Hepburn v Beauty Services Holdings Pty Ltd

INTRODUCTION 1 Section 570 of the Fair Work Act 2009 (Cth) (the FWA) relevantly prescribes two "jurisdictional criteria", at least one of which must be met before the power to award costs in proceedings under the FWA is enlivened (see Shea v EnergyAustralia Services Pty Ltd (No 2) [2015] FCAFC 14 at [10]). 2 The two criteria concerned are set out in s 570(2)(a) and (b) as follows: 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 need to meet these criteria in proceedings under the FWA is reinforced by s 79(1) of the Federal Circuit Court of Australia Act 1999 (Cth) (the FCCA Act) which provides: This section does not apply to family law or child support proceedings or proceedings in relation to a matter arising under the Fair Work Act 2009 or section 14, 15 or 16 of the Public Interest Disclosure Act 2013. Note: See section 117 of the Family Law Act 1975 in relation to family law or child support proceedings. See section 570 of the Fair Work Act 2009 for proceedings in relation to matters arising under that Act. See section 18 of the Public Interest Disclosure Act 2013 for proceedings in relation to matters arising under section 14, 15 or 16 of that Act. 4 This application for leave to appeal relates to a decision of the Federal Circuit Court in respect of the operation of these provisions (see Hepburn v Beauty Services Holdings Pty Ltd & Ors [2018] FCCA 1206 (Hepburn)). It should be noted that, while this application began as an application for an extension of time in which to file it, that extension of time has already been granted (see Hepburn v Beauty Services Holdings Pty Ltd [2018] FCA 1577).

THE FACTUAL CONTEXT 5 The background to this application was briefly summarised by the primary judge as follows (Hepburn at [2]-[5]): 2. The Applicant, Rodney Hepburn, instituted proceedings in this Court on 13 September 2017. Before the matter came to me for a first date, the parties contacted my Chambers and asked that I make certain orders by consent to obviate the need for an appearance in Court. I made those orders on 9 October 2017. 3. Part of those orders indicated that the parties were to have a mediation before a Registrar of my Court. The parties were contacted that the mediation would occur on 13 February this year before one of the Registrars. That was a Tuesday. 4. On Friday 9 February at 4.39 pm a Notice of Discontinuance was filed in this Court. That brought those proceedings to an end. 5. The Respondents now are seeking costs … 6 The particular events that occurred in the period leading up to 9 February 2018, when Mr Hepburn filed his notice of discontinuance, were outlined later in the primary judge's reasons as follows (Hepburn at [25]-[31]): 25. On 22 November 2017, the parties were advised of the mediation date, and that meant that all proceeded towards that mediation date. 26. On 24 January 2018, the Applicant suggested vacating the mediation by consent if there was no prospect of settlement. 27. But on 29 January, the Respondents confirmed that they proposed to attend the mediation for the purpose of exploring options for settlement. 28. On 6 February, the Applicant offered to discontinue the matter on the basis that there were no costs consequences to the Applicant. 29. And on 8 February, the Applicant, again, offered to discontinue on the basis that there were no costs consequences. 30. On 9 February, the Respondents confirmed that they were prepared to agree to that discontinuance on the basis that each party bear their own costs, if the Applicant provided a statutory declaration in which he was honest about the events leading to his termination. It was said that he should not sign any statutory declaration if he knew it to not be true. 31. He was asked to give notification of his intentions by a particular time. He did not meet that deadline, but then discontinued later that day.

THE APPLICATION 7 The formal application for costs that the respondents filed in the Federal Circuit Court was in the following form: 1. The Applicant pay to the First Respondent its costs pursuant to Rule 13.02 of the Federal Circuit Court Rules 2001 (Cth) and section 570(1) of the Fair Work Act 2009 (Cth) on the basis that: a. the Applicant instituted the proceedings vexatiously or without reasonable cause; and / or b. the Applicant's unreasonable acts or omission caused the First Respondent to incur the costs. 2. The Applicant pay to the First Respondent the amount payable under order 1 above within 28 days of the date of these orders. (Errors in original)

THE PRIMARY JUDGMENT 8 It will be noted that [7(1)] above essentially replicates the terms of s 570(2)(a) and (b) of the FWA. It is unsurprising, therefore, that the primary judge identified those criteria early in his ex tempore reasons for judgment (see Hepburn at [5]). After setting out the factual background to Mr Hepburn's substantive claims in some detail (see Hepburn at [6]-[31], partly set out at [6] above), the primary judge then identified the issue he had to determine as follows (at [32]): "[t]he question for me to look at is whether these proceedings were issued vexatiously or without reasonable cause". 9 As to what constituted vexatiousness, the primary judge used the definition of "vexatious proceeding" in s 37AM of the Federal Court of Australia Act 1976 (Cth) as a guide (see Hepburn at [33]). Mr Hepburn has made no challenge to this approach in any of his proposed grounds of appeal so it is worth setting the terms of that definition out in full: vexatious proceeding includes: (a) a proceeding that is an abuse of the process of a court or tribunal; and (b) a proceeding instituted in a court or tribunal to harass or annoy, to cause delay or detriment, or for another wrongful purpose; and (c) a proceeding instituted or pursued in a court or tribunal without reasonable ground; and (d) a proceeding conducted in a court or tribunal in a way so as to harass or annoy, cause delay or detriment, or achieve another wrongful purpose. 10 After discussing this definition briefly, the primary judge reached the following conclusions on the identified issue above (Hepburn at [34]-[40]): 34. It seems to me that the Applicant, on these facts, knew exactly why it was that he was dismissed. He knew exactly what he had done. And he knew the serious misconduct in putting a listening device, even if on the best view of the facts, it was under the express approval of some other person in the company. 35. Such conduct could never be seen as anything other than serious misconduct. The Applicant knew at all times that that is what he had done. And the letter that was sent to him dismissing him made that fact abundantly clear. 36. For him to then allege that this was not serious misconduct is bad enough. But to then refer to a previous decision by the board (to stand him down from the position of CEO and return him to his original position), and to say that he was dismissed because he had said that he would get some legal advice as to that, is, at the very least, disingenuous. 37. In these circumstances, such an institution of proceedings, could only be described as an abuse of process of this Court; and it could have only have meant to be harassing or annoying to the company knowing, as he would, what the company would have to do to meet such a claim. It would seem to me that he was hoping that he could get some form of settlement from the company. 38. These proceedings were instituted without reasonable ground, and then conducted in a combative way by refusing to engage in meaningful discussion with the other side. 39. It seems to me that such is vexatious. 40. For those reasons the pre-requisites of s.570(2) have, in my view, been met. It is then a question as to what form of costs should be awarded. 11 This led to his Honour's ultimate conclusion as follows (Hepburn at [41]): 41. I have taken into account all the principles with regard to indemnity costs. The Respondents should have their costs on an indemnity basis up until the time of the discontinuance. After that date, the Respondent[s] should have their costs on a party and party basis. 12 The following orders were made: (1) That the Applicant pay the [First] Respondent's costs of and incidental to this application from the date the [First] Respondent became aware of this application until the date of discontinuance (4.39pm on 9 February 2018) on an indemnity basis. (2) That in relation to this application for costs the Applicant pay costs on a party and party basis to be determined under Schedule 1 of Federal Circuit Court Rules 2001 (Cth) as assessed.

THE APPLICABLE PRINCIPLES 13 The principles applicable to an application for leave to appeal such as the present are well settled. In Re CSR Ltd (2010) 183 FCR 358; [2010] FCAFC 34, Keane CJ and Jacobson J summarised them in the following terms (at [5]): … Generally speaking, leave to appeal will be granted where there is a reasonably arguable case that the decision below is affected by appellable error, and a grant of leave is necessary to remedy a substantial injustice (Décor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397 at 399 [sic - Decor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397 at 398]) ...

THE FIVE PROPOSED GROUNDS OF APPEAL 14 There are five grounds of appeal in Mr Hepburn's draft notice of appeal as follows: 1. The Learned Judge erred at law in finding the conduct of the Applicant could only have been serious misconduct. 2. The Learned Judge erred at law in finding the conduct of the Applicant was an abuse of process. 3. The Learned Judge erred in failing to provide reasons for ordering costs on an indemnity basis. 4. The Learned Judge erred at law in ordering costs on an indemnity basis. 5. The Learned Judge erred in failing to provide reasons for Order 2. For the following reasons, none of these grounds discloses an appellable error in the primary judgment. That being so, no substantial injustice will occur if leave to appeal is refused.

PROPOSED GROUNDS 1 AND 2 - MISCONCEIVED 15 Since they both seek to challenge the primary judge's findings concerning his conduct, namely that it was serious misconduct and that it constituted an abuse of process, I will begin by considering Mr Hepburn's first two proposed grounds of appeal together. To demonstrate error in these findings, Mr Hepburn sought to rely upon various authorities and a statutory provision (reg 1.07 of the Fair Work Regulations 2009 (Cth)), dealing with the meaning of the expressions "serious misconduct" and "abuse of process". In this approach, it is important to note, Mr Hepburn did not challenge the primary judge's factual findings themselves, but rather whether his conduct, as found, fell within the terms of either, or both, of those expressions in their technical or legal meanings. These contentions are, in my view, misconceived. 16 In considering the respondents' costs application, the primary judge was not conducting a trial of Mr Hepburn's substantive proceeding. Indeed, absent special circumstances, such an approach is rarely, if ever, appropriate (see Gribbles Pathology Pty Ltd v Health Insurance Commission (1997) 80 FCR 284 at 287 per Finkelstein J). Instead, his Honour was examining what Mr Hepburn knew about his conduct when he issued this proceeding to determine whether s 570(2) of the FWA applied. That is, whether he instituted this proceeding vexatiously or without reasonable cause. There is plainly an area of overlap between these two exercises; nonetheless, in the examination the primary judge undertook, he was neither required to, nor did, construe and apply either of these expressions in the manner mentioned above. 17 Instead, the expression "serious misconduct" featured in that examination because it was used in the "show cause" letter Mr Hepburn's employer (the first respondent) sent to him shortly before his employment was terminated (see Hepburn at [13]). After reviewing Mr Hepburn's response to that "show cause" letter, together with the first respondent's subsequent decision to terminate him and the substantive claims Mr Hepburn made when he issued this proceeding soon after that dismissal (Hepburn at [14]-[19]), the primary judge reached the following conclusions concerning what Mr Hepburn knew about his conduct when he issued this proceeding (Hepburn at [20]-[21]): 20. That behaviour, in and of itself, is despicable. And anyone who thought it was not serious misconduct really would not be utilising any common sense. Notwithstanding that, the Applicant, being a lawyer himself, knowing what he had actually done, and realising the serious nature of his conduct, still chose to pursue this action. 21. The action itself was seemingly met with some incredulity by the Respondents who gave to the Applicant a copy of an affidavit, and I'm not too sure if it was sworn or unsworn. That affidavit was meant for proceedings in some other matter but its contents were relevant simply to show to the Applicant what the state of affairs was for him; to consider the futility of the application that he was undertaking. It is worth noting that, in reaching these conclusions, his Honour applied a common sense approach to the expression "serious misconduct" rather than a technical or legal one. Furthermore, his Honour had particular regard to the fact that Mr Hepburn was a lawyer. 18 Thereafter the primary judge turned his attention to the circumstances surrounding the discontinuance of this proceeding (see at [6] above). Having done so, his Honour returned to the question of Mr Hepburn's knowledge when he issued this proceeding and the particular question posed by s 570(2) above (see at [8]). It can be seen from those conclusions (set out at [10] above) that, first, his Honour summed up what he had found to be Mr Hepburn's knowledge about his conduct and the circumstances that led to his dismissal (at [34]-[36] set out at [10] above). Next, his Honour characterised that conduct using the words of s 37AM above as variously "an abuse of process", "harassing or annoying", and "without reasonable ground" (at [37]-[38] set out at [10] above). And finally, he came to the conclusion that Mr Hepburn's conduct was vexatious within the terms of s 570(2) (at [39]-[40] set out at [10] above). 19 All of these observations and conclusions were open to the primary judge on the evidence before him. All of them were made in the context described above, namely whether s 570(2) of the FWA applied. None of them sought to consider whether Mr Hepburn's conduct amounted to serious misconduct or an abuse of process within the technical or legal meaning of those expressions. I do not therefore consider that any appellable error is apparent in any of those conclusions.

PROPOSED GROUNDS 3 AND 4 - UNMERITORIOUS 20 I turn next to Mr Hepburn's proposed grounds of appeal 3 and 4. Under these grounds, Mr Hepburn contended that the primary judge did not consider the legal principles associated with indemnity costs at common law, nor under s 570(2) of the FWA. Further, he contended that his Honour did not identify the factual findings that he took into account when making the indemnity costs order. There is no merit in either of these contentions. As for the former, in the concluding paragraph of his reasons, the primary judge expressly stated that he had "taken into account all the principles with regard to indemnity costs" (Hepburn at [41]). There is no reason to doubt the accuracy of that statement. As for the latter, it is quite apparent from his Honour's extensive review of the facts, as outlined above, what it was that he relied upon to exercise his discretion to award indemnity costs. Among other things, it plainly included his conclusions that Mr Hepburn had commenced this proceeding without reasonable cause and that, once commenced, he had conducted it "in a combative way by refusing to engage in meaningful discussion with the other side". Each of these findings constitutes the type of special or unusual feature that justifies an order for indemnity costs (see Colgate-Palmolive Company v Cussons Pty Limited (1993) 46 FCR 225 at 233-234 and Sacco trading as Globeline Automotive Service v F.V. Bilotto Nominees Pty Ltd [2011] FCA 1287 at [9]). 21 While it is not apparent from the terms of either of these two proposed grounds of appeal, in his submissions concerning them, Mr Hepburn also made an assertion that he was not afforded procedural fairness in that he was deprived of an opportunity to make submissions on the question whether an indemnity costs order should be made. This contention is also unmeritorious. The transcript of the inordinately lengthy costs hearing before the primary judge records that, near the conclusion of her submissions, the respondents' counsel made it perfectly clear that she was seeking an order for indemnity costs and that she was relying on the same conduct as enlivening s 570. She said: Your Honour, this is an application which primarily seeks costs on the indemnity basis of and incidental to the applicant's application, but also the cost[s] application. And in the alternative basis we seek costs on a party/party basis on the Federal Court scale and if not then on the Federal Circuit Court scale. The principles relating to … an award of indemnity costs are well settled … the grounds on which we say section 570 is enlivened are also the grounds on which we rely to say that indemnity costs are warranted in the circumstances. (Emphasis added) If he wished to, Mr Hepburn's counsel could have responded to these contentions. The transcript reveals he chose not to.

PROPOSED GROUND 5 - ALSO LACKS MERIT 22 On its face, Mr Hepburn's fifth and final proposed ground of appeal raises the same issue as is raised by proposed ground of appeal 3 above, that is, a failure to provide reasons. It can therefore be disposed of for the same reasons as are set out above for that proposed ground of appeal. Mr Hepburn also attempted to make the bold contention under this proposed ground of appeal that this costs issue constituted a separate proceeding to his substantive proceeding. Even on its most generous reading, this issue does not arise for consideration under the terms of this proposed ground of appeal. Nonetheless, even if it did arise, there are at least two reasons why it should be rejected. First, the expression "proceeding" is defined in s 5 of the FCCA Act to include "an incidental proceeding in the course of, or in connection with, a proceeding". Thus, even though this proceeding had been discontinued by the time the primary judge made the costs ruling, its unresolved costs aspect did not constitute a separate proceeding because that aspect was still connected with, and therefore incidental to, this proceeding. Secondly, accepting this contention would contravene the prescription in s 14 of the FCCA Act that "all multiplicity of proceedings" should be avoided.

CONCLUSION 23 For these reasons, there is no merit in any of Mr Hepburn's proposed grounds of appeal, nor any of the issues he sought to raise under them. His application for leave to appeal filed on 2 August 2018 must therefore be dismissed with costs. Since the respondents have been successful in this application, those costs should also include the costs of and incidental to Mr Hepburn's application for the extension of time and the respondents' related objection to competency (see Hepburn v Beauty Services Holdings Pty Ltd [2018] FCA 1577 at [18]). 24 Finally, because I have dismissed Mr Hepburn's application for leave to appeal, it is unnecessary to consider the respondents' notice of contention. 25 The orders will be:

1. The applicant's application for leave to appeal filed on 2 August 2018 is dismissed.
2. The applicant pay the respondents' costs of and incidental to the objection to competency, the application for an extension of time and the application for leave to appeal to be taxed failing agreement. I certify that the preceding twenty-five (25) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Reeves.