Shackley v the Australian Croatian Club Ltd

[1997] FCA 1544

FEDERAL COURT OF AUSTRALIA

INDUSTRIAL LAW - unlawful termination of employment - costs - s 347 Workplace Relations Act - tests to be applied thereunder - unsuccessful proceedings brought by employer to review decision of Judicial Registrar - whether reasonable to pursue a case unanswerable on one ground in order to disturb finding of untoward conduct under another ground.

Thompson v Hodder (1990 21 FCR 467, applied

SHACKLEY v THE AUSTRALIAN CROATIAN CLUB LIMITED
A 1020 of 1997

FOSTER, von DOUSSA AND MADGWICK JJ
CANBERRA
24 OCTOBER 1997

IN THE FEDERAL COURT OF AUSTRALIA

AUSTRALIAN CAPITAL TERRITORY

DISTRICT REGISTRY

A 1020 of 1997

APPEAL FROM THE INDUSTRIAL RELATIONS COURT OF AUSTRALIA

BETWEEN:	JANICE SHACKLEY APPLICANT
AND:	THE AUSTRALIAN CROATIAN CLUB LTD RESPONDENT

JUDGE(S):	FOSTER, VON DOUSSA and MADGWICK JJ
DATE:	24 OCTOBER 1997
PLACE:	CANBERRA

THE COURT ORDERS THAT:

1. The appeal is upheld.

2. The respondent to the appeal should pay the appellant’s costs of and incidental to the proceeding constituted by the application for review of the orders made by the Judicial Registrar on 27 February 1995.

IN THE FEDERAL COURT OF AUSTRALIA

AUSTRALIAN CAPITAL TERRITORY

DISTRICT REGISTRY

A 1020 of 1997

APPEAL FROM THE INDUSTRIAL RELATIONS COURT OF AUSTRALIA

BETWEEN:	JANICE SHACKLEY APPLICANT
AND:	THE AUSTRALIAN CROATIAN CLUB LTD RESPONDENT

JUDGE(S):	FOSTER, von DOUSSA and MADGWICK JJ
DATE:	24 OCTOBER 1997
PLACE:	CANBERRA

REASONS FOR JUDGMENT

THE COURT:  This is an appeal against a judgment of Moore J dealing with costs.

Background

Ms Shackley was employed by the respondent Club as its secretary-manager in January 1994.  It would seem that she principally reported to the Club President, Mr Bajic.  Her employment was terminated in May 1994.  She made application to the Industrial Relations Court of Australia under s 170EA of the Workplace Relations Act 1966 (“the Act”) as it then stood, alleging that the termination of her employment was unlawful.

A Judicial Registrar heard that application and determined it in Ms Shackley’s favour, awarding her compensation.  The Judicial Registrar discussed ss 170DF(1)(f) and 170DC of the Act.  The first such provision prohibited termination of employment on the ground of “race, . . . national extraction or social origin”.  The second required that, in cases of termination for reasons related to an employee’s conduct or performance, the employee should (subject to a presently immaterial exception) be given the opportunity of self-defence against the allegations.  The Judicial Registrar accepted Ms Shackley’s evidence that Mr Bajic had told her that the real reason for her dismissal was that she was not of Croatian dissent.  Mr Bajic in evidence had denied that conversation.  The Judicial Registrar found that the Club had contravened both ss 170DF(1)(f) and 170DC.  The Judicial Registrar did not consider whether there was also a breach of s 170DE(1), which prohibited the termination of an employee’s employment unless there was a valid reason for such termination because of the employee’s capacity or conduct, or because of operational requirements.

The club exercised its right under s 377 to have a review of the Judicial Registrar’s decision by a Judge. That section, in substance, sought to give effect to constitutional requirements to avoid the system of judicial registrars offending against Chapter III of the Constitution, and s 377 is to be construed as requiring that the review be by way of rehearing de novo:  APESMA v Deniliquin Council (1995) 65 IR 253, esp 258.

The Club again failed. Again Ms Shackley’s evidence was preferred to that of Mr Bajic. However, his Honour found in terms that ss 170DE(1) (prohibiting termination unless there is a valid reason for it), as well as that ss 170DF(1)(f) and 170DC (explained above) had been contravened. Upon her success before his Honour, Ms Shackley sought a costs order. His Honour’s power to order costs for her was limited by s 347. That section provides:

“347(1)         [Payment of costs]  A party to a proceeding (including an appeal) in a matter arising under this Act shall not be ordered to pay costs incurred by any other party to the proceeding unless the first-mentioned party instituted the proceeding vexatiously or without reasonable cause.

347(2)          . . .”

His Honour refused an order for costs on the basis that s 347 precluded the making of a costs order as a review under s 377 was not a separate proceeding from the proceeding before the Judicial Registrar. Ms Shackley appealed against that decision to the Full Court of the Industrial Relations Court of Australia. The appeal was allowed. The Full Court held that the review was a “proceeding . . . in a matter arising under [the] Act” within the meaning of s 347, and that Moore J had jurisdiction to award costs if the review had been instituted “vexatiously or without reasonable cause” (see Shackley v Australian Croatian Club Ltd (1996) 141 ALR 736). The Full Court remitted the matter to Moore J.
After receiving submissions from the parties, Moore J rejected Ms Shackley’s application for costs as he considered that the review had not been instituted vexatiously or without reasonable cause.  It is against that decision that Ms Shackley now appeals.

Questions on the appeal

Having rightly, in our view, dismissed any suggestion that the review was sought “vexatiously”, the legal test which his Honour applied was as follows:

“In relation to an appeal, Wilcox CJ posits the following test as to whether it was brought without reasonable cause in Imogen Pty Ltd v Anthony Sangwin (unreported, Full Court, Industrial Relations Court of Australia, 20 December 1996):

“Only minor modifications of that test are necessary to cover the situation of an appeal.  The question would be whether, having regard to the arguments available to the appellant at the time of instituting the appeal, there was no substantial prospect of success.  The prospect must be evaluated in the light of the facts of the case, the judgment appealed from and the points taken in the notice of appeal.  If, having regard to those matters, there was a not insubstantial prospect of the appeal achieving some success, albeit not necessarily complete success, then it seems to me it cannot fairly be described as having been instituted “without reasonable cause”.  This is so even if, in the result, the appeal proved unsuccessful.”

It was submitted that his Honour had applied an incorrect test, but that cannot be sustained.  What Wilcox CJ stated does not materially differ from what was said in Thompson v Hodder (1990) 21 FCR 467 at 469-70 by a unanimous Full Court of this Court:

“Section 347 replaced the now repealed provision in s 197A of the Conciliation and Arbitration Act 1904(Cth). That provision was considered in a number of cases. In R v Moore; Ex parte Federated Miscellaneous Workers’ Union of Australia (1978) 140 CLR 470 at 473, Gibbs J said:

“In my opinion a party cannot be said to have commenced a proceeding “without reasonable cause”, within the meaning of that section, simply because his argument proves unsuccessful.  In the present case the argument presented on behalf of the prosecutor was not unworthy of consideration and it found some support in the two decisions of this Court to which I have referred.  The fact that those decisions have been distinguished, and that the argument has failed, is no justification for ordering costs in the face of the prohibition contained in s 197A.’

In Heidt v Chrysler Australia Ltd (1976) 26 FLR 257 at 272, Northrop J said:

‘The policy of s 197A of the Act is clear.  It is designed to free parties from the risk of having to pay the costs of an opposing party.  At the same time the section provides a protection to parties defending proceedings which have been instituted vexatiously or without reasonable cause.  This protection is in the form of conferring a power in the court to order costs against a party who, in substance, institutes proceedings which in other jurisdictions may constitute an abuse of the process of a court.’

It is apparent from these authorities that an applicant who has the benefit of the protection of s 347 will only rarely be ordered to pay the costs of a proceeding in exceptional circumstances.”

The substantial question is whether his Honour did not correctly appreciate the significance, for costs purposes, of Ms Shackley’s s 170DC ground, the failure to give her an opportunity to defend herself.

In the affidavit filed by the Club for the purposes of the hearing of the review, Mr Bajic recounted Ms Shackley’s dismissal in the following way:

“On about 18 May 1994, I approached Ms Janice Shackley and asked if I could speak to her.  I said ‘Ms Shackley, we have warned you many times and I have tried to help you, but we are not able to keep you with the Club any longer.’  I said ‘You have 14 days notice or seven days if you want to leave earlier.’  Ms Shackley said she wanted to finish straight away.”

His Honour dealt with the matter by saying:

“Contravention of s170DC

On any view of the evidence, the Club and those acting on its behalf did not raise with Ms Shackley the concerns they had about her work in a context where it would have been apparent to her that a failure to rectify them would result in her termination.  While she was aware of some concerns, they were generally non-specific and it was not suggested to her that her employment might be terminated.  Section 170DC requires an employer to give an employee the opportunity to defend himself or herself against allegations concerning performance so that an employee can demonstrate that the allegations are without substance or otherwise explain the performance.  I find that the termination of Ms Shackley was in contravention of s170DC.”

On the hearing of the appeal before us it was rightly not contended for the Club that there was any error in this approach by his Honour.

However, in his judgment rejecting Ms Shackley’s application for the costs of the review, his Honour said:

“As to the contravention of s 170DC that the Judicial Registrar found, I accept that at the time the review proceeding was instituted, there was no real prospect that the Club would succeed in establishing in the review there had been no contravention of s 170DC if the matter was approached in the review in the way it had been by the Judicial Registrar.  As it turned out, it was decided in the same way.  However it must be said, and this is not a matter adverted to in my judgment nor that of the Judicial Registrar, nor was it the subject of submissions in the review, that if the only operative reason why Ms Shackley had been dismissed was the reason identified in s 170DF(1)(f), then s 170DC would have had no application as the termination would not have been for a reason related to the employee’s conduct or performance.  Section 170DC only applies in those circumstances.

Nonetheless, submissions and findings were made about contravention of s 170DC.  But contravention of s 170DC was very much a subsidiary issue.  As earlier discussed, the compensation awarded by the Judicial Registrar either entirely or in substantial part flowed from contravention of s 170DF(1)(f) and not s 170DC.  Moreover, the issue that concerned the Club, and this it made plain, was the finding of a contravention of s 170DF(1)(f).  It was, in my opinion, entitled to have the finding of contravention of that section reviewed.  The judgment of the Judicial Registrar depended on findings of fact that would not inevitably or even highly probably be made again by the Judge hearing the review.  Accordingly the application for review cannot be characterised as having been instituted without reasonable cause.”

Before us, Ms Shackley contended that the review was instituted unreasonably because, even accepting the Club’s case as expressed in Mr Bajic’s affidavit, she was bound to succeed under s 170DC.  As the review was instituted unreasonably, she also contended that she should recover indemnity costs.

Conclusions

We agree with his Honour that where a Judicial Registrar’s conclusions have depended on findings of fact that “would not inevitably or even highly probably be made again” by the Judge hearing the review, an application for review cannot be characterised as having been instituted without reasonable cause” and, in general, as we have said, the legal test applied by his Honour was unexceptionable.

But this was not a case where Ms Shackley’s ultimate success depended to any degree on contested findings of fact.  On the version of the facts being advanced by the Club, she had, as was recognised by his Honour and before us, an unanswerable case based on s 170DC.  The Club committee and members may considerably and understandably have felt aggrieved at the finding that s 170DF(1)(f) had been breached and thereby that the Club committee had acted, putting the matter colloquially, in a racist way.  Nevertheless, it was not reasonable to put Ms Shackley to the cost of defending a review application whose only effect would be to expunge the s 170DF(1)(f) finding while leaving intact the finding in her favour that her employment had nevertheless been unlawfully terminated and the order that Ms Shackley should have compensation, at least without first asking Ms Shackley if she would consent to the setting aside of the Judicial Registrar’s s 170DF(1)(f) finding, while assuring her that she would continue to have the tangible fruits of her victory before the Judicial Registrar.

With great respect to his Honour, the consideration that much time and energy was spent on s 170DF(1)(f) did not rob the invincibility of Ms Shackley’s s 170DC case of its significance in relation to a judgment about how reasonable it was for the Club to have instituted the review proceedings. No submission was put to his Honour or to us that the compensation payable on breach of s 170DC ought be less than that payable on breach of s 170DF(1)(f) or s 170DE(1). This was a case, before the Judicial Registrar and on review, whose subject was essentially whether compensation should be had for unlawful termination of employment; the result arrived at by the Judicial Registrar may have hurt some feelings but the review proceeding was not one intended by the legislature for the vindication of reputation or character. We think the inevitable conclusion is that the Club did institute that proceeding without reasonable cause within the meaning of s 347.

As to the application for indemnity costs, it is enough to say that that is a matter entirely within the discretion of the court. Section 347 and its forebears have a long history. It was not the intention of the section automatically to clear the way for indemnity costs orders whenever the s 347 test had been surmounted and a costs order of some kind would therefore be made. Logic must yield to experience. It was not, for example, suggested that the Club had been served with a Calderbank letter.  While the review proceeding was instituted unreasonably, there seems simply to have been a failure on the part of those directing the Club to perceive the significance for Ms Shackley’s final position of the infringement of s 170DC.  In this field, as far as we are aware, an indemnity costs order has never been made. We are not satisfied that this is the case to break new ground.

In the result the appeal will be upheld.  The parties desired that the matter be finalised by us without further remitter to the learned trial judge.

The orders we accordingly make are:

1. The appeal is upheld.

2. The respondent to the appeal should pay the appellant’s costs of and incidental to the proceeding constituted by the application for review of the orders made by the Judicial Registrar on 27 February 1995.

I certify that this and the preceding six (6) pages are a true copy of the Reasons for Judgment of the Court.

Associate:        
Date:               24 October 1997

Appearances

Counsel for the Applicant:            P L Sheils, QC
Solicitor for the Applicant:            Scott Sheils & Glover
Counsel for the Respondent:        B Collaery
Solicitors for the Respondent:       Bernard Collaery & Associates
Date of hearing:  21 October 1997