Macushla Pty Ltd (Trading as Sunnytop Bakery Ciabatta Della Nonna) v El Souki

SNADEN J: 1 At least between 27 August 2009 and 21 October 2013 (hereafter, the "relevant period"), the appellant operated a bakery business known as "Sunnytop Bakery". The respondent is a former employee of the applicant's, who worked within that business. 2 By an action commenced in the Federal Circuit Court of Australia, he alleged (amongst other things) that the appellant had committed various contraventions of s 45 of the Fair Work Act 2009 (Cth) (hereafter, the "FW Act"). Those contraventions - which, for the sake of convenience, I refer to hereafter as the "underpayment allegations" - were said to subsist in the appellant's failure to observe certain obligations that it owed to the respondent pursuant to the terms of two awards of the Fair Work Commission or its predecessors. There is (and was) no issue between the parties that the two awards in question (which, for reasons that will become apparent, need not be identified) applied in respect of the respondent's employment, albeit each at different stages over the relevant period. 3 At first instance, the trial judge determined the underpayment allegations primarily in the respondent's favour: El Souki v Macushla Pty Ltd (T/A Sunnytop Bakery Ciabatta Della Nonna) [2017] FCCA 591 (Judge Hartnett). In doing so, she identified three factual issues upon which their determination was said to rest, namely: (1) the date upon which the respondent commenced his employment at the Sunnytop Bakery; (2) the respondent's working hours; and (3) the respondent's duties. Again, there is no issue between the parties that the proper resolution of the underpayment allegations called for findings to be made on each of those three factual matters. 4 The second question was self-evidently central to whether the relief that the respondent sought (or at least some of it) ought to have been granted. The third required analysis because the parties were at odds as to which classifications within the two applicable awards the respondent had been employed in. The respondent asserted that he was employed in a "higher" classification than the appellant was prepared to concede. Resolution of the third question was central to the task of determining which party ought to prevail on that question; and, by extension, whether (and, if so, to what extent) the underpayment allegations could be substantiated. The trial judge needed to make findings about the nature of the respondent's work in order that she could determine the award classifications within which he had, over the relevant period, been employed. Ultimately, she found that the respondent was employed in the classifications that he urged her to find applicable. 5 In any event, all three topics were the subject of conflicting evidence. On all three, the trial judge preferred (or substantially preferred) the evidence led by the respondent. Her reasons for judgment - which are the subject of further analysis below - record why she did so. Ultimately, her Honour made orders granting (relevantly, for present purposes) relief in the nature of declarations and compensation. 6 By notice of appeal filed on 6 July 2017, the appellant sought to have those orders set aside. That notice cites nine numbered appeal grounds. By its written submissions, the appellant abandoned all but three of them. The remaining three grounds are difficult to understand in the form in which they find expression in the notice of appeal. When they are read alongside the appellant's written submissions, it is apparent that the appellant proposed to take issue with the learned trial judge's findings as to the respondent's hours of work, and with the adequacy of her reasons for deciding that the nature and scope of his duties constituted him as being employed within the classifications within which he claimed to have been employed. 7 The appeal was scheduled for hearing on Thursday, 2 May 2019. In the afternoon of Tuesday, 30 April 2019, the appellant filed a notice of discontinuance pursuant to rule 36.73 of the Federal Court Rules 2011 (Cth). That notice had the effect of dismissing the appeal: Federal Court Rules 2011 (Cth), r. 36.73(2). 8 The only question remaining for the Court to determine is that of costs. Rule 36.73(4) provides that an appellant who files a notice of discontinuance must, absent agreement to the contrary, pay the costs of each respondent. The parties are jointly of the view that that sub-rule mandates payment by the appellant of the respondent's costs of the appeal, assessed on the standard party and party basis. Whether that view is correct is not a question that I need to decide. 9 Instead, the respondent seeks an order that the appellant, its director, Mr Iaconis, and its solicitor pay his costs of the appeal on an indemnity basis. The appellant, of course, resists those outcomes. Indeed, it goes further: it says that the respondent's application for indemnity costs is made without reasonable cause, such that it should get a costs order of its own to cover what it incurred in resisting it. The respondent's opposition to that outcome is equally unsurprising. 10 For the reasons that follow, I decline both applications.

SecTION 570 of the FW Act 11 Section 570 of the FW Act 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. 12 Neither of ss 569 and 569A is presently relevant. Both parties acknowledge that, in order to succeed in their quests for costs orders, they must first clear the hurdle to which s 570(1) of the FW Act gives effect. 13 Neither of ss 570(2)(b) or (c) is relevant to either of the present applications. Both rest, instead, upon whether or not there has been a matter instituted vexatiously or without reasonable cause. In the case of the respondent's application, that matter is said to be the appeal. In the case of the appellant's application, it is said to be the respondent's indemnity costs application. 14 Early in his oral submission, counsel for the respondent appeared to suggest that the appeal was attended by both of the deficiencies to which s 570(2)(a) refers: that is, that it was instituted vexatiously and without reasonable cause. As to the former, it was suggested that the appellant instituted the appeal for an improper purpose, although it remains less than clear precisely what that purpose is said to have been. The suggestion that it was instituted vexatiously, if put, was not developed and I take it to have been abandoned. If it wasn't, it should have been: there is nothing in the material before the Court that inclines me to the view that the appellant initiated the appeal for any purpose other than to vindicate what it perceived, rightly or otherwise, were its legal rights. 15 In Baker v Patrick Projects Pty Ltd (No 2) (2014) 145 ALD 548 (Dowsett, Tracey and Katzmann JJ), a Full Court of this Court endorsed (at [9]) what was said about the application of s 570(2)(a) of the FW Act in Construction, Forestry, Mining and Energy Union v Corinthian Industries (Australia) Pty Ltd (No 2) [2014] FCA 351 (Pagone J). There, Pagone J, at [8], said that: …[t]o 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) 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. 16 The Full Court in Baker identified some "minor modification[s]" of the test when applied to appeals and judicial review proceedings. At [10], the Court observed that: …[i]n such proceedings the focus changes to whether, having regard to the facts apparent to the appellant at the time of instituting the appeal or the application for judicial review, there were no reasonable prospects of success. In evaluating these prospects regard may be had to the reasons for judgment or decision under appeal or review, as the case may be, and the grounds relied on to challenge the judgment or decision: see Imogen Pty Ltd v Sangwin (1996) 70 IR 254 at 257 (Wilcox CJ). 17 In order to succeed on their respective expeditions, then, each party has to satisfy the Court that the other party's "matter" - for the respondent, the appellant's appeal; for the appellant, the respondent's application for indemnity costs - was instituted without reasonable cause. Only upon the attainment of that state of satisfaction does the Court have cause to consider whether its discretion to award costs, on any basis, should be exercised.

Indemnity costs 18 The Court's power to award indemnity costs is not in dispute: Federal Court of Australia Act 1976 (Cth), s 43. The bases upon which it might typically do so are notorious and also not credibly in doubt: see, eg, Colgate-Palmolive Company and Another v Cussons Pty Limited (1993) 46 FCR 225, at 232-234 (Sheppard J), referred to with approval in Dowling v Fairfax Media Publications Pty Ltd (No 2) [2010] FCAFC 28, [42] (Graham J), [140] (Logan and Flick JJ) and Tytane Pty Ltd v Lyons [2017] FCA 1602, [18] (Davies J). 19 The respondent lays two charges against the appellant. First, that the appeal amounts to an abuse of the Court's processes because it proceeds upon what is said to be the applicant's having, "…devise[d] misstatements, employ[ed] misquotes, and rel[ied] on legal failings of the [a]ppellant or its representative in its formulation"; and, second, that the appeal was "made without a proper basis". There is no suggestion (nor any obvious ground for contending) that either basis is insufficient to found an order for indemnity costs. 20 Again, early in his oral submission, counsel for the respondent appeared to urge a finding that an order for indemnity costs was appropriate because the appellant had instituted the appeal for an improper purpose; that is to say, a purpose unrelated to the vindication of its legal rights. Such a purpose was, it was submitted, evident as a matter of inference from the absence of any basis upon which the grounds of appeal could properly be agitated. As outlined above, that submission was not properly developed and I take it to have been abandoned. If it wasn't, it should have been. For the reasons that I have already identified, I do not accept it. 21 The respondent's real concern with the appeal, it seems to me, is that it proceeded, so he submits, on grounds that were foredoomed to failure. There is, then, an obvious - and perhaps complete - overlap between what he says as to why the prohibition provided for by s 570(1) of the FW Act does not apply, on the one hand, and why indemnity costs ought to be awarded, on the other. On each score, it is said that the appeal, had it run, was bound to fail.

The appeal's prospects 22 As is outlined above, the appeal proceeded (prior to its discontinuance) on two bases. First, the appellant sought to challenge factual findings made by the trial judge about the respondent's hours of work. Second, the appellant complained that the trial judge's conclusions as to the award classifications within which the respondent was employed were inadequately explained in the Court's reasons for judgment. 23 As to the first of those two challenges, it is appropriate to summarise the findings in question. Her Honour held that the respondent worked seven days per week for the appellant over the relevant period: from 9:00pm to 6:00am on three days per week, and from 2:00am to 6:00am on the other four; in each case, without meal breaks (for the conferral of which both of the relevant awards provided). 24 Those findings were open on the evidence before the Court, a careful and detailed summary of which appears in the reasons for judgment below and need not be repeated here. To the extent that the evidence of the parties conflicted, those reasons record why it was that the Court preferred that of the respondent. In part, that preference was a function of adverse findings made about the credibility of the appellant's witnesses, some of whom the Court determined were vague, unpersuasive or unreliable. Perhaps more significantly, it was a function of the Court's perception that the respondent's evidence was largely corroborated by that of other witnesses, including, in one case, one of the appellant's witnesses. 25 By its appeal, the appellant sought to challenge the Court's findings as to the respondent's working hours on the strength of other evidence, which was said to incline the other way. Had the appeal proceeded, it would have been necessary to delve into that evidence in much greater detail that I have or propose to. For present purposes, it is enough that I accept - as I do - that there was evidence before the Court below sufficient to ground the factual findings that the appellant unsuccessfully urged it to make on the question of the respondent's hours of work. 26 Faced with competing factual assertions, the Court below proceeded to accept one in preference to the other. That task - hardly uncommon - was undertaken in an orthodox way. To overturn them on appeal, the appellant would have needed to show that those findings were unsound; that is to say, that they were contrary to the weight of the evidence and the inferences that it compelled. 27 That task, so the respondent now contends in support of its application for indemnity costs, was one upon which the appellant could not have succeeded. Two reasons were advanced in support of that contention: first, that the appellant's summation of the evidence about the respondent's working hours misunderstood the evidence that was, in fact, given, and that the findings that the Court below ultimately made reflected a truer consideration of that evidence; and, second, that this Court, on appeal, could not properly overturn factual rulings that were partially the product of adverse credibility findings. 28 The first contention amounts to little more than that the trial judge was right and the appellant is (or would have been) wrong: that is to say, that each of the grounds of appeal would, had it been pursued, have ultimately failed. That may well be so but it is not the question that presently falls for consideration. At issue presently is whether each ground had to fail. As I have said above, I accept that there was evidence before the Court below that could have sustained the factual findings about the respondent's working hours that the appellant urged it to make. This first contention is of little assistance to the Court's immediate task. 29 The second contention makes more of the trial judge's observations about the credibility of particular witnesses than ought to be made. It is, of course, the case, that appellate courts should be slow to overturn findings of fact that are, in part, the product of a trial judge's observations about witness credibility. Nonetheless, that course is open should it be necessary to take it. In Fox v Percy (2003) 214 CLR 118, the majority of the High Court said (at 128, [29]) as follows (footnotes omitted): In some, quite rare, cases, although the facts fall short of being "incontrovertible", an appellate conclusion may be reached that the decision at trial is "glaringly improbable" (48) or "contrary to compelling inferences" in the case. In such circumstances, the appellate court is not relieved of its statutory functions by the fact that the trial judge has, expressly or implicitly, reached a conclusion influenced by an opinion concerning the credibility of witnesses. In such a case, making all due allowances for the advantages available to the trial judge, the appellate court must "not shrink from giving effect to" its own conclusion. Finality in litigation is highly desirable. Litigation beyond a trial is costly and usually upsetting. But in every appeal by way of rehearing, a judgment of the appellate court is required both on the facts and the law. It is not forbidden (nor in the face of the statutory requirement could it be) by ritual incantation about witness credibility, nor by judicial reference to the desirability of finality in litigation or reminders of the general advantages of the trial over the appellate process. 30 The appellant's case on appeal was - or would have been, had the appeal been heard - that the trial judge's findings as to the respondent's working hours were impossible (or, at best, very difficult) to reconcile with other accepted evidence. By way of example, the appellant cites the fact (as the trial judge found it) that the baking of bread at the Sunnytop Bakery did not normally commence until 10:00pm or later and typically concluded at around 2:00am; and that, given that his primary duties involved the slicing, sorting and packaging of baked bread, the respondent would have had little to do had he commenced as early as 9:00pm on any given evening. That, in turn, is (or was to be) said to incline very strongly against the suggestion that the respondent regularly commenced working at the bakery as early as 9:00pm, as the trial judge found. 31 That example exposes the flaw in the respondent's submission in support of his application for indemnity costs. It might well be that the appellant's abandoned challenge to the trial judge's findings about the respondent's working hours was ambitious and it might well be the case that, had the appeal proceeded, the appellant would, on that score, have failed; but I do not accept that that challenge was one upon which success was impossible. The appellant was (or would have been) entitled to contend that the trial judge's findings as to the respondent's working hours were so glaringly improbable or contrary to compelling inference that they ought to have been reversed. 32 The same can be said in respect of the appellant's challenge to the adequacy of the trial judge's reasons for concluding that the respondent was employed in the award classifications that within which he asserted that he had been employed. That conclusion is stated summarily at the conclusion of the trial judge's reasons. Nonetheless, the question turned upon which recitation of the respondent's duties - about which competing positions were advanced - was preferred. It is clear that her Honour preferred the respondent's evidence on that front and her reasons expose clearly enough why that was so. Had it been necessary for me to decide the issue, I would have taken some persuading that the reasons below were inadequate; but I do not accept that this ground of appeal, had it been run, was foredoomed to failure. 33 It follows that the respondent can establish neither that the general prohibition against an award of costs (for which s 570(1) of the FW Act provides) is presently inapplicable, nor that he should be entitled to costs on an indemnity basis if it is. His application must be dismissed.

The prospect of indemnity costs 34 For equivalent reasons, I do not accept that the application for indemnity costs was without reasonable prospects of success. The appellant's application for its costs of defending the respondent's indemnity costs application must also be dismissed. 35 The contention that the trial judge's factual findings about the respondent's working hours were immune to appellate review because they were, in part, a product of credibility findings was not beyond what could reasonably be argued. Indeed, I concede instinctive sympathy for it. 36 I have the equivalent view in respect of the respondent's contention about the appellant's challenge to the adequacy of the trial judge's reasons concerning which of the competing award classifications applied. The respondent said that that challenge was devoid of reasonable prospects. I have rejected that contention; but not because I am satisfied that it was inarguable. The classification issue turned on which of the competing positions as to the respondent's duties the Court below accepted. The trial judge's reasons explain why it was that the respondent's position on that score prevailed. As indicated above, had the adequacy of reasons ground been pressed, I would have required some persuasion to uphold it. The respondent's contention that it was inarguable was, despite its failure, not without reasonable prospects of success.

conclusions 37 In light of the observations above, it is not necessary for me to consider whether an order should issue against the appellant's director, Mr Iaconis, or its solicitor. Suffice it to say that the respondent did not develop his contention that such unusual orders should be made. It is not apparent to me why they ought to have been had I reached a different view about the application of s 570(1) of the FW Act. Had that submission been put more thoroughly, I am confident that it would have been rejected. For obvious reasons, though, that need not be further explored. 38 Neither of the present applications warrants an exercise of the Court's discretion to award costs. Both are dismissed. I certify that the preceding thirty-eight (38) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Snaden.