Thomas v Trustee for the Blakai Trust (No 2)
[2023] FedCFamC2G 802
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Thomas v Trustee for the Blakai Trust (No 2) [2023] FedCFamC2G 802
File number: ADG 300 of 2020 Judgment of: JUDGE BROWN Date of judgment: 1 September 2023 Catchwords: INDUSTRIAL LAW – Application for costs following final hearing – general protection proceedings pursuant to the provisions of the Fair Work Act 2009 – whether the refusal to accept an offer to settlement amounts to an unreasonable act or omission – whether the applicant’s conduct of the proceedings was unreasonable – matters to be considered Legislation: Fair Work Act 2009 (Cth) s 570
Federal Circuit and Family Court of AustraliaAct (Cth)
ss 5, 190, 191, 192
Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) r 22.02
J D Heydon, Cross on Evidence (Lexis Nexis, 12th ed, 2020)
Cases cited: Australian Workers Union v Leighton Contractors Pty Ltd & Ors(No2) [2013] FCAFC 23
Celand v Skycity Adelaide Pty Ltd [2017] FCAFC 222
Construction, Forestry, Mining and Energy Union v Clarke (2008) 170 FCR 574
Johnson v Monti-Haitsma Enterprises (No 2) [2014] FCA 1020
Kanan v Australian Postal & Telecommunications Union [1992] FCA 539
Melbourne Stadiums Ltd v Sautner (2015) 229 FCR 221
Ryan v Primesafe [2015] FCA 8
Saxena v PPF Asset Management Ltd [2011] FCA 395
Spotless Services Australia Ltd v Deputy President March [2004] FCAFC 155
Division: Division 2 General Federal Law Number of paragraphs: 91 Date of hearing: 9 August 2023 Place: Adelaide Counsel for the Applicant: Mr Blewett Solicitor for the Applicant: Wearing & Blairs Pty Ltd Counsel for the Respondents: Mr Manual Solicitor for the Respondents: RSA Law ORDERS
ADG 300 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: KELLY THOMAS
Applicant
AND: THE TRUSTEE FOR THE BLAKAI TRUST
First Respondent
WARREN RANKINE
Second Respondent
ORDER MADE BY:
JUDGE BROWN
DATE OF ORDER:
1 SEPTEMBER 2023
THE COURT ORDERS THAT:
1.The Application in a Proceeding filed 5 December 2022 is dismissed.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
JUDGE BROWN:
INTRODUCTION
These reasons for judgment relate to an application for costs, by the successful party, in a general protection proceeding, brought pursuant to the provisions of the Fair Work Act 2009 (Cth).[1]
[1] Hereinafter referred to “the FWA” or “the Act”.
Warren Rankine is the owner/operator of a small business, The Trademan, which between 2005 and 10 March 2020, was focussed on installing carports and verandahs for commercial and residential properties. It is he who seeks his costs. Kelly Thomas was his employee. She opposes the costs order on the basis that each party should bear their own costs.
Relevant to the resolution of the cost application is the fact that leading up to the commencement of the hearing the parties were engaged in settlement negotiations, including formal offers to compromise the proceedings.
It is Mr Rankine’s position that Ms Thomas imprudently rejected his offer of settlement, which necessitated him to incur significant costs, as a consequence of the matter proceeding to final hearing and judgment. He also asserts that Ms Thomas’ conduct of the case was unreasonable.
Ms Thomas concedes that an offer was made to her to resolve the case, which she declined. However, she refutes any suggestion that her refusal of the offer can be characterised as unreasonable, given the complexity of the issues, which she wished to ventilate in her case and the novelty of its subject matter, at the time.
In addition, she points to the fact that the offer to settle was made at a late stage, by which time both she and Mr Rankine had incurred significant expenses in preparing the matter for final hearing.
Essentially, she contends that the reasonableness or otherwise of her conduct in the case must be judged by reference to the state of affairs at the commencement of the case and the stage at which the offer was made, not with the benefit of hindsight, after the conclusion of the case, when judgment has been delivered.
BACKGROUND
The date of 10 March 2020 is relevant to the substantive proceedings.[2] Shortly afterward this date, Mr Rankine closed the Trademan office, where Ms Thomas worked. The date coincides with what most will recollect was the commencement of the state of emergency arising from the COVID-19 pandemic in Australia generally and South Australia specifically.
[2] Thomas v Blakai Trust [2022] FedCFamC2G 551, hereinafter referred to as “the principle proceedings”.
Between March 2017 and 10 March 2020, Ms Thomas, the applicant in the principle proceedings, was employed, on an infrequent basis, by Mr Rankine to provide administrative support, at The Trademan’s office, particularly in respect of answering potential customer enquiries of the business.
There was no dispute between the parties that Ms Thomas worked flexible hours and was able to decide when she would attend the office. The evidence available to me indicated that over the period of approximately 3 years, during which she held her position, Ms Thomas’ hours became increasingly sporadic and less in number.
The controversy, which the court was called upon to resolve between the parties, was whether Mr Rankine had taken adverse action, against Ms Thomas, in breach of a workplace right which she held, as a consequence of the provision of the FWA, by failing to apply for the JobKeeper allowance, on her behalf.
As is well known, JobKeeper was a Commonwealth funded scheme initiated in response to the Covid-19 emergency. It was directed towards assisting both employers and employees, including casual ones, through what the government anticipated would be an economic crisis, in Australia at the time, as a consequence of the imposition of widespread lockdowns, in the community, to prevent the spread of the disease.
Ms Thomas commenced her proceedings in early-September of 2020. She was represented by the same firm of solicitors throughout. Mr Rankine responded to the application in early-December of 2020. He too was represented by the same firm of solicitors throughout.
The proceedings, in my impression, were emotionally laden and hard fought, with each of the parties feeling hard done by as a consequence of his/her perceptions of the machinations of the other in and around March/April of 2020 and afterwards.
This state of affairs was not helped by the fact that Ms Thomas and Mr Rankine had previously been friends and had fallen out over their differing views as to what the JobKeeper scheme entailed. In addition, neither could be considered a person of significant means and the institution of proceedings and their defence constituted a considerable impost for each of them.
As I indicated in the judgment published in the principle proceedings, at the time of the parties’ falling out, in my view, there was a widespread lack of understanding, in the community as a whole, as to what JobKeeper entailed. In my view, again as I indicated in the judgment, the scheme was, for reasons understandable at the time, largely related to the unprecedented nature of the emergency involved, hastily implemented. It was also subject to a number of changes, in its early iterations.
More significantly, as indicated in the earlier judgment, the nature of Ms Thomas’ employment relationship with The Trademan was neither conventional nor clear in its terms. In addition, following their falling out, Mr Rankine and Ms Thomas had no capacity to communicate with one another in a calm and focussed manner and so sort out any misunderstanding between them regarding the nature of JobKeeper and its application to their circumstances.
In these circumstances, it fell to the court to resolve the various controversies arising between Ms Thomas, on the one hand and Mr Rankine, on the other. It did so following a hearing occupying approximately three days. Ms Thomas was not wholly unsuccessful in her application. There was no dispute that Mr Rankine had breached two provisions of the Act in respect of paying Ms Thomas on a weekly basis and providing her payslips.
These breaches were a reflection of the nature of Ms Thomas’ employment at the Trademan, which, in the last fifty-five weeks of her employment, comprised at its maximum 7 hours per week (for one week) and 9 weeks of no hours and 13 weeks of one hour.
It was accepted that given the small amounts of money involved, it was easier for both concerned for the payments to be aggregated until a reasonably large sum had been accumulated.[3] In addition, Ms Thomas had not agitated to be provided with payslips. In the circumstances, these seemed to me to have been a breach of the Act but not one of such seriousness as to require the imposition of a civil monetary penalty.[4]
[3] Thomas v Blakai Trust [2022] FedCFamC2G 551 at [136].
[4] Thomas v Blakai Trust [2022] FedCFamC2G 551 at [266].
Accordingly, the gravamen of Ms Thomas’ claim arose in respect of her entitlement to JobKeeper payments, which she calculated to be $1,500.00 per fortnight until late September of 2020; $750.00 per fortnight between September and early January 2021; and $650.00 per fortnight between January and late March of 2021. A total amount of $28,875.00.
The striking factor regarding these calculations being that they were not calculated by reference either to Ms Thomas’ previous rate of hours worked or to what she had been taking home in wages prior to the pandemic emergency.[5] From Ms Thomas’ perspective, these factors were of no account.
[5] Thomas v Blakai Trust [2022] FedCFamC2G 551 at [23].
It being her position that if she satisfied the legislative criteria as an eligible employee of the scheme, Mr Rankine was obliged to nominate her to the authorities, if he applied for JobKeeper, which he did on his own behalf. The fact that he did not do so constituted adverse action in breach of a workplace right.
Matters were complicated by evidentiary disputes as to whether, firstly, Ms Thomas in fact resigned her position, on 10 March 2020, when Mr Rankine elected to close the Trademan office and secondly whether Mr Rankine deceptively proposed to her splitting Ms Thomas’ JobKeeper payment with him, in a conversation between the two which took place on 15 April 2020.
Mr Rankine denied any such proposal was actively proposed by him. Rather he asserts that he personally did not understand the ramifications of the scheme and was merely trying to help Ms Thomas and explore with her the application of JobKeeper on a hypothetical basis. However, as I found, following this conversation, whatever good offices had existed between the two, thereafter, they were irreconcilably poisoned and thereafter they did not communicate.
More significantly, at the trial before me, it was the submission of Mr Sallis, counsel for the respondent, that Ms Thomas was not an eligible employee, for JobKeeper because she was not employed on a regular and systematic basis given the level of hours she had previously worked and their sporadic nature.
Ultimately, I found that the parties ended their employment relationship on 10 March 2020 in the atmosphere of uncertainty, which surrounded the advent of the emergency, in response to which Mr Rankine elected to close the Trademan office. Given their long-standing prior involvement with each other and their friendship, this relationship was capable of restoration.
This was the context in which their conversation of 15 April 2020 took place. Ultimately I found this conversation to be a source of mutual misunderstanding, which led to bitter recrimination, rendering their relationship irretrievable. In such an atmosphere, it was impossible for them to discuss the application of JobKeeper to their situation. As a consequence, Mr Rankine applied for JobKeeper for himself alone.
As no application was specifically made for JobKeeper, on Ms Thomas’ behalf, it cannot be definitively determined if she would have been accepted as an eligible employee. The resolution of this issue turning on whether she could be classified as a permanent casual employee as at 1 March 2020.
In the principle proceedings, I found as follows:
There is no evidence as to what was or was not Mr Rankine personal state of mind vis-à-vis Ms Thomas’ employment status as at 1 March 2020. However, given what occurred on 17 March 2020 and afterwards, it seems clear that he did not consider that The Trademan was under any on-going obligation to maintain her employment at this stage. Certainly because Ms Thomas did not contact him in respect of her desire to be nominated for JobKeeper he was not in a position to turn his mind to the issue or seek professional advice as to what were the possible ramifications of Ms Thomas’ previous level of employment so far as her eligibility for the Scheme was concerned.
In my view, these were obvious live issues in the context of the modest amounts of income which had been derived by her and the lack of system and regulation in her hours of work. In these circumstances it would have been open to Mr Rankine, if the issue had been specifically raised with him, to have classed Ms Thomas, so far as The Trademan was concerned, as being a person who was not casually employed.
In these circumstances, it seems to me to be essentially unfair that Mr Rankine should be regarded as having a retrospective statutory obligation in respect of a matter which had not been specifically canvassed with him and which also relied on the employee concerned certifying his or her personal degree of eligibility and willingness to take part in the Scheme, neither of which Mr Rankine himself was in a position to certify.
As previously indicated, the underpinning of the JobKeeper Scheme, including so far as it pertains to casual employees, is to ensure a minimum level of connection between an employing entity and the employee concerned. This requires an assessment of the degree of connection at both the start of the Scheme and during each relevant JobKeeper fortnight. In my view, such considerations are likely to be central in informing what is a reasonable state of mind for any relevant entity.
Both before and after 1 May 2020, Mr Rankine clearly considered that Ms Thomas wished to have nothing further to do with The Trademan. There is no evidence to indicate that Ms Harding or anyone else did anything to dissuade him otherwise.
In all these circumstances, I am of the view that Ms Thomas has not been able to establish either that she had a relevant workplace right at relevant times or that The Trademan or its operator (Mr Rankine) took any proscribed adverse action against her. As a consequence, I have formed the conclusion that Ms Thomas’ principle cause of action should be dismissed.[6]
[6] Thomas v Blakai Trust [2022] FedCFamC2G 551 at [248] – [253].
THE APPLICATION FOR COSTS
The judgment in the principle proceedings was published on 7 July 2022. On 5 December 2022 Mr Rankine’s solicitor made an application for costs pursuant to the provisions of section 570 of the Act. Leave is required to proceed with the application given that it was made more than 28 days after the relevant judgment.
The application for costs is supported by an affidavit of Mr Rankine’s solicitor, MyChi Dong. Attached to her affidavit is correspondence passing between the parties’ solicitors on 29 September and 1 October 2021, which indicated that Mr Rankine was prepared to compromise the proceedings initially for $11,500.00 inclusive of costs, which was subsequently increased to $15,000.00. Ms Dong calculated her client’s costs, in defending the proceedings, amounted to $35,000.00.
It is asserted by Mr Manuel, counsel for Mr Rankine, that the failure to accept this offer constitutes unreasonable behaviour on the part of Ms Thomas, which justifies an award of costs against her. It is also clear that Mr Rankine would characterise Ms Thomas’ application as having been meritless from its initiation and this, of itself, compounds the unreasonableness of her rejection of the offer to settle, when the outcome of her proceedings resulted in no material award in her favour.
In this latter context, Mr Manuel made the following written submissions:
The JobKeeper Claim was the primary claim of the Applicant in the proceedings and was bound ab initio to fail on any view of the evidence.
The Applicant had not submitted the JobKeeper Nomination Form to the First Respondent in circumstances where as evidenced from her communications with the Bookkeeper, she knew doing so was mandatory for her to be eligible for the JobKeeper Allowance under the Scheme. She had also deliberately failed to otherwise notify the Respondents of either her eligibility or desire to nominate the First Respondent as her primary employer, upon which nomination by an employee the Scheme was dependent.
Those failures occurred in a context of there being a real likelihood that the Applicant would not be eligible for the JobKeeper Allowance given her idiosyncratic and irregular work system and work hours.
In light of the foregoing, it should have been obvious to the Applicant that her primary claim, being the JobKeeper Claim, was bound to fail from the very outset. Reasonably considered, the Claim was sheer opportunism and ought never to have been pursued.[7]
[7] Written Submissions filed 3 April 2023 at [16] - [19].
In addition, he asserts that the findings made in respect of the payslip and regularity of pay violations must be characterised as of having little consequence and so having no significance in shifting the focus of the case away from the general protection aspect of the case.
Ms Thomas resists any application that an award of costs be made against her. She relies on an affidavit of her current solicitor, Donald Blairs. Mr Blairs deposes that shortly after the institution of the relevant proceedings, in late October of 2020, his client offered to compromise the proceedings for $10,000.00 inclusive of costs. This offer was rejected.
In these circumstances, Ms Thomas’ exposure to costs escalated. In these circumstances, she is somewhat critical of Mr Rankine that he deferred exploring settlement options until approximately one year after she sought to compromise the case. Mr Blairs further deposes that on 1 October 2021, she offered to settle the case for $20,000.00 inclusive of costs. Accordingly, prior to the trial the parties were $5,000.00 apart in respect of a possible compromise.
In this context, it is the submission of Mr Blewett that his client’s conduct cannot be regarded as unreasonable. She was open to negotiate throughout the proceedings and acted in good faith in the settlement discussions, which came within agonisingly close to resolving the case. More significantly, it is his submission that his client’s conduct must be assessed against what was happening when she declined the offers of settlement.
Mr Blewett submits that the issues arising in the case were far from simple, both in a legal and factual sense and accordingly, it is a mischaracterisation to assess her case as doomed to fail as Mr Manuel has it.
Rather, at the time of the negotiation in question, Ms Thomas must be regarded as having a tenable case, which might have been successful if the court had taken a different view of the highly controversial discussions which took place between the parties in March and April of 2020, particularly whether she did or did not resign from the Trademan.
In all these circumstances, Mr Blewett emphasizes the need for the court to take a very cautious approach in respect of making any order for costs in a FWA general protection proceedings given the clear legislative import of section 570 of the Act.
LEGISLATIVE PROVISIONS APPLICABLE
Pursuant to section 570(1) of the FWA, the court has a controlled discretion regarding the award of costs relating to proceedings under the Act. Any award of costs can only be in accordance with the provisions of section 570(2) which reads as follows:
(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)…
In the context of his submissions, Mr Manuel referred to the case of Johnson v Monti-Haitsma Enterprises (No 2)[8] in which Edmonds J observed that the cost protection provided to a party pursuant to section 570 did not provide a free kick. Rather it was something which had to be considered within the overarching purpose applicable to the conduct of civil proceeding in both this court and the Federal Court.
[8] See Johnson v Monti-Haitsma Enterprises (No 2) [2014] FCA 1020 at [16].
As a consequence of its enabling legislation, the Federal Circuit & Family Court of Australia is subject to a broadly based system of case management both in terms of actual proceedings in the form of what is characterised as its overarching purpose.
Section 190 of the Federal Circuit and Family Court of AustraliaAct[9] provides a directive to the court to, in the application of its practice and procedure, to facilitate the just resolution of disputes according to law, as quickly, inexpensively and efficiently as possible. This reflects the objects of the FCFCOA Act as contained in section 5 and is referred to as the court’s overarching purpose.
[9] Hereinafter referred to as the FCFCOA Act.
Section 190(2) of the FCFCOA Act provides that the court’s overarching purpose includes the following objectives:
·The just determination of proceedings;
·The efficient use of judicial and administrative resources;
·The efficient and timely disposal of cases; and
·The resolution of disputes at a cost proportionate to the importance and complexity of the issues raised by them.
Pursuant to section 191(1) & (2) of the FCFCOA both the parties and their lawyers are obliged to conduct litigation before the court, including negotiations for settlement in ways that are consistent with the overarching purpose. Such principles inform section 191(4) which reads as follows:
In exercising the discretion to award costs in a civil proceeding, the Federal Circuit and Family Court of Australia (Division 2) or a Judge must take account of any failure to comply with the duty imposed by subsection (1) or (2).
In the context of these principles, pursuant to section 192 of the FCFCOA Act, the court is empowered to give directions to ensure the compliance of parties with the principles contained in the overarching purpose. Pursuant to section 192(3) if a party fails to comply with such a direction, the court may make any order which it thinks appropriate, including pursuant to section 192(4) an order for costs, including indemnity costs.
It is the submission of Mr Manuel that Ms Thomas’ rejection of the offer to compromise made to her is not consistent with the overarching purpose and so should attract the censure of the court in the form of an award of costs.
Offers to settle are, in my view, an adjunct to the effective management of civil litigation. They are direct to encourage a focus, in the minds of litigants, the strengths and weakness of their own case and that of their opponents, so that appropriate compromises are made at the earliest possible stage and both the individuals concerned and the community generally are spared the expense arising from protracted litigation.
Pursuant to rule 22.02(2) of the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 the court has a wide discretion as to how costs are to be calculated. It may set a specific amount; set the method by which costs are to be calculated; or refer the matter for taxation.
DISCUSSION
In the present matter, it is not asserted that Ms Thomas commenced the proceedings vexatiously. It is however asserted, on behalf of Mr Rankine, that Ms Thomas’ cause of action was misconceived from the date of its initiation and this was axiomatically unreasonable.
In addition there is a focus on the second limb contained in section 570(2)(b) namely whether any act or omissions of Ms Thomas, particularly her rejection of an offer to settle, can be characterised as being unreasonable and directly relating to Mr Rankine incurring costs.
In Construction, Forestry, Mining and Energy Union v Clarke[10] the Full Court of the Federal Court held that two criteria must be satisfied to engage section 570(2)(b). They are:
·A party must have engaged in an unreasonable act or omission; and
·The unreasonable act or omission must have caused another party to incur costs in connection with the proceedings.
[10] See Construction, Forestry, Mining and Energy Union v Clarke (2008) 170 FCR 574 at 582.
The Full Court of the Federal Court explained the legislative rationale for section 570 in Australian Workers Union v Leighton Contractors Pty Ltd & Ors (No2) (‘Leighton’)[11] where it was said as follows:
[I]n our view the authorities establish the following principles:
1.The purpose or policy of the sections to free parties from the risk of having to pay their opponent’s costs in matters arising under the Act, while at the same time protecting those parties who are forced to defend proceedings that have been instituted vexatiously or without reasonable course.
2.It follows from the protection offered by section 570(2) that a person will rarely be ordered to pay the costs of a proceedings but it is not necessary to prove that there are exceptional circumstances warranting the making of an order …
3.The relevant question is whether the proceeding had reasonable prospects of success at the time it was instituted, not whether it ultimately failed …
We would emphasise however, that these principles relate to the question of whether the jurisdiction to award costs is enlivened. Even if the court has jurisdiction to make a costs order, it retains the discretion to refrain from exercising it in an appropriate case.
[11] See Australian Workers Union v Leighton Contractors Pty Ltd & Ors(No2) [2013] FCAFC 23 at [7]-[8].
This is the basis of Mr Blewett’s submission that the court needs to exercise very great caution before making any order for costs in FWA proceedings. He relies on the following passage from Ryan v Primesafe:[12]
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.
[12] See Ryan v Primesafe [2015] FCA 8 at [64] per Mortimer J (as her Honour then was).
It would appear to be the case that the relevant authorities favour an approach in which an applicant for costs need not necessarily demonstrate exceptional circumstances to justify an order for costs. However, at the same time, given the import of section 570, the discretion must be approached with exceptional caution. In practical terms there may not be any great distinction in the two approaches.
What is required is a careful and conservative approach to what was the relevant state of affairs prevailing at the relevant time cost were incurred. Not every unreasonable action will warrant an award of costs. A discretion always remains. In Saxena v PPF Asset Management Ltd[13] Bromberg J said as follows:
With great respect to the observations made in CFMEU v Clark, I wholeheartedly agree that this Court ought be very careful indeed to exercise the discretion provided by section 570(2) and should not do so other than in a clear case. The limited discretion conferred on the Court by that subsection ought not become the basis for arguments about costs in relation to any and every transgression in the conduct of a case.
[13]See Saxena v PPF Asset Management Ltd [2011] FCA 395 at [6].
Accordingly Bromberg J referred to it being clear in the sense of self-evident that the discretion to make an award of costs had been engaged in the case in question. In my view, the discretion is to be informed by an objective assessment of the circumstances arising bearing in mind that the award of costs, in a general protection proceeding is, in itself, exceptional in the sense of being rare or a departure from ordinary processes. In Spotlight Services Australia Ltd v Deputy President Marsh[14] The Full Court of the Federal Court (approved in Leighton) said as follows:
The usual course is that, in matters arising under the Act, there will be no order as to costs. To that extent a costs order is an exceptional order. However, there is no warrant for applying “an exceptional circumstances test” to consider whether a proceeding has been commenced without reasonable cause. Whether a proceeding has been commenced without reasonable cause is relevantly established as a matter of objective fact.
[14] See Spotless Services Australia Ltd v Deputy President March [2004] FCAFC 155 at [13].
In this context, in my view, the following passage of Wilcox J from Kanan v Australian Postal & Telecommunications Union[15] seems to me to be useful:
If success depends upon the resolution in the applicant’s favour of one or more arguable points of law, it is inappropriate to stigmatise the proceedings, as being ‘without reasonable cause’. But where, on the applicant’s own version of the facts, it is clear that the proceeding must fail, it may properly be said that the proceedings lack a reasonable cause.
[15] See Kanan v Australian Postal & Telecommunications Union [1992] FCA 539.
Applying such considerations to the current matter, I do not consider that it can be said that Ms Thomas should not have brought her application or it can be characterised as being meritless ab initio. In this context, it is noteworthy that Mr Rankine did not bring an application for summary dismissal at any stage.
In addition, as is evident from the discussions passing between the parties in the lead-up to the trial commencing in late 2021, each acknowledged that there were potential advantages for each in attempting to resolve the case, which was not without its evidentiary and legal challenges from the perspective of both of them.
These issues included the following: did Ms Thomas resign on 10 March 2020; thereafter what was the status of her employment, if any, in particular, was she a casual; as such what obligations, if any, did Mr Rankine owe her pursuant to the JobKeeper scheme; and what was the legal effect of the contested conversation between them in April. Each of these issues had to be unpacked in the context of novel legislation relating to an unprecedented national emergency.
Accordingly, in my view, in these circumstances, it cannot be said that Ms Thomas commenced the proceedings without reasonable cause or that her application was doomed to failure from the time it was instigated. Certainly, this was not her view nor that of her legal advisors. In addition, it does not appear to have been the view taken by Mr Rankine.
This was understandable given the uncertainty surrounding the nature of Ms Thomas’ employment and its possible amenability to the JobKeeper scheme. As a consequence, I am not of the opinion that the usual rule created by section 570 is negated by the fact that ultimately the judgment of the court did not favour Ms Thomas’ application.
In my assessment the case was full of potential controversies, not the least of which was whether Ms Thomas would have been considered a permanent casual employee by the Commonwealth entity which was charged with administering the JobKeeper scheme. As I observed in the principle case, the unprecedented nature of the scheme meant that its application resulted in situations which many in the community regarded as anomalous.
This was essentially the underpinning of Ms Thomas’ case, which had something of an ideological flavour to it. She asserted that it was irrelevant that, prior to the crisis she had worked limited and diminishing hours, as the Commonwealth Government, in its wisdom, had created a scheme to inject liquidity into the community to support the economy during the emergency.
This was an issue which, in my view, surrounded the litigation in this matter with an atmosphere of novelty and difficulty. As I observed in the judgment delivered in the principle proceeding, it was highly regrettable that the parties did not have the capacity to approach this conundrum in a unified manner and avoid turning it into a zero sum game.
Rather following the conversation between them of April 2020, their relationship became mired in mutual recrimination and hostility and once the proceedings had been commenced, the metaphorical egg had become scrambled and could not be re-constituted.
The next issue is whether the failure of Ms Thomas to accept an offer to compromise the matter, in the September/October of 2021 period, constitutes unreasonable act or omission. Necessarily, with the benefit of hindsight it would have axiomatically been in Ms Thomas’ financial interests to have accepted the offer, given the court’s judgment resulted in her receiving none of the compensation sought by her.
However, the issue of reasonableness, in the context of a failure to accept a compromise, is not to be determined by reference to outcome alone. Such an approach would be neither fair nor congruent with human experience. As Kierkegaard said: Life can only be understood backwards; but it must be lived forwards.
In his submissions, Mr Manuel relies on the following passage from Melbourne Stadiums Ltd v Sautner[16] in support of his position that an unreasonable rejection of an offer to compromise a proceedings can found the basis of an award of costs pursuant to section 570(2)(b). In the case the Full Court said as follows:
It is well established that a failure to accept a reasonable offer of compromise may constitute an unreasonable act for the purposes of s 570(2) …
[16] See Melbourne Stadiums Ltd v Sautner (2015) 229 FCR 221 at [166].
However, as was pointed out by Logan J in Celand v Skycity Adelaide Pty Ltd (‘Celand’):[17]
Trite though the observation may be, whether there exists occasion to make such an order must turn on the circumstances of a given case.
[17] See Celand v Skycity Adelaide Pty Ltd [2017] FCAFC 222 at [89].
As was pointed out in Leighton (supra) the reasonableness or unreasonableness of an incident of civil litigation must be assessed at the time it occurred and in the light of the factors operating on the mind of the person concerned, at the time, not as viewed through the helpful lens of hindsight.
This includes the refusal of what is usually referred to as a Calderbank offer. This process is described in Cross on Evidence in the following terms:
This procedure, known as the Calderbank letter or offer, was first used in matrimonial cases, but is now recognised to be of general application. The consequence of marking an offer “without prejudice save as to costs” is that the document and its contents are treated as being without prejudice for the determination of the substantial issues between the parties – they are privileged. But they may be used after these issues are determined, for the purpose of deciding the incidence of costs. Where the payment into court procedure is available, it is prudent that it be used.[18]
[18] J D Heydon, Cross on Evidence (Lexis Nexis, 12th ed, 2020) 1018 [25360].
For self-apparent reasons, such offers are made prior to any extensive canvassing of the evidence involved, in cases which may be characterised by significant level of controversy, as was the case in the current matter. Necessarily, the outcome of the case concerned remains conjectural until judgment is delivered.
As such, at the offer stage, neither party is in a position to paint a composite or cumulative picture of what had occurred between them and so be in a position to demonstrate definitively what the outcome will be. This is the prerogative of the court alone. The result becoming apparent after it has assessed all the available evidence and it has been subject to scrutiny in the trial process. Sometimes the trial process itself is subject to unanticipated twists and turns. Clarity necessarily arises at the latter stage, invariably long after the relevant offer has been made.[19] Again, it is trite but true, that it is easy to be wise after the event.
[19] See Celand v Skycity Adelaide Pty Ltd [2017] FCAFC 222 at [86].
This is the gist of Ms Thomas’ submission that it would be unwarranted for her to be assessed to pay Mr Rankine’s costs on the basis of her rejection of his offer to compromise. Essentially, given the situation at the time the offer was made – prior to the trial commencing and after she herself had incurred significant costs in preparation – her conduct in rejecting the offer cannot be characterises as being unreasonable.
It being the case that the offer would not have reimbursed her costs and it remained the case that she had an arguable case that Mr Rankine had taken adverse action against her by not being more proactive in advancing a claim for JobKeeper, on her behalf, when he had pursued such an application on his own behalf and there had been some form of employment relationship between him and Ms Thomas at the time the pandemic emergency unfolded.
Again, it would seem to me that the reasonableness or otherwise of the rejection of such an offer must depend on the objective circumstances prevailing at the time the offer was made. Relevant to such an assessment must be the state of evidence available at that time, including the degree of controversy surrounding it. At the heart of this assessment, in my view, the court must bear in mind that section 570, as Mortimer J characterised it, is an access to justice provision.
As such, the court must bear in mind, particularly in the industrial context, where there is the potential to be a marked disparity between the financial resources of an employer, on the one hand and an employee on the other, that potential applicants with an arguable case to have been subject to some form of prejudicial conduct emanating from their employers, should not be deterred by a fear of being penalised by a cost order.
Two observations must be made, in my view, in this context, vis-à-vis the current matter. Firstly, it must have been apparent to Ms Thomas that the Trademan, being essentially a one person operation, was not an entity with deep financial pockets. Secondly, the offer of $11,500.00, in the context of her claim to receive JobKeeper payments of $28,875.00, given what she had earned in the twelve months preceding the pandemic emergency, cannot be regarded as being, in my view, at the time it was made, a derisory or walk away offer from her perspective.
Rather, in my view, it must be considered to be one which was well calibrated, given the nature of the litigation in question and the fact that neither party could be considered to be in a position to easily withstand the vicissitudes or exigencies of any form of protracted litigation. Although each is likely to have regarded the case as a matter of the highest principle. In my view, economic factors alone rendered the case a piece of high stakes litigation, which was demonstrated by the fact that the final gap between their respective offers was tantalisingly small.
In these circumstances, there may arise a tension between the access to justice aspects of section 570 and the principles created by the overarching purpose provisions, which are directed towards the efficient conduct of civil litigation. The latter resulting in the rejection of an offer to compromise becoming more amenable to censure because of its potential to result in the protraction of litigation.
In my view, in a case such as the present one, involving two passionate but not well financially resourced litigants that is not an easy balance to find. Both Ms Thomas and Mr Rankine approached the case as a matter of principle. In addition, during the case, each subjected the character of the other to personal censure.
In Celand Bromberg J put it in the following terms:
In the context of justifying an order for indemnity costs in favour of a person who has made a Calderbank offer, the rejection of the offer need not be “plainly unreasonable” and an “especially high standard of unreasonableness” is not to be adopted because that would operate to diminish the effectiveness of the Calderbank offer as an incentive to settlement … Accordingly, in that context the word “unreasonable” may be used synonymously with “imprudent” … It denotes an act which is not guided by or based upon good sense or sound judgment. In the context of the use of the word “unreasonable” in s 570(2)(b), taking into account the underlying purpose of that provision which includes the promotion of access to justice … a higher standard of unreasonableness is to be adopted. It has been said that the fact that a party has conducted litigation inefficiently or adopted a misguided approach will be relevant to, but not conclusive of, the party having acted unreasonably in a sense relevant to s 570(2)(b) … The difference in the standards of unreasonableness which are applicable in the two contexts in question needs to be appreciated before the rejection of a reasonable offer of settlement is characterised as an “unreasonable act or omission”. [20] (citations removed)
[20] See Celand v Skycity Adelaide Pty Ltd [2017] FCAFC 222 at [165].
In the context of this matter, in my view, there was a mutual level of imprudence, from the perspective of both Ms Thomas and Mr Rankine, in respect of allowing the case to continue to judgment. As I have outlined above, at the close of the negotiations between them they were only a few thousand dollars apart. In these circumstances, in my view, it was imprudent of each of them to present the court with essentially a zero sum game. There were obvious perils for both in such an exercise of brinkmanship.
In my view, Ms Thomas’ rejection of the offer cannot be characterised as an act or omission of such unreasonableness to attract the application of section 570(2). I reach this conclusion for the following reasons:
·There was a level of novelty or uncertainty concerning the construction and interpretation of the JobKeeper scheme, which was unprecedented and, as such, likely to create all sorts of anomalies;
·The operative offer was made at a late stage, after each party had become committed, to some extent, to the court having to resolve the factual controversies between them;
·It cannot be said that Ms Thomas’ case was a case that should not have been brought ab initio;
·True it was that she had earned modest amounts in the year leading up to the pandemic emergency but it was arguable that this was not relevant to whether she was eligible to be nominated for JobKeeper;
·Factual controversies, regarding whether Ms Thomas had resigned and as to why she and Mr Rankine did not discuss an application, on her behalf, for JobKeeper remained outstanding at the time of the relevant offer and were only resolved by the court’s judgment; and
·There was a mutual level of imprudence, in allowing the case to proceed.
Most significantly, it is the usual rule that no orders for costs are to be made in FWA proceedings. The court must bear in mind that those who have claims for redress under the Act, relating to the employment context should not be deterred from being such claim because of a fear of being penalised by an award of costs.
Clearly, Ms Thomas felt a sense of grievance at how she perceived she had been treated by Mr Rankine. Ultimately I found this was as a result of a misconception on her part. Similarly Mr Rankine felt ill-used by Ms Thomas and what he felt were the unwarranted aspersions she had made against his character. In my view, these powerful emotions motivated the way in which each of the parties approached the litigation, with mutually disastrous consequences. In these circumstances, I decline to make an order for costs.
For all these reasons the orders of the court will be as set out at the commencement of these reasons for judgment.
I certify that the preceding ninety-one (91) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Brown. Associate:
Dated: 1 September 2023
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