INDUSTRIAL MAGISTRATES COURT OF WESTERN AUSTRALIA

CITATION : 2024 WAIRC 00351

CORAM : INDUSTRIAL MAGISTRATE R. COSENTINO

HEARD : ON THE PAPERS

DELIVERED : FRIDAY, 21 JUNE 2024

FILE NO. : M 55 OF 2022

BETWEEN : CAMERON TWEEDIE

CLAIMANT

AND

zenitas healthcare pty ltd ACN 009 074 588

FIRST RESPONDENT

APM LIFECARE TRUSCO PTY LTD

SECOND RESPONDENT

CatchWords : INDUSTRIAL LAW – Costs – s 570(2) of Fair Work Act 2009 (Cth) – whether claimant instituted proceedings vexatiously or without reasonable cause for purpose of s 570(2)(a) – whether claimant engaged in an unreasonable act or omission which caused the respondents to incur costs for purpose of s 570(2)(b) – held s 570(2)(a) not engaged – held claimant’s conduct from point in time was unreasonable – no special or unusual feature warranting indemnity costs – claim for costs allowed in part

Legislation : Fair Work Act 2009 (Cth)

Long Service Leave Act 1958 (WA)

Case(s) referred

to in reasons: : Australian Workers Union v Leighton Contractors Pty Ltd (No 2) [2013] FCAFC 23; (2013) 232 FCR 428

Saxena v PPF Asset Management Ltd [2011] FCA 395

Baker v Patrick Projects Pty Ltd (No2) [2014] FCAFC 166; 145 ALD 548

Australian International Pilots Association v Qantas Airways Ltd (No 3) [2007] FCA 879; 162 FCR 392

Construction, Forestry, Mining and Energy Union v Clarke [2008] FCAFC 143; 170 FCR 574

Sivwright v St Ives Group Pty Ltd [2022] FCA 136

Construction, Forestry, Mining and Energy Union v Corinthian Industries (Australia) Pty Ltd (No 2) [2014] FCA 351

Shea v Energy Australia Services Pty Ltd (No 2) [2015] FCAFC 14

Tweedie v Zenitas Healthcare Pty Ltd ACN 009 074 588 & Another [2023] WAIRC 00732; 103 WAIG 1608

Tsilibakis v Transfield Services (Australia) Pty Ltd (No 2) [2015] FCA 1048

Result : Application allowed in part

Representation:

Claimant : Gibson Lyons Lawyers

Respondents : Gilbert + Tobin

REASONS FOR DECISION

1         On 15 December 2023 I refused the claimant permission to further amend his claim in the proceedings, and dismissed his claim.

2         The first and second respondents seek an order for the claimant to pay their costs of the proceedings on an indemnity basis.

3         The respondents say the proceedings were commenced without reasonable cause, and that the claimant’s conduct in the proceedings was unreasonable and caused them to incur costs.

4         The application for costs involves consideration of the following issues:

(a)     Whether the claimant instituted proceedings unreasonably.

(b)     Whether in the course of the proceedings, the claimant engaged in an unreasonable act or omission which caused the respondents to incur costs;

(c)     If yes, to either (a) or (b), is there some special or unusual feature which warrants an order for indemnity costs?

Principles

5         The law concerning orders for costs is settled. The limited power to award costs is found in s 570 of the Fair Work Act 2009 (Cth) (FW Act). It says:

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.

6         Section 570 confers a discretion to order costs where a pre-condition of s 570(2) is met. This discretion must be exercised judicially according to the terms defining it. It must also be exercised with caution because of the exceptional nature of the power in an otherwise non-costs jurisdiction: Australian Workers Union v Leighton Contractors Pty Ltd (No 2) [2013] FCAFC 23; (2013) 232 FCR 428 (AWU v Leighton Contractors) per Dowsett, McKerracher and Katzmann JJ at [8].

7         This means that the case for a costs order must be clearly demonstrated by the party seeking a costs order: Saxena v PPF Asset Management Ltd [2011] FCA 395 at [6].

8         In relation to the precondition in s 570(2)(a), the relevant question is whether the proceedings had reasonable prospects of success at the time it was instituted, not whether it ultimately failed: AWU v Leighton Contractors [7].

9         That can be tested by asking whether the party bringing the action, on the facts apparent to the party, properly advised, should have known the claim had no reasonable prospects of success: Baker v Patrick Projects Pty Ltd (No2) [2014] FCAFC 166; 145 ALD 548 at [9] ‑ [10]. A distinction can be drawn between cases where success depends on resolution in the claimant’s favour of one or more arguable points of law, and cases which are misconceived, unsupportable, incompetent or hopeless: Australian International Pilots Association v Qantas Airways Ltd (No 3) [2007] FCA 879; 162 FCR 392 (Australian International Pilots Association) at [36]; Construction, Forestry, Mining and Energy Union v Clarke [2008] FCAFC 143; 170 FCR 574 at [29]. Pursuit of cases in the latter category can be characterised as unreasonable.

10      Whether a party has engaged in an ‘unreasonable act or omission’ for the purposes of s 570(2)(b) turns on the facts and circumstances of the case: Sivwright v St Ives Group Pty Ltd [2022] FCA 136 per Jackson J at [9].

11      Even if the Court is satisfied of a s 570(2) precondition, it retains a discretion not to order costs: Construction, Forestry, Mining and Energy Union v Corinthian Industries (Australia) Pty Ltd (No 2) [2014] FCA 351 per Pagone J at [12].

12      Once the power to award costs is enlivened under s 570(2) of the FW Act, the Court can make an order for costs to be paid on an indemnity basis, with the general law principles as to the award of such costs applied: Shea v Energy Australia Services Pty Ltd (No 2) [2015] FCAFC 14; at [10].

13      The test as to whether indemnity costs should be awarded is whether the justice of the case might so require or, whether there exists some special or unusual feature of the case to justify the Court in departing from the ordinary practice: Australian and International Pilots Association.

Were the proceedings instituted unreasonably?

14      The claimant’s Originating Claim, dated 23 May 2022, raised three causes of action:

(a)     For accrued and untaken long service leave under the Long Service Leave Act 1958 (WA) (LSL Act).

(b)     For accrued and untaken annual leave under the FW Act.

(c)     For payment in lieu of notice of termination under the FW Act.

15      It was never in dispute that the claimant was not paid for accrued leave entitlements when the relationship between him and the respondents came to an end. The reasons he was not paid the claimed entitlements was, first, because his status as an employee was in dispute and second, because his length of continuous service with the respondents was in dispute. The claims therefore depended on the claimant establishing that he was at all relevant times an employee, and that earlier periods of service with other employing entities were transferred without a break in continuity.

16      The Originating Claim named only the first respondent, Zenitas Healthcare Pty Ltd, as a respondent. It referred to the claimant having been employed in the business known as ‘LifeCare’ from the period 5 February 1990 to 28 February 2020. It set out the ‘relevant employment history’ in the LifeCare business in a table which listed four different employing entities and referred to four ‘transfer occasions.’

17      The Originating Claim was awfully deficient. To start with, the first respondent was not one of the named employing entities. Nothing in the Originating Claim connected the claimant to the first respondent, or the claimant’s claims to the first respondent, at all.

18      Despite paragraph 1 of the Originating Claim referring to a period of employment commencing in 1990, the table covered only the period from 5 February 1995.

19      The Originating Claim contained no material facts going to the formation of an employment contract with any of the named employing entities.

20      While the Originating Claim referred to ‘transfer occasions’ it contained no material facts establishing that there was a transfer of employment for the purposes of the FW Act, or a transfer of business for the purpose of the LSL Act.

21      Over the course of the proceedings, the claimant attempted to fix at least some of these deficiencies.

22      On 19 July 2022 he applied to join the second respondent, being an entity named in the original Originating Claim as an employing entity from ‘on or around 30 December 2016,’ to the proceedings, and to amend the Originating Claim to name the first respondent as an alternative employing entity.

23      In an affidavit made on 19 July 2022 in support of the application to amend the Originating Claim, the deponent, Georgina Thomas, stated:

4. The grounds for the Originating Claim are set out in Annexure A to the Originating Claim. By way of summary, those grounds are that the Claimant was continuously employed in the “LifeCare Business” as owned and operated by various entities during the period 5 February 1990 to 28 February 2020. Each of the occasions on which the LifeCare Business changed hands constituted a transfer of the business within the meaning of section 311 of the Fair Work Act 2009 (Cth). Given the Claimant was not informed by any of his employers that his relevant period of prior service would not be recognised for the purpose of his employment nor did he receive any payments on account of accrued entitlements, the Claimant’s position is that upon termination of his employment on 28 February 2020, he was owed significant accrued entitlements for which he did not receive payment.
5. The Claimant has not been able to ascertain from the material available to him the precise identity of his employer on the Third Transfer Occasion or the Fourth Transfer Occasion. Despite a request having been made to the Respondent’s solicitors for relevant documentation, no documents have been forthcoming. In all the circumstances, the Claimant has formed the view that:

(a)       On the Third Transfer Occasion, his employer was Zenitas Healthcare Ltd (as the Respondent was formerly known) and/or Zenitas HNA Trusco Pty Ltd (as APM Lifecare Trusco Pty Ltd was formerly known) and/or HNA Physio (WA) Pty Ltd, or one or more of those entities; and

(b)       On the Fourth Transfer Occasion, his employer was either or both of Zenitas Healthcare Ltd and Zenitas HNA Trusco Pty Ltd.

6. The Claimant has reached the above view having regard to, among other things, the following:

(a)       his remuneration having been paid from at least July 2017, as far as he can ascertain, by Zenitas Healthcare Ltd and not either of Zenitas HNA Trusco Pty Ltd or HNA Physio (WA) Pty Ltd; and

(b)       various draft written contracts of employment which were being negotiated between the parties in 2017 and 2018 having referred to the Claimant’s putative employer as Zenitas Healthcare Ltd and not either of Zenitas HNA Trusco Pty Ltd or HNA Physio (WA) Pty Ltd.

7. The Claimant has similarly not been able to confirm that Zenitas Healthcare Ltd and not Zenitas HNA Trusco Pty Ltd was the entity that acquired the assets of the LifeCare business on the Third Transfer Occasion (and retained the same on the Fourth Transfer Occasion). However, at all relevant times, including at the time of termination of the Claimant’s employment, Zenitas HNA Trusco Pty Ltd was a wholly owned subsidiary of Zenitas Healthcare Ltd (or Zenitas Healthcare Pty Ltd as it became known from 18 December 2018) and was therefore an associated entity of Zenitas Healthcare Ltd within the meaning of section 311(6) of the Fair Work Act 2009 (Cth).

24      On 10 August 2022 orders were made by consent joining the second respondent to the proceedings and allowing the Originating Claim to be amended as sought. No other amendments were made at that time.

25      On 28 April 2023, after discovery orders were made and complied with, the claimant presented a Further Amended Originating Claim (FAOC). The FAOC inexplicably increased the amount of the claim from $124,346.13 to $145,684.40. It purported to set out particulars of seven contracts; variations to some of those contracts; and labelled the formation of certain contracts as ‘transfer occasions.’

26      On the claimant’s case as pleaded in the FAOC, the respondents, or one or the other of them, were contracting parties only from late 2016 to 28 February 2020 so that, unless some earlier alleged employment with another entity was shown to have been transferred to the respondents, the claimant’s purported continuous service would not have qualified him for long service leave. The claim for long service leave was the largest monetary component of the claimant’s claim.

27      All three causes of action potentially depended on the claimant establishing that his purported employment with non-party entities was transferred to the first or second respondents without loss of continuity of employment, or continuity of service under the applicable legislation. Because the claim for accrued annual leave was not particularised, it is not possible to say whether or not this part of the claimant’s claim depended on continuous service prior to 2016.

28      So, in the context of the issues that were in dispute between the parties, the facts relevant to contract formation and the connection between contracting entities were critical matters. It was inevitable that contract formation would be the dispute’s main battleground.

29      The respondents applied to strike out the claimant’s claim in its entirety by an application dated 15 June 2023. When I determined that application on 16 August 2023, I observed that:

While the ordinary course is to grant leave to re‑plead, I see no utility in granting the claimant an opportunity to re‑plead his case insofar as it concerns purported employment prior to 2005. The claimant has said that in order to make these claims good, he needs access to business sale agreements from that period. Those business sale agreements are between third parties who are not parties to these proceedings. There is no indication that those documents are likely, after this lengthy period of time, to suddenly come to hand. In any event, the facts asserted by the claimant cannot be re‑pleaded in a way that will disclose an arguable case of transfer of business for the purpose of the LSL Act for the reasons I have already stated.

Tweedie v Zenitas Healthcare Pty Ltd ACN 009 074 588 & Another [2023] WAIRC 00732; 103 WAIG 1608 (August Reasons)

30      The respondents say that the claimant’s concession that he required further documents and evidentiary material to properly plead and particularise the claims in relation to purported employment prior to 2005 means that there was an insufficient basis to make out his claim when the proceedings were instituted.

31      I agree. But that can only be said for the proceedings insofar as they relate to purported employment prior to 2005. It does not show that there was no basis for the claims as they relate to employment from 2005 onwards.

32      The respondents also say that the claim for unpaid notice of termination in the sum of 2 months’ pay under the FW Act was unreasonable and had no prospects of success. I agree about that too. The FW Act provides for notice of termination of up to 4 weeks’, plus 1 week if the employee is over 45 years old and has completed at least 2 years of continuous service with the employer at the end of the day the notice is given: s 117. But this only goes to one of the claimant’s causes of action, not the proceedings as a whole.

33      Finally, the respondents say that the claimant’s inability to clearly set out the facts underpinning the alleged periods of employment and transfers of employment, which underpinned his significant long service leave claim, indicates that he did not have a reasonable factual basis to institute the proceedings. In other words, the inability to set out the case was an issue of substance, not form. The respondents say, essentially, that the proceedings were commenced unreasonably because, as has been demonstrated by the history of attempts to amend the pleadings, the claimant was never in a position to articulate the essential facts of his case for the purpose of a statement of claim. If the claimant could not articulate the essential facts justifying his claim, how could he have had any reasonable expectation of success in a substantive hearing?

34      In granting leave to replead on 16 August 2023, I did consider that some elements of the claimant’s claim were without real prospects of success and doomed to failure. However, I also considered there were other parts of the claimant’s claim that might be capable of being made good. Many of the reasons for striking out pleadings concerning the contracts from 2005 onwards, and the ‘transfer occasion’ pleadings, was because the existing pleading was illogical, unclear or embarrassing, not because the facts if properly pleaded, could not disclose a cause of action: see August Reasons at [54], [55], [58], [63], [66], [67], [74].

35      The success of the respondents’ first strike out application therefore does not in and of itself mean that the proceedings were without reasonable prospects of success when commenced. There were some parts of the proceedings which may have had some prospect, even if other parts did not.

36      Finally, the respondents rely on observations I made when deciding the claimant’s application to amend his claim on 15 December 2023 to the effect that the claimant was pleading facts to suit the case he wanted to make, rather than assessing the facts to determine if he had a case:

From this evidence, and in the context of the multiple failed attempts to properly plead the claims, I am left with the impression that the pleading as a whole is a contrivance. By this, I mean the claimant is seeking to design a pleading that suits his claims, disregarding whether the claims are justified by the true facts. I accept that dismissing the claim is a draconian step, and one that should be taken with extreme caution. The balance here is, no doubt, a fine one, but ultimately there are two things which I think tell against granting the claimant further time or opportunities to make good his claims.

The first is the obvious futility of the long service leave claim. Despite the considerable passage of time, the claimant has not yet identified the facts necessary to establish a transmission of business for the purposes of continuous service under the Long Service Leave Act. The long service leave claim comprises the majority of the monetary compensation sought in these proceedings to the extent that the claims are within the Court's jurisdiction.

Second, the contrived nature of the annual leave claim, revealed through the annexure to the Thomas affidavit and the significant unexplained changes to the quantum of it. The claimant's strategic choice not to comply with the orders of 16 August mean that this application to amend the claim carries significant risk to him should the application fail. That risk has materialised. (ts 36)

37      However, these observations were made about the case the claimant sought to raise long after the proceedings were instituted, which, significantly, included a claim for contravention of s 357(1) of the FW Act: see transcript, 15 December 2023, 31. This cause of action was not part of the claim when the proceedings were instituted.

38      The claimant’s claim was ultimately dismissed not because the claims made at the time the proceedings were commenced were wholly unsupportable, but because the claimant made the strategic decision not to focus on properly pleading those claims, and to instead apply to plead expanded and additional claims. Importantly, the additional claims included claims for pecuniary penalties, for reasonable notice at common law, and for other contraventions of the FW Act, which were not part of the claim as originally made. In order for the claimant to then resist his claim being dismissed in its entirety, he needed to not only have remedied the original pleading deficiencies, but also to show that his proposed amended and expanded pleadings were supportable.

39      Accordingly, I am not satisfied that the institution of the proceedings was unreasonable, and I decline to order that the claimant pay the respondents costs of the proceedings under s 570(2)(a).

Did the claimant act unreasonably?

40      The respondents say the claimant’s conduct was unreasonable because, generally and collectively, the claimant’s approach was akin to ‘shoot first and ask questions later.’ The respondents point to the following conduct which they say amounts to a pattern of unreasonable conduct:

(a)      On 10 July 2023, the Claimant was served with the Respondents’ application to strike out the Further Amended Originating Claim (FAC) dated 27 April 2023 and an outline of submissions in support. After several extensions of time, the Claimant wrote to the Respondents on 31 July 2023 and conceded, without specificity, that the FAC required amendment. On 2 August 2023, the Claimant sought leave to amend the FAC but did not provide the Respondents or the Court with a proposed amended FAC . The Court heard, and dismissed, this application on 16 August 2023. It was unreasonable not to have conceded that the FAC was deficient earlier and not to have provided a minute showing the proposed amendments prior to the hearing of the Respondents’ application. This caused the Respondents to incur unnecessary costs of preparing for and attending that hearing in circumstances were the Claimant had been served detailed written submissions over a month before the hearing.

(b)      The FAC was pleaded in such a manner that it was bound to be struck out and the Respondents incurred unnecessary costs responding to it. To the extent the Claimant refers to issues concerning conferral, the Respondents rely on the Court’s note at [15] of [the August Reasons].

(c)      On 30 August 2023, the Claimant provided what was, effectively, a substituted claim contrary the Court’s grant of leave. Putting aside the issues that were considered in [the 15 December 2023 proceedings], the Claimant initially sought orders that the Respondents pay him unpaid superannuation entitlements. During a further directions hearing, however, the Claimant conceded that the Court had no power to order the Respondents pay the superannuation claim and sought to provide a further substituted claim.

(d)      On 4 October 2023, the Claimant presented a further substituted originating claim (Substituted OC). The expansion of the Claimant’s case was justified on the basis of effectively solicitor error and that the matter had subsequently been reviewed by counsel. The Respondents again rely on the Court’s finding that the Substituted OC was, as a whole a contrivance. By way of example, the Respondents emphasise, as the Court did, the unexplained evolution of the annual leave claim and the contrast between the serious allegation that the Respondents (through Justin Walter, previously the Third Respondent) engaged in sham contracting and the emails between the Claimant and Mr Walter annexed to the affidavit of Georgina Thomas. There was no clear explanation for those matters (See e.g., [transcript, 15 December 2023], 20 ‑ 23, the exchange between counsel for the Claimant and the Court in relation to the email chain).

(e)      Further, there was no reasonable basis for the Claimant’s argument that the Substituted OC was pleaded in accordance with the Court’s grant of leave.

(f)       The Claimant joined Justin Walter, who filed submissions, but the Claimant quickly discontinued the proceedings as against the Mr Walter because they had reached a ‘negotiated resolution’ (transcript, 15 December 2023, 2). There was no evidence that the Claimant had sought to confer with Mr Walter prior to joining him to the proceedings. The failure to do so was unreasonable and caused the Respondents to incur unnecessary costs dealing with procedural issues in relation to joining Mr Walter and reviewing his submissions.

(g)      The Substituted OC was pleaded in such a way that was liable to be struck out, even to the extent that it failed to remedy deficiencies identified by the Court in [the August Reasons] (see e.g., at [64], [70], and [75]).

41      It is uncontroversial that the conduct described caused the respondents to incur costs. But the claimant says the conduct was not unreasonable. While he concedes that his legal representative’s conduct might be characterised as ‘inadequate,’ that does not amount to unreasonable conduct for the purpose of s 570(2)(b). He says the failure to rectify deficiencies in the pleadings, and raising difficult causes of action are not unreasonable in and of themselves either.

42      The claimant says that the matter involves a complex factual matrix spanning 27 years. Accordingly, it was to some extent inevitable that the proceedings would also involve complexity, and some ‘procedural turbulence’ which might not be an ordinary incident of more straight forward proceedings.

43      The claimant points out that criticisms of a party’s pleadings are commonplace and not necessarily indicative of unreasonable conduct justifying an award of costs. The claimant refers to Tsilibakis v Transfield Services (Australia) Pty Ltd (No 2) [2015] FCA 1048 at [19] - [22] where White J said:

In my opinion, the applicant should have recognised earlier that the proposed amended statement of claim still contained deficiencies. Had he done so, Transfield’s interlocutory application and the hearing on 19 March 2014 may have been unnecessary. At the costs hearing, the applicant’s counsel acknowledged that he could have appreciated the existence of the deficiencies earlier. I accept however, his explanation that it was not until he heard the critique by the respondent’s counsel that he appreciated the nature and extent of the shortcomings in the pleading.

However, I am not willing to characterise the applicant’s conduct as being the kind of unreasonableness to which s 570(2)(b) refers. In my opinion, the Court should be circumspect before doing so. It commonly occurs that applicants have difficulties in pleading appropriately an adverse action claim and an associated breach of contract claim. Experience also indicates that, despite inadequate pleadings, a matter can often proceed to trial without undue embarrassment to the opposing party. A somewhat robust approach to pleadings is often appropriate in actions of the present kind, and not that adopted in substantial commercial litigation between sophisticated and experienced litigants. There are some indications that Transfield may initially have taken this view in the present case, because on 18 December 2013, it allowed the matter to be listed for trial without raising any issue as to the adequacy for the applicant’s statement of claim. It is difficult for the Court to determine in retrospect the effect of inadequacies in a pleading on the opposing parties’ ability to proceed to trial.

These considerations suggest that the Court should be circumspect before allowing claims for costs under s 570 to descend into analyses of the adequacy or otherwise of a pleading and of the extent to which established shortcomings have had on the opposing party’s preparation. As I have said, criticisms of a party’s pleading are commonplace. Defects in a pleading are an ordinary incident in litigation.

In my opinion, this is an example of an applicant’s conduct which, while inadequate, should not be characterised as having the quality of unreasonableness warranting an order under s 570.

44      If the claimant’s conduct in the proceedings only involved the failure to remedy defective pleadings, I would have no hesitation in following White J’s conclusion. However, the claimant’s conduct did not simply involve the way the claims were pleaded. The claimant made strategic decisions at key points in time in the proceedings:

(a)     Not to comply with the Court’s orders of 29 June 2023 and 28 July 2023 requiring him to file submissions in response to the respondents’ strike out application of 15 June 2023. Compliance with the order would have necessitated the claimant turning his mind to the substance of the grounds for striking out the claim;

(b)     To, instead of filing submissions, file an application for a general grant of leave to amend and adjourn the strike out application, without detailing what amendments he proposed to make;

(c)     Not to utilise the leave to amend contained in the Court’s order of 16 August 2023 which granted a limited right to replead the statement of claim; and

(d)     Instead, purport to file a substituted statement of claim on 30 August 2023 contrary to the Court’s grant of leave, which significantly expanded the original claim by:

• Adding another party to the proceedings as an accessory under s 550(1) of the FW Act;
• Adding to the quantum claimed in the proceedings;
• Adding new causes of action for common law reasonable notice, superannuation, failure to keep employment records, failure to provide pay slips, and sham contracting; and
• Adding new claims for relief in the form of civil penalties, under the LSL Act and the FW Act.

45      These strategic decisions, collectively, reflect a ‘head in the sand’ approach. The claimant accepts his claim involved difficulties but sought, at the stages referred to in the preceding paragraph, to avoid confronting those difficulties.

46      Many of the expanded claims proved to be smoke and haze. The superannuation claim was promptly withdrawn. The claim against the third respondent was discontinued as part of a ‘negotiated resolution.’ There was no sound argument advanced as to why the common law reasonable notice claim was within the Court’s jurisdiction. There was no sound argument advanced as to why the Court was empowered to impose civil penalties under the LSL Act.

47      If the claimant hoped the difficulties in his claim would evaporate into the smoke and haze of his expanded claims, he was misguided.

48      The gravest indication that the claimant’s strategy was unreasonable and his claims lacking substance, rather than simply inadequate or inefficient, is the fact that the claimant sought to pursue a claim of sham contracting under s 357(1) of the FW Act in light of and despite the evidence he had before him.

49      Section 357(1) is a civil penalty provision. It says:

A person (the employer) that employs, or proposes to employ, an individual must not represent to the individual that the contract of employment under which the individual is, or would be, employed by the employer is a contract for services under which the individual performs, or would perform, work as an independent contractor.

50      By the substituted statement of claim the claimant sought to allege that by offering and entering into a contract variation with him in December 2016, and in doing so representing to the claimant that his contract was a contract for services under which he would perform work as an independent contractor, the respondents breached s 357(1) of the FW Act.

51      The contravention of s 357(1) was set out in paragraphs 70 to 89 of the proposed substituted statement of claim. Those paragraphs relate to the ‘Variation to the First Contract,’ the ‘Alternative Second Contract’ and ‘Second Contract.’ In each case, it is said that the terms of the relevant contract were ‘presented to the claimant for acceptance’: see paragraphs 70, 73 and 76. In each case, it is said that the terms of the relevant contract ‘represented to the claimant that the contracts of employment under which he was to be employed were contracts for services under which he would perform work as an independent contractor’: see paragraphs 80, 82, 84 and 86. It is alleged that the relevant respondent knew or ought to have known of these matters: paragraph 79 and 81.

52      There is obvious inconsistency between these allegations and the pleaded facts concerning the Variation to the First Contract, the Alternative Second Contract and the Second Contract. The Variation to the First Contract is described in paragraph 12 as ‘entirely oral, the terms of which were negotiated between the claimant and Justin Walter during numerous meetings convened in person and over the phone.’ That is nothing like presenting terms for acceptance. The Second Contract formation and the Alternative Second Contract formation are described similarly as ‘entirely oral’ and in terms ‘negotiated and agreed’ by the claimant and Mr Walter during multiple discussions or in a meeting: see paragraph 15 and 16.

53      Further, none of the express terms referred to for any of the contracts were that the claimant would be engaged under ‘contracts for services under which he would perform work as an independent contractor’: paragraphs 12.2, 15.2 and 16.2. 

54      In short, the alleged contraventions of s 357(1) had no basis in the facts pleaded about the formation of, or terms of, the relevant contracts.

55      In addition, the claimant filed an affidavit of Georgina Elizabeth Clare Thomas dated 30 October 2023 in support of his application for leave to file the substituted statement of claim. An email chain was annexed to the affidavit as an example of ‘further relevant documents’ located by the claimant which allegedly made it ‘clear a cause of action lay against the Third Respondent.’

56      The email chain starts with an email dated 10 April 2017 to the claimant from Justin Walter, Managing Director with a direction in the subject line: ‘if not already, please submit your leave form for the 24th April.’

57      The following exchange occurs:

Claimant:  I’m actually not an employee, but rather I contract my services, so I don’t get annual leave (and so can’t submit a form). So taking the 24th off would not affect the figures…

Walter:         Can you flick me your contractor agreement, it appears we do not have it on file.

Can you recall it being novated across at the time of sale?

Claimant:  There is no contract agreement. Probably due to me being a business partner, and/or it never being addressed.

I’ve been an independent contractor, with no formal service agreement since before HNA and I purchased the WA Practices in April 2006

Happy to provide any other information, and/or discuss further as required.

Walter:         Ok….would be the latter.

We will need to formalise this agreement, and my preference is for you to become an employee. It will not be a good look for a publicly listed company to have their SM as a contractor.

Let’s discuss at our regular.

58      This exchange occurs not long after the purported Variation to the First Contract in December 2016, and before the Second Contract, of 22 June 2018.

59      What is happening in this email exchange is nothing like the picture that the substituted statement of claim seeks to paint, of Mr Walter presenting an offer on a take it or leave it basis, and misleading the claimant to agree that he was an independent contractor, knowing the reality was he was an employee.

60      The email is not a basis for making any finding as to the merits of the claimant’s causes of action, nor to make any findings of fact. However, it does say something about the claimant’s lack of attention to the facts in pleading his case.

61      It is this email exchange together with the internal inconsistencies in the claimant’s pleading which led me to conclude that the claimant’s pleadings were a contrivance, fashioning facts to support the claim the claimant sought to make, and ignoring the true facts known to the claimant.

62      I therefore consider the claimant’s conduct on and from 30 August 2023 by expanding rather than confining his case was unreasonable. The claimant’s conduct of his case was not mere inefficiency, nor was it merely the result of difficulties with pleading. The claimant’s conduct was deliberate and strategic. The claimant’s conduct undermined the claimant’s own prospects of his claims succeeding, and caused the respondents to incur costs unnecessarily.

63      The circumstances of this case justify the exercise of the discretion in s 570 so that the claimant should pay the respondents costs incurred from the time that the claimant chose to pursue his additional expanded claims rather than to file an amended claim pursuant to the leave granted on 16 August 2023. The claimant should pay the respondents’ costs incurred on and after 30 August 2023, including the costs of the present application.

Should indemnity costs be awarded?

64      The respondents say that the Court should award indemnity costs because the claimant has proceeded both with a wilful disregard of facts and clearly established law. The respondents emphasise by way of example the superannuation claim and common law notice claim, as well as the claimant’s ‘persistent’ failure to set out his case clearly.

65      I am not satisfied that the circumstances of this case meet the high test for costs to be ordered to be paid on an indemnity basis. The claimant was misguided in bringing a claim for common law notice of termination, but that was not because the claim was, in substance, hopeless. Rather, it was because the Industrial Magistrates Court lacked jurisdiction to determine it. Although the superannuation claim appeared in a draft statement of claim, the claimant did not ever apply to make that claim in the proceedings. The fact that he abandoned the claim before making the application to amend the statement of claim is in his favour when considering whether indemnity costs are warranted.

66      While the conduct which warrants a costs order is unreasonable, it does not amount to a special or unusual feature such that an indemnity costs order is required to do justice.

Orders and disposition

67      I will order that the claimant pay the respondents’ costs of the proceedings incurred on and from 30 August 2023, including the respondents’ costs of this application, on a party/party basis to be fixed by the Court if not agreed. I propose to direct that the parties attend a conference before the Clerk of the Court to give the parties an opportunity to agree costs.

R. COSENTINO

INDUSTRIAL MAGISTRATE