Bywater v Appco Group Australia Pty Ltd

LEE J: 1 By interlocutory application dated 15 February 2019, the respondent seeks an order that the applicant in this Part IVA representative proceeding pay the respondent's costs thrown away by reason of the filing of the further amended originating application and further amended statement of claim. This includes the costs of an earlier interlocutory application dated 3 April 2017, by which the respondent sought orders consequent upon an allegation that the applicant failed to comply with the threshold requirements of s 33C of the Federal Court of Australia Act 1976 (Cth) (FCA Act) or, alternatively, that the proceeding not continue as a representative proceeding under s 33N of the FCA Act. In the events that happened, it was only the first of these logically inconsistent applications that was agitated. 2 The applicant seeks the substantive relief of declarations (in a personal and representative capacity) that the respondent has breached various provisions of the Fair Work Act 2009 (Cth) (FW Act) including by allegedly: (a) failing to pay each group member in accordance with an applicable award; and (b) making false representations to group members that they were independent contractors and not employees. Alternative relief is sought based upon various alleged breaches of the FW Act, and orders are sought for statutory compensation and pecuniary penalties. 3 It is common ground that by reason of the nature of the claim made, this Court's ordinary discretion with respect to the making of a costs order pursuant to s 43(1) of the FCA Act is subject to the terms of s 570 of the FW Act. 4 As the Full Court (Reeves, Kerr and Lee JJ) recently explained in Liu v Stephen Grubits & Associates [2019] FCAFC 24 at [5], s 570 of the FW Act operates (in relation to a proceeding in this Court) as a limitation on the broad discretion contained in s 43 of the FCA Act when both those laws of the Commonwealth are read together: see also Melbourne Stadiums Ltd v Sautner [2015] FCAFC 20 at [140]; (2015) 229 FCR 221 at 252 [140]. 5 The predecessor provision of s 570 of the FW Act (s 824 of the Workplace Relations Act 1996 (Cth) (WR Act)) was considered by another Full Court (Tamberlin, Gyles and Gilmour JJ) in Construction, Forestry, Mining and Energy Unit v Clarke [2008] FCAFC 143 at [29]; (2008) 170 FCR 574 at 582 [29], where it was observed that: Indeed, while courts should use the discretion in s 824(2) to ensure that parties to litigation arising from the WR Act do not engage in unreasonable acts and omissions which put the other party to undue expense, they should also be careful not to exercise a 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. 6 The caution was reflected by Bromberg J in Saxena v PPF Asset Management Ltd [2011] FCA 395 at [6], where his Honour observed that "this Court ought be very careful indeed to exercise the discretion provided by s 570(2) and should not do so other than in a clear case". His Honour then went on to note that the "limited discretion conferred on the Court by that subsection ought not to become the basis for arguments about costs in relation to any and every transgression in the conduct of a case". 7 His Honour's remarks in Saxena, and those of the Full Court in Clarke, are based on the notion that there is a clear legislative intent that the Fair Work jurisdiction be primarily a "no costs" jurisdiction, unless a statutory threshold of unreasonable litigious conduct is demonstrated. The reason reflects a longstanding, underlying legislative intention to ensure access to justice in relation to Fair Work-type matters. 8 Another aspect of the Full Court's reasoning in Clarke at [28] merits mentioning: that is, the notion that courts should use the discretion to ensure that parties to litigation arising from the WR Act do not engage in unreasonable acts and omissions which put the other party to undue expense. This observation now finds express reflection in relation to all civil proceedings in this Court by sub-s 37N(4) of the FCA Act, which provides: (4) In exercising a discretion to award costs in a civil proceeding, this Court or a judge must take account of any failure to comply with the duty imposed by subsection (1) or (2). (emphasis added) 9 Subsections (1) and (2) of the same section provides: (1) The parties to a civil proceeding before the Court must conduct the proceeding (including negotiations for settlement of a dispute to which the proceeding related) in a way consistent with the overarching purpose [being the just determination of the proceeding before the Court according to law and ensuring a determination is reached as quickly, inexpensively and efficiently as possible]. (2) A party's lawyer must, in the conduct of civil proceedings before the Court (including negotiations for settlement) on the party's behalf: (a) take account of the duty imposed on the party by subsection (1); and (b) assist the party to comply with the duty. 10 At the very least, a lack of compliance with the overarching purpose obligations informs the assessment of whether one of the pre-conditions for the exercise of the attenuated costs discretion mandated by s 570 of the FW Act exists: that is, whether the court is satisfied (in relation to the party against whom a costs order is sought), that the party's "unreasonable act or omission caused the other party [seeking costs] to incur the costs" (see sub-s 570(2)(b) of the FW Act). 11 The pre-conditions in s 570(2) (that costs will only be awarded in the above circumstances or where the proceeding is instituted vexatiously or without reasonable cause) are a necessary condition of an award of costs, but their existence is not determinative of the issue - the court retains a discretion as to whether it will award costs, even if the pre-conditions exists. Put in terms of what was said in Saxena, costs may not be awarded in relation to any and every transgression in the conduct of a case, even if the transgression could be characterised as an unreasonable act or omission that caused costs to be incurred by another party. Be that as it may, the considerations which give rise to caution in awarding costs even where a pre-condition exists (evident from Saxena) and which incidentally serve to facilitate access to justice, seem to me to be signally important when it comes to usual inter partes litigation in this jurisdiction, including litigation maintained by industrial organisations. They also have real force when one is dealing with a Fair Work representative proceeding funded out of the resources of the applicant and group members, or one which is conducted on a speculative basis. These considerations seem to me to have less force, however, when one is dealing with a Fair Work representative proceeding, which is funded by a litigation funder seeking to use the processes of the Court in order to conduct an enterprise to derive a profit. 12 Indeed, it seems to me the fact that litigation is funded might be relevant at an anterior stage of the analysis. It may be a particular act or omission alleged to be unreasonable within the meaning of s 570(2)(b) - say a failure to comply with an important pre-trial time-tabling order which occasioned costs thrown away - which might have been caused by a failure to allocate sufficient resources to a task. Such an omission might be regrettable but understandable if the litigant had limited resources, and yet it takes on a different character when a funder had agreed to make sufficient resources available to the defaulting party by promises contained in a funding agreement. In the first case the stigmatisation of the omission as unreasonable may well be inapt and hence no costs consequences follow; but in the second case, the opposite conclusion might be reached, thus enlivening the discretion to award costs. 13 This proceeding is one which is funded by such a litigation funder. Harbor Fund III LP (Funder) is an exempted limited partnership organised under the laws of the Cayman Islands. As part of the bargain for funding the proceeding, the Funder has agreed to resource the litigation and pay any adverse costs, which are ordered by the Court. 14 It seems to me that provided the statutory preconditions for an award of costs under s 570(2) of the FW Act are met, then given the existence of a funder, amorphous broad policy considerations as to access to justice, which have real weight in different contexts, should not mean that I should show excessive caution and shrink from making an order for costs in this funded Fair Work litigation, if I otherwise thought it was appropriate. 15 As I have said, the interlocutory application which alleged that there had been a non-compliance with the gateway provisions of Part IVA (because of the failure to articulate any common question) forms a part of the costs that the respondent wishes to cover. That application was dismissed by Wigney J, who found that there were in fact two common questions. As I indicated during the course of today's case management hearing, it is not to the point that some common questions were, or were not, found by his Honour to exist; nor is it particularly relevant that in further amended pleadings the common questions have evolved quite considerably. The respondent mounted the challenge to the proper constitution of the proceeding, and the question that arose was whether there was a substantial common question of law and fact. The simple answer is that there was, and the attack on the constitution of the proceeding was misconceived. This seems to have been belatedly recognised by the respondent, as evidenced by the discontinuation of the application for leave to appeal against the interlocutory orders of his Honour. 16 Having said that, after Wigney J handed down his decision, the respondent's solicitors wrote to the applicant's solicitors on 21 May 2018 to seek confirmation as to whether the applicant intended to amend his statement of claim in the light of criticisms of the pleading levelled by Wigney J. The applicant turned down the opportunity to amend its claim and instead sought directions, which required the respondent to put on its defence. This defence was filed on 24 July 2018, with the new, current version of the applicant's pleading not filed until 14 December 2018; that is, over two years after the proceeding was commenced on 20 October 2016. 17 It is fair to say that this proceeding has not advanced at the pace of summer lightning. There does not seem to me to be any rational or reasonable explanation as to why the nettle was not grasped following the criticism by Wigney J, and reformulation of the claim did not occur far earlier. The costs of the respondent in filing a defence to a now-superseded pleading seems to me to have been incurred entirely unnecessarily. 18 As noted above, s 570(2) of the FW Act relevantly provides that a party may be ordered to pay costs in the event that the Court is satisfied that the party's unreasonable act or omission caused the other party to incur the costs. In its interlocutory application, the respondent seeks an order that the applicant in this representative proceeding pay the respondent's costs thrown away by reason of the further amended originating application and further amended statement of claim. I am not satisfied an order in these terms should be made. In the alternative, an order is sought by the respondent, that the applicant pay the respondent's costs thrown away by reason of the further amended originating application and the further amended statement of claim in the period between 18 May 2018 and 26 October 2018 (other than costs of what were described as the "appeal proceedings", being applications for leave to appeal). Again, I am not satisfied an order in those terms should be made. 19 Notwithstanding this, I do believe that the costs in preparing the defence to the amended statement of claim were costs incurred by the respondent, which are the result of the unreasonable act of the applicant in pressing for a defence to a pleading which had been criticised by Wigney J, and which in due course was superseded by a further pleading. 20 In those circumstances, notwithstanding the restriction on my power to award costs which I have discussed at some length above, and having regard to what I consider to be the failure by the applicant to comply with the overarching purpose, I order the applicant to pay the respondent's costs of the preparation and the filing of the defence to the amended statement of claim. 21 It follows from the above that I consider that any further or broader award of costs as sought in the interlocutory application filed by the respondents is unwarranted. I certify that the preceding twenty-one (21) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lee.