ZAHRA v Pharmacy Management Avoca Beach Pty Ltd (No.2)

[2015] FCCA 1515

FEDERAL CIRCUIT COURT OF AUSTRALIA

ZAHRA v PHARMACY MANAGEMENT AVOCA BEACH PTY LTD (No.2) [2015] FCCA 1515

Catchwords:
INDUSTRIAL LAW – Fair Work – costs application – whether the application was vexatious and unreasonable – costs awarded against the applicant.

Legislation:

Fair Work Act 2009, ss.336, 340, 351, 570

Kelly v Fitzpatrick [2007] FCA 1080
Stanley v Service to Youth Council Incorporated (No 3) [2014] FCA 716

Applicant: NICOLE ZAHRA

Respondent: PHARMACY MANAGEMENT AVOCA BEACH PTY LTD

File Number: SYG 38 of 2014

Judgment of: Judge Street

Hearing date: 2 June 2015

Date of Last Submission: 2 June 2015

Delivered at: Sydney

Delivered on: 2 June 2015

REPRESENTATION

Counsel for the Applicant: Mr R. de Meyrick

Solicitors for the Applicant: CBD Law

Counsel for the Respondent: Ms M. Linkenbagh

Solicitors for the Respondent: Dina Lawyers

ORDERS

1. The application be dismissed. 

2. The applicant pay the first respondent’s costs fixed in the sum of $5000.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT SYDNEY

SYG 38 of 2014

NICOLE ZAHRA

Applicant

And

PHARMACY MANAGEMENT AVOCA BEACH PTY LTD

Respondent

REASONS FOR JUDGMENT

1. This is an application for costs under s.570 of the Fair Work Act 2009 in circumstances where the Court has dismissed the application. Section 570 provides:

   (1)  A party to proceedings (including an appeal) in a court (including a court of a State or Territory) exercising jurisdiction 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.

   (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 FWA;

   (ii)  the matter arose from the same facts as the proceedings.

2. The explanatory memorandum to the amendment provides:

   Section 570 of the FW Act provides for courts exercising jurisdiction under the FW Act to award costs against a party to proceedings (including appeals) only in circumstances where the court is satisfied that the party instituted proceedings vexatiously or without reasonable cause, the party’s unreasonable act or omission caused the other party to incur costs, or the party unreasonably refused to participate in a matter before FWA that arose from the same facts as the court proceedings. Part 1 of Schedule 10 to the Bill will amend section 570 of the FW Act so that it operates in relation to matters arising under the FW Act, rather than in relation to courts exercising jurisdiction under the FW Act. This amendment confirms that the FW Act is generally a ‘no costs’ jurisdiction (including in appeal proceedings).

3. I accept the applicant's submission that caution must be exercised in relation the application of s.570 and I take into account specifically the object identified in s.336 of Part 3.1 and the principles discussed at [23]-[34] of Stanley v Service to Youth Council Incorporated. The Form 2 initiating process in this case alleged both a breach of s.340 and s.351 and relevantly had attached a schedule of damages as follows,

   1. The Applicant claims $18,720.00 in damages.

   2. At the time of her dismissal the Applicant was receiving a wage of $720.00 per week gross.

   3. To date the Applicant has been unable to obtain new employment since her dismissal on 10 October 2013.

   4. Loss of wages: 16 weeks = $7,200.00

   Future loss of wages: 16 weeks = $11,520.00

   5. Further to this the Applicant is seeking a pecuniary penalty of $33,000.00 as per section 539 and 546(2)(b) of the Fair Work Act 2009.

4. I note that this is a case where the alleged entitlements of the applicant were paid by the respondent prior to the commencement of proceedings and that the respondent had only just commenced carrying on the pharmacy business. The purpose of the penalty provisions is informed both by s.336 and the principles identified in Kelly v Fitzpatrick [2007] FCA 1080:

   14     In Mason v Harrington Corporation Pty Ltd [2007] FMCA 7 Mowbray FM identified "a non-exhaustive range of considerations to which regard may be had in determining whether particular conduct calls for the imposition of a penalty, and if it does the amount of the penalty". Those considerations were derived from a number of decisions of this Court. I gratefully adopt, as potentially relevant and applicable, the various considerations identified by him. They were:

   •    The nature and extent of the conduct which led to the breaches.

   •    The circumstances in which that conduct took place.

   •    The nature and extent of any loss or damage sustained as a result of the breaches.

   •    Whether there had been similar previous conduct by the respondent.

   •    Whether the breaches were properly distinct or arose out of the one course of conduct.

   •    The size of the business enterprise involved.

   •    Whether or not the breaches were deliberate.

   •    Whether senior management was involved in the breaches.

   •    Whether the party committing the breach had exhibited contrition.

   •    Whether the party committing the breach had taken corrective action.

   •    Whether the party committing the breach had cooperated with the enforcement authorities.

   •    The need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements and

   •    The need for specific and general deterrence.

5. It is accepted by the applicant in the present case that the amount of penalty sought was the maximum in the alleged contraventions. In my opinion the case advanced under s.351 was without substance and can be said to both vexatious and unreasonable with the principles identified in Stanley. Section 570 can have application in relation to part of the subject matter of the proceedings. In a case of this kind in respect of the pharmacy business that had just started by the respondent, where the full entitlements demanded upon dismissal were paid, and the circumstances in which it would have been clear to the applicant and the applicant well knew that there was a breakdown in the employment relationship to advance the claim under s.351 and to be seeking pecuniary penalties at all, let alone for the maximum amount was both vexatious and unreasonable.

6. The applicant submitted that the issue raised by s.351 has not added substantially to the context of the proceedings in terms of the costs that may be incurred. I do not accept that submission. Further, the respondent has been faced with an application brought in this Court in respect of which the full pecuniary penalty has been sought against the respondent and an allegation advanced not just a contravention of s.340 but a breach of s.351 that had no reasonable prospect of success and is, in my findings, both vexatious and unreasonable.

7. It was put by counsel for the applicant that if costs are awarded in this case that would give rise to the costs being awarded in every case.  I reject that submission.  Where a case is advanced of a contravention of Part 3.1 of Chapter III it should not follow as a course that there are allegations advanced that it is a case appropriate for the imposition of penalties given the principles that must be taken into account relating to the award of penalties let alone seeking the maximum penalties.  It is a significant exposure for a respondent to be faced with a process in which penalties are being sought in circumstances where the underlying alleged contravention is unreasonable and vexatious.

8. It should not be the case that every application filed for alleged contravention of Part 3.1 seeks penalties for the maximum amount under the Act and to do so in the circumstances of this case is in my opinion unreasonable and vexatious given that the alleged contravention of s.351 is completely lacking in substance. Further, the alleged contravention of s.351 was itself vexatious and unreasonable. Further, in my opinion, to be seeking the maximum penalty in respect of the alleged contravention of s.340 in this case was also unreasonable and vexatious. The full penalty should not be sought in circumstances of a contravention under s.340 unless it is apparent that there is an arguable basis of the alleged contravention that upon both the object of the Act and the factors of the kind identified in Kelly v Fitzpatrick are reasonably capable of requiring a pecuniary penalty for that maximum amount as being reasonably arguable. Where all entitlements claimed were paid at the time of dismissal, to seek penalties for contravention of s.340 may itself be vexatious and unreasonable. I find that the claim for maximum penalty for the contravention s.340 in these proceedings was itself vexatious and unreasonable.

9. This was not a case in which it could possibly be said that the respondent had engaged in conduct that would have warranted the maximum penalty. I find that the circumstances in this case were not reasonably capable of requiring a penalty and that the claim for the maximum amount in respect of either alleged contravention was no reasonably arguable. Costs are ordered in the amount fixed as being in respect of the costs incurred by the respondent for the s.351 alleged contravention and for the alleged penalty claims for both alleged contraventions.

I certify that the preceding nine (9) paragraphs are a true copy of the reasons for judgment of Judge Street

Associate: 

Date: 4 June 2015