Trustee for The MTGI Trust v Johnston (No 2)

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FEDERAL COURT OF AUSTRALIA

Trustee for The MTGI Trust v Johnston (No 2) [2016] FCAFC 190

Review of:

The Trustee for The MTGI Trust v Johnston [2015] FWCFB 1288

The Trustee for The MTGI Trust v Johnston [2015] FWCFB 6168
File numbers: NSD 1696 of 2015
Judges: SIOPIS, COLLIER AND KATZMANN JJ
Date of judgment: 23 December 2016
Catchwords: COSTS – application for first respondent’s costs to be paid by applicant and non-party on indemnity basis – s 570 Fair Work Act 2009 (Cth) – proceedings found to have no merit – Calderback offer by first respondent refused – non-party sole director and shareholder of applicant – non-party had interest in the subject of the litigation – applicant instituted litigation vexatiously or without reasonable cause
Legislation:

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

Federal Court of Australia Act 1976 (Cth) ss 43, 43(1), 43(2)
Cases cited:

Apotex Pty Ltd v Les Laboratoires Servier (No 5) [2015] FCA 334

Ashby v Slipper (No 2) [2014] FCAFC 67

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

Brosnan v Katke [2016] FCA 717

Calderbank v Calderbank [1975] 3 All ER 333

Colgate-Palmolive Company v Cussons Pty Limited (1993) 46 FCR 225

Construction, Forestry, Mining and Energy Union v BHP Coal Pty Ltd (No 2) [2015] FCAFC 97

Coshott v Prentice [2014] FCAFC 88

Dunghutti Elders Council (Aboriginal Corporation) RNTBC v Registrar of Aboriginal and Torres Strait Islander Corporations (No 4) (2012) 200 FCR 154

Garrett v Commissioner of Taxation [2015] FCA 117

Knight v FP Special Assets Ltd (1992) 174 CLR 178

Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd (No 2) [2011] FCAFC 141

Pettit v Evolution Mining Ltd [2016] FCA 1304

re Hughes, in the matter of Firepower Operations Pty Ltd (In Liquidation)(No 3) (2010) 183 FCR 150

Ryan v Primesafe [2015] FCA 8

Sagacious Legal Pty Ltd v Wesfarmers General Insurance Ltd [2011] FCAFC 53

Saxena v PPF Asset Management Ltd [2011] FCA 395

Selig v Wealthsure Pty Ltd [2015] HCA 18

Spotless Services Australia Ltd v The Honourable Senior Deputy President Jeanette Marsh [2004] FCAFC 155
Date of hearing: 4 August 2016
Registry: New South Wales
Division: Fair Work Division
National Practice Area: Employment & Industrial Relations
Category: Catchwords
Number of paragraphs: 36
Counsel for the Applicant: Mr A Duc
Solicitor for the First Respondent: Mr J Conomy (solicitor advocate) of Laxon Lex
Counsel for the Second Respondent: The Second Respondent filed a submitting notice

ORDERS

NSD 1696 of 2015
BETWEEN:

THE TRUSTEE FOR MTGI TRUST T/A MACQUARIE TECHNOLOGY GROUP INTERNATIONAL

Applicant
AND:

DAVID JOHNSTON

First Respondent

FAIR WORK COMMISSION

Second Respondent

JUDGES:

SIOPIS, COLLIER AND KATZMANN JJ

DATE OF ORDER:

23 DECEMBER 2016

THE COURT ORDERS THAT:

1.The Trustee for MTGI Trust T/A Macquarie Technology Group International and Mr Paul Desmond Wallace be jointly and severally liable for the costs of Mr David Johnston of and incidental to the proceedings.

2.The costs referred to in paragraph 1 of these…

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Details
Case
[2016] FCAFC 190
Decision Date

CaseChat Overview and Summary

The Trustee for The MTGI Trust v Johnston (No 2) is a case where Mr David Johnston sought an order for the costs of the proceedings to be paid by the applicant, MTGI, and Mr Paul Wallace, a non-party. The proceedings were for a review of two decisions by the Full Bench of the Fair Work Commission, which had awarded Mr Johnston compensation and costs. The Federal Court found no merit in the application and ordered MTGI to pay Mr Johnston’s costs. Mr Johnston then applied for his costs to be paid on an indemnity basis by both MTGI and Mr Wallace, who is the sole director and shareholder of MTGI. The application was based on the argument that MTGI instituted the proceedings vexatiously or without reasonable cause under s 570 of the Fair Work Act 2009 (Cth). The Court examined the submissions from both parties, considering whether the proceedings were instituted vexatiously or without reasonable cause, and if an unreasonable refusal to participate in the Fair Work Commission proceedings caused Mr Johnston to incur costs. The Court found that the application for costs should be made with caution, given the exceptional nature of the power to award costs in an otherwise no-costs jurisdiction. The Court concluded that the application for costs against both MTGI and Mr Wallace should be granted. The Court ordered that MTGI and Mr Wallace be jointly and severally liable for Mr Johnston’s costs, fixed at $48,387.18, to be paid within 28 days.

Orders

Orders of the court

1. The Trustee for MTGI Trust T/A Macquarie Technology Group International and Mr Paul Desmond Wallace be jointly and severally liable for the costs of Mr David Johnston of and incidental to the proceedings.

2. The costs referred to in paragraph 1 of these Orders are:

(a) fixed in the sum of $48,387.18; and

(b) to be paid to Mr David Johnston within 28 days of the date of this Order.

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 18 October 2015 the Court delivered judgment in The Trustee for The MTGI Trust v Johnston [2016] FCAFC 140 (the primary judgment). The background facts are set out in detail in that judgment. It is sufficient to say that the Court found no merit in the application brought by the trustee (MTGI) for review of two decisions of the Full Bench of the Fair Work Commission, where the Full Bench had refused permission to appeal decisions of Senior Deputy President Boulton awarding Mr Johnston compensation equivalent to 20 weeks’ pay and costs. In dismissing the application the Court also made case management orders for any costs application by Mr Johnston. On 1 November 2016 Mr Johnston filed an interlocutory application seeking orders in the following terms:1. The first respondent seeks:a.An order that Mr Paul Desmond Wallace pay the first respondent’s costs of these proceedings on the indemnity basis; andb.An order that the applicant pay the first respondent’s costs of these proceedings on the indemnity basis.2. Alternatively to 1, the first respondent seeks:a.An order that the [sic] Mr Paul Desmond Wallace pay the first respondent’s costs of these proceedings, with such costs to be assessed on the indemnity basis from 5 July 2016; andb.An order that the applicant pay the first respondent’s costs of these proceedings, with such costs to be assessed on the indemnity basis from 5 July 2016. Mr Johnston filed an affidavit affirmed by his solicitor, Mr John Laxon, in support of this interlocutory application.Submissions of the parties In summary, Mr Johnston submitted:·MTGI instituted the proceedings vexatiously or without reasonable cause within the meaning of s 570 of the Fair Work Act 2009 (Cth) (the FW Act).·MTGI appeared to have had an ulterior purpose in applying for judicial review of the Full Bench’s decisions, namely an attempt to evade enforcement action commenced by the Fair Work Ombudsman which was stayed for the duration of the proceedings before the Court.·On the eve of the hearing MTGI notified Mr Johnston that it would not press five of the 11 grounds it had originally pleaded in the statement of claim.·Mr Johnston’s representatives had written to MTGI’s representative setting out reasons why the proceedings were vexatious and without reasonable cause.·Mr Johnston made an offer to settle the proceeding on 5 July 2016, on the basis that MTGI discontinue the proceedings and each party pay its own costs. The failure of MTGI to accept that offer was an unreasonable omission which caused Mr Johnston to incur costs, as explained in such cases as Calderbank v Calderbank [1975] 3 All ER 333.·Mr Johnston seeks an order for costs against a non-party, Mr Paul Wallace, pursuant to s 43 of the Federal Court of Australia Act 1976 (Cth) (the Federal Court Act), in circumstances where it is clear that Mr Wallace used MTGI as a mere device in the proceedings, where Mr Wallace conducted MTGI’s case before the Fair Work Commission, and where MTGI has already failed to pay compensation and costs in breach of orders of the Fair Work Commission.

Ratio Decidendi

Legal Principle Established

MTGI submits, in summary, that:·The proceedings were not instituted to avoid Fair Work Ombudsman enforcement action.·The fact that MTGI abandoned a number of its grounds does not constitute evidence that its application for judicial review was vexatious.·While MTGI did not accept Mr Johnston’s settlement offer, and its application was ultimately unsuccessful, MTGI wished to have the matters heard by the Court. Claims about how the Full Bench dealt with the unfair dismissal in the four cases before it were important to raise before the Court. There were no grounds to base a finding that MTGI was imprudent or unreasonable in its rejection of Mr Johnston’s offer: Apotex Pty Ltd v Les Laboratoires Servier (No 5) [2015] FCA 334.·It is not appropriate that a costs order be made against Mr Wallace simply because he is a director of MTGI.·There is no evidence before the Court that MTGI is a “straw man”.·The Court should approach applications for costs pursuant to s 570 of the FW Act with caution.Consideration Section 570 of the FW Act provides: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. Mr Johnston relies on both s 570(2)(a) and (b) of the FW Act in his interlocutory application. Section 570 of the FW Act confers discretion on the Court to order costs in Fair Work matters where proceedings were instituted vexatiously or without reasonable cause. Not only must this discretion be exercised judicially according to the terms defining it, it must be exercised with caution because of the exceptional nature of the power in an otherwise no-costs jurisdiction. The case for its exercise should be clearly demonstrated: Saxena v PPF Asset Management Ltd [2011] FCA 395 at [6]. As Mortimer J observed (correctly, in our opinion) in Ryan v Primesafe [2015] FCA 8 at [64]: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.(cf Barker J in Pettit v Evolution Mining Ltd [2016] FCA 1304 at [62].)