Australian Building and Construction Commissioner v Construction, Forestry, Maritime, Mining and Energy Union

NORTH J: 1 On 26 March 2018, the application brought under s 500 and s 348 of the Fair Work Act 2009 (Cth) (the Act) by the applicant against the respondents was dismissed (see [2018] FCA 402). The respondents now seek an order for costs against the applicant. 2 Section 570(2)(a) and (b) of the Act provides as follows: (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; 3 The judgment which dismissed the application resolved a number contentious issues. In respect of the s 500 claim, there was a construction issue, namely, whether the discussions referred to in s 484, included purely social discussions. Then there was an evidentiary issue, namely, whether the discussions which were held were purely social. 4 In respect of the s 348 claim, there was an evidentiary issue, namely, whether Mr Travers contravened s 348 by saying to Mr White that if Mr White called the police to the site he would be "starting a war and it will be no different to what we have done with Kane [Constructions]". 5 The respondents argued that it should have been apparent to the applicant that there was no proper basis for the application. Consequently, the applicant either instituted the application vexatiously or without reasonable cause or continued to the proceeding unreasonably, causing the respondents to incur costs. A further element of the respondents' argument was articulated in the written submissions as follows: [3] … b. At any rate, even if such contraventions were technically open, there was no proper basis to seek enforcement in a matter where the conduct was so clearly de minimus and was not a proper use of the community's resources, including i. the tax payer's resources in having the police called to the site; ii. the tax payer's resources in utilising the Fair Work Building Inspectorate staff and resources to investigate and prosecute; iii. the Court's time and resources; iv. the Respondents' time and resources, including considerable legal costs. 6 The respondents relied on exchanges between counsel for the applicant and the Court at the hearing on 6 December 2016 in support of their claim for costs, namely: HIS HONOUR: So, Mr O'Neill, as at the moment, as the evidence stands, am I right in thinking that really the sole evidence that you have of these two men falling within section 500 as exercising rights under the division is the one reference to, "We're here because of some safety issue"? MR O'NEILL: With respect, your Honour, no. But there are - there is an issue of law involved in that answer. Our primary position, your Honour, is that by answering and speaking - with the intention of speaking to Mr Duggan, that the officials were exercising their right under section 484 to enter and hold discussions with a worker, albeit HIS HONOUR: Well, that might be so if they hadn't said that they're there for a cup of tea and in the context that's not - I'm just concerned, I'm very concerned to see that we had a presence onsite of two officials - for how long, half an hour or an hour - which has given rise literally to a federal case where you're in court with five supporters, we have four police attending, we have Mr Rose, we've had, like, a dozen people over what seems to be a very miniscule incident. Now, you know that I and the court hear a lot of cases involving the CFMEU. And there is, no doubt, a community concern which has given rise to the amendment which you announced earlier. But on the scale of things, it is a matter of some concern to me that we have this sort of resources committed to an incident of this nature. I mean, I'm wondering how this reflects on the Inspectorate's exercise of its prosecutorial discretion. And, I mean, it's early in the evidence and things might change. But, I mean, here - this is your first witness and we've explored to a limited extent where it goes. You know, there's court time as well as this whole group of people paid for by our society at the same time when in Victoria we're concerned about carjackings and other matters which the police might perhaps more profitably be involved in. You might just reflect on these things, and those instructing you might reflect upon them at lunchtime, because it's not a picture that I think does credit, at the moment as I see it - and I stress that, at the moment as I see it - uninstructed by argument. But I'm aware that you've got - you've put your best foot forward with this witness who was very honest and apparently explained why - how the matter came to arise. Well, anyway, those are matters for you to consider, and I would urge you to give careful consideration to them at the time that we break, because this is an area of the work of the court that I don't think should be trifled with. MR O'NEILL: I hear what your Honour says, and that consideration will be given, your Honour, and I will discuss it with those instructing me. Can I make a couple of points, though, that arise from it. The first is that - without wishing to argue the point now - my submission will be that even if it was a social purpose, that still fits within the meaning of discussions pursuant to section 484. And HIS HONOUR: Well, I wouldn't want you to think that you could have a lot of confidence about that argument. I will think about it and consider it, but MR O'NEILL: Yes, I hear what HIS HONOUR: it's not immediately attractive. MR O'NEILL: I hear what your Honour says. Secondly, in any event, there is some evidence, as your Honour has pointed out, one statement only, but some evidence from this witness as to the possibility that there was an industrial representational aspect to the discussions. But, thirdly, your Honour, there is also the section 348 allegation which we haven't yet got to. That will be the subject of HIS HONOUR: Well, that was a latecomer, and I suspect for good reason. I mean, look, you can weave a case around facts. But, you know, I'm looking at the central reality of this case. It was an hour onsite. There was no aggravation, no stoppage of work, between people who got on well. I mean, really and truly, if this is what the Inspectorate thinks is worthy of its attention I would be amazed. Because, you know, its work is serious work in serious cases. And a dozen people should not, I think, from what I've presently heard, have been taken up with a case within these confines. But, you know, look, I throw out at the moment an impression, and I'm keen to do that so you understand my thought processes as we go along. It's not a final position. And I'm perfectly happy to listen to what you say. But it might be that those impressions strike a chord amongst those instructing you. And they should have the opportunity to consider it. Because, I mean, it is the way my mind is thinking. MR O'NEILL: Yes. HIS HONOUR: And, I mean, I might change. But if I don't, then there are consequences for a judgment which, you know, has this sort of view. MR O'NEILL: Yes. Your Honour, I hear what your Honour says. I don't propose to take it further with your Honour at the moment, but would ask not to be seen by not doing so as necessarily accepting HIS HONOUR: Of course. And, as I make quite clear, I will listen to what you say, but it's valuable, I hope, for you to see the way I'm presently thinking. I mean, it might be when the respondents get into the witness box, if they do, that the case changes complexion altogether. I mean, you might cross-examine them in a way which demonstrates that my views are perhaps not well founded. MR O'NEILL: Yes. I would just make this point in terms of resourcing, your Honour, which doesn't apply to the court case. But in terms of what happened on the day, the occupier had lawfully asked these officials to leave and they refused to leave. And my friend didn't cross-examine that that wasn't the case. Then the police are called. But, with respect, if they're refusing to leave, what option does an occupier have but to call the police when someone is either trespassing or exercising their rights in an unlawful manner? I ask that rhetorically, your Honour. I don't expect your Honour to answer the question. But HIS HONOUR: I think that if Mr Naughton had been left to his own devices without a protocol, he would have said, "Have your cup of tea and then F off," and no one would have heard another word about it. But there's a background, which he explained, where McConnell Dowell apparently, so far as the evidence currently is, was forced to make a stand. And it makes a stand in a case of this nature and it ends up in court. I mean, we have enough CFMEU cases without every mate visiting another for a cup of tea coming to our court. MR O'NEILL: I have an instructor in court from the Inspectorate - or, rather, the Commission, your Honour, and HIS HONOUR: Well, I hope he or she will contemplate what I've said. And, as I say, it's a view that's forming at the moment. It might be dispelled with your next two witnesses, it might not. If it's not, then it has consequences about how a judgment will read. That's all. MR O'NEILL: Yes, your Honour. HIS HONOUR: I think the community needs to know if a case is brought to court what the circumstances are. 7 Following the hearing of evidence on 6 December 2016, the proceeding was adjourned until 10 March 2017 for oral submissions. During the period between the two hearings the parties exchanged Calderbank offers, thus, on 25 January 2017, the applicant's solicitors wrote to the respondents: We note that our client's offer that the proceeding be dismissed by consent with no order as to costs put verbally by our counsel, Rob O'Neill, to your counsel, Gideon Boas, on Friday 20 January 2016 was rejected that day by your clients. We now write to inform you that we are instructed that the Applicant offers to resolve this matter on the basis that, by consent of all parties, the proceeding be discontinued with no order as to costs or dismissed with no order as to costs. Your clients can state their preference as to whether the proceeding is discontinued or dismissed. The Applicant will agree to either, providing your clients agree to an order that there is no order as to costs. This offer may only be accepted on the basis that all three respondents agree to resolve the matter on the basis referred to above. Our client's offer will remain open for acceptance until 4:00pm on 2 February 2017, at which time it will lapse. Even if your clients are successful in defending the proceeding, section 570 of the Fair Work Act 2009 (Cth) applies, and this is not a case in which any of the subsections have application. In our view, having regard to the facts set out in the statements obtained from the Applicant's witnesses, (including that Messrs Travers and Hall remained on McConnell Dowell's site after they were asked to leave, in circumstances where they had not given notice of entry or been invited, and the threat that Mr Travers is alleged to have made to David White) and the relevant case law as it stood at the time, it is highly unlikely that costs could be awarded on the basis that the proceedings were instituted vexatiously or without reasonable cause (pursuant to section 570(2)(a)). Alternatively, any costs your clients do recover would be likely to be limited to those incurred between 6 December 2016 and the time of this offer. Given that your client's closing submissions are not due to be filed until 17 February 2017, those costs are likely to be exceeded by the costs that your clients incur between now and judgment. This offer is made without prejudice save as to costs in accordance with the principles in Calderbank v Calderbank [1975] 3 All ER 333. Should your clients fail or refuse to accept this offer within the timeframe, our client intends to rely on this offer in relation to the question of costs. In particular, we give notice that our client may rely on any rejection of this offer as constituting an unreasonable act or omission for the purposes of subsection 570(b) of the Fair Work Act 2009. In this regard, in addition to our observations with respect to your clients position, we draw your attention to the obligations of parties to civil proceedings imposed by sections 37M and 37N of the Federal Court of Australia Act 1976 (Cth). We do so particularly in the context of North J's invitation to our client during the hearing to consider its position and also explore ways of resolving the matter with your clients. Our client has now had the opportunity to properly consider its position, with the benefit of transcript, and considers that its offer to resolve this matter is consistent with, and is appropriate to address, the comments made by his Honour. Your clients ought to do the same having regard to the statutory imperative to resolve litigation as quickly, inexpensively and efficiently as possible. In all of the circumstances, should this offer not be accepted, we consider your clients will be exposed to the risk of an order to pay our client's costs from 2 February 2017 onwards and in any event are extremely unlikely to be able to recover the significant costs they will incur in relation to the preparation of written closing submissions and the appearance for the oral hearing listed for 10 March 2017. Of course, when deciding whether to accept this offer your clients should also consider that there is still litigation risk for one or more the Respondents if the matter ultimately proceeds to a judgment as a contested matter. We look forward to hearing from you. Please contact Will Spargo … should you wish to discuss the issues raised in this letter. [Emphasis in original.] 8 On 1 February 2017, the respondents' solicitors responded: We refer to your letter of 25 January 2017. You have made a formal offer which you assert is made in accordance with Calderbank v Calderbank [1975] 3 All ER 333, and which remains open until 4pm on 2 February 2017. The terms of that offer are that the proceeding be either dismissed or discontinued by consent of all parties, and on the condition that my clients agree that there be no order as to costs. You represent certain matters in your letter that first require comment. You argue that, even if the Respondents are successful in defending the proceeding, s 570 of the Fair Work Act 2009 (Cth) (FW Act) would apply in a manner that would not enliven costs. We disagree. Your account in that paragraph of your letter might have some bearing on a trespass case; this is not a trespass case, the Police were entirely unimpressed with the conduct of Macconnell Dowell in being called onto site, and never so much as spoke to another person about it let alone charged anyone. Beyond that, whether the finding is to the effect that the right of entry provisions were applicable or otherwise (and we say they clearly were not), the conduct is so clearly de minimus that a prosecution should never have been brought, and no interpretation of the law can cure that. We find it extraordinary that you would seek to rely upon ss 37M and 37N of the Federal Court of Australia Act 1976 (Cth) (FCA Act) in the context of your offer. First, your client should never have initiated a prosecution of this matter. As to your reliance upon s 37M of the FCA Act, the Commissioner pursued the matter over an extensive period, occasioning significant costs when it was apparent from the beginning that it would not facilitate an "efficient use of the judicial and administrative resources available for the purposes of the Court" (s 37M(2)(b)); an "efficient disposal of the Court's overall caseload" (s 37M(2)(c)), and/or "resolution of disputes at a cost that is proportionate to the importance and complexity of the matters in dispute" (s 37M(2)(e)). Second, even when provided with helpful comments from the Bench as to the appropriateness of this proceeding being brought and the view of the Court on the basis of the evidence as led, and on the basis of responses from Counsel for the Commission when these matters were put to him at trial, your client nonetheless gave instructions over the luncheon adjournment on the day of trial to pursue the matter. Your client did pursue the matter for the remainder of the day, concluding the evidence, and has maintained that position following trial and up until now. As to your reliance upon s 37N of the FCA Act, it is the Applicant who has conducted this proceeding in a manner that is inconsistent with the overarching purpose, as set out in s 37M and referred to above (s37N(l)). It is true that this provision requires the parties to act consistently with the overarching purpose set out in s37M in relation to negotiations for settlement. In that respect, it is our view that the Applicant should never have commenced proceedings but, having done so, should have sought to withdraw or dismiss the matter by consent a long time ago. Having gone to trial, we note that despite it being apparent that an offer to settle the matter should have been made at lunch on the day of trial, your Counsel told the Court that that proposition was expressly rejected and the Applicant would press on. Your client has since waited well over 6 weeks before giving any indication of an offer to settle. Work has been undertaken, particularly in the December post-trial period, to commence drafting of closing submissions while the case and transcript were fresh. An offer to resolve at this late stage can hardly be described, as you suggest, as having due regard for the statutory imperative to resolve litigation as quickly, inexpensively and efficiently as possible. We do not consider that your client, in rejecting an invitation from the Bench to seek settlement and then waiting over 6 weeks to approach us, is consistent with this proposition or s 37M of the FCA Act. To be clear, we consider your reference to now having the benefit of transcript is inapposite as the transcript was available immediately upon completion of the trial in early December. Further, we do not consider the offer in its terms to be consistent with, or appropriately address, the comments made by his Honour at trial. It is late and inadequate. The Respondents do agree that if this matter can be settled it should be settled, but it must be done on fair and proper terms. The conduct of your client in this prosecution is such that the respondents cannot, and should not have to, forego a likely order to recover at least some of the substantial costs expended by them in defending this matter. Your client should also publicly acknowledge that it should not have commenced the proceeding in the first place. We are accordingly instructed to reject your offer. We are further instructed to counter offer in the following terms: 1. the proceeding be dismissed by consent of both the parties; 2. the Applicant pay the costs of the Respondents: a, on a party-party basis from commencement of this matter up to lunch time on the day of trial, 6 December 2016; and b. on an indemnity basis from lunchtime on the day of trial, 6 December 2016, up to the date of acceptance of this offer; and 3. the Applicant issue a public statement to be agreed by the parties to the effect that the Applicant acknowledges that the conduct of the CFMEU and its organisers was not conduct that warranted action by the Australian Building and Constructions Commissioner and he should not have commenced the prosecution of this matter. This offer is made without prejudice except as to costs in accordance with the principles in Calderbank v Calderbank [1975] 3 All ER 333. Should your client fail or refuse to accept this offer within the timeframe, our client intends to place reliance on that failure or refusal in addition to its current position on the question of costs This offer will remain open until 4pm on 9 February 2017. [Emphasis in original.] 9 The applicant's solicitors wrote on 8 February 2017 rejecting the counter-offer made by the respondents. 10 Section 570(2)(a) is concerned with the institution of proceedings. It utilises two concepts, namely, the unreasonable institution of proceedings and the vexatious institution of proceedings. Proceedings may be instituted vexatiously even if not unreasonably. It is not necessary to examine the distinction in this case. 11 When the proceeding was instituted, the applicant had witnesses whose evidence, if accepted, would have established the contraventions alleged. Those contraventions, although minor, were not such that their pursuit by the applicant could be seen as vexing the respondents. However, the situation was different when the evidentiary hearing concluded on 6 December 2016. By then the applicant had observed the course of all of the evidence and also had some preliminary observations from the Court. The applicant responded to those circumstances by offering to settle the proceeding on the basis that the case be dismissed or discontinued with no order as to costs. 12 The question arises whether at that point there was an unreasonable act of the applicant which caused the respondents to incur costs pursuant to s 570(2)(b) of the Act. It is noteworthy that the concept of vexation does not apply in the case of circumstances arising under s 570(2)(b). 13 When the proceeding was adjourned on 6 December 2016 for submissions, orders were made requiring the parties to file written submissions. The written submissions from the respondents were due on 17 February 2017. It appears from the letter dated 1 February 2017 from the solicitors for the respondents that work had been undertaken, particularly in the post-trial period, to commence drafting of closing submissions while the case and the transcript were fresh. 14 The letter from the applicant's solicitor dated 25 January 2017 expressly anticipated that some costs might have been incurred by the respondents between 6 December 2017 and the date of the offer. In the circumstances, it was unreasonable of the applicant not to offer to pay those costs. The result was that the respondents were put to the expense of finalising the written submissions and appearing on 10 March 2017 to make oral submissions. 15 Mr Star QC, who appeared on behalf of the applicant, drew attention to the need for caution in applying s 570. In particular, he referred to Construction, Forestry, Mining and Energy Union & Ors v Clarke [2008] FCAFC 143 at paragraph 29 where the Full Court (Tamberlin, Gyles and Gilmour JJ) said: … Indeed, while courts should use the discretion in s 824(2) to ensure that parties to litigation arising from the WR Act [Workplace Relations Act 1996 (Cth)] do not engage in unreasonable acts and omissions which put the other party to undue expense, they should also be careful not to exercise the discretion with too much haste, given that such haste may discourage parties, for fear of an adverse costs order, from pursuing litigation under the WR Act in the manner which they deem best. 16 Mr Star argued that the application of s 570 was available only in exceptional cases and reflected the policy of the Act that generally, in cases subject to the section, no costs should be ordered. 17 However, in the circumstances prevailing on 25 January 2017, the action of the applicant in failing to offer costs to that date was an unreasonable act which caused the respondents to incur further costs. For that reason, the applicant should pay the respondents' costs incurred from the date after the conclusion of the evidentiary hearing being 7 December 2016 until and including 10 March 2017 when oral submissions were finalised. 18 Separate regard should be had to the period following 10 March 2017. After judgment was delivered on 26 March 2018, the question of costs was left outstanding. As it transpired, the respondents persisted in their claim for costs and it appeared that it would be necessary for the Court to schedule a hearing on that issue and to manage the proceeding by ordering written submissions prior to the oral hearing. In order to seek to avoid further costs being incurred in a case which seemed not to deserve them, the Court advised the parties by email that: His Honour's current view, having read the papers, but, of course, not heard oral argument, would be that the applicant make some limited contribution towards the costs of the respondents. 19 That communication provoked some discussions between the parties and the applicant took the first step on 8 June 2018 in response to the Court's communication by inquiring from the respondents what would be an appropriate contribution. The respondents replied that they were seeking their full costs. The applicant rejected that position. However, on 3 August 2018, in order to avoid the hearing scheduled for 7 August 2018, the applicant made an offer to pay 25 per cent of the respondents' party-party costs incurred following the lunchbreak adjournment on 6 December 2016 until 4.30pm on 6 August 2018, when that offer expired. 20 On 6 August 2018, the respondents rejected that offer and made a counter-offer, namely, that the applicant pay 90 per cent of their party-party costs for the entire proceeding. On the same day, the applicant rejected the respondents' counter-offer but made a further offer to pay 30 per cent of the respondents' party-party costs following the lunchbreak adjournment on 6 December 2016 until 5pm on 6 August 2018. The respondents rejected that offer. 21 In these circumstances, Mr Star argued that the costs incurred after the 8 June 2018 were caused by the respondents inflexibility in their rejection of any offer apart from payment of full costs. 22 This argument should not be accepted. The offers made by the applicant were made at a very late stage of the preparation for the costs hearing. At best, they might be available in relation to the costs after 3 August 2018. However, the amounts offered by the applicant in August were inadequate to address the circumstances. It is true that the respondents were uncooperative in their responses, however, the question to be considered is whether there was an unreasonable act of the applicant which caused the further costs to be incurred. 23 In my view, the unreasonable refusal of the applicant to pay the costs incurred by the respondents from 7 December 2016 until and including 10 March 2017 was sufficiently connected to the need for the application for costs that the applicant should pay the respondents' costs of and incidental to the application for costs. However, there is no basis for such costs to be awarded on an indemnity basis. 24 The orders for costs which will be made are for the purpose of compensating the respondents for costs incurred. They do not punish the applicant for bringing the application. 25 The motivation of the applicant in bringing the application is a separate issue. It is appropriate that judges exercise caution in criticising the exercise of prosecutorial discretion for the good reason that prosecutors should not be intimidated from pursuing difficult cases out of fear that they will be criticised by the Courts. Judges will often not be in a position to know all of the factors which feed into a decision whether to prosecute. However, there are cases in which it appears plainly enough that the discretion has been exercised in a way which does not serve the public interest. In such cases, if judges who witness such abuse of power do not call it out, the matter will be left hidden from view. 26 The present case calls for such observation. Whilst on a careful analysis, s 570 should not be applied to order the applicant to pay all of the respondents' costs, it seems likely that reasonable members of the public would be offended by the use of community resources to prosecute a case such as this. The details of that criticism appear from the extracts from the hearing which are set out in [6] of these reasons for judgment. I certify that the preceding twenty-six (26) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice North.