For the reasons at [45]-[79] above, I find that the proceedings were instituted without reasonable cause, and that Mr Galanty should be ordered to pay Auscor's costs pursuant to s 570(2)(a) of the Act.
The remaining issues are the period of time which the costs orders should cover and whether indemnity costs should be ordered.
In relation to the period of time, I am satisfied that Mr Galanty's own objective records and knowledge of his own business affairs (through his conduct at [58] above) from the outset, and his knowledge that when he instituted the Originating Claim that the law was settled by Personnel Contracting and Jamsek, warrant the issuance of an order for Mr Galanty to pay Auscor's costs pursuant to s 570(2)(a) from 26 April 2023, to be taxed if not agreed.
Auscor seeks a costs order under s 570(2)(b) in the alternative to a costs order under s 570(2)(a). Where I consider it appropriate for the order at [79] above to issue, it would be unnecessary to issue an order under the alternative provision (s 570(2)(b)).
If I was not persuaded to issue the order at [79] above, and it was necessary to consider the issuance of an order under s 570(2)(b), I would have issued an order for Mr Galanty to pay Auscor's costs pursuant to s 570(2)(b) from 9 February 2024 (the date the First Affidavit was filed). This is because I am persuaded by the respondent's submissions (at [8(j)] above), that upon preparing and filing the First Affidavit on 9 February 2024, producing Mr Galanty's tax returns for the financial years 2013-2017, it would have been readily apparent to Mr Galanty, and his advisors, that Mr Galanty's own evidence wholly aligns with him operating his own business (Phillink), and having conducted himself in a manner wholly consistent with him engaging in his own business for many years.
As outlined at [48] above, Mr Galanty accepts that when he filed the Originating Claim, the law was settled by Personnel Contracting and Jamsek. As outlined at [64] above, Kiefel CJ, Keane and Edelman JJ said in Jamsek [63] that the respondents incurring expenses and taking advantage of tax benefits available only to businesses, was irreconcilable with the contention that they were not conducting a business of their own.
At the hearing, Auscor conceded that Mr McCoy and Auscor had common legal representation, such that Mr McCoy's costs were Auscor's costs and vice versa during the period that Mr McCoy was the second respondent to these proceedings. Auscor acknowledged that Mr McCoy was the sole director of Auscor.[21] In circumstances where Auscor's legal representatives would have needed to take instructions from Mr McCoy in relation to the claim against Auscor, it is difficult to see how the costs Mr McCoy incurred in defending the claim against him as the second respondent, would be different to the costs incurred by Auscor in defending the claim against it as the first respondent. Accordingly, I am not inclined to make an order that Mr Galanty pay Mr McCoy's costs.
However, I am inclined to issue an order for Mr Galanty to pay Auscor's costs on the Costs Application.
In relation to whether indemnity costs should be ordered, I am not satisfied that they should, for the reasons that follow.
As outlined at [18] above, it is for Auscor to clearly demonstrate its case for seeking the orders sought in its Costs Application (at [3] above): (emphasis added)
[2]
That the claimant pay the respondent's costs pursuant to section 570(2)(a) and alternatively 570(2)(b) of the Fair Wok Act 2009on an indemnity basis from 26 April 2023 (the commencement of the claim), to be taxedif not agreed.
[3]
While Auscor sought orders for Mr Galanty to pay its costs on an indemnity basis, to be taxed if not agreed, Auscor did not satisfy me of the following:
[4]
That the costs in this matter should not be subject to the Legal Profession (Magistrates Court) (Civil) Determination 2022 and the Legal Profession (Magistrates Court) (Civil) Determination 2024.[22]
[5]
(b) That Rodwell v Hutchinson[2010] WASCA 197 does not apply to limit this court's power to award indemnity costs.
As outlined at [8(i)] above, Auscor contended that if the court was not satisfied that an indemnity costs order should issue, then in the alternative, an order for 'ordinary costs' should issue.
Accordingly, I will issue an order for Mr Galanty to pay Auscor's costs pursuant to s 570(2)(a) of the Act, on a party and party basis, from 26 April 2023, to be taxed if not agreed.
[6]
For the preceding reasons, I find that Mr Galanty instituted the proceedings without reasonable cause.
Therefore, I consider that an order requiring Mr Galanty to pay Auscor's costs in the proceedings, including its costs on the Costs Application, pursuant to s 570(2)(a) of the Act, from 26 April 2023, on a party and party basis, to be taxed if not agreed, should be issued.
I will list the matter for a Directions Hearing to hear from the parties on whether the parties should attend a conference before the Clerk of the Court to give them an opportunity to agree the costs, and on any other orders to be issued to give effect to these reasons.
[7]
[1]On 20 November 2024, Mr Farrell filed a Form 27 - Notice of Cessation of Representation by Lawyer or Agent.
[3]Re Minister for Immigration & Ethnic Affairs; Ex parte Lai Qin[1997] HCA 6 (Lai Qin); ONE.TELLtd v Deputy Commissioner of Taxation[2000] FCA 270 (ONE.TEL).
[4]Mr Galanty's Form 8.1 - Case Outline/Further and Better Particulars of Case Outline filed on 17 October 2023 states, 'At all material times, the Claimant alleges that he was employed by the First Respondent as a Technician'; 'The Claimant asserts that he was classified as C11 - Manufacturing Employee Level IV [of the Manufacturing and Associated Industries and Occupations Award 2020]' or in the alternative 'as an Electrical worker grade 4 [of the Electrical, Electronic and Communications Contracting Award 2020]'; 'However ... other than the claim detailed in paragraphs 21-23 of the statement of claim (Annual Leave Loading), the Claimant does not allege any breaches of either Award.': [3], [8]-[12].
ZG Operations Australia Pty Ltd v Jamsek[2022] HCA 2
The law concerning orders for costs is settled. The limited power to award costs is found in s 570 of the [Act]. ...
Section 570 confers a discretion to order costs where a pre-condition of s 570(2) is met. This discretion must be exercised judicially according to the terms defining it. It must also be exercised with caution because of the exceptional nature of the power in an otherwise non-costs jurisdiction: Australian Workers Union v Leighton Contractors Pty Ltd (No 2)[2013] FCAFC 23 [(AWU)] per Dowsett, McKerracher and Katzmann JJ [8].
This means that the case for a costs order must be clearly demonstrated by the party seeking a costs order: Saxena v PPF Asset Management Ltd[2011] FCA 395 [6].
In relation to the precondition in s 570(2)(a), the relevant question is whether the proceedings had reasonable prospects of success at the time it was instituted, not whether it ultimately failed: [AWU [7]].
That can be tested by asking whether the party bringing the action, on the facts apparent to the party, properly advised, should have known the claim had no reasonable prospects of success: Baker v Patrick Projects Pty Ltd (No2)[2014] FCAFC 166 [9]-[10]. A distinction can be drawn between cases where success depends on resolution in the claimant's favour of one or more arguable points of law, and cases which are misconceived, unsupportable, incompetent or hopeless: Australian [and] International Pilots Association v Qantas Airways Ltd (No 3)[2007] FCA 879 [(AIPA) [36]]; Construction, Forestry, Mining and Energy Union v Clarke[2008] FCAFC 143 [29]. Pursuit of cases in the latter category can be characterised as unreasonable.
Whether a party has engaged in an 'unreasonable act or omission' for the purposes of s 570(2)(b) turns on the facts and circumstances of the case: per Jackson J at [9].
Where costs are ordered by the Court they will ordinarily be paid on a party and party basis. Any departure from this usual practice, according to the authorities collected by Sheppard J in Colgate-Palmolive Company v Cussons Pty Ltd[1993] FCA 536, will only occur in a limited range of cases. The 'tests' used to identify such cases have been couched in general terms such as 'when the justice of the case might so require' or whether there exists 'some special or unusual feature on the case to justify the Court in departing from the ordinary practice.' These 'tests' have, for example, been found to have been met in cases in which unwarranted allegations of fraud have been made, proceedings have been prosecuted for some ulterior motive or in wilful disregard of known facts or clearly established law or where there has been an imprudent refusal of an offer of compromise.
I do not doubt that, in instituting this proceeding, Mr Kanan was motivated to obtain relief to which he considered himself entitled. There is no reason to believe that he was actuated by a desire to harass the respondent. To the extent that the word 'vexatious' imports considerations additional to the question whether there was a reasonable cause for the proceeding, I make no finding adverse to Mr Kanan. But, for the qualification of s 347 to operate, it is sufficient that the proceeding be instituted 'without reasonable cause'. A proceeding is not to be classed as being launched 'without reasonable cause' simply because it fails. As Gibbs J said in R v Moore; Ex parte Federated Miscellaneous Workers' Union of Australia[1978] HCA 51; (1978) 140 CLR 470 [(Moore)] at 473, speaking of the Conciliation and Arbitration Act equivalent of s 357 (s 197A):
In Standish v University of Tasmania[1989] FCA 166; (1989) 28 IR 129 at 139 Lockhart J applied the qualification in ordering costs against an applicant whose case he thought 'misconceived', rather than simply unsuccessful. But, as the Full Court pointed out in Thompson v Hodder[1989] FCA 493; (1989) 29 IR 339 ([Thompson]) at 342, 'there may be cases which could not be described properly as 'misconceived' but which would nevertheless be held to have been instituted without reasonable cause'.
The next question is whether the proceeding was instituted vexatiously. This looks to the motive of the applicant in instituting the proceeding. It is an alternative ground to the ground based on a lack of reasonable cause. It therefore may apply where there is a reasonable basis for instituting the proceeding. This context requires the concept to be narrowly construed. A proceeding will be instituted vexatiously where the predominant purpose in instituting the proceeding is to harass or embarrass the other party, or to gain a collateral advantage: see Attorney General v Wentworth[1988] NSWCA 8; (1988) 14 NSWLR 481 at 491.
It is well-established that a failure to accept a Calderbank offer may justify the exercise of the Court's discretion to award costs on an indemnity basis. Principles referable to Calderbank offers are well-known. As the Full Court explained in Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd (No 2)[2011] FCAFC 141:
In determining whether the Court should exercise its discretion and order indemnity costs in light of a rejection by the unsuccessful party of a Calderbank offer, a key question for consideration by the Court is whether the Calderbank offer was reasonable and proposed a genuine compromise of a case brought without a realistic prospect of success: Sagacious Legal Pty Ltd v Wesfarmers General Insurance Ltd[2011] FCAFC 53 [(Sagacious)] [125].
Further, we consider that the failure of MTGI to accept Mr Johnston's offer of 5 July 2016 was an unreasonable omission which caused MrJohnston to incur costs in these proceedings, within the meaning of s 570(2)(b) of the [Act] (cf Ashby v Slipper (No 2)[2014] FCAFC 67 at [2]-[3]).
ONE.TEL is a Federal Court of Australia decision, delivered on 13 March 2000, where the issue for consideration was whether the Deputy Commissioner of Taxation (DCT) should pay the applicants' costs, in circumstances where the applicants had applied to the court to set aside notices issued under s 108 of the Sales Tax Assessment Act 1992 (Cth), and the DCT agreed to consent orders setting aside the notices.
Burchett J said in ONE.TEL [5]-[8]:
It is accepted that, in a case which terminates before there has been a hearing, the Court should not resolve the issue of costs by engaging in something in the nature of a hypothetical trial: Australian Securities Commission v Aust-Home Investments Ltd[1993] FCA 585; (1993) 44 FCR 194 [(Aust-Home)] at 201_;_ [Lai Qin] at 624. But this does not mean that the Court can never make an order for costs. Often, it will be unable to do so; but in other cases an examination of the reasonableness of the conduct of the parties, respectively, may provide the basis of an order, or 'a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried', as McHugh J put it in [Lai Qin] at 625. His Honour added:
As Sackville J pointed out in Rizal v Minister for Immigration and Multicultural Affairs[1999] FCA 334 [(Rizal)] at para 16, the remarks made by McHugh J evince 'a somewhat more flexible approach' than that taken by the Court in Gribbles Pathology Pty Ltd v Health Insurance Commission[1997] FCA 1414; (1997) 80 FCR 284 [(Gribbles)] at 287, when it suggested that 'there will be very few cases where the issues will be sufficiently clear, in the absence of a hearing, for an order for costs to be made in favour of a party.' What is well established is that frequently the determining factor will be the reasonableness of the conduct of the parties, a matter which was emphasized in each of the decisions I have cited, and also in Reddy v Hughes(1996) 37 IPR 413 [(Reddy)]; Sun Zhan Qui v Minister for Immigration and Ethnic Affairs[1999] FCA 119 [Qui]; and Australian Securities Commission v Berona Investments Pty Ltd(1995) 18 ACSR 772 [(Berona)]. In the last case, Cooper J commented (at 774), concerning the principles laid down in [Aust-Home]:
In my opinion, it is important to draw a distinction between cases in which one party, after litigating for some time, effectively surrenders to the other, and cases where some supervening event or settlement so removes or modifies the subject of the dispute that, although it could not be said that one side has simply won, no issue remains between the parties except that of costs. In the former type of case, there will commonly be lacking any basis for an exercise of the Court's discretion otherwise than by an award of costs to the successful party. It is the latter type of case which more often creates problems, since there may be difficulty in discerning a clear reason why one party, rather than the other, should bear the costs. In [Lai Qin], McHugh J was careful to state (at 624) that the principles with which he was concerned were those that 'govern an application for costs when a party elects not to pursue an action because he or she has achieved the relief sought in the action either by settlement or by extra-curial means'. As his Honour recounted the facts, the instant case was one where the applicant had challenged a decision of the Refugee Review Tribunal denying her status as a refugee but, during the pendency of her action in the High Court, the Minister had exercised his special discretion in her favour under s 417 of the Migration Act1958. The question whether the Tribunal had or had not erred in law thus became moot. [Qui] was a similar case. Following the decision of the Full Court in Sun v Minister for Immigration and Ethnic Affairs (1997) 81 FCR 71, the Minister exercised his discretion under s 417, with the result that an outstanding proceeding in respect of one of several decisions of the Refugee Review Tribunal lost any significance for either party. Beaumont J followed [Lai Qin]. [Gribbles] was a variation on the theme. There, the Health Insurance Commission was sued by a pathologist because it declined to recognize particular services as eligible for the payment of Medicare benefits; but during the pendency of the proceeding, certain arrangements affecting the performance of the services were changed, with the result that the Commission reversed its decision. The original dispute thus ceased to have any significance, and the argument about the appropriate costs order had to take place in the absence of any determination of the merits. Again, in [] and in [], as Cooper J put it in the latter case (at 777), 'events had overtaken the proceedings'. The relief originally sought was no longer required, and the proceedings were terminated without any decision on the merits. Neither side had won or lost (see the former case at 202, and the latter at 777). [] and [] perhaps each turned even more clearly on an assessment of the reasonableness of a party's behaviour. In [], the respondent had offered the applicant a substantially complete remedy before the institution of proceedings, and Branson J held (at 415) that her Honour was 'not able to be satisfied that the applicant acted reasonably in commencing the proceeding'. In , although the applicant achieved the result he sought by his proceeding in the Court, there was an 'at least arguable' objection to the Court's jurisdiction to entertain the application, and a proposed amendment to overcome the jurisdictional problem would have required leave to file an application long out of time. That leave had not been granted when the proceeding became moot because of the Minister's plainly reasonable decision to reconsider the request the previous rejection of which was the subject and of the litigation.
Even if the Court is satisfied of a s 570(2) precondition, it retains a discretion not to order costs: Construction, Forestry, Mining and Energy Union v Corinthian Industries (Australia) Pty Ltd (No 2)[2014] FCA 351 per Pagone J [12].
Once the power to award costs is enlivened under s 570(2) of the [Act], the Court can make an order for costs to be paid on an indemnity basis, with the general law principles as to the award of such costs applied: Shea v Energy Australia Services Pty Ltd (No 2)[2015] FCAFC 14 [10].
The test as to whether indemnity costs should be awarded is whether the justice of the case might so require or, whether there exists some special or unusual feature of the case to justify the Court in departing from the ordinary practice: [AIPA].
The principles at [17] above, emphasise the exceptional nature of costs orders in this jurisdiction, requiring Auscor to clearly demonstrate its case for seeking a[5]costs order.5
Tweedie [13] cites AIPA, for the test to be satisfied when deciding whether indemnity costs should be awarded. In AIPA, the respondent sought an order of costs in its favour, principally under s 824(2) of the Workplace Relations Act 1996 (Cth) (WR Act):
Costs only where proceeding instituted vexatiously etc.
(1) A party to a proceeding (including an appeal) in a matter arising under this Act ... must not be ordered to pay costs incurred by any other party to the proceeding unless the first mentioned party instituted the proceeding vexatiously or without reasonable cause.
(2) Despite sub-section (1), if a court hearing a proceeding (including an appeal) in a matter arising under this Act ... is satisfied that a party to the proceeding has, by an unreasonable act or omission, caused another party to the proceeding to incur costs in connection with the proceeding, the court may order the first mentioned party to pay some or all of those costs.
(3) In subsection (1) and (2):
Aust-Home
Berona
Reddy
Rizal
Reddy
Rizal
casus belli
By contrast with the decisions I have been discussing, the present matter involves a clear winner. The applicants, by their proceeding, sought to challenge the validity of certain notices, and to have them set aside. The respondent, after initially defending those notices, encountered at least an evidentiary difficulty, and acknowledged that they were to be set aside. That means that the applicants have succeeded, just as the respondent succeeded in Ahmetaj v Minister for Immigration and Multicultural Affairs[1999] FCA 332, where a proceeding failed by reason of the occurrence of an event that was always liable to occur and to defeat the proceeding; in those circumstances, Sackville J, when the hearing did not proceed, distinguished [Lai Qin] and made a costs order. As in that case, so here, the result one party sought was achieved without a hearing, but not by a 'settlement' in the ordinary sense, or as McHugh J used the word, and certainly not by what his Honour called 'extra-curial means'.
In any event, if, as the respondent contends, I should determine the question of costs by assessing whether, to borrow the language of McHugh J in [Lai Qin] (at 625), 'both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation [came to an end by the respondent's decision not to seek to uphold his notices]', I would arrive at the same result. The respondent asserts that his decision to desist from defending the proceeding was reached 'consistently with his obligation as an officer of the Commonwealth to act as a model litigant'. Since reliance upon clear proof, by secondary evidence, that an authorisation actually existed would be in no way inconsistent with the attitude of a model litigant, this can only mean that there was some degree of dubiety about the secondary evidence. Moreover, if a model litigant would not have maintained the validity of these notices as respondent to proceedings to set them aside, a fortiori a fair-minded officer of the Commonwealth would not have sought to enforce the same notices by criminal sanctions against an unsuspecting citizen or corporation - or even against a protesting one. On the [DCT's] own stance now, his stance earlier must have been unreasonable, at least once he had ascertained the true position. Yet that stance was maintained by opposition to the applicant's motion to amend, and by service of the notice to admit facts. It was only abandoned after the applicants defeated the attempt to obtain admissions.