Fair Work Ombudsman v Devine Marine Group Pty Ltd

The application for costs 38 Capt Boucaut-Jones sought an order that the FWO pay his costs of the proceedings. This was the only order for costs sought by any party. No party sought an order that the matter be remitted to the Federal Circuit Court for it to determine those costs which it had reserved while the proceedings were in that Court, as was contemplated by my decision in Fair Work Ombudsman v Devine Marine Group Pty Ltd [2013] FCA 1135. 39 The exercise of Court's discretion with respect to costs pursuant to s 43 of the Federal Court Act 1976 (Cth) is governed, in the circumstances of this case, by s 570 of the FW Act. Section 570 provides: 570 Costs only if proceedings instituted vexatiously etc. (1) A party to proceedings (including an appeal) in a court (including a court of a State or Territory) in relation to a matter arising under this Act may be ordered by the court to pay costs incurred by another party to the proceedings only in accordance with subsection (2) or section 569 or 569A. (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. 40 As can be seen, s 570(2)(a) has the effect that an order for costs may be made against a party only if the Court is satisfied that the party instituted the proceedings vexatiously or without reasonable cause. 41 Captain Boucaut-Jones submitted that the FWO had instituted the proceedings against him "without reasonable cause", so that subs (2)(a) enlivened the discretion in the Court. This was so, he submitted, because it should have been clear to the FWO that the claim of accessorial liability made against him would fail even if all the findings of facts sought by the FWO were made in the FWO's favour. Even on that basis, the FWO could not establish that Capt Boucaut-Jones had knowledge that an award applied, and the FWO should have known that proof of such knowledge was necessary for a finding of accessorial liability. 42 The principles relating to the assessment of whether a proceeding was commenced without reasonable cause were not in issue. The mere fact that the claim against Capt Boucaut-Jones failed does not mean, by itself, that the proceedings were commenced without reasonable cause. In this respect, Gibbs J said in R v Moore; Ex parte Federated Miscellaneous Workers' Union of Australia (1978) 140 CLR 470 at 473, when considering s 197A of the Conciliation and Arbitration Act 1904 (Cth): In my opinion, a party cannot be said to have commenced a proceeding "without reasonable cause", within the meaning of that section, simply because his argument proves unsuccessful. In the present case the argument presented on behalf of the prosecutor was not unworthy of consideration and it found some support in the two decisions of this Court to which I have referred. The fact that those decisions have been distinguished, and that the argument has failed, is no justification for ordering costs in the face of the prohibition contained in s. 197A. 43 In Baker v Patrick Projects Pty Ltd (No 2) [2014] FCAFC 166, the Full Court said: [9] The meaning and application of the phrase "without reasonable cause" in s 570 and its predecessors has been considered in many cases. The effect of these authorities was recently summarised by Pagone J in Construction, Forestry, Mining and Energy Union v Corinthian Industries (Australia) Pty Ltd (No 2); [2014] FCA 351. His Honour said (at [8]) that: "To exercise the discretion conferred by [s 570(2)(a) of the FW Act] the Court must be satisfied that the claims were, relevantly, instituted without reasonable cause. That is not established merely because a party fails in the claims: R v Moore; ex parte Federated Miscellaneous Workers Union of Australia [1978] HCA 51; (1978) 140 CLR 470, 473. The relevant provisions reflect 'a policy of protecting a party instituting proceedings from liability for costs' and costs will rarely be awarded unless justified by exceptional circumstances: see Kangan Batman Institute of Technology and Further Education v Australian Industrial Relations Commission (2006) 156 FCR 275 at [60]. In Kangan Batman Institute it was said by the Full Court at [60] that "a proceeding will be instituted without reasonable cause if it has no real prospects of success, or was doomed to failure". In Kanan v Australian Postal and Telecommunications Union (1992) 43 IR 257 Wilcox J indicated at 264 that one way of testing whether a proceeding was instituted 'without reasonable cause' was to ask whether, upon the facts apparent to the applicant at the time of instituting the proceeding, there was no "substantial prospect of success". His Honour went on to say that a proceeding lacks a reasonable cause where it is clear that it must fail on the applicant's own version of the facts." Counsel for Capt Boucaut-Jones emphasised the last sentence in this passage. 44 Some assistance in determining whether a proceeding has been commenced without reasonable cause can be obtained by enquiring whether the proceeding could have been dismissed summarily. Care must be taken in this respect however, so as not to substitute a different test for that created by the words of the statute. The Full Court in Weeks v Commissioner of Taxation (No 2) [2013] FCAFC 22 made this point: [6] As the Full Court said in Thompson v Hodder (1989) 21 FCR 467 at 471, the words of the Act must be allowed to speak for themselves, in the sense, we would add, that it may be a distraction to substitute different words for those of s 824. Nevertheless the expression, "without reasonable cause", may describe a proceeding that is capable of being disposed of summarily. It is therefore appropriate to ask whether the present appeal had no substance in fact and law. 45 As is apparent from the principal reasons at [204], I found that, even on the inferences most favourable to the FWO, the evidence did not establish that Capt Boucaut-Jones "had knowledge of an applicable industrial award, let alone an award containing stipulations with respect to minimum rates of pay and weekend penalty rates". 46 Earlier, I had reviewed several of the authorities bearing upon the requisite intention and knowledge for a finding of accessorial liability. In particular, I referred to the decisions in Potter v Fair Work Ombudsman [2014] FCA 187, Fair Work Ombudsman v Al Hilfi [2012] FCA 1166, and Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union (AMWU) v John Holland Pty Limited ACN 004 282 268 [2009] FCA 274; (2008) 180 IR 350. In Potter, Cowdroy J had held, in analogous circumstances, that knowledge that a particular award applied was necessary for a finding of accessory liability. In Al Hilfi, Besanko J had held, without deciding the point, that there was a good deal of force in the contention of the respondent to like effect and, in John Holland, Greenwood J in a different but analogous context seemed to take a similar view. 47 I concluded at [187]-[188]: [187] In my opinion, Potter cannot be distinguished on this basis. The FWO submission does not give effect to the requirement that the accessory's involvement be intentional. That is the real issue to which Cowdroy J's reasoning was directed. Without knowledge that an Award is applicable, it is difficult to see how a finding could be made that the accessory had intentionally participated in the contravention: see Yorke v Lucas at 670. [188] As the respondents were not represented, the Court did not have the benefit of full argument on these issues. Nevertheless, I consider that the claims of accessorial liability in this case should be determined in accordance with the principles stated in Potter and Al Hilfi. That is because knowledge that there is an award which is applicable which prescribes minimum rates or entitlements is a factual element necessary for the establishment of the accessory's intention. 48 Counsel for Capt Boucaut-Jones noted that the original Statement of Claim filed in these proceedings on 31 May 2012 contained no allegation at all concerning his (Capt Boucaut-Jones) knowledge of any applicable award, let alone an allegation concerning his knowledge of an application of the kind relied upon by the FWO for his accessory liability. Further, the Amended Statement of Claim filed on 19 September 2013 alleged only that Capt Boucaut-Jones was "aware of the obligation to pay minimum wages to employees for time worked" but made no further allegation. 49 Counsel also referred to the terms of s 45 of the FWA and, in particular, to Note 2 which makes it plain that a person does not contravene the terms of a modern award unless the award applies to the person. This should have made it plain to the FWO, he submitted, that knowledge that an award applied had to be established as part of the claim of accessory liability. 50 In short, counsel's submission was that, in the light of Yorke v Lucas (1984) 158 CLR 661 and the cases which followed it, the FWO should have known that Capt Boucaut-Jones could be knowingly concerned in the alleged contraventions of DMG only if he had knowledge of the essential facts constituting the contravention and in particular, knowledge of the application of an award. 51 Despite the force of those submission, I am not satisfied, as required by s 570(2)(a), that the FWO instituted the proceedings without reasonable cause. 52 First, as already noted, the mere fact that the FWO failed in her claim against Capt Boucaut-Jones is not sufficient for a finding in terms of s 570(2)(a). The relevant question is whether the proceeding had some reasonable prospect of success at the time it was instituted, and not whether it ultimately failed: Australian Workers' Union v Leighton Contractors Pty Ltd (No 2) [2013] FCAFC 23 at [7]. 53 Secondly, the decisions in both Potter and al Hilfi were handed down after the commencement of the present proceedings on 31 May 2012. The judgment in Al Hilfi was delivered on 26 October 2012 and the judgment in Potter on 7 March 2014, only five days before the commencement of the trial in this action on 12 March 2014. Accordingly, the FWO cannot be taken to have known of these judicial views as at 31 May 2012. 54 Thirdly, the state of the law at 31 May 2012 as to the requisite knowledge in circumstances like the present was not clear. In particular, there was no clear authority as to the essential facts of which an accessory must have knowledge for a contravention of s 45 of the FWA. It is pertinent to note in this respect that, after 31 May 2012, there were some judicial decisions to the effect that knowledge of the applicability of an award, in a context like the present, was not necessary for accessory liability. The FWO referred in this respect to decisions of the then Federal Magistrates Court in Fair Work Ombudsman v Kingsford Carwash Pty Ltd [2012] FMCA 464; Fair Work Ombudsman v Kingsford Carwash Pty Ltd (No 2) [2012] FMCA 1210; and Fair Work Ombudsman v Access Embroidery (Australia) Pty Ltd [2012] FMCA 835. Although these decisions were handed down after the commencement of the present proceedings, they do provide support for the FWO's contention that, as at 31 May 2012, there was more than one view reasonably open as to the essential elements to be established for a finding of accessorial liability in circumstances like the present. 55 Fourthly, there are cases outside the context of the FW Act which provide some support for the FWO's position. I referred to one such authority in the principal reasons at [176], namely, Rafferty v Madgwicks [2012] FCAFC 37; (2012) 203 FCR 1 at [254]. 56 Fifthly, Capt Boucaut-Jones did bring an application for summary dismissal of the proceedings against him, and failed: Fair Work Ombudsman v Devine Marine Group Pty Ltd [2013] FCA 1135. In that decision, I gave a number of reasons for declining to dismiss the FWO's claim against Capt Boucaut-Jones summarily, including: [42] However, I am not satisfied that this indicates that these particular claims of the FWO have no reasonable prospects of success. First, the manner in which Giorgianni and Yorke v Lucas are to be applied in a context such as the present is not settled. At the heart of the FWO's claim is an allegation that DMG sought to avoid the payment to Mr Kouka and Mr James of employment entitlements of a kind commonly found in an industrial award. In that context, there is a question as to whether it is sufficient for the FWO to establish knowledge on Capt Boucaut-Jones' part that work was being carried out to which minimum legislative protections would apply or to which the Award would apply if it were performed by employees. Alternatively, must the FWO go further and establish knowledge of the particular circumstances giving rise to the individual contraventions arising under the applicable award? These are not easy questions and, in my opinion, should be addressed in the context of a trial. 57 It should also be kept in mind that the FWO commenced the proceedings against three respondents: DMG and Capt Devine as well as Capt Boucaut-Jones. There was accordingly the prospect that there may be evidence in the trial in addition to that which the FWO proposed to lead. I referred to this consideration in [13]-[19] of the summary judgment decision. 58 These circumstances in combination make it inappropriate to conclude that it should have been obvious to the FWO as at 31 May 2012 that, on any reasonable view of the facts, the claim against Capt Boucaut-Jones could not succeed. For these reasons I am not satisfied that the proceedings were commenced without reasonable cause. 59 The means that Capt Boucaut-Jones does not establish a matter enlivening this Court's discretion with respect to costs under s 570. 60 Given these views, it is not necessary to consider the submissions of the FWO made by reference to Fair Work Ombudsman v Pocomwell Ltd (No 2) [2013] FCA 1139; (2013) 218 FCR 94. 61 Further, it is not necessary to address the submissions of the parties with respect to the exercise of the discretion vested in the Court once it is satisfied that proceedings have been commenced without reasonable cause. 62 The appropriate order in the case is that there be no order as to costs.