Zhang v Saiyu Construction Pty Ltd - [2018] FCCA 460

FEDERAL CIRCUIT COURT OF AUSTRALIA

ZHANG v SAIYU CONSTRUCTION PTY LTD

[2018] FCCA 460

Catchwords:
INDUSTRIAL LAW – Small claim under Fair Work Act and Federal Circuit Court Rules – application to set aside orders made in absence of the Respondent – where the Application is refused.

Legislation:

Fair Work Act 2009, s.545

Federal Circuit Court Rules 2001, rr.16.05, 45.11, 45.12

Cases cited:

Matthews v Sellars [2017] FCCA 2323

NAJN v the Minister for Immigration (2003) FMCA 414

Victorian Supreme Court in Lord v Safeway (1996) 1 VR 614

Applicant:

ZHANG

Respondent:

SAIYU CONSTRUCTION PTY LTD

File Number:

SYG 722 of 2017

Judgment of:

Judge Altobelli

Hearing date:

20 February 2018

Date of Last Submission:

20 February 2018

Delivered at:

Sydney

Delivered on:

23 February 2018

REPRESENTATION

The Applicant appeared in person.

Counsel for the Respondent:

Mr Mahendra

Solicitors for the Respondent:

W & H Lawyers Australia

ORDERS

The Application in a Case filed 6 October 2017 is dismissed.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT SYDNEY

SYC 722 of 2017

ZHANG

Applicant

And

SAIYU CONSTRUCTION PTY LTD

Respondent

ORAL REASONS FOR JUDGMENT

By way of an Application in a Case filed on 6 October 2017, Saiyu Constructions Pty Ltd (‘Saiyu’) - the Respondent in substantive proceedings initiated by Zhitao Zhang - applies to set aside, pursuant to r.16.05(2)(a) of the Federal Circuit Court Rules 2001, the Order made by the Court on 29 September 2017. The Order sought to be set aside was an Order that the Respondent pay to the Applicant, Mr Zhang $12,000.00 within two months.
The Order was made on an undefended basis as there was no appearance by or on behalf of the Respondent when the matter was called at 10.58 am and then at 12.15 pm. The procedural history of the substantive claim is that it was filed on 13 March 2017, came before the Court for the first time on 21 July 2017 and on that date Orders were made as follows: Mr Zhang (solicitor and not the Applicant in this case) was granted leave to appear for the Respondent, the Applicant was granted leave to file and serve an amended application within 21 days, the Respondent was directed to file and serve his response and affidavit within 63 days, that is, by 22 September 2017, and the matter was stood over to 29 September 2017 at 11 am. The principal of the Respondent was ordered to attend in person. On 21 September 2017, the Response was filed. It is a somewhat minimalist document that asserts that the relationship between the Applicant and the Respondent was one of independent contractor and not employer and employee. It is important to note that the affidavit of the Respondent was not filed by 22 September 2017 as directed.
Rule 16.05 states as follows:
The Court may vary or set aside its judgment or order after it has been entered if (a) the order is made in the absence of the party.
Rules 45.11 and 45.12 are also relevant in this regard. Rule 45.11 sets out the small claims procedure. The rules are as follow:
45.11 Small claims procedure
(1) An applicant may request that an application for compensation be dealt with under this Division if:
(a) the compensation is not more than $20 000; and
(b) the compensation is for an entitlement mentioned in subsection 548(1A) of the Fair Work Act.
(2) The Court is not bound by any rules of evidence and procedure when dealing with a small claims application and may act:
(a) in an informal manner; and

(b) without regard to legal forms and technicalities.

45.12 Starting proceedings
A small claim application must:
(a) be in accordance with the approved form; and
(b) be accompanied by a claim in accordance with the approved form.

Note 1: Sections 545 and 548 of the Fair Work Act state the orders the Court may make.
Note 2: Part 4 of Chapter 1 sets out the general rules concerning how to start proceedings.

Note 3: An application filed under this rule need not be accompanied by an affidavit, statement of claim or points of claim in accordance with rule 4.05.

I wish to highlight that in 45.11(2), it says:
The Court is not bound by any rules of evidence and procedure when dealing with a small claims application and may act (a) in an informal manner and (b) without regard to legal forms and technicalities.
The evidence in support of the Respondent’s Application in a Case is the affidavit of Mr Zhang, a director of Saiyu, which goes to the question of arguable case and that was filed on 8 November 2017. In addition, there is the affidavit of Bell Lu, Solicitor, giving an explanation for non-appearance, that was filed on 11 December 2017.
One example of the applicable law is the decision of this Court in NAJN v the Minister for Immigration (2003) FMCA 414 at [7]:
This is not a case where both parties consent to the setting aside of the orders. The respondent opposes such a procedure. The court has a discretion under Rule 16.05(2)(a) to set aside a judgment. Such discretion must be exercised with caution having regard to the importance which the public interest has in the finality of litigation recognising the tension between the public interest in the expeditious conduct of litigation and the obligation of the court to ensure litigants have the opportunity to present a case where there is a real dispute. The power is generally not to be exercised unless the applicant can show that by accident and without fault on his part the order was made without his being heard. It is necessary to look at the whole of the circumstances. (Australian Fisheries Management Authority v P.W. Adams Pty Limited No.2 (1996) 66 FCR 349).
A useful statement of the law and procedure is contained in the LexisNexis Practice and Procedure at 69793.5 as follows:
[69,793.5] Setting aside
Rule 16.05 confers a discretion which requires the consideration of three factors, and whether, on balance, they tend for or against the reinstatement. The factors are:
(a)
whether there was a reasonable excuse for the party’s absence from the hearing in which the proceeding was struck out;
(b)
the existence and nature of any prejudice which might flow to the other party from the reinstatement, and the extent, if any, to which that prejudice can be assuaged by an adjournment, an order for costs or other relief which the court is empowered to grant;
(c)
whether the applicant has a reasonably arguable prospect of success on the substantive application. As North J said in MZKAJ v Minister for Immigration and Multi-Cultural and Indigenous Affairs (2005) FCA 1066 at [18]:
The decision whether to reinstate … depends, however, not only on the existence of a reasonable explanation for the need to adjourn …, but also whether the [proceeding], if reinstated, has a reasonable chance of success.If not, there is no purpose in reinstatement.
In MZYEZ v Minister for Immigration and Citizenship [2010] FCA 530; BC201003588 per Ryan J the Federal Court found at [12] the discretion miscarried because the applicant for reinstatement did not have an opportunity to put any submissions in support of the proposition that he had an arguable case for judicial review.
In BTR15 v Minister for Immigration and Border Protection [2016] FCA 892; BC201606762 Edelman J at [13] applied the principles formulated by Ryan J in MZYEZ and found that the primary judge in refusing leave for reinstatement had acted properly.
In Malak & Malak [2016] FamCAFC 114; BC201650510 Bryant CJ, Ryan and Kent JJ at [62] found that the primary judge was obliged to consider the factors bearing upon the exercise of discretion under r 16.05(2) even if the party seeking reinstatement consented to the dismissal of the application. At[95] the Court found that the rule requires the exercise of discretion which is unfettered but nonetheless to be exercised judicially, bearing in mind the public interest in there being an end to litigation. At [96] the Family Court identified the three criteria bearing upon the exercise of discretion in the following terms:
1.
Is there an adequate explanation proffered by the absent party for their failure to appear? If not, principles of the importance of finality would ordinarily see the relief pursuant to the Rules refused (Nicholson v Nicholson [1974] 2 NSWLR 59; (1974) 4 ALR 212 at [64] ; Maxwell-Smith v Donnelly [2012] FCA 154; BC201200889 ).
2.
The necessity for an applicant to demonstrate an arguable case for the relief sought. That is, a case which is credible with real prospects of success (Aboriginal Corporations, Registrar of v Murnkurni Women's Aboriginal Corp (in liq) (1995) 58 FCR 125; 137 ALR 404). In other words, material arguments available to the applicant that might reasonably lead to the making of an order different to that sought to be set aside.
3.
No prejudice to the party with the benefit of the order sought to be set aside that is not able to be adequately addressed by the court.
In Hudson v Sigalla (No 3) [2016] FCCA 2140; BC201607537 Judge Driver considered variation of a costs order under r 16.05(2)(f). The Court found that while the rule would support a variation of the costs order identifying a different person or persons who would have the benefit of the costs order, it would not support a variation of the process for determination of the costs, because the procedural part of the order was not in favour of one party over another. Note that the correctness of this reasoning was rejected on appeal in the Federal Court. See Hudson v Sigalla [2016] FCA 1204; BC201610186 per Katzmann J at [43].
There are three issues for the Court: first, was there a reasonable excuse for the Respondent’s absence from the hearing at which the order was made? The evidence in this regard is Ms Lu’s affidavit of 11 December 2017. She explains that when instructions were taken on 10 July 2017, the matter was assigned to Mr Zhang, who then resigned in September 2017 - at which time the matter became her sole responsibility. She was not aware of the directions hearing and did not diarise the date, and therefore, she asserts, it was not the fault of the Respondent.
The evidence, however, does not deal with a number of very important matters. There is no evidence about when Mr Zhang resigned. The order sought to be aside was made on 29 September 2017. Did Mr Zhang resign on 1 September or 28 September 2017, the Court asks rhetorically. Did he, in fact, resign on 29 September 2017? When did Ms Lu look at the file? When did she discover the date? Did Mr Zhang, the solicitor, advise the Respondent of the Orders made on 21 July 2017, especially the Order that the principal of the company attend in person? If so, when? All of this is relevant evidence which the Court infers the Respondent was capable at all times of putting before the Court but has not done so. Significantly, it is evidence that goes to whether there was a reasonable excuse for the Respondent’s absence. For example, how can the Court find that the principal of the Respondent had a reasonable excuse not to attend if the Court does not know whether the Respondent was told of the order made on 21 July 2017 to attend in person?
Counsel for the Respondent argued that a solicitor’s error should not be visited on the Respondent. The obvious problem with that is that the evidence does not satisfy the Court that it was the solicitor’s error in circumstances where the Respondent was not present at Court when so ordered, and there is no explanation where the Court infers that the principal of the Respondent would have been told of an order made on 21 July 2017 several months earlier.
Counsel, in any event, referred to the decision of the Victorian Supreme Court in Lord v Safeway (1996) 1 VR 614 as an example of a case where the sins of the solicitor were not visited on the client. But, as stated at page 621 of the decision at line 19, every case must depend on its own facts. The Court there was satisfied on the evidence before it that the client had acted reasonably and promptly and that it was not unreasonable for the client to simply leave the matter in the solicitor’s hands.
This case is different. A personal obligation was put on the principal of the Respondent to attend in person. No adequate explanation is given for his non-appearance. There is no evidence before the Court, for example, that he was not told to attend in person. The Court infers, as it believes it is entitled reasonably to do, that he was so told.
Counsel also referred the Court to a decision of this Court in Matthews v Sellars [2017] FCCA 2323. The discussion of the relevant principles by Judge Brown is found at [75] to [84], and this is useful, but it ultimately does not assist the Respondent. Whilst it is a fulsome explanation of the law, it does not help the Respondent on the facts. In any event, the rule 16.05(2)(a) relief was not granted in that case.
The bottom line is this. Evidence led on this factor, that is, reasonable excuse, is inadequate. There is no reason why the Respondent should be given the benefit of the doubt.
The second issue is whether there is prejudice to the Applicant in setting aside the order. The Respondent says there is none which cannot be compensated by an order for costs or interest. The Applicant says there is prejudice to him as a self-represented litigant who must take time off work and away from his family, let alone the stress of litigation, none of which can be compensated by an order for interest. If the Respondent had succeeded on reasonable excuse, this factor probably would not weigh heavily in the Court’s consideration, but given that reasonable excuse is not established, the prejudice to the Applicant weighs heavily in the Court’s mind.
The third issue is whether there is a reasonably arguable prospect of success. The answer here is yes, but only if the Court were to unequivocally accept the Respondent’s case and unequivocally ignore the Applicant’s case. Whether the relationship of the Applicant and Respondent was employer or employee, or something else is not determined solely by reference to the form of the contract they entered into.
The Applicant, for example, insisted that he was, at all times, under the direction of the principal of the Respondent such that, the Court infers, he did not have the requisite autonomy in respect of the work. Was it an arguable case? Possibly. Given that reasonable excuse is not established, the Court is not prepared to exercise discretion in the Respondent’s favour. It must be remembered that if the Respondent had attended in person or even if he had not done so but had complied with the order to file and serve his evidence, it is highly likely that the Court would have hesitated in proceeding on an undefended basis. Why the Court should exercise its discretion in the Respondent’s favour is hard to discern in all the circumstances.
Some final observations about the Small Claims Rules are worthy. Rules 45.11 and 45.12 are at the heart of this small claims list in Fair Work matters. These are procedural rules which explicitly release the Court from the rules of evidence and procedure. The rules expressly implement s.545(3) of the Fair Work Act 2009. Counsel for the Respondent submitted that these rules do not give the court licence to depart from procedural fairness.
The rules do not deny a party natural justice but natural justice and procedural fairness cuts both ways: for the Applicant and the Respondent. On the facts of this case, to give the Respondent procedural fairness deprives the Applicant of the same thing. Besides, the procedure was not procedurally unfair. This is not a case of default judgment without notice to the Respondent. It is, indeed, far from it. The Respondent was afforded procedural fairness on 21 July 2017. He was given the opportunity to present his case. He failed to do so.
There is nothing procedurally unfair about proceedings on an undefended basis when a Respondent fails to do what he was directed to do in pursuit of the procedural fairness that he sought and was given. So far as this Court is concerned, it proceeded in accordance with rr. 45.11 and 45.12 and did so consistently with principles of procedural fairness to the Respondent.
Having regard to my reasons above, the Application in a Case filed 6 October 2017 is dismissed.

I certify that the preceding twenty-two (22) paragraphs are a true copy of the reasons for judgment of Judge Altobelli

Associate:

Date: 5 March 2018