Sautner v Melbourne Stadiums Limited (No.2)

[2014] VCC 784

IN THE COUNTY COURT OF VICTORIA

AT MELBOURNE

Revised
(Not) Restricted

COMMERCIAL LIST

GENERAL DIVISION

Case No. CI-13-03122

NICHOLAS SAUTNER	Plaintiff
v.
MELBOURNE STADIUMS LIMITED	Defendant

---

JUDGE:

HIS HONOUR JUDGE ANDERSON

WHERE HELD:

Melbourne

PLAINTIFF’S SUBMISSIONS:

12 & 28 May 2014

DEFENDANT’S SUBMISSIONS:

22 May 2014

DATE OF JUDGMENT:

CASE MAY BE CITED AS:

6 June 2014

Sautner v Melbourne Stadiums Limited (No.2)

MEDIUM NEUTRAL CITATION:

[2014] VCC 784

REASONS FOR JUDGMENT

---

Catchwords:              Costs – Claims made both at common law and pursuant to the Fair Work Act 2009 (Cth) – Whether costs may be ordered on the common law claim – Costs on the statutory claims limited by s.570 of the Fair Work Act 2009 (Cth).

Practice and procedure – Offer of compromise pursuant to Rule 26 County Court (Civil Procedure) Rules 2008 (Vic) – Plaintiff sought to compromise common law claim and statutory claims for an “all-in” figure – Recovery more favourable – Whether costs payable on the common law claim pursuant to Rule 26.08(2)(b) – Failure to accept plaintiff’s offer on the statutory claims an “unreasonable act or omission” pursuant to s.570(2)(b) of the Fair Work Act 2009 (Cth).

---

APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr W. Friend SC with Mr M. Hoyne	AJ Macken & Co
For the Defendant	M J. Bourke SC with Mr J. Forbes	Thomson Geer

HIS HONOUR:

1.       Judgment was entered in this matter on 2 May 2014 in the sum of $154,978.84 in favour of the plaintiff. There are a number of subsidiary matters which need to be decided. The parties have filed written submissions and have asked the Court to make a determination without hearing further from them.

2.       The matters for decision are as follows:

a.       interest on the plaintiff’s judgment;

b.       dismissal of the defendant’s counterclaim upon its acceptance of an undertaking by the plaintiff;

c. whether the Court should impose a pecuniary penalty under s.546 of the Fair Work Act2009 (Cth) (“the Act”), and, if so, in what sum and to whom should it be paid;

d.       whether an order should be made in respect of the costs of the proceeding and specifically:

i)    the plaintiff’s costs of the proceeding;

ii)   the defendant’s costs of its counterclaim;

iii)     the costs of transcript.

Interest

3.       It was agreed by the parties that I should award interest on the plaintiff’s claim from the date of the issue of the proceeding, on 19 June 2013, to the date of judgment, on 2 May 2014, pursuant to the penalty interest rate in the sum of $13,693.34.

Defendant’s counterclaim

4.       It is agreed by the parties that upon the acceptance by the defendant of the undertaking proffered by the plaintiff in relation to matters the subject of the counterclaim, that the defendant’s counterclaim should be dismissed.

Pecuniary penalty

5. The plaintiff seeks the payment of a pecuniary penalty under s.546 of the Act as a consequence of the defendant’s failure to make a redundancy payment to the plaintiff which I have found the defendant was required to do pursuant to s.119(2) of the Act. The maximum penalty that may be imposed pursuant to the Act is $51,000.

6.       On behalf of the plaintiff, it was submitted that the penalty that would fit the circumstances would be “50 per cent of the maximum”, although it was conceded that specifying the amount of the penalty may not be appropriate. The defendant submitted that no penalty should be imposed.

7.       In reaching my decision on the issue of the redundancy payment, I was satisfied that:

a. the Act provided that seven weeks pay was appropriate in the circumstances of the plaintiff;

b.       the plaintiff had not otherwise been provided for in the event of redundancy under the conditions of his employment agreement.

8.       The defendant had offered the plaintiff 12 weeks redundancy pay on 3 June 2013 when it terminated his employment. That offer was conditional upon the plaintiff agreeing to certain obligations on his part which went beyond what was required of him under the employment contract. The plaintiff at no time accepted these additional obligations. The defendant did not at any time pay or indicate that payment would be made of the redundancy payment.

9. In the proceeding, the defendant denied that it was liable to pay a redundancy entitlement to the plaintiff, primarily because there were grounds to justify the summary termination of the plaintiff’s employment, but also because of the terms of the employment contract. The defendant argued that the contractual payment of six months’ salary in lieu of notice encompassed any entitlement to a redundancy payment which meant that the Act had no application. I rejected that submission.

10. I consider in the circumstances it is appropriate that the defendant’s failure, at the time of termination, to recognise its statutory obligations and its actions, in continuing to contest that part of the plaintiff’s claim on the basis that the Act did not apply, requires the imposition of a penalty. I will impose a penalty on the defendant of $12,000. That sum must be paid to the plaintiff. The penalty relates to the conduct of the defendant as regards the statutory entitlements of the plaintiff. It is not further recompense to the plaintiff for being made redundant, or for having been kept out of his redundancy pay for a lengthy period. Those matters have been otherwise compensated. I consider that, of the options open to the Court, payment to the plaintiff is the most appropriate.

Costs

11.     The matters for determination are:

a. whether s.570 of the Act applies to the whole proceeding or simply to the claims under the Act for a redundancy payment and for a pecuniary penalty;

b. if the Act applies to the whole or part of the proceeding, is s.570(2)(b) of the Act enlivened by acts or omissions of the defendant which caused the plaintiff to incur costs; namely:

i)    the defendant’s failure to accept the plaintiff’s offer of compromise dated 12 July 2013;

ii)   the defendant’s amendments to its defence and counterclaim shortly prior to trial;

c. if the Act does not apply to the plaintiff’s common law claim, what orders are appropriate, particularly having regard to the plaintiff’s offer of compromise;

d. is the question of the costs of the defendant’s counterclaim governed by s.570 of the Act? If the Act does not apply, is the defendant entitled to any and what costs?

12. : Whether s.570 applies to the plaintiff’s common law claimSection 570 of the Act, so far as it is relevant, reads as follows:

“(1)      A party to proceedings (including on appeal) in a court (including a court of a State…) 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 the court is satisfied that the party's unreasonable act or omission caused the other party to incur the costs …”

13. The provision has been construed on many occasions by the Federal Court of Australia and other Federal Courts. No authorities were cited to me of instances where the section was construed by a State court exercising Federal jurisdiction. The note-up function to s.570 of the Act on refers to the decision of Ryan v. Custom Sportswear Pty Ltd [2013] SAIRC 23, a decision of Industrial Magistrate Ardlie sitting in the South Australian Industrial Relations Court.

14. Industrial Magistrate Ardlie had determined an interlocutory application in a proceeding involving a claim for long service leave under the Act as well as other claims including “a claim for payment in lieu of notice of termination”. The Learned Magistrate made an order for costs but appeared to base his decision on a finding that the long service leave claim was not a stand-alone claim and should not be excluded from the general costs order because s.570(2)(a) applied. The specific issue which arises in the present case appears not to have been authoritatively determined.

15.     The Federal Court has construed the section in proceedings in the Court which included both a claim under the Industrial Relations Act (which contained a similar provision to s.570 of the Act) and a claim for damages for wrongful dismissal at common law. The Full Court in Bostik (Aust) Pty Ltd v Georgevski (No.2) (1992) 36 FCR 439 (“Bostik”) held that both claims arose under the Industrial Relations Act and the Court refused to order costs on the common law claim.

16.     The plaintiff submitted that the Court reached the decision in Bostik because “the term of the employment contract relied upon by the employee arose from a Federal Award and the award owed its existence to the Industrial Relations Act and its predecessor, accordingly the claim arose under the Industrial Relations Act. It is submitted that in the present case, the contractual term relied upon by the plaintiff does not owe its existence in any way to the [Fair Work] Act”.

17.     The plaintiff submitted that a different result than in Bostik may occur where two claims are made in a Federal Court proceeding where two Federal statutes are involved, each of which conferred jurisdiction upon the Court, but only one of which limited costs.

18.     The Full Court in CFMEU v Director, Fair Work Building Industry Inspectorate (No.2) (2013) 209 FCR 464 (“CFMEU”) stated that s.824 of the Workplace Relations Act (which limited an award of costs in similar terms to s.570 of the Act) and the Building and Construction Industry Improvement Act2005 (Cth), which contained no such limitation, should be construed so as to produce a “harmonious legal meaning” (paragraph 61).

19.     The Full Court in CFMEU made an order that the losing party pay 50% of the costs of the successful party. The Court considered at paragraph 65 that where “there may not be a common factual substratum, and the claims, by number or otherwise, may be predominantly referable [to an Act with a limiting costs provision], apportionment may well be relevant”.

20.     The plaintiff submitted that the court in Bostik was bound to conclude as it did because the Federal Court’s jurisdiction in respect of “non-federal” matters is derived from its “accrued jurisdiction”. The Federal Court can only deal with a non-federal matter if it is part of the same matter or controversy as the federal claim over which the court has primary jurisdiction. If the non-federal matter (for example a common law claim for damages for wrongful termination of an employment contract) were not part of the same matter or controversy as a claim within the court’s jurisdiction, the Federal Court could not determine the non-federal claim.

21.     In Re Wakim [1999] HCA 27; (1999) 198 CLR 511, the High Court at paragraph 71 stated that, “If the substratum of fact which gives rise to a matter in federal jurisdiction cannot be effectively disposed of without the application of State law, the issues of State law are determined in the exercise of federal jurisdiction (Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd (1981) 148 CLR 457; Fencott v Muller (1983) 152 CLR 570; Stack v Coast Securities (No 9) Pty Ltd [1983] HCA 36; (1983) 154 CLR 261). As Mason, Brennan and Deane JJ pointed out in Stack v Coast Securities (No 9) Pty Ltd [1093] HCA 36; (1983) 154 CLR 261 at 290, federal jurisdiction is ‘not restricted to the determination of the federal claim or cause of action in the proceeding, but extend[s] beyond that to the litigious or justiciable controversy between parties of which the federal claim or cause of action forms part. The determination of State law issues in such circumstances is part of the ‘accrued jurisdiction’ of the Federal Court”.

22. The plaintiff submitted the position of the County Court was different and that accordingly, s.570 of the Act should not be construed to limit the costs of the successful common law claim. The County Court:

a.       had jurisdiction to hear the common law claim for payment in lieu of notice;

b.       had the power pursuant to s.78A(1) of the County Court Act1958 (Vic) to order costs “of and incidental to all proceedings”, in its “discretion”, and to determine “by whom and to what extent the costs are to be paid”.

c. had jurisdiction pursuant to s.539 and s.545(3) of the Act to hear the claims for the redundancy payment and the pecuniary penalty under the Act.

Accordingly, the plaintiff submitted that “there is no reason why those Acts ought not also be construed harmoniously in precisely the same way as was done in CFMEU”.

23.     The defendant submitted that, “The costs ‘shield’ in s570 is unambiguously directed to the ‘proceeding’ as an indivisible whole” and that “once a party chooses to enliven federal jurisdiction, s570 is also enlivened and the whole of the proceeding is subject to s570”. The defendant supported this interpretation, not by reference to the word “proceedings” in s.570(1), but rather by reference to the word “matter” in the section.

24. In my view, the proper interpretation of s.570 is to be derived from the construction of the word “matter” rather than the word “proceedings” in s.570, although this does not support a conclusion that the costs “shield” is “directed to the ‘proceeding’ as an indivisible whole”. In s.570, “proceedings” includes within the scope of the court action to which the section applies, “on appeal”. However, the costs orders to which the section applies are only those “in relation to a matter arising under this Act”.

25.     The defendant submits that, “It is common ground that the plaintiff’s claim for redundancy pay and the claim for a pecuniary penalty are ‘matters’ arising under the FW Act”. The defendant submits that “the County Court only has jurisdiction in relation to those matters by reason of it being an ‘eligible state or territory court’ under the FW Act”. Sections 539 and s.545(3) of the Act do indeed grant jurisdiction to the state court to determine claims for redundancy pay and for a pecuniary penalty. However, unlike the “accrued jurisdiction” of the Federal Court, jurisdiction is not bestowed on the state court only if the redundancy claim “is part of the same matter or controversy” as the other claim over which the state court has primary jurisdiction.

26.     The High Court in Fencott v Muller (1983) 152 CLR 570 at 608 stated that a “matter”, as that word is used in s.75 and s.76 of the Constitution (in the phrases in all “matters” or in any “matter arising under…”) , cannot “preclude the exercise of judicial power”, “to exclude what is in truth a single justiciable controversy”. In s.570, the words to be construed are “a matter arising under this Act”. In the context of the present case, I consider that this can only refer to the claims for a redundancy payment pursuant to s.119 and for a pecuniary penalty pursuant to s.546 of the Act. I do not consider that I can, in the present case, approach the construction of s.570 on the basis that the defendant suggests, that there is a “single justiciable controversy [which] involves the dismissal of the plaintiff by [the defendant] and the legal consequences of that dismissal, whether those consequences be common law (damages) or statutory (redundancy pay and penalty)”.

27.     That path of reasoning may have been appropriate in Bostik, and other similar cases, but it is not warranted in the present case where the common law claim can be regarded as a separate “justiciable controversy” to the statutory claims. Each of the statutory claims are matters “arising under this Act”. Further I do not consider that a claim for payment in lieu of notice is necessarily equivalent to a claim for damages for wrongful termination of contract, for example, where insufficient or no notice was given. I do not regard the proceeding as involving “a single justiciable controversy” which arises under the Act.

28. Accordingly, I consider that the plaintiff is entitled to recover his costs in respect of the common law claim, to which the limitation in s.570 does not apply, but that the section does prohibit recovery in respect of the claims arising under the Act, unless the circumstances in s.570(2)(b) apply.

29.     :Offer of Compromise The offer of compromise, dated 12 July 2013, was “to compromise the within proceeding by accepting payment to him by the defendant of the amount of $111,000”. The Statement of Claim claimed $123,777.67 as payment in lieu of notice, $31,201.17 as redundancy pay and a pecuniary penalty to be paid to the plaintiff.

30.     The offer of compromise is not an offer “that states that costs are to be paid or received in addition to the offer” to accept payment “of the amount of $111,000”. Therefore, as Rule 26.03(7) provides, no costs would be payable, upon acceptance of the offer of compromise, in addition to the payment of $111,000.

31.     Accordingly, no issue arises as to the validity of the offer of compromise. Such an issue might have arisen if the offer had included the payment of costs, without for example the offer making it clear that the costs were only to be paid in respect of the common law claim and that no costs were to be paid for the statutory claims.

32.     I consider that the plaintiff has clearly been successful for an amount in the proceeding significantly more favourable than the amount the plaintiff indicated he was prepared to accept by his offer of compromise.

33.     In the circumstances, I consider that:

a.       Rule 26.08(2)(b) entitles the plaintiff to an order for his costs in respect of the common law claim in accordance with the rule, “before 11.00am on the second business day after the offer was served, taxed on a party and party basis and for the plaintiff’s costs thereafter taxed on an indemnity basis”;

b.       the costs of the plaintiff of the statutory claims, after 11am on the second business day after the offer was served, to be taxed on an indemnity basis, should be paid by the defendant. The defendant’s failure to accept the offer was, in my view, an “unreasonable act or omission [which] caused the other party to incur the costs”, pursuant to s.570(2)(b) of the Act.

34.     I do not accept that the stage of the proceeding, at which the plaintiff’s offer was made, would ordinarily affect its validity, as the defendant contended. Offers of compromise should be encouraged at the earliest opportunity, even before the issue of proceedings (Rule 26.08). The defendant was, at the time the offer was made, sufficiently abreast of the issues raised by the proceeding to have been able to give proper consideration to the offer of compromise, and the consequences of any failure to accept it within a reasonable period.

35.     :Amendment of the Defence shortly prior to trial The defendant, by its Amended Defence in early April 2014, reduced the bases upon which it sought to argue that it was entitled to summarily terminate the plaintiff’s employment, including the alleged misuse of the defendant’s confidential information. The parties on 9 April 2014 obtained a consent order that the defendant pay the plaintiff’s costs “thrown away by reason of the amendments”. The plaintiff submitted that the defendant, by agreeing to this costs order, “acknowledged that its reliance upon significant parts of its defence until just prior to trial was unreasonable”.

36.     Rule 63A17(2) provides that, ”A party who amends a pleading…by leave shall, unless the Court otherwise orders, pay the costs of and occasioned by the amendment”. It is unlikely that the costs order of 9 April was designed to do anything other than restate the intent of Rule 63A17(2), perhaps, in circumstances where both parties may have considered that Rule 63A17(2) might not operate because of s.570 of the Act.

37.     The terms of the costs order would not in my view enlarge the scope of the plaintiff’s recoverable costs. Further, it could not be regarded as an “acknowledgement” of the nature suggested by the plaintiff, or an “unreasonable act” under s.570(2)(b). Whilst in certain circumstances a late amendment to a Defence might be capable of being regarded as an “unreasonable act”, the amendments by the defendant narrowed the scope of the enquiry about the plaintiff’s conduct and resulted in a much more focussed presentation of the case by both parties at trial.

38.     In CMFEU v Clarke (2008) 170 FCR 574 at paragraph 29, the Full Court of the Federal Court stated its view that:

“The late abandonment of some of its defence [does not cross] the threshold of being ‘an unreasonable act or omission’ for the purposes of s824(2) [of the Workplace Relations Act, and that courts] should also be careful not to exercise the discretion [under the section] with too much haste, given that such haste may discourage parties, for fear of an adverse costs order, from pursuing litigation under the [Workplace Relations ] Act in the manner which they deem best”.

39. :Appropriate costs order on the plaintiff’s claims On the basis of the conclusions I have reached the plaintiff is entitled to recover his costs in respect of all of the claims, although the costs of the claims under the Act will be limited to the costs following the offer of compromise.

40.     In the circumstances, I propose to order that the defendant pay the plaintiff’s costs of the proceeding, in relation to the claim for a payment in lieu of notice, before 11am on 15 July 2013 to be taxed on a party and party basis and thereafter on an indemnity basis and, in relation to the plaintiff’s claims arising under the Fair Work Act2009 (Cth) only after 11am on 15 July 2013, those costs to be taxed on an indemnity basis.

41.     Appropriate cost order on the defendant’s counterclaim: The defendant’s counterclaim sought the delivery up of “property (including confidential information) of the defendant” particularised “at the very least” as certain documents listed in the plaintiff’s affidavit of documents in the proceeding. The counterclaim was resolved by the plaintiff providing a written undertaking to the Court. This was foreshadowed at the start of the trial. The matter was not canvassed otherwise at the trial apart from the submission to the Court of a signed memorandum recording the terms of the plaintiff’s undertaking.

42.     The undertaking related to the return of documents, including electronic documents, of which the plaintiff had copies. A letter from the plaintiff’s solicitors to the defendant’s solicitors dated 7 June 2013, stated, in the relevant parts:

“We are instructed that our client does not seek to retain any property which is not lawfully his own. In addition we are instructed that our client is aware of and compliant with his post-employment obligation of confidentiality. We confirm that your client’s property which was in the possession, custody or control of our client will be available for collection from our Firm, by appointment, between 10am and 5pm on Tuesday 11 June 2013…We are instructed that the ‘drop box’ was created by your client for the purpose of our client carrying out his duties including making presentations to the Company’s clients. We are instructed that during the course of our client’s employment it was necessary for our client to increase the size of the ‘drop box’ to facilitate those presentations. We are instructed that our client no longer has access to the ‘drop box’ following the termination of his employment”.

43.     It is unclear whether there was anything unreasonable in this approach by the plaintiff. Further, the proceeding was issued on 19 June 2013 and, on 2 August 2013, the defendant filed its counterclaim which put in issue the plaintiff’s entitlement to retain documents and other confidential information.

44.     In the circumstances, it seems obvious that, until the determination of the dispute relating to the termination of the plaintiff’s employment, particularly until the misuse of confidential information (including the allegation in relation to the creation of a “drop box” account by the plaintiff) was removed as a basis for termination by the late amendment, the return of the defendant’s documents by the plaintiff was problematic.

45.     Justice McHugh in Re Minister for Immigration and Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622 at 624-625 said that:

“If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion would usually mean that the court will make no order as to the cost of the proceedings”.

46.     In the circumstances, I consider that I should make no order in relation to the costs of the defendant’s counterclaim.

47. :Transcript costs The parties agreed to share the costs of transcript in the first instance. The plaintiff seeks an order that the defendant pay the plaintiff’s trial transcript costs. A small part of the cost of transcript is attributable to the time taken to deal with claims under the Act. In the plaintiff’s submissions, a figure of 95% was suggested as the basis for apportioning the plaintiff’s costs of the proceeding, upon the application of s570 to the statutory claims. I consider however, that in view of the conclusion I have reached as to the application of s.570(2)(b), the plaintiff is entitled to be reimbursed for the transcript costs he paid. Accordingly, I propose to order that the defendant shall pay the plaintiff’s trial transcript costs.

48.     :Certification of counsels’ fees Whilst the Court has the power to certify counsels’ fees, ordinarily, in cases conducted in the Court’s Commercial Division, it is rare for this to happen. These matters are better left for determination by the Costs Court. If the parties cannot reach agreement, the Costs Court has the expertise and experience necessary to deal with these matters.

49.     I note that the plaintiff seeks certification of daily rates for the court appearances, preparation and conferences conducted by counsel. Whilst the defendant’s submission suggests that “the usual party/party basis” is to fix counsels’ fee “on the usual scale, including as to refreshers, and not based on daily and hourly rates”, the County Court Rules have, since 1 September 2012, provided a different basis for the fixing of counsels’ fees “on daily and hourly rates” – see Appendix A, item 42.

50.     The rates at which counsels’ fees should be allowed, and the time allowed for preparation and conferences should be decided by the parties or, in default of agreement, by the Costs Court unless there is a jurisdictional bar to the Costs Court performing that task.

Orders

51.     The followings orders are proposed:

1.   The defendant must pay interest on the judgment sum of $154,978.84, calculated from 19 June 2013 to 2 May 2014 pursuant to statute, in the sum of $13,693.34.

2. The Court imposes a pecuniary penalty on the defendant pursuant to s.546 of the Fair Work Act2009 (Cth) fixed at $12,000. The defendant must pay the penalty to the plaintiff.

3.   The defendant must pay the plaintiff’s costs of the proceeding, including any reserved costs:

a.   in relation to his claim for the payment in lieu of notice upon the termination of his employment, before 11am on 15 July 2013 taxed on a party and party, basis and thereafter on an indemnity basis; and

b.   in relation to the plaintiff’s claims under the Fair Work Act2009 (Cth) for the payment of a redundancy payment and for a pecuniary penalty, no costs prior to 11am on 15 July 2013 and thereafter on an indemnity basis;

c.   the plaintiff’s costs shall include the plaintiff’s trial transcript costs.

4.   Judgment for the plaintiff on the defendant’s counterclaim, that the defendant’s counterclaim be dismissed.

5.   There shall be no order as to the costs of the defendant’s counterclaim.

- - -

Certificate

I certify that these 12 pages are a true copy of the reasons for decision of His Honour Judge Anderson delivered on 6 June 2014.

Dated: 6 June 2014

Catherine Kusiak

Associate to His Honour Judge Anderson