WESTERN AUSTRALIAN INDUSTRIAL MAGISTRATES COURT

CITATION : 2017 WAIRC 00088

DELIVERED : THURSDAY, 23 FEBRUARY 2017

FILE NO. : m 184 of 2015

 CLAIMANT

AND

Group Training South West Inc

first Respondent

Stan Liaros

second Respondent

FILE NO. : m 185 of 2015

CLAIMANT

AND

Group Training South West Inc

first Respondent

Stan Liaros

second Respondent

FILE NO. : m 186 of 2015

CLAIMANT

AND

Group Training South West Inc

first Respondent

Stan Liaros

second Respondent

CatchWords : Orders for the payment of redundancy entitlement - Whether interest should be ordered – Whether penalties should be ordered, quantum of penalties – Whether costs order should be made.

Legislation : Fair Work Act 2009
Workplace Relations Act 1996
Supreme Court Act 1935 (WA)
Crimes Act 2014

Case(s) referred to
in reasons  : Trigg, Bestwick and Tomlinson v Group Training South West Inc
    and Liaros [2017] WAIRC 17
    Textile, Clothing and Footwear Union of Australia v Givoni Pty
    Ltd (2002) 121 IR 250
    Kelly v Fitzpatrick (2007) 166 IR 14
    Mason v Harrington Corporation Pty Ltd [2007] FMCA 7
    Ingersole v Castle Hill Country Club Limited [2015] FCCA 1055
    Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008]
    FCAFC 8
    Commonwealth of Australia v Director, Fair Work Building
    Inspectorate [2015] HCA 46
    Fair Work Ombudsman v Maclean Bay Pty Ltd (No. 2) [2012] FCA
    557
    Cerin v ACI Operations Pty Ltd and others [2015] FCCA
    2762
    Markarian v R (2006) 228 CLR 357
    Milardovic v Vemco Services Pty Ltd (Administrators Appointed)
    (No 2) [2016] FCA 244
    Sayed v Construction, Forestry, Mining and Energy Union [2016]
    FCAFC 4
    Fair Work Ombudsman v Skilled Offshore Australia Pty Ltd (No 2)
    [2015] FCA 1509
    Suda Ltd v Sims (No 2) [2014] FCCA 190
    Chileshe v E & M Business Trust [2014] FCCA 1381
    Construction, Forestry Mining and Energy Union v Clarke [2008]
    170 FCR 574
    Ryan v Primesafe [2015] FCA 8
    Daglish v MDRN Pty Ltd (No 2)I [2014] 287 FLR 227
    Direct Freight Express Pty Ltd v King [2015] FCCA 1006
    Vandeven v Virgin Blue Airlines [2013] FCCA 2031
    Melbourne Stadium Ltd v Sautner [2015] FCAFC 20

Result   : Orders made

Representation:

Claimants : Mr G. McCorry as agent.

Respondents : Mr D. S. Mare as agent.

REASONS FOR DECISION

Introduction

1          On 12 January 2017 I delivered reasons for decision in Trigg, Bestwick and Tomlinson v Group Training South West Inc and Liaros [2017] WAIRC 17. I concluded therein that Group Training South West Inc (the first respondent) had contravened s 44 of the Fair Work Act 2009 (FW Act) because it had failed to pay the claimants their redundancy entitlements. I also found that, in Mr Tomlinson’s case, the first respondent had contravened s 323 of the FW Act by failing to pay him his redundancy entitlement required by his contract of employment.  I found also that the first respondent’s chief executive officer Mr Stan Liaros (the second respondent) had been involved in those contraventions.

2          Upon receipt of those reasons the parties agreed to provide written submissions concerning the orders to be made. Their submissions have been received and considered.

3          The submissions address the following issues:

1. The quantum of each claimant’s redundancy entitlement;
2. Whether interest should be ordered and if so, the rate to be applied;
3. Whether the first respondent should be penalised for its contravention of s 44 and s 323 of the FW Act;
4. Whether the second respondent should be penalised; and
5. Whether a costs order should be made against the respondents.

Redundancy Entitlements

4          The respondents accept (written submissions at [16] and [17]) that the claimants are entitled to the redundancy payments claimed as follows:

• Mr Glenn Edward Trigg (first claimant) - $9,422 (seven weeks x $1,368);
• Mr Adrian Troy Bestwick (second claimant) - $13,680 (10 weeks x $1368);
• Mr Gregory Paul Tomlinson (third claimant) - $40,014 (27 weeks x $1,482).

5         Accordingly, the first respondent will be ordered to pay each claimant his respective redundancy entitlement outlined above.

Interest

6          Section 547 (2) of the FW Act provides that in making the order the court must, on application, include an amount of interest in the sum ordered, unless good cause is shown to the contrary. Each claimant has made an application for interest and no good cause has been advanced as to why interest should not be ordered.

7         Each claimant’s contract of employment ended on 30 June 2015 and therefore his redundancy entitlement was payable before 31 July 2015 (see s 323(1) of the FW Act). Consequently, interest runs from 31 July 2015 until judgement.

8         The rate of interest will be at the discretion of the court.

9         In Textile, Clothing and Footwear Union of Australia v Givoni Pty Ltd (2002) 121 IR 250 Goldberg J, in granting interest under the Workplace Relations Act 1996 (WR Act), followed a number of Federal Court of Australia authorities in which the relevant state penalty interest rate had been applied.

10      In Western Australia the relevant state penalty interest rate is that prescribed by s 31 of the Supreme Court Act 1935 (WA).

11      The respondents have submitted (written submissions [34]) that the maximum Supreme Court rate of 6% usually applied in this state is unrealistic and out of date and that a more appropriate rate is 3%.

12      There appears to be no reason as to why this court should depart from the application of the 6% penalty interest rate usually applied in this State. Indeed such rate is relatively consistent with the current Federal Court of Australia’s pre-judgement interest rate which is the cash rate plus 4%.  The interest due to the claimants should be applied at the rate of 6% for the period 31 July 2015 to 31 January 2017 (549 days) as follows:

• First claimant - $850.95;
• Second claimant - $1,235.25;
• Third claimant - $3,612.42.

13      Thereafter daily interest accrues as follows:

• First claimant - $1.55;
• Second claimant - $2.25;
• Third claimant - $6.58.

Penalties

14      When the first respondent contravened s 44 and s 323(1) (civil penalty provisions) of the FW Act, the applicable maximum penalty for each contravention was 60 penalty units.

15      Section 12 of the FW Act provides that a penalty unit has the meaning given to it by s 4AA of the Crimes Act 2014. At the material time each penalty unit was $170.

16      Although the maximum applicable penalty for each contravention was $10,200 (60 x $170) the first respondent (being a body corporate) was, pursuant to s 546(2)(b) of the FW Act, exposed to a maximum penalty five times that amount being $51,000.

17      Section 546(1) of the FW Act provides that a court may order a person to pay a pecuniary penalty that the court considers appropriate if the court is satisfied that the person has contravened a civil penalty provision. Such power is discretionary. There is no principle or requirement that the court must, in all cases of proven contravention, impose a penalty. The FW Act does not give any express or explicit guidance about the circumstances in which a penalty will be appropriate. Nor does it give any indication as to the criteria which might guide the court in relation to the exercise of the discretion or the determination of the level of penalty that is appropriate. There is, however, a checklist of factors that courts have suggested may be taken into account.

18      In Kelly v Fitzpatrick (2007) 166 IR 14 Tracy J referred with approval to the ‘non-exhaustive range of considerations’ identified by Mowbray FM in Mason v Harrington Corporation Pty Ltd [2007] FMCA 7 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 that penalty.

19      In Ingersole v Castle Hill Country Club Limited [2015] FCCA 1055 Barnes J said that although such factors are to be considered it must be borne in mind that it is necessary to have regard to the particular circumstances of the individual case and to all the evidence. The checklist is no more than a starting point.

20      The list is not a rigid catalogue of matters for attention. At the end of the day the task of the court is to fix a penalty which pays appropriate regard to the circumstances in which the contraventions have occurred and the need to sustain public confidence in the statutory regime which imposes the obligations (Buchanan J in Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8).

21      The non-exhaustive range of considerations identified in Mason 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 co-operated 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.

22       There are three broad purposes for imposing penalties for breaches of industrial law: punishment, deterrence and rehabilitation. In Commonwealth of Australia v Director, Fair Work Building Inspectorate [2015] HCA 46 [126] – [127] French CJ, Kiefel, Bell, Nettle and Gordon JJ observed:

[53] Civil penalty proceedings are civil proceedings and therefore an adversarial contest in which the issues and scope of possible relief are largely framed and limited as the parties may choose, the standard of proof is upon the balance of probabilities and the respondent is denied most of the procedural protections of an accused in criminal proceedings.

 [54] Granted, both kinds of proceeding are or may be instituted by an agent of the state in order to establish a contravention of the general law and in order to obtain the imposition of an appropriate penalty. But a criminal prosecution is aimed at securing, and may result in, a criminal conviction. By contrast, a civil penalty proceeding is precisely calculated to avoid the notion of criminality as such.

 [55] No less importantly, whereas criminal penalties import notions of retribution and rehabilitation, the purpose of a civil penalty, as French J explained in Trade Practices Commission v CSR Ltd, is primarily if not wholly protective in promoting the public interest in compliance:

 Punishment for breaches of the criminal law traditionally involves three elements: deterrence, both general and individual, retribution and rehabilitation. Neither retribution nor rehabilitation, within the sense of the Old and New Testament moralities that imbue much of our criminal law, have any part to play in economic regulation of the kind contemplated by Pt IV [of the Trade Practices Act]. …The principal, and I think probably the only, object of the penalties imposed by s 76 is to attempt to put a prices on contravention that is sufficiently high to deter repetition by the contravener and by others who might be tempted to contravene the Act.

23      In determining whether penalties should be imposed I follow the approach suggested in Mason.

The Nature and Extent of Conduct Which Led to the Breaches

24      The respondents suggest that their conduct arose from a genuine disagreement about the legal requirement of the first respondent to make redundancy payments. It is suggested that there was no attempt to avoid legal obligations or to defraud the claimants. The respondents say that their views were sincere and did ‘not involve the cynical exploitation or the audacious manipulation of employees who were ignorant or at a disadvantage’.

25      I note however that the first respondent’s conduct was clearly in breach of the express terms of its contract with each claimant. That was particularly demonstrative in the third claimant’s case.

26      I observe, in any event, that ignorance and a failure to obtain proper advice about the issue cannot be used as a shield. It was incumbent for the first respondent to meet its obligations and its misapprehension of law cannot justify or ameliorate its conduct.

Circumstances in Which the Conduct Took Place

27      The respondents say that the first respondent’s refusal to pay redundancy entitlements flow from their interpretation of each claimant’s contract of employment as being for a fixed term. Further, in light of the uncertainty of the meaning of the contracts it was not unreasonable for the respondents to have taken the stance that they took. Also, they suggest that the claimants contributed to the outcome by voluntarily signing an agreement which contained conflicting provisions.

28      I am somewhat surprised by that submission because hitherto it had been the respondents’ position that there was no confusion about the terms of the contracts. In that regard, I observe that the contract was prepared by the first respondent and any uncertainty in the contracts remains its responsibility and cannot be shifted to the claimants.

The Nature and Extent of Loss

29      The nature of the loss incurred by each claimant was their non-receipt of redundancy payments. The extent of the loss was significant in each instance.

Similar Previous Conduct

30      There is no evidence of any previous similar conduct.

Whether the Breaches Were Distinct or Arose Out of the One Course of Action

31      It is clear that the breaches arose out of one course of conduct. The third claimant does not seek a separate penalty for the breach of s 323 of the FW Act.

Size of the Business

32      The first respondent’s business is large, employing over 300 people. The second respondent is employed in that business and is its chief executive officer.

Whether or Not the Breaches Were Deliberate

33      The breaches were clearly deliberate because the second respondent made the conscious decision for the first respondent to not make the redundancy payments. That is so, notwithstanding the demand for such payment made by the claimants.

34      The breaches did not occur as a result of ignorance or inadvertence. It was a deliberate and considered decision made not to pay redundancy payments.

Involvement of Senior Management

35      The second respondent made the decisions on behalf of the first respondent. He was the most senior person in the organisation. The decision made not to pay the claimants redundancy payments was made at the highest level of the first respondent.

Contrition and Corrective Action

36      The respondents have expressed contrition following the publication of my reasons for decision in this matter. They have undertaken to conduct a total review of its employment contracts and to immediately remove all uncertain terms in those contracts. They have also undertaken to participate in training programs to better understand the FW Act and on the law of redundancy (Affidavit of Stan Liaros sworn 25 January 2017).

37      The expression of contrition is noted but the weight that it attracts is not significant. The corrective action indicated is of little benefit to the claimants but I accept that it is aimed at preventing further contraventions.

38       The corrective action taken must be considered in determining whether penalties should be imposed and if so, the amount.

Co-operation with Enforcement Attitudes

39      This factor is not relevant in these matters.

Need to Ensure Compliance with Minimum Standards by the Provision of an Effective Means of Investigation and Enforcement

40      This factor is not particularly relevant to these matters.

Deterrence

41      The respondents contend that the need for general and specific deterrence is not high. They say that the contraventions flow from an incorrect interpretation of the terms of an agreement and not from a refusal to pay redundancy payments.

42      The respondents have expressed both contrition and corrective action and to that extent, the need for specific deterrence is not high.

43      I am of the view that there is a need for general deterrence.

44      On 14 February 2016 the respondents were put on notice (Affidavit of Graham McCorry sworn 18 January 2017) that their position in denying the payment of redundancy entitlements was not maintainable.  Notwithstanding that, they failed to obtain independent legal advice and allowed the breaches to continue for a lengthy period resulting in the claimants not receiving their entitlements. The need to discourage others from such behaviour is a significant consideration.

Should Penalties Be Imposed?

45      Given the considerable loss incurred by the claimants (which still continues) in circumstances where the loss has not arisen out of ignorance or inadvertence, it will be necessary that a general deterrent penalty be imposed to bring home not only to the respondents but others that any decision to deny the payment of redundancy payment can only be made after careful consideration with the benefit of legal advice.

46      Employers must be deterred from making unilateral ill-considered decisions without the benefit of legal advice, particularly in circumstances where the employer’s decision will significantly and negatively impact its employees. That is particularly the case for employers employing a large work force as was the case in this instance.

47      It will be important to impose a penalty to mark the court’s disapproval of such behaviour.

48      There is a need for the imposition of a penalty against the first respondent.  Further, the second respondent’s acts were integral to the first respondent’s conduct and accordingly he too should be penalised.

49      In Fair Work Ombudsman v Maclean Bay Pty Ltd (No. 2) [2012] FCA 557 Marshall J said in relation to a similar proceeding under the WR Act:

[29] …It is important to ensure that the protections provided by [the Workplace Relations Act 1996 (Cth)] to employees are real and effective and properly enforced. The need for general deterrence cannot be understated. Rights are a mere shell unless they are respected …

Quantum of Penalty

50      Although heard together and having almost identical elements, there are three distinct proceedings on foot. Only one breach is alleged with respect to each claimant. The claimants concede that although s 557 of the FW Act is not applicable to these proceedings, it is appropriate in the exercise of the court’s discretion and the totality principle for a single penalty to be imposed on each of the respondents and apportioned equally (claimants’ written submissions - 18 January 2017 at [19]).

51      The task of fixing the penalty is a process of instinctive synthesis (Australian Ophthalmic Supplies Pty Ltd [26] – [28]) having regard to the circumstances of the case and the need to maintain public confidence in the statutory regime.

52      The claimants submit an appropriate penalty for each respondent is 60% of the maximum provided by the FW Act. In that regard, they point out that in Cerin v ACI Operations Pty Ltd and others [2015] FCCA 2762 the respondent’s essentially cavalier attitude towards its obligations with respect to an employee involving an insignificant sum, saw it receive a penalty of 40% of the maximum penalty.

53      In his paper on civil penalty contraventions delivered to an Employment Law Symposium of the Law Society of Western Australia on 30 November 2011 Gilmour J of the Federal Court of Australia observed that:

Determining penalties is not a matter of precedent. There is no tariff. Regard must be had in fixing a penalty to the individual circumstances of a case and should not be determined by a line by line comparison with another case. In NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 at 295 Buchanan J said:

‘The facts of the instant case should not be compared with a particular reported case in order to derive therefrom the amount of the penalty to be fixed. Cases are authorities for matters of principle; but the penalty found to be appropriate, as a matter of fact, in the circumstances of one case cannot dictate the appropriate penalty in the different circumstances of another case.’

This proposition was supported in ABCC v CFMEU (No. 2) (2010) 199 IR 373 at [11] per Barker J and upheld by the Full Court on appeal in McDonald v Australian Building and Construction Commissioner [2011] FCAFC 29.

54      His Honour cited the High Court of Australia in Markarian v R (2006) 228 CLR 357 which said that in considering the appropriate penalty, careful attention needs to be given to the maximum penalties because:

1. The legislature has legislated for them;
2. They invite a comparison between the worst possible case and the case before the court; and
3. They provide a yard stick to balance other, relevant factors.

55       In determining the appropriate penalties in these matters, I observe that the contraventions are not in the worst category in that they do not arise in circumstances of a deliberate defiance of the law, but rather have occurred in circumstances in which the respondents have arrived at a misguided conclusion about the first respondent’s liability with respect to the payment of redundancy entitlements. Such must be viewed against a previously unblemished record. An aggravating factor however is the size of the loss incurred by each claimant which remains outstanding.

56       The respondents’ expressed contrition and remedial action, which are mitigating considerations, are of limited value in determining the appropriate penalty. The respondents’ contrition has not manifested itself in letters of apology to the claimants and, of course, their entitlements remain unpaid. The taking of remedial action simply to comply with the law is of little consequence.

57       In the end result, the penalties imposed must be appropriate to the circumstances of the case and must be proportionate as well as being in accordance with the prevailing standard of punishment.

58       Taking those factors into account, I have concluded that the penalty to be imposed against each respondent is 50% of the maximum available penalty. In the case of the first respondent, that is $25,500 and in the case of the second respondent, $5,100.

59       The penalties are to be apportioned equally between the claimants with the result being that the first respondent is penalised $8,500 in respect to each claimant and the second respondent $1,700 in respect to each claimant.

60       Section 546(3) of the FW Act provides:

(3) The court may order that the pecuniary penalty, or part of the penalty, be paid to:

(a)               the Commonwealth

(b)               a particular organisation, or

(c)                a particular person.

61       In Milardovic v Vemco Services Pty Ltd (Administrators Appointed) (No 2) [2016] FCA 244 [40] – [44], Mortimer J summarised the law with respect to s 546(3) of the FW Act citing what was said in Sayed v Construction, Forestry, Mining and Energy Union [2016] FCAFC 4:

The power conveyed by s 546(3) is ordinarily to be exercised by awarding any penalty to the successful applicant. The initiating party is normally the proper recipient of the penalty as part of a system of recognising particular interests in certain classes of persons in upholding the integrity of awards and agreements the subject of penal proceedings. Where a public official vindicates the law for suing for and obtaining a penalty, it is appropriate that the penalty be paid to the Consolidated Revenue Fund. Otherwise, the general rule remains appropriate, that the penalty is to be paid to the party initiating the proceeding, with the “Gibbs exception” (Gibbs v The Mayor, Councillors and Citizens of City of Altona [1992] FCA 553) that the penalty may be ordered to be paid to the organisation on whose behalf the initiating party has acted.

62       I have concluded for the reasons outlined by the Full Federal Court in Sayed that the penalties should be paid to the claimants.

Costs

63       The claimants ask that an order be made pursuant to s 570(2)(b) of the FW Act that the respondents pay their costs on an indemnity basis.  On 14 February 2016 the claimants’ agent sent a letter to the respondents’ representative pointing out in detail that there was no substance in fact or law that would support their pleaded defences.

64       The claimants submit that a reasonable offer was made to the respondents to settle the proceedings at that stage and their failure to accept that offer or to otherwise then settle the claims and actively pursue arguments that had no reasonable prospect of success was an unreasonable act that justifies an award of indemnity costs from 14 February 2016.

65       The claimants submit further that the pursuit of a case by a party in circumstances where, on the materials before the party at the time, there was no substantial prospects of success may constitute an unreasonable act or omission (see Fair Work Ombudsman v Skilled Offshore Australia Pty Ltd (No 2) [2015] FCA 1509 [12]). The respondents’ continuation of their defences which were not maintainable in the face of evidence and authority amounts to an unreasonable act or omission.

66       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.

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

68       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) of the FW Act. Section 570(2) of the FW Act ensures that litigants involved in the proceedings under the FW Act are not exposed to costs orders being made against them save in limited circumstances (see Suda Ltd v Sims (No 2) [2014] FCCA 190 per Lucev J [20]).

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

1. The evidence leads a court to make a different finding as to the facts (see Chileshe v E & M Business Trust [2014] FCCA 1381 [39]); or
2. He or she is mistaken about the application of the law to those facts.

70       In Suda, Lucev J repeated what was said in Construction, Forestry Mining and Energy Union v Clarke [2008] 170 FCR 574, 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.

71       In Ryan v Primesafe [2015] FCA 8, Mortimer J said:

The discretion conferred by the confined terms of s 570(2) should be exercised cautiously, and the case for its exercise should be clear. The reason for caution is the potential for discouraging parties’ pursuit in a complete and robust way of the claims for contravention which they seek to make under the Fair Work Act, or the defence of such claims. The policy behind s 570 is to ensure that the spectre of costs being awarded if a claim is unsuccessful does not loom so large in the mind of potential applicants (in particular, in my opinion) that those with genuine grievances and an arguable evidentiary and legal basis for them are put off commencing or continuing proceedings. It is an access to justice provision. Insofar as it operates to the benefit of respondents, it is designed to ensure respondents feel free to pursue arguable legal and factual responses to the claims made against them [64].

72       In Skilled Offshore (Australia) Pty Ltd Gilmour J said:

[8] The purpose of s 570 is to ensure that litigants, including respondents, are not deterred from “complete[ly] and robust[ly]” defending claims for contravention.

[9] In light of this purpose, costs will rarely be awarded under [s 570] and exceptional circumstances are required to justify the making of such an order. Courts should be particularly cautious before finding that a party has engaged in an unreasonable act or omission, lest that discourages parties from pursuing litigation in the matter which they deem best.

[10] That a party has a “self-evidently weak case” is not enough to warrant a costs order. There must be ‘a higher level of criticism or disapprobation’. Indeed, costs were not awarded against the FWO in Fair Work Ombudsman v Valuair Limited (No 3) [2014] FCA 1182 even though elements of the FWO’s case were “artificial and unsatisfactory” and “potentially bizarre”.

[11] Where a party relies on s 570(2)(b), the Court must be satisfied of two matters:

there must be an unreasonable act or omission; and that act or omission must have “caused” costs to be incurred.

[12] The pursuit of a case by a party in circumstances where, on the materials before the party at the time, there was no substantial prospect of success may constitute an unreasonable act or omission. However, that an argument is ultimately not accepted does not mean it is unreasonable to put it.

[13] Even if the Court is satisfied of a s 570(2) precondition, it retains a discretion not to order costs.

73       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 [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.

74       The basis upon which the claimants say the respondents acted unreasonably was their refusal to accept the offer of settlement made on 14 February 2016. There are a number of authorities (Daglish v MDRN Pty Ltd (No 2) [2014] 287 FLR 227; Direct Freight Express Pty Ltd v King [2015] FCCA 1006; Vandeven v Virgin Blue Airlines [2013] FCCA 2031; Melbourne Stadium Ltd v Sautner [2015] FCAFC 20) which confirm 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.

75       In Sautner their Honours Tracey, Gilmour, Jagot and Beach JJ observed that ‘Calderbank letters presupposed the existence of a “costs jurisdiction”. No such jurisdiction existed (subject to s 570(2)) where claims are made under the Fair Work Act’ [168].

76       The respondents deny that their failure to accept the offer and advice received on 14 February 2016 constituted an unreasonable act or omission within the meaning of s 570(2)(b) of the FW Act.

77       The respondents submit that they requested the claimants to further and better explain certain matters in their letter of offer but that the claimants either failed or refused to provide those details (Affidavit of Dietlof Siegfried Von S Mare sworn 25 January 2017). In the circumstances their non- acceptance of the offer until the provision of further information was not unreasonable.

78       Further, the respondents contend that the claims made by the claimants were a moving feast with regard to the facts and the quantum of the third claimant’s claim. The respondents point out that the claimants initially alleged that they were dismissed on 22 May 2015 and that allegation was not altered until just prior to the commencement of the trial. Further, that the increase in the third claimant’s claim from $23,712 to $40,014 occurred late without the respondents being given a proper opportunity to consider the same.

79       I agree with the respondents that it was not unreasonable for them to have rejected the offer made, given that the issues between the parties were in a state of contention with respect to the facts and the quantum sought. Indeed, the claimants’ pleaded facts as at 14 February 2016 were not the same as those relied upon at trial. 

80       It was not unreasonable for the respondents to have sought clarification about issues. The failure to provide the information sought by the respondents may well have impeded settlement.

81       I find that the respondents did not act unreasonably.

82       In respect to the second limb of the claimants’ argument as to costs, it suffices to say that the fact that the respondents adopted a genuine but misguided approach as to the first respondent’s liability is not of itself a sufficient ground for an order for costs. That a party has a self-evidently weak case is not enough to warrant a costs order (Skilled Offshore (Australia) Pty Ltd [8]).

83       Section 580(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 parties are not dissuaded from making or resisting claims because of the prospect of an adverse costs order being made, and further that costs orders are exceptional in nature.

84       In these matters, I am satisfied that the respondents were genuine in defending the claims and believed they had a legitimate defence. Ultimately, they were unsuccessful because the respondents were mistaken as to the application of the law.

85       In the circumstances, the respondents 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.

86       The costs application is refused.

Orders

87       I propose to make the following orders.

1. The first respondent shall pay to the first claimant $9,422 plus interest thereon from 31 July 2015 until judgment in the sum of $885.05.
2. The first respondent shall pay to the second claimant $13,680 plus interest thereon from 31 July 2015 until judgment in the sum of $1,284.75.
3. The first respondent shall pay to the third claimant $40,014 plus interest thereon from 31 July 2015 until judgment in the sum of $3,757.18.
4. The first respondent shall pay to the first claimant a civil penalty of $8,500.
5. The first respondent shall pay to the second claimant a civil penalty of $8,500.
6. The first respondent shall pay to the third claimant a civil penalty of $8,500.
7. The second respondent shall pay to the first claimant a civil penalty of $1,700.
8. The second respondent shall pay to the second claimant a civil penalty of $1,700.
9. The second respondent shall pay to the third claimant a civil penalty of $1,700.
10. The claims are otherwise dismissed.

G. CICCHINI

INDUSTRIAL MAGISTRATE