Somerville v AFS Security 24/7 Pty Ltd and Ors (No.2)
[2018] FCCA 2234
•17 August 2018
FEDERAL CIRCUIT COURT OF AUSTRALIA
| SOMERVILLE v AFS SECURITY 24/7 PTY LTD & ORS (No.2) | [2018] FCCA 2234 |
| Catchwords: INDUSTRIAL LAW – Costs – application for costs pursuant to s.570 of the Fair Work Act 2009 (Cth) – whether proceedings were instituted vexatiously – whether proceedings were instituted without reasonable cause – cost order made. |
| Legislation: Fair Work Act 2009 (Cth), ss.45, 340, 368, 389, 569, 569A, 570 Federal Circuit Court of Australia Act 1999 (Cth), s.79 |
| Cases cited: Somerville v AFS Security Pty Ltd & Ors [2018] FCCA 964 Ruddock and Others v Vadarlis and Others (No.2) [2001] FCA 1865; (2001) 115 FCR 229 |
| Applicant: | MICHAEL STEWART NEIL SOMERVILLE |
| First Respondent: | AFS SECURITY 24/7 PTY LTD T/AS ARMIDALE FIRE & SAFETY, AFS |
| Second Respondent: | BRIAN EVERETT |
| Third Respondent: | BROOKE EVERETT |
| File Number: | SYG 3141 of 2016 |
| Judgment of: | Judge Nicholls |
| Hearing date: | Matter determined on the papers |
| Date of Last Submission: | 19 June 2018 |
| Delivered at: | Sydney |
| Delivered on: | 17 August 2018 |
REPRESENTATION
| Applicant: | In person |
| Solicitors for the Respondents: | Mr M Dennis of Michael Dennis Solicitor |
ORDERS
The applicant (in the substantive proceedings) pay the costs of the respondents (in the substantive proceedings) set in the amount of $12,491.50.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 3141 of 2016
| MICHAEL STEWART NEIL SOMERVILLE |
Applicant
And
| AFS SECURITY 24/7 PTY LTD T/AS ARMIDALE FIRE & SAFETY, AFS |
First Respondent
| BRIAN EVERETT |
Second Respondent
| BROOKE EVERETT |
Third Respondent
REASONS FOR JUDGMENT
Mr Somerville made an application pursuant to the Fair Work Act 2009 (Cth) (“the Act”) alleging that the respondents had contravened s.45 and s.340 of the Act.
On 30 April 2018 I handed down judgment and made an order dismissing Mr Somerville’s application (see Somerville v AFS Security Pty Ltd & Ors [2018] FCCA 964 (“Somerville (No 1)”). For the background to this matter see Somerville (No 1) at [2] – [5].
The respondents have now applied (by way of an Application in a Case (“AIC”) made on 14 May 2018) for their costs. They seek these in the amount of $15,068.90. [In this judgment I have continued to use the term “respondents” to refer to the respondents in the substantive application even though they are the applicants in the AIC.] Relevantly, in support of the AIC, the respondents have filed the following:
a)The affidavit of Michael Dennis, solicitor, made on 14 May 2018.
b)The written submissions of 14 May 2018.
c)The written submissions of 19 June 2018.
Mr Somerville has filed the following:
a)The affidavit of Michael Somerville made on 28 May 2018.
b)The written submissions of 28 May 2018.
c)The written submissions of 5 June 2018.
The Court’s discretion to award costs derives from s.79 of the Federal Circuit Court of Australia Act 1999 (“Cth”) (“the FCCA Act”). Generally, the power to award costs is unfettered, subject to the need for the discretion to award costs to be exercised judicially (Ruddock and Others v Vadarlis and Others (No.2) [2001] FCA 1865; (2001) 115 FCR 229 at [9] per Black CJ and French J (as he then was) and Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 at [66] per McHugh J and see also Noble v Baldwin & Anor (No.2) [2011] FMCA 700 at [9] per Barnes FM (as she then was), Lee v Proctor and Gamble Australia Pty Ltd & Anor (No.2) [2012] FMCA 1075 and SZRTP v Minister for Immigration & Anor (No.2) [2013] FCCA 711; (2013) 277 FLR 469).
However, in the current case, the exercise of the discretion is confined, or qualified, by s.570 of the Act. That section is in the following terms:
“570 Costs only if proceedings instituted vexatiously etc.
(1) A party to proceedings (including an appeal) in a court (including a court of a State or Territory) 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) or section 569 or 569A.
Note: The Commonwealth might be ordered to pay costs under section 569. A State or Territory might be ordered to pay costs under section 569A.
(2) The party may be ordered to pay the costs only if:
(a) the court is satisfied that the party instituted the proceedings vexatiously or without reasonable cause; or
(b) the court is satisfied that the party’s unreasonable act or omission caused the other party to incur the costs; or
(c) the court is satisfied of both of the following:
(i) the party unreasonably refused to participate in a matter before the FWC;
(ii) the matter arose from the same facts as the proceedings.”
While the Court’s discretion remains, any costs order can only be made if the Court is satisfied as to any of the matters set out at s.570(2) of the Act (or in accordance with s.569 or s.569A of the Act, however these sections are not relevant to the current case). In this context, I also note that the discretion to award costs must be exercised cautiously (see also Saxena v PPF Asset Management Ltd [2011] FCA 395 at [6] per Bromberg J).
Also of assistance in this case is Ashby v Slipper (No.2) [2014] FCAFC 67; (2014) 314 ALR 84 at [35] as follows:
“Section 570 of the FWA ‘reflects a policy of protecting a party instituting proceedings from liability for costs’ and ‘costs will rarely be awarded under the section and exceptional circumstances are required to justify the making of such an order’: Council of Kangan Batman Institute of Technology and Further Education v Australian Industrial Relations Commission (2006) 156 FCR 275 at [60]. Whilst Kangan was decided before the introduction of the FWA and concerns the former s 347(1) of the Workplace Relations Act 1996 (Cth) (WRA), s 347(1) of the WRA was similar in terms to s 570(2)(a) of the FWA. Moreover ‘[a] party cannot be said to have commenced a proceeding ‘without reasonable cause’...simply because his argument proves unsuccessful’, and costs will not be awarded against a party whose unsuccessful argument was ‘not unworthy of consideration’: R v Moore; Ex parte Federated Miscellaneous Workers’ Union of Australia [1978] HCA 51; (1978) 140 CLR 470 at 473. Only a case that has ‘no real prospects of success, or was doomed to failure’ will meet the tests set out in s 570(2)(a) of the FWA: Kangan at [60]. Each of these matters is a question of fact. They were neither entertained nor determined by the Court.”
The respondents relied on s.570(2)(a) of the Act, and argue that Mr Somerville instituted the proceedings vexatiously or without reasonable cause.
The respondents’ position can, in essence, be summarised as follows. Mr Somerville commenced the proceedings by making a large number of allegations. However, those allegations either had no relevance to the proceedings, as commenced, or he did not adduce evidence to support these allegations.
Further, Mr Somerville made further unsubstantiated allegations in his affidavit evidence, which were not corroborated by any further evidence.
The respondents argued that the allegations of “deception” by the respondents, and allegations of underpayment of wages, and the claimed loss of the respondents’ State Training Accreditation, are all serious allegations.
The respondents submitted that Mr Somerville commenced proceedings in which, to a significant extent, he made “baseless” allegations without supporting evidence. The argument is that in those circumstances, Mr Somerville instituted the proceedings “vexatiously”.
Further, the respondents submitted that Mr Somerville alleged that his employment was terminated after he made a complaint that he had been underpaid. However, his failure to produce evidence to support this allegation made the commencement of the proceedings “unreasonable”.
Mr Somerville’s response, in essence, was that at the time of the institution of the proceedings, he had a “genuinely held belief” that his employment was terminated in “retaliation” for his having made a complaint about underpayment ([5] of Mr Somerville’s written submissions of 28 May 2018).
Mr Somerville argued that in that light, at the time of the institution of the proceedings, the following matters informed his “belief”.
One, his matter had been the subject of a “conference” before the Fair Work Commission. He had raised his concerns about termination and underpayment. The issue of a certificate pursuant to s.368 of the Act “lent credence” to his belief ([7] of Mr Somerville’s written submissions of 28 May 2018).
Two, the respondents’ “restructure” of the relevant business (see Somerville (No 1) at [50] – [52] and [55]). Mr Somerville argued that in terminating his employment, the respondents did not follow the “restructuring process” described in either the Modern Award under which he was employed or in s.389(1) of the Act. His assertion was that the respondents did not provide any evidence of any consultation ([8] of Mr Somerville’s written submissions of 28 May 2018).
Three, the Court did make a finding that he had made a complaint. Given that his employment was terminated “shortly thereafter”, the Court’s findings at [41] – [43] of Somerville (No 1) were said to “establish” that there was a reasonable cause for the institution of the proceedings, and therefore the institution of the proceedings was also not vexatious ([10] of Mr Somerville’s written submissions of 28 May 2018).
The relevant question in relation to the meaning of “without reasonable cause” (as it appears in s.570(2)(a) of the Act), is whether Mr Somerville’s application had reasonable prospects of success at the time the proceedings were instituted. It is not whether the application failed (R v Moore; Ex parte Federated Miscellaneous Workers’ Union of Australia [1978] HCA 51; (1978) 140 CLR 470).
The test to be applied is that the application must be so “obviously untenable that it cannot possibly succeed”, or is “manifestly groundless”, or “discloses a case which the court is satisfied cannot succeed” (see Nimmo, Re Application for an Inquiry relating to an Election for an Office in the Australian Education Union (NT Branch) (No 2) [2011] FCA 728 at [30]).
The matter of whether proceedings were instituted vexatiously (under s.570(2)(a) of the Act) is “separate” to whether they were instituted “without reasonable cause” (Nilsen v Loyal Orange Trust [1997] IRCA 267; (1997) 76 IR 180 (“Loyal Orange Trust”) endorsed by the Full Bench of the Fair Work Commission in Holland v Nude Pty Ltd t/as Nude Delicafe [2012] FWAFB 6508 (“Holland v Nude”), and see Attorney-General v Wentworth (1988) 14 NSWLR 481 (“AG v Wentworth”) at 491, and Kowalski v Mitsubishi Motors Australia Ltd [2011] FCAFC 159; (2011) 198 FCR 153).
Further, it is the case that a proceeding would be “instituted vexatiously where the predominant purpose in instituting the proceeding is to harass or embarrass the other party or to gain a collateral advantage” (AG v Wentworth at 491, Loyal Orange Trust at 181 and Holland v Nude at [7]).
I also note what was said by the Full Bench of the Fair Work Commission in Church v Eastern Health [2014] FWCFB 810 (at [41]),
“…the question of whether an application was made vexatiously turns on the motive of the applicant in making the application. Motive can be inferred from, among other things, the surrounding circumstances, the applicants conduct and the merits of the application itself.”
[Footnotes omitted.]
In relation to vexatiousness in the current case, the focus, first, is on the motive of Mr Somerville in instituting the proceedings. It is to be remembered that the term “vexatious” is to be narrowly construed (Loyal Orange Trust).
The respondents accepted that the onus rested with them to satisfy the Court that the proceedings were instituted vexatiously. They also accepted that this cannot be answered by the success, or otherwise, of the proceedings.
Some care must be taken in the current case as to drawing a reasonable inference from the material before the Court on the one hand, and speculation on the other.
In light of the above, I cannot see that the respondents have shown that Mr Somerville’s predominant purpose in instituting the proceedings was to “harass or embarrass” the respondents. Nor, for that matter, that it was to “gain a collateral advantage”, in the sense described in Loyal Orange Trust at 181.
On what is before the Court, Mr Somerville instituted the proceedings because he believed that it was the appropriate course to ask the Court to adjudicate on the “issues” that he saw arising from the events (his complaint and the termination).
That issue was whether his employment had been terminated because he had made a complaint about underpayment.
On what is before the Court, Mr Somerville stated that he genuinely believed that instituting the proceedings would lead to the proper disposition of his grievance against the respondents.
While the matters of a lack of evidence and the like are relevant to the concept of instituting proceedings without reasonable cause, the “narrower” focus of “vexatious” means that the matters raised by the respondents in that context, do not satisfy the Court that the proceedings were instituted vexatiously.
As I have sought to emphasise, particularly for the benefit of Mr Somerville who is not legally represented in these proceedings, the concepts of “without reasonable cause” and “vexatious” are different. As is made clear by the disjunctive “or”, as it appears between those two terms at s.570(2)(a) of the Act, the terms are not synonymous.
For the reasons that follow, I am satisfied however, that the proceedings were instituted “without reasonable cause”.
In his written submissions of 5 June 2018 Mr Somerville refers to Kanan v Australian Postal and Telecommunications Union [1992] FCA 366; (1992) 43 IR 257 at [29] per Wilcox J:
“It seems to me that one way of testing whether a proceeding is instituted ‘without reasonable care’ is to ask whether, upon the facts apparent to the applicant at the time of instituting the proceeding, there was no substantial prospect of success…”
Plainly, the temporal focus is on the time of instituting the proceedings. Mr Somerville’s reference in his submissions to findings made by the Court (see [19] above) can only assist Mr Somerville to the extent that they may assist in informing the situation as at the time of the institution of proceedings.
As set out above, the respondents argued that, with reference to the relevant time (the institution of the proceedings), Mr Somerville made a large number of factual allegations which were “baseless”.
I agree with the respondents that, at the time of instituting the proceedings, Mr Somerville, if acting reasonably, would have known given that he was instituting Court proceedings, the need for evidence on which to base those allegations.
A distinction must be drawn between an applicant’s “genuine belief”, and supposition or speculation. A belief, even if genuine, in the righteousness of the cause, is not sufficient, of itself, to argue that the institution of the proceedings was reasonable.
Mr Somerville is not a lawyer. He was not legally represented before the Court. However, it is reasonable to take the view that even a layperson, particularly one who presented as articulately as did Mr Somerville before the Court, would understand, at least in a general sense, the difference between speculation, and evidence on which to base that speculation, such that it becomes reasonable to institute the proceedings.
At its highest, Mr Somerville’s belief, as it arose from what was pleaded, and his affidavit filed at the same time, was that his employment had been terminated because he made a complaint. There was nothing in his pleading (and affidavit) as at the time of instituting the proceedings, to reasonably indicate that that was the case.
What Mr Somerville’s pleading had failed to indicate, and what with respect, Mr Somerville still does not appear to grasp, is that a temporal coincidence, without more, is simply a coincidence. Further, there was no indication of any causal link between the making of the complaint and the termination of employment.
It may well be that Mr Somerville felt justified, as he claims, in having instituted the proceedings. But “proceedings” is not an abstract. The term relates to the institution of proceedings in a Court. It is to those “proceedings” to which s.570 of the Act directs attention.
Even a layperson can be reasonably expected to know that proceedings in Courts rely on evidence for their proper prosecution. Mr Somerville’s allegations, at the time of instituting the proceedings, were presented as allegations which lacked an appropriate evidentiary context, as to the causal link between the making of the complaint and the termination of his employment. Indeed his application (and accompanying affidavit) lacked even an indication as to any such evidentiary context.
The subsequent findings of the Court are plainly not dispositive of the question raised by the respondents’ application now. However, the Court’s findings in dismissing the application confirmed the original state of the proceedings instituted by Mr Somerville. If he was unable to provide relevant evidence during the course of his case before the Court, this only serves to emphasise the lack of an evidentiary basis, or indication of any such basis for the proceedings, at the time of the institution of the proceedings.
Mr Somerville contended, that he received notification of the termination of his employment without any discussion or explanation. In these circumstances, he argued, it was reasonable to believe that the termination was a result of his complaint.
However, at the time of instituting the proceedings, Mr Somerville did not dispute that the respondents had made the payments that were the subject of the underpayment complaint, and he had been given a letter of termination setting out the respondents’ reasons.
There was nothing in his pleadings that sought to reasonably address those matters, let alone any indication of evidence to “counter” them.
At the proceedings before the Fair Work Commission Mr Somerville may well have felt encouraged to proceed to this Court. But such encouragement does not outweigh, or negate, the need to act reasonably in instituting proceedings in the manner set out above.
What made Mr Somerville’s institution of the proceedings as being “without reasonable cause” was the lack of “grounds” in the application. That is, mere allegations and supposition unsupported by evidence, render the application as being baseless and groundless.
Further, Mr Somerville relied on Christina Hatchett v Bowater Tutt Industries Pty Ltd (No 3) [1991] FCA 188; (1991) 28 FCR 324 (“Hatchett”) per Von Doussa J at [7] (see [7] of Mr Somerville’s written submissions of 5 June 2018):
“The respondent conceded in argument, correctly in my view, that ordinarily an applicant who genuinely holds a belief as to a state of fact, which, if correct, would support the claim which is made in the proceeding, is entitled to ‘a day in court’ to test that belief without becoming liable to pay costs…”
The entire of Hatchett at [7] is as follows:
“The respondent conceded in argument, correctly in my view, that ordinarily an applicant who genuinely holds a belief as to a state of fact, which, if correct, would support the claim which is made in the proceeding, is entitled to ‘a day in court’ to test that belief without becoming liable to pay costs under s.347. However the respondent contends that in the unusual circumstances of this case the institution of the proceeding was vexatious or without reasonable cause. This is said to follow from the fact that immediately following the applicant's dismissal, the merits of her beliefs, and the opposing evidence of the respondent's main witness, were fully aired in a hearing in the Australian Industrial Relations Commission before a Commissioner who published reasons for concluding that the termination of the applicant's employment had not been harsh, unjust or unreasonable. In substance the respondent's argument is that the applicant should have accepted this decision, even though this Court later held that the decision was made without jurisdiction: Hatchett v. Bowater Tutt Industries (No. 1): Judgment delivered 26 October 1990. I have reached the conclusion that I should reject this argument, and hold that the proceeding was not instituted vexatiously or without reasonable cause. I have already noted the genuineness of the beliefs of the applicant. In Heidt v. Chrysler Australia Ltd Northrop J. at p 272 described s.347 as affording to a party defending proceedings to which the section relates as ‘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’. I do not think it can fairly be said that for the applicant to pursue her claim in a court of competent jurisdiction amounted to an abuse of the process of the court.”
I do not respectfully understand His Honour to say that mere “belief”, even a genuine belief, is sufficient to say that the proceedings were not instituted without reasonable cause. As His Honour plainly stated, that “belief”, “if correct would support the claim which is made in the proceedings” [Emphasis added]. That reference was to a belief “as to a state of fact”. Not to mere conjecture or supposition, as is the current case.
What was implicit, if not explicit, in Mr Somerville’s submissions was the proposition that proceedings under the Act are “no cost proceedings”.
As is made clear by s.570(1) of the Act, the successful disposition of proceedings under the Act does not attract consideration of costs in the “usual” way (the “usual” way being that costs follow the event). That is, as set out above, there is a costs “limitation”.
The decision now to award costs to the respondents in relation to the institution of the proceedings was arrived at with caution. I note what was relevantly said by Justice Mortimore in Ryan v Primesafe [2015] FCA 8; (2015) 323 ALR 107 at [64]:
“I accept the general import of the authorities relied on by the applicant and Mr McDonald in their written submissions about the significance of the threshold set by s 570(2) of the Fair Work Act. Although some of the authorities relied on dealt with the predecessor provisions to s 570, there is no difference in substance in the way the threshold is expressed. The discretion conferred by the confined terms of s 570(2) should be exercised cautiously, and the case for its exercise should be clear: see Saxena v PPF Asset Management Ltd [2011] FCA 395 at [6] per Bromberg J. The reason for caution is the potential for discouraging parties’ pursuit in a complete and robust way of the claims for contravention which they seek to make under the Fair Work Act, or the defence of such claims. The policy behind s 570 is to ensure that the spectre of costs being awarded if a claim is unsuccessful does not loom so large in the mind of potential applicants (in particular, in my opinion) that those with genuine grievances and an arguable evidentiary and legal basis for them are put off commencing or continuing proceedings. It is an access to justice provision. Insofar as it operates to the benefit of respondents, it is designed to ensure respondents feel free to pursue arguable legal and factual responses to the claims made against them. There is an almost identical provision in s 611 of the Fair Work Act, giving the Fair Work Commission a similar costs power, conditioned by similarly-worded considerations. The predecessor provisions, and the conscious broadening of the statutory terms used in s 570, are traced by the Full Court in Australasian Meat Industry Employees’ Union v Fair Work Australia (No 2) (2012) 203 FCR 430; [2012] FCAFC 103 at [3]- [4] per Jessup and Tracey JJ.”
However, in the current case, while Mr Somerville may have felt he had a genuine grievance, his application at the time of its institution lacked an arguable evidentiary basis such as to make the institution of the proceedings, even when viewed cautiously, as being instituted with reasonable cause.
To be clear, the reason for the Court’s finding is that applicants who have a case which relates to, at least, an arguable evidentiary basis, should not be discouraged from pursuing their claims for contraventions under the Act. But the purpose of s.570(2) of the Act, in my view, is that whatever else, Parliament sought to achieve with s.570 of the Act, it still makes clear that instituting proceedings without reasonable cause renders an applicant liable to pay costs.
Conclusion
It is appropriate that an order be made that Mr Somerville pay the respondents’ costs. Although not expressed as such by the respondents, I understood their application for costs to be put on a party/party basis.
The respondents have sought costs set in the amount of $15,068.90 (see Mr Dennis’ affidavit of 14 May 2018 at annexure “A”). Of this amount, $12,491.50 derives from professional fees calculated in accordance with Part 1 of Schedule 1 of the Federal Circuit Court Rules 2001 (Cth) (“the FCC Rules”). The remaining $2577.40 derives from other “disbursements” including the loss of wages, travel expenses, meal expenses and accommodation costs of Mr Dennis (the respondents’ solicitor), Mr Everett and Mrs Everett (the second and third respondents).
However, the respondents have not made any attempt to explain how these “disbursements” constitute party/party costs. They have therefore failed to satisfy the Court that the “disbursements” should be included in the costs order.
The Court’s power to make costs orders derives from r.21.02 of the FCC Rules. It is appropriate that Mr Somerville pay the respondents’ costs set in the amount of $12,491.50. I will make the appropriate order.
I certify that the preceding sixty-two (62) paragraphs are a true copy of the reasons for judgment of Judge Nicholls
Date: 17 August 2018
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