Rahman v Commonwealth of Australia as represented by the Australian Taxation Office

[2013] FCCA 388

FEDERAL CIRCUIT COURT OF AUSTRALIA

RAHMAN v COMMONWEALTH OF AUSTRALIA AS REPRESENTED BY THE AUSTRALIAN TAXATION OFFICE [2013] FCCA 388

Catchwords:
COSTS – Interlocutory application for costs – Fair Work proceedings – multiple amendment of pleading and changes of representation – whether costs incurred because of an unreasonable act or omission considered.

Legislation:  
Fair Work Act 2009 (Cth), s.570

Construction, Forestry, Mining and Energy Union v Clarke (2008) 170 FCR 574
Dowling v Fairfax Media Publications Pty Ltd (2009) 182 IR 28
Fair Work Ombudsman v Lovers of Property Pty Ltd & Ors [2012] FMCA 1025
Larne-Jones v Human Synergistics Australia Limited & Ors [2013] FMCA 206
Minister for Immigration and Citizenship v Li [2013] HCA 18
National Mutual Life Association of Australasia Ltd v Campbell [2000] FCA 852; (2000) 99 FCR 562

Applicant: FAHMID RAHMAN

Respondent: COMMONWEALTH OF AUSTRALIA AS REPRESENTED BY THE AUSTRALIAN TAXATION OFFICE

File Number: SYG 842 of 2011

Judgment of: Judge Driver

Hearing dates: 28 May, 10 July 2013

Date of last submission: 10 July 2013

Delivered at: Sydney

Delivered on: 12 July 2013

REPRESENTATION

Counsel for the Applicant: Mr A Rogers

Solicitors for the Applicant: JESUS' Advocacy International

Counsel for the Respondent: Ms K Eastman SC

Solicitors for the Respondent: Clayton Utz

INTERLOCUTORY ORDERS

1. The applicant (Fahmid Rahman) shall pay the costs of the respondent (the Commonwealth of Australia as represented by the Australian Taxation Office) thrown away by reason of the amendment of Mr Rahman’s statement of claim to assert the retrospective operation of the Fair Work Act 2009 (Cth) and the subsequent abandonment of that aspect of his claim.

2. Costs of the proceedings otherwise are reserved.

FEDERAL CIRCUIT COURT OF AUSTRALIA

AT SYDNEY

SYG 842 of 2011

FAHMID RAHMAN

Applicant

And

COMMONWEALTH OF AUSTRALIA AS REPRSENTED BY THE AUSTRALIAN TAXATION OFFICE

Respondent

REASONS FOR JUDGMENT

Introduction and background

1. The respondent in the principal proceedings (ATO) seeks an order for its costs thrown away by reason of multiple amendments to the pleadings of the applicant (Mr Rahman).  The ATO relies on the affidavit of Christa Lenard affirmed on 7 May 2013 in support of its application for costs and the quantification of them.

2. The application for costs is opposed by Mr Rahman.  Both parties have prepared written submissions on the issue.  I also received oral submissions on the issue on 10 July 2013.

Consideration

1. Section 570 of the Fair Work Act 2009 (Cth) (Fair Work Act) relevantly provides:

   Costs only if proceedings instituted vexatiously etc.

   /(1) A party to proceedings (including an appeal) in a court (including a court of a State or Territory) exercising jurisdiction under this Act may be ordered by the court to pay costs incurred by another party to the proceedings only in accordance with subsection (2) ....

   (2)    The party may be ordered to pay the costs only if:

   ...

   (b) the court is satisfied that the party's unreasonable act or omission caused the other party to incur the costs; or

   ...

Principles relevant to the application of s.570(2)(b) of the Fair Work Act

1. I accept generally the parties’ submissions concerning the relevant principles to be applied. In ordinary circumstances, the Court is not empowered to order costs in matters arising under the Fair Work Act. The power is enlivened by a party’s unreasonable act or omission. Once the power is enlivened, the Court has a broad discretion. What is an unreasonable act or omission will depend upon the facts of the particular case. A procedural failure may, prima facie, be unreasonable and a pleading failure (by which I mean something put in or left out of a pleading) which is unreasonable may also enliven the power.  A finding of an unreasonable act or omission must be the exception rather than the rule.  It follows that a reasonably high bar needs to be set for a party alleging an unreasonable act or omission. 

2. In Construction, Forestry, Mining and Energy Union v Clarke[1], the Full Court of the Federal Court said:

   The exception applies when two criteria are satisfied. The first criterion is that one party must have engaged in "an unreasonable act or omission". As the reasoning of Tracey J in Australian and International Pilots Association v Qantas Airways Ltd (No 3) [2007] FCA 879; (2007) 162 FCR 392 and Siopis J in McAleer v The University of Western Australia (No 2) [2007] FCA 247; (2007) 161 IR 151 demonstrates, whether a party has conducted itself or its litigation in such a way as to cross this threshold will depend on the particular circumstances of the case. The second criterion is that the act or omission of one party must have "caused another party to the proceeding to incur costs in connection with the proceeding". Once both criteria are satisfied, then the Court "may" in its discretion order the party which has engaged in the unreasonable act or omission to pay some or all of the costs of the other party.

   See also Larne-Jones v Human Synergistics Australia Limited & Ors[2].

   [1] (2008) 170 FCR 574 at 582.

   [2] [2013] FMCA 206 at [46] ff.

3. In Dowling v Fairfax Media Publications Pty Ltd[3] Moore J said the task involves “a qualitative assessment of the proceeding in its entirety, focussing of course on the party that ‘instituted’ the proceeding”[4].

   [3] (2009) 182 IR 28 at 45 [52].

   [4]  His Honour was there considering the equivalent provision in the Workplace Relations Act1996 (Cth).

4. The expression “an unreasonable act or omission” used in s.570(2)(b) of the Fair Work Act should bear its ordinary meaning. The test is not whether Mr Rahman acted in a manner that no reasonable person would have acted or that the pleadings were drafted in a manner that no reasonable person could have drafted pleadings[5]. 

   [5] See Minister for Immigration and Citizenship v Li [2013] HCA 18 at [68] (per Hayne, Kiefel, Bell JJ) and [106] per Gageler J, albeit in a different legal context.

5. As to the meaning of “unreasonable”, the Full Federal Court (Black CJ Emmett & Hely JJ) in National Mutual Life Association of Australasia Ltd v Campbell[6] said:

   There was some discussion during the hearing of the appeal about the meaning of "unreasonable " and "unfair". Reference was made to decisions of the Court in which dictionary definitions of these broad concepts had been adopted. Although the question does not arise for decision in this case, we would comment that attempts to achieve a precise definition of words such as "unreasonable" and "unfair" are likely to run into difficulty. The legislature has quite deliberately used words of broad content. Concepts such as "unreasonable" can be unduly restricted by the use of synonyms and definitions.  For example, in ordinary usage conduct may be referred to as "unreasonable" which is not really beyond the bounds of reason at all - it is just "unreasonable".  As Kitto J cautioned in Federal Broom Co Pty Ltd v Semlitch (1964) 110 CLR 626 at 633: "Fallacy lurks in paraphrase". See also Kumar v Minister for Immigration and Ethnic Affairs (1997) 144 ALR at 445, 446

   [6] [2000] FCA 852; (2000) 99 FCR 562 at [36] . The comments were not concerning the Fair Work Act or any of its predecessor legislation but are relevant because they concern the ordinary meaning of “unreasonable”.

6. Costs have been awarded by this Court for the delivery of a seriously deficient pleading[7].  In that matter, there appeared to have been three versions of a statement of claim.  The factors taken into account by the Court included:

   a)that the first pleading was an improper pleading and demonstrably it did not plead the facts upon which the claim against the second respondent was advanced. It required significant and wholesale amendment;

   b)that the second respondent was right to make complaint about that pleading;

   c)the form of the pleading was an inefficient way to conduct litigation and there was a failure to set out the facts upon which that claim was based;

   d)the second respondent incurred costs as a result of that unreasonable act or omission, including the second respondent engaging in correspondence with the applicant about the deficient pleading.

   [7] Fair Work Ombudsman v Lovers of Property Pty Ltd & Ors [2012] FMCA 1025.

7. In that case the costs order was made at an early stage.  In this matter, significant additional costs are claimed to have been incurred after the parties had filed their evidence and the matter was ready for a final hearing.  The ATO complains that Mr Rahman’s amendments which have resulted in significant costs being incurred were amendments raised on the eve of the hearing.

8. The ATO relies upon the following chronology in order to support its contention that the deficiencies in Mr Rahman’s pleadings constitute an unreasonable act or omission:

02.05.11	Mr Rahman files a Form 4 Claim under the Fair Work Act. The application alleges breaches of ss.340, 342, 343, 344, 346, 351 of the Fair Work Act.
06.06.11	ATO files response – general federal law.
28.07.11	Mr Rahman commenced a claim in Fair Work Australia (C 2011/534) raising events that postdate 22 March 2011. 22 March 2011 was the last date of any event or thing happening which Mr Rahman referred to in his originating claim, filed 2 May 2011. This claim was not pursued by Mr Rahman.
01.08.11	First statement of claim filed. Mr Rahman abandons claim under ss.343, 344, 346, 347, and 362 of the Fair Work Act.
22.02.12	Mr Rahman files affidavit in support of his claim.
10.04.12	Directions in the Court re filing evidence.  Proceedings set down for hearing for four days from 17 July 2012.
04.07.12	Mr Rahman files affidavit in reply but his material raises new evidence in chief.
06.07.12	Mr Rahman files affidavit in reply which also raises new evidence in chief.
13.07.12	Mr Rahman seeks leave to file an amended statement of claim (second iteration) to introduce new claim based on implied contractual terms and the retrospective operation of the Fair Work Act.
17.07.12	Hearing commences (Dr John Berwick, Counsel, representing Mr Rahman).  Mr Rahman discontinues a related judicial review claim (SYG1554 of 2011).
18.07.12	Mr Rahman granted leave to file amended statement of claim (third iteration).  ATO granted leave to seek particulars.
25.07.12	Mr Rahman’s solicitor responds to particulars.
27.07.12	ATO’s Application in a Case seeking summary dismissal is filed with Ms Christa Lenard’s affidavit in support of ATO’s application.
09.10.12	Affidavit of Mr Seyfi Atila (Mr Rahman’s solicitor) responded to aspects of the proposed pleading.
05.11.12	ATO files submissions in support of its application.
26.11.12	Mr Rahman files submissions.
03.12.12	Hearing in FMC to hear the ATO’s application.  The hearing is adjourned on Mr Rahman’s application.  Costs order made for costs thrown away because of the adjournment.  Costs payable by Dr Berwick.
07.12.12	Mr Rahman files an affidavit raising a new issue about his trade union membership.
25.01.13	Mr Rahman serves further amended statement of claim (fourth iteration).
January – February 2013	Discussions between parties on a without prejudice basis regarding the pleading.
20.02.13	ATO notifies Mr Rahman’s solicitor of its consent to some of the proposed amendments.
21.02.13	Mr Rahman’s Application in a Case to file further amended statement of claim (fifth iteration) and affidavit of Mr Atila.
26.02.13	Interlocutory hearing, Ms Chris Ronalds SC appears for the Mr Rahman.
28.02.13	Notice of withdrawal of solicitor by Mr Atila.
11.03.13	Notice of Appearance filed by Jesus' Advocacy International acting for Mr Rahman.
12.03.13	ATO receives proposed further amended statement of claim (sixth iteration).
15.03.13	The ATO receives a further amended statement of claim (seventh iteration).
21.03.13	Further proposed statement of claim (eighth iteration).
22.03.13	Interlocutory hearing– third listing of the ATO’s Application in a Case.
30.04.13	Mr Rahman files second further amended statement of claim (ninth iteration).

1. The ATO contends that the chronology demonstrates that Mr Rahman’s conduct of the proceedings in making multiple and inconsistent amendments over a lengthy period of time has caused the ATO to incur costs each time it has engaged with Mr Rahman’s legal representatives and considered the pleadings. 

2. Of particular significance, the ATO submits that the application to amend the statement of claim to advance a claim based on the Fair Work Act operating retrospectively to make events prior to 1 July 2009 unlawful acts of “adverse action” was wholly misconceived. The retrospectivity point has now been abandoned completely. However, the chronology shows that Mr Rahman’s pursuit of that claim until March 2013 resulted in significant costs being incurred by the ATO which have all been wasted. They are:

   a)the loss of a four day hearing in July 2012 which had to be vacated following the proposed amendment;

   b)requests for particulars of the new claim;

   c)an application seeking summary dismissal and detailed submissions filed by the ATO;

   d)a number of appearances in relation to the summary dismissal application;

   e)attendances between the solicitors and between counsel in relation to the proposed amendment;

   f)new pleadings delivered on 25 January 2013; and

   g)clarification of the point in the proposed pleading on 26 February 2013. The claim based on retrospective operation of the Fair Work Act was abandoned by Mr Rahman’s counsel on 26 February 2013 but it remained part of the pleading filed on 15 March 2013.

3. With respect to the second further amended statement of claim, the ATO notes that Mr Rahman appears to have abandoned the following claims made in the statement of claim filed on 1 August 2011:

   ·claims of victimisation and harassment (paragraph 3a, 3b);

   ·alleged breach of a duty of care (paragraph 4b);

   ·claims in relation to leave on a range of dates other than 28 February 2011 (paragraphs 5, 6, 7, 8, 9, 10, 11,12, 13, 14);

   ·claims about the denial of overtime (paragraphs 33 – 34);

   ·claim about discrimination (paragraph 35);

   ·claim about referee report (paragraphs 36 – 38); and

   ·claims about bias and coercion (paragraphs 39 – 46).

4. These were matters covered in the evidence filed by the ATO.  The evidence addressing these issues is claimed to represent further costs thrown away as the evidence will not be relevant to the proceeding. 

5. The ATO notes that the following new claims have been made in the second further amended statement of claim which were not included in the statement of claim filed on 1 August 2011 and these are matters which will require further evidence to be filed:

   ·a claim under the Workplace Relations Act 2009 (sic) (paragraphs 1(i), 7(i) and 15);

   ·a claim relying on the Public Service Act1999 (paragraph 16);

   ·a new claim referring to events that post dated the commencement of the proceeding (paragraphs 14(i), 17, 20(c));

   ·a claim about racial comments (paragraph 19).

6. The ATO submits that having to deal with nine versions of a pleading is unreasonable.

7. The ATO submits that it is unreasonable for it to bear the costs of preparing for a final hearing which was vacated because of Mr Rahman’s desire to pursue a wholly misconceived claim which he later abandoned.

8. The ATO submits that it is unreasonable for it to bear the costs of evidence which was relevant to answer the initial claim but now appears to be unnecessary given the nature of the claim that Mr Rahman now wishes to advance.

9. I accept that there is substance to the ATO’s complaints, although its attack on the conduct of the proceedings by Mr Rahman is rather too comprehensive and broad ranging.  While Mr Rahman’s pleadings have been through numerous iterations, there have in substance been four attempts by him to articulate his claims.  These have been in the form of a statement of claim, an amended statement of claim, a further amended statement of claim and a second further amended statement of claim.

10. Mr Rahman’s attempt to amend his statement of claim to argue for the retrospective operation of the Fair Work Act was a challenging one, especially in the face of the detailed and complex transitional legislation which deals with the time period before the commencement of the Fair Work Act[8]. Further, the circumstances of Mr Rahman parting company with his counsel and solicitor of choice were unfortunate. However, the more recent amendments of the statement of claim, while I accept that they have added some new claims, have assisted to clarify the dispute between the parties and have prudently abandoned the case which depended upon the asserted retrospective operation of the Fair Work Act.

    [8] Counsel for Mr Rahman represented the retrospectivity issue as a simple point of law but it was an issue with enormous ramifications which would, if it had been pressed, have called for a whole of government response.

11. The ATO, in effect, conceded the positive impact of the most recent iteration of the statement of claim by electing not to pursue the Application in a Case it had made for the summary dismissal of the proceedings.  The parties have, at the Court’s urging, discussed at various times various proposed iterations of the statement of claim in draft form.  While I accept that the ATO has been put to additional expense through the process of dealing with the various iterations of Mr Rahman’s pleading, and while I accept that his conduct of the proceedings has resulted in the ATO incurring costs which have been thrown away, I dealt with what I saw as the most grievous fault in the protracted procedural history of this matter by making a costs order against Mr Rahman’s former counsel on 3 December 2012.  I had earlier (on 19 July 2012) taken the position that, while there were likely to be costs ramifications from the amendment of Mr Rahman’s pleading, those were best dealt with at the conclusion of the proceedings generally.  That was the point of order 5 made by me on that day:

    Costs of the applicant’s Amended Statement of Claim and any costs consequential to the amendment be reserved for argument at the conclusion of the proceeding.

12. The issue of costs became particularly contentious (as is noted in the ATO’s submissions) because of Mr Rahman’s claim (now abandoned) based upon the asserted retrospective operation of the Fair Work Act. That stimulated the ATO to apply for summary dismissal, which application was itself not pursued when the retrospectivity argument was abandoned in the more recent amendment of Mr Rahman’s statement of claim.

13. In my view, Mr Rahman’s claim, insofar as it was based upon the asserted retrospective operation of the Fair Work Act, was unreasonable in the face of the transitional provisions. That aspect of the claim, while unreasonably made, was properly abandoned. The significance of the abandonment of that claim is that it crystallised the ATO’s loss in terms of costs thrown away. The ATO’s claim for costs seeks the sum of $39,240.85 which comprises 65 per cent of the ATO’s solicitor’s fees and 100 per cent of their disbursements. While I have no reason to doubt that those costs have been incurred, based upon Ms Lenard’s affidavit evidence, I do not accept that those costs are all attributable to the unreasonable amendment raising the retrospectivity argument. The better view is that those costs have been incurred by reason of the various iterations of the pleadings and the delay in hearing both interlocutory and substantive aspects of the proceedings due in part to Mr Rahman’s changes in representation.

1. I accept that the ATO should receive its costs thrown away by reason of the making of the now abandoned retrospective aspect of the claim.  The ATO does not seek its costs prior to the completion of the proceedings generally and I see no need to quantify the costs thrown away.  The quantification of the costs thrown away can be undertaken following the conclusion of the proceedings. I note that I have previously reserved the issue of costs in proceedings SYG1554 of 2011 against the ATO and the Merit Review Protection Commissioner.  Those proceedings were discontinued on 17 July 2012.  Likewise, costs of these proceedings should otherwise be reserved until the conclusion of them.  That reservation will extend to any issue of who should pay the costs now awarded against Mr Rahman.

I certify that the preceding twenty-five (25) paragraphs are a true copy of the reasons for judgment of Judge Driver

Associate: 

Date:  12 July 2013