Prism Pty Ltd T/A Vigil Antislip v Ms Rachel Falzon

[2014] FWC 507

[2014] FWC 507

FAIR WORK COMMISSION

DECISION

AND

REASONS FOR DECISION

Fair Work Act 2009
s.402 - Application for costs orders

Prism Pty Ltd T/A Vigil Antislip
v
Ms Rachel Falzon
(U2013/10318)

COMMISSIONER CLOGHAN PERTH, 29 JANUARY 2014

Application for costs.

[1] This is an application by Prism Pty Ltd T/A Vigil Antislip seeking recovery of costs incurred in legal representation caused as a result of an unfair dismissal application to the Commission by a former employee, Ms R Falzon.

[2] Ms Falzon initially made an application to the Commission alleging that she was forced to resign by the conduct of Vigil Antislip. After unsuccessful conciliation, but before the arbitral hearing, Ms Falzon discontinued her application for unfair dismissal.

PROCEDURAL BACKGROUND

[3] On 8 June 2013, Ms Rachel Falzon (Ms Falzon) made application to the Fair Work Commission (Commission) seeking a remedy for alleged unfair dismissal from her former employer, Prism Pty Ltd T/A Vigil Antislip (Employer).

[4] The application is made pursuant to s.394 of the Fair Work Act 2009 (FW Act).

[5] In response to the application, the Employer asserts that:

● the application is frivolous and vexatious; and
● the Applicant gave notice of her resignation on 22 May 2013 and resigned on 3 June 2013.

[6] The application was unable to be resolved at conciliation and was referred to me for arbitration on 18 August 2013.

[7] To assist in an efficient and effective resolution of the jurisdictional objection outlined in paragraph [5], procedural directions were issued on 23 August 2013 for a hearing on 7 November 2013. Notwithstanding the procedural directions, I held a conciliation conference of the parties on 5 September 2013.

[8] On 23 October 2013, the Applicant filed a notice of discontinuance of her application.

[9] On 1 November 2013, the Employer made application for costs against the Applicant setting out the “grounds” and stating further written submissions would be filed.

[10] On 3 December 2013, the Employer provided its further written submissions to the Commission and copied them to the Applicant.

[11] In determining the costs application, I issued procedural directions on 4 December 2013 for a hearing on 21 January 2014.

[12] At the costs application hearing on 21 January 2014, the Employer was represented by Mr Stephen McCorkill, Managing Director. Ms Falzon represented herself.

RELEVANT LEGISLATIVE BACKGROUND

[13] Section 400A of the FW Act provides the circumstances in which the Commission can make an order requiring one person to be accountable for all or part of the costs incurred by another party in relation to an unfair dismissal application to the Commission.

[14] Section 400A reads as follows:

“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.”

[15] The general powers referred to in s.400A(3) relating to s.611 of the FW Act are as follows:

“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) ...”

COSTS INCURRED BY THE EMPLOYER

[16] In response to the procedural directions issued on 4 December 2013, the Employer, through its legal representatives, provided a schedule of the costs incurred in defending the application by Ms Falzon.

[17] From 5 September to 21 October 2013, the Employer incurred legal costs of $9,464.

[18] In preparation of the costs application, the Employer has incurred legal expenses of $1,738.66.

EMPLOYER’S CASE

[19] The Employer’s written submission is that:

● the application was not resolved at conciliation on 22 July 2013;

● on 23 August 2013 the Commission issued procedural directions for a hearing on 7 November 2013;

● on 5 September 2013 Ms Falzon formally engaged a solicitor to act on her behalf. Prior to 5 September 2013, Ms Falzon was self represented;

● on 9 September 2013, the Employer filed, in accordance with the procedural directions, documents which it intended to reply upon in the hearing on 7 November 2013;

● Ms Falzon failed to comply with the procedural directions to file with the Commission, and serve upon the Employer, the documents which she intended to rely upon in the hearing on 7 November 2013;

● on 17 September 2013, the Commission advised Ms Falzon and her legal representative of non-compliance with the procedural directions due on 9 September 2013 and that the Commission would hold a non-compliance hearing on 24 September 2013;

● on 19 September 2013, Ms Falzon’s solicitor advised that she had no documents to file in accordance with the procedural directions in view of the documents lodged by the Employer;

● on 3 October 2013, the Employer filed its statement of facts, five witness statements and other documentation which it intended to rely upon in accordance with the procedural directions;

● on 15 October 2013, Ms Falzon failed to comply with the procedural directions by not filing her response to the statement of facts asserted by the Employer, a statement of facts and witness statements upon which she relies upon and any other documentary material;

● on 17 October 2013, the Commission advised Ms Falzon’s legal representative of her non-compliance with the procedural directions due on 15 October 2013 and that the Commission would hold a non-compliance hearing on 24 October 2013.

[20] On 23 October 2013, Ms Falzon’s solicitor advised my Associate that the Applicant had decided to discontinue her application because:

● her financial circumstances had changed and she could no longer afford legal representation;

● she wishes to have representation at any hearing; and

● she was unable to obtain leave from her place of employment to attend the hearing in person.

[21] Ms Falzon’s solicitor also advised my Associate on 23 October 2013 that he ceased to act for the Applicant.

[22] The parties were advised that the hearing on 7 November 2013 was vacated as a consequence of the Applicant discontinuing the matter.

[23] As a consequence of the above events, the Employer submits that Ms Falzon caused it costs to be incurred by her unreasonable acts or omissions in connection with the continuation of the matter up until the date of discontinuing the application.

APPLICANT’S CASE

[24] The Applicant’s submission consisted of:

● details of what she sought by way of compensation in the conciliation conference to resolve the application;

● a chronology of events;

● the provisions of the FW Act as it relates to the costs application;

● a statement of facts dated 9 January 2014 under the heading “Constructive Dismissal”; and

● the statement “Vigil Antislip are seeking approx $10,000 in costs, when the matter did not proceed to a hearing and additionally they had the opportunity to settle originally by attending a bullying course. I believe their lack of interest in attending their lack of concern towards bullying.”

[25] In addition, Ms Falzon provided a number of documents in resisting the Employer’s costs application.

CONSIDERATION

[26] Ms Falzon’s originating application is one which is commonly referred to as “constructive dismissal” and refers to a situation where an employee alleges they were forced to resign from their employment because of the conduct or course of conduct engaged in by the Employer. Clearly, as a result of Ms Falzon discontinuing her application, the veracity of her allegations was never tested in hearing.

[27] The primary position or principle, as set out in s.611(1) of the FW Act, is that each person in proceedings in the Commission must sustain their own costs in relation to a matter. This first principle relating to costs is clear and unambiguous.

[28] However, the FW Act also provides for exceptions to the primary principle. The circumstances in which the exceptions apply require the Commission to be satisfied that, in cases of unfair dismissal, that the Applicant caused “costs to be incurred because of an unreasonable act or omission in connection with the conduct or continuation of the matter”.

[29] At the core of s.400A of the FW Act is a determination of what is “unreasonable”.

[30] An insight into s.400A of the FW Act is assisted by the Explanatory Memorandum which provides:

“Parts 3 and 4 of Schedule 6 to the Bill enhance the FWC's ability to order costs against a party and/or their representative in unfair dismissal matters. The new ‘party costs’ provision applies where a party to an unfair dismissal matter (either an employee or employer) has caused the other party to incur costs by an unreasonable act or omission.

Under section 401 of the FW Act, lawyers and paid agents may currently be exposed to costs orders if FWA has granted permission for a person to be represented in an unfair dismissal matter. The Bill will provide for the FWC to order costs against a lawyer or paid agent whether or not the FWC has given permission for a person to be represented.

The amendments strike a balance between the need to protect workers from unfair dismissal, and to provide a deterrent against unreasonable conduct during proceedings. The amendments will enable costs orders to be more easily made in the case of unreasonable conduct but will not prevent genuine claims from being pursued. They will discourage frivolous and speculative claims and assist in the efficient resolution of claims by encouraging all parties to approach proceedings in a reasonable manner. These measures are reasonable and proportionate to address the time and expense that an unreasonable conduct by a participant and/or their representative may cause another party to incur.”

[31] Often parties appearing in the Commission determine what is “reasonable” or “unreasonable” in the same way as Shakespeare did in Love’s Labour’s Lost with the words “Beauty is bought by judgement of the eye”, or as it is better known, “beauty lies in the eye of the beholder”. Put shortly, what is “reasonable” or “unreasonable” is usually determined by the party claiming the proposition.

[32] The Employer’s application, pursuant to s.400A of the FW Act, for costs of 1 November 2013 reads:

“...the Applicant caused the Respondent to incur its legal costs to prepare for the hearing, and in that respect the Applicant’s conduct in continuing the proceedings following the conciliation conference and causing the Respondent to incur such costs in preparation for the hearing, and then filing a Notice of Discontinuance at the time the Applicant did, and for the reasons stated by the Applicant’s solicitor, constituted an unreasonable act or omission of the Applicant in connection with the conduct or continuation of the matter.”

[33] I now turn to each of those grounds in seriatim.

Continuation of proceedings following the conciliation conference.

[34] This submission can be dealt with expeditiously by making the obvious observation that in the absence of a successful conciliation, the Conciliator referred the application to a member of the Commission for arbitral proceedings.

[35] While the outcome of conciliation before the Conciliator was unsuccessful, both parties indicated a preference, in the first instance, for further conciliation before an arbitral hearing.

[36] Ms Falzon was represented by counsel at the conciliation conference. However, a resolution to the application was not achieved and the matter was continued to hearing.

[37] The above events are not unusual and I am not satisfied that Ms Falzon, by continuing with her application, was unreasonable and caused costs to be incurred by the Employer.

Preparation for the hearing

[38] This submission can also be dealt with swiftly by observing that the Employer, similar to Ms Falzon, elected to have legal representation in preparation for the hearing. In making such a decision, both parties must have acknowledged and understood that such a decision comes with a financial cost which, unless falling within the provisions of s.400A or s.611 of the FW Act, would be borne by themselves.

[39] It is true that had Ms Falzon not make the application, the Employer would not have had to bear those costs in preparation of the hearing. It is equally true that had the Employer agreed to Ms Falzon’s second proposal to resolve the matter, especially as it did not involve monetary compensation, would not have had to bear the costs in preparation of the hearing. The short fact is that both parties, as they are entitled to do, did not reach agreement to resolve the matter in conciliation, and consequently, the matter was referred for an arbitral hearing.

[40] The above events are not unusual and I am not satisfied that Ms Falzon’s conduct in necessitating the matter going to hearing and requiring the Employer to prepare for that hearing was an unreasonable action.

[41] I now turn to the actions of Ms Falzon which appear to be the substantive conduct which the Employer asserts caused costs to be incurred unreasonably. They are the failure of Ms Falzon to adhere to relevant procedural directions and the timing of her notice of discontinuance.

Failure to comply with procedural directions

[42] The Employer acknowledges, in the first instance, that Ms Falzon was legally represented.

[43] It is a fact that the Applicant did not comply, on two occasions, with the procedural directions, to file and serve the documents she intended to rely upon in the hearing.

[44] The first documents were due on 9 September 2013.

[45] On 17 September 2013, my Associate sought an explanation from Ms Falzon’s legal representative as to why the documents had not been filed on 9 September 2013. The Applicant was given until 19 September 2013 to comply with the procedural directions, and importantly, the Employer was relieved of its obligation to comply with the next stage of the procedural directions, until the Applicant provided the documents she intended to rely upon in hearing. The Applicant’s representative provided a response on 19 September 2013 advising that Ms Falzon intended to rely on the same documents provided by the Employer. While there is certainly an element of tardiness, I am not satisfied it falls within the realm of unreasonableness.

[46] The Employer complied with its requirement to provide a statement of facts, witness statements and a decision which it intended to rely upon in the hearing. Following the Employer’s compliance, Ms Falzon was required to respond by 15 October 2013.

[47] The Applicant failed to comply with the procedural directions by not filing a response to the statement of facts asserted by the Employer, her own statement of facts and witness statements (if any) and any other documentary material on 15 October 2013.

[48] Ms Falzon describes in her oral submissions that she only became aware of the second instance of non-compliance with the procedural directions when she received an email from my Associate on 17 October 2013 advising her of a non-compliance hearing on 24 October 2013 1.

[49] On receiving the email from my Associate, Ms Falzon contacted her lawyer.

[50] Not unexpectedly, Ms Falzon made the oral submission:

“So I’d left everything sort of in their hands [her lawyers] and I didn’t realise those things were occurring, and the best I can explain it is as soon as I realised that I wasn’t able to continue, I contact my lawyer...” 2

[51] Further:

“The biggest thing for me is I was trying to continue it [the application]. I had every intention of wanting to go through with it, and it was only at the point of when my personal life - when my partner and I split up that that was when I realised I couldn't keep doing it, and I couldn't do it by myself, and as soon as I knew that happened, that's when I contacted my lawyer and asked them to cancel it. So I did do it as soon as I knew that I couldn't continue, and it was never my intention to cause them those costs. I had a legitimate claim, and I don't think myself that it should have gone to this extent either, but I did make my best attempt to notify them as soon as possible.” 3

[52] There is no dispute that Ms Falzon failed to comply with the directions of the Commission. However, I also have no reason to disbelieve Ms Falzon when, like many applicants, she states that she left “everything” in the hands of her lawyer.

[53] Ms Falzon submits that she contacted her lawyer soon after receiving notice on 17 October 2013 of the non-compliance hearing on 24 October 2013. I note it was Ms Falzon’s lawyer who authored the discontinuance of the application. The discontinuance of the application was signed at the same time as Ms Falzon’s legal representative ceased to act for her. The details of the communication between Ms Falzon are not entirely evident but when the first principle of parties bearing their own costs is considered, and the expired time of four (4) working days from Ms Falzon becoming aware of the status of her application, I am not satisfied that her actions were unreasonable in causing the Employer to incur costs in continuation of the matter.

[54] From the invoice provided by the Employer, the non compliance by Ms Falzon resulted in it incurring costs of two telephone calls and two emails to the Commission, and the cost of correspondence it received from its legal representatives.

[55] The mere fact that an applicant does not comply with procedural directions does not, of itself, make the conduct unreasonable notwithstanding the action may cause costs to be incurred by the respondent employer. Whether it is unreasonable or not is a matter of examination of the facts against such criterion as frequency of non-compliance, awareness and responsiveness to non-compliance notification, the reasons for non-compliance and whether a person was represented or not. When criterion such as these are examined, the Commission is better able to determine whether the conduct is reasonable. There is not a direct causal relationship between non-compliance of procedural directions and unreasonable conduct causing costs to be incurred - it is a maze - not a straight line.

[56] Having considered the totality of the circumstances, I am not satisfied that Ms Falzon’s actions in failing to comply with procedural directions were unreasonable and caused costs to be incurred by the Employer in continuation of the application.

[57] In case I am misunderstood, I emphasise to the parties that I am not saying that those who fail to comply with procedural directions avoid accountability for their actions and any costs incurred by the other party. When all the circumstances of non-compliance with procedural directions are considered, the Commission may come to the view that one party has, by their unreasonable actions or omission, led the other party to incur avoidable costs. In this particular application, I have come to the view, after considering all the circumstances, that the actions of Ms Falzon were not unreasonable. Obviously, the most appropriate action is to comply with procedural directions and avoid any behaviour which gives reason to the other party to believe that that behaviour is unreasonable.

The timing of the discontinuance

[58] Ms Falzon and her legal representative were advised by my Associate on 17 October 2013 that she had failed to comply with the procedural directions due on 15 October 2013.

[59] Ms Falzon in her oral submissions states that she contacted her solicitor to say that she could not attend the non-compliance hearing on 24 October 2013. It was at this time she became aware of the fact that she had not complied with the procedural directions on 15 October 2013. Ms Falzon submits that, “at that point he [her solicitor] forwarded me a document and said, ‘take a look at your emails and everything in there because we haven’t submitted the documents for this portion of it [procedural directions]”. 4

[60] While Ms Falzon’s submission was in generalisations and did not provide particulars as to exactly when she contacted her solicitor, I am inclined to a view that with better case management of her application, procedural directions could have been handled more timely. Notwithstanding these circumstances, in less than four (4) working days after becoming aware of non-compliance of procedural directions, Ms Falzon’s solicitor provided a notice of discontinuance of the application on behalf of the Applicant.

[61] The clear inference concerning the Employer’s submission is that Ms Falzon only took action to discontinue her application when facing a non-compliance hearing on 24 October 2013. While there can be no dispute regarding the sequence of events, I am not prepared to draw the adverse inference that Ms Falzon deliberately waited until the impending non-compliance hearing to discontinue the application. As I have already found, Ms Falzon was unaware of the non-compliance with the procedural directions on 17 October 2013 and came to a relatively quick decision to discontinue the application having considered her work and personal circumstances.

[62] In considering the submissions and the sequence of events, I am not satisfied that Ms Falzon conducted herself unreasonably in continuing the matter until the eventual timing of her discontinuing the application.

[63] While I am not required in the grounds set out by the Employer in the costs application, I now turn to the remaining matter as set out by the Employer in its response to Ms Falzon’s application - Ms Falzon instituted these proceedings vexatiously.

Can the Commission be satisfied that Ms Falzon made the application vexatiously?

[64] There is no dispute between the parties that Ms Falzon provided her resignation to the Employer on 22 May 2013. Ms Falzon’s letter of resignation states that the reason was due to “unresolved events”. The resignation took effect on 3 June 2013.

[65] In her application, Ms Falzon states that she was “forced to leave the company due to ongoing bullying issues” and sets out 11 particulars. Also in her application, Ms Falzon sets out why her alleged constructive dismissal was unfair.

[66] In response to the Applicant’s contentions, the Employer agrees that “the essence of her claim is that she was bullied by the company’s production manager” and concedes that the Production Manager and Ms Falzon “did not get along”.

[67] The Employer categorically denies Ms Falzon’s allegations. However, the emails provided as part of the Employer’s response clearly demonstrate that two employees had, in the weeks leading up to Ms Falzon’s resignation, reached a point of vigorous argument concerning how each was carrying out their respective duties and responsibilities, and made character assessments of each other.

[68] As a consequence of these emails, Mr McCorkhill became involved in the dispute between the two employees. Mr McCorkhill met with Ms Falzon on 2 May 2013 and subsequently restructured the working arrangements to minimise interaction between both employees. Mr McCorkhill also interviewed a number of employees.

[69] On 22 May 2013, Ms Falzon handed in her resignation. While Mr McCorkhill did not sight the resignation letter, the Employer contends that the reason for Ms Falzon’s resignation was a promotion and closer to her home. Further, the allegation of constructive dismissal was a “manipulation of the situation”. In contrast, I have an email from Ms Falzon to Mr McCorkhill dated 27 April 2013 which concludes with a statement that the Production Manger “has now made himself unbearable to work with”.

[70] I have taken some time to set out the circumstances leading up to Ms Falzon tendering her resignation for the purposes of considering whether she “made the application...vexatiously or...” pursuant to paragraph 6121(2)(a) of the FW Act.

[71] A Full Bench of the Commission considered the concept of vexatious in Holland and Ors v Nude Pty Ltd T/A Nude Delicafe[2012] FWAFB 6508 and referred to the approach generally taken of adopting the comments of Justice North in Nilsen v Loyal Orange Trust (1997) 76 IR 180. His Honour stated:

“The next question is whether the proceeding was instituted vexatiously. This looks to the motive of the applicant in instituting the proceeding. It is an alternative ground to the ground based on a lack of reasonable cause. It therefore may apply where there is a reasonable basis for instituting the proceeding. This context requires the concept to be narrowly construed. A proceeding will be instituted vexatiously where the predominant purpose in instituting the proceeding is to harass or embarrass the other party, or to gain a collateral advantage : see Attorney General v Wentworth (1988) 14 NSWLR 481 at 491.

[72] The Australian Concise Oxford Dictionary defines “vexatious” as:

“causing or tending to cause vexation; not having sufficient grounds for action and seeking only to annoy defendant”.

[73] In view of the fact that the application did not go to hearing, the assertion of Ms Falzon that she was constructively dismissed, and alternatively, the Employer’s contention that the Applicant resigned to go to a better job which was closer to home will not be tested in a hearing. The Commission, not having the benefit of a hearing, is unable to come to a view that the application was made vexatiously.

[74] Notwithstanding the Commission being unable to reach a conclusion that the application was vexatious without a hearing, I have a bundle of documents which both parties intended to rely upon in a hearing. These documents provide the base material for a properly contestable unfair dismissal action.

[75] Having objectively considered the factual circumstances of the events leading to Ms Falzon’s resignation of employment and the general approach adopted by the Commission, I am not satisfied that Ms Falzon made the application to the Commission vexatiously.

CONCLUSION

[76] In conclusion, for the reasons outlined above, the Employer’s application for cost must be dismissed. An order to this effect is issued in conjunction with this Decision and Reasons for Decision.

COMMISSIONER

Appearances:

S McCorkill on behalf of the Applicant.

R Falzon, the Respondent.

Hearing details:

2014:

Perth,

21 January.

 1   Transcript PN32

 2   Transcript PN33

 3   Transcript PN34

 4   Transcript PN13

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