Cultural Office of the Embassy of the State of Kuwait v Soliman

background 1 This is an appeal from orders made by the Federal Circuit and Family Court of Australia (Division 2) on 14 December 2021: Soliman v The Cultural Office of the Embassy of the State of Kuwait [2021] FedCFamC2G 351 (hereafter "J"). 2 The appellant (Cultural Office) is part of the Embassy of the State of Kuwait in Canberra. Mr Soliman (the respondent) was an "academic advisor" employed by the Cultural Office. His employment was regulated by an employment contract dated 16 June 2014, and the Protocol of the regulations for locally engaged staff employed at the State of Kuwait No 45/99 (Protocol). Clause 5 of the employment contract incorporated the Protocol. The contract and the Protocol were written in Arabic and agreed translations of these documents were provided to the Court before the hearing. 3 Mr Soliman commenced working for the Cultural Office on 16 June 2014. Before the critical events, Mr Soliman had received two disciplinary warnings from the Cultural Office in relation to his workplace conduct. 4 On 13 November 2018 the Head of the Cultural Office, Mr Alrefae, discussed at an interview with Mr Soliman a complaint received from a student who was sponsored by the Cultural Office. The complaint related to Mr Soliman's alleged conduct on a telephone call or calls with the student. In the course the interview, Mr Alrefae asked Mr Soliman questions regarding the complaint. After the meeting, Mr Alrefae attempted to give Mr Soliman a written disciplinary warning and notes of the meeting. Mr Alrefae advised Mr Soliman that his employment would be terminated once the Ministry of Higher Education in Kuwait approved Mr Alrefae's decision. 5 Mr Soliman's evidence was that he understood his employment was suspended. He worked the remainder of the day on 13 November 2018 and did not return. His access to his work emails was cancelled. 6 Mr Soliman wrote an email to the Cultural Office on 17 November 2018, amongst other things, enquiring about his employment status. In that email, Mr Soliman also made various submissions, including about what had occurred during the meeting with Mr Alrefae. 7 No response was given by the Cultural Office to Mr Soliman's enquiry of 17 November 2018 about his employment status. 8 According to Mr Alrefae's affidavit, Mr Alrefae sent a letter to the Ministry of Higher Education in Kuwait on 20 November 2018 seeking confirmation of his decision to terminate Mr Soliman's employment. This letter was not in evidence. The affidavit explained the reason for this as being that it was written in Arabic and that it contained information about the person who made the complaint. 9 On 9 January 2019, the Ministry of Higher Education sent an email to Mr Alrefae confirming a decision to terminate the employment of Mr Soliman. 10 The primary judge at J[90] found that the effect of the meeting on 13 November 2018 was that Mr Soliman was suspended from work. His contract was not effectively terminated until 10 January 2019. This was also the finding of the Fair Work Commission where Mr Soliman had earlier brought proceedings. On 10 January 2019, Mr Soliman had filed an application with the Commission seeking an extension of time to lodge a general protections dispute. The decision of the Deputy President of the Commission was that the application was filed within the statutory timeframe and no extension was required because the date of termination of Mr Soliman's employment was 10 January 2019: Emad Soliman v The Cultural Office of the Embassy of the State of Kuwait [2020] FWC 3142. 11 There was no dispute on appeal that the termination of Mr Soliman's employment occurred on 10 January 2019. There was also no dispute at the hearing of the appeal that Mr Soliman was not provided reasons for termination of his employment on 10 January 2019. 12 After termination of Mr Soliman's employment on 10 January 2019, the Cultural Office retrospectively paid Mr Soliman's superannuation entitlements of $23,819.97, presumably with a view to complying with its obligations under the Superannuation Guarantee (Administration) Act 1992 (Cth). This occurred on 3 April 2019. 13 The proceedings the subject of this appeal were commenced by Mr Soliman on 17 October 2019. He sought payment of an amount of $20,000.00, being the maximum for a small claim within the meaning of s 548 of the Fair Work Act 2009 (Cth) (FW Act). 14 Mr Soliman's application was subsequently amended. Mr Soliman advanced three claims, but limiting the total amount claimed to $20,000. The three claims were: (1) $10,585.00 for an end of service entitlement; (2) $9,760.00 for two months' notice period; and (3) $9,287.00 for the period of his suspension from 14 November 2018 until termination on 10 January 2019. 15 Each of these claims was apparently accepted by the primary judge, although the primary judge misunderstood the nature of the first claim as being one for superannuation. 16 The Cultural Office appealed on two grounds, namely that the trial judge erred in finding: (1) at J[83] that the Cultural Office was required to pay Mr Soliman superannuation entitlements that took into account calculations for an end of service payment under Article 37 of the Protocol; and (2) at J[86] and J[89] that the Cultural Office was required to provide Mr Soliman with two months' notice of termination of employment in accordance with clause 4 of the Contract and Article 33 of the Protocol, with the consequence that Mr Soliman was entitled to payment in lieu of two-months' notice pursuant to Clause 4 of the contract. 17 There was no dispute at any stage of the appeal that Mr Soliman was entitled to the payment of $9,287.00 for payment in respect of the suspension period between 14 November 2018 and termination on 10 January 2019. 18 During the course of argument on appeal, the appellant abandoned the second ground summarised above, leaving ground 1 as the sole issue for determination. 19 The appellate jurisdiction of this Court was exercised by a single judge pursuant to section 25(1AA)(a) of the Federal Court of Australia Act 1976 (Cth) (FCA Act). It was also considered appropriate that the parties be granted leave to be legally represented in these proceedings pursuant to section 548(5) of the FW Act.

GROUND 1 20 The Cultural Office submits that Article 37 of the Protocol excludes Mr Soliman from end of service payments by reason of the fact that he was entitled and/or provided with superannuation guarantee contributions pursuant to Article 28 of the Protocol. 21 Article 28 provided (typographical errors in original): Article 28 In cases where the mission is obliged to local staff to participate in a general superannuation system in the country of the Mission, the representative Mission after the approval of the Ministry pays the entitlements to the insitutions in which the local employee has been engaged in accordance with the superannuation system, provided that it does no exceed the percentage approved by the Ministry, and this should be registered in the employment contract specifying the participation rate between the two parties. In the application of the preceding paragraph, it is required to obtain from the local employee an explicit declaration that he/she shall bear the full expenses of his/her contribution in the superannuation system and his/her non-entitlement in requesting from the Mission any amounts related to his/her participation in the superannuation system in the country of the Mission ,and in all cases, participation in the superannuation system is subject to the approval of the Ministry and the superannuation amounts are not paid in advance, these cases exclude locally recruited Kuwaiti employees by joining them in the Public Social Security System in the State of Kuwait in accordance with the prescribed conditions. 22 Clause 8(3) of Mr Soliman's employment contract provided: 3 - As an important part of the Australia government's retirement scheme each employee is responsible for his/her own superannuation welfare scheme 23 Notwithstanding the second paragraph of Article 28 and cl 8(3) of the contract of employment, there is no dispute that the Cultural Office was responsible for payment of superannuation in respect of Mr Soliman and that it belatedly paid Mr Soliman's superannuation entitlements. Having said that, Mr Soliman has apparently not been informed precisely how the amount of $23,819.97 paid in respect of superannuation was calculated. 24 Article 37 of the Protocol provided (typographical errors in original): Article 37 Local staff performing services duties (servants) and their duties are in accordance with article (41) of this protocol shall not have end of service reward or periodic or encouragement bonuses, and their salaries shall be considered fixed and the increase shall be at the discretion of the Ministry, and the local employee other than the categories stipulated in the preceding paragraph shall not be entitled to claim any renumeration for the duration of the trial period which was unsuccessful. [This is referred to below as the "first paragraph of Article 37"] For the local employee in cases other than in the previous paragraph and in article (28) of this protocol at the end of his/her service shall have the right to the end of service half a month's salary for each year of his first five years of service and then one month's salary for each year of his net year of service so that the total reward shall not exceed two years' salary - the calculation of the end of service reward shall take into account the following: [This is referred to below as the "second paragraph of Article 37"] A - The end of service reward is calculated on the basis of the salary earned by the employee at the end of his/her service after the exclusion of the allowances and the years he/she has been included in the superannuation system, and in this case the calculation for the end of service will be for the last salary he/she received before his participation in the superannuation fund. B - The end of service reward shall be reduced by 10% in case of resignation without adherence to the period specified in the contract with that employee or in accordance with that provisions of the clause 2 or clause 5 of Article 33. C - The end of service reward shall be doubled in case of death of the employee during the performance of the work, this shall be estimated by the committee (panel) approved by the representative Mission. D - In case of termination of the employment of the local employee by dismissal in accordance with the provisions of Article 30 of this protocol, he may be deprived of not less than 15% and shall not exceed 50% of the value of the end of service reward, the assessment shall be made by the Ministry which may decide to pay the reward in full. In all cases, the end of service reward shall not be paid except with the prior approval of the Ministry. 25 The central issue is the correct construction of the first sentence of the second paragraph of Article 37. The primary judge concluded at J[81] that the most logical and practical understanding of the paragraph was that an employee is not entitled to end of service payments only if he or she fell within both: (a) "local staff performing services duties (servants)" as referred to in the first paragraph of Article 37; and (b) Article 28 as an employee entitled to superannuation. 26 It was an agreed fact at trial that Mr Soliman was not a member of "local staff performing duties" within Article 41, as referred to in the first paragraph of Article 37. It therefore followed, according to the primary judge's reasoning at J[81], that Mr Soliman was entitled to an end of service payment: Mr Soliman could not satisfy both (cumulative) limbs required for exclusion from an end of service payment. 27 The Cultural Office contended that Mr Soliman was excluded from end of service payments by the second paragraph of Article 37, because he was an employee in Article 28, namely one who was entitled to superannuation payments. The Cultural Office submitted that the better construction of the contract was that, where staff are employed in a country that obliged them to participate in a general superannuation system, such as Australia, those staff would not be paid an end of service entitlement under Article 37. 28 Objectively ascertained from the text of Articles 28 and 37 and the context and purpose (Mount Bruce Mining Pty Limited v Wright Prospecting Pty Limited [2015] HCA 37; 256 CLR 104 at [46]), the correct construction of the second paragraph of Article 37 is as follows. An end of service payment is payable to local employees other than: (a) those identified in paragraph 1 of Article 37; and (b) those entitled to superannuation under Article 28. 29 The evident purpose underlying Articles 28 and 37 is that employees who work in countries without a superannuation system should be entitled to end of service payments calculated by reference to the duration of their employment. Those employees who have the benefit of superannuation should not have the benefit of end of service payments. This purpose is confirmed by subparagraph (A) of Article 37, which calculates the end of service payment for employees who became eligible for superannuation part way through their term of employment by deducting "the years [the employee] has been included in the superannuation system, and in this case the calculation for the end of service will be for the last salary he/she received before his participation in the superannuation fund". 30 It follows that the primary judge erred in his construction of Article 37 at J[81]. 31 The primary judge stated at J[82] - J[84]: 82 It should be noted in particular that in the Respondent's closing submissions, at par.8, it was conceded that it had made an error in not paying superannuation during the course of the Applicant's employment which, it was said, had [now] been rectified by the lump sum payment. 83 This concession having been made, the only issue here is whether the lump sum payment actually took into account, as Article 37 provided, the relevant calculation for the end of the employment by reference to the years of service of the employee. Strictly speaking, this should be an arithmetical calculation only. Absent confirmation by both parties by 30th January 2022 that the payment of superannuation that has been made relevantly took into account the formula set out in Article 37, the relief sought by the Applicant should be granted. 84 In addition to these reasons, I prefer and accept the submissions of the Applicant in relation to the Article 37 issue. 32 The issue identified by the primary judge at [83], and which was also reflected in the orders made by the primary judge, was not one which was raised by either party. The primary judge misunderstood the case which Mr Soliman was putting in this respect. Mr Soliman was claiming that he was entitled to an end of service payment under Article 37 in addition to his entitlement to superannuation under Article 28. 33 Contrary to submissions advanced for Mr Soliman, it does not matter that there may not have been strict conformity with every requirement mentioned in Article 28. Specifically, it does not matter that the requirement to pay superannuation to the employee was not "registered in the employment contract specifying the participation rate between the two parties". The exclusion in Article 37 is to employees to whom Article 28 applies and does not turn on strict compliance with each and every aspect of Article 28. 34 In this regard, and as already mentioned, Article 28 was substantially complied with, albeit belatedly, because Mr Soliman was in fact paid superannuation in the amount of $23,819.97 pursuant to his entitlement to superannuation as provided by Article 28. 35 It follows that the appeal must be allowed on the first ground summarised earlier. 36 It was submitted for the Cultural Office that the proper way to determine what amount should be payable if the Cultural Office were successful on appeal was to subtract from the amount of $20,000 the amounts in respect of which the Cultural Office was successful: $20,000 - $10,585.00 (ground 1) = $9,415. This was said to be appropriate because Mr Soliman had effectively abandoned any right to an amount beyond $20,000 in bringing his claim as a "small claim" under s 548 of the FW Act. In my view, and ignoring the fact that no sensible basis for adopting this methodology was made apparent, that would be quite unjust. Further, the methodology proposed by the Cultural Office would be directly inconsistent with the agreement reached between the parties before the hearing of the appeal as to what the appropriate orders were depending on which of the two grounds was successful, if successful at all. 37 The correct question is simply: how much should Mr Soliman have been paid on termination of his employment? The primary judge ought to have held that Mr Soliman was entitled to two amounts: $9,287.00 reflecting the amount he should have been paid for the suspension period between 14 November 2018 and termination on 10 January 2019, and the amount of $9760.00 being for two months' notice period, a total of $19,047.00.

costs 38 Immediately after delivery of the judgment above, Mr Soliman sought an order for the costs of the appeal under s 570(2) of the FW Act. Section 570 provides as follows: 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. 39 Ms Backhouse relied on s 570(2)(b), namely that the Cultural Office's unreasonable act or omission caused Mr Soliman to incur costs. No reliance was placed upon sub-para (a) or (c) of s 570(2). The unreasonable act was said to be the failure to accept an offer of settlement. 40 Mr Soliman relied on an offer, said to be made in accordance with the principles in Calderbank v Calderbank [1975] 3 All ER 333, made in a letter dated 17 May 2022 to the solicitors for the Cultural Office. That offer was open until 5pm on 24 May 2022. The offer was to compromise the proceedings on the basis that Mr Soliman be paid $19,047 for the two months' notice in lieu and the suspension period. The offer expressly stated that Mr Soliman would forego any claim for end of service entitlements. The offer did not contain a detailed explanation as to why Mr Soliman considered this result would prevail, but the parties had already filed written submissions which contained their respective arguments. This offer precisely reflected the result of the judgment that has just been delivered. 41 Ms Backhouse, representing Mr Soliman, also relied on the fact that the respondent had abandoned ground 2 of its appeal during the course of argument. 42 I accept that, as a matter of principle, an unreasonable rejection of, or failure to accept, an offer of compromise may constitute an unreasonable act or omission for the purposes of 570(2)(b): Melbourne Stadiums Ltd v Sautner [2015] FCAFC 20; 229 FCR 221 at [166]; McDonald v Parnell Laboratories (Aust) (No 2) [2007] FCA 2086; 164 FCR 591 598-599. The question whether an act or omission is "unreasonable" is informed by context and requires an evaluative assessment of all the circumstances: Celand v Skycity Adelaide Pty Ltd [2017] FCAFC 222; 256 FCR 306 at [164] and [171]. 43 The question whether a rejection of, or a failure to accept, an offer of compromise involves an "unreasonable" act or omission within the meaning of s 570(2)(b) depends upon all of the particular circumstances, including the obviousness of the likely result of the proceedings. For example, the rejection of a Calderbank offer that explains clearly and in detail the reasons why a position cannot succeed is more likely to be unreasonable than the rejection of a Calderbank offer that merely asserts the likely result. Other factors include the length of time for which the offer remains open; the stage of proceedings at which the offer was made; the extent of the compromise offered, including as assessed against the objectively assessed strength of the parties' respective positions; and the context in which the offer was made. 44 A part of the context here is that the proceeding at first instance was a "small claim" where the parties were incurring legal fees. In describing the claim as a "small claim" by reference to s 548 of the FW Act, it is not intended to diminish the importance of the case to the parties. Whilst s 570 of the FW Act impinges on the general discretion in relation to costs provided by s 43 of the FCA Act, it does not absolve parties or their legal representative from compliance with ordinary standards of care and diligence or with obligations to conduct proceedings in accordance with the overarching purpose set in s 37M and 37N of the FCA Act. Indeed, the statutory and general context amplifies the requirement for careful consideration to be given to the merits of the dispute and the way in which the proceeding is conducted precisely because the matter is a FW Act matter in which costs are affected by s 570, and a "small claim" in which the parties chose to be represented such that costs are likely to absorb a substantial part of, or even exceed, any order for payment of an amount referred to in s 548(1A) of the FW Act. Those matters inform whether the conduct of the parties, directly or through their legal representatives, is "unreasonable" within the meaning of s 570(2)(b). 45 I also accept that, as a matter of principle, the abandoning of a ground of appeal at hearing may support a conclusion that there has been an unreasonable act or omission within s 570(2)(b). In the present context, for example, it is one factor which might be capable of suggesting insufficient attention being given, at an appropriate time (including on commencement of the appeal), to the merit of the appeal or the particular ground of appeal. 46 I accept that, at the time the offer was made, namely on 17 May 2022, the Cultural Office considered its appeal on ground 2 was arguable. The letter of offer did not explain why that ground was unlikely to succeed and it was not obvious on the written submissions which had then been filed that the ground had little or no prospect. 47 A part of the relevant context is that the jurisdiction is one in which costs orders are only made on the limited grounds contained in s 570(2) of the FW Act. Whether the rejection of a Calderbank offer is "unreasonable" within the meaning of s 570(2) must be assessed against the particular statutory context and all of the relevant circumstance. Ultimately, this appeal has been fought over an amount of $953, each party being represented and presumably incurring significant legal fees. Another part of the context is that the Cultural Office disagreed with the primary judge's construction of the Protocol, in respect of provisions which are likely to be relevant to a number of existing employees. The Cultural Office was successful in this respect, albeit Mr Soliman's offer involved conceding the point. 48 Whilst I think the application for costs was well made, with a considerable degree of reluctance, I consider that the appellant's conduct in not accepting the offer, and in its prosecution of ground 2, was not sufficiently "unreasonable" as to warrant the making of an order under s 570(2) in the circumstances. 49 There will accordingly be no order as to costs. I certify that the preceding forty-nine (49) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Thawley.