Zou v Superway Pty Ltd

[2021] FedCFamC2G 144

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISON 2)

Zou v Superway Pty Ltd [2021] FedCFamC2G 144

File number:

SYG 1477 of 2021

Judgment of:

JUDGE CAMERON

Date of judgment:

15 October 2021

Catchwords:

PRACTICE & PROCEDURE – Security for costs – relevant considerations in a proceeding brought under the Fair Work Act 2009.

INDUSTRAL LAW – Policy of s.570 of the Fair Work Act 2009 (Cth) – interaction of s.570 with general law principles governing availability of security for costs.

Legislation:

Fair Work Act 2009 (Cth), ss.325, 569, 569A, 570

Federal Circuit and Family Court of Australia Act 2021 (Cth), ss.214, 215

Foreign Judgments Act 1991 (Cth)

Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth), r.22.01

Cases cited:

 Liu v Stephen Grubits and Associates (2019) 284 IR 475

 Equity Access Ltd v Westpac Banking Corporation (1989) ATPR 40-972

Augusta Ventures Ltd v Mt Arthur Coal Pty Ltd (2020) 300 IR 446

Australian Workers’ Union v Leighton Contractors Pty Ltd (No 2) (2013) 232 FCR 428

Division:

Fair Work Division

Number of paragraphs:

29

Date of hearing:

6 October 2021

Solicitor for the Applicant:

Mr L. Meagher (Clayton Utz)

Counsel for the Respondents:

Mr I. Latham

Solicitor for the Respondents:

Juris Cor Legal

ORDERS

SYG 1477 of 2021

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)

BETWEEN:

ZHENG ZOU

Applicant

AND:

SUPERWAY PTY LTD ACN 133 268 890

First Respondent

WEIMING ZHI

Second Respondent

ORDER MADE BY:	JUDGE CAMERON
DATE OF ORDER:	15 OCTOBER 2021

THE COURT ORDERS THAT:

1.The respondents’ application for security for costs be dismissed.

Note: The form of the order is subject to the entry in the Court’s records.

Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors 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 CAMERON

1. The applicant, Zheng Zou, an international student presently enrolled at Western Sydney University but resident in China by reason of border closures, has brought this proceeding alleging that the respondents, Superway Pty Ltd (“Superway”) and Weiming Zhi, have contravened s.325(1) and s.325(1A) of the Fair Work Act 2009 (Cth) (“FW Act”). He alleges that for two and a half years he was employed by Superway, of which Mr Zhi was a principal, and that during his employment he had been required to repay a portion of his Superway wages to Superway or to Mr Zhi. He now seeks compensation for those “cash back” payments of $26,968.05 plus interest together with pecuniary penalties.

2. On 13 September 2021 the respondents filed an application in a proceeding seeking orders that Mr Zou give security for the respondents’ costs in the amount of $50,000.

3. For the reasons which follow that application will be dismissed.

   LEGISLATION

4. Section 215 of the Federal Circuit and Family Court of Australia Act 2021 (Cth) (“FCFCOA Act”) relevantly provides:

   215Security for costs

   …

   (2)The Federal Circuit and Family Court of Australia (Division 2) or a Judge may order an applicant in a proceeding in the Court to give security for the payment of costs that may be awarded against the applicant.

   (3)The security is to be of such amount, and given at such time and in such manner and form, as the Federal Circuit and Family Court of Australia (Division 2) or Judge directs.

   …

   (5)If security, or further security, is not given in accordance with an order under this section, the Federal Circuit and Family Court of Australia (Division 2) or a Judge may order that the proceeding by:

   (a)     dismissed; or

   (b)     stayed until security or further security is given in accordance with the first-mentioned order.

   …

5. Rule 22.01 of the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) (“FCFCOADiv2 GFL Rules”) provides that the Court may order an applicant to give such security for the respondent’s costs of the proceeding as it considers appropriate.

6. Although s.214 of the FCFCOA Act empowers the Court to award costs in a proceeding, that power is excluded by s.570 of the FW Act: Liu v Stephen Grubits and Associates (2019) 284 IR 475 at 478-479 [10]-[11], which provides instead:

   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

   (c)     the court is satisfied of both of the following:

   (i)the party unreasonably refused to participate in a matter before the FWC;

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

   Vexatiousness or unreasonableness in the bringing of a proceeding will be found if the action is misconceived. Sections 569 and 569A of the FW Act are not relevant to this case.

   EVIDENCE

   Respondents

   Yu Chen

7. In his affidavit affirmed 10 September 2021 Mr Chen, the respondents’ solicitor, deposed that Mr Zou is likely to commit unreasonable acts which would cause the respondents undue expense.  This alleged unreasonable conduct arises out of the following circumstances:

   a)Mr Zou currently resides in China and cannot return to Australia under the current COVID-19 related travel restrictions;

   b)Mr Zou may not be able to produce for scrutiny original documents which are relevant to this proceeding or the telephone which stores some of them; and

   c)Mr Zou may not be able to give evidence in person.    

8. Mr Chen also deposed to Mr Zou’s impecuniosity, stating that his assets in Australia are valued at less than $10,000, giving reason to believe that he would be unable to pay the respondents’ costs if ordered to do so.  Mr Chen also deposed that although Mr Zou may have additional assets in China, which were identified in an email from Mr Zou’s solicitors dated 3 September 2021, China is not a party to any reciprocal enforcement agreement with Australia for the purposes of the Foreign Judgments Act 1991 (Cth).

9. In relation to the merits of the case, Mr Chen deposed that both Mr Zou and a proposed witness in his case, Mr Su, are motivated by malice because of the circumstances of their dismissal from Superway’s employment.

10. As to the respondents’ likely costs of the proceeding, Mr Chen deposed to his expertise as a solicitor having conducted and supervised around 200 proceedings since his admission in 2009. In his opinion, this proceeding warrants the engagement of counsel and that because of factual disputes between the parties, a substantial number of documents will need to be reviewed.  Some documents stored on Mr Zou’s phone will require a forensic technology expert to determine their authenticity.

11. Mr Chen estimated that a trial of this matter would last two days and, based on an itemised schedule of anticipated costs annexed to his affidavit, that the respondents’ costs would be at least between $60,411 and $70,411.

    Siyang Dai

12. Ms Dai, solicitor, deposed to matters going to the merits of Mr Zou’s case and to his credibility.  In particular, she referred to the evidence of prospective witnesses which ostensibly contradicted some of Mr Zou’s allegations and reflected adversely on his character. 

    Navid Sobbi

13. Navid Sobbi, digital forensic data recovery practitioner, deposed that, in order to determine the genuineness of certain photographs, videos and text messages which Mr Zou intended to rely on and which he stored on his phone, it would be necessary to examine the device itself by way of a “forensic process”.

    Applicant

    Regina Featherstone

14. In her affidavit affirmed 22 September 2021 Ms Featherstone, solicitor for Mr Zou, deposed that Mr Zou’s chattels and savings in Australia are worth approximately $10,000.

15. Exhibited to Ms Featherstone when affirming her affidavit were documents that became Ex.A1.  The documents to which the Court was taken contained evidence ostensibly supportive of allegations made in the statement of claim, in particular the practice of repaying portions of employee wages by way of “cash backs”.

16. Also tendered was a series of emails, Ex.A2, ostensibly recording evidence from Superway employees about having to repay part of their wages.

    DISCUSSION

    Security for costs - generally

17. The Court’s discretion to order security for costs is unfettered and each case depends on its own facts. 

18. Various considerations which may be taken into account when considering applications for security for costs have been discussed in the cases.  For instance, in Equity Access Ltd v Westpac Banking Corporation (1989) ATPR 40-972 Hill J identified the following to be among the matters appropriate for consideration when determining an application for security for costs:

    •the chances of success of the applicant; whether the applicant’s claim is bona fide or a sham;

    •the quantum of risk that the applicant cannot satisfy a cost order;

    •whether use of the power would shut out a small company from making a genuine claim against a large company, i.e. is the power being used oppressively;

    •whether the impecuniosity arises out of the Act [sic] in respect to which relief is sought;

    •whether there are aspects of public interest which weigh in the balance against the making of an order;

    •whether there are any particular discretionary matters peculiar to the circumstances of the case.

19. Were this not a proceeding based on allegations of contravention of the FW Act, those matters would be centrally relevant to the present interlocutory application. However, for the reasons that follow they are of only secondary relevance and not decisive in this case.

    Security for costs – Fair Work Act proceedings

20. Because this is a proceeding under the FW Act, Mr Zou is not at risk of bearing the respondents’ costs, although that situation would change were one or other of the conditions prescribed in s.570(2) satisfied. Because costs will not follow the event, as they would in the ordinary course of civil ligation, but instead depend on the satisfaction of the s.570(2) criteria, it would not be appropriate to order security for costs if those criteria were not satisfied.

21. In Augusta Ventures Ltd v Mt Arthur Coal Pty Ltd (2020) 300 IR 446, the Full Court of the Federal Court set aside orders for security for costs directed to the litigation funder (“AVL”) of two group proceedings in which a Mr Turner as representative applicant alleged against his former employer various contraventions of the FW Act. The orders were set aside in circumstances where Mr Turner’s potential liability for costs was governed by s.570 of the FW Act and where there had been no suggestion that his claim, or that of the group, had been brought other than reasonably or had been brought without reasonable cause.

22. Chief Justice Allsop, with whom Middleton J agreed, observed in that case that the consequences of non-compliance with the orders for security made by the primary judge included staying the proceedings, dismissing the proceedings or de-classing them and that to make those consequences express in each case’s order:

    … would reveal in its terms the visitation of the consequences of non-compliance by the funder upon the applicant who is a party who cannot (relevantly) be ordered to pay costs and who, nevertheless, will have his proceeding either stayed, dismissed, impeded, or affected by the funder failing to fulfil the condition.  (at 456 [22])

    His Honour went on to say:

    …The rights of the respondents, in due course if they are successful, to an order for costs against AVL does not entitle them to condition, or to threaten to condition, Mr Turner’s proceedings to secure obligations of another which he does not share.  This is the nub of my disagreement with the primary judge and the nub of the appeal.  (at 471 [73])

    In a similar vein, White J said:

    First, and perhaps most obviously, the circumstances (if any) in which an applicant in proceedings in relation to a matter under the FW Act should be ordered to provide security for a respondent’s costs are likely to be exceptional. An applicant should not ordinarily be required to provide security for costs which, in the absence of unsatisfactory conduct on his or her part, will never be payable. (at 483 [127])

23. In Augusta Ventures v Mt Arthur Coal, the Full Court stressed the policy of s.570: that, subject to s.570(2), parties to FW Act litigation are to bear their own costs and not the risk of the costs of each other: at 468-469 [66]; 474 [89]; 476-477 [103]. Unless s.570(2) were satisfied, ordering security for costs in a FW Act action would subvert that policy.

24. No such generally exceptional circumstances are presently apparent in this case.  In particular, the evidence led on this interlocutory application does not persuade me that the action has been brought unreasonably for lacking reasonable prospects of success:  Australian Workers’ Union v Leighton Contractors Pty Ltd (No 2) (2013) 232 FCR 428 at 430 [7], in that the evidence indicates that there are real questions of fact to be determined at trial. Further, Mr Zou’s statement of claim is prima facie regular and discloses a cause of action and although his motivation for bringing this action has been questioned, it has not been demonstrated that he commenced it for an improper purpose or otherwise vexatiously. Indeed, in their written submissions, the respondents submitted that the applicant and they all had bona fide cases with reasonable prospects of success. At the moment, noting that no response has been filed, all there is, is a dispute about the facts. Admittedly, the parties are in sharp disagreement but the vehemence of a party’s defence is not the test of the reasonableness of an action, at least at the commencement of the proceeding and before the matter has been tried. Once the material facts have been found, such vehemence may point to the case always having been vexatious or unreasonable but any trial in this case is some time away yet.

25. Justice White said in Augusta v Mt Arthur Coal at 483 [132] that the question is whether effect can be given to the usual principles on which security is ordered while at the same time preserving the protection s.570 afforded to the applicant and respecting its underlying rationale. In this case I am not persuaded that it can be. To order security without, for instance, having concluded that the proceeding lacked reasonable prospects of success, would be, in effect, to impose a burden that the FW Act states should not be borne in proceedings brought under it.

26. I should also record that the respondents led evidence with a view to showing that Mr Zou was likely, by unreasonable act or omission, to cause them to incur unnecessary costs.  However, the matters they raised in that connection were only speculative at this point and, in any event, did not present as ones of such significance that one could be confident that an order for costs would be made in relation to them.  In particular, I am not sure that Mr Zou could be called unreasonable for being unable to return to Australia by reason of travel restrictions imposed by the Commonwealth and it was not argued that costs had already been incurred by reason of any unreasonable act or omission on Mr Zou’s part.

27. For those reasons, I conclude that the application for security for costs should be refused.

28. As the present interlocutory application involves an exercise of discretion I should also observe that although Mr Zou’s present residence in China would ordinarily weigh heavily in favour of security being ordered, that is more than balanced by the significant likelihood that because of s.570, costs will not be awarded in this case. Further, although it was not canvassed, I am also concerned that, as Mr Zou is a student, an order for security of any magnitude might stultify the proceeding, which would be contrary to the policy of s.570 as well as being a factor under the general principles relevant to applications for security for costs which would not be supportive of an application such as the present. Finally, I note that pecuniary penalties are sought. There is public interest in contraventions of the FW Act being identified and sanctioned for the benefit of the community generally. In the absence of any cogent reason to believe that the proceeding is vexatious or unreasonable, and no such reason has been made out to me, the public interest favours an exercise of discretion in Mr Zou’s favour.

    CONCLUSION

29. The respondents’ application for security for costs will be dismissed.

I certify that the preceding twenty-nine (29) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Cameron.

Dated:       15 October 2021