Peden v Lake Macquarie Refrigeration Pty Limited

Industrial Relations Commission (NSW)|2004-04-02|Before: Wright J, Walton J, Harrison DP

CITATION : Peden v Lake Macquarie Refrigeration Pty Limited [2004] NSWIRComm 66 APPELLANT Andrew Hugh Peden PARTIES : RESPONDENT Lake Macquarie Refrigeration Pty Limited FILE NUMBER: IRC3157 of 2003 CORAM: Wright J President; Walton J Vice-President; Macdonald C CATCHWORDS : Costs - Appeal - Unfair dismissal - Costs awarded at first instance because s84 application frivolous or vexatious - Tests to be applied - Errors found - Section 84 application not frivolous or vexatious - Appeal upheld - Costs on appeal. Industrial Relations Act 1991 LEGISLATION CITED : Industrial Relations Act 1996 s84 s187 s181 Supreme Court Rules Abdullah Al-Shennag v Bankstown City Council Civic Services Group Attorney General v Wentworth (1988) 14 NSWLR 481 Beahan v Bush Boake Allen Australia Limited (1999) 93 IR 1 Caltex Petroleum Pty Ltd v Harmer (1999) 92 IR 264 House v The King (1936) 55 CLR 499 King v State Bank of New South Wales (No 2) [2002] NSWIRComm 353 CASES CITED : Knowles v Anglican Church Property Trust (No 2) (1999) 95 IR 380 Fairweather v Ladehai Pty Ltd T/as North Star Holiday Resort [2002] NSWIRComm 367 Mitchforce v Starkey (2002) 117 IR 122 Peden v Lake Macquarie Refrigeration Pty Ltd [2003] NSWIRComm 155 Perrott v Xcellenet Australia Limited (1998) 84 IR 255 Rajski v Powell (1987) 11 NSWLR 522 Stephan v RL Whyburn and Associates [2000] NSWIRComm 154 Weisser v Spur Group Pty Ltd (2003) 121 IR 89 HEARING DATES: 03/22/2004 DATE OF JUDGMENT: 04/02/2004

JUDGMENT: - 16 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES

CORAM: WRIGHT J, President WALTON J, Vice-President MACDONALD C

ANDREW HUGH PEDEN v LAKE MACQUARIE REFRIGERATION PTY LIMITED

Application for leave to appeal and appeal against a decision of Deputy President Harrison given on 19 May 2003 in Matter No IRC 1653 of 2000

1 This matter concerns an application by Andrew Hugh Peden ("the appellant") for leave to appeal pursuant to s187 of the Industrial Relations Act 1996 ("the Act"), and if granted, appeal from a decision of Harrison DP of 19 May 2003, in which his Honour determined an application for costs in favour of Lake Macquarie Refrigeration Pty Limited ("the respondent") pursuant to s181(2)(c) of the Act: Peden v Lake Macquarie Refrigeration Pty Ltd [2003] NSWIRComm 155.

2 The matter first came before the Commission as a result of an application pursuant to s84 of the Act, in which the appellant alleged that he had been unfairly dismissed by the respondent from his position as refrigeration mechanic. Briefly stated, the facts of that matter were: (1) The appellant was employed by the respondent from 10 October 1994 until 25 March 2000, initially as an apprentice refrigeration mechanic, and most recently as a tradesman. (2) A "family and friends" policy existed, whereby the appellant was permitted to carry out a limited amount of private work for family and friends outside of normal business hours. (3) In August 1999, the appellant carried out repairs to a domestic refrigerator for a customer, Mr Chapman, who the appellant claimed was a family friend. The appellant issued Mr Chapman with an invoice for $470 on behalf of the Respondent. Mr Chapman gave the appellant a cheque for the full amount of the invoice, payable to the respondent. The appellant subsequently cashed the cheque and retained the proceeds. (4) In March 2000, the respondent discovered that the appellant had cashed Mr Chapman's cheque. (5) On 25 March 2000, the appellant's employment with the respondent was terminated. Criminal charges brought against him were dismissed on appeal (and it will be observed that the Deputy President made no findings as to theft of monies from the respondent).

3 The matter was heard by Harrison DP on 14 February 2003, who found in favour of the respondent. A decision was given extempore by his Honour on that day in which his Honour indicated that he would publish full reasons in due course. His Honour issued that further decision on 6 March 2003 which incorporated the reasons for decision given in the extempore decision as follows:

The gravamen of this issue is whether the job carried out by Mr Peden, for Mr Chapman, was within the employer's policy of work for family and friends, close or otherwise. There is little evidence about the foundation and the basis of that policy. The evidence that is before me can be found in the evidence of Mr Burgess. This suggests, and leads me to the conclusion that, that policy was not a licence to compete with the employer in his own time, but a concession to the employee, Mr Peden, to provide discounted or free services to family and friends, in his own time, that is, those people who had supported him in his life and his education and the acquisition of the skills that he obtained in employment with Mr Burgess, and so repay them for their involvement with him.

I am compelled to the conclusion that the job for Mr Chapman came to Mr Peden through the employer. I am compelled to the conclusion that the job was carried out in ordinary working hours, described as those that he undertook for the employer.

The use of the company invoice, and the disposition of the cheque, are ancillary issues so far as the carrying out of the job is concerned. The most fascinating thing about the invoice, so far as I am concerned, is the amount charged. If I look at attachment D to Mr Burgess' evidence, exhibit 4, it discloses there that the supplier price for the (refrigerator) compressor was $88.80 plus 12 per cent sales tax, a total of $99 and 45 cents. The invoice, exhibit F charges that out to Mr Chapman at $220. Further parts are charged at a total of $45, and three and a half hours of labour is charged at $175. Hardly mates rates. Hardly suggestive that it was done within the policy of work for family and friends.

I find that the stealing of the job by Mr Peden from his employer, when he had been placed in a position of absolute trust and confidence, to be a reprehensible breach of that confidence, and attracting the penalty of dismissal as determined by Mr Burgess. There is no basis for the intervention of the Commission in this matter. The application is discharged.

4 In the further decision of 6 March 2003, Harrison DP made some additional findings. We set out some relevant aspects below: [10] The applicant's employment continued without incident until the events leading directly to his dismissal on 25 March 2000. [11] In August 1999 the applicant attended the residence of Mr Mackton Chapman for the purpose of repairing a domestic refrigerator. Mr Chapman was a friend of the applicant's father. The applicant provided Mr Chapman with an invoice in the amount of $470.00, which Mr Chapman paid by cheque, made out to Lake Macquarie Refrigeration. Subsequently, the applicant endorsed the cheque by signature on the reverse and cashed it at a local butchery, owned and operated by a friend of the applicant. [12] In early March 2000 Mr Chapman made a telephone call to the Company seeking a guarantee service as he was unhappy with the operation of the refrigerator repaired by Mr Peden. This call was taken by Mr Burgess, who then became aware that Mr Peden had carried out the work for Mr Chapman and had cashed a cheque made out to the Company. [13] Mr Burgess out these events to Mr Peden on 25 March 2000. Mr Peden's employment was terminated and criminal proceedings instituted concerning disposal of the cheque. Mr Peden was convicted in the Local Court. This conviction was overturned on appeal to the District Court. The Evidence [14] Mr Chapman's evidence is that he had looked up the number for Lake Macquarie Refrigeration in the telephone book and that the repairs to his refrigerator were carried out in normal business hours. [15] Mr Chapman deposed that when the applicant arrived to repair his refrigerator he was reminded by the applicant that he was a friend of the applicant's father. Mr Chapman denies that any arrangement was made for him via the applicant's father for refrigeration repairs to be undertaken. Mr Chapman further denies any recollection of meeting the applicant at the local bowling club, though he concedes that this may have occurred in the form of a brief encounter but considers it most unlikely. [16] This evidence is directly contrary to that of the applicant who asserts that the arrangement to repair Mr Chapman's refrigerator was promoted by his father as a favour to assist Mr Chapman. There is no corroborative evidence brought by the applicant to support this contention. [17] Mr Chapman's evidence is that he paid for the repairs to his refrigerator by personal cheque, made out to the company, and was later reimbursed by his insurer. [18] The evidence of Mr Burgess reveals a thorough and detailed investigation into the disposition of the cheque provided by Mr Chapman.

5 The respondent subsequently filed a Notice of Motion seeking costs pursuant to s181(2)(c) of the Act. That matter was heard by Harrison DP on 14 May 2003, who determined that the application at first instance was frivolous, and although he did not need to decide the matter, also vexatious, and made the following orders in favour of the respondent:

Pursuant to s181(2)(c) of the Industrial Relations Act 1996 Mr Andrew Hugh Peden is ordered to pay Lake Macquarie Refrigeration Pty Limited the amount of $7,643.76 (seven thousand six hundred and forty three dollars and seventy six cents) within 21 days of the date of this decision.

Pursuant to s181(2) of the Industrial Relations Act 1996 Mr Andrew Hugh Peden is ordered to pay Lake Macquarie Refrigeration Pty Limited costs associated with the proceedings of 14 May 2003 as agreed or as taxed by the Registrar.

6 The appellant seeks leave to appeal and appeal from the decision of Harrison DP as to costs.

7 The principles applicable to the granting of leave have been settled by the Commission in Knowles v Anglican Church Property Trust (No 2) (1999) 95 IR 380 (at 381 - 382), and the Full Bench authorities which have followed and applied that decision. They may be summarised as follows: (1) Leave will not lightly or automatically be granted: Perrott v Xcellenet Australia Limited (1998) 84 IR 255 at 265). The legislative intention is to restrict access to appeals to "appropriate cases meeting the public interest test stated in s188(2)". (2) Leave would ordinarily be refused where an appeal raises arguments which were not squarely raised at first instance, that is, where the appellant has brought, in substance, a new or materially different case on appeal: Caltex Petroleum Pty Ltd v Harmer (1999) 92 IR 264.

(3) An appeal should raise substantial and important considerations, and any public interest considerations need to be evaluated "in the light of the nature of the issues raised in the appeal, including whether the appeal raises substantial issues of principle or law or has wider implications for the jurisprudence of this Commission, including whether the decision has widespread practical application". See also Mitchforce v Starkey (2002) 117 IR 122 at [23]; Abdullah Al-Shennag v Bankstown City Council Civic Services Group; King v State Bank of New South Wales (No 2) [2002] NSWIRComm 353 (at [52]); and Weisser v Spur Group Pty Ltd (2003) 121 IR 89 at [14].

8 Mr Stephen Coleman of counsel, who appeared for the appellant in these proceedings, submitted that the Deputy President's decision to award costs was affected by serious errors, including: (a) Harrison DP misapplied the test as to whether the appellant's unfair dismissal application was frivolous by failing to properly consider whether the appellant's claim was "manifestly faulty"; (b) No finding was made in the substantive matter that the claim was frivolous and/or vexatious, and further, no support can be found in that decision for such a finding; (c) The respondent raised matters during the hearing on costs which were not raised in the substantive matter, for instance relating to the appellant's alleged motive for pursuing an unfair dismissal application; and (d) Harrison DP made findings in the decision on costs which did not arise from findings in the substantive matter.

9 Mr Coleman further submitted that "the appeal raises important issues as to the appropriate test to be applied and the approach to be adopted by the Commission in determining whether to award costs in unfair dismissal proceedings pursuant to s181(2)(c)".

10 On balance, we are satisfied that this is an appropriate matter for the grant of leave, for three major reasons. The appeal appears to raise for the first time at appellate level important questions as to the Commission's jurisdiction to award costs pursuant to s181(2)(c) where the Commission considers that an application was "frivolous or vexatious". Secondly, the introduction of issues in the decision on costs, which were not subject of findings in the substantive proceedings, represents a significant error which warrants appellate intervention. Thirdly, given that s181(2) prescribes limited circumstances in which costs may be awarded in unfair dismissal matters, there is a need for some clarification of the nature of the tests applicable under that section, and some guidance in that area is therefore warranted. Finally, in our view, there is also an overall public interest element to the appeal.

11 The power to award costs under s181(2) is a discretionary one. The relevant principles governing a review of discretionary decisions are well established and are set out in the majority decision in House v The King (1936) 55 CLR 499 at 504 - 505:

The manner in which an appeal against an exercise of discretion should be determined is governed by established principles. It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred.

12 Those principles were recently applied by a Full Bench of the Commission in Weisser v Spur Group Pty Limited (2003) 121 IR 89 at [34]:

It is well established that where the appeal is from a discretionary decision, the appellate court must not interfere with the decision unless "it reaches the clear conclusion that by reason of some error, whether of fact or of law, the primary judge not only has taken a different view but has failed properly to exercise the discretion conferred": Ace Business Brokers Pty Ltd v Phillips-Treby (2000) 100 IR 420 at 428. The locus classicus for the principle is the judgment of the High Court in House v King at 504 - 505. See also Mace v Murray (1955) 92 CLR 370 at 378; Port Macquarie Golf Club Ltd v Stead (1996) 64 IR 53 at 58 - 60; Drake Personnel Ltd t/as Drake Industrial v WorkCover Authority of New South Wales (Inspector Ch'ng) (1999) 90 IR 432 at 446 and Abboud v The State of New South Wales (Department of School Education) at 42 - 43.

13 The question that arises for determination in this matter is whether, in exercising his discretion pursuant to s181(2)(c) of the Act, Harrison DP erred in awarding costs on the basis that the unfair dismissal application made and pursued by the appellant was frivolous. Although his Honour did not decide the matter on the basis that the proceedings at first instance were vexatious, we shall, having regard to the contentions of the parties, also address that matter. In our view, that question must be answered in the negative in both respects.

14 Sections 181(1) and (2) of the Act are relevantly in the following terms:

181 Costs (1) Subject to the rules of the Commission and any other Act or law: (a) the Commission may award costs, and (b) costs are in the discretion of the Commission, and ... (2) However, the Commission when it is not in Court Session may award costs only in the following cases: ... (c) the Commission may award costs against a party to proceedings under Part 6 of Chapter 2 (Unfair dismissals) who, in the opinion of the Commission, unreasonably failed to agree to a settlement of the claim or whose application was frivolous or vexatious, or ...

15 In finding that the application brought by the appellant was frivolous, his Honour stated:

[21] I respectfully follow the determination his Honour Barwick CJ in General Steel Industries Inc v Commissioner for Railways (NSW) and Others 112 CLR 125 at 129 and 130:

"The test to be applied has been variously expressed: "so obviously untenable that it cannot possibly proceed"; "manifestly groundless"; "so manifestly faulty that it does not admit of argument"; "discloses a case which the Court is satisfied cannot succeed"; "under no possibility can there be a good cause of action"; be manifest that to allow them" (the pleadings) "to stand would involve useless expense.

At times the test has been put as high as saying that the case must be so plain and obvious that the court can say at once that the statement of claim, even if proved, cannot succeed; or "so manifest on the view of the pleadings, merely reading through them, that it is a case that does not admit of reasonable argument"; so to speak apparent at a glance."

"On the other hand, I do not think that the exercise of the jurisdiction should be reserved for those cases where argument is unnecessary to evoke the futility of the plaintiff's claim. Argument, perhaps even of an extensive kind, may be necessary to demonstrate that the case of the plaintiff is so clearly untenable that it cannot possibly succeed."

[22] This is such a case in which the frivolity of the application is known only to the applicant and not revealed to the Commission until the evidence is heard.

[23] Had the absolute denial of any "family/friend" arrangement by Mr Chapman been known at the outset, the earlier observation of his Honour Barwick CJ as to the obviously untenable applies. I find the application to be frivolous.

16 The notion of frivolity as the basis for striking out or staying a claim is well established. The Supreme Court rules, for instance, provide as follows:

(1) Where in any proceedings it appears to the court that in relation to the proceedings generally or in relation to any claim for relief in the proceedings - … (b) the proceedings are frivolous or vexatious … the Court may order that the proceedings be stayed or dismissed generally or in relation to any claim for relief in the proceedings.

17 The test for determining whether a claim may be stayed or dismissed is that stated in the case cited by Harrison DP; that is General Steel Industries. For example, in Rajski v Powell (1987) 11 NSWLR 522 at 524, Kirby J held:

First, the circumstances in which summary intervention is justified, effectively to prevent a party from submitting a case for determination on the merits, are limited indeed: Dey v Victorian Railways Commissioners (1949) 78 CLR 62 at 91. This is because, normally, a party is entitled to have the case proceed to trial when a full opportunity will be given to present evidence and argument in support of the claim. Necessarily, applications such as the present typically involve little or no consideration of evidence. The proceedings are telescoped. These and other reasons explain why the exercise of the jurisdiction now invoked is reserved to exceptional cases. The formulae used by the courts vary. But the instruction is the same. The relief sought is conserved to clear cases where the claim made is "so obviously untenable that it cannot possibly succeed"; "manifestly groundless"; "so manifestly faulty that it does not admit of argument"; "discloses a case which the Court is satisfied cannot succeed"; "under no possibility can there be a good cause of action"; or where "manifestly to allow them to stand would involve useless expense": see General Steel Industries Inc v Commissioner for Railways (NSW) and Others 112 CLR 125 at 129. The stringent requirements for the provision of summary relief were recently emphasised by this Court in Pannizuitti v Trask (1987) 10 NSWLR 531 [emphasis added].

18 That principle has been consistently followed and applied in relation to proceedings under both the Industrial Relations Act 1991 and the present Act, and was reaffirmed by a Full Bench of the Commission sitting in Court Session in Beahan v Bush Boake Allen Australia Limited (1999) 93 IR 1.

19 We note that "frivolous" is defined by the Oxford English Dictionary as "of little or no weight, value, or importance; paltry, trumpery; not worthy of serious attention; having no reasonable ground or purpose".

20 In light of the well established line of authority, and the ordinary meaning of the word "frivolous", we are satisfied that an application under s84 will be frivolous if, on its face, it cannot possibly succeed, if it is manifestly groundless or if it is a paltry or trifling matter.

21 When those principles are applied to the present case, there is an insufficient foundation for a finding that the application for relief under s84 of the Act was frivolous. So much so is clear from the decision in the substantive matter, where Harrison DP considered firstly, that there had existed an employment relationship which ended at the initiative of the employer; secondly that there was a claim, within jurisdiction, pursuant to s84 of the Act; thirdly, that a "family and friends" policy existed as between the respondent and the appellant; and fourthly, that the policy did not apply to the work performed by the appellant for Mr Chapman; and consequently, that the application must fail.

22 In arriving at his conclusion that the appellant's application could not succeed, Harrison DP relied on a breach by the appellant of the "family and friends" policy, holding (at [19]):

The gravamen of this issue is whether the job carried out by Mr Peden, for Mr Chapman, was within the employer's policy of work for family and friends, close or otherwise. … I am compelled to the conclusion that the job for Mr Chapman came to Mr Peden through the employer. I am compelled to the conclusion that the job was carried out in ordinary working hours, described as those he undertook for the employer.

23 There was clearly a conflict of evidence as to the application of the "family and friends" policy which required determination. It was an active contest in the proceedings which his Honour was required to resolve using an orthodox application of principles and the testing of evidence. That question was determined by Harrison DP in favour of the respondent. The very existence of that question in the particular way it arose before his Honour (and the findings of his Honour in resolving it) admits the possibility that it may have been determined in favour of the appellant, or at least that the appellant had an arguable case (although we make no comment on the likelihood of such a determination). In such circumstances, the appellant's application can hardly be described as "manifestly groundless" or "obviously untenable". Certainly, it may not have been an exceptional case, but that is not to say that, on its face, there was no reasonable argument.

24 As to the findings in the decision as to costs, we make the following further observations: (1) The findings in paragraphs 17 and 18 of the decision at first instance regarding the conflict of evidence regarding the "family and friends" policy confirms that there was indeed a real question for determination. In order for the respondent to have been successful in its application for costs it needed to demonstrate, in essence, that it was unarguable that the appellant had breached the family and friends policy. That required at least a finding that there was clear evidence as to the policy, but his Honour in fact found the opposite, namely that there was "little evidence about the foundation and basis for the policy". (2) The finding in paragraph 18 that it was the appellant who first raised with Mr Chapman the issue of any familial or social relationship is not decisive of, and is possibly not relevant to, the question of whether the s84 application was frivolous. (3) The findings in paragraph [20] regarding overtime booking arrangements raises fresh issues which were not the subject of determination in the substantive matter. In any event, those findings do not materially impact on the question of whether the s84 application was frivolous. (4) His Honour's conclusion that a knowledge at the outset of Mr Chapman's denial of the "family and friends" arrangement would have made the application untenable is both circular and unsustainable. It was not known at the outset because it was part of the evidence in the proceedings which his Honour weighed in the balance with the appellant's evidence to reach his determination. In that respect, we reject the respondent's submission that "it logically follows that if the applicant lied, then he was cognizant of his deceit from a time prior to the institution of his unfair dismissal proceedings. That necessarily renders his claim futile, and the futility became patent to the Commission upon hearing the evidence". In any event, Harrison DP did not find that the appellant "lied" and the evidence shows that Mr Chapman's recollection of the transaction with the respondent is far from clear-cut. (5) This is not a case that resolved itself upon the basis of the respondent's issuing of the invoice to Mr Chapman or the 'cashing' of it.

25 In our view, the decision reveals the failure to firstly identify the appropriate test, and secondly to determine, on the facts before the Commission, whether the present matter satisfied that test such that an award of costs was appropriate. Accordingly, the appeal is upheld.

26 Harrison DP stated in his decision on costs that "having found the application to be frivolous, it is not necessary to find it vexatious in order to award costs". Accordingly, we are inclined to agree with the respondent's submission that the Deputy President's comments in that regard were obiter dicta. Nevertheless, the findings as to vexatiousness in this matter warrant comment.

Having regard to the required tests I would find the application to be also vexatious.

28 There is an absence of any discussion as to the nature of the test to be applied to determine whether an application is vexatious for the purpose of s181(2)(c). Counsel for the appellant submitted that the following definition of "vexatious" in Attorney General v Wentworth (1988) 14 NSWLR 481 per Roden J at 487 is "generally regarded in the Commission as useful":

It seems then that litigation may properly be regarded as vexatious for present purposes on either objective or subjective grounds. I believe that the test may be expressed in the following terms:

Proceedings are vexatious if they are instituted with the intention of annoying or embarrassing the person against whom they are brought.

They are vexatious if they are brought for collateral purposes, and not for the purpose of having the court adjudicate on the issues for which they give rise.

They are also properly to be regarded as vexatious if, irrespective of a motive of a litigant they are so obviously untenable or manifestly groundless as to be utterly hopeless.

29 The basis of counsel's observations as to Attorney General v Wentworth was its adoption by Sams DP in Stephan v RL Whyburn and Associates [2000] NSWIRComm 154 and by Harrison DP in Fairweather v Ladehai Pty Ltd T/as North Star Holiday Resort [2002] NSWIRComm 367.

30 In our view, there is nothing in the findings in the decision on costs that supports the conclusion that the s84 application was vexatious. In particular, we note that the findings in paragraphs [25] and [26] of the decision under appeal do not assist in the determination of that question.

31 As earlier stated, the s84 application was made by the appellant in time and within jurisdiction following the termination of his employment at the initiative of his employer, in circumstances where there was conflicting evidence as to the events leading to his dismissal. The appellant was entitled to commence proceedings and prosecute his claim. In the event, he was unsuccessful. However, a case which does not succeed on the balance of probabilities does not equate with an absence of grounds. Still less does it on that basis equate with a case that is frivolous. There is no evidence in the present case that the appellant commenced proceedings under s84 with any intention other than to have his claim determined by the Commission, which is what occurred, and to the extent that his Honour found to the contrary, it involved an error requiring appellate intervention. Accordingly, we do not consider that the s84 application was vexatious. The appellant did not press for an order for costs in the event that he was successful on the appeal. The respondent sought an order for costs when an earlier hearing of the appeal was adjourned to a date convenient to both parties. Having regard to the transcript before the Commission on the earlier occasion and the overall circumstances of the matter, we consider that no order as to costs should be made in this appeal.

(3) The decision of Harrison DP of 19 May 2003 is quashed.

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Cases Cited (19)