Ryan v J-Corp Pty Ltd (No.2)
[2019] FCCA 1593
•12 June 2019
FEDERAL CIRCUIT COURT OF AUSTRALIA
| RYAN v J-CORP PTY LTD (No.2) | [2019] FCCA 1593 |
| Catchwords: INDUSTRIAL LAW – COSTS – Costs in proceedings under the Fair Work Act 2009 (Cth) – whether unreasonable act or omission caused costs to be incurred – whether applicant’s lawyer should be liable for costs – whether indemnity costs should be awarded – whether costs should be awarded above scale. |
| Legislation: Fair Work Act 2009 (Cth), ss.340, 370(a)(ii), 570 Federal Circuit Court Act 1999 (Cth), s.81(1)(b) |
| Cases cited: Atkinson v Killarney Properties Pty Ltd & Ors [2016] FCCA 3233 |
| Applicant: | KELVIN RYAN |
| Respondent: | J-CORP PTY LTD |
| File Number: | PEG 691 of 2017 |
| Judgment of: | Judge Kendall |
| Hearing date: | On the papers |
| Date of Last Submission: | 11 December 2018 |
| Delivered at: | Perth |
| Delivered on: | 12 June 2019 |
REPRESENTATION
| Solicitors for the Applicant: | Steven Heathcote, Barrister and Solicitor |
| Solicitors for the Respondent: | Quinn Emanuel Urqhart & Sullivan |
ORDERS
The solicitor of the applicant, Mr Heathcote, pay the respondent’s costs of the applicant’s Interlocutory Application seeking an extension of time dated 20 April 2018 fixed in the sum of $6,000.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT PERTH |
PEG 691 of 2017
| KELVIN RYAN |
Applicant
And
| J-CORP PTY LTD |
Respondent
REASONS FOR JUDGMENT
Introduction
The matters the Court is considering in these reasons for judgment arise from, and should be read in conjunction with, the Court’s decision in Ryan v J-Corp Pty Ltd [2018] FCCA 2403 (“Ryan (No.1)”).
The respondent, J-Corp Pty Ltd, is seeking an order that the applicant’s solicitor, Mr Steven Heathcote (“Mr Heathcote”) pay the respondent’s costs of the applicant’s Interlocutory Application for an extension of time dated 20 April 2018 (“Extension Application”) on an indemnity basis.
Background
The Court adopts, and refers to, the chronology from Ryan (No.1) at [3]-[10] per Judge Kendall. That chronology should, to the extent that it is relevant, be read with these reasons for Judgment.
A brief summary of Ryan (No.1) can be provided as follows:
a)on 11 December 2017, the applicant filed an application (“Substantive Application”) in this Court alleging dismissal in contravention of a general protection pursuant to s.340 of the Fair Work Act 2009 (Cth) (“FW Act”);
b)the filing of the Substantive Application was outside the statutory timeframe. Hence, pursuant to s.370(a)(ii) of the FW Act, the applicant required an order from this Court for an extension of time in which to bring the Substantive Application; and
c)on 20 April 2018 (approximately 4 months after the filing of the Substantive Application), the applicant filed the Extension Application.
The hearing of the Extension Application took place on 6 August 2018. On 29 August 2018, this Court handed down its reasons in Ryan (No.1).
The Court ordered that the applicant be granted an extension of time in which to file the Substantive Application.
Relevantly, and despite the order granting an extension of time, the Court noted at [81] that:
Although the Court remains concerned with the complete failure of the applicant’s solicitor to execute his client’s wishes and his failure to explain to the Court why that occurred, the Court finds that, on balance, it would [be] most unfair to this applicant if he were punished for his solicitor’s short comings.
In relation to the issue of costs (the sole issue the subject of these reasons) the Court made the following observations at [83]:
In relation to costs, and bearing in mind the provisions of s.570(2) of the FW Act, which make costs in FW Act proceedings in this Court the exception rather than the rule, the parties to these proceedings will need to give consideration as to whether a costs application by them is justified in the circumstances. If a costs application is to be made then it can be made in accordance with the provisions of r.21.02(1)(a) of the Rules, and if any such application is made, the Court will list that costs application for directions: Atkinson at [46]
The respondent subsequently filed submissions on 9 November 2018 (prior to a case management directions hearing on 13 November 2018). Those submissions sought orders that (“Costs Application”):
(a) the Applicant pay the Respondent’s costs of the Extension Application;
(b) the costs be assessed on an indemnity basis, fixed in the sum of $15,000; and
(c) the Applicant’s solicitor, Mr Heathcote, indemnify the Applicant in respect of the costs that the Applicant is liable to pay by virtue of orders (a) and (b) above.
At the directions hearing on 13 November 2018, the Court made orders referring the Substantive Application to mediation. The Court also made orders that the parties file any affidavits and submissions in relation to the Costs Application. It was determined that the Costs Application would be decided on the papers.
The matter proceeded to mediation on 21 March 2019.
The Court felt it inappropriate to determine the Costs Application prior to, or while, the mediation was on foot so as not to distract from any settlement discussions.
On 22 May 2019, the respondent’s solicitor advised the Chambers of Judge Kendall that the parties had resolved the dispute in relation to the Substantive Application and provided signed consent orders seeking orders that the proceedings be dismissed, save for the respondent’s Costs Application. Orders were made in those terms on 22 May 2019.
One issue thus remains to be resolved – that is, the Costs Application.
Evidence and Submissions
In support of the Costs Application the respondent filed:
a)an outline of submissions dated 9 November 2018;
b)an affidavit of Adam Rompotis (“Mr Rompotis”) sworn on 7 November 2018 (“First Rompotis Affidavit”);
c)an outline of submissions dated 11 December 2018; and
d)an affidavit of Adam Rompotis sworn on 11 December 2018 (“Second Rompotis affidavit”).
Mr Rompotis is a lawyer engaged by the respondent during the proceedings.
In opposition to the Costs Application, the applicant filed:
a)an outline of submissions dated 4 December 2018; and
b)an affidavit of Mr Heathcote sworn on 4 December 2018 (“Heathcote Affidavit”).
The Court has considered the above submissions and affidavits in formulating these reasons for judgment.
Respondent’s Submissions
The respondent’s submissions, dated 9 November 2018, contend that the respondent’s costs (in their entirety) of the Extension Application are attributable to various unreasonable acts and omissions of Mr Heathcote.
Relevantly, the respondent submits that:
9. Quite apart from the usual position that a party seeking an indulgence ought to bear the costs of the application, the Extension Application was entirely avoidable. All that was required was an explanation for the delay in filing the Applicant’s general protections application.
10. However, instead of offering an explanation, the Applicant (through his solicitor):
(a) Denied an extension of time was required in reliance of an argument the Court described as “perplexing” and in circumstances where his solicitor understood the deadline for filing imposed by the Rules.
(b) Failed to provide any explanation for the delay in open correspondence (and failed to provide any explanation at all until mid-April).
(c) Continued to argue that an extension of time was not required, despite making the Extension Application.
(d) Despite prompting by the Respondent 105 days before the hearing of the Extension Application, failed to file any evidence explaining the delay.
11. The Applicant’s failure to accept the need for an extension of time, followed by his failure to explain the reasons for the delay to the Respondent, and then to the Court, have caused the Respondent to incur costs opposing the Extension Application.
(citations removed)
The respondent further argues that costs should be borne by the applicant’s solicitor, submitting that:
12. The Court concluded that the Applicant’s solicitor, Mr Heathcote, was “solely responsible for the delay” and that the Applicant “was not responsible for, nor did he contribute to, the delay”.
13. Mr Heathcote’s failure to accept that an extension of time was required (notwithstanding his knowledge of the deadline for filing imposed by the Rules) and his refusal to provide an explanation for the delay to Respondent’s solicitors were productive of the need for the Extension Application.
14. Further, the evidence required to provide an acceptable explanation for the delay was entirely within the knowledge of Mr Heathcote. The decision not to file any evidence was his own, and was a decision taken notwithstanding prompting by the Respondent’s solicitors.
15. Accordingly, by reference to the criteria set out in r.21.07 FCCR, Mr Heathcote:
(a) unreasonably failed to file and deliver the general protections application as required;
(b) unreasonably failed to prepare proper information to allow the Respondent to make an informed decision about whether to consent to an extension of time; and
(c) unreasonably failed to prepare proper evidence, leaving the Court in “the unenviable position of not having any evidence before it explaining why Mr Heathcote did not, or was unable to, [file within time]”.
16. An order that Mr Heathcote indemnify the Applicant is appropriate in the circumstances.
(citations removed)
Referring to the Court’s observation in Ryan (No 1) that Mr Heathcote’s “client deserved much better from him, as did the respondent”, the respondent argues that Mr Heathcote’s conduct fell well short of the standard required of practitioners before the Court. As a consequence, his conduct should be met with an order fixing costs above the scale set out in Schedule 1 of the Federal Circuit Court Rules 2001 (Cth) (“FCC Rules”).
The respondent seeks an amount of $15,000 in their submissions. The respondent submits that this sum is approximately 60 per cent of the costs the respondent claims were incurred in relation to the Extension Application. The respondent argues that $15,000 is a reasonable amount reflecting the nature of the proceedings and the unreasonable conduct of Mr Heathcote.
The First Rompotis Affidavit
The First Rompotis Affidavit provided evidence as follows:
a)following the delivery of Ryan (No 1), the respondent’s solicitors wrote to Mr Heathcote asking if he would consent to a costs order being made in favour of the respondents, and Mr Heathcote personally paying those costs;
b)for the purposes of opposing the Extension Application costs in the amount of $24,500 were billed arising from:
i)correspondence and conferral with Mr Heathcote in January, February and March 2018;
ii)considering the Extension Application;
iii)considering the submissions and affidavit filed by the applicant in support of the Extension Application;
iv)preparing submissions and an affidavit in opposition to the Extension Application;
v)preparing for and attending the hearing of the Extension Application; and
vi)attending the reserved judgment by telephone on 29 August 2018;
c)on 12 September 2018, the respondent’s solicitors sent Mr Heathcote a letter proposing that the applicant consent to orders being made in the terms sought in this Costs Application;
d)a series of correspondence and communication was exchanged as the parties conferred between 18 September 2018 and 25 October 2018; and
e)no substantive response was ever received from Mr Heathcote as to the applicant’s position on the proposed orders, and this led to the Costs Application being made.
Applicant’s Evidence
The Heathcote Affidavit provides that:
a)Mr Heathcote was instructed by the applicant to represent him and prepare the Substantive Application. Mr Heathcote’s evidence does not indicate when these instructions were received;
b)on or around 27 November 2017, Mr Heathcote asked a lawyer who works with him on a casual basis to prepare the Substantive Application. The lawyer prepared the Substantive Application and provided Mr Heathcote with an electronic copy a day or two later;
c)Mr Heathcote began reviewing the Substantive Application on the morning of 11 December 2017. He was aware that the s.368 Certificate had been issued on 27 November 2018 and that the Substantive Application had to be made within 14 days of that date;
d)Mr Heathcote was aware that the Court’s Registry would not process any application lodged after 4:30PM until the next day. He intended to settle and lodge both documents before 4:30PM on 11 December 2018;
e)Mr Heathcote was “interrupted several times during that day”, “to take phone calls and to respond to emails” and the Substantive Application “required more editing that (sic.) I had anticipated”;
f)the Substantive Application was lodged electronically at 8:11PM on 11 December 2018; and
g)while Mr Heathcote was concerned that the documents had been lodged after the Registry cut-off time, he did not believe that the time was likely to be a problem to the applicant because:
i)the applicant had been very diligent in providing the required instructions to complete the Substantive Application and Mr Heathcote was of the view that the applicant’s conduct was much more important than any failure of him, for the purposes of any application for an extension of time;
ii)Mr Heathcote had “read a decision in which His Honour Judge Lucev had discussed the meaning of ‘day’, and recalled his conclusion that it was a 24-hour period ending at midnight;
iii)Mr Heathcote believed that it was arguable that the Substantive Application was made within 14 days after the day the certificate was issued; and
iv)if an extension of time was required, the relevant principles applying to an extension of time application strongly favoured granting an extension of time.
The Court notes that the Heathcote Affidavit is the first time that the Court has been provided with any explanation from Mr Heathcote in relation to his delay in filing the Substantive Application. In this regard, the Court notes its findings in Ryan (No.1) at [41]-[55].
Applicant’s Submissions
The applicant’s written submissions dated 4 December 2018 reference the orders sought by the respondent. Again, those orders are:
a)the applicant pay the respondent’s costs of the Extension Application;
b)the costs be assessed on an indemnity basis, fixed in the sum of $15,000; and
c)the applicant’s solicitor, Mr Heathcote, indemnify the applicant in respect of the costs that the Applicant is liable to pay by virtue of orders (a) and (b) above.
The applicant’s submissions argue that the respondent’s costs claim can be read in two ways:
Reading 1
3. The Respondent seeks the 3 orders set out in paragraph 1 of its submissions dated 09 November 2018. Specifically,
“(a) the Applicant pay the Respondent's costs of the Extension Application;
(b) the costs be assessed on an indemnity basis, fixed in the sum of $15,000; and
(c) the Applicant's solicitor, Mr Heathcote, indemnify the Applicant in respect of the costs that the Applicant is liable to pay by virtue of orders (a) and (b) above.”
Reading 2
4. The Respondent’s submissions mis-describes the relief it seeks and, in fact, the Respondent seeks an order that the Lawyer pays $15,000.00 of the Respondent’s costs of opposing the Applicant’s application for an extension of time in which to make his substantive application.
In relation to these “readings”, the applicant submits that:
a)“Reading 1” argues that order (b) and (c) of the orders sought by the respondent are contingent on order (a) being awarded and frames the costs claim in relation to the Court’s power to make a costs order against the applicant pursuant to s.570(2) of the FW Act. In this respect, Mr Heathcote argues that there is no legal or factual basis upon which any costs order against the applicant could or should be made; and
b)“Reading 2” frames the costs claim in relation to Mr Heathcote’s conduct and the classes of conduct to which r.21.07(1) of FCC Rules refer. Mr Heathcote argues that he did not engage in any of conduct that is a pre-requisite for a costs order to be made against him pursuant to that rule.
“Reading 1”
In relation to “Reading 1”, Mr Heathcote argues that order (b) and (c) of the orders sought by the respondent are dependent on the court making order (a).
In relation to order (a), Mr Heathcote refers to the respondent only having provided evidence in support of costs being awarded under s.570(2)(b) of the FW Act (ie, where the Court is satisfied that the party’s unreasonable act or omission caused the other party to incur the costs).
Mr Heathcote argues that for the respondent to rely on the exception contained in s.570(2)(b), it must demonstrate that the applicant was responsible for some unreasonable act or omission that caused it to incur costs. In this regard he notes:
a)the Court’s findings in Ryan (No 1) that the applicant was not responsible for, nor did he contribute to, the delay in filing the Substantive Application and that Mr Heathcote was solely responsible for the delay;
b)to the extent that the respondent contends that the applicant unreasonably failed to confer with it in relation to the need for an extension of time, that contention is unsupported by any evidence;
c)the applicant’s affidavit dated 20 April 2018 provides evidence that the applicant gave instructions for Mr Heathcote to confer with the respondent’s solicitor with a view to obtaining consent to an order permitting the Substantive Application to be filed on 12 December 2018, and that, when it was clear that no consent was forthcoming, Mr Heathcote should prepare and file an application for the extension of time;
d)the respondent has not provided any evidence of any relevant conduct by the applicant; and
e)there is no evidence of any act or omission by the applicant that could provide a proper basis for an order that he pay the respondent’s costs.
Based on the above, Mr Heathcote argues that order (a) cannot be made and therefore orders (b) and (c) cannot be awarded.
“Reading 2”
In relation to “Reading 2”, Mr Heathcote submits that he did not engage in any of the classes of conduct to which r.21.07(1) of the FCC Rules refers and that in the absence of undue delay, negligence, improper conduct, or other misconduct, the Court should not make an order for costs.
Furthermore, Mr Heathcote argues that even if the Court does find that he engaged in one or more of the classes of conduct to which r.21.07(1) refers, that conduct did not cause the respondent to incur costs, or cause costs to be thrown away.
Mr Heathcote argues that his failure to lodge the Substantive Application in time did not require the respondent to do anything beyond alerting the Court and the applicant to its view that the application was lodged out of time. In this respect, Mr Heathcote notes:
a)the respondent raised the issue of an extension of time with Mr Heathcote briefly on or around 1 February 2018;
b)the respondent raised the matter again at a directions hearing on 2 February 2018 that would have taken place in any event and Judge Lucev’s comments from the bench at the directions hearing prompted the parties to confer;
c)that conferral could have been very brief and be limited to indicating whether the respondent would or would not consent to an extension of time, however the respondent opted to engage in a much lengthier and unnecessarily detailed conferral process;
d)the respondent was entitled to require the applicant to make an application for an extension of time and to provide the Court with a factual and legal basis for doing so. It decided to oppose the Extension Application when there was no need or benefit to either party in doing so; and
e)there is no evidence that the respondent ever considered consenting to the applicant’s request for an extension of time.
Mr Heathcote also submits that the respondent has not identified any relevant costs and has not provided any evidence that any costs were needlessly incurred or were thrown away.
The Respondent’s Submissions in Response
The respondent’s submissions dated 11 December 2018 address the following issues:
a)the applicant’s analysis of the form of the costs orders sought (being the references to “Reading 1” and “Reading 2” above);
b)the applicant’s analysis of the conduct of Mr Heathcote;
c)the causal effects of Mr Heathcote’s conduct; and
d)the quantum of costs sought.
The applicant’s analysis of the form of costs orders sought
The respondent argues that the applicant’s references to “Reading 1” and “Reading 2” are apt to confuse and unnecessary.
The respondent submits that the form of the orders proposed by the respondent are orthodox and clear and operate together to impose liability for the costs order on Mr Heathcote personally, by reason of the conduct of Mr Heathcote.
The respondent further submits that, even without r.21.07 of the FCC Rules, there is authority that s.570(2)(b) of the FW Act would underpin a costs order against a lawyer personally – the lawyer’s conduct being regarded as equivalent to the party’s conduct: Molony v ATM Logistics Pty Ltd [2018] FCA 640 (“Molony”).
Mr Heathcote’s conduct
In relation to the applicant’s analysis of Mr Heathcote’s conduct in the applicant’s written submissions and the Heathcote affidavit, the respondent argues that:
There is an air of unreality about the manner in which the Applicant’s Submissions analyse the circumstances which unfolded in the Extension Application. The Applicant’s Submissions do not withstand objective scrutiny, perhaps because, once again with his conduct under direct examination, Mr Heathcote has performed the role of counsel, advocating on his own behalf. This is an exercise in serious professional misjudgement, as it was for Mr Heathcote to appear as counsel at the Extension Application hearing when his own conduct was clearly in issue.
The respondent submits that a number of important matters are overlooked or mischaracterised in the applicant’s submissions, namely:
a)Mr Heathcote’s failure to provide the respondent and the Court with some explanation for the delay, despite being confronted with the issue by the respondent and the Court;
b)the provision of an adequate explanation for the delay is well recognised by the authorities as the most important matter weighing on the exercise of the discretion to extend time. Mr Heathcote cannot have been unaware of the importance of providing an explanation for the applicant’s delay;
c)Mr Heathcote has ignored the findings made by the Court in Ryan (No 1) that:
i)Mr Heathcote had “failed to do what his client asked him to do and then failed to explain to the Court why this was the case”;
ii)Mr Heathcote “failed to effectively execute his instructions and has then failed to explain why this is so”;
iii)Mr Heathcote’s failure to think about the relevant evidence until the day of the hearing of the Extension Application was “unacceptable”; and
iv)“[Mr Heathcote’s] client deserved much better from him, as did the respondent in these proceedings”;
d)Mr Heathcote vacillated as to whether an extension was required, asserted (wrongfully) at times that no extension was needed, then abandoned that point, and then re-agitated the spurious argument based on the Moon v JLG Industries (Australia) [2011] FMCA 343 decision; and
e)Mr Heathcote fails to squarely address his personal knowledge, which can be found in the Atkinson decision, that an extension was plainly required. What he does not grapple with is the reality that he knew an extension order was required, failed to address the issue until the respondent raised it, advanced no explanation, and did all that he could to avoid putting on an affidavit to explain his conduct and be subjected to cross-examination.
The respondent stresses further that:
9. Mr Heathcote’s analysis of the facts must be carefully scrutinised as it does not accord with the course of the correspondence and, unfortunately, his submissions lack objective distance. The true position is that Mr Heathcote’s insistence on the untenable position that no extension of time was required, followed by his refusal to provide a meaningful explanation for the delay in filing (both in correspondence and before the Court), prevented the Respondent from being able to make an informed decision to consent to the Applicant’s request for an extension of time. If an acceptable explanation was provided, the evidence suggests that the Respondent was open to consenting to an extension.
10. No acceptable explanation was forthcoming. Indeed, Mr Heathcote’s affidavit marks the first time that any explanation has been provided in an open communication. Even then, the explanation is not acceptable:
(a) Mr Heathcote deposes he was provided with a draft copy of the Applicant’s application around 30 November 2017. The period from 30 November 2017 to 11 December 2017 is completely unexplained. Mr Heathcote simply says he commenced work on the application on 11 December 2017and did not file on time because he was “interrupted”.
(b) Further, Mr Heathcote deposes to his knowledge of the need to file the application before 4.30pm to have it processed by the Court that day (contrary to his position in conferral with the Respondent and before the Court).
(citations removed)
In relation to the applicant’s submissions that Mr Heathcote did not engage in any of the classes of conduct to which r.21.07(1) of the FCC Rules refers, the respondent submits:
a)Mr Heathcote engaged in conduct that was a default, by his acts and omissions;
b)Mr Heathcote caused undue delay in two respects:
i)by denying that an extension of time was required at all for the period up until 11 April 2018 (and the applicant then resumed that position after filing the extension of time); and
ii)failing to provide any meaningful explanation for his delay in filing the Substantive Application until after the hearing of the Extension Application;
c)The applicant’s submissions that Mr Heathcote did not neglect his obligations to the applicant or respondent gloss over the findings of the Court in Ryan (No 1);
d)in relation to improper conduct or misconduct, Mr Heathcote incorrectly asserts that there is authority which confines or limits this aspect of r.21.07 to conduct that would justify disbarment, etc. The findings of this Court in Ryan (No 1) as to the conduct of Mr Heathcote, as well as Mr Heathcote’s insistence that the applicant had filed in time notwithstanding his personal knowledge of Atkinson, provide ample basis for the Court to be comfortably satisfied that there has been improper conduct.
The conduct caused the Respondent to incur costs
In relation to the causal effect of Mr Heathcote’s conduct, the respondent argues that:
18. The Applicant’s Submissions mischaracterise Mr Heathcote’s conduct as productive only of delay and minor costs of what is said to be an inevitable Extension Application. However, the conduct must be viewed in its full context…
19. The findings of this Court (referred to at [8(c)] above) as to the conduct of Mr Heathcote, as well as Mr Heathcote’s insistence that the Applicant had filed in time notwithstanding his personal knowledge of Atkinson, provide ample basis for the Court to be comfortably satisfied that there has been improper conduct.
20. For completeness (though these matters are not directly relevant to the exercise of the costs discretion) the Respondent notes that:
(a) Contrary to [62] of the Applicant’s Submissions, the Respondent was not excessive in its opposition. Mr Lundberg appeared because he was the solicitor with conduct of the matter, just as Mr Heathcote appeared for the Applicant. It would hardly have been economical to brief counsel, or reasonable to have Mr Rompotis, then a restricted practitioner, appear at the hearing. Further, the Respondent should not be criticized for assisting the Court with relevant material and detailed submissions. The Applicant’s 1½ page affidavit and 3 pages of submissions (1½ pages of which were dedicated to arguing that no extension of time was required) were simply inadequate. It was in the Respondent’s material that the only semblance of an explanation for the Applicant’s delay was found.
(b) Contrary to [63] of the Applicant’s Submissions, the Applicant would not have been entitled to costs, for the reasons set out in Golski v Kirk (1987) 72 ALR 443 at 457 per Beaumont J.
The Quantum of Costs
In relation to the quantum of costs that the respondent seeks, the respondent submits that the amount claimed is modest compared to the actual amount of fees incurred by the respondent.
The respondent’s relied upon the Second Rompotis Affidavit to evidence the quantum of costs sought.
The Second Rompotis Affidavit
The Second Rompotis affidavit provided a schedule of costs breaking down, or itemising, the respondent’s claimed costs in relation to the Extension Application.
The schedule relates to the claimed costs of Michael Lundberg (a Partner from the respondent’s solicitors’ firm) and Adam Rompotis in relation to:
a)attending to reviewing correspondence from the applicant’s solicitor dated 11 April 2018;
b)attending to reviewing the applicant’s application, submissions and evidence, and preparing the respondent’s submissions and evidence in opposition;
c)attending the directions hearings on 1 June 2018 and conferral; and
d)the hearing of Extension Application on 6 August 2018 (including preparation of hearing).
The total billed figure is stated as $25,632.90 with a claimed amount of $15,600.60.
As previously indicated, the claimed amount is approximately 60 per cent of the total billed figure.
Proceedings under the FW Act – generally, a no costs jurisdiction
The Court’s power to make an order for costs in these proceedings arises under the terms of s.570 of the FW Act.
Relevant to this Costs Application are the following subsections:
(1) A party to proceedings (including an appeal) in a court (including a court of a State or Territory) in relation to a matter arising 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
…
It is well accepted that proceedings under the FW Act are generally no costs proceedings, with costs very much the exception to the no costs rule: Construction, Forestry, Mining and Energy Union & Others v Clarke (2008) 170 FCR 574 at [28]-[30] per Tamberlin, Gyles and Gilmour JJ (“Clarke”).
That a party has conducted litigation inefficiently, made late concessions, or adopted a misguided approach will be relevant to, but not determinative of, unreasonableness in a sense relevant to s.570(2)(b): Clarke at [29] per Tamberlin, Gyles and Gilmour JJ.
What is required in the context of s.570 of the FW Act was explained in Celand v Skycity Adelaide Pty Ltd [2017] FCAFC 222 at [74] per Logan J as follows:
74. So I respectfully agree with the statement made by the Full Court in Australian Workers Union v Leighton Contractors (No 2) that it is not necessary to establish “exceptional circumstances” in order to award costs in a matter arising under the FWA. What it is necessary to do is to engender satisfaction that a pre-condition for the enlivening of the costs power exists and, even then, the exercise of a judicial discretion is required; there is no as of right entitlement to costs. Each of the pre-conditions for which s 570 of the FWA provides entails the reaching of satisfaction as to a pejorative. Materially in this case, that is satisfaction as to an unreasonable act by Ms Celand causing another party, Skycity to incur costs. As to its proof, satisfaction of this type is but a species in a class to which s 140(2) of the Evidence Act 1995 (Cth) has application. And what must be engendered is not just satisfaction as to an unreasonable act but also that it had a causative sequel. As a norm in our public and private law, unreasonableness in act or decision is not confined to the bizarre or irrational but entails rather more than a supervisor of that act or decision substituting his own view for that of the actor or decision-maker: Minister for Immigration and Citizenship v Li (2013) 249 CLR 332 at [65] to [73] per Hayne, Kiefel and Bell JJ.
The Court notes that, even where the statutory preconditions in s.570 of the FW Act have been satisfied, costs do not automatically follow. Awarding costs is a discretionary decision based upon the particular conduct and circumstances of the case, and bearing in mind the purpose of s.570 of the FW Act being to ensure that fear of a costs order does not discourage genuine litigants from pursuing cases with reasonable cause: Qantas Airways Ltd v Transport Workers Union of Australia (No 2) (2011) 211 IR 119 at [208] per Moore J.
Consideration – should there be an award of costs
The respondent seeks a costs order against the application under s.570(2)(b) of the FW Act.
For the purposes of s.570(2)(b) of the FW Act, two criteria must be fulfilled:
a)a party must have engaged in an unreasonable act or omission; and
b)that unreasonable act or omission must have caused another party to incur costs in connection with the proceeding.
(Clarke at [28] per Tamberlin, Gyles and Gilmour JJ)
In relation to “reading 1” in the applicant’s submissions and whether s.570 of the FW Act applies to Mr Heathcote’s conduct, the Court notes the remarks of Gleeson CJ, Heydon and Crennan JJ in Smits v Roach (2006) 227 CLR 423 at [46] that:
The adversarial system of litigation operates upon the basis that a party is generally bound by the conduct of counsel, and that counsel has a wide discretion as to the manner in which proceedings are conducted. The width of that discretion is reinforced by the role of the barrister as an officer of the court, by the barrister’s paramount duty to the court, and by the public interest in the efficiency and finality of the judicial processes.
The Court also refers to the conclusion of Justice O’Callaghan in Molony at [16] that:
In my view, the conduct of the applicant’s solicitor to which I have referred above is:
(1) properly to be characterised as a party’s unreasonable acts or omissions within the meaning of paragraph 570(2)(b) of the FW Act; and
(2) sufficient to enliven my discretion to order that the applicant’s solicitor bear the costs, in the manner ordered, pursuant to s 43(3) of the Federal Court of Australia Act 1976 (Cth).
To the Court, it is plain from the above authorities that s.570 of the FW Act can extend to Mr Heathcote’s conduct (or, indeed, to any solicitor who appears on behalf of an applicant).
The Court now must undertake an objective analysis of the particular circumstances of the case to determine whether the applicant, through Mr Heathcote has engaged in an unreasonable act or omission: Australian and International Pilots Association v Qantas Airways Ltd (No.3) (2007) 162 FCR 392 at [32] per Tracey J.
The respondent argues that the Extension Application was entirely avoidable if Mr Heathcote had simply provided an explanation for the delay in filing the Substantive Application. In this regard, the respondent notes the Court’s findings in Ryan (No 1) that, instead of offering an explanation for the delay, the applicant, through Mr Heathcote:
a)denied an extension of time was required in reliance on an argument the Court described as “perplexing” and in circumstances where Mr Heathcote understood the deadline for filing imposed by the FW Act and the FCC Rules (Ryan (No 1) at [21]-[22]);
b)failed to provide any explanation for the delay in open correspondence (and failed to provide any explanation at all until mid-April) (Ryan (No 1) at [50]);
c)continued to argue that an extension of time was not required, despite making the Extension Application (Ryan (No 1) at [11]-[27]); and
d)despite prompting by the respondent some 105 days before the hearing of the Extension Application, failed to file any evidence explaining the delay (Ryan (No 1) at [43]-[49]).
The respondent submits that the applicant’s failure (through Mr Heathcote) to accept the need for an extension of time, followed by his failure to explain the reasons for the delay to the respondent, and then to the Court, caused the respondent to incur costs opposing the Extension Application.
The Court is of the view that Mr Heathcote’s conduct and the resulting Extension Application was unnecessary and unreasonable (in the sense that his conduct was not what the Court would expect of a reasonable legal practitioner), and, in particular, in circumstances where it was entirely a result of his own making.
The applicant should never have been in a position where an extension of time was required. Based on Mr Heathcote’s own evidence in the Heathcote Affidavit:
a)the applicant had been “very diligent in providing the required instructions” and Mr Heathcote was provided with instructions well before the date that the Substantive Application needed to be filed (Heathcote Affidavit at [14]);
b)Mr Heathcote instructed a solicitor to prepare the Substantive Application well before the date that it was required to be filed and the lawyer prepared the Substantive Application and provided Mr Heathcote with an electronic copy “a day or two later” (Heathcote Affidavit at [3]-[4]);
c)Mr Heathcote did not begin reviewing the documents until the morning of 11 December 2017, despite being aware that the application had to be made within 14 day of the date on which Commissioner McKinnon issued his s.368 Certificate. Mr Heathcote was aware that the s.368 Certificate had been issued on 27 November 2017 (Heathcote Affidavit at [5]-[6]); and
d)Mr Heathcote intended to settle and lodge both documents before 4:30PM that day because he was aware that the Registry would not process any application made after 4:30PM until the next day (Heathcote Affidavit at [7]).
Mr Heathcote has stated in his affidavit that the Substantive Application required more editing than he had anticipated, and he was interrupted several times in the course of undertaking this editing. Mr Heathcote does not provide details of the interruptions, other than to say “I am sure that I interrupted my work over the course of the afternoon to take phone calls and to respond to emails” (Heathcote Affidavit at [10]).
The Court finds this explanation to be unacceptable.
While the Court is sympathetic to the workload of legal professionals generally and does not doubt that Mr Heathcote faced multiple “interruptions” and demands on his time throughout his day, this is not a reasonable excuse for him neglecting his obligations to the applicant in this matter. “Interruptions” are part and parcel of legal practice. Those committed to the provision of quality legal work for those that engage them should expect, and take steps to accommodate, “interruptions” and the time demands that all lawyers face.
Mr Heathcote had ample time to finalise the Substantive Application and file it within the required time. As outlined above, Mr Heathcote’s own evidence is that the applicant had been very diligent in providing the required instructions, the solicitor he asked to prepare the Substantive Application for him had done so in a timely manner but Mr Heathcote did not begin reviewing the draft application until the morning of 11 December 2017 (despite knowing it was due that day).
Mr Heathcote provides no explanation for the period between receiving the draft Substantive Application on around 30 November 2017 and him commencing work on the application on 11 December 2017. To the Court, this indicates that Mr Heathcote was entirely inefficient when attending (or not attending) to the Substantive Application. Mr Heathcote’s explanation that the Substantive Application required “more work than he anticipated” is, frankly, no excuse for him waiting until the day that it was supposed to be filed to start work on the Substantive Application.
Following Mr Heathcote’s failure to file the Substantive Application on time the parties conferred regarding the need for an extension of time. It was not until 20 April 2018 that the applicant (through his lawyer, Mr Heathcote) filed the Extension Application. Mr Heathcote has stated in his affidavit that he was “unsure” whether an extension of time was required. This was an argument addressed in Ryan (No 1).
The Court reiterates its comments in Ryan (No 1) that it is somewhat perplexing that Mr Heathcote would dispute the need for an extension of time in this case given that he was also the solicitor acting for the applicant in Atkinson v Killarney Properties Pty Ltd & Ors [2016] FCCA 3233 (“Atkinson”). In Atkinson, the issue of filing a general protections Court application was addressed. Post-Atkinson it cannot be said that Mr Heathcote would not now understand that the deadline for filing was 4:30PM.
In relation to the applicant’s submissions regarding conferral between the parties and the respondent’s refusal to consent to an extension of time, the Court does not take issue with the respondent’s conduct, particularly given Mr Heathcote’s position that no extension of time was required. The respondent had no obligation to consent to an extension of time (something that was conceded in the applicant’s submissions here) and it was entirely reasonable for the respondent to seek a proper explanation from Mr Heathcote regarding the delay in filing the Substantive Application.
In relation to whether the respondent incurred costs as a result of the applicant’s unreasonable act or omission, the applicant submitted that:
a)the applicant’s denial of the need for an extension of time did nothing more than delay the date on which the Extension Application was made;
b)Mr Heathcote’s failure to lodge the Substantive Application in time did not require the respondent to do anything or to incur any costs, beyond alerting the Court and the applicant to its view that the application was lodged out of time; and
c)in the circumstances the respondent should have consented to an extension of time.
In this regard, and noting the above findings in relation to Mr Heathcote’s conduct, the Court agrees with the respondent that all costs in relation to the Extension Application were caused entirely by Mr Heathcote’s (mis)conduct.
If not for Mr Heathcote’s insistence that no extension of time was required, and Mr Heathcote’s failure to provide an adequate explanation for the delay in filing, the need for the Extension Application would have been avoided.
It was recognised in Madigan v South Australian Museum Foundation Inc [2017] FCCA 2165 at [29] per Judge Heffernan that a significant matter weighing on the exercise of the discretion to extend time is the adequacy of the explanation which has been provided for the delay.
It was perfectly reasonable for the respondent to seek a proper explanation from the applicant and to refuse to consent any extension of time while that information was not forthcoming.
The Court is satisfied that the applicant’s insistence (through Mr Heathcote) to refute the need for an extension of time, followed by his failure to explain the reasons for the delay to the respondent, and then to the Court, was an unreasonable act which caused the respondent to incur costs in opposing the Extension Application.
The delay was brought about by:
a)Inefficiency;
b)Mr Heathcote’s failure to make a concession that an extension of time was required (something he was clearly aware of by virtue of Atkinson) which inhibited the filing of the Extension Application by almost four months; and
c)Mr Heathcote adopting a misguided (and troublesome) approach whereby he simply assumed that there would be no issue raised by the respondent or, in any event, that an extension of time would be granted.
(Clarke at [29])
Those factors, in addition to the remarks made in Ryan (No 1) and those already made, are, in the Court’s view, determinative of, and amount to, unreasonableness in a sense relevant to s.570(2)(b).
Overall, the Court is of the view that it should exercise its discretion under s.570(1) and (2)(b) of the FW Act to order the applicant to pay costs incurred by the respondent.
The question then arises whether those costs ought to be paid by the applicant’s lawyer, Mr Heathcote, and whether they should be paid on an indemnity basis.
Whether Mr Heathcote should be liable for costs
The Court has power to award costs against a party’s lawyer pursuant to its implied incidental power to regulate the conduct of legal practitioners who appear before the Court: s.81(1)(b) of the Federal Circuit Court of Australia Act 1999 (Cth) (“FCCA Act”) and r.21.07 of the FCC Rules; Robinson v Blackheart Industries Pty Ltd & Ors (2014) 286 FLR 277 at [125]-[128] per Judge Manousaridis.
Rule 21.07(1) of the FCC Rules provides that a Court may make an order for costs against a lawyer if the lawyer, or an employee or agent of the lawyer, has caused costs:
a)to be incurred by another person; or
b)to be thrown away because of undue delay, negligence, improper conduct or other misconduct or default.
Rule 21.07(2)(b) of the FCC Rules provides:
(2) A lawyer may be in default if a hearing may not proceed conveniently because the lawyer has unreasonably failed:
(a) to attend, or send another person to attend, the hearing; or
(b) to file, lodge or deliver a document as required; or
(c) to prepare any proper evidence or information; or
(d) to do any other act necessary for the hearing to proceed.
The power to award costs against a lawyer must be exercised with care and discretion and only in clear cases: Mitry Lawyers v Barnden [2014] FCA 918 at [39] per Wigney J (“Mitry”).
The relevant principles applicable under r.21.07 of the FCC Rules were summarised in Mitry at [42] per Wigney J, and include:
a)a requirement for something involving “unreasonable conduct”, with what constitutes unreasonable conduct depending on the circumstances of the particular case;
b)acting unreasonably involves some deliberate or conscious decision taken by reference to circumstances unrelated to the prospects of success, with either a recognition that there is no chance of success, or an intention to use the proceeding for an ulterior purpose, or to abuse the processes of the court, or with a disregard of any proper consideration of the prospects of success;
c)the circumstances must involve or result in a serious dereliction of duty owed to the Court, or serious misconduct in promoting the course of, and the proper administration of, justice; and
d)pursuit of an unmeritorious case is insufficient, because the courts are concerned to avoid the risk of a practice of lawyers endeavouring to browbeat opponents into abandoning clients or particular arguments for fear of personal costs orders against them.
The applicant’s submissions do not directly address whether Mr Heathcote’s conduct was in default under r.21.07(2). Rather, they argue that Mr Heathcote did not engage in any of the classes of conduct to which r.21.07(1) refers and that, in the absence of undue delay, negligence, or improper conduct, or other misconduct, the Court should not make an order for costs.
The Court has already commented (adversely) on what it views as unreasonable conduct on the part of Mr Heathcote.
The Court agrees with the respondent that Mr Heathcote’s unreasonable conduct supports an order for costs against him under r.21.07 of the FCC Rules.
The conduct which, in the Court’s view, necessitates an order that Mr Heathcote pay the respondent’s costs of the Extension Application include:
a)by reference to the criteria set out in r.21.07(2) of the FCC Rules, Mr Heathcote was in default by:
i)unreasonably (for the reasons given above) failing to file the Substantive Application as per the statutory time limit (r.21.07(2)(b) of the FCC Rules);
ii)unreasonably failing to prepare proper information to allow the respondent to make an informed decision about whether to consent to an extension of time. The Court notes it has only been within the context of a personal adverse costs order against Mr Heathcote that an explanation has been provided. This is unsatisfactory and unreasonable for a legal practitioner (r.21.07(2)(c) of the FCC Rules); and
iii)unreasonably failing to prepare proper evidence of why the Substantive Application was not within time -- in particular, in circumstances where that evidence was sought by the respondent and the Court (r.21.07(2)(c) of the FCC Rules).
b)the findings of this Court in Ryan (No 1) as to the conduct of Mr Heathcote, as well as Mr Heathcote’s insistence that the applicant had filed in time (notwithstanding his personal knowledge of Atkinson) enable the Court to be comfortably satisfied that Mr Heathcote’s conduct was unreasonable and improper; and
c)the Court reiterates that Mr Heathcote’s refusal to provide an explanation for the delay was unreasonable. The evidence required to provide an acceptable explanation, or simply an explanation, for the delay was entirely within the knowledge of Mr Heathcote. The decision not to file any evidence was his own (that is, it was a conscious and forensic decision not to do so) and was a decision made notwithstanding prompting by the respondent’s solicitors.
In all of the above circumstances, the Court finds that there was a failure by Mr Heathcote to advance the interests of the administration of justice by taking proper steps to have the proceedings conducted at less expense to the respondent and the Court and in a manner which might have better protected the interests of his client/the applicant.
The Court refers to the objects provided in r.1.03 of the FCC Rules -- in particular, the purpose of the Court being to avoid “undue delay”. The delay seen here in filing the Substantive Application, and the Extension Application, were, in the circumstances of this case, “undue” and unjustifiable. The applicant himself in no way contributed to this course of action. The errors made were those of his lawyer and his lawyer alone.
It is therefore appropriate that an order be made that the applicant’s lawyer, Mr Heathcote, be responsible for the payment of the respondent’s costs.
What costs should be awarded
The respondent seeks costs in excess of Schedule 1 of the FCC Rules.
The respondent argues that the Court’s observation in Ryan (No 1) that Mr Heathcote’s “client deserved much better from him, as did the Respondent” ([49]) is demonstrative of the degree to which Mr Heathcote’s conduct fell well short of the standard required of parties and practitioners before the Court.
The respondent seeks indemnity costs in the amount of $15,000, which the respondent states is 60 per cent of the actual costs incurred in relation to the Extension Application. The respondent argues that this is a reasonable amount, reflecting the nature of the proceedings and Mr Heathcote’s conduct generally.
The Court has jurisdiction and an absolute and unfettered discretion to determine whether to award indemnity costs: Genovese v BGC Constructions Pty Ltd (No.2) [2007] FMCA 601 at [47] per Lucev FM (“Genovese (No.2)”); Colgate-Palmolive Co & Anor v Cussons Pty Ltd (1993) 46 FCR 225 at 230 per Sheppard J (“Colgate-Palmolive”).
What constitutes an appropriate costs or indemnity costs order depends on the circumstances of the case: Genovese (No. 2) at [47] per Lucev FM.
The Court ought not depart from the normal practice – for costs to be on a party-party basis – lightly: Colgate-Palmolive FCR at 230 per Sheppard J.
In the case of indemnity costs, it has been said that there must be some special or unusual feature which entitles the successful party to indemnity costs: Davids Holdings Pty Ltd v Coles Myer Ltd [1995] ATPR 41-383 at [7] per Drummond J.
As outlined by Judge Lucev in Lu v AO-Zhong International Mineral Resources Pty Ltd (No.2) [2015] FCCA 2453 at [42], the circumstances which may qualify as “special or unusual circumstances” warranting an indemnity costs order relevantly include:
a)whether a party should have known that there was no prospect of success in the case;
b)where a party alleges fraud, knowing the accusation to be false, or irrelevant to the issues;
c)where a party proceeds for “no good purpose at all due to inertia and carelessness”;
d)where a party’s conduct causes loss of time to the Court, and to other parties; and
e)having regard to the objects of:
i)encouraging savings of private costs and avoidance of inherent risks, delays and uncertainties of litigation; and
ii)saving public cost necessarily incurred in litigation which events demonstrate to have been unnecessary: Genovese (No. 2) at [47] per Lucev FM.
The Court is conscious that these categories are not closed. Other matters, such as litigious misconduct, may also be relevant.
In essence, the Court must make a determination on the basis of the particular circumstances of the case.
Again, as with a consideration of s.570 of the FW Act, the Court must bear in mind that indemnity costs are the exception rather than the rule. An imposition of indemnity costs should not occur too readily.
Although not without some misgivings, the Court considers that, whilst the unreasonable acts and omissions of the applicant, through Mr Heathcote, are sufficient to warrant an award of costs for the purposes of s.570 of the FW Act, they are not sufficient for the Court, on this occasion, to make an order for indemnity costs to be payable in the amount sought by the respondent. The Court is of the view that an award of indemnity costs in the amount of $15,000 would be excessive given the nature of the hearing concerned, as well as the general rule that indemnity costs are the exception and not the rule.
The Court notes that if costs were to be awarded according to the scale amount, the respondent would be entitled under Item 3 of Part 1 of Schedule 1 of the FCC Rules to $1,832 plus the daily hearing fee mentioned in Item 13 that applies to the hearing. The hearing was not a short mention, being listed for a half-day hearing. The daily hearing fee that is appropriate is therefore $1,099. The cost of the Extension Application under the scale would therefore be $2931.
The circumstances warranting a departure from the Court’s scale need not be exceptional. Rather, they need only be is reasonably justifiable to warrant the setting of costs in an increased or decreased amount. Again, this is at the discretion of the Court: SZRTP v Minister for Immigration & Citizenship & Anor (No 2) (2013) 277 FLR 469 at [44]-[46].
Although the Court does not consider the amount sought by the respondent to be a reasonable amount, it does conclude that it should exercise its discretion to order Mr Heathcote to pay the respondent’s costs of the Extension Application above scale. The Court bases this conclusion on its view that Mr Heathcote was solely responsible for the applicant’s delay in filing the Substantive Application and, as a result, the need for the applicant to file the Extension Application. The Court also considers that the conduct of Mr Heathcote in delaying the filing of the Extension Application and his denials that such application was required, despite his knowledge of those requirements as discussed above, are further factors in support of the Court awarding costs above the scale.
Bearing in mind the above reasons, the Court considers that it is appropriate to award a lump sum of $6,000 to be paid by the applicant’s solicitor, Mr Heathcote. This is approximately twice the amount that would normally be awarded under the scale for proceedings of this nature, and well below the $15,000 sought by the respondent.
Conclusion
The Court concludes that:
a)the unreasonable acts and omissions which caused the respondent to incur costs for the purposes of s.570(2)(b) of the FW Act arose solely from the conduct of the applicant’s solicitor, Mr Heathcote.
b)Mr Heathcote should pay the respondent’s costs of the Extension Application;
c)the costs sought by the respondent are excessive and unreasonable given the nature of the proceedings; however, the Court is satisfied that an order should be made for costs to be awarded above the scale amount because of the unreasonable nature of Mr Heathcote’s conduct; and
d)a lump sum figure of $6,000 is appropriate in all of the circumstances.
The Court will make an order that the solicitor of the applicant, Mr Heathcote, pay the respondent’s costs of the Extension Application to be fixed in the sum of $6,000.
I certify that the preceding one hundred and sixteen (116) paragraphs are a true copy of the reasons for judgment of Judge Kendall
Date: 12 June 2019
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