WESTERN AUSTRALIAN INDUSTRIAL MAGISTRATES COURT

CITATION : 2015 WAIRC 01075

DELIVERED : WEDNESDAY, 9 DECEMBER 2015

FILE NO. : M 153 OF 2014

CLAIMANT

AND

S.E.T.S ENTERPRISES PTY LTD

FIRST RESPONDENT

KEVIN JAMES BROADBENT

SECOND RESPONDENT

Catchwords : Respondents’ application for costs - Claimant wholly unsuccessful as against each respondent - Whether proceedings instituted without reasonable cause - Whether claimant’s acts or omissions were unreasonable, causing the respondents to incur costs - Whether the award of costs is appropriate

Legislation : Fair Work Act 2009

Instruments :  Miscellaneous Award 2010 [MA000104]

Result : Application for costs refused

Case(s) referred to

 in Reasons : Telum Civil (Qld) Pty Limited v Construction, Forestry, Mining
 and Energy Union
 [2013] FWCFB 2434
Williams v MacMahon Mining Services Pty Ltd
[2010] FCA 1321
Fair Work Ombudsman v Devine Marine Group Pty Ltd & Others
[2014] FCA 1365
Dalglish v MDRN Pty Ltd (No 2)
[2014] 287 FLR 227
 

  Direct Freight Express Pty Ltd v King
[2015] FCCA 1006
Aitken v Virgin Blue Airlines and Vandeven v Virgin Blue Airlines
[2013] FCCA 2031
Somers v S.E.T.S Enterprises Pty Ltd and another
[2015] WAIRC 00953
Construction, Forestry, Mining and Energy Union v Clarke
[2008] 170 FCR 574
Cerin v ACI Operations Pty Ltd & Ors
[2015] FCCA 2762
Suda Ltd v Sims (No 2)
[2014] FCCA 190
Chileshe v E & M Business Trust
[2014] FCCA 1381
Reeve v Ramsey Health Care Australia Pty Ltd (No 2)
[2012] FCA 1322
Construction, Forestry, Mining and Energy Union v Corinthian Industries (Australia) Pty Ltd (No 2)
[2014 FCA 351
Melbourne Stadium Ltd v Sautner
[2015] FCAFC 20

REASONS FOR DECISION AS TO COSTS

Background

1          On 22 October 2015 I dismissed the claimant’s action against each respondent.  My reasons for doing so are set out in Somers v S.E.T.S Enterprises Pty Ltd and another [2015] WAIRC 00953.  Following the delivery of my reasons for decision the respondents made a costs application which was adjourned to enable the provision of written submissions. The parties agreed that I should determine the issue of costs on the papers.

2          These are my reasons with respect to costs.

Grounds for Making the Application 

3         The respondents argue that they were, in defending the claim, forced to incur considerable unnecessary costs ($43,307.00). They say that the claimant’s claim was fundamentally misconceived when considered in light of the decision in Telum Civil (Qld) Pty Limited v Construction, Forestry, Mining and Energy Union [2013] FWCFB 2434 (Telum).

4         To avoid the cost of the trial the respondents’ solicitors, the day prior to the trial commencing, wrote to the claimant’s solicitors and made a counter-offer to settle the claim as follows:

Your client is relying on the case of Williams v MacMahon Mining Services Pty Ltd [2010] FCA 1321. The Full Bench in Telum Civil (Qld) Pty Ltd v CFMEU [2013] FWCFB 2434 (Telum case) expressly said:

“[That] case is concerned with a different statutory context and Barker J’s decision does not assist in the proper construction of the expression “casual employee” in s.123(1)(c) of the FW Act.”

As clearly stated in my clients’ Outline of Submissions, the Telum case is wholly apposite for the proper construction of section 86 of the Fair Work Act 2009 (Cth), and therefore, the case that your client relies upon does not assist him.

As you are aware, section 570 of the Fair Work Act 2009 (Cth) allows my clients to seek their costs if:

(a)    the Court is satisfied that your client instituted the proceedings vexatiously or without reasonable cause; or

(b)    the Court is satisfied that your client’s unreasonable act or omission caused my client to incur costs.

If my clients are successful, my clients will be seeking costs.

In the circumstances, I am instructed by my clients to:

1. reject your client’s offer;
2. make the following without prejudice offer to your client, in full and final settlement of all matters between the parties, open for acceptance until 4:00pm, Wednesday, 5 August 2015:
   1. your client discontinue his claim and there be no order as to costs; and
   2. the parties sign a Deed of Settlement and Release, to be prepared by us, that includes mutual releases, indemnities, obligations of confidentiality and non-disparagement clauses.

If this offer is not accepted by your client and the matter proceeds to trial and your client receives a result less favourable than this offer, my client intends to pursue your client for indemnity costs pursuant to section 570(2)(b) of the Act.

In the matter of Daglish v MDRN Pty Ltd (No. 2) [2014] FCCA 1969, it was accepted that an applicant’s failure to accept a reasonable offer was an ‘unreasonable act or omission’ for the purposes of section 570(2)(b) of the Act.

Please provide your client’s response to this offer by 4:00pm, Wednesday, 5 August 2015.

5         The claimant did not accept the offer to settle and the matter proceeded to trial.

6         Ultimately the court accepted the respondents’ arguments.  It followed Telum and held that Williams v MacMahon Mining Services Pty Ltd [2010] FCA 1321 (Williams) had no bearing on the proper construction of the meaning of ‘casual employee’.

7         The respondents contend that when considered in the context of the case, the claimant’s claim had no prospect of success and that it was unreasonable for him to have refused the settlement proposal.  Further the claimant was on notice that the non-acceptance of the offer would, in a future costs application, be argued to be an unreasonable act or omission as contemplated by s 570(2)(b) of the Fair Work Act (FW Act).

8         The respondents assert that a number of authorities including Dalglish v MDRN Pty Ltd (No 2) [2014] 287 FLR 227 (Dalglish), Direct Freight Express Pty Ltd v King [2015] FCCA 1006 [14] - [15] and [28] - [34] (King), and Aitken v Virgin Australia Airlines and Vandeven v Virgin Australia Airlines (No 2) [2013] FCCA 2031 [31] (Vandeven) support their case for costs.

9         In addition they say that the claimant has done other things (constituting unreasonable acts or omissions) which have resulted in the respondents incurring unnecessary additional costs. The acts or omissions complained of are as follows:

a)      Not complying with time frames set by the court with respect to the lodgement of discovery, witness statements, outline of submissions and notice of cross-examination;

b)     Failing to seek an extension of time for compliance with the court’s orders;

c)      Failing to properly plead his claim;

d)     Introducing further and better disclosure on the morning of the first day of trial;

e)      The abandonment of part of his claim only two days prior to the commencement of the trial; and

f)       Unnecessarily cross-examining witnesses.

10       The second respondent contends that the claim made against him as director of the first respondent was entirely misconceived and unnecessary.  He asserts also that the claim against him was not prosecuted and that his situation is not dissimilar to the fourth respondent in Cerin v ACI Operations Pty Ltd & Ors [2015] FCCA 2762 [84] - [85] (Cerin), where a costs order was made against a worker who, at trial, failed to prosecute his claim against the senior manager of the respondent employer.

Claimant’s Position

11       The claimant argues that merely because he failed to establish his claim does not mean that he instituted the proceedings vexatiously or without reasonable cause.  He submits that his argument relating to the application of Williams was with respect to a point of law that could not be viewed as clearly settled.

12       Further, when considering the entirety of the evidence, the issues could not be seen as so clear as to afford the claimant with no prospect of success in the action. There were numerous facts and issues in dispute that required the making of findings.

13       The claimant further denies that his acts or omissions were unreasonable. He says that the late lodgement of documents did not materially affect the conduct of the trial and further denies that his case was not properly pleaded. He contends that it was clear throughout that he was asserting that he was not a ‘casual employee’.

14       He says also that his refusal to discontinue the action on the basis that each party bears its own costs was not an unreasonable act particularly in the context of the proceedings. His non-acceptance of the offer of settlement was not as exceptional or unreasonable so as to warrant a costs order being made.

15       With respect to the second respondent he argues that the interrelationship between the first and second respondents was such as to draw the second respondent’s liability for the purpose of s 550 and s 546 of the FW Act. If he had been successful against the first respondent it would have been open for the court to have ordered the second respondent to pay a penalty.

16       Further and in any event, there is no evidence to suggest that the second respondent incurred legal costs independently of the first respondent. All aspects of the claim were identical for both respondents.

17       Finally, the claimant disputes the amount claimed and says that the issue of quantum should be dealt with at a taxation of costs, only if a costs order is made against the claimant.

Determination

18       Section 570 of the FW Act provides:

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.

Note: The Commonwealth might be ordered to pay costs under section 569. A State or Territory might be ordered to pay costs under section 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.

19       Section 570(2)(c) is not relevant to my considerations. Similarly s 569 and s 569A of the FW Act do not have any application in this instance.

20       Section 570(1) of the FW Act provides that a costs order is entirely discretionary, subject however to the constraints imposed by s 570(2). Section 570(2) of the FW Act ensures that litigants involved in proceedings under the FW Act are not exposed to a costs order being made against them save in limited circumstances (see Suda Ltd v Sims (No 2) [2014] FCCA 190 (Suda) per Lucev J at [20]). 

21       Section 570(2) of the FW Act provides protection.  If a claimant believes, in good faith that a set of facts exist that entitles him or her to a legal remedy, then he or she will not be exposed to an adverse costs order if either:

a)      the evidence leads a court to make a different finding as to the facts (see Chileshe v E & M Business Trust [2014] FCCA 1381 at [39]); or

b)     he or she is mistaken about the application of the law to those facts.

22       In Suda, Lucev J repeated what was said in Construction, Forestry, Mining and Energy Union v Clarke [2008] 170 FCR 574 (Clarke), that the court ought not exercise its discretion to award costs (under s 570(2) of the FW Act) ‘with too much haste’. The discretion to award costs must be considered against the policy behind s 570(2) of the FW Act, which is to ensure that workers are not dissuaded from taking legitimate action to recover entitlements because of the prospect of a costs order being made.

Were the Proceedings Instituted Without Reasonable Cause?

23       The respondents assert that the claimant initiated the proceedings without reasonable cause.

24       In Reeve v Ramsay Health Care Australia Pty Ltd (No 2) [2012] FCA 1322 Barker J said at [10]:

It is now well accepted that one way of testing whether a proceeding is instituted ‘without reasonable cause’, for the purpose of a provision such as s 570,  is to ask whether upon the facts apparent to the applicant at the time of instituting the proceeding, there were no substantial prospects of success. If success depends upon resolution in the applicant’s favour of one or more arguable points of law, it is inappropriate to say that the proceeding was instituted ‘without reasonable cause’. But where on the applicant’s own version of the facts it is clear the proceeding must fail, it may be said that it lacks a reasonable cause…

25       The pivotal issue at trial was whether the claimant was a casual employee. The respondents argued that the issue could (applying Telum) only be determined on a proper construction of the award definition of ‘casual employee’. The claimant argued however that whether or not he was a casual employee could not be determined outside of common law principles. The claimant argued that although the Miscellaneous Award 2010 [MA000104] provides that ‘a casual employee is one engaged as such’, common law principles nevertheless need to be considered in determining whether he was engaged as a casual employee.  In Fair Work Ombudsman v Devine Marine Group Pty Ltd & Others [2014] FCA 1365 White J at [141] and [142] recognised that such contention was capable of argument (albeit that he did not accept it).  In the circumstances it cannot be said that the issue is so well settled that it did not permit argument.

26       In Construction, Forestry, Mining and Energy Union v Corinthian Industries (Australia) Pty Ltd (No 2) [2014] FCA 351, his Honour Pagone J said (at [8]) that:

To exercise the discretion conferred by [s 570(2) (a) of the FW Act] the Court must be satisfied that the claims were relevantly, instituted without reasonable cause. This is not established merely because a party fails in the claims: R v Moore; ex parte Federated Miscellaneous Workers Union of Australia [1978] HCA 51; (1978) 140 CLR 470, 473. The relevant provisions reflect ‘a policy of protecting a party instituting proceedings from liability for costs’ and costs will rarely be awarded unless justified by exceptional circumstances: see Kangan Batman Institute of Technology and Further Education v Australian Industrial Relations Commission (2006) 156 FCR 275 at [60]. In Kangan Batman Institute it was said by the Full Court at [60] that ‘a proceeding will be instituted without reasonable cause if it has no real prospects of success, or was doomed to failure’. In Kanan v Australian Postal and Telecommunications Union (1992) 43 IR 257 Wilcox J indicated at 264 that one way of testing whether the proceeding was instituted ‘without reasonable cause’ was to ask whether, upon the facts apparent to the Claimant at the time of instituting the proceeding, there was no ‘substantial prospect of success’.

His Honour went on to say that a proceeding lacks a reasonable cause where it is clear that it must fail on the claimant’s own version of events.

27       At [9] his Honour said:

Section 570(2)(a) imposes a high threshold to be established before costs can be awarded, and the threshold may be difficult to meet where the complaint concerns forensic judgments made together with other forensic judgments which would not meet the threshold. The test in s 570(2)(a) is, relevantly, whether the claim was instituted “vexatiously or without reasonable cause”. Applications under s 570(2)(a) are not occasions for courts to be invited to second guess forensic decisions made by litigants, but to compensate a party for costs incurred by them in defending proceedings which were instituted vexatiously or without reasonable cause.

28       The respondents contend that the claim has been brought vexatiously because the claim was so obviously untenable or manifestly groundless as to be utterly hopeless, or in the alternative, the claim was brought without reasonable cause because on the claimant’s own version of events his claim could not succeed and was doomed to fail. With respect, I do not agree with those contentions.

29       The legal issues were not so clear cut that they were not open to argument.  Despite having signed an employment contract which stated that he was a casual employee and notwithstanding that he was told by the second respondent that he was engaged as a casual, the claimant nevertheless believed because of the way the parties conducted themselves that he was not in fact a casual. That belief was not based on some fanciful notion but rather on common law principles which he thought applied to him.  The claimant was ultimately unsuccessful because he was mistaken about the application of the law to his circumstances.

30       I am not satisfied that the claim was instituted without reasonable cause. The claimant genuinely believed that he was not a casual employee and took action accordingly. The fact that he was unsuccessful in his claim does not mean that there are exceptional circumstances which justify the award of costs. Costs do not simply follow the event.

Did the Claimant Commit an Unreasonable Act or Omission Causing Cost?

31       The respondents submit that if the court is unwilling to award costs pursuant to s 570(2)(a) of the FW Act, then in the alternative it should make an order pursuant to s 570(2)(b) of the FW Act. Two reasons are advanced to support the contention. The first being the claimant’s conduct in the proceedings and secondly, the claimant’s refusal to settle the claim on the basis proposed by the respondents.

32       In Suda his Honour Lucev J, in dealing with s 570(2)(b) of the FW Act, adopted what was said by the Full Court of the Federal Court of Australia in Clarke at 382 per Tamberlin, Gyles and Gilmour JJ. Their Honours observed that the exercise of the discretion 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; or

d)     a party adopted a genuine but misguided approach.

33       Those observations are apposite in this case. Even if the respondents’ contentions concerning the way in which the claimant ran his case were held to be correct, it should not result in the making of a costs order against him particularly given that the making of costs order requires exceptional circumstances.  I do not accept that all the deficiencies referred to by the claimant either singularly or in combination were of such exceptional nature that it would warrant the making of a costs order against him.

34       The second independent basis upon which the respondents say that the claimant acted unreasonably was his refusal to accept the offer of settlement made on 5 August 2015. There are a number of authorities, including Dalglish, King, Vandeven and Melbourne Stadium Ltd v Sautner [2015] FCAFC 20 (Sautner) which confirms that a failure to accept a reasonable offer of settlement may constitute an unreasonable act or omission.  However it will not always be the case that the failure to accept a reasonable offer constitutes an unreasonable act.  In Sautner their Honours Tracey, Gilmour, Jagot and Beach JJ observed at [168] that ‘Calderbank letters presupposed the existence of a “costs jurisdiction”. No such jurisdiction existed (subject to s570(2)) where claims are made under the Fair Work Act’.

35       In the present case, no offer of money was made in the context of the claim seeking in excess of $24,000. The respondents invited the claimant to discontinue his claim in which case, they would not pursue costs.  I observe that that offer was made late (the day before the trial was due to commence) in circumstances where the proceeding, which had been protracted, was ready for trial. The offer made was never likely to have been accepted at such a late stage, particularly in circumstances where the claimant would have been aware that a costs order against him, although possible, was in light of the authorities, unlikely. In my view, the offer that was made was not reasonable in the context of the timeline of the case and the refusal to accept the offer was not an unreasonable act which would give rise to the making of a costs order. Even if the offer was reasonable its rejection in the context of the timing of the offer was not an unreasonable act.

Claim for Costs by the Second Respondent

36       The second respondent was the person who facilitated the claimant’s employment by the first respondent. The second respondent negotiated the terms of the employment agreement and was the face of the first respondent. The second respondent’s acts and those of the company were largely one and the same.

37       If the claimant had been successful in his claim as against the first respondent, then it would have been arguable that the second respondent in some way by act or omission had directly or indirectly been knowingly concerned in, or party to, the contravention (s 550(2)(c) of the FW Act) and therefore taken to have contravened the civil remedy provision (s 550(1) of the FW Act). In those circumstances, the claim against the second respondent was legitimately brought.

38       The second respondent relies on what Simpson J said in Cerin to support his claim for costs. In that matter his Honour observed that the applicant had, at trial, failed to prosecute his claim against the employer’s senior manager and concluded that the claim against him was vexatious and made without reasonable cause. The factual circumstances that gave rise to his Honour’s decision to award costs were unexplained in his Honour’s reasons. 

39       The claim made against the second respondent in this matter was neither vexatious nor, for the reasons stated previously, initiated without reasonable cause. Cerin is clearly distinguishable in that the acts or omissions of the first and second respondents in this matter were intertwined. Had the claimant been successful against the first respondent, the second respondent could conceivably had orders made against him. Further and in any event there was never any failure to prosecute this claim against the second respondent.  Having said that I acknowledge that the claimant struggled to identify the precise legal foundation for his claim against the second respondent but that does not mean that it did not exist.

Discretion

40       Section 570(1) of the FW Act makes it clear that the award of costs is entirely discretionary. The exercise of discretion must take into account the merits of the claim and the way in which the litigation was conducted.  All of those factors need to be considered in the context of the policy behind s 570 of the FW Act, which is to ensure that workers are not dissuaded from making genuine claims because of the prospect of an adverse costs order being made, and further that costs orders are exceptional in nature.

41       In this matter I am satisfied that the claimant was genuine in making his claim and reasonably believed he had a legitimate claim against the respondents. Ultimately he was unsuccessful because he was mistaken as to the application of the law. In the circumstances, the claimant should not be subject to an adverse costs order. Irrespective of s 570(2) of the FW Act my general discretion under s 570(1) of the FW Act is exercised in refusing the costs application.

Conclusion

42       The costs application is refused.

G. CICCHINI

INDUSTRIAL MAGISTRATE