Welsh v Allblend Holdings Pty Ltd (No.3)
[2010] FMCA 378
•4 June 2010
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| WELSH v ALLBLEND HOLDINGS PTY LTD (No.3) | [2010] FMCA 378 |
| INDUSTRIAL LAW – Costs – where matter listed for hearing – where no notice of intended amended response and defence and institution of cross-claim prior to mediation – whether unreasonable act or omission. |
| Fair Work Act 2009 (Cth), s.570 Federal Magistrates Act 1999 (Cth), ss.3, 18, 42 Federal Magistrates Court Rules 2001 (Cth), r.1.03 Workplace Relations Act 1996 (Cth), s.824 |
| Construction, Forestry, Mining and Energy Union v Clarke (2008) 170 FCR 574; [2008] FCA 143 Ginger Roger Pty Ltd v Parrella Enterprises Pty Ltd (No. 2) [2010] FCA 128 Hughes v Mainrange Corporation Pty Ltd(No. 2) (2009) 190 IR 351; [2009] FMCA 1044 Rentuza v Westside Auto Wholesale (2009) 236 FLR 231; [2009] FMCA 1022 Welsh v Allblend Holdings (No. 1) [2010] FMCA 281 Welsh v Allblend Holdings (No. 2) [2010] FMCA 377 |
| Applicant: | PENELOPE JANE WELSH |
| Respondent: | ALLBLEND HOLDINGS PTY LTD |
| File Number: | PEG 176 of 2009 |
| Judgment of: | Lucev FM |
| Hearing date: | 24 May 2010 |
| Date of Last Submission: | 24 May 2010 |
| Delivered at: | Perth |
| Delivered on: | 4 June 2010 |
REPRESENTATION
| Counsel for the Applicant: | Mr M.W. Fatharly |
| Solicitors for the Applicant: | Kott Gunning |
| Counsel for the Respondent: | Mr K. Malhotra |
| Solicitors for the Respondent: | Taylor Smart |
ORDERS
That the applicant’s application for costs:
(a)thrown away of mediation on 30 November and 7 December 2009; and
(b)of the respondents interim application to amend its response and defence and institute a cross-claim,
be dismissed.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT PERTH |
PEG 176 of 2009
| PENELOPE JANE WELSH |
Applicant
And
| ALLBLEND HOLDINGS PTY LTD |
Respondent
REASONS FOR JUDGMENT
Introduction
In Welsh v Allblend Holdings Pty Ltd[1] this Court granted an interim application[2] by the respondent, Allblend Holdings Pty Ltd,[3] for leave to amend its response and defence and to institute a cross-claim against the applicant, Penelope Jane Welsh,[4] and a new respondent, 2B Wizards Pty Ltd.
[1] [2010] FMCA 281 (“Allblend Holdings (No. 1)”).
[2] “Interim Application”
[3] “Allblend Holdings”.
[4] “Ms Welsh”.
The issue of costs arose in the context of possible prejudice to Ms Welsh in granting leave to amend the pleadings, and then again at the time when the judgment in Allblend Holdings (No. 1) was handed down. At that time, the question of costs was adjourned to a directions hearing six days later. Due to the non-attendance of any representative for Allblend Holdings that directions hearing was subsequently adjourned to 24 May 2010. On 24 May 2010 Counsel for Allblend Holdings advised the Court that he had been unable to obtain any instructions on the matter, and was therefore not in a position to advance argument on the question of costs. The matter having been:
a)adjourned once because of the non-attendance of any representative for Allblend Holdings; and
b)set down on 29 April 2010 for further hearing on costs on 24 May 2010,
the Court determined to hear argument from Counsel for Ms Welsh on the question of costs. The Court did so having regard to statutory provisions which require it to act informally, without undue protraction, and using streamlined procedures.[5] These Reasons for Judgment deal with the question of costs.
[5] Federal Magistrates Act 1999 (Cth), ss.3 and 42 (“FM Act”). See also Federal Magistrates Court Rules 2001 (Cth), r.1.03 (“FMC Rules”).
The costs application
Ms Welsh has made application for the costs:
a)thrown away in two mediations on 30 November and 7 December 2009; and
b)of the Interim Application to amend the response and defence and institute a cross-claim.
In the event that Ms Welsh’s application were to be successful she may also be entitled to seek the costs of the costs hearing and attendance for the taking of these Reasons for Judgment.
Allblend Holdings (No. 1)
The application for the costs of the mediation conferences arises against the background of the Interim Application filed by Allblend Holdings, on which the Court ruled in Allblend Holdings (No. 1).
In Allblend Holdings (No. 1) the Court observed that:
49. The Court cannot say that the Interim Application was made too late in the proceedings and that Allblend Holdings had had a sufficient opportunity to plead its case. On the contrary, whilst the Interim Application could have been made prior to mediation going ahead, or during the mediation, the timing of the Interim Application is not such as to prejudice Ms Welsh so much that that prejudice cannot be rectified by:
a)an opportunity to file a reply and defence to cross-claim; and
b)the possibility of an award of costs under s.824 of the WR Act.[6]
[6] Allblend Holdings (No. 1) at para.49 per Lucev FM. The reference to the “WR Act” is to the Workplace Relations Act 1996 (Cth) (“WR Act”).
The Court went on to find that the reason for the delay in seeking leave to file the application to amend the pleadings had been adequately explained in that Allblend Holdings’ solicitor thought it a more judicious approach to await the outcome of mediation prior to making an application to amend the pleadings, given that it was possible that the matter might settle at mediation. That, as the Court pointed out, might have resulted in cost savings for Allblend Holdings.[7] As noted above,[8] the Court granted Allblend Holdings’ Interim Application.
[7] Allblend Holdings (No. 1) at para.50 per Lucev FM.
[8] See para.1 above.
Relevant facts
The relevant facts are as follows:
7. The Interim Application is supported by an affidavit sworn by Peter Albert Nevin, a partner in the firm of Taylor Smart. Mr Nevin has the conduct of the case on behalf of Allblend Holdings. The essence of that affidavit is that:
a) Counsel was engaged on 19 November 2009 in preparation for the mediation;
b) the response and defence filed on 23 November 2009 were prepared by Mr Nevin and were not reviewed by Counsel prior to being filed;
…
d) Counsel subsequently reviewed the matter and recommended that a cross-claim be commenced against Ms Welsh and that 2B Wizards be joined as a respondent to that cross-claim;
e)as mediation was imminent, instructions were not sought to make the Interim Application to amend the response and defence and to institute a cross-claim prior to mediation as Mr Nevin considered that it was appropriate in all the circumstances to await the outcome of mediation before doing so;
f) mediation took place in the case on 30 November and 7 December 2009, and was finalised, without success; and
g)the interim application was filed on 10 December 2009.[9]
[9] Allblend Holdings (No. 1) at para.7 per Lucev FM (footnote removed).
In summary, Allblend Holdings did not, for reasons set out above, put Ms Welsh on notice of the proposed amended pleadings prior to or during the mediation conferences, and the next working day after the mediation had completed, filed an application for leave to amend the pleadings.
WR Act provisions
Section 824 of the WR Act provides as follows:
(1) A party to a proceeding (including an appeal) in a matter arising under this Act (other than an application under section 663) must not be ordered to pay costs incurred by any other party to the proceeding unless the first‑mentioned party instituted the proceeding vexatiously or without reasonable cause.
(2) Despite subsection (1), if a court hearing a proceeding (including an appeal) in a matter arising under this Act (other than an application under section 663) is satisfied that a party to the proceeding has, by an unreasonable act or omission, caused another party to the proceeding to incur costs in connection with the proceeding, the court may order the first‑mentioned party to pay some or all of those costs.
Until now this matter has been conducted in the Fair Work Division of this Court. Therefore, as the Court observed in Allblend Holdings (No. 1),[10] s.824 of the WR Act applies, notwithstanding that the cross-claim brings in matters under the Court’s statutory associated jurisdiction under s.18 of the FM Act.
[10] Allblend Holdings (No. 1) at paras.66-67 per Lucev FM.
In Construction, Forestry, Mining and Energy Union v Clarke[11] the Full Court of the Federal Court said:
[28] We turn now to s 824(2) of the WR Act. This provision carves out another exception to the usual rule in s 824(1) that costs orders are not to be made in respect of proceedings in a matter arising under the WR Act. The exception applies when two criteria are satisfied. The first criterion is that one party must have engaged in “an unreasonable act or omission”. As the reasoning of Tracey J in Australian and International Pilots Association v Qantas Airways Ltd (No 3) (2007) 162 FCR 392 and Siopis J in McAleer v University of Western Australia (No 2) (2007) 161 IR 151 demonstrates, whether a party has conducted itself or its litigation in such a way as to cross this threshold will depend on the particular circumstances of the case. The second criterion is that the act or omission of one party must have “caused another party to the proceeding to incur costs in connection with the proceeding”. Once both criteria are satisfied, then the Court “may” in its discretion order the party which has engaged in the unreasonable act or omission to pay some or all of the costs of the other party.
[29] In our view, the respondent has not engaged in “an unreasonable act or omission”. As the authorities indicate, there is a distinction between a party who pursues arguments which are ultimately abandoned or rejected by the Court and a party who commences a proceeding which is misconceived in the sense of being incompetent or unsupportable: Australian and International Pilots Association 162 FCR at 402; Standish v University of Tasmania (1989) 28 IR 129 at 138-139. Simply because a party does not conduct its litigation in the most efficient way does not mean that the Court should exercise its discretion in s 824(2) of the WR Act to make a costs order. In our view, neither the late abandonment of some of its defence, nor the use of a notice of contention to advance a previously minor and ultimately unsuccessful argument, crosses the threshold of being "an unreasonable act or omission" for the purposes of s 824(2). True it is that the concession ultimately given by the respondent that it regarded the decision of Nicholson J as erroneous could have been given earlier. However, it was a concession which was, in light of the decision of this Court on the substantive appeal, properly made and beneficial to the appellants. Although it is arguable that the lateness of the concession may have put the appellants to some extra costs, we are of the view that it cannot be characterised as "unreasonable" in the circumstances of this case. Indeed, while courts should use the discretion in s 824(2) to ensure that parties to litigation arising from the WR Act do not engage in unreasonable acts and omissions which put the other party to undue expense, they should also be careful not to exercise the discretion with too much haste, given that such haste may discourage parties, for fear of an adverse costs order, from pursuing litigation under the WR Act in the manner which they deem best.
[30] The appellants in this case suggest that the respondent's best course was, upon responding to the appeal to this Full Court, "to concede that the foundation of ... the decision of Nicholson J was unsupportable ... and also concede that the Industrial Magistrate erred". We do not accept this proposition. Ideal as this outcome may have been for the appellants, the respondent was entitled to meet the appeal. The mere fact that it could have done so in a different or timelier fashion is not sufficient, in itself, to warrant the making of an adverse costs order against it, particularly where the usual practice in litigation arising from the WR Act is to make no orders as to costs.
[11] (2008) 170 FCR 574; [2008] FCA 143 (“Clarke”).
In Mainrange Corporation (No. 2) this Court summarised the relevant requirements (albeit under the equivalent provision of the FW Act) as follows:
19.For the purposes of s.570(2)(b) two criteria must be fulfilled. They are:
a)that a party must have engaged in an unreasonable act or omission; and
b)that the unreasonable act or omission must have caused another party to incur costs in connection with the proceeding.
20.Whether a party has engaged in an unreasonable act or omission depends upon an objective analysis of the particular circumstances of the case.
21.The exercise of the discretion in s.570(2)(b) is not necessarily engaged because:
a)a party does not conduct litigation efficiently;
b)a concession is made late;
c)a party may have acted in a different or timelier fashion;
d)a party has adopted a genuine but misguided approach.[13]
[13] Mainrange Corporation (No. 2) IR at 355 per Lucev FM; FMCA at paras.19-21 per Lucev FM (footnotes removed).
Unreasonable act or omission
The fact that there was an adequate explanation for the purposes of leave being granted to file amended pleadings does not preclude costs being awarded under s.824 of the WR Act. Rather, it means that in a case where costs are ordered, an otherwise unreasonable act or omission has been adequately explained for the purposes of granting leave to amend pleadings. The two matters are not mutually exclusive.
In determining whether an act or omission is unreasonable for the purposes of s.824(2) of the WR Act it must be remembered that the primary position is that matters of this type brought before this Court under the WR Act are ordinarily not the subject of a costs order. That contrasts with the position in ordinary federal civil litigation where a matter of this type would probably ordinarily attract a costs order.
The filing of the proposed amendments to the response and defence and institution of a cross-claim was not unreasonable for reasons set out in detail in Allblend Holdings (No. 1).[14] Those amendments introduced significant defences which might have been anticipated, and were “hardly … surprising”.[15] It was suggested in argument that the nature of the amendments was such that they were disproportionate to the original simple claim. It is not, however, unreasonable for a party to rely upon all available defences. There was nothing inherently unreasonable in the amended defence as pleaded, and no application was made by Ms Welsh to strike out those defences.
[14] Allblend Holdings (No. 1) at paras.42-46 per Lucev FM.
[15] Allblend Holdings (No. 1) at para.46 per Lucev FM.
Counsel for Ms Welsh also suggested that the delay in filing the Interim Application was unreasonable. But, as the Court observed in Allblend Holdings (No. 1), the delay in filing was not too late in the context of the history of the conduct of the proceedings,[16] nor could the Court be satisfied, because of the speed with which the proceedings had been conducted to that point, that Allblend Holdings had had sufficient opportunity to properly plead its case.[17] In that factual matrix the mere fact that the matter had been listed for hearing does not advance the argument put by Ms Welsh. No criticism on the ground of delay can be levelled at Allblend Holdings when the Interim Application was filed less than eleven weeks after the application itself was filed, in circumstances where a defence had already been filed which adverted to some of the issues pleaded in greater detail in the proposed amended defence and cross-claim.[18]
[16] Allblend Holdings (No. 1) at para.48 per Lucev FM.
[17] Allblend Holdings (No. 1) at para.49 per Lucev FM.
[18] See generally Allblend Holdings (No. 1) at paras.47-53 per Lucev FM.
There is also reliance by Ms Welsh on Allblend Holdings’ failure to advise her prior to the mediation that an amended response and defence would be filed and a cross-claim instituted. In Allblend Holdings (No. 1) the Court said:
44. The circumstances giving rise to the amendment are far from the class of worst cases. Allblend Holdings could have filed the Interim Application prior to or during the mediation (there were two mediation events, spread over a week) but made a judgment, through its solicitors not to do so. Had Allblend Holdings filed the Interim Application earlier some time and money may have been saved, and it may also be possible that the matter might have been mediated to settlement. The view that Allblend Holdings’ solicitors took concerning not raising the proposed amendments prior to mediation was probably wrong,[19] but understandable insofar as it was decided to await the outcome of mediation before seeking to take instructions to make the application with respect to the proposed amendments. There is no evidence that the course of action adopted by Allblend Holdings was done for any tactical advantage.[20]
[19] And might neatly be contrasted with the approach adopted in Ginger Roger Pty Ltd v Parrella Enterprises Pty Ltd (No. 2) [2010] FCA 128 at para.15 per Collier J, where the amending party gave notice of the intention to seek leave to amend and provided a copy of proposed amendments prior to the mediation (footnote in original quote).
[20] Allblend Holdings (No. 1) at para.44 per Lucev FM.
The conduct of Allblend Holdings is open to criticism. Allblend Holdings’ approach was not the most efficient conduct of the litigation. However, if the matter had settled at mediation in late November or early December of 2009 it would have been both efficient and cost-effective. Thus, whilst Allblend Holdings could have acted differently, or in a timelier fashion prior to mediation by providing a draft of the amended response and defence and the cross-claim which was to be instituted, or at least have corresponded with Ms Welsh concerning the essence of the amended pleadings, the approach adopted was genuine, albeit probably misguided. It was not done for tactical purposes. In those circumstances it cannot be said that the conduct associated with the failure to advise Ms Welsh of the proposed amended response and defence and the institution of a cross-claim prior to mediation was an unreasonable act or omission.
Finally, because the matter was commenced, and is still in, the Fair Work Division of this Court, the submissions on Ms Welsh’s behalf that relied upon the fact that some of the additional matters pleaded were matters ordinarily within the General Division of the Court, is not relevant to whether there was an unreasonable act or omission. Rather, it is a consequence of the manner in which the Parliament has framed the jurisdiction of this Court and allocated it between the two Divisions and given it statutory associated jurisdiction. For reasons set out in Welsh v Allblend Holdings (No. 2)[21] the true position is that the additional matters pleaded are not matters in the General Division, and could not be so because they are matters in the statutory associated jurisdiction and in this instance the statutory associated jurisdiction to the Fair Work Division, not the General Division.
[21] [2010] FMCA 377.
Overall, looking at the conduct of Allblend Holdings, the Court has concluded that there was no unreasonable act or omission for the purposes of s.824(2) of the WR Act.
Because no unreasonable act or omission for the purposes of s.824(2) of the WR Act has been made out, it is unnecessary for the Court to go on to consider whether or not that act or omission actually caused another party (in this case Ms Welsh), to incur costs in connection with the proceeding. Had it been necessary for the Court to do so, Ms Welsh may have had evidentiary difficulties in satisfying the Court that such costs were actually incurred as there was no particular evidence lead by her in relation that issue.
Conclusions and order
In all of the circumstances, the Court has decided that the conduct of Allblend Holdings the subject of this costs application does not constitute an unreasonable act or omission for the purposes of s.824(2) of the WR Act. It follows, therefore, that the applicant’s application for costs:
a)thrown away of mediation on 30 November and 7 December 2009; and
b)of the Interim Application,
must be dismissed. There will be an order accordingly.
I certify that the preceding twenty-three (23) paragraphs are a true copy of the reasons for judgment of Lucev FM
Associate: S. Gough
Date: 4 June 2010
[12] Clarke FCR at 582-583 per Tamberlin, Gyles and Gilmour JJ; FCAFC at paras.28-30 per Tamberlin Gyles and Gilmour JJ. This Court has applied Clarke in relation to costs applications concerning s.570 of the Fair Work Act 2009 (Cth) (“FW Act”), which is the equivalent of s.824 of the WR Act for relevant purposes: see Rentuza v Westside Auto Wholesale (2009) 236 FLR 231 at 237-238 per Lucev FM; [2009] FMCA 1022 at paras.25-28 per Lucev FM; Hughes v Mainrange Corporation Pty Ltd(No. 2) (2009) 190 IR 351 at 355 per Lucev FM; [2009] FMCA 1044 at paras.18-21 per Lucev FM (“Mainrange Corporation (No. 2)”).
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