Fair Work Ombudsman v Grouped Property Services Pty Ltd

The Court's powers 25 The Court's powers to award costs in an application of this kind are constrained by the terms of s 570 of the FW Act. That section relevantly provides that a party to proceedings relating to a matter arising under the Act may only be ordered to pay the costs incurred by another party if the court is satisfied that the first mentioned party's "unreasonable act or omission" caused the other party to incur the costs: s 570(2)(b). In the present case that means that the Court only has the power to make the orders the Ombudsman seeks if two conditions are established. First, the Court must be satisfied that GPS, by its action(s) or omission(s), behaved unreasonably. That question is to be determined objectively: Australian and International Pilots Association v Qantas Airways Ltd (No 3) (2007) 162 FCR 392 at [32]. Secondly, the Court must be satisfied that GPS's unreasonable act(s) or omission(s) caused the Ombudsman to incur costs. If those two conditions are established, the Court has a discretion to make a costs order against GPS and in the Ombudsman's favour: Construction, Forestry, Mining and Energy Union v Clarke (2008) 170 FCR 574 at [28]. 26 Importantly, the touchstone for the exercise of the power is unreasonableness, not negligence or inefficiency. That said, once the power is enlivened and the Court is considering whether or not to exercise its discretion to make an order, the Court is bound to exercise that discretion in the way that best promotes the overarching purpose of any statutory provision on a matter of practice and procedure referred to in s 37M of the FCA Act: s 37M(3). At this point questions of inefficiency are very relevant, for the overarching purpose of the civil practice and procedure provisions includes the efficient resolution of disputes. 27 Section 37M provides: 37M The overarching purpose of civil practice and procedure provisions (1) The overarching purpose of the civil practice and procedure provisions is to facilitate the just resolution of disputes: (a) according to law; and (b) as quickly, inexpensively and efficiently as possible. (2) Without limiting the generality of subsection (1), the overarching purpose includes the following objectives: (a) the just determination of all proceedings before the Court; (b) the efficient use of the judicial and administrative resources available for the purposes of the Court; (c) the efficient disposal of the Court's overall caseload; (d) the disposal of all proceedings in a timely manner; (e) the resolution of disputes at a cost that is proportionate to the importance and complexity of the matters in dispute. (3) The civil practice and procedure provisions must be interpreted and applied, and any power conferred or duty imposed by them (including the power to make Rules of Court) must be exercised or carried out, in the way that best promotes the overarching purpose. (4) The civil practice and procedure provisions are the following, so far as they apply in relation to civil proceedings: (a) the Rules of Court made under this Act; (b) any other provision made by or under this Act or any other Act with respect to the practice and procedure of the Court. 28 Furthermore, the parties have a duty to conduct the proceeding in a way that is consistent with the overarching purpose: FCA Act, s 37N(1). In exercising the discretion to award costs in any civil proceeding the Court must take account of any failure to comply with that duty. 29 The Court also has the power to make a costs order in a specified sum: see s 43(3)(d) of the FCA Act, and r 40.02(b) of the Rules. The purpose or object of such an order is "to avoid the expense, delay and aggravation involved in protracted litigation arising out of taxation": Beach Petroleum NL v Johnson (No 2) (1995) 57 FCR 119 at 120 citing Leary v Leary [1987] 1 WLR 72; [1987] 1 All ER 261.

Power of a Registrar to fix the costs in a lump sum 30 Order 3 of the amended application envisages that, should the parties not come to an agreement on the question of the quantum of costs, the matter be referred to a Registrar of the Court to fix the costs in a lump sum. 31 In Clipsal Australia Pty Ltd v Clipso Electrical Pty Ltd (No 4) [2017] FCA 436 Perram J ordered that costs be paid in a lump sum and directed the Registrar, pursuant to r 1.37 of the Rules to determine the quantum of the applicant's costs in such manner as he or she deems fit including, "if thought appropriate", on the papers. There is no good reason why a similar order should not be made in the present case. 32 Section 35A(1) of the FCA Act provides that, subject to subs (2), a number of powers of the Court may, if the Court or a judge so directs, be exercised by a registrar. One of those powers is the power to make an order as to costs: s 35A(1)(f). Another is a power of the Court prescribed by the Rules: s 35A(1)(h). 33 Rule 3.01(1) prescribes, for the purposes of s 35A(l)(h), the relevant powers of the Court, including relevantly a power of the Court under a provision of the Rules mentioned in column 2 of an item in Schedule 2 to the Rules. Item 221 of Schedule 2 is the power under r 40.02 to make an order about the amount of costs. 34 As the Ombudsman submitted, this means that, if the Court considers that the Ombudsman should be awarded costs, a Registrar of the Court has the delegated power to fix the costs amount in a lump sum, pursuant to r 40.02(b).

The Ombudsman's argument 35 The Ombudsman relied on two sets of submissions, the first filed on 2 December 2016 together with the affidavit of Mr Leahy, and the second filed on 26 May 2017 together with the amended application. 36 In relation to the first hearing, the Ombudsman submitted that GPS's conduct was "objectively unreasonable" for the following reasons. 37 First, GPS disputed the Ombudsman's claim including by insisting that the alleged employees were not employees of GPS when the Court found that they were and that the arrangement that GPS had with National Contractors did not have any apparent legitimate business objective. 38 Secondly, GPS put the Ombudsman to significant costs by submitting that she not be permitted to file outlines of evidence (rather than affidavits) from each of the 51 employees named in the statement of claim (costs the Ombudsman no longer seeks to recover) on the basis that they wished to cross-examine them despite not having seen the evidence. Yet, GPS failed to file and serve any evidence after the Ombudsman had incurred those costs and failed to attend the hearing, challenge any of the Ombudsman's evidence or cross-examine her witnesses. 39 Thirdly, GPS's failure to attend the first hearing meant that it provided no assistance to the Court and the Court was "not in a position to seek appropriate clarification" from it "as to various matters that were clearly within [its] knowledge". 40 Fourthly, GPS denied that certain persons were employees when the Court found that GPS had put in place a scheme designed to disguise the true nature of the relationship. 41 Fifthly, GPS failed to make reasonable admissions as to facts or contraventions "that were plain". 42 Sixthly, GPS put the Ombudsman to proof in respect of all aspects of her claim, "without intending properly to defend the proceedings at the first hearing, in circumstances where the respondents knew that the [Ombudsman]'s case was reliant on some non-English speaking witnesses and persons who were otherwise working in low paid jobs". The Ombudsman submitted that it was open to the Court to infer that, objectively viewed, GPS had no intention of ever defending the proceedings, other than by way of bare denials. 43 In relation to the second hearing, the Ombudsman only seeks 75% of the costs she incurred, taking into account that approximately 25% of her costs were incurred in relation to "matters such as penalty". The Ombudsman acknowledges that in this respect she would have incurred these costs regardless of the allegedly unreasonable conduct of GPS. The Ombudsman also only seeks costs incurred after 5 December 2016 (when the Ombudsman served GPS with her additional evidence, details of the compensation she was claiming, and all relevant calculations), on the basis that the costs incurred beforehand involved quantifying the amount of compensation payable to each employee, which would have been required in any event. The Ombudsman submitted that, since this date, GPS's acts or omissions were unreasonable for the following reasons. 44 First, GPS put the Ombudsman to the significant costs of having to consider and take the Court through the calculations and evidence relating to all employees and for each contravention. 45 Secondly, GPS failed to file and serve any evidence or submissions, yet insisted that the Ombudsman prove every item of her claim. 46 Thirdly, GPS failed to appear at the hearing. 47 Fourthly, GPS failed to admit or agree to "calculations that were plain" when ultimately it failed to challenge the Ombudsman's calculations in any significant respect.

Disposition 48 In the absence of any submissions from or on behalf of GPS I take it that the Ombudsman's application is not contested. As I indicated at the outset, I am satisfied that I not only have the power to make the orders but also that I should exercise my discretion in the Ombudsman's favour. 49 The fact that the Court found that the alleged independent contractors were employees and that GPS was the employer of all 51 of the individuals in question would not necessarily demonstrate that GPS was unreasonable to put the matter in dispute. There is a distinction between a party who pursues arguments which are ultimately abandoned or rejected by the Court and a party who propounds an unsupportable case: Clarke at [29]. Here, however, where the evidence was all one way and the legal principles not in dispute, only one conclusion was reasonably open. That was the conclusion I reached. In these circumstances, it was unreasonable for GPS to deny that any of the 51 was an employee and that it was the employer. There was no foundation in fact or law for GPS's position. I am satisfied that GPS's unreasonable denials caused the Ombudsman to incur the costs of proving these matters and of persuading the Court to make the findings. 50 In view of its failure to challenge the Ombudsman's evidence or offer any evidence of its own, it was also unreasonable of GPS to put the Ombudsman to the costs of preparing for and conducting a trial. 51 It seems to me, therefore, that, save for the costs incurred in preparing the affidavits, GPS should pay the costs of the Ombudsman in preparing for, and attending, the first hearing. There should be a modest reduction, however, in the amount of costs she should recover to take into account the fact that she failed to prove four contraventions (11, 15, 20 and 21) in their entirety and a number of them with respect to some employees. I would therefore allow the Ombudsman 95% of those costs. With this qualification, I accept the Ombudsman's submission that order 1 of the amended interlocutory application appropriately reflects the costs she incurred by reason of GPS's unreasonable acts or omissions and only those costs. 52 As for the second hearing, in circumstances in which it offered no evidence of its own and made no submissions to counter those filed by the Ombudsman, GPS's failure to assist the Court by agreeing on the arithmetic or pointing out any errors in the Ombudsman's calculations was unreasonable and it was productive of increased costs and inefficiencies. GPS's omissions undoubtedly contributed to the Ombudsman's costs. Moreover, they meant that the Court was also put to an excessive amount of time and effort, intruding into both its available judicial and administrative resources and interfering with the efficient and timely disposition of this and other cases. 53 The discount of 25% which the Ombudsman proposed in order to reflect the fact that approximately one quarter of the costs she incurred were dedicated to matters such as penalty which would have been incurred in any event, is an appropriate one. Certainly in the absence of any argument to the contrary I see no reason to apply a further discount. 54 In order to avoid the costs and delays associated with taxation, a fixed costs order should be made. That application should be quantified in accordance with these reasons and, as envisaged in the proposed orders, in the event of a dispute the question of the amount will be determined by a Registrar. I certify that the preceding fifty-four (54) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Katzmann.

SCHEDULE OF PARTIES NSD 659 of 2014 Respondents Fourth Respondent: ENRICO PUCCI