been reasonably apparent that the claim had no reasonable prospect of success.

[61] The Full Bench in Church dealt with the issue of whether a claim was made vexatiously as follows:

“[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 Nilsen v Loyal Orange Trust  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’.” (footnotes omitted)

[62] The phrase “without reasonable cause” in section 611(2)(a) is dealt with in both the Roy Morgan and Church decisions. It is noted that the test is not whether the application might have been successful but whether it should not have been made. The Church Full Bench notes that the courts have observed that the test is similar to that adopted for summary judgement, that it is “so obviously untenable that it cannot possibly succeed”, is “manifestly groundless” or “discloses a case which the Court is satisfied cannot succeed”. Similar observations can be made about the phrase “no reasonable prospect of success” in section 611(2)(b)

[63] The College says that Mr Khan brought his claim vexatiously in order to defend himself from possible criminal prosecution, to harass and embarrass the College to obtain some settlement and to pressure the College into finalising his teaching accreditation. It also says his case was obviously untenable in that he must have been the author of the emails as his wife would not have had the necessary knowledge of school-related details disclosed in them.

[64] There is no evidence before me that Mr Khan made his claim for some improper or ulterior purpose. I accept that Mr Khan may have been motivated to pressure the College into reinstating him or paying compensation however that is a motive which could be attributed to most applicants who make claims in relation to their dismissal. They want to be reinstated or receive compensation whether by way of an order of this Commission or by a settlement.

[65] Mr Khan was cross-examined at some length about the contents of the emails. He denied that he had sent them, with the exception of that of 1 June. He provided plausible explanations for his wife being in possession of the relevant school-related information in each. I accept Mr Khan’s evidence. It follows that I do not consider that his claim was “so obviously untenable” or “manifestly groundless”.

[66] For the preceding reasons I do not consider that Mr Khan’s claim was made vexatiously or without reasonable cause. The next issue is whether it should have been reasonably apparent to Mr Khan that his application had no reasonable prospects of success. The test is an objective one. A conclusion about this would be more certain had there been a full contested hearing and a decision on the substantive claim. Nevertheless, on the basis of the evidence before me I do not consider that Mr Khan’s claim was so lacking in merit or substance as to be not reasonably arguable.

[67] In summary I do not consider that the College has made its case under either section 400A or section 611. The costs application is dismissed..

. .

COMMISSIONER

Appearances:

L. Burke, solicitor, for Australian Islamic College of Sydney.

A. K. Singh, Counsel for Mr M. Khan.

Hearing details:

Sydney

2014

December 1.

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<Price code C, PR558798>