Wavish v Descon Group Australia Pty Ltd
[2022] FedCFamC2G 912
•3 November 2022
Federal Circuit and Family Court of Australia
(DIVISION 2)
Wavish v Descon Group Australia Pty Ltd [2022] FedCFamC2G 912
File number: MLG 3698 of 2020 Judgment of: JUDGE BLAKE Date of judgment: 3 November 2022 Catchwords: INDUSTRIAL LAW – Costs – s 570 of the Fair Work Act 2011 (Cth) (Act) – whether proceeding against cross respondent instituted vexatiously and without reasonable cause as contemplated by section 570(2)(a) – where cross claimant had facts available to it but chose not to institute cross claim when filing its initial response – where cross claim initiated only after filing of affidavits – where sequence of events makes clear that cross claim pursued to intimidate witness – cross claim filed sought to pursue an action without reasonable cause – Held s 570(2)(a) engaged.
INDUSTRIAL LAW – Costs – whether s 570(2)(b) of the Act is engaged – where claim amended to include a claim for general damages – where no basis for claim for general damages and where the claim was unilaterally withdrawn prior to trial – held the claim for general damages was an act or omission that engaged s 570(2)(b) of the Act.
INDUSTRIAL LAW – Costs – whether s 570(2)(b) of the Act is engaged – where offer of compromise served – whether offer was reasonable- reasonableness assessed – offer of compromise and failure to accept able to be relied on and engages s 570(2)(b) of the Act.
INDUSTRIAL LAW – Costs – whether to award indemnity costs – where claims advanced to harass and intimidate witness – principles considered – Held that this is an exceptional case warranting an indemnity costs order.
INDUSTRIAL LAW – Costs – whether costs order should be made against solicitor – where solicitors acted inconsistently with Australian Solicitor Conduct Rules and the overarching obligation in ss 190 and 191 of the Federal Circuit and Family Court of Australia Act 2021 – where solicitors failed to exercise care and skill – held that solicitors pay 50% of an order for indemnity costs.
Legislation: Australian Solicitor Conduct Rules, rr. 21, 21.1, 21.3.
Fair Work Act 2009 (Cth), ss 570, 570(1), 570(2).
Federal Circuit and Family Court of Australia Act 2021 (Cth), ss 190, 191, 191(2), 191(4), 191(5).
Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021, r 22.06.
Federal Court Rules 2011, r 25.
Cases cited: Baker v Patrick Projects Pty Ltd (No 2) [2014] FCAFC 166
Calderbank v Calderbank [1975] 3 All ER 333
CGU Insurance Ltd v Corrections Corporation of Australia Staff Superannuation Pty Ltd [2008] FCAFC 173
Colgate Palmolive v Cussons Pty Ltd (1993) 46 FCR 225
Harvey v Dioceses of Sale Catholic Education Ltd (St Joseph’s Primary School Wonthaggi) (No 3) [2021] FCA 1420
Hazeldene’s Chicken Farm Pty Ltd v Victorian Workcover Authority [2005] VSCA 298
Mitry Laywers v Barnden [2014] FCA 918
Polis v Zombor (No 5) [2022] FCA 122
Ritter v Godfrey [1920] 2 KB 47
Ryan v Primesafe (No 2) (2015) 323 ALR 107
Tregidga v Pasma Holdings Pty Ltd (No 2) [2021] FCA 1439
Tucker v State of Victoria (No 2) [2021] VSCA 182
Veda Advantage Ltd v Malouf Group Enterprises Pty Ltd (No 2) [2016] FCA 470
White Industries (Qld) v Flower & Hart (1998) 156 ALR 169
Division: Division 2 General Federal Law Number of paragraphs: 91 Date of hearing: 27 July 2022 Place: Melbourne The Applicant / First Cross Respondent: No Appearance Required Counsel for the First Respondents / Cross Claimant: Mr Lawrence Solicitor for the First Respondents / Cross Claimant: Irish Bentley Lawyers Counsel for the Second Cross Respondent: Mr Howard Solicitor for the Second Cross Respondent: Hall & Wilcox ORDERS
MLG 3698 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: TODD WAVISH
Applicant / First Cross Respondent
AND: DESCON GROUP AUSTRALIA PTY LTD
First Respondent / Cross Claimant
DANNY ISAAC
Second Respondent
STEPHEN RODD
Second Cross Respondent
order made by:
JUDGE BLAKE
DATE OF ORDER:
3 NOVEMBER 2022
THE COURT ORDERS THAT:
1.Descon Group Australia Pty Ltd (being the First Respondent/Cross Claimant) and Irish Bentley Lawyers each pay 50% of Mr Stephen Rodd's costs of and incidental to the proceeding on an indemnity basis.
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 BLAKE
This is an application by Stephen Rodd for legal costs he has incurred in relation to proceedings commenced under the Fair Work Act 2009 (‘Act’). Mr Rodd was a cross respondent in a proceeding initially commenced by Todd Wavish against Descon Group Australia Pty Ltd ACN 625 771 075 (‘Descon’), Danny Issac and Anthony Quinn (collectively, ‘respondents’). In response to the claim from Mr Wavish, Descon ultimately filed a defence and cross-claim against Mr Wavish. Mr Rodd was joined to the proceeding and was a respondent to Descon’s cross-claim along with Mr Wavish.
Mr Wavish commenced proceedings in the Court on 16 October 2020. Mr Wavish discontinued his claim against Mr Quinn on 28 March 2022. The remaining claims and the cross-claim were set down for final hearing before me on 25 July 2022. In the week before the trial was to commence, Mr Wavish resolved his claims with the remaining respondents, and Descon and Mr Issac resolved their claims with Mr Wavish. The dispute between Descon and Mr Rodd remained unresolved. At a mention before me on 21 July 2022 in the week before the trial was to commence, Descon advised that it would file a notice of discontinuance in respect of its claim against Mr Rodd, which it ultimately did. It is arising out of this background that Mr Rodd now seeks that Descon pay his legal costs on an indemnity basis.
Mr Rodd filed an Application Book containing all of the material on which he relied, including an outline of submissions and an affidavit from his solicitor Sean Sullivan. Descon filed an outline of submissions setting out the material on which it relied and an affidavit from its instructing solicitor Daniel Devitt. Subsequent to the oral hearing before me, I received further affidavits from Mr Sullivan and Mr Devitt. I have considered all of the material.
For the reasons that follow, I have decided Mr Rodd should receive his costs on an indemnity basis and that those costs be paid 50% by Descon and 50% by its solicitors.
principles
The application pursued by Mr Rodd arises within a proceeding to which section 570 of the Act applies. Section 570 of the Act relevantly provides as follows:
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.
(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…
It is apparent from the terms of section 570(1) that the Court lacks jurisdiction to award costs unless inter alia one of the limbs of subsection (2) is satisfied. In the event that the Court is satisfied of one of the matters in subsection (2), the Court may still decide not to order costs.
The purpose, principles and approach to the application of section 570(2)(a) and (b) of the Act in any particular case was summarised recently by the Victorian Court of Appeal in Tucker v State of Victoria (No 2) [2021] VSCA 182 (‘Tucker’) at [30]-[32]:
[30]It is convenient briefly to summarise the approach to be taken to each paragraph.
[31]Section 570(2)(a) asks whether a party has instituted the proceedings ‘vexatiously or without reasonable cause’. The following principles emerge from the authorities:
(a)The purpose of s 570(2)(a) is to protect parties from the risk of adverse costs in matters arising under the FWA, while also affording costs protection to parties forced to defend proceedings instituted vexatiously or without reasonable cause.
(b)A proceeding will have been instituted vexatiously if it is scandalous, oppressive, embarrassing, discloses no reasonable cause of action, or is otherwise an abuse of the process of the Court.
(c)A proceeding will have been instituted without reasonable cause if the proceeding lacked reasonable prospects of success at the time it was instituted, having regard to the facts apparent to the instituting party at that time. The focus is on the circumstances of the commencement of the proceeding; the manner in which the proceeding is conducted after it is commenced is irrelevant to para (a) but is instead relevant to para (b).
(d)That the proceeding ultimately fails is not decisive. Nor is it enough that a proceeding is merely misconceived. However, a proceeding will lack reasonable prospects of success where, on the instituting party’s own version of the facts, it is doomed to fail.
(e)Where the proceeding at issue is an appeal, the above test as to the absence of reasonable cause applies with minor modifications. The relevant enquiry is whether, having regard to the facts apparent to the applicant at the time of instituting the appeal there were no reasonable prospects of success. In evaluating those prospects, regard may be had to the reasons for judgment or decision under appeal and the grounds relied on to challenge the judgment or decision.
[32] The following principles apply in the case of s 570(2)(b):
(f)Paragraph (b) is enlivened when two criteria are satisfied:
(i)one party has engaged in an ‘unreasonable act or omission’; and
(ii)that unreasonable act or omission has caused the other party to incur costs.
(g)Unreasonableness is to be determined objectively. It is a question of impression and degree, to be assessed by reference to the particular circumstances of a given case.
(h)Unreasonableness is not to be confused with negligence or inefficiency. A failure to conduct litigation in the most efficient way does not, without more, enliven the paragraph. The fact that a party has conducted litigation inefficiently, made belated concessions, or adopted a misguided approach may be relevant to, but will not be conclusive of, the question of unreasonableness.
(footnotes omitted)
In Ryan v Primesafe (No 2)(2015) 323 ALR 107 (‘Ryan’), Mortimer J stated at [64]:
[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. In so far 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; 289 ALR 552; [2012] FCAFC 103 at [3]–[4] per Jessup and Tracey JJ.
In Baker v Patrick Projects Pty Ltd (No 2) [2014] FCAFC 166 (Dowsett, Tracey and Katzman JJ) (‘Baker’), a Full Court was required to consider a costs application brought by the Respondent. The Full Court stated, inter alia, that while one purpose of section 570 of the Act is to enable parties to bring viable cases without being deterred by the prospect of an adverse costs order, particularly employees with limited means, another purpose is to deter parties from bringing or pursuing cases which have no reasonable prospects of success.
There is then the question of whether any costs order, if made, should be made on an indemnity basis. In Ryan, while Mortimer J considered that the proceedings against a solicitor were instituted without reasonable cause and the unreasonable conduct in joining the solicitor caused him to incur costs, without more, those factors did not justify what would be, in substance, a second departure from the underlying policy evidenced in section 570 of the Act. Mortimer J awarded costs on a party/party basis. Similarly, in Baker, while the Full Court considered that the application had no reasonable prospects of success, it awarded costs to the Respondent on a party/party basis.
background
Mr Rodd was employed by Descon as a Project Manager in Melbourne from 1 May 2019 until his employment ceased on 30 April 2020. Following the cessation of his employment, Mr Rodd continued to work for Descon on a consultancy basis until 10 July 2020.
Mr Wavish was employed by Descon as a Senior Site Manager between 31 March 2019 and 30 May 2020.
Mr Wavish reported to Mr Rodd. Mr Rodd reported to Mr Dean Lockhart, General Manager for Descon.
Mr Wavish was employed under a written contract of employment. Clause 4 of the contract of employment required him to work 38 hours per week ‘however on occasion you may be required to work additional hours as may be necessary to the business of Descon and the performance of your duties’. Clause 9 of the contract provided that Mr Wavish’s fixed remuneration compensated him for a range of benefits including overtime rates of pay. Clause 11 of the contract dealt with leave and relevantly provided that Mr Wavish was entitled to leave in accordance with the National Employment Standards in the Act. It also stated as follows: ‘Please note that Descon has a shutdown period over the Christmas/New Year period annually of approximately two (2) to three (3) weeks duration (to align generally with shutdowns in the construction industry) during which you will be requested to take annual leave’. Clause 21 required Mr Wavish to comply with all relevant State and Federal Occupational Health & Safety laws and all site and Descon safety standards.
Mr Wavish’s employment was terminated by Descon on around 30 May 2020. His employment was terminated following Mr Quinn arriving at the relevant site to find Mr Wavish was not present for work.
Mr Wavish commenced proceedings against the respondents on 16 October 2020. The proceeding was commenced by the filing of an application and Statement of Claim. At paragraph 11 of the Statement of Claim, Mr Wavish pleaded that he had been, among other things, excused from attending work on Saturday 30 May 2020 by Mr Rodd and that as a consequence of that, his termination of employment by Descon was unlawful.
On 10 November 2020, the Court made orders that, among other things, required the respondents to file a Defence or Response by 13 January 2021. The orders also required the parties to file any affidavits on which they intended to rely by 25 February 2021.
On 13 January 2021, Descon filed its Response to Mr Wavish’s claims. In response to paragraph 11 of the Statement of Claim, the respondents pleaded inter alia:
(a)‘Mr Rodd did not have the requisite authority to excuse the Application [sic] from work on Saturday, 30 May 2020’;
(b)the respondents had become aware that the Applicant had failed to attend for work without lawful justification on 49 days including 30 May 2020. Each day was identified separately in the Response. It was further claimed that the respondents had become aware of these dates following an ‘investigation’.
Thus, as at this date, Descon was alleging 49 unauthorised absences and that Mr Rodd did not have authority to authorise absences on 30 May 2020.
Despite making the claims set out above in the Response, Descon did not seek to institute any cross-claim against Mr Wavish, Mr Rodd, or anyone else at the time it filed its Response on 13 January 2021.
Mr Rodd filed an affidavit in the proceeding on 15 February 2021 in support of Mr Wavish. In his affidavit, Mr Rodd deposed to a range of matters including the following. First, that he was directed by Descon and authorised to make decisions with respect to the employment of Mr Wavish. On this issue, Mr Rodd deposed among other things that in so far as authorising days off for employees was concerned, he had been requested by Mr Lockhart to carry out this role. Second, that Descon applied the CFMEU RDO calendar. Third, that Mr Wavish would often voluntarily work hours in excess of those stipulated in his contract of employment. Fourth, that all dates for which Mr Wavish was absent from the time he commenced employment until the time he ceased employment had been discussed and approved by Mr Rodd including Mr Wavish’s absence on 30 May 2020.
On 25 February 2021, Mr Quinn filed an affidavit in the proceeding. In the affidavit, Mr Quinn deposed, among other things, that:
(a)he had conducted an ‘investigation’ into the extent of Mr Wavish’s absences and set out 49 specific days that he claimed Mr Wavish had not attended for work. The 49 dates are the same dates that were set out by the respondents in their Response filed 13 January 2021;
(b)that a Delegation of Authority Policy was in place from 4 November 2019 (‘Delegation’) under which Mr Rodd had authority to authorise staff leave applications. Mr Quinn purported to attach to his affidavit a copy of an email and the Delegation. As it transpired, only the email was attached;
(c)the CFMEU RDO calendar never applied to Mr Wavish;
(d)from 1 May 2020 when he ceased employment, Mr Rodd did not have authority to make decisions authorising leave of employees (and therefore could not have authorised Mr Wavish’s leave on 30 May 2020).
On 1 April 2021, the respondents filed a cross-claim in the Court. In the cross-claim, the respondents among other things:
(a)claimed that Mr Wavish had taken leave in breach of his contract of employment;
(b)identified 49 days it was alleged Mr Wavish took unauthorised leave. These were the same 49 days set out in the Response filed 13 January 2021 and also contained in the affidavit of Mr Quinn;
(c)pleaded in substance that in the event Mr Rodd purported to approve the leave taken by Mr Wavish, that Mr Rodd has breached his contract of employment with Descon and was liable to Descon in damages.
In the cross-claim, the respondents sought damages from Mr Wavish for, among other things, breach of contract in the amount of $34,149. Alternatively, those damages were sought by the respondents from Mr Rodd. The respondents also pleaded that in the event they were liable for any sum payable to Mr Wavish, that the amount of the cross-claim be set off against amounts that might be owing to Mr Wavish.
On 14 June 2021, Mr Rodd’s solicitors sent two letters to the solicitors for Descon. One was an open letter. The other was sent on a ‘without prejudice save as to costs’ basis, relying on the principles in Calderbank v Calderbank [1975] 3 All ER 333 (‘Calderbank’). In the Calderbank letter, Mr Rodd made an offer to Descon to resolve the proceedings between the parties. The terms of the offer were that Descon discontinue the cross-claim, Mr Rodd would bear the costs he had incurred in the proceedings to date (being approximately $35,000), and the parties to enter into a brief discharge. The offer was open for acceptance for 14 days.
The open letter of 14 June 2021 sent to Descon’s solicitors set out a comprehensive rebuttal of Descon’s claims of unauthorised absence by Mr Wavish. Among other things, Mr Rodd’s solicitors:
(a)identified various, specific dates where Mr Rodd did not approve Mr Wavish taking leave because no approval was required. The identified dates included the construction industry shutdown period, public holidays and Saturdays;
(b)identified dates when Mr Rodd indicated his belief that Mr Wavish had worked;
(c)identified specific dates when Mr Wavish had taken personal sick leave;
(d)clarified that Mr Rodd was not responsible for leave approvals for Mr Wavish after 1 May 2020.
The letter of 14 June 2021 was not the first time an offer was made by Mr Rodd to Descon, nor would it be the last. Offers were made on 9 April 2021, 16 August 2021 and 6 April 2022.
Subsequent to the letter of 14 June 2021, an Amended Cross Claim was filed by the respondents on 2 July 2021. The amendments relevantly set out other matters by which it was contended that Mr Wavish and Mr Rodd had breached their duties or contracts with Descon. In the Amended Cross Claim, the respondents also revised the amount they claimed in damages from each of Mr Wavish and Mr Rodd to include not only the amounts referable to the alleged unauthorised leave taken by Mr Wavish (the amount of $34,149), but a further amount of $25,000 in general damages.
On 18 March 2022, Mr Rodd filed a further affidavit in the proceeding. In that affidavit, Mr Rodd clarified his earlier affidavit and consistent with what he had first stated in the letter of 14 June 2021, deposed that he was not involved in authorising any leave taken by Mr Wavish after 1 May 2020.
Ultimately, the parties prepared for a trial that was listed before me to commence on 25 July 2022. The proceedings as between the respondents and Mr Wavish ultimately resolved. The respondents also ultimately discontinued the cross-claim against Mr Rodd, with their counsel informing the Court at the mention on 21 July 2022 that it was, among other things, no longer commercial to run the matter.
the claim for costs
Mr Rodd submits that Descon instituted the proceedings against him vexatiously and without reasonable cause (section 570(2)(a)). Mr Rodd also submits that unreasonable acts or omissions by Descon caused him to incur costs (section 570(2)(b)). Alternatively, Mr Rodd submits that by refusing offers of settlement made by him to resolve the proceedings, Descon acted unreasonably bringing it within the purview of section 570(2)(b). Descon submits that none of the submissions above ought to be accepted.
The claim for costs under section 570(2)(a) of the Act
An issue raised by the terms of section 570(2)(a) is whether the Court is satisfied that a party has ‘instituted’ the proceedings vexatiously or without reasonable cause. The focus is therefore on the circumstances that existed at the time the proceeding was commenced. It is to that matter that I now turn.
In the initial version of the Cross Claim filed 1 April 2021, Descon pleaded, inter alia, as follows in respect of its case against Mr Rodd:
36.By virtue of the Second Cross-Respondent purporting to provide leave approval to the First Cross-Respondent for the days specified in Schedule A of this Cross Claim, the Second Cross-Respondent acted in breach of contract to the First Cross-Claimant by:
a.refusing or neglecting to perform his duties or comply with any lawful or reasonable direction with respect to the First Cross-respondent’s Leave Policy and Clause 11 of the Terms;
b.acting dishonesty with respect to the First Cross-respondent’s attendance at the Site and compliance with the Contract by either concealing said absenteeism or failing to report it when a reasonable employee should have done so; and
c.persistently breaching the Contract with respect the First Cross-applicant’s Leave Policy and Clause 11 of the Terms.
In the Amended Cross Claim filed 2 July 2021, Descon significantly expanded the pleading above, which then included the following:
36.By virtue of the Second Cross-Respondent purporting to provide leave approval to the First Cross-Respondent for the days specified in Schedule A of this Amended Cross-Claim, the Second Cross-Respondent acted in breach of contract to the
FirstCross-Claimant by:a.…
b.acting dishonesty with respect to the First Cross-respondent’s attendance at the Site and compliance with the Contract by either concealing said absenteeism or failing to report it when a reasonable employee should have done so; and
c.…
d.…
e.purporting to approve, enable or permit the First Cross-Respondent’s leave in circumstances where he knew or ought to know his actions were dishonest because;
i.he covertly concealed his actions and the First Cross-Respondent’s absence to his superiors including the Second and Third Respondents, as set out in paragraphs 31.d and 31.e above ;
ii.he knew or ought to know the First Cross-Respondent’s leave was in breach of the Cross-Claimant’s Leave Policy as set out in paragraphs 31.d and 31.e above;
iii.and the Cross-Claimant repeats and relies on paragraph 35(i)-(k) of the Response and Amended Cross-Claim;
f.…
It can be seen from the above that Descon was not simply alleging breach of contract by Mr Rodd. It was, among other things, alleging dishonest conduct by Mr Rodd and that he had covertly concealed matters from Descon.
Mr Quinn was the only director of Descon who was, at least partly, domiciled in Victoria. The other directors (Mr Sneeden and Mr Isaac) were domiciled in Queensland and were therefore never in a position to give evidence or instructions about particular absences of Mr Wavish. It seems clear that Descon’s cross claim was based on material supplied by Mr Quinn; after all, 49 days of alleged absences referred to in the first version of the Cross Claim are the same 49 days that Mr Quinn refers to in his affidavit of 25 February 2021. In this context, the evidence of Mr Quinn bears close examination.
I have summarised aspects of Mr Quinn’s affidavit above. I observe the following:
(a)Mr Quinn refers to an ‘investigation’ in respect of 49 days of alleged absences. He does not provide any evidence about the conduct of the investigation, the persons he spoke to, or the entirety of any documents he may have reviewed;
(b)Mr Quinn attaches site diaries for the period 23 May 2020 to 30 May 2020. Site diaries for any other dates are not annexed (this despite the claim there were 49 days of unauthorised absences);
(c)Mr Quinn does not attach any time and wage records to the affidavit for the 49 days;
(d)There is no evidence from Mr Quinn going to how Mr Rodd acted dishonestly, how he concealed absenteeism, or how he covertly concealed his actions as pleaded in the Cross claim documents;
(e)Mr Quinn never filed any subsequent affidavit. His evidence was never improved on or developed. Had the trial run, it seems it would have proceeded on the information Mr Quinn deposed to in his one and only affidavit of 25 February 2021.
It is important at this juncture to remember the reporting relationship and the state of the evidence. Mr Wavish reported to Mr Rodd, and Mr Rodd reported to Mr Lockhart. Mr Rodd’s evidence was that his authority to manage employees and the expectations on him to do so came from Mr Lockhart. This made Mr Lockhart an important person in the proceeding. He was the only person that could dispute Mr Rodd’s version of events that he (Mr Rodd) had been authorised by Mr Lockhart. Despite his apparent importance, however, Mr Lockhart never filed any affidavit in the proceeding. There is no evidence from Descon that it ever sought instructions from Mr Lockhart despite his importance.
In submissions before me, Descon sought to make much of what was said to be the inconsistency in Mr Rodd’s evidence and his admission that he authorised leave. That inconsistency is, principally Mr Rodd’s statement in his first affidavit that he authorised all leave for Mr Wavish, and his subsequent statements that he did not authorise leave after 1 May 2020. Descon submitted that this, combined with Mr Rodd’s lack of authority from 1 May 2020 to authorise absences meant that the proceeding was not commenced vexatiously or without reasonable cause. Furthermore, Descon submitted that in light of the above, no costs order should be made because it was the conduct of Mr Rodd that primarily led to Descon commencing the proceedings against him. In this respect, Descon relied on the statements by Eve J in Ritter v Godfrey [1920] 2 KB 47 at 66 and O’Bryan J in Polis v Zombor (No 5) [2022] FCA 122 at [77].
It is convenient to deal with Descon’s point above in relation to Mr Rodd’s lack of authority. The concession made or clarification given by Mr Rodd was only that he lacked authority from 1 May 2020. His position was not that he lacked authority prior to that time. The clarification given by Mr Rodd therefore affected only ten of the days on which Mr Wavish was allegedly absent without authorisation. The clarification does not advance Descon’s position in relation to the other 39 dates on which Mr Wavish was allegedly absent without authority. Moreover, while Descon says it was motivated to make its claim because Mr Rodd stated he authorised all leave for Mr Wavish it should be noted that such a claim could not be meaningfully advanced and had no basis without Descon getting instructions and ultimately evidence from Mr Lockhart, something it never did.
Further, insofar as there was an inconsistency in Mr Rodd’s evidence, he clarified his position in relation to his power to authorise leave reasonably promptly by 14 June 2021. Also to the extent there was an inconsistency, as noted above, it only affected ten of the alleged 49 days.
There is then the Amended Cross Claim on 2 July 2021. This is a document of significance. Descon added to its earlier allegations by pleading that Mr Rodd ‘covertly concealed’ his actions. Nothing in Mr Quinn’s affidavit deals with this issue in any meaningful way, and there is no evidence from Descon as to the instructions given. Moreover, in the Amended Cross Claim, Descon also claimed for the first time general damages of $25,000 from Mr Wavish and Mr Rodd. This amount was not particularised in the Amended Cross Claim. Nor was it referable to any particular breach of contract or act of misconduct. Nothing in Mr Quinn’s affidavit touched on this issue either. No evidence was ever filed to support such a claim. The amount was claimed in circumstances where Descon was on notice (from the letter of 14 June 2021) that Mr Rodd had comprehensively answered the allegations concerning alleged unauthorised absences of Mr Wavish. Ultimately the claim for general damages was belatedly abandoned when the respondents filed their outline of argument for trial on 4 July 2022, some three weeks before the trial was to commence. The amount of the general damages claimed ($25,000) was significant when one considers that the other damages claimed totalled $39,140.
It next falls to consider the circumstances in which the cross claim was filed. The cross-claim was initially filed on 1 April 2021, approximately 6 weeks after Mr Rodd filed his affidavit of 15 February 2021 in support of Mr Wavish. Mr Rodd says the timing of the filing of the cross claim shows that the claim was brought against him with the intention to harass or vex him. Descon says, inter alia, it filed the cross-claim at this time because it was only after receipt of Mr Rodd’s first affidavit that it had an admission from Mr Rodd as to what he had authorised Mr Wavish to do. This submission by Descon needs to be considered in light of the following. First, Descon knew Mr Rodd was authorised to manage leave. It had authorised him to do so. Second, the admission, clarification or concession by Mr Rodd (however it might be described) that he did not have authority to authorise leave as noted above only affected the ten days after 1 May 2020. It is not an answer to the remaining 39 days that Descon alleged there were unauthorised absences. Third, it was within Descon’s power at any time to clarify the situation concerning Mr Rodd’s authority by speaking to Mr Lockhart, something it apparently never did.
Another way to consider Descon’s submission is to consider what Descon knew at the time Mr Wavish commenced the proceeding, and at the time the respondents filed their initial Response on 13 January 2021. At that time, Descon knew Mr Wavish reported to Mr Rodd and that Mr Rodd reported to Mr Lockhart. It was aware that it had given Mr Rodd authority to manage the leave of employees under the Delegation. It was aware that Mr Wavish claimed his absence on 30 May 2020 was authorised by Mr Rodd. It was also aware that Mr Wavish was, in its view, absent from work on approximately 49 other days (see paragraph 13 of Mr Quinn’s affidavit). It also had access to Mr Lockhart and Mr Quinn to obtain further particulars. Despite all of this, Descon elected not to file a cross-claim against either Mr Wavish or Mr Rodd at the time it filed its original Response on 13 January 2021.
In my view, Descons submissions as to its reason for filing the cross claim when it did should be rejected. The proper conclusion to be drawn from the facts and the chronology is that Descon commenced the cross claim and joined Mr Rodd as a cross respondent on around 1 April 2021 in retaliation for Mr Rodd filing an affidavit in support of Mr Wavish. That conclusion is reinforced, in my view, by Descon’s subsequent decision to amend the cross-claim to include claims, without any apparent foundation that Mr Rodd ‘covertly concealed his actions’ and the claim for general damages. There was never any basis for these claims for the reasons I have referred to earlier. It was commenced to bring pressure to bear on Mr Rodd and to intimidate him in circumstances where he was to give evidence on behalf of Mr Wavish.
When all of the above matters are considered, I am satisfied that section 570(2)(a) is engaged in this case. The proceedings were commenced against Mr Rodd vexatiously, and they were commenced without reasonable cause.
There is then the question of whether the Court should exercise its discretion to order costs. I noted earlier that Descon submitted, based on the authorities in Ritter and Polis, that costs should not be awarded because Mr Rodd had brought the proceedings upon himself. I do not accept that submission, given the conclusions I have come to above. This was not a case of Mr Rodd bringing the proceedings on himself or contributing to the institution of those proceedings. Rather, this was a case in which Descon pursued a claim without reasonable cause for the purpose of vexing and harassing Mr Rodd, who was to give evidence against Descon. It is also difficult to see how Mr Rodd can be said to have brought the proceedings upon himself in circumstances where Descon authorised him to manage leave under the Delegation, and where it never made an attempt to speak to Mr Lockhart to verify whether or not Mr Rodd’s version of events was disputed.
In my view, in all the circumstances of this case and for the reasons that I have endeavoured to identify above, the Court should exercise its discretion to make an order for costs.
The claim for costs under section 570(2)(b) of the Act
Mr Rodd submitted that the matters to which I have referred above also grounded a claim for costs under section 570(2)(b) of the Act. For the reasons I have given above, the institution of the cross-claim on 1 April 2021 and the filing and pursuit of the Amended Cross Claim from 2 July 2021 also constitute unreasonable acts or omissions which caused Mr Rodd to incur costs within the meaning of section 570(2)(b) of the Act.
Mr Rodd also sought his costs under section 570(2)(b) of the Act based upon the offers of settlement he made to Descon.
Whether the refusal to accept an offer of compromise is reasonable is to be determined in light of the circumstances that existed at the time that the rejection occurred. In Veda Advantage Ltd v Malouf Group Enterprises Pty Ltd (No 2) [2016] FCA 470 Katzmann J was asked to determine a costs application where two offers of settlement had been made in accordance with the principles in Calderbank. Katzmann J, at [31], and quoting the statements of the Victorian Court of Appeal in Hazeldene’s Chicken Farm Pty Ltd v Victorian Workcover Authority [2005] VSCA 298 stated as follows:
[31]In contrast, however, to an offer of compromise made under r 25.01, refusal to accept an offer not made in compliance with the rules (a Calderbank offer, see Calderbank v Calderbank [1975] 3 All ER 333) does not give rise to any presumption in favour of the offeror. The offeror needs to show that there was a genuine offer of compromise, and that it was unreasonable for the offeree not to accept it: Black v Lipovac at [217]–[218]. In deciding whether it is unreasonable for an offer to be rejected, the following matters should ordinarily be considered:
•the stage of the proceeding when the offer was made;
•the time afforded to the offeree to consider the offer;
•the extent of compromise involved;
•the offeree’s prospects of success, assessed as at the date of the offer;
•the clarity with which the terms of the offer were expressed;
•whether the offer foreshadowed an application for indemnity costs in the event of refusal.
See Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435 at [25].
Descon acknowledged the offers made by Mr Rodd. It made various submissions, however, as to why the failure to accept the offers made did not engage with section 570(2)(b). It submitted, among other things, that its claim had merit, that it had no choice but to proceed against the person who aided alleged breaches of contract by Mr Wavish, and that the Fair Work jurisdiction is in principle a no cost jurisdiction.
I have made findings above that the proceeding was instituted vexatiously and without reasonable cause. If, however, there was ever any doubt that the proceedings were without merit, that should have been abundantly clear to Descon by 14 June 2021. On that day, Descon via its solicitors received an open letter that addressed in detail the alleged unauthorised absences of Mr Wavish and Mr Rodd’s role in those absences. A significant amount of detail was provided in the letter, including the provision of explanations as to why on certain dates, Mr Wavish could not have been absent in an unauthorised manner. From that point, Descon and its solicitors were squarely and clearly on notice that further enquiries needed to be made about the evidence provided by Mr Quinn in his affidavit, particularly given the nature of that evidence.
Descon’s submissions that it had no choice but to continue the proceeding warrants close scrutiny. It is pertinent to note that at around the time Descon received the letter of 14 June 2021, it was also in the process of giving consideration, or would shortly give consideration, to amending the cross-claim. As noted earlier, the Amended Cross Claim included the claim for $25,000 in general damages and the further allegation that Mr Rodd covertly concealed his actions. From at least 14 June 2021 Descon knew or ought to have known that its claim in the form of the original cross-claim could not be sustained given the open letter from Mr Rodd’s solicitors. I do not accept in the circumstances that it had no choice other than to proceed against Mr Rodd. It had a choice. That choice was to reasonably reconsider the claim it was pursuing in light of the letter of 14 June 2021 and accept the offer of compromise of that date, or negotiate some other settlement. It did not take that course. Instead, Descon chose to continue with the claim, not seek to improve its evidence, and on top of that, chose to pursue a further unsupported claim of $25,000 general damages against Mr Rodd. Faced with a choice to reconsider its position, Descon to use an expression used by card players, ‘doubled down’.
The submission that the Fair Work jurisdiction is in principle a no cost jurisdiction can be accepted at a general level, however there is not a prohibition on costs orders from being made. The position, rather, is that a costs order may only be made if the Court is satisfied, applying correct principle as expounded in Tucker and Ryan, that the terms of section 570 are satisfied.
Descon submitted that Mr Rodd should not be permitted to rely on his Calderbank offer dated 14 June 2021 because the offer was not likely a genuine offer, because it contained no commercial incentive to Descon to settle and because it was made before most of the evidence in the case was filed. In respect of these matters, I observe the following. Descon had the benefit of an affidavit from Mr Wavish and Mr Rodd. Importantly, it had the detailed response to the claims set out in the open letter of 14 June 2021. Descon was therefore on notice about the deficiencies in its claim given the detail it had been provided with. Moreover, in light of what it was on notice about, there was a commercial enticement to Descon to settle its claim. Had Descon accepted the offer, it would not have had to pay for Mr Rodd’s costs which at that stage amounted to some $35,000. It therefore had the opportunity to walk away from its claim without having to pay costs. It declined to do so. Instead, it upped the ante against Mr Rodd, amending the cross-claim to include the claim for $25,000 in general damages. When these matters are considered, I am of the view that the offer made by Mr Rodd was a genuine offer, it contained a commercial incentive to Descon to settle and there is no reason why Mr Rodd ought not be able to rely on it.
As part of its submissions, Descon also referred to the offers of compromise it made to Mr Rodd and sought to rely on those.
On 25 August 2021, Descon made an offer jointly to Mr Wavish and Mr Rodd. Descon offered to pay the sum of $40,000 to both of them to resolve the proceeding. It was reasonable for Mr Rodd to reject this offer and it cannot be relied on by Descon. The offer failed to specify what amount each of Mr Wavish and Mr Rodd might obtain. The offer was unclear. Mr Wavish and Mr Rodd were not able to assess as between them the extent of the compromise involved, given the lack of clarity in the offer.
On 20 July 2022, five days prior to trial, Descon made an offer to Mr Rodd to resolve the cross claim against him on the basis that it would pay him $30,000. The offer purports to be made pursuant to Rule 25 of the Federal Court Rules 2011 (‘FCA Rules’). The offer is not one, however, that complies with the FCA Rules. That is because the FCA Rules require the offer to remain open for 14 days. The offer made by Descon was open for less than 24 hours.
The offer of 20 July 2022 by Descon also purports to be an offer made pursuant to the principles enunciated in Calderbank. Descon submitted that the offer was a reasonable one, and that it could not remain open for a longer period because a mention was scheduled in Court on 21 July 2022. The following things should be noted in respect of that submission. First, on any view, the time in which the offer was open was very short. Second, while the Court had called the matter on for mention on 21 July 2022, the trial was still set down to commence on 25 July 2022, some 4 days later. No reason was advanced as to why the offer could not, at least, have been open for acceptance until that time. Third, the fact that offer was made so close to the trial and was only open for a short period is entirely a situation of Descon’s making. It could have made the offer earlier. It would have been well known to Descon for some considerable time before that (at least from 14 June 2021, and certainly by the time that it came to filing its trial material in February 2022) that its case against Mr Rodd in evidentiary terms had not advanced beyond what was contained in the affidavit of Mr Quinn filed 25 February 2021. Fourth, by the time this offer was made, Mr Rodd had incurred most if not all of the costs he would likely have incurred in respect of trial preparation. The offer was, in short, too little, too late. The offer was not a reasonable one, and it was reasonable in the circumstances for Mr Rodd to reject the offer.
Given what I have set out above, section 570(2)(b) is engaged in this matter. By 14 June 2021, Descon was in receipt of a detailed response from Mr Rodd in relation to Mr Wavish’s alleged unauthorised absences, and an offer made pursuant to Calderbank principles. That response and offer did not cause a reappraisal of the situation as it should have done. Descon’s refusal to accept the offer of 14 June 2021 and its persistence with the litigation after that date was an unreasonable act or omission.
Descon’s decision to file the Amended Cross Claim was also a further unreasonable act. There was no basis for seeking general damages of $25,000 or advancing an allegation that Mr Rodd covertly concealed his actions. Descon’s late decision on the eve of the trial not to press that claim provides further support for the conclusion that claim was doomed to fail from the start and should never have been brought.
Each of the unreasonable acts or omissions to which I have referred for the reasons I have set out above caused Mr Rodd to continue to incur costs up to the week before trial. Those costs included Mr Rodd having to complete his trial preparations. On the basis of what I have set out above, not only is section 570(2)(b) enlivened in this case, but in my view, Mr Rodd should receive an order for costs in all the circumstances of the case.
costs on an indemnity basis or according to scale
I was not addressed on this issue to any significant extent. Mr Rodd submitted that indemnity costs should be ordered in all the circumstances of the case. Descon opposed any order for costs.
The usual outcome where costs are ordered is that they are payable on a party and party basis. Departure from this practice may only occur in certain circumstances, as noted by Sheppard J in Colgate Palmolive v Cussons Pty Ltd (1993) 46 FCR 225 (‘Colgate Palmolive’) at 230-4. In this jurisdiction, an order of indemnity costs represent a second departure from the underlying policy evidenced in section 570 of the Act.
For the reasons I have set out above, an order for indemnity costs is warranted in this case. The proceedings were instituted against Mr Rodd in order to intimidate and harass him. The proceeding was commenced and then pursued without there being reasonable basis for the pursuit of such claim. The cross-claim was amended to include a claim for general damages that had absolutely no basis in fact. That amendment was pursued even after Descon was on notice about the clear deficiencies in its claim. The Amended Cross-Claim too was pursued to further harass and intimidate Mr Rodd. This is an example of a rare case where the conduct of a litigant warrants a second departure from the underlying policy evidenced by section 570 of the Act. The case is one that clearly falls within the guidelines set by Sheppard J in Colgate Palmolive.
I would also have awarded indemnity costs arising from the failure to accept the Calderbank offer of 14 June 2021.
In CGU Insurance Ltd v Corrections Corporation of Australia Staff Superannuation Pty Ltd [2008] FCAFC 173, a Full Court (Moore, Finn and Jessup JJ) cautioned that ‘there appears to be a view abroad that the failure of a party who has rejected a Calderbank offer ultimately to achieve a better outcome than provided for in the offer leads to a presumptive entitlement to indemnity costs with respect to the period subsequent to the offer. Such a view would be mistaken’ (at [75]). The Full Court went on to note that where reliance is placed on the Court’s general discretion ‘it is necessary for the party seeking indemnity costs to demonstrate the other party’s refusal of the Calderbank offer was unreasonable’. Similarly, Reeves J in Tregidga v Pasma Holdings Pty Ltd (No 2) [2021] FCA 1439 at [12] noted that a party seeking indemnity costs must identify a ‘special or unusual feature in the case’ to justify such an order, and that the rejection of a Calderbank offer may constitute such a special or unusual feature (at [12]).
In my view, an order for indemnity costs arising from the refusal to accept the Calderbank offer is warranted for three reasons. First, from 14 June 2021, the proceedings were continued by Descon against Mr Rodd in wilful disregard of known facts of which it became aware. As at that date, Descon was in possession of a comprehensive response to the allegations it made. No apparent attempt was made to reconsider the case at that point. Subsequent events show its evidentiary position never improved, yet it persisted with the claim. It did so despite knowing Mr Rodd had delegated authority. It also persisted in circumstances where it knew Mr Rodd relied on authorisations apparently given by Mr Lockhart, yet did nothing to seek evidence or instructions from Mr Lockhart. Second, the claim for $25,000 general damages contained in the Amended Cross Claim was groundless, not based on fact, should never have been made and was instituted and pursued for the ulterior purpose of harassing or vexing Mr Rodd. It was advanced in disregard of known facts and established law. Third, armed with all of the facts above, Descon refused to compromise the proceeding after it received offers of compromise on each of 14 June 2021, 16 August 2021 and 6 April 2022. All the features of this case make Descon’s refusal to accept the offer of compromise on 14 June 2021 a special or unusual feature, warranting an indemnity costs order.
should a costs order be made against descon’s lawyers?
Mr Rodd sought that his costs be paid by Descon’s lawyers, Irish Bentley Lawyers (‘IBL’) on an indemnity basis. At the very minimum, he contended IBL should be ordered to pay a proportion of his costs.
Power to order lawyers to pay costs
There are two sources of power available to the Court in the present circumstance. The first is to be found in section 191 of the Federal Circuit and Family Court of Australia Act 2021 (‘FCFCOA Act’).
Section 190 of the FCFCOA Act sets out the overarching purpose of the civil practice and procedure provisions as follows:
Overarching purpose of civil practice and procedure provisions
(1)The overarching purpose of the civil practice and procedure provisions is to facilitate the just resolution of disputes:
(a) according to law; and
(b) as quickly, inexpensively and efficiently as possible.
Note 1: See also paragraphs 5(a) and (b).
Note 2:The Federal Circuit and Family Court of Australia (Division 2) must give effect to principles in the Family Law Act 1975 when exercising jurisdiction in relation to proceedings under that Act.
(2)Without limiting subsection (1), the overarching purpose includes the following objectives:
(a)the just determination of all proceedings before the Federal Circuit and Family Court of Australia (Division 2);
(b)the efficient use of the judicial and administrative resources available for the purposes of the Court;
(c) the efficient disposal of the Court's overall caseload;
(d) the disposal of all proceedings in a timely manner;
(e)the resolution of disputes at a cost that is proportionate to the importance and complexity of the matters in dispute.
(3)The civil practice and procedure provisions must be interpreted and applied, and any power conferred or duty imposed by them (including the power to make Rules of Court) must be exercised or carried out, in the way that best promotes the overarching purpose.
(4)The civil practice and procedure provisions are the following, so far as they apply in relation to civil proceedings:
(a) the Rules of Court;
(b)any other provision made by or under this Act or any other Act with respect to the practice and procedure of the Federal Circuit and Family Court of Australia (Division 2).
Section 191 then provides as follows:
Parties to act consistently with the overarching purpose
(1)The parties to a civil proceeding before the Federal Circuit and Family Court of Australia (Division 2) must conduct the proceeding (including negotiations for settlement of the dispute to which the proceeding relates) in a way that is consistent with the overarching purpose.
(2)A party's lawyer must, in the conduct of such a proceeding before the Federal Circuit and Family Court of Australia (Division 2) (including negotiations for settlement) on the party's behalf:
(a) take account of the duty imposed on the party by subsection (1); and
(b) assist the party to comply with the duty.
(3)The Federal Circuit and Family Court of Australia (Division 2) or a Judge may, for the purpose of enabling a party to comply with the duty imposed by subsection (1), require the party's lawyer to give the party an estimate of:
(a) the likely duration of the proceeding or part of the proceeding; and
(b)the likely amount of costs that the party will have to pay in connection with the proceeding or part of the proceeding, including:
(i) the costs that the lawyer will charge to the party; and
(ii)any other costs that the party will have to pay in the event that the party is unsuccessful in the proceeding or part of the proceeding.
Note:Paragraph (b)--in relation to a family law or child support proceeding, the Federal Circuit and Family Court of Australia (Division 2) may make an order as to costs under section 149 of the Family Law Act 1975 if the Court is of the opinion that there are circumstances that justify it in doing so.
(4)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).
(5)Without limiting the exercise of that discretion, the Federal Circuit and Family Court of Australia (Division 2) or a Judge may order a party's lawyer to bear costs personally.
(6)If the Federal Circuit and Family Court of Australia (Division 2) or a Judge orders a lawyer to bear costs personally because of a failure to comply with the duty imposed by subsection (2), the lawyer must not recover the costs from the lawyer's client.
It is apparent from what is set out above that a party to litigation must conduct the litigation in a way that is consistent with the overarching purpose. A party’s lawyer must take account of the duty posed on the party and assist the party to comply with the duty. In exercising the discretion to award costs, a Judge may take account of any failure to comply with, among other things, a lawyers failure to comply with the duty imposed upon the lawyer under subsection (2), and may order the lawyer to bear costs personally.
The second source of power is to be found within the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (‘Rules’). Rule 22.06 deals with costs orders against lawyers. Relevantly, sub rule (1) provides as follows:
(1)The Court or a Registrar may make an order for costs against a lawyer if the lawyer, or an employee or agent of the lawyer, has caused costs:
(a) to be incurred by a party or another person; or
(b) to be thrown away;
because of undue delay, negligence, improper conduct or other misconduct or default.
Principles
The principles to consider when assessing whether a lawyer for a party should be liable for costs personally were summarised in Mitry Laywers v Barnden [2014] FCA 918 where Wigney J stated:
[42]The relevant principles emerge from three decisions of this Court: the judgment of Goldberg J in White Industries (Qld) Pty Ltd v Flower & Hart [1998] FCA 806; (1998) 156 ALR 169; and two Full Court decisions; Levick; and Macteldir v Roskov [2007] FCAFC 49. The principles may be summarised as follows:
1.Instituting or maintaining a proceeding on behalf of a client which has no, or substantially no, prospect of success will not, without more, invoke the jurisdiction to make a costs order against a lawyer.
2. Something which involves “unreasonable conduct” is required.
3.What constitutes unreasonable conduct will depend on the circumstances of the particular case.
4.The element of acting unreasonably involves some deliberate or conscious decision taken by reference to circumstances unrelated to the prospects of success, with either a recognition that there is no chance of success, or an intention to use the proceeding for an ulterior purpose, or to abuse the processes of the court, or with a disregard of any proper consideration of the prospects of success.
5.The circumstances must involve or result in a serious dereliction of duty owed to the court, or serious misconduct in promoting the course of, and the proper administration of, justice.
6.An ulterior purpose or an abuse of process cannot be assumed simply because the case is hopeless.
7.The reason that the mere pursuit of an unmeritorious case is not so sufficient to invoke the jurisdiction to make a costs order against a lawyer is that a party is entitled to have a practitioner act for him or her in an unmeritorious case. The court is concerned to avoid the risks of a practice developing whereby lawyers endeavour to browbeat their opponents into abandoning clients, or particular issues or arguments, for fear of personal costs orders being made against them.
More recently, in Harvey v Dioceses of Sale Catholic Education Ltd (St Joseph’s Primary School Wonthaggi) (No 3) [2021] FCA 1420, O’Callaghan J emphasised that costs orders against lawyers should be approached with great caution. His Honour stated:
[34]It is, of course, the case that the power to make orders that legal practitioners bear costs personally is to be exercised sparingly and with great caution. One of the reasons that is so is “the risk of a practice developing whereby solicitors endeavour to browbeat their opponents into abandoning ... particular issues or arguments, for fear of a personal costs order being made against them”…
Consideration
Mr Rodd submitted that a costs order should be made against IBL for reasons that include the following: that IBL’s conduct in pursuing and maintaining the proceedings against Mr Rodd was conduct that was not consistent with the obligations on a solicitor set out in rule 21 of the Australian Solicitor Conduct Rules (‘ASC Rules’) or sections 190 and 191 of the FCFCOA Act; that the allegations against Mr Rodd essentially amounted to allegations that he and Mr Wavish defrauded Descon and there was not a reasonable basis for the allegations and that IBL omitted relevant and essential documentary evidence (the Delegation) when compiling witness affidavits and its affidavit of disclosure.
It is convenient to deal with the last submission first. Mr Quinn purported to attach to his affidavit a copy of the Delegation, but did not do so. The Delegation was an important document because it went to the question of whether Mr Rodd had the authority to approve leave for Mr Wavish. In an affidavit filed in support of his application for costs, Mr Rodd’s solicitor Sean Sullivan, deposes that the Delegation was not produced in response to a request from Mr Wavish’s solicitors on 4 June 2021. Mr Sullivan also deposes that the Delegation was not disclosed in Descon’s affidavit of disclosure served on 2 December 2021 nor is it attached to the affidavit of Mr Sneeden (a witness to be called by Descon at trial) on 4 March 2022. In a further affidavit filed after I had concluded hearing the oral application for costs, Mr Sullivan deposed that it is apparent from the draft Court Book index which was circulating between the parties prior to trial that IBL did not intend to include the Delegation in the Court Book. Mr Sullivan goes on to depose that he ultimately had to obtain a copy of the document from Mr Wavish’s solicitor.
I have considered carefully the affidavits of Mr Sullivan and the various affidavits of Mr Devitt, Descon’s solicitor. I accept that the Delegation was not attached to Mr Quinn’s affidavit. It also seems that the Delegation was not disclosed as a separate document in the affidavit of disclosure filed on 2 December 2021, a serious matter. It is clear, however, that a copy of the Delegation was produced to Mr Wavish’s solicitors on 4 June 2021. It is also clear that on 4 June 2021, Mr Devitt filed an affidavit that attached the missing Delegation. That affidavit was on the Court file, available for all to see. Moreover, in that affidavit, Mr Devitt disclosed openly that the attachments to Mr Quinn’s affidavit were missing and that this was an ‘inadvertent omission’.
As to the submission that IBL sought not to include the Delegation in the Court Book, that submission cannot be accepted. Mr Devitt sent an amended Court Book index to Mr Sullivan on 18 July 2021 that included documents including the Delegation. Moreover, it appears that when asked for his comments on the index, Mr Sullivan on 18 July 2022 at 12:36pm said he had nothing further to add to the Court Book.
When these matters are considered, I am of the view that IBL did not deliberately seek to withhold the Delegation from Mr Rodd. While I have made this finding in the circumstances before me, I wish to make it plain that I regard the failure to disclose the Delegation in an affidavit of disclosure as serious even if it occurs inadvertently. I expect solicitors that prepare such affidavits to do so with requisite care. It is inexplicable to me how a solicitor can purport to attach a document to one affidavit, but fail to account for it in disclosure.
I now deal with the remainder of the submissions. I have set out the relevant parts of the Cross Claim and sections 190 and 191 of the FCFCOA Act earlier. Rules 21.1 to 21.4 of the ASC Rules provide as follows:
21.1A solicitor must take care to ensure that the solicitor’s advice to invoke the coercive powers of a court:
21.1.1 is reasonably justified by the material then available to the solicitor;
21.1.2is appropriate for the robust advancement of the client’s case on its merits;
21.1.3 is not made principally in order to harass or embarrass a person; and
21.1.4is not made principally in order to gain some collateral advantage for the client or the solicitor or the instructing solicitor out of court.
21.2A solicitor must take care to ensure that decisions by the solicitor to make allegations or suggestions under privilege against any person:
21.2.1 are reasonably justified by the material then available to the solicitor;
21.2.2are appropriate for the robust advancement of the client’s case on its merits; and
21.2.3 are not made principally in order to harass or embarrass a person.
21.3 A solicitor must not allege any matter of fact in:
21.3.1 any court document settled by the solicitor;
21.3.2 any submission during any hearing;
21.3.3 the course of an opening address; or
21.3.4the course of a closing address or submission on the evidence,
unless the solicitor believes on reasonable grounds that the factual material already available provides a proper basis to do so.
21.4A solicitor must not allege any matter of fact amounting to criminality, fraud or other serious misconduct against any person unless the solicitor believes on reasonable grounds that:
21.4.1available material by which the allegation could be supported provides a proper basis for it; and
21.4.2the client wishes the allegation to be made, after having been advised of the seriousness of the allegation and of the possible consequences for the client and the case if it is not made out.
In the cross-claim, Descon made allegations that Mr Rodd acted dishonestly, concealed absenteeism and covertly concealed his actions. Each of these allegations were allegations that Mr Rodd had committed or engaged in serious misconduct. They also amounted to an allegation of fraud committed by Mr Rodd.
Where an allegation of fraud or other serious misconduct is to be made, Rule 21.4 of the ASC Rules makes plain that a solicitor must not make such an allegation unless the solicitor believes on reasonable grounds that available material by which the allegation could be supported provides a proper basis for it; and the client wishes the allegation to be made after having been advised of the seriousness of the allegation and the possible consequences for the client and the case if it is not made out. There is no evidence from IBL as to how it sought to comply with these obligations.
The position in the Rules is reflective of the statement by Goldberg J in White Industries (Qld) v Flower & Hart (1998) 156 ALR 169 at 242 when dealing with an allegation of fraud and the costs consequences that may follow. Goldberg J said that ‘as a matter of principle an unwarranted allegation of fraud by a solicitor or, putting the matter more precisely, an allegation of fraud when there is no factual basis for it is sufficient, in my view to constitute a serious dereliction of duty for serious misconduct by a solicitor which will enliven jurisdiction to order costs against the solicitor’.
In Ryan, Mortimer J considered whether a costs order should be made against lawyer. At paragraph [74] of her reasons, Mortimer J considered the situation where a client forms an impression and then seeks advice and representation from a lawyer. Mortimer J stated ‘Part of the skill, Judgement, knowledge and experience for which a client retains a lawyer is to examine the factual account given by the client and exercise professional judgement about whether or not there is a foundation in law, and likely admissible evidence to support that foundation, for a claim to be made in the way the client wishes’. At paragraph [75], Mortimer J stated that the lawyer in that case had been ‘too ready’ to make allegations, that the lawyer had had the inappropriateness of the claim drawn to his attention which ought to have led to a reconsideration of claim. In that circumstance, Mortimer J considered that the lawyer should take the burden of the conduct attributed to the applicant under section 570(2) of the Act.
IBL was required to take care to ensure the decisions it made in relation to allegations made against Mr Rodd were reasonably justified by the available material and not made principally in order to harass him (rule 21.2). IBL was required to comply with rule 21.4 of the ASC Rules insofar as allegations of fraud or serious misconduct were made against Mr Rodd. It was required to assist Descon to comply complied with the overarching purpose in the FCFCOA Act to facilitate the just resolution of disputes according to law and as quickly, inexpensively and efficiently as possible.
IBL did not file any material in relation to how it sought to comply with the obligations above. It has not done so in circumstances where I have found as follows. That Cross Claim was initiated and pursued principally to harass and intimidate Mr Rodd. There was no basis for the claim against Mr Rodd to be pursued given the strength (or lack thereof) of the evidence of Mr Quinn and the rebuttal evidence and other facts that subsequently emerged. There was no basis for the claim of fraud or serious misconduct to be levelled against Mr Rodd that he had acted dishonestly, or concealed absenteeism, or covertly concealed his actions. There was no basis for the claim for general damages.
The absence of any evidence from IBL about these matters means it is not possible to make findings as to its precise role in what occurred in this case. What is clear is that Descon engaged lawyers to assist it. In doing so, it was entitled to rely on their professional expertise and judgement. What occurred in this case, it seems to me, could have occurred in any one of the following ways. IBL drew the pleading to include the claim and advised their client about it, including to file it and pursue it. Alternatively, Descon sought advice and instructed IBL to pursue the claims and IBL simply carried out Descon’s instructions, without properly checking to see whether there was a legal and factual basis for the inclusion of that claim. Another alternative is that the decision to pursue the claims was made jointly by Descon and IBL.
Whether it is one of these scenarios or some other, there can be no doubt as to the following. First, IBL was involved in the pursuit of this claim in this court. Second, by its involvement and in the absence of any evidence from it given the other findings I have made, IBL acted contrary to the obligations imposed on it under the ASC Rules, the FCFCOA Act and failed to exercise the skill and judgment of which Mortimer J spoke in Ryan. If the pursuit of the claim was its idea, IBL acted inconsistently with obligations imposed on it that I have identified under the ASC Rules and acted inconsistently with sections 190 and 191 of the FCFCOA Act. If Descon sought the pursuit of the claim, then IBL failed to comply with rule 21.4 of the ASC Rules and did not comply with its obligations under section 190 and 191 of the FCFCOA Act. This is therefore an appropriately exceptional case in which solicitors should be required to pay a portion of the costs.
No submissions were advanced as to what the percentage split should be in the event I arrived at the conclusion above (other than Mr Rodd’s general submission that IBL should bear all of the costs). In circumstances where there is no evidence as to the role each of Descon and IBL played in the pursuit of the cross-claim, but where they have acted together to prosecute the cross-claim, the only appropriate outcome is that each should bear equal responsibility for what occurred. The proper outcome is that IBL and Descon each pay 50% of Mr Rodd’s costs on an indemnity basis from the date the cross claim was instituted. Orders will be issued to that effect.
I certify that the preceding ninety-one (91) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Blake. Associate:
Dated: 3 November 2022
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