Pettit v Evolution Mining Ltd

BARKER J: 1 On 20 May 2016, I made consent orders withdrawing the originating application in this proceeding, which sought remedies for breach of contract and contravention of s 351 of the Fair Work Act 2009 (Cth) in relation to the respondent's termination of the applicant's employment on 11 July 2015. 2 In doing so, I ordered that the issue of costs be determined on the papers following the filing of parties' submissions in this regard. 3 The Court's general discretion with respect to costs pursuant to s 43 of the Federal Court of Australia Act 1976 (Cth) is subject, in the circumstances of this proceeding, to s 570 of the Act, which provides as follows: (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 order 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. 4 The respondent seeks an order that the costs incurred by the respondent be assessed and paid by the applicant. In doing so, it says the proceeding was instituted vexatiously (s 570(2)(a)) and/or the applicant's unreasonable acts caused the respondent to incur costs (s 570(2)(b)). 5 The applicant opposes such an order and seeks that the respondent pay the applicant's costs of, and ancillary to, this hearing on the papers forthwith, to be taxed if not agreed by the parties. It further seeks that there otherwise be no order as to costs. 6 For the reasons that follow, I consider that, in the circumstances of this case, the applicant should pay the costs of the respondent incurred after the proceeding was not resolved at the mediation on 29 January 2016, including the preparation of the submissions in relation to this costs question.

Factual background 7 On 22 September 2015, the applicant commenced this proceeding by filing an originating application alleging, amongst other things, that the respondent contravened s 35(1) of the Act by terminating the applicant's employment because of an illness or disability, or a perceived illness or disability. 8 The applicant sought compensation of 60 penalty units as provided for in s 539 of the Act, damages for breach of the applicant's employment contract, and costs. 9 On 3 November 2015, the applicant filed and served his statement of claim in which he sought "payment of any part of the notice period unpaid" together with interest, in addition to the relief claimed in the originating application. 10 On 6 November 2015, I made orders for the filing of pleadings and referred the proceeding to mediation before a Registrar of the Court. Pursuant to these orders, the respondent filed its defence on 30 November 2015 and the applicant filed its reply on 14 December 2015. 11 The proceeding did not resolve at the mediation conducted on 29 January 2016. 12 On 9 February 2016, the solicitor on record for the applicant, Delta Legal, sent an email to the solicitor on record for the respondent, Hopgood Ganim, suggesting that the proceeding be transferred to the Federal Circuit Court of Australia. 13 On 11 February 2016, the respondent's solicitors responded by stating, amongst other things, that: The general protections claim, if there is one, should be evidenced, before we can, or the Court can, conclude that this is a matter appropriate for the Federal Circuit Court or any other Court, State or Federal. 14 On 24 February 2016, I made orders by the parties' consent relevantly requiring the applicant to file witness statements containing all the evidence on which he intended to rely by 17 March 2016. The time for filing was extended to 31 March 2016 by orders made by the parties' consent on 18 March 2016. 15 The applicant did not file, or apparently serve, any witness statements in accordance with these orders. 16 On 4 April 2016, the Court sent an email to the parties' solicitors noting that the applicant had not filed any witness statement(s) and requiring compliance with its order of 18 March 2016. 17 On that same day, the applicant's solicitors sent an email to the Court and the respondent's solicitors advising that the applicant intended to withdraw its originating application. The respondent says it had no prior notice of the applicant's intention to withdraw the application. 18 On 18 May 2016, the respondent's solicitors sent an email to the applicant's solicitors notifying them of the respondent's intention to seek costs, and its reasons for doing so. The applicant's solicitors replied on the same day stating the applicant's intention to "vigorously oppose" any application for costs and his reasons for doing so. 19 On 20 May 2016, I made orders by the parties' consent that the originating application be withdrawn and the issue of costs be determined on the papers following the filing of parties' written submissions. 20 On 24 May 2016, the applicant filed a writ of summons in the District Court of Western Australia, on which was indorsed a statement of claim seeking remedies in relation to the same alleged breach of contract the subject of proceedings in this Court.

Respondent's submissions 21 The respondent says it is accepted that where the criteria in s 570 are met and costs are able to be awarded under the Act, the actual award of costs is in the discretion of the Court, and the onus is on the respondent in an application for costs of this kind. See Hobson v BWL Pty Ltd & Ors (No. 5) [2013] FCCA 2145 at [11] and [15]. 22 It goes on to cite the following summary of Lucev J in Hobson at [12], of the general principles to be considered when determining an application for the award of costs pursuant to s 570: (a) from early in its history this Court has made costs orders in proceedings where an application has been discontinued; (b) although there is no presumption that a discontinuing party is liable to pay the other party's costs, ordinarily costs would follow the event of such a discontinuance, if in all the circumstances, it was reasonable to make such an order; and (c) in Poole v Rod Baker & Co the Court orders costs to be paid after the applicant sought to discontinue on the day of the hearing when faced with difficulties, and orders those costs to be paid by the applicant's lawyer personally on the basis the lawyer had acted unreasonably and caused the respondent to incur costs notwithstanding notice had been given some time previously of jurisdictional difficulties with the application. (Footnotes omitted.) 23 In determining whether a claim is vexatious for the purposes of s 570(2)(a) of the Act, the respondent says the Court must determine whether the claim is doomed to fail or lacks reasonable cause. See Construction, Forestry, Mining and Energy Union v Corinthian Industries (Australia) Pty Ltd (No 2) [2014] FCA 351 at [10]. 24 In determining whether a party's unreasonable act or omission caused the other party to incur costs for the purposes of s 570(2)(b), the respondent says the prosecution of an incompetent or hopeless case can be regarded as "an unreasonable act". See Hobson at [31] and [34]. 25 With regard to para (a), the respondent notes that in their email dated 9 February 2016, the applicant's solicitors identified the applicant's "primary claim was breach of contract, with the general protections matter being pleaded because it arises from the facts". 26 The respondent says the statement of claim does not properly plead a dismissal contravening any general protection pursuant to s 351 of the Act, and thus this claim was destined to fail. 27 In this regard, it refers to [12] of the statement of claim, which alleges that the termination of the applicant's employment directly arose because of the applicant's illness. The respondent says the statement of claim fails to establish any causal link between the alleged illness and the dismissal, and so the applicant's claim must have been doomed to fail. 28 It further says the "shortcomings" of the applicant's statement of claim gave rise to a question as to whether the proceeding was commenced in the correct jurisdiction, and the applicant never provided the evidence he intended to rely upon in this proceeding. 29 In the result, the respondent submits the applicant's claim was doomed to fail as he had no proper basis to commence or continue his application in the jurisdiction of this Court. 30 With regard to para (b), the respondent says it incurred significant costs in defending the applicant's claim by reason of the following: (1) On 5 November 2015, the respondent agreed to consent orders. (2) On 6 November 2015, the respondent attended a case management hearing. (3) On 30 November 2015, the respondent filed its defence. (4) The respondent had to consider the applicant's statement of claim and reply. (5) The respondent prepared for and attended a mediation conference before a Registrar on 29 January 2016. (6) On 24 February 2016, the respondent attended a further case management hearing, where further consent orders were made. (7) On 18 March 2016, the respondent agreed to further consent orders. 31 The respondent says it incurred these costs in circumstances where the applicant failed to adduce any evidence in support of his claim, despite orders having been made to this end, and then "abruptly discontinued" the proceedings "with no explanation". In the result, the respondent submits that it was unreasonable for the applicant to file and apparently pursue a claim that was vexatiously made and ultimately doomed to fail. 32 In support of this ground, the respondent further says that the applicant faced jurisdictional difficulties "from the start" because the case lacked a proper basis for federal jurisdiction. It says the applicant's new proceeding in the District Court alleging breach of his employment contract and wrongful dismissal is presumably explicable due to these jurisdictional difficulties. 33 The respondent submits it incurred substantial and apparently unnecessary costs in this proceeding while the applicant "took his time to realise his jurisdictional error and put an end to this wasteful proceeding". 34 It further submits that the applicant's submissions on costs, as detailed below, also fail to explain why he discontinued this proceeding at such a late stage without notice to the respondent. It says the only reasonable conclusion that can be drawn is that the applicant became aware of his error in commencing his proceeding in this Court, as evidenced by the applicant commencing a claim in the District Court arising from the same facts shortly after discontinuing this proceeding. 35 In the circumstances, the respondent submits that a costs order should be made as it has been put to unnecessary trouble, cost and expense by the application and by unnecessary steps which were, it contends, without substance in a proceeding which was belatedly discontinued.

Applicant's submissions 36 With regard to the principles relevant to s 570(2), the applicant cites the Full Court of this Court's decision in Australian Workers' Union v Leighton Contractors Pty Ltd and Others (No 2) (2013) 232 FCR 428 at [7]; [2013] FCAFC 23, which provides as follows: (1) The purpose or policy of the section is to free parties from the risk of having to pay their opponents' costs in matters arising under the Act, while at the same time protecting those parties who are forced to defend proceedings that have been instituted vexatiously or without reasonable cause. (2) It follows from the protection offered by s 570(2) that a person will rarely be ordered to pay the costs of a proceeding. But it is not necessary to prove that there are exceptional circumstances warranting the making of an order: Spotless Services Australia Ltd v Senior Deputy President Marsh [2004] FCAFC 155 (Spotless) at [12]-[13] (to the extent that the Full Court in Council of Kangan Batman Institute of Technology and Further Education v Australian Industrial Relations Commission (2006) 156 FCR 275 (Kangan) held otherwise, we would respectfully disagree). (3) The relevant question is whether the proceeding had reasonable prospects of success at the time it was instituted, not whether it ultimately failed: R v Moore; Ex parte Federated Miscellaneous Workers' Union of Australia (1978) 140 CLR 470 at 473 per Gibbs J; Kangan at [60]. In Kanan v Australian Postal and Telecommunications Union (1992) 43 IR 257 at 264-265 (approved in Kangan) Wilcox J said: If success depends upon the resolution in the applicant's favour of one or more arguable points of law, it is inappropriate to stigmatise the proceeding as being "without reasonable cause". But where, on the applicant's own version of the facts, it is clear that the proceeding must fail, it may properly be said that the proceeding lacks a reasonable cause. 37 The applicant further cites the Full Court in Leighton at [8], where it emphasised that these principles relate to the question of whether the jurisdiction to award costs is enlivened, noting that, even if the Court has jurisdiction, it retains the discretion to refrain from exercising it in an appropriate case. 38 The applicant says there is a distinction between a party who pursues arguments that are ultimately abandoned or rejected by the Court, and a party who commences a proceeding that is misconceived in the sense of being incompetent or unsupportable. See Construction, Forestry, Mining and Energy Union and Others v Clarke (2008) 170 FCR 574 at [29]; [2008] FCAFC 143. He further says that costs will not be awarded against a party whose unsuccessful argument was "not unworthy of consideration"; that only a case that has "no real prospects of success or was doomed to failure" at the time that it was commenced will satisfy s 570(2)(a) of the Act. See Ashby v Slipper (No 2) (2014) 144 ALD 10 at [35]; [2014] FCAFC 67, citing Council of Kangan Batman Institute of Technology and Further Education v Australian Industrial Relations Commission and Another (2006) 156 FCR 275 at [60]; [2006] FCAFC 199, and R v Moore and Others; ex parte Federated Miscellaneous Workers' Union of Australia (1978) 140 CLR 470 at 473; [1978] HCA 51. 39 With regard to s 570(2)(a), the applicant says the respondent must show that the applicant commencing proceedings was vexatious or without reasonable cause at the time they were instituted. See Leighton at [7] and Ashby at [35]. 40 The applicant submits that at no stage of the proceeding has the respondent raised any objection to the manner or the circumstances in which the proceeding was commenced, and so he has nothing to respond to in that regard. 41 The applicant further submits that at no stage of the proceeding has the respondent raised any objection in relation to jurisdiction or any aspect of the applicant's pleadings. He says this is because there is no such defect but, even if there was, it would be entirely inappropriate for the respondent to now seek costs in relation to matters to which it had previously not objected, despite having ample opportunity to do so whether in correspondence or as part of its defence or by way of a "strike out motion". 42 The applicant says the respondent has not demonstrated any evidentiary weakness in the applicant's case, and the applicant has not made any concession that would suggest any weakness. As such, it says the respondent's solicitors' contention in their email dated 18 May 2016, namely, that the applicant provided no witness statements in accordance with the Court's orders and knew "at all times he had no basis for an adverse action claim in the Federal Court", is purely speculative. 43 Further, the applicant says the recently commenced District Court proceeding means that he "maintains his position as to the facts". Consequently, he submits, the question of whether the applicant has grounds for claiming breach of contract is still to be determined by the courts and this Court should not pre-empt that determination by ruling the proceeding was vexatious or unreasonable. 44 The applicant says that the proceeding was affected by unusual "jurisdictional difficulties" in that, while it is not possible to bring proceedings under the Act in state courts, it is also not possible to continue proceedings in this Court once adverse action claims are discontinued. He says this Court has repeatedly held that, in cases where an applicant seeks remedies in relation to the termination of their employment and claims both breach of contract and adverse action, those two arguments should be considered alternative legal characterisations of a single matter rather than separate and discrete claims that may individually be considered unreasonable for the purpose of s 570 of the Act. See Tsilibakis v Transfield Services (Australia) Pty Ltd (No 2) [2015] FCA 1048 and Hobson. 45 The applicant consequently submits that it is reasonable and proper for an applicant to plead both causes of action in the jurisdiction of this Court rather than omitting from the outset an obvious alternative legal characterisation of essentially the same events that comprise the breach of contract. 46 In these circumstances, the applicant submits that the point at which the applicant chose to discontinue the proceeding was entirely appropriate if not "overly generous" given it was before the respondent had been "put to the burden of" discovery and witness statements. 47 In support of this submission, the applicant cites the decision of this Court in Tsilibakis and the decision of the Federal Circuit Court in Hobson, in which applications for costs under s 570 of the Act were refused, noting that in those cases not only did the respective applicants withdraw their claims far later in the litigation, but put the respective respondents "to the trouble of" interlocutory applications. He further notes that in Hobson, the respondents' claim for costs was on the basis that the applicant's case was inherently implausible. He says the present case involved no such weakness or implausibility nor had this ever been claimed by the respondent prior to its written submissions on costs, and so any claim the respondent now makes to that effect is entirely speculative. 48 With regard to his failure to file witness statements by 31 March 2016, the applicant says the conduct of a case can be "inadequate" without being unreasonable within the meaning of s 570 of the Act. See Tsilibakis at [22]. 49 He further says that this failure should be viewed in the context of his decision to discontinue the proceedings in this court and commence proceedings in the District Court. Had the applicant filed and served witness statements, this would have caused the respondent to incur costs in preparing its witness statements in response. By instead withholding the filing and service of witness statements, the applicant ensured that the proceedings could be discontinued prior to the respondent's obligations arising. 50 Therefore, the applicant says, the pertinent issue is whether he acted unreasonably in delaying giving notice of his intention to withdraw the application until shortly after the date on which his witness statements were due. 51 In this regard, the applicant says his choice to discontinue this proceeding and commence a proceeding in the District Court was to the benefit of both parties as it narrowed the issues that must be determined at trial. 52 The applicant concedes it would have been preferable if he had given notice of his intention to withdraw prior to 31 March 2016, but says there is no evidence that this delay caused the respondent to incur any costs. 53 In the event that the Court's jurisdiction to make a costs order is enlivened due to one of the criteria in s 570(2) being satisfied, the applicant makes the following submissions as to how the Court should exercise its discretion. 54 The applicant says he is a natural person and former employee of the respondent, who is a large corporation and a sophisticated litigant. He says the need to exercise hesitancy in ordering costs under s 570, as discussed by the Full Court in Leighton, is particularly pertinent in this context. 55 The applicant notes that at no stage prior to the respondent's decision to agitate the issue of costs had the respondent put the applicant on notice nor made any complaint as to the applicant's institution of proceedings or conduct of the case. He says, in these circumstances, it is wholly inappropriate that the respondent now claims costs on the grounds that the applicant's conduct of the case was unreasonable, or that the proceeding was vexatious or unreasonable at the time of its commencement. He says if the respondent had such concerns, it had ample opportunity to voice them in correspondence and to seek to effect them through an interlocutory application. 56 Consequently, even if the Court is of the view that the applicant's conduct was unreasonable within the meaning of s 570, the applicant submits the respondent's uniform acceptance of that conduct should deter the Court from exercising its discretion to grant costs. 57 The applicant further submits that to grant costs on the basis that commencing or failing to earlier withdraw the proceeding was unreasonable would have the effect of speculating as to findings of fact that are yet to be determined by the District Court. 58 Finally, if the Court does not award the respondent a costs order against the applicant under s 570 of the Act, the applicant seeks his costs with respect to the respondent's costs application on the basis that the respondent acted unreasonably in agitating the issue. 59 In this regard, the applicant repeats its previous submissions and says that, in light of the "clearly established case law" regarding s 570 of the Act, it was unreasonable for the respondent to seek costs in relation to matters that the respondent had not previously objected to. 60 The applicant submits that while the principles cited by the Full Court in Leighton suggest the need to exercise caution with regard to ordering costs under s 570, the same considerations may support the use of costs as a deterrent in the context of the respondent's conduct. 61 He says that by pressing for this hearing on the papers, the respondent has forced the applicant to go to considerable expense to defend against the threat of a substantial costs penalty. In doing so, the applicant submits that the respondent's conduct undermines the protection afforded by s 570(2) by putting future applicants in cases of this type on notice that a respondent may effectively penalise them for the conduct of their case, even if they conduct their case in a reasonable manner.

Consideration 62 The principles governing an award of costs under s 570 of the Act are well established. The Full Court of this Court has repeatedly held that s 570, and its predecessor s 824 of the Workplace Relations Act 1996 (Cth), are to be understood as reflecting a legislative policy of protecting parties to proceedings under the Act from costs orders so that a party with a genuine grievance will not be discouraged from pursuing a remedy to which they may be entitled, or from pursuing litigation in the manner which they deem best, for fear of an adverse costs order. See Tsilibakis at [7], citing Clarke at [29] and Ashby at [35]. Consequently, it is usually only in exceptional circumstances that costs will be awarded under s 570. See Kangan at [60]. 63 In all the circumstances, I am not prepared to conclude that the proceeding, when instituted, was doomed. However, I consider that from the time when the mediation conducted on 29 January 2016 failed to achieve a resolution of the matters in dispute, and the applicant then sought to transfer the proceeding to the Federal Circuit Court of Australia and subsequently failed to file and serve any witness statements in this proceeding in accordance with programming orders made and ultimately gave notice of his intention to withdraw his originating application in this Court, the applicant's whole course of conduct should be considered an unreasonable act that caused the respondent to incur costs. 64 In these circumstances, I would order that the applicant pay the costs of the respondent incurred after 29 January 2016, to be taxed, if not agreed, including the preparation of the submissions in relation to this costs question.

Order 65 The Court orders: (1) The applicant do pay the costs of the respondent incurred after 29 January 2016, to be taxed, if not agreed, including the preparation of the submissions in relation to this costs question. I certify that the preceding sixty-five (65) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Barker.