Raylook Pty Ltd v Banga Legal Pty Ltd

[2022] FWC 2495

[2022] FWC 2495

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009

s.401 - Application for costs orders against lawyers and paid agents

Raylook Pty Ltd
v

Banga Legal Pty Ltd

(U2022/5842)

COMMISSIONER O'NEILL MELBOURNE, 19 SEPTEMBER 2022

Application for costs orders under s.401 against lawyers and paid agents – costs awarded.

1. On 19 May 2022, I dismissed an application for an unfair dismissal remedy brought by Ms Teagan Salton (the Employee) against her former employer, Raylook Pty Ltd.[1]

1. Ms Salton’s application was dismissed on the basis that she had not served the minimum employment period and was therefore not eligible to bring an unfair dismissal application.  The issue in the substantive application came down to whether Raylook was a small business. On the Employee’s own material, her period of continuous employment prior to the dismissal was a period of around 10 months, being less than the 12-month minimum employment period applying to a small business but more than the 6-month minimum for other employers. 

1. On 30 May 2022 Raylook applied for costs against both the Employee and her lawyer, Banga Legal Pty Ltd. The application in relation to Banga Legal was made pursuant to s.401 of the Fair Work Act 2009 (Cth) (the Act). The application against the Employee was subsequently withdrawn.

1. I have decided to make an order for costs in the sum of $3,300 against Banga Legal and these are my reasons.

Submissions by Raylook

1. Raylook submits that the Commission should be satisfied both that Banga Legal encouraged the Employee to start or continue her unfair dismissal application within the meaning of s.401(1A)(a) of the Act and secondly, that it engaged in unreasonable acts in connection with the conduct or continuation of the application pursuant to s.401(1A)(b).

1. In relation to s.401(1A)(a), Raylook submits that Banga Legal encouraged the Employee to start and continue the unfair dismissal application because it had represented the Employee at all times and that it should have been reasonably apparent that there were no reasonable prospects of success. That is said to be because the Employee admitted that she had resigned from her employment in November 2020 and recommenced on 17 May 2021, and Banga Legal had no basis to believe that Raylook was not a small business employer. Shortly after the unfair dismissal application was lodged on 13 April 2022, Raylook’s representative had put Banga Legal on notice that the minimum employment period had not been met and that it would seek costs if it encouraged the Employee to continue the matter.

1. Raylook submits that it can be inferred that Banga Legal ‘encouraged’ the making and/or continuation of the application, given that a party seeking costs against a lawyer would likely never be able to adduce direct evidence of such encouragement because of legal professional privilege.

1. In relation to s.401(1A)(b), Raylook submits that there were 3 unreasonable acts by Banga Legal:

(a)   Causing Ms Silby, a paralegal employee of Banga Legal, to manufacture spurious evidence that Raylook and its associated entities employed 15 or more persons;

(b) Making an application for an order to produce 14 categories of documents one day before the Employee was due to file evidence and 5 days before the hearing of Raylook’s jurisdictional objection; and

(c) Making a submission without any foundation that Raylook had not complied with the Commission’s Order to produce documents.

1. The first act relates to evidence provided by Ms Silby, who provided two witness statements dated 3 and 12 May 2022 respectively.  In the 3 May witness statement, Ms Silby includes the outcome of an ASIC search identifying multiple associated entities of Raylook, and then states: “Despite [Raylook’s] assertion that it falls within the Small Business Code, there are associated entities within Australia under the Trust which means there are more than 15 employees.”[2] In her witness statement of 12 May, Ms Silby states “Due to the number of associated entities, the Employee asserts that the Employer has more than 15 employees and does not meet the criteria of the Small Business Code.”[3]

1. Raylook submits that Banga Legal knew, or ought to have known, that the number of associated entities in a company search is entirely irrelevant to determining the number of employees.  Further, that these two statements are nonsensical, and practitioners ought to be deterred from filing such spurious evidence in the Commission and causing opponents to incur costs in responding to them.  Thirdly, that this evidence was adduced where Banga Legal knew that Raylook was a small business from the F3 Employer Response and from the sworn evidence of Dr Dickinson.[4] Dr Dickinson’s evidence was that at the relevant date, Raylook and its associated entities had 6 employees, as evidenced by extracts from their payroll systems, and Banga Legal filed no evidence contradicting this evidence.

1. By way of this unreasonable conduct, Raylook submits it incurred costs of briefing counsel to prepare for and appear at the hearing of the jurisdictional objection on 17 May 2022.

1. Raylook submits that the second unreasonable act was in relation to the Employee’s application for an order to produce documents.  Banga Legal made an application for orders to produce on 12 May 2022 and sought orders requiring Raylook to produce 14 categories of documents.  That conduct was submitted to be unreasonable as the application was essentially a ‘fishing’ exercise and most of the categories of documents sought were not relevant.

1. In responding to this application, Raylook incurred the costs of instructing counsel to prepare for and appear at the return of the Form F52 application on 13 May 2022.

1. Raylook submitted that the third unreasonable act was the allegation by Banga Legal, in their written submissions that Raylook had not complied with the Commission’s Order to produce certain lists of employees.[5] Banga Legal did not articulate a basis for this serious allegation and the Commission had found they had provided no basis for it.

1. Raylook incurred costs as a result of this act, of briefing counsel to prepare for and appear at the hearing of the jurisdictional objection on 17 May 2022.

1. In support of its application Raylook referred to observations of Deputy President Anderson in Simon Lewis v SGA (1994) Pty Ltd:[6]

· that s.401 “was inserted by the legislature by amendment in 2012 after the FW Act (including Part 3-2 and section 611(1) had commenced) … represents a clear indication of legislative purpose that representatives be held accountable for unreasonable conduct in pursuit of unfair dismissal matters.”

·   the legislature referred to its 2012 amendments as being a “stronger deterrent.”

· the “manifest purpose” of s.401(1A)(b) is “to act as a disincentive to lawyers or paid agents granted permission to appear from causing costs to be incurred by other parties through unreasonable acts or omissions.”

·   in analogous contexts, the Federal Court has indicated that “such an order must be exercised with care and discretion and only in clear cases.”

1. Raylook submitted that this is precisely the type of ‘clear case’ described in Simon Lewis, and that the Commission should hold Banga Legal accountable for its unreasonable conduct and for its encouragement in pursuing a hopeless claim.  Further, that the Commission has held that “actions or omissions by legally qualified and trained people should be measured against a higher standard than that which would apply to an unrepresented party, by virtue of the representative’s training and expertise.”[7] Finally, it submits that a costs order against Banga Legal would advance the legislative purpose of s.401 and have the additional benefit of deterring other paid agents from pursuing patently untenable claims.

Submissions by Banga Legal

1. Banga Legal submitted that the policy of the Act is clear that parties should bear their own costs, with costs being awarded a rare exception. The discretion to order costs should be exercised cautiously and only in a clear case, and there is a long line of authority which provides that an unsuccessful argument does not, itself, enliven costs.  It contended that the Commission should consider the deleterious effect of a costs order on the exercise of statutory rights by parties, as part of access to justice.

1. Banga Legal submits that there is no evidence that Banga Legal encouraged the Employee as required under s.401(1A)(a), nor was it reasonably apparent that there was no reasonable prospect of success.

1. Banga Legal also submitted that:

(a) The jurisdictional issue of the minimum employment period had not been determined and the Employee was entitled to test this matter.

(b) There was a basis for the statements made in Ms Silby’s witness statements “having regard to the entities identified in paragraph [11] of the Decision and the definition of “associated entity” in s.23(3) of the Act and s.50 of the Corporations Act 2001 noting that notoriously family trusts corporate or otherwise are often part of a number of entities that have been created for tax minimisation purpose – there is no reason to suggest that the Applicant is any different.”[8]

(c) There is no evidence that Banga Legal caused the Employee to adduce Ms Silby’s evidence, and that Dr Dickinson’s evidence as to the number of employees did not need to be accepted just because it was filed.

(d) Seeking the production of documents by lodging a Form F52 was appropriate as part of the testing of the evidence through discovery, and there is no basis to infer that it was a fishing exercise, it is an overstatement to submit that most of the categories of documents sought were not relevant, and “a party is entitled to attempt to ensure (even if the claim made is erroneous) that orders in relation to production (noting that one was made in this case) have been complied with.”[9]

Consideration

1. In the substantive case, Raylook filed a signed witness statement of Dr Dickinson dated 2 May 2022 attesting that Raylook and its associated entities employed 6 people, setting out in detail its structure and associated entities, including extracts from its payroll systems to evidence these.  No evidence of any kind was filed by Banga Legal on behalf of the Employee that provided any basis to challenge or even question the veracity of Dr Dickinson’s evidence and Raylook’s submission that it was a small business.  Dr Dickinson was not required for cross-examination at the hearing on the basis that no ‘objections in relation to Browne v Dunn’ would be made by Raylook, although given that Banga Legal on behalf of the Employee had not led any evidence conflicting with Dr Dickinson’s it is difficult to understand what was meant by this qualification. 

1. I am satisfied that it should have been reasonably apparent that the Employee had no reasonable prospect of success in the matter, given the evidence in the case.  However, I am not satisfied that there is a sufficient basis to find that Banga Legal encouraged the Employee to make and continue her unfair dismissal application. There is no evidence of this, and it is possible that Banga Legal was doing no more than acting on the Employee’s instructions, contrary to their advice.  There may well be instances where in the absence of direct evidence of ‘encouragement’, the Commission can appropriately draw an inference that it has, however this is not one of them.  At least in relation to paid agents, where issues of legal professional privilege do not arise, there may also be cases where direct evidence of encouraging a party to act in a certain way is available.

1. I am satisfied that Banga Legal acted unreasonably in continuing to contend that Raylook was a small business despite the evidence filed by Raylook and the absence of any countervailing evidence. In particular, it was unreasonable to cause Ms Silby to make two witness statements contending that the fact there were a number of associated entities meant it had more than 15 employees. Ms Silby did not provide any basis for her conclusion and it is plainly not the case.  I reject Banga Legal’s submission that there was no evidence that it caused the Employee to adduce Ms Silby’s evidence. A client is not entitled to direct its legal representative to adduce evidence itself.  Banga Legal actively decided to arrange for Ms Silby to make and file two witness statements, and this was unreasonable in the circumstances.  Whilst the Employee did not have to simply accept Dr Dickinson’s evidence and was entitled to test the evidence, the problem is that it did not file any evidence or make any submissions that provided a foundation to dispute this evidence. I wholly reject the submission that there was a basis for Ms Silby’s evidence. This submission was inappropriate and without foundation. That “there is no reason to suggest the Applicant is any different” to trusts being “notoriously” created for “tax minimisation purposes” is itself a spurious contention.

1. I am satisfied that Banga Legal acted unreasonably causing Raylook to incur the cost of engaging counsel to prepare for and appear at the jurisdiction hearing on 17 May 2022, in the sum of $3,300.

1. I am not satisfied that Banga Legal acted unreasonably in relation to the application for an order to produce documents. I considered it appropriate to issue an Order requiring the production of some documents, although in much more confined terms than had been sought in the application. I was satisfied the documents ordered to be produced had some apparent relevance and that whilst finely balanced, it was not a fishing exercise.

1. I am satisfied that the third act of Banga Legal, was also unreasonable. There was no basis whatsoever for the allegation that Raylook had not complied with the Commission’s Order.  The costs incurred in relation to this unreasonable act are the same as the costs incurred in relation to the first unreasonable act.

Conclusion

1. For the reasons set out above, I am satisfied that Banga Legal caused Raylook to incur costs because of its unreasonable acts in manufacturing spurious evidence that Raylook and its associated entities employed 15 or more persons and by making a submission, without foundation, that Raylook had not complied with the Order to produce documents.

1. The costs incurred by these 2 unreasonable acts were the costs of instructing counsel to prepare for and appear at the jurisdiction hearing on 17 May 2022, in the amount of $3,300.  I am satisfied that it is appropriate to exercise my discretion to order costs and I do so.

1. An Order to that effect will be issued separately.

COMMISSIONER

Appearances:

L Stevens of Counsel for the Applicant.
M McKenney of Counsel for the Respondent.

Hearing details:

2022.
Melbourne (by video):
July 20.

[1] [2022] FWC 1211.

[2] Witness statement of Ms Silby, 3 May 2022 at [30].

[3] Witness statement of Ms Silby, 12 May 2022 at [8].

[4] Witness statement of Dr Dickinson, 2 May 2022.

[5] Employee’s submissions, 13 May 2022 at [8](e).

[6] [2020] FWC 2229 at [91]-[96].

[7] Rohan Veal v Sundance Marine Pty Ltd[2013] FWCFB 8960 at [15].

[8] Banga Legal’s submissions, 4 July 2022 at [14](v).

[9] Ibid at [14](xi).

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