Mrs Joanna Macdougall v Health Axis Pty Ltd T/A Raymond Hader Clinic

[2012] FWA 4407

Note: An appeal pursuant to s.604 (C2012/666) was lodged against this decision - refer to Full Bench decision dated 20 September 2012 [[2012] FWAFB 8109] for result of appeal.

[2012] FWA 4407

FAIR WORK AUSTRALIA

DECISION

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

Mrs Joanna Macdougall
v
Health Axis Pty Ltd T/A Raymond Hader Clinic
(U2011/2650)

COMMISSIONER ROE MELBOURNE, 22 MAY 2012

Application for costs.

[1] This is an application for costs made on behalf of Joanna McDougall (the Applicant in the unfair dismissal proceedings).

[2] On 23 December 2011 the Applicant lodge an unfair dismissal Application. Health Axis Pty Ltd T/A Raymond Hader Clinic (the Respondent) made a jurisdictional objection to the Application alleging that the Applicant was not an employee but an independent contractor. On 11 April 2012 I issued a decision rejecting the jurisdictional objection having found that the Applicant was an employee. 1

[3] The merits of the Application will be determined at a hearing on 4 and 5 July 2012. On 17 April 2012 the Applicant made an Application for costs to be awarded against the Respondent in respect to the costs of dealing with the jurisdictional objection on the grounds that it was or should have been abundantly clear to the Respondent that its jurisdictional objection had no prospects of success and or because the objection was pursued vexatiously. I proposed and the parties agreed that the matter of the costs order should be determined based upon written submission and that there was no need for a hearing. The parties provided written material which I have considered.

[4] The legislation provides 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 ofthe 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).”

[5] The Applicant referred to the following parts of my decision in rejecting the jurisdictional objection. 2

“The matter was not resolved through conciliation on 31 January 2012. On 6 February 2012 the Respondent provided a response to the Application. In that response the Respondent made a jurisdictional objection that the Applicant was at all times an independent contractor and not an employee. Fair Work Australia issued directions to determine the jurisdictional objection on 13 February 2012. Those directions required the Respondent to provide any submissions and evidence by 24 February 2012. The Respondent did not provide any material despite a number of follow up communications between Fair Work Australia and the Respondent. The Applicant provided detailed submissions, a witness statement from the Applicant and supporting evidence.

The Respondent failed to attend the proceedings on 30 March 2012. I granted leave for Mr Hulls to appear for the Applicant. Notice of listing was provided on 9 March 2012 and 23 March 2012. My Associate had spoken to Mr Oppy for the Respondent on the 29 March 2012 and was advised that he would be in attendance at the hearing the next day. When he failed to attend my Associate again contacted Mr Oppy who seemed unaware of the time and said he was unable to attend due to work pressures. After further conversation he said someone else would attend. In a subsequent conversation the Respondent advised no one was available to attend. I decided to proceed with this matter and the Respondent was advised prior to the commencement of the proceedings.

.........

The Respondent was provided with a copy of the directions I issued at the conclusion of the hearing. The transcript was provided to the Respondent at 9.55am on Monday 2 April 2012. In accordance with the directions the Respondent had until the morning of Tuesday 3 April 2012 to provide any further submissions in response. No response was received.

I accept the evidence of the Applicant. The evidence was supported in the main by convincing documentary evidence. I accept the submissions of the Applicant in respect to the assessment of the various indicators of an employment relationship or a contract relationship in the circumstances of this case.

The offer of employment of 3 August 2011 quoted earlier is a strong indicator that the essential character of the relationship was employment. The contractor service document signed at that time would normally be an important indicator of an independent contractor arrangement however, the accompanying letter and the surrounding evidence provided by the Applicant makes it clear that the arrangement was in fact an employment relationship. I am satisfied that the contract for service and the payment by invoice arrangements were tax minimisation arrangements rather than indicators of the real character of the situation. I accept the evidence of the Applicant that she had no choice but to accept these arrangements prior to August 2011.”

[6] The Applicant submitted that the Respondent’s conduct demonstrated contemptuous disregard of its statutory obligations, Fair Work Australia’s procedures and directions and the Applicant’s right to challenge the termination of her employment. The failure of the Respondent to meet FWA directions meant that the Applicant incurred extra costs because the Applicant had to cover the field in preparing material to defend the jurisdictional objection. The Applicant incurred costs in defending the jurisdictional objection which was effectively not prosecuted by the Respondent. The Applicant argues that it is clear that the Respondent’s jurisdictional objection was designed to dissuade the Applicant from persisting with the Section 394 Application by putting costly legal barriers in her path.

[7] I am satisfied that there is considerable merit in these submissions for the Applicant. However, what I have to decide is was the jurisdictional objection made vexatiously or without reasonable cause or where it should have been reasonably apparent that the jurisdictional objection had no reasonable prospect of success. In that respect I have to look at the situation at the time the jurisdictional objection was made.

[8] I cannot be satisfied that at the time the objection was made that it should have been reasonably apparent that the jurisdictional objection had no reasonable prospect of success. In my decision I made it clear that there were some indicators that suggested a contractor rather than an employment relationship.

“The contractor service document signed at that time would normally be an important indicator of an independent contractor arrangement however, the accompanying letter and the surrounding evidence provided by the Applicant makes it clear that the arrangement was in fact an employment relationship.” 3

[9] Given that there was at least some basis for the jurisdictional objection, even though I found the basis was not a strong one, I could not conclude that, at the time it was made, the jurisdictional objection was made without reasonable cause. Even if the Respondent had doubts about the strength of its arguments that the Applicant was a contractor, as suggested by the Applicant and as demonstrated by the Respondent’s behaviour in failing to effectively prosecute the case, the fact that there was a weak basis for the argument means that the Respondent had “reasonable cause” to raise it.

[10] The Applicant correctly argues that the behaviour of the Respondent after making the Application can be considered in making a judgement as to whether or not the application was made vexatiously. In the circumstances of this case there is some evidence which supports an inference that the jurisdictional objection was pursued vexatiously. This includes the failure to follow directions and the lack of attendance at the proceedings. The Applicant also argues I should have regard for the fact that the Respondent produces detailed legal submissions to combat the costs Application but made no effort at all to prosecute the jurisdictional objection.

[11] In looking at whether the Application was made vexatiously the Applicant correctly argues that I should look at the “real reason” behind the objection or its predominant purpose. I accept that the circumstances and conduct of the Respondent suggest the possibility that the jurisdictional objection was made for the collateral purpose of discouraging the Applicant from proceeding and causing the Applicant to incur additional costs. The Applicant argues that the indicators of an independent contractor arrangement are in fact indicators of a sham arrangement at the instigation of the Respondent rather than evidence of a basis for genuine belief that there was a contractor relationship. The failure of the Respondent to comply with the Directions issued by FWA on 13 February for it to put forward its case or even to provide any advice of difficulties in complying with the directions is the strongest indicator of this lack of a genuine belief that there was a contractor relationship. The Applicant argues that I should find the Respondent’s explanation for this failure to be totally unconvincing.

[12] I find the matter of whether the Application was made vexatiously to be finely balanced. I am concerned at the costs incurred by the Applicant and I believe that the actions of the Respondent in failing to comply with the Directions issued by FWA were reprehensible. I do not find the reasons for that failure given by the Respondent to be particularly convincing. However, on balance I cannot find that the real reason behind the jurisdictional objection was to cause the Applicant to incur costs in the hope that it would dissuade the Applicant from further pursuit of her Application. Incompetence and negligence are equally plausible explanations for the behaviour of the Respondent.

[13] On balance I am not satisfied that there is a sufficient basis on which I can conclude that the Application was made vexatiously.

[14] In coming to my decision I have had regard for all the submissions made by the Applicant employee and the Respondent.

[15] I dismiss the application for costs.

COMMISSIONER

 1   [2012] FWA 3058.

 2   [2012] FWA 3058 at paras 2 to 4 and 14 to 16.

 3   [2012] FWA 3058 at para 16.

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