Tran v Kodari Securities Pty Ltd (No 2)

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FEDERAL COURT OF AUSTRALIA

Tran v Kodari Securities Pty Ltd (No 2) [2020] FCA 1819  

File number: NSD 310 of 2017
Judgment of: BROMWICH J
Date of judgment: 18 December 2020
Catchwords: COSTS – application by applicant for costs of respondents’ abandoned cross-claim upon basis that (a) it was instituted unreasonably within the meaning of s 570(2)(a) of Fair Work Act 2009 (Cth); and (b) filing affidavit evidence to support it was an unreasonable act causing the applicant to incur costs within the meaning of s 570(2)(b) of Fair Work Act 2009 (Cth) – application by applicant for costs of the hearing upon basis that refusing to accept applicant’s offer of compromise to settle the proceedings was an unreasonable act causing the applicant to incur costs within the meaning of s 570(2)(b) of Fair Work Act 2009 (Cth) – held: cross-claim not demonstrated to be instituted without reasonable cause – filing of affidavit evidence in support of cross-claim not demonstrated to be an unreasonable act causing the applicant to incur costs – refusal to accept applicant’s offer of compromise to settle not demonstrated to be an unreasonable act causing the applicant to incur costs – application dismissed
Legislation:

Corporations Act 2001 (Cth) ss 182, 183

Fair Work Act 2009 (Cth) ss 570(1), 570(2)(a), 570(2)(b)

Federal Court of Australia Act 1976 (Cth) ss 37M, 37N

Workplace Relations Act 1996 (Cth) s 824
Cases cited:

Actrol Parts Pty Ltd v Coppi (No 3) [2015] VSC 758; 49 VR 573

Australian Workers’ Union v Leighton Contractors Pty Ltd (No 2) [2013] FCAFC 23

Bywater v Appco Group Australia Pty Ltd [2019] FCA 799

Construction, Forestry, Mining and Energy Union v Clarke [2008] FCAFC 143; 170 FCR 574

Council of Kangan Batman Institute of Technology and Further Education v Australian Industrial Relations Commission [2006] FCAFC 199; 156 FCR 275

Health Services Union v Jackson (No 5) [2015] FCA 1467

Kodari Securities Pty Ltd v Tran [2020] FCAFC 164

McDonald v Parnell Laboratories (Aust) (No 2) [2007] FCA 2086; 164 FCR 591

Morris v McConaghy Australia Pty Ltd [2018] FCA 2099

R v Moore; Ex parte Federated Miscellaneous Workers’ Union of Australia (1978) 140 CLR 470

Reeve v Ramsay Health Care Australia Pty Ltd (No 2) [2012] FCA 1322

Ryan v Primesafe [2015] FCA 8; 323 ALR 107

Spotless Services Australia Ltd v The Honourable Senior Deputy President Jeanette Marsh [2004] FCAFC 155

Tran v Kodari Securities Pty Ltd [2019] FCA 968
Division: Fair Work Division
Registry: New South Wales
National Practice Area: Employment and Industrial Relations
Number of paragraphs: 32
Date of last submission: 24 September 2019
Date of hearing: Determined on the papers
Counsel for the Applicant: D Mahendra
Solicitor for the Applicant: Danny King Legal
Counsel for the Respondents: J Alderson
Solicitor for the Respondents: Mark O’Brien Legal

ORDERS

NSD 310 of 2017
BETWEEN:

STEVEN TRAN

Applicant
AND:

KODARI SECURITIES PTY LTD ACN 147 963 755

First Respondent

YASHAR (MICHAEL) KODARI

Second Respondent

GEORGE KODARI

Third Respondent

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Details
Case
[2020] FCA 1819
Decision Date

CaseChat Overview and Summary

Tran v Kodari Securities Pty Ltd (No 2) involved a proceeding initiated by Mr Tran, who sought his costs thrown away arising from the abandoned cross-claim filed by Kodari Securities Pty Ltd. The primary issues in the case concerned whether the cross-claim was instituted unreasonably, whether the filing of affidavit evidence in support of the cross-claim constituted an unreasonable act, and whether the refusal to accept Mr Tran's offer of compromise was an unreasonable act causing him to incur costs. The matter was brought before the court after the Full Court had dismissed the appeal and cross-appeal, ordering no costs to be awarded.

The legal issues before the court required it to determine if the cross-claim was brought without reasonable cause, if filing affidavit evidence in support of the claim was an unreasonable act, and if the refusal to accept the offer of compromise was an unreasonable act. The court was tasked with interpreting sections 570(2)(a) and (b) of the Fair Work Act 2009 (Cth) to assess whether any of the actions taken by Kodari Securities warranted an exception to the general rule prohibiting the awarding of costs. Mr Tran argued that the cross-claim was largely doomed to fail, and that filing evidence in support of it was an unreasonable act. He also argued that the refusal to accept his offer of compromise was unreasonable.

In considering the application, the court found that Mr Tran had not demonstrated that the cross-claim was instituted without reasonable cause, as required under s 570(2)(a) of the Fair Work Act. The court also held that filing evidence in support of the cross-claim was not an unreasonable act under s 570(2)(b), as the evidence was filed in accordance with a court-ordered timetable. Lastly, the court found that the refusal to accept the offer of compromise did not constitute an unreasonable act under s 570(2)(b), as the terms of the offer were not sufficiently compelling to warrant a deviation from the presumptive operation of s 570 of the Fair Work Act.

1. The application for costs by the applicant be dismissed.
2. There be no order as to costs.

Orders

Orders of the court

1. The application for costs by the applicant be dismissed.

2. There be no order as to costs.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

On 1 October 2020, the Full Court dismissed the appeal and cross-appeal from the primary judgment: Kodari Securities Pty Ltd v Tran [2020] FCAFC 164 (appeal judgment). The Full Court ordered that there be no order as to costs. The pleading and evidence phase of this proceeding is as follows:(1)The proceeding was commenced by Mr Tran by an originating application filed in March 2017. The claims made and the outcome are detailed in the primary judgment and also in the appeal judgment, but do not require any detailing in these reasons.(2)A defence was filed by all three respondents in May 2017.(3)The first respondent, Kodari Securities Pty Ltd, filed a detailed cross-claim later in May 2017, alleging breach of implied contractual duties, breach of fiduciary duties and breach of statutory duties under ss 182 and 183 of the Corporations Act 2001 (Cth).(4)Mr Tran filed a defence to the cross-claim in June 2017. (5)Mr Tran’s evidence for the proceedings overall was filed in March and May 2018. (6)The respondents filed their evidence in June 2018. (7)Mr Tran filed evidence in reply in August 2018. On 5 March 2019, just under two weeks before the hearing, Mr Tran offered to settle the proceedings for $75,000. He ultimately secured a total of $151,000, being $85,000 in compensation jointly from Kodari Securities and Mr Yashar (Michael) Kodari (Mr Michael Kodari, the second respondent), $55,000 in penalties payable to him by Kodari Securities, and $11,000 in penalties payable to him by Mr Michael Kodari and his father, Mr George Kodari (the third respondent). In opening submissions for the respondents filed on 12 March 2019, ahead of the trial starting on 18 March 2019, Kodari Securities abandoned the cross-claim, which was subsequently dismissed with costs reserved. Mr Tran seeks his costs thrown away arising from the abandoned cross-claim. That aspect of this costs application is advanced on two grounds:(1)the vast majority of the claims advanced in the cross-claim brought by Kodari Securities were instituted without reasonable cause so as to activate that aspect of the exception to the ordinary prohibition on costs being awarded contained in s 570(2)(a) of the Fair Work Act (filing aspect); and (2)by filing and serving affidavit evidence in support of what are characterised as the doomed parts of the cross-claim, Kodari Securities engaged in an unreasonable act because of which Mr Tran incurred costs in responding to it, so as to enliven that aspect of the exception to the ordinary prohibition on awarding costs in s 570(2)(b) of the Fair Work Act (evidence aspect). Mr Tran also seeks costs, effectively of the hearing, upon the basis that all three respondents engaged in an unreasonable act by refusing to accept Mr Tran’s offer of compromise to settle the proceedings, so as to enliven that aspect of the exception in s 570(2)(b) of the Fair Work Act.Mr Tran’s submissions As to the filing aspect, Mr Tran contends that even on the cross-claimant’s own facts, approximately 90% of the matters advanced by the cross-claim were doomed to fail. He submits that the cross-claim sought damages and equitable compensation against him, but did not articulate the loss or damage that it said it suffered in respect of the alleged breaches. He submits that even if those breaches had been established, there was no evidentiary or legal basis upon which Kodari Securities was able to obtain an order of loss or damage against him for those matters. Mr Tran therefore submits that the cross-claim was instituted without reasonable cause and that he was entitled to costs orders in his favour in accordance with s 570(2)(a) of the Fair Work Act.

Ratio Decidendi

Legal Principle Established

Once a claim is made that has not been shown to be brought without reasonable cause so as to fall within s 570(2)(a), the first alternative or additional basis for a costs order under s 570(2)(b) of an unreasonable act (or omission) causing the other party to incur costs needs to point to the act relied upon being in itself inherently unreasonable in some way. Mr Tran falls well short of that threshold. He points to nothing more than evidence being filed in the ordinary way in relation to a claim that has not been shown to be unreasonably brought. While undoubtedly responding to that evidence meant that costs were incurred by Mr Tran that would not have been had the evidence in support of the claim not been filed, that does not render the filing of that evidence itself an unreasonable act. To the contrary, the evidence was filed in accordance with a Court-ordered timetable. I am therefore not satisfied that Mr Tran has demonstrated that it was an unreasonable act to file evidence in support of the cross-claim, and accordingly this foundation for the s 570(2)(b) exception to the ordinary application of s 570(1) of the Fair Work Act is not made out.Consideration of the rejection of the offer of compromise The substantive part of Mr Tran’s offer to compromise was in the following terms:While our client is prepared to prosecute his claim in full, and to seek an order for a full costs indemnity on a solicitor/client basis in accordance with this letter, our client is prepared to resolve this matter on a strictly commercial basis, in terms set out below:(1)The Respondents to pay the Applicant 6 month’s pay, or $75,000. This amount is to be paid directly to our trust account as a lump sum;(2)The parties apply by consent for the proceedings to be discontinued in full, with no order as to costs;(3)The cessation of the Applicant’s employment is to be characterised as a resignation; and(4)The parties to formalise the terms of settlement in a balanced deed of settlement, reflecting the above, and including mutual terms as to confidentiality, non-disparagement, releases, bars to proceedings, and indemnities. It is important to note that I do not regard the characterisation of the outcome of the proceeding as being anything like as predictable as Mr Tran’s submissions both in chief and reply suggest. While I ended up preferring Mr Tran’s evidence over that of Mr Michael Kodari and Mr George Kodari, that was far from a simple conclusion to reach, let alone one that could be predicted with any degree of confidence. In any event, these submissions seem to ignore the proper operation of s 570 of the Fair Work Act, which is not to be side-stepped by an ordinary offer of compromise in unremarkable terms. The will of the legislature is not to be so easily set aside. Turning to the terms of the offer, which must be considered in the context of the presumptive operation of s 570 of the Fair Work Act against any award of costs, while Mr Tran did do better than his offer, he did not do so in relation to the major part of his claim, being $75,000 in compensation for economic loss. The rest of the $151,000 award apart was made up of factors that emerged from the totality of the hearing process, which could easily not have gone as well for Mr Tran.