PIA Mortgage Services Pty Ltd v King

Federal Court of Australia (Full Court)|2020-03-27|Before: Ms P, Snaden JJ, Snaden J

The respondent's application for a lump sum costs order be dismissed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

THE COURT: 1 On 24 February 2019, the court partially upheld both the appellants' appeal and the respondent's cross-appeal: PIA Mortgage Services Pty Ltd v King [2020] FCAFC 15 (Rangiah, Charlesworth and Snaden JJ). Following input from the parties, orders were made, including with respect to the receipt and consideration of submissions concerning what, if any, costs orders should flow in consequence of the court's judgment. These reasons are directed to that inquiry. 2 In the primary judgment, Snaden J set out the relevant background as follows: 66 At the times relevant to this appeal, the first appellant (hereafter, "PIAMS") operated a mortgage broking business. It formed part of, or was otherwise aligned with, a group known as the "Property Investors Alliance" (hereafter, the "PIA Group"). The second appellant, Mr Wang, was its sole director and shareholder. 67 Mr King is PIAMS's former chief executive officer. The present appeal and cross-appeal - and the judgments from which each is brought - relate to the circumstances in which his employment in that position was terminated. 68 By a proceeding commenced in the Federal Circuit Court of Australia, Mr King alleged, amongst other things, that: (1) PIAMS had terminated his employment in contravention of s 340(1) of the Fair Work Act 2009 (Cth) (hereafter, the "FW Act"); (2) Mr Wang was an accessory to that contravention; and (3) by having failed to pay to him at the point of that termination an amount equivalent to the value of untaken annual leave entitlements that he had accrued over the course of his employment, PIAMS had contravened s 90(2) of the FW Act. 69 The trial judge agreed and awarded Mr King statutory compensation in the sum of $100,000.00: King v PIA Mortgage Services Pty Ltd & Ors [2018] FCCA 3426 (Judge Smith; hereafter, the "Liability Judgment"). Further claims for damages for breach of contract and for misleading and deceptive conduct under the Australian Consumer Law were unsuccessful. 70 Mr King sought the imposition of pecuniary penalties against the appellants in respect of their contraventions of the FW Act. By a later judgment, the court resolved not to impose upon the appellants pecuniary penalties in respect of their breaches of s 340(1) of the FW Act but, in respect of its contravention of s 90(2), imposed upon PIAMS a penalty of $43,200.00: King v PIA Mortgage Services Pty Ltd & Ors (No 2) [2019] FCCA 1460 (Judge Street; hereafter, the "Penalty Judgment"). 71 PIAMS and Mr Wang appeal from both judgements. In summary form, they maintain that Mr King was not dismissed in contravention of s 340(1) of the FW Act, that Mr King did not in any event suffer any loss as a consequence of such a contravention if there was one, and that the penalty imposed against PIAMS for its breach of s 90(2) of the FW Act was manifestly excessive. 72 Mr King cross-appeals against both judgments. He maintains that the compensation that he was awarded was insufficient, that he ought to have been awarded damages for breach of contract and that the court below ought to have imposed a penalty upon the appellants in respect of their contraventions of s 340(1) of the FW Act. 3 In the result, both sides can lay claim to a measure of success and failure. The appellants succeeded in having the penalty that was the subject of the Penalty Judgment reduced and they defended the respondent's attempts to increase the amount that they were ordered to pay to him pursuant to the Liability Judgment. They failed, however, to overturn the findings based on s 340(1) of the FW Act and had additional penalties imposed upon them in respect of those contraventions. 4 The respondent now seeks a lump sum costs order under s 43(3)(d) of the Federal Court of Australia Act 1976 (Cth) and r 40.02(b) of the Federal Court Rules 2011 (Cth). The appellants, by contrast, urge the court to make no order as to costs. 5 There is no dispute that the appeal and cross-appeal were proceedings in relation to matters arising under the FW Act. Their character as such is sufficient to enliven the general prohibition against the awarding of costs for which s 570(1) of the FW Act provides. At issue is whether the circumstances that here present are sufficient to bypass that general prohibition. For the reasons that follow, they are not. There will be no order made as to costs.

Legislation 6 Section 570 of the FW Act provides: 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. 7 It is only the second of the three circumstances to which s 570(2) of the FW Act refers that is of present relevance. The respondent contends that the appellants committed a series of unreasonable acts or omissions sufficient to warrant departure from the general rule for which s 570(1) of the FW Act provides.

The respondent's contentions 8 The respondent attributes to the appellants three species of unreasonable act or omission by reason of which he contends that the general prohibition against the awarding of costs should not here apply. 9 The first concerns the withdrawal of some contentions that the appellants initially sought to challenge by their appeal (the particulars of which needn't here be stated). The respondent complains that those withdrawals only came about during the hearing of the appeal and that some of the withdrawn contentions were only raised for the first time by the appellants' written submissions. That timing, he says, bespeaks unreasonableness of the kind to which s 570(2)(b) of the FW Act refers. He submits that he should be able to recover an amount representative of the costs that he incurred in respect of the abandoned contentions. 10 The second concerns the appellants' failure to accept offers that the respondent made to compromise the appeal and cross-appeal. The respondent proposed to settle both proceedings on terms that, had they been accepted, would have been more beneficial to the appellants than the outcome that has since eventuated. He contends that the appellants' failure to accept those terms was unreasonable and that he should be entitled to recover the costs that he subsequently incurred. 11 Third and finally, the respondent submits that the first appellant has failed to pay the penalty amount that was the subject of the Penalty Judgment. That, he says, was an unreasonable omission by reason of which he has incurred certain costs that, s 570(1) notwithstanding, he should be permitted to recover. 12 In support of his contentions, the respondent read an affidavit sworn by his solicitor, Mr Warwick Ryan on 9 March 2020. To that affidavit are attached (amongst other documents) a number of letters that evidence the ultimately unsuccessful negotiations that transpired between the parties before and after the hearing of the appeal and cross-appeal. 13 We address each of the three bases in turn.

Basis #1: Withdrawn contentions 14 The narrowing of issues that are to be ventilated before a court is always to be encouraged. By itself, the withdrawal of an otherwise live contention cannot amount to unreasonableness of the sort to which s 570(2)(b) of the FW Act refers, no matter when it occurs. 15 Unreasonableness may, however, arise by reason of the nature of the contention that is withdrawn or the circumstances in which that withdrawal occurs (or both). A litigant who fails until the proverbial eleventh hour to withdraw a speculative contention might more readily be thought to have committed an unreasonable omission for the purposes of s 570(2)(b) of the FW Act than would a litigant who withdraws an arguable contention at the same point or earlier. Similarly, the failure to withdraw a contention before the eleventh hour might more readily qualify as an unreasonable omission if there is reason to think that the party withdrawing it could, with proper care, have withdrawn it more promptly. In combination, the timing of the withdrawal, the quality of the withdrawn contention and the circumstances in which the withdrawal was effected inform whether a particular withdrawal trespasses into the realm of unreasonableness. It is, in that sense, that unreasonableness is a question of impression and degree, to be assessed by reference to the particular circumstances of a given case: Construction, Forestry, Mining and Energy Union v Clarke (2008) 170 FCR 574, 582 [28] (Tamberlin, Gyles and Gilmour JJ). 16 Here, the respondent's submission does not rise beyond a complaint that the appellants withdrew what they withdrew at a relatively late stage of the proceeding. He says, simply enough, that had he been notified of the withdrawals sooner than he was, it would not have been necessary for him to incur costs in respect of their defence. That, with respect, is undoubtedly (if not axiomatically) so; but it is not nearly sufficient. To impugn the withdrawal of otherwise live contentions as unreasonable, the respondent needs to point to something more than simply the late stage at which they occurred: there needs to be something about the circumstances within which a particular withdrawal was effected or the quality of what was withdrawn (or both) that enlivens the spectre of unreasonableness. 17 The respondent says nothing about the quality of the contentions that were withdrawn or the circumstances within which those withdrawals took place (other than that they occurred at a late stage). He does not, for example, suggest that the withdrawn contentions were speculative or foredoomed to failure, or that the appellants deliberately or carelessly delayed their withdrawal, such that the prohibition against the awarding of costs that would otherwise apply might properly be circumvented. Having not been addressed on them, it is not possible for the court to make an assessment as to the quality of the contentions in question and there is no evidence to suggest that their withdrawal was delayed by ineptitude or sharp practice. It might well be that the appellants, perhaps assisted by the penetrating light of an imminent hearing, simply made a forensic choice to narrow what they wished to ventilate before the court. That, without more, is not unreasonable. 18 For those reasons, we do not accept that the appellants' late withdrawal of any contentions amounted to an unreasonable act or omission of the kind that might permit an order for costs under s 570(1) of the FW Act.

Basis #2: Rejected offers of compromise 19 The respondent also seeks an order for costs on the basis that it was unreasonable for the appellants to have rejected an offer that he made to compromise the appeal and cross-appeal. 20 There is little doubt that the offer here in question was reasonable. The appellants do not contend otherwise. The rejection of a reasonable offer to compromise proceedings can (but does not necessarily) constitute an unreasonable act or omission of the kind to which s 570(2)(b) of the FW Act refers: Melbourne Stadiums Ltd v Sautner (2015) 229 FCR 221, 255 [166] (Tracey, Gilmour, Jagot and Beach JJ, with whom White J agreed on that issue). Again, whether the rejection of an offer to compromise proceedings can be impugned as unreasonable will be a question of impression and degree, to be informed by all of the circumstances that surround it. At the least, those circumstances will include the objective attractiveness of the offer, whether a more beneficial result was realistically possible and whether the effort required to achieve a more beneficial result was proportionate to any marginal benefit. 21 In the present case, there was nothing unreasonable about the appellants' pressing ahead with their appeal in the face of the respondent's proposed compromise. Success on their appeal would have seen them overturn a six-figure compensation order and a finding of statutory contravention. The arguments that they advanced to that end, although ultimately unsuccessful, were not without merit (a fact amply reflected in the court's split decision). The respondent's offer was not so plainly attractive - particularly measured against what the appellants would have achieved had their contentions been accepted - that the only course reasonably open was to accept it. 22 The appellants' conduct since the hearing of the appeal does not impact upon that conclusion. The respondent has drawn the court's attention to correspondence dated 22 August 2019 (the day after the completion of the hearing of the appeal and cross-appeal), by which the appellants' solicitors: (1) accused the respondent of having given false evidence under oath and, thereby, having committed a criminal offence or offences; (2) indicated that the appellants would initiate a private prosecution of the respondent in respect of that alleged offence (or those alleged offences) - and, in particular, would "not spare any costs" in the pursuit of that endeavour; (3) indicated that the respondent's alleged "false evidence" would "…only go away if the [Liability] Judgment is set aside…"; and (4) suggested that a "further reason" why the respondent ought to have accepted the appellants' earlier settlement overtures was because the first appellant "…does not have assets." 23 However regrettable those representations may be, it is difficult to see how any of them is sufficient to stigmatise the appellants' rejection of the respondent's offer as unreasonable. Even read in the worst light, they amount simply to inappropriate threats made by the appellants in an attempt to coerce the respondent into accepting (or, perhaps, proposing) less beneficial settlement terms. To observe as much is not to excuse what was represented, nor to accept that those representations were inappropriate. Either way, the representations that were made do not inform whether or not it was reasonable for the appellants to reject the offer that the respondent had earlier made to compromise the appeal and cross-appeal. 24 The appellants' rejection of the respondent's attempts to settle the appeal and cross-appeal did not amount to an unreasonable act or omission of the kind that might permit an order for costs under s 570(1) of the FW Act.

Basis #3: Enforcement of the pecuniary penalty order 25 The respondent next submits that he has been put to unnecessary expense on account of the first appellant's apparent non-compliance with the orders that were made in consequence of the Penalty Judgment. He submits that the "…failure of the first appellant to make payment of the penalties [sic] awarded against it constituted an 'unreasonable act or omission' for the purposes of section 570(2)(b) of the FW Act…" 26 We would have little difficulty in accepting that a failure to comply with a court order might - and, perhaps more often than not, would - amount to an unreasonable act or omission. That would be so even in circumstances where, as here, the order in question was significantly altered on appeal. Costs incurred in consequence of such a failure might well attract the operation of s 570(1) of the FW Act. 27 The difficulty for the respondent, however, lies in tying any unreasonable conduct back to costs that he has incurred in respect of the appeal or cross-appeal. The costs to which he refers appear to have been incurred in connection with efforts that he has made to realise the benefit of the Penalty Judgment. They are not costs incurred in connection with the appeal or the cross-appeal. This court has no jurisdiction to award costs under s 570(1) of the FW Act in respect of proceedings other than those with which it is seized: Construction, Forestry, Mining and Energy Union v Clarke (2008) 170 FCR 574, 582 [28] (Tamberlin, Gyles and Gilmour JJ). 28 We do not accept that any costs that the respondent has incurred in pursuit of payment of the amount that was the subject of the Penalty Judgment are costs that this court can award under s 570(1) of the FW Act.

Conclusion 29 None of the bases upon which the respondent seeks costs under s 570(1) of the FW Act is made out. The respondent's application for a lump-sum costs order must be dismissed. I certify that the preceding twenty-nine (29) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Rangiah, Charlesworth and Snaden.

SCHEDULE OF PARTIES NSD 51 of 2019 Cross-Respondents Second Cross-Respondent YUE ('JUSTIN') WANG

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