Nathaniel Garang v Byron Bay Superfoods Pty Ltd

[2017] FWC 3356

[2017] FWC 3356

FAIR WORK COMMISSION

DECISION

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

Nathaniel Garang
v
Byron Bay Superfoods Pty Ltd
(U2016/11217)

VICE PRESIDENT HATCHER SYDNEY, 10 AUGUST 2017

Application for relief from unfair dismissal – costs application.

[1] On 9 September 2016, Mr Nathaniel Garang made an application for an unfair dismissal remedy under s.394 of the Fair Work Act 2009 (FW Act) in respect of the termination of his employment with Byron Bay Superfoods Pty Ltd (Byron Bay Superfoods). In a decision issued on 22 May 2017 1 (Primary Decision) I found the dismissal of Mr Garang to have been unfair and proposed to award an amount of compensation to Mr Garang, subject to any further submissions of the parties relating to the proposed amount. In a further decision and order issued on 16 June 20172, I ordered Byron Bay Superfoods to pay compensation to Mr Garang for unfair dismissal to the amount of $10,694.84, in four equal monthly instalments.

[2] Mr Garang, through his solicitors, GPN Law, has now made an application for Byron Bay Superfoods to pay his legal costs and disbursements in the amount of $4,738.37 as well as personal costs accrued in pursuing his application in the amount of $447.18. The application is made pursuant to s.400A and s.611 of the FW Act. Section 611(1) establishes a general rule that parties in proceedings before the Commission must bear their own costs. Section 611(2) operates as an exception to this general rule and provides:

(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.

[3] The relevant principles concerning the interpretation and application of s.611(2)(a) were comprehensively stated in Church v Eastern Health t/as Eastern Health Great Health and Wellbeing 3and may be summarised as follows:

• An application is made vexatiously when the predominant motive or purpose of the applicant is to harass or embarrass the other party or to gain a collateral advantage.



• An application is not made without reasonable cause simply because the application did not succeed.



• Whether an application is made without reasonable cause may be tested by asking, on the facts apparent to the applicant at the time the application was made, whether 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 characterise the application as having been made without reasonable cause.



• In relation to an appeal, the question becomes whether the appeal has no substantial prospect of success. The prospect of success must be evaluated in the light of the facts of the case, the judgment appealed from and the points taken in the notice of appeal. If there is a not insubstantial prospect of the appeal achieving some success, it cannot fairly be described as having been made without reasonable cause.



• An application will have been made without reasonable cause if it can be characterised as so obviously untenable that it cannot possibly succeed, or manifestly groundless, or discloses a case which the tribunal is satisfied cannot succeed.

[4] In relation to s.611(2)(b), the relevant principles were summarised by the Full Bench in Baker v Salva Resources Pty Ltd 4as follows (footnotes omitted):

“[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.”

[5] Section s.400A provides an additional power to award costs in respect of unfair dismissal remedy applications. It provides:

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.

[6] In relation to s.400A, the Full Bench in Hansen v Calvary Health Care Adelaide Limited 5said:

“[18] ...Section 400A is a relatively recent amendment to the Act (1 January 2013) and is designed to provide the Commission with a discretionary power to award costs against a small proportion of litigants who pursue or defend unfair dismissal claims in an unreasonable manner. As stated in the Explanatory Memorandum accompanying the s.400A amendment, ‘the power is only intended to apply where there is clear evidence of unreasonable conduct by the first party’ and ‘is intended to capture a broad range of conduct, including a failure to discontinue an unfair dismissal application made under s.394’.”

[7] Additionally the Full Bench in Matthew Gugiatti v SolarisCare Foundation Ltd 6  said that s.400A was concerned with only “unreasonable acts or omissions in connection with the ‘conduct or continuation’ of a matter already instituted, not with whether it was reasonable to have instituted a matter in the first place”.

[8] In the written submissions made on Mr Garang’s behalf in support of his costs application, it was submitted that he had made a number of efforts to reduce the costs of pursuing his application, including by acting within timeframes and being available when requested by the Commission, representing himself at the conciliation of the matter on 8 November 2016 7and accepting an offer of settlement at the conciliation for an amount representing less than two weeks’ wages (which offer was subsequently withdrawn by Byron Bay Superfoods) and by making a final offer to settle prior to the determinative conference on 14 March 2017. Mr Garang further submitted that the Commission should be satisfied that Byron Bay Superfoods caused the costs claimed to be incurred because:

● it acted unreasonably in dismissing Mr Garang unfairly;

● it pursued Mr Garang post-dismissal by threatening him with various legal actions in retaliation of his claim for relief;

● it deferred and delayed proceedings without providing substantiation of commitments; and

● it failed to attempt to resolve or settle the matter in a bona fide manner.

[9] Byron Bay Superfoods, through its CEO, Mr Paul Owies, responded to the costs application in an email on 17 June 2017. With respect to Mr Garang’s legal costs and disbursements, Byron Bay Superfoods submitted that the decision to engage a legal representative was discretionary and not a necessary one, due to Mr Garang having no difficulty understanding or speaking English. Further, Byron Bay Superfoods said that as it was not represented, it was not necessary for Mr Garang to engage a lawyer because he was placed at no disadvantage by being unrepresented.

[10] With respect to the attempt to settle the matter at conciliation, Mr Owies said that it was in fact Mr Garang who would not agree to a final settlement, and that it was advised by the conciliator that it was the applicant’s decision alone to proceed to arbitration of the matter. Mr Owies said that the second offer, made immediately prior to the determinative conference, was unrealistic and considerably more than the amount ordered to be paid by the Commission. In relation to delays in hearing the matter said to have been caused by Byron Bay Superfoods, Mr Owies stated that he was unavailable during January and February 2017 due to business commitments involving him being “on the road” to present products to clients in Australia and overseas. Otherwise, Mr Owies said that Byron Bay Superfoods had acted promptly within the timeframes set by the Commission, and at no time was it apparent that it had no reasonable prospects of success, given the downturn in its business and the unavailability of alternative positions for Mr Garang.

[11] The first three grounds for the award of costs advanced on Mr Garang’s behalf (as set out in paragraph [8] above) do not satisfy the jurisdictional prerequisites for the award of costs under either s.400A(1) or s.611(2). In relation to the first ground, it is certainly the case that in the Primary Decision the dismissal of Mr Garang was found to be harsh, unjust and unreasonable, and therefore unfair. 8 However a finding adverse to an employer’s defence to an unfair dismissal remedy application does not by itself establish that the employer acted unreasonably in defending the application for the purpose of s.400A(1), or that the employer responded to the application without reasonable cause or that its defence of the claim had no reasonable prospects of success for the purpose of s.611(2). As the authorities earlier cited make clear, more is required. It might have been argued that the findings in the Primary Decision adverse to the credibility of Mr Owies, the principal of Byron Bay Superfoods, enabled the necessary findings under s.400A(1) or s.611(2) to be made, but no such argument was advanced. In relation to the second ground, while the post-dismissal treatment of Mr Garang by Mr Owies and Mr Reed was reprehensible (for the reasons set out in the Primary Decision9), there was no finding, and no evidence, that this conduct related to Mr Garang’s unfair dismissal proceedings as such. As to the third ground, there is no doubt that Mr Owies’ absence overseas in the period December 2016-January 2017 delayed the hearing of the matter, but there is nothing before me that would allow the conclusion that his absence was not for the reason he said it was for, namely a pre-planned business trip. I therefore cannot conclude that his conduct was unreasonable for the purpose of s.400A(1) in this respect.

[12] The fourth ground however has greater merit. It is apparent on the material before me that at the telephone conciliation in the matter which occurred on 8 November 2016, there was an agreement in principle for the matter to settle on the basis of a payment by Byron Bay Superfoods of an amount representing two weeks’ pay, taxed as a redundancy payment, and the provision to Mr Garang of a written positive reference, a statement of earnings, a separation certificate and a record of hours worked by him. This was to be in return for Mr Garang releasing Byron Bay Superfoods from further claims arising from his employment, but with the release to specifically exclude any claims for underpayment of wages. After the conciliation had completed on 8 November 2016, the staff conciliator sent the parties a letter noting the agreement and attaching terms of settlement intended to give effect to the agreement. The correspondence then noted that a three day cooling off period would apply, and if no further advice was received in that time, the matter would be regarded as having settled in accordance with the attached terms. Later the same day Mr Owies, on behalf of Byron Bay Superfoods, sent the staff conciliator an email. The terms of that email were partially set out in the Primary Decision. 10 The full email was as follows (omitting formal parts):

“Please advise Garang of the following:

I wish to advise that Byron Bay Superfoods will not agree to anything other than the following. We cannot provide a separation certificate and reference until the matter is full[y] closed. As advised we have for Magistrates court [sic] against Garang for alleged fraud and costs. This matter will require Garang to have legal counsel and lengthy [sic].

We will agree to settle and cease the fraudulent claim and action and provide a separation certificate and reference if Garang accepts 2 weeks settlement and drops all allegations and actions. There needs to be an acceptance of goodwill and a complete settlement and withdrawal of all claims against the mentioned company for us to agree to the 2 weeks payment + separation certificate + reference.”

[13] In the Decision I made the following findings about this email:

“[62] ... The apparent reference in the email to legal proceedings against Mr Garang for fraud was an outright falsehood. There were no such proceedings. Mr Owies tried to explain this in his oral evidence by saying that what he meant was that Byron Bay Superfoods had advice from its lawyers that it had a cause of action in the “Magistrate’s Court” against Mr Garang for fraud in relation to the issue of the medical certificate and Mr Garang’s non-attendance for work after 15 August 2016, and that Byron Bay Superfoods was “in the process of taking action”, but ultimately decided not to do so. I do not believe any of this to be true. Mr Owies’ email was an attempt to intimidate Mr Garang.”

[14] As a consequence of this email, the settlement reached at the conciliation did not proceed. The total amount ultimately awarded against Byron Bay Superfoods was, as earlier stated, $10,694.84. The two weeks’ pay in the abandoned settlement amounted to only $1,673.00. Mr Garang of course remains at liberty to pursue an underpayment claim against Byron Bay Superfoods.

[15] There is authority to the effect that an offer of settlement made in a conciliation conference should be treated as immune from consideration in a costs application. This was discussed in my decision in Harsha Aggarwal v Vision Asia Pty Ltd 11 as follows (footnotes omitted):

“[3] Vision Asia submitted that the rejection of two offers of settlement by Mr Aggarwal constituted unreasonable omissions on his part which caused it to incur costs. The first offer was made on 20 February 2014 at a conciliation conference conducted by the Commission. However Vision Asia has acknowledged that the Full Bench decision in McKenzie v Meran Rise Pty Ltd t/a Nu Force Security Services [Print S4692, 7 April 2000], which has been applied in decisions under the Act, is authority for the proposition that offers of settlement made in conciliation conferences cannot be relied upon on the question of costs. In McKenzie the Full Bench said:

‘[12] An offer of settlement made in conciliation proceedings is by its nature made on a without prejudice basis. It is inappropriate that an offer made in those circumstances should be taken into account in a costs application unless the offer is subsequently repeated on an open basis. It has long been accepted that positions taken in conciliation are without prejudice to the position to be taken in arbitration. The protection afforded to participants by this principle is an essential feature of conciliation proceedings.’

[4] It may be that the above reasoning in McKenzie should at some stage be the subject of review at the Full Bench level. The conduct of conciliation conferences is a key element of the process by which this Commission manages its unfair dismissal jurisdiction. It is the principal opportunity which parties have to settle their matters before they go to hearing. That is particularly the case for the many unrepresented litigants in this jurisdiction, who cannot be expected to have any understanding of the mechanisms of Calderbank offers and the like. In that context, there may be room for reconsideration of the rationale of an approach which may give parties at conciliation conferences a licence to behave unreasonably by declining to engage seriously in the process and failing to properly consider reasonable offers of settlement without the risk of any adverse consequences later in the proceedings. I note that in the New South Wales unfair dismissal jurisdiction, conduct in conciliation conferences has never been treated as being immune from consideration on the questions of costs.

[5] However it was not submitted by Vision Asia that McKenzie was wrongly decided or that I should not follow it. Indeed, Vision Asia has (quite properly) not disclosed in its submissions or evidence what the offer was which it made at the conciliation conference on the basis that the principle stated in McKenzie applies (although I have become aware of the offers which were made at that conciliation because they are referred to in an email dated 4 March 2014 from Mr Aggarwal’s then solicitors, which was annexed to Mr Aggarwal’s submissions on costs). I consider that the appropriate course is to follow the approach taken in McKenzie, with the result that any refusal by Mr Aggarwal of an offer of settlement made by Vision Asia at the conciliation conference cannot be treated as an unreasonable act or omission for the purposes of s.400A(1).”

[16] I do not consider that the McKenzie principle is applicable here. This is not a case where a reasonable, without prejudice offer of settlement was refused at a conciliation conference. An agreement, at least in-principle, was reached and reduced to writing. There is no doubt that agreement could have been relied upon as bringing the proceedings to an end had Byron Bay Superfoods confirmed rather than reneged upon it. Byron Bay Superfoods chose to renege upon it and advance a different proposal in an email sent to the Commission which bears no indication that it was intended to be treated as confidential or advanced on a without prejudice basis. Accordingly I consider that Mr Owies’ email of 8 November 2016 may be considered in relation to Mr Garang’s costs application.

[17] I consider that the email constituted an unreasonable act on the part of Byron Bay Superfoods in connection with the conduct and continuation of Mr Garang’s unfair dismissal remedy application, for the following reasons:

● no proper basis was identified for Byron Bay Superfoods’ departure from the in-principle agreement which had been reached at the telephone conference;

● as found in the Primary Decision, the email included a serious falsehood concerning other purported legal proceedings against Mr Garang, and was intended to intimidate Mr Garang into departing from what had previously been agreed;

● the settlement amount which had previously agreed in-principle was entirely reasonable, at least from Byron Bay Superfoods’ perspective, having regard to the amount which was ultimately awarded after the hearing;

● the exclusion in the in-principle settlement of any release by Mr Garang concerning underpayment claims was also reasonable, having regard to my findings in the Primary Decision concerning the way in which he was paid and the involvement of the Fair Work Ombudsman on his behalf; 12

● the email was an unreasonable attempt to escape this aspect of the in-principle settlement; and

● by reneging on the in-principle settlement, Byron Bay Superfoods chose to continue to defend the unfair dismissal remedy application on a basis which, in the Primary Decision, I found to be false, namely that Mr Garang had been dismissed because of redundancy, 13

[18] Mr Owies’ email of 8 November 2016 caused the matter not to settle, and Mr Garang had to continue to prosecute his claim. This caused him to incur costs, including legal costs because he was legally represented, and personal expenses associated with bringing the claim and attending at court (which are identified below). Accordingly I am satisfied as to the jurisdictional prerequisite for the order of costs in s.400A(1). I also consider that I should exercise my discretion under s.400A(1) in favour of the grant of an award for costs. Byron Bay Superfoods chose to depart from a reasonable in-principle settlement which would have resolved the proceedings at an early stage, and instead chose to continue to contest the matter on a basis which not only did not succeed but was found not to represent the truth, as already discussed. In those circumstances it should bear responsibility for the costs which it caused Mr Garang to occur. As earlier noted, Byron Bay Superfoods submitted that costs should not be awarded because it was not necessary for Mr Garang to engage lawyers in order to bring his application, and it had not been legally represented. I accept that it is highly relevant in considering a costs application that s.596 of the FW Act discloses a legislative policy that, subject to identified exceptions, parties in proceedings before the Commission require permission for legal representation and such permission may only be granted in limited prescribed circumstances. However I do not accept Byron Bay Superfoods’ submission in this respect for two reasons. First, Mr Garang did not require the permission of the Commission in respect of his out-of-court legal representation. 14 Second, Byron Bay Superfoods did not oppose Mr Garang being granted permission for legal representation at the determinative conference.

[19] That leaves the question of the quantification of costs. The costs claimed by Mr Garang fall into three categories: the professional fees charged by Mr Garang’s lawyers, GPN Law; the disbursements charged by those lawyers; and Mr Garang’s personal costs associated with bringing the claim and attending at court.

[20] The professional legal fees are quantified at $3,300.00 (including GST). However I have not been provided with any particularisation of this total amount of costs. Apart from the attendance of Mr Garang’s legal representative at the determinative conference, it is not possible to identify what preparatory work was actually engaged in by Mr Garang’s lawyers. Some of the evidentiary material filed, for example, was clearly prepared by Mr Garang or his wife and not by his lawyers. In the circumstances, I consider I should award a global amount which is reasonable but at the conservative end of the range. I will therefore award a total of $2,200 for professional legal costs.

[21] GPN Law’s disbursements are particularised and total $991.19 inclusive of GST. GPN Lawyers are located in Sydney, but the determinative conference took place in Ballina due to Byron Bay Superfoods and Mr Garang’s residence being located nearby. A significant proportion of those costs are associated with the travel and accommodation costs incurred as a result of Mr Garang’s lawyer having to attend the determinative conference in Ballina. I do not consider that Byron Bay Superfoods should have to pay the costs incurred as a result of Mr Garang’s decision to use Sydney rather than local lawyers. The other disbursements claimed appear reasonable. I will award a total of $184.90 for GPN Law’s disbursements.

[22] Mr Garang claimed a total of $447.18 in personal costs. The Commission has the power to award costs in respect of out-of-pocket expenses incurred by a party in the conduct of litigation. This may include expenses associated with attendance at court and lost wages for a person who is a witness. 15 I will award Mr Garang, in connection with his attendance and that of his wife at the determinative conference, his claimed lost wages of $168.18, his fuel for travel of $30 and his babysitter fees of $100. This makes a total of $298.18.

[23] The total amount of costs which will be awarded in Mr Garang’s favour will therefore be $2683.08. The amount will be payable by Byron Bay Superfoods within 28 days. A separate order (PR595259) will be issued giving effect to this decision.

VICE PRESIDENT

 1   [2017] FWC 2022

 2   [2017] FWC 2980, PR593748

 3   [2014] FWCFB 810, 240 IR 377 at [23]-[33]

 4   [2011] FWAFB 4014, 211 IR 374

 5   [2016] FWCFB 8162

 6 [2016] FWCFB 2478

 7   In Mr Garang’s submissions of 5 June 2017 supporting his application for costs, it was stated that the conciliation occurred on 19 October 2016. However the Commission’s records demonstrate that it in fact occurred on 8 November 2016.

 8   [2017] FWC 2022 at [86]

 9   Ibid at [55]-[59] and [64]

 10   Ibid at [61]

 11   [2014] FWC 4479

 12   [2017] FWC 2022 at [13]-[18]

 13   Ibid at [51]

 14 FW Act, s.596(1) and Fair Work Commission Rules 2013, r.12

 15   See Paul Hill v L E Stewart Investments Pty Ltd[2014] FWC 5588 at [11]-[14]

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