Mrs Janet Holmesby v Strathavon Resort Pty Ltd T/A Strathavon Accommodation House

[2015] FWC 2754

[2015] FWC 2754

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.372 - Application to deal with other contravention disputes

Mrs Janet Holmesby
v
Strathavon Resort Pty Ltd T/A Strathavon Accommodation House
(C2014/6466)

VICE PRESIDENT CATANZARITI SYDNEY, 18 MAY 2015

Application for costs order - s.372 conciliation conference - voluntary participation in telephone conference - application for costs made under s.376 and s.611- whether application had ‘no reasonable prospects of success’ - whether application was ‘vexatious’ or ‘without reasonable cause’ - application for costs dismissed.

Introduction

[1] This decision arises from a General Protections application made under s.372 of the Fair Work Act 2009 (the ‘Act’). A section 372 application is one made where a person is not entitled to apply to the Fair Work Commission (the Commission) under s.365 for the Commission to deal with the dispute. That is the dispute does not involve an allegation that the applicant has been dismissed in contravention of Part 3-1 General Protections of the Act. In addition there is no time constraint specified under the Act in which to file a s.372 application.

[2] Janet Holmesby (the applicant) lodged her application with the Commission on 19 September 2014, alleging that Strathavon Resort Pty Ltd T/A Strathavon Accommodation House (the respondent) had failed to pay her the correct entitlements owing under the Hospitality Industry (General) Award 2010 (the Award). In Mrs Holmesby’s application, which was completed by her solicitor David Prior, the alleged contraventions are stated as follows:

“1. Failure to pay correct employee entitlements under the relevant Award (Hospitality Industry (General) Award 2010), during the period of February 2010 through April 2013.

2. Failure to provide a safe working environment”

[3] At 3.2 of the Form F8, the above alleged contraventions were said to have adversely affected the applicant resulting in:

● Direct loss of income and livelihood; and

● The trauma and distress associated with the unsafe work environment resulting in resignation.

[1] In response to question 3.3 of the Form F8 which asks what section of the Act had been contravened, the applicant has ticked s.340- Protection. The respondent’s contact person was listed as Mr Trevor Drake from Drake and Associates (Solicitors).

[2] The documents annexed to the Form F8 outlined that the applicant was seeking reimbursement for alleged underpayment of wages totalling $41,446.10.

[3] On 22 September 2014, the application was served on Mr Drake.

[4] On 14 October 2014, the respondent (via Mr Drake) was advised by email that the matter was listed for a conciliation conference by telephone on 15 October 2014 (as the parties were located outside the Sydney metropolitan area) and that an employer response was required to be filed as it had not been done within the specified 7 days .

[5] On the day of the telephone conference Mr Trevor Drake, a solicitor on behalf of the respondent filed the required Employer Response Form F8A. The response raised a jurisdictional objection to the application. The objection was termed in the following manner:

“The alleged contraventions at paragraph 3 of the application do not disclose any contravention of general protections as defined in Part 3-1 of the Act.”

[6] Section 374 of the Act requires the Commission to conduct a conciliation conference for an application made under s.372, only where the parties agree. At 4.1 of the F8A, the employer is asked whether they agree to participate in a conference to deal with the dispute. No answer was provided to this question.

[7] The telephone conference was conducted by Commissioner Bull. In attendance was the applicant and her solicitor Ms J. Black, and for the respondent Mr D. Smith a Director and the respondent’s solicitor Mr T. Drake. The matter was not resolved during the conference, with the applicant to consider whether they should pursue an underpayment of wages claim.

[8] On 21 October 2014, the Commission received a letter from the applicant’s solicitors advising that, as the Commission did not have jurisdiction concerning unpaid wages, they had been instructed to discontinue the matter and initiate proceedings in the Federal Circuit Court of Australia. The correspondence also stated, “We confirm that there are no cost penalties in discontinuing proceedings in this jurisdiction”.

Application for costs

[9] On 27 October 2014, the respondent filed an application for costs (Form F6) via email (the original was received by the Commission on 31 October 2014). The application sought a costs order against the applicant’s solicitor under s.376 of the Act and against the applicant under s.611of the Act. In its application, the respondent alleged that the application did not disclose a contravention of the Act, was an abuse of process incurring unnecessary costs against the respondent, had no reasonable prospects of success, an unreasonable act and was made vexatiously or without reasonable cause.

[10] On 12 November 2014, the Commission conducted a directions conference by telephone to deal with the costs application. Mr D. Van Dyk, a solicitor, appeared on behalf of the applicant and Mr Smith, and Mr T. Drake on behalf of the respondent.

[11] Directions to the parties were issued the same day.

[12] On 30 January 2015, Commissioner Bull wrote to the parties and advised that, unless objected to by 4 February 2015, the application for costs would be determined on the papers.

[13] No party opposed this course; however, in its correspondence dated 3 January 2015, the respondent raised a concern that the Commissioner may have already formed a view on the costs application. On this basis, the Commissioner has referred the matter to me to determine on the papers.

Submissions of the respondent

[14] In its outline of submissions dated 16 January 2015, the respondent argued the following:

“The costs applicant submits that the applicant made such application vexatiously and or without reasonable cause, and in the alternate that it should have been reasonably apparent to the applicant that it had no reasonable prospect of success.”

[15] In support of its submission, the respondent argued that the s.372 application was brought for “collateral purposes”. In reference to annexure B of its submissions, the respondent submitted that, “the last two paragraphs of this letter clearly indicate an intention to file the application that was filed, in the absence of Mr Smith resolving his claim for $38,000 with the applicant.”

[16] Furthermore, the respondent relied upon the letter sent on behalf of the applicant dated 21 October 2014, in which it was advised that the application was being withdrawn. I have extracted the substantive part of that letter below:

“We refer to the Conference by telephone on Wednesday 15 October 2014.

Following consideration of Commissioner Bull’s helpful comments in respect to the Commission not having jurisdiction concerning unpaid wages, we have sought our client’s instruction to discontinue proceedings in the Fair Work Commission and lodge proceedings in the Federal Circuit Court of Australia.

We confirm that there are no cost penalties in discontinuing proceedings in this jurisdiction.”

[17] In respect of this letter, the respondent submitted the following:

“On the question of reasonable cause, it is submitted that on the facts available to the applicant, there was no substantial prospect of success. Dain v Sam Bradley & Robert Grant (2012) FWA 9029 DP Booth at paragraph 30. There was no point of law to be considered. The applicant had legal advice and the letter at annexure A clearly indicates and supports the contention herein.”

[18] The respondent further submitted that the letter dated 21 October 2014 indicated that the applicant was aware that the matter had no reasonable prospects of success.

Submissions of the applicant

[19] In her submissions in reply, the applicant’s solicitor rejected the notion that the application was brought for a collateral and/or improper purpose. In this respect, the applicant’s solicitor stated;

“There is no evidence that Holmesby made an application for an improper or ulterior purpose or to harass or embarrass Strathavon.”

[20] The submission goes on to state:

“Holmesby’s interpretation of the general protections provision is not manifestly untenable or groundless or so lacking on merit or substance as to be not reasonably arguable. It is open to characterise the facts that allege workplace rights and adverse action, the particulars of which were addressed in the application could reasonably be argued as fitting within the auspices of the general protections provision.”

[21] It was submitted that the Form F8A response was only received on the afternoon of the day of the conference by the applicant’s solicitor. The applicant states that had the respondent filed its jurisdictional objection within the prescribed time she would have had an opportunity to seek instructions on the response. The respondent’s application for costs is not assisted in filing the jurisdictional objection on the day of the telephone conference.

Relevant Statutory Provisions

[22] Section 376 of the Act sets out the requirements for the making of cost orders under the General Protection provisions:

“376 Costs orders against lawyers and paid agents

(1) This section applies if:

(a) an application for the FWC to deal with a dispute has been made under section 365 or 372; and

(b) a person who is a party to the dispute has engaged a lawyer or paid agent (the representative) to represent the person in the dispute; and

(c) under section 596, the person is required to seek the FWC’s permission to be represented by the representative.

(2) The FWC may make an order for costs against the representative for costs incurred by the other party to the dispute if the FWC is satisfied that the representative caused those costs to be incurred because:

(a) the representative encouraged the person to start, continue or respond to the dispute and it should have been reasonably apparent that the person had no reasonable prospect of success in the dispute; or

(b) of an unreasonable act or omission of the representative in connection with the conduct or continuation of the dispute.

(3) The FWC may make an order under this section only if the other party to the dispute has applied for it in accordance with section 377.

(4) This section does not limit the FWC’s power to order costs under section 611.”

[23] Section.611 of the Act sets out the making of cost orders generally:

“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.”

[24] Awarding costs under s.376(2)(a) of the Act requires an application of a two pronged test. Firstly, the representative must “encourage the applicant to start, continue or respond to the dispute” and secondly, it must be “reasonably apparent that the applicant had no reasonable prospect of success”.

[25] Neither party has referred to any costs orders granted by the Commission arising from s.372 applications.

[26] In E. Church v Eastern Health t/as Eastern Health Great Health and Wellbeing [2014] FWCFB 810 (Eastern Health), the Full Bench made the following observations concerning the operation of s.611 of the Act;

“[26] 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.”

[27] The Full Bench in Eastern Health defined what constituted a vexatious application in the following manner:

“[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 (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'.”

[28] The Full Bench in Eastern Health relied upon the meaning given to the phrase “without reasonable cause” expressed by Gibb J in R v Moore; Ex Parte Miscellaneous Workers Union of Australia (1978) 140 CLR 470 at 473 where he stated;

“In my opinion a party cannot be said to have commenced a proceeding "without reasonable cause", within the meaning of that section, simply because his argument proves unsuccessful.”

[29] In ReJoseph Michael Kanan v Australian Postal and Telecommunications Union [1992] FCA 366, Wilcox J gave further meaning to the expression ‘without reasonable cause’ in the following manner:

“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.”

[30] The Full Bench in Eastern Health made it clear that an award of costs should only granted in limited circumstances, given that the established position is that parties bear their own costs.

[31] In summary, the authorities demonstrate that as a general rule, each party must bear their own costs in proceedings before the Commission, indeed that is what s.611(1) provides. The power to award costs is to be exercised with caution and only in a clear case. A proceeding will be considered to have been 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

[32] The approach to be taken to the meaning of “without reasonable cause” and whether it should have been reasonably apparent a proceeding had no reasonable prospect of success has recently been discussed in the Full Bench decision in Neil Keep v Performance Automobiles Pty Ltd 2 in relation to a s.365 consent arbitration matter. The Full Bench stated that the Commission should exercise caution before arriving at the conclusion that an application had “no reasonable prospects of success.” The Full Bench decision in G.H. Deane v Paper Australia Pty Ltd3 was referred to where the following observation about this expression in the context of enlivening a power to award costs under s.170CJ(1) of the Workplace Relations Act 1996:

“unless upon the facts apparent to the applicant at the time of instituting the [application], the proceeding in question was manifestly untenable or groundless, the relevant requirement in s.170CJ(1) is not fulfilled and the discretion to make an order for costs is not available”.

Conclusion

[33] It must be acknowledged that the Commission’s role in General Protection applications is to resolve the dispute by way of mediation/conciliation. 4 The Commission has no determinative powers in respect of the merits of a s.372 General Protections claim, although it must advise an applicant if it believes there are no reasonable prospects of success.5 In the case of a s.372 application, the respondent is not required to attend a conciliation/mediation conference and no certificate from the Commission is required before the applicant can make a General Protections court application.

[34] In this application, a response was filed by the respondent on the day of the conciliation conference which raised a jurisdictional objection. The conference proceeded by telephone and subsequently the application was withdrawn. The respondent was under no obligation to participate in the telephone conference but chose to do so. As a result of the withdrawal of the application the respondent now seeks an order for costs.

[35] I am not satisfied that the applicant’s case was one initiated “vexatiously or without reasonable cause” within the meaning of s.611(2)(a) of the Act. There is nothing to indicate that the motive for the applicant in lodging her application was other than the reasons stated in her application. The application cannot be characterised as displaying a predominant purpose of “harassing or embarrassing” the respondent, given that the participation of the respondent in a s.372 conference is optional. The applicant withdrew her application following the telephone conference despite there being no statutory obligation to do so. It should be noted that a withdrawal of an application can be the outcome of a successful conciliation.

[36] For these reasons, the criteria for an application for costs under s.611(2)(a) has not been demonstrated.

[37] Further, I am not satisfied that the applicant’s case was one that exhibited “no reasonable prospects of success”. The Commission has not been not been apprised of all the facts and circumstances that relate to this application. As stated above, the Commission has no role in determining the merits of a General Protections application in a s. 372 application. 6 The assertion in the application that failing to pay the award rates of pay and failure to provide a safe workplace being “workplace rights” resulting in adverse action, being the applicant’s resignation falls within Part 3-1 General Protections of the Act is at least arguable.

[38] The application for costs is dismissed.

VICE PRESIDENT

 1   Nilsen v Loyal Orange Trust (1997) 76 IR 180

 2   [2015] FWCFB 1956

 3   PR932454, 6 June 2003

 4   Consent arbitration is available for a s.365 application see s.368(3)

 5   S.375

 6   Consent arbitration under s.369 may occur for a s.365 application

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