Qantas Airways Limited v Australian and International Pilots Association

A. Introduction

1. On 12 July 2024, I published my reasons for judgment in Qantas Airways Limited v Australian and International Pilots Association (No 2) [2024] FCA 756 (J or Qantas (No 2)). Some familiarity with Qantas (No 2) is assumed in these reasons for judgment.
2. On 29 July 2024, I made orders: dismissing Qantas's originating application and the AIPA's cross-claim; providing a timetable for the preparation of any application for an order for costs; and for any application for costs to be determined on the papers.
3. Each of the AIPA and Qantas seeks a costs order with respect to the claim in respect of which it was successful. It is common ground that the proceeding involves a matter arising under the Fair Work Act 2009 (Cth) (FW Act) and thus that s 570 of the FW Act applies so as to limit the Court's otherwise broad discretion under s 43 of the Federal Court of Australia Act 1976 (Cth): see Melbourne Stadiums Ltd v Sautner [2015] FCAFC 20; (2015) 229 FCR 221 at 252 [140] (Tracey, Gilmour, Jagot and Beach JJ; White J agreeing).
4. Section 570 of the FW Act provides, in so far as is presently relevant: 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. (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 ...
5. The discretion conferred by s 570(1) of the FW Act to award costs in favour of a party to a proceeding is enlivened only in accordance with s 570(2), s 569 or s 569A: s 570(1). In the present case, only s 570(2) is relevant.

B. Costs of the originating application

1. The AIPA seeks costs of the originating application, on an indemnity basis, from 12 noon on 11 July 2023. It contends that the failure by Qantas to accept an offer which expired at that time was an unreasonable act or omission of Qantas that caused the AIPA to incur costs from that time, within the meaning of s 570(2)(b) of the FW Act.
2. The offer was set out in a "without prejudice save as to costs" letter from the AIPA to Qantas dated 7 July 2023. The offer was expressed to be open until 12 noon on 11 July 2023 and was in the following terms: Without any admission, AIPA offers to resolve the Proceedings as follows: a. Within 7 days of accepting this offer, Qantas will file a notice of discontinuance in accordance with Form 48 in relation to the whole of its claim. b. Within 7 days of accepting of this offer, AIPA will file a notice of discontinuance in accordance with Form 48 in relation to the whole of its cross-claim. c. Each party will bear its own costs. d. Within 3 days of the acceptance of this offer, the parties are to execute a deed which confirms that the parties have agreed to resolve the Proceedings in accordance with this offer, with such deed to contain mutual terms as to release from any claims arising from the subject matter of the Proceedings, confidentiality and non-disparagement.
3. The letter indicated that the offer was made in accordance with the principles stated in Calderbank v Calderbank [1975] 3 All ER 333, and that if the offer was rejected or otherwise not accepted, then the AIPA might tender the letter in support of an application for costs on an indemnity basis, pursuant to s 570(2)(b) of the FW Act. The letter also asserted that the offer constituted a genuine compromise because the AIPA was agreeing to discontinue its cross‑claim; and gave the following as reasons why the offer should be accepted:
4. This offer should be accepted because, for the reasons identified in 'AIPA's Outline in relation to primary claim liability' filed 5 July 2023, Qantas' claim is doomed to fail.
5. We draw your attention, in particular, to: a. The weakness of Qantas' case, which is confined to a single ground on which to make good its onus to prove that AIPA's conduct in withholding agreement was unreasonable, being a conclusory assertion that the reasons given by AIPA 'at the time' were 'opaque' and 'reflected only the narrow and immediate interests of a small segment of the existing pilot establishment', in circumstances where: i. It would be contrary to well-settled authority for AIPA to be held only to its contemporaneously stated reasons. ii. AIPA has given detailed and clear evidence of its reasons, about which Qantas has said nothing. iii. That evidence demonstrates that AIPA's reasons were reasonable, reasonably based and concerned with maintaining the integrity of the seniority system, which objective is consistent with not only the interests of the by-passed pilots, but with those of the broader pilot establishment, AIPA and Qantas. Put another way, Qantas' single ground is contrary to the evidence. Even if that were not so, that would not be sufficient to prove that AIPA's conduct was unreasonable. b. The declarations sought by Qantas are inutile. c. For the foregoing reasons, the continuation of the proceedings would be a waste of the time and resources of the Court and that of the parties, as well as an unreasonable act within the meaning of s.570(2)(b) of the Fair Work Act 2009 (Cth).
6. Qantas did not accept the offer or respond to the letter.
7. The AIPA submitted that the failure of Qantas to accept the offer and its continuation with the originating application constituted an unreasonable act or omission within the meaning and operation of s 570(2)(b) of the FW Act, because:
8. the offer was made at a stage of the proceedings when Qantas was fully aware of all of the issues and evidence, and was therefore fully equipped to make an informed assessment of the strengths and weaknesses of its case and that of the AIPA;
9. the offer - which envisaged both parties "walking away" and bearing their own costs - was manifestly reasonable and proposed a genuine compromise of the case, particularly when the cross­claim was the subject of more limited submissions and evidence than the originating application;
10. the offer accurately drew to the attention of Qantas the weaknesses in its case on the originating application;
11. if Qantas had accepted the offer, then both parties would have been in essentially the same position they are now in relation to all matters in dispute, save that the AIPA would not have incurred expenses after the acceptance of the offer; and
12. when making the offer, the AIPA expressly put Qantas on notice that the AIPA would be seeking indemnity costs in the event of non-acceptance of the offer.
13. A failure to accept a reasonable offer of compromise may constitute an unreasonable act for the purposes of s 570(2) of the FW Act: Melbourne Stadiums at 255 [166].
14. I have had regard to the fact that both the originating application and the cross-claim were dismissed and that the offer contemplated that each party would discontinue its respective claim. However, I do not consider that this is sufficient to render the non-acceptance of the offer an unreasonable act or omission; and if it were sufficient such that the discretion was enlivened, I would not exercise the discretion so as to require Qantas to pay costs on the originating application. In particular, such an order is not appropriate in the present case when regard is had to the policy objectives underlying s 570(2)(b) of the FW Act (see e.g., Salama v Sydney Trains (No 2) [2021] FCA 1200 at [11] (Burley J) and the authorities there cited).
15. In Salama at [13] to [14], Burley J explained: In the present case, the focus of attention falls upon the intersection between these principles and those developed by reference to Calderbank v Calderbank [1975] 2 All ER 333. 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. In Brosnan v Katke [2016] FCAFC 156, Gleeson J (with whom Dowsett and Edelman JJ agreed) set out the principles applicable to rejection of a Calderbank offer. Her Honour said at [6]: … the relevant legal principles were not in dispute. Costs will usually be assessed on a party/party basis in the absence of an unusual feature warranting a different approach. In this case, the unusual feature relied upon by the respondents was the rejection of the Calderbank offer. Rejection of a Calderbank offer does not per se warrant an order for indemnity costs: it is necessary to consider whether the offeree's rejection of the offer was unreasonable in the circumstances in which the rejection occurred: Black v Lipovic [1998] FCA 699; (1998) 217 ALR 386 at [217]-[218]; Szencorp Pty Ltd v Clean Energy Council Limited (No 2) [2009] FCA 196 at [7]; Carey v Freehills [2013] FCA 1258 at [16]; Veda Advantage Limited v Malouf Group Enterprises Pty Limited (No 2) [2016] FCA 470; 118 IPR 156 at [31]. It may be that the policy objectives underlying s 570(2)(b) require the rejection of a Calderbank offer to be sufficiently unreasonable to warrant the conclusion that indemnity costs are appropriate considered through the lens of the policy objectives under that section: see obiter dicta remarks of Bromberg J in Celand at [163]-[165]. I respectfully agree with those observations and, in particular, that all relevant circumstances need to be taken into account and that circumstances other than the character of the offer may have a bearing on whether its rejection was, or was not, unreasonable. This appears to have been the approach taken by the Full Court in MTGI at [23]-[24]. (emphasis added)
16. See also Tredders Investments Pty Ltd as trustee for Warren Tredrea Trust v Channel 9 South Australia (No 4) [2024] FCA 453 at [34] to [35] (Kennett J); Dorsch v HEAD Oceania Pty Ltd (Costs) [2024] FCA 832 at [17] to [18] (Raper J).
17. Further, the case advanced by Qantas could not be regarded as one that should not have been pursued because it was unsupportable, nor "doomed to fail" as suggested in the letter. The originating application involved questions of construction of LHEA10, and it could not reasonably be said that the construction advanced by Qantas was not an available construction. Had the AIPA made an application for summary judgment, it would have failed.
18. It follows that the AIPA's application for costs of the originating application should be dismissed.

C. Costs of the cross-claim

1. Qantas seeks its costs of the cross-claim on a party-party basis. It contends that the AIPA instituted the cross-claim without reasonable cause within the meaning of s 570(2)(a) of the FW Act.
2. Qantas submitted, in essence, that:
3. whether the AIPA instituted the cross-claim without reasonable cause is to be determined objectively. A common way of making that assessment is to determine whether the AIPA had substantial prospects of success on the basis of the materials and facts known to it at the time the cross-claim was commenced (akin to the approach to summary judgment). Relevantly here, that question can be determined with the benefit of the reasons for judgment in Qantas (No 2);
4. the cross-claim was brought, opportunistically, simply because Qantas had already filed its claim in the proceeding, but in circumstances where the legal arguments upon which the cross-claim relied were misconceived;
5. the evidence before the Court at the hearing showed that, since around 27 March 2023, the AIPA was aware that SOTs had been swapped to, and were then undertaking, A380 type training. Yet the AIPA never alleged or suggested that this gave rise to an "allocation" of those SOTs to the A380, and hence a contravention of cl 19.1.2 of LHEA10, until the cross-claim was filed by the AIPA on 10 May 2023;
6. further, the AIPA's cross-claim turned on two narrow questions of construction based on principles that were "well-established and … not in dispute" (J[136]). Those two narrow questions of construction were disposed of in 11 paragraphs and would have been readily amenable to summary judgment in the ordinary course;
7. as to the first question of construction, there was no justification in any relevant language of LHEA10, or its context, for the construction of the word "training" to be limited to induction training only. Indeed, as was found at J[140] the "natural reading" of that expression is that it referred to all training to be undertaken by a SOT, and the alternative construction advanced by the AIPA was described at J[141] and [142] as unlikely;
8. the second question of construction was always bound to fail because it ignored cl 15.1.2 of LHEA10 and misconstrued the evidence; and
9. thus, the cross-claim was legally misconceived such that its commencement was without reasonable cause. That being so, there is no other discretionary reason why costs should not be awarded to Qantas.
10. I am not satisfied that the AIPA acted unreasonably in instituting the cross-claim.
11. The essence of the argument advanced by Qantas is that the cross-claim was legally misconceived and as such should not have been instituted. I do not accept this argument which is tainted by hindsight analysis based upon the reasons set out in Qantas (No 2): cf. Construction, Forestry, Mining and Energy Union v BHP Coal Pty Ltd (No 2) [2015] FCAFC 97; (2015) 230 FCR 337 at 344 to 345 [19] (Logan, Bromberg and Katzmann JJ); Transit Systems West Services Pty Ltd v Australian Rail, Tram and Bus Industry Union (No 2) [2021] FCAFC 13 at [18] (Katzmann, Kerr and O'Callaghan JJ). As is well‑established, mere failure on a claim does not establish that the claim was instituted without reasonable cause: see e.g. Council of Kangan Batman Institute of Technical and Further Education v Australian Industrial Relations Commission [2006] FCAFC 199; (2006) 156 FCR 275 at 289 [60] (Black CJ, North and Mansfield JJ); Baker v Patrick Projects Pty Ltd (No 2) [2014] FCAFC 166; (2014) 145 ALD 548 at 549 to 550 [9], (Dowsett, Tracey and Katzmann JJ). Further, the cross‑claim involved a question of construction of cl 19.1.2 of LHEA10 and the construction advanced by the AIPA was not unarguable.
12. There is also no suggestion in Qantas (No 2) that the cross-claim was misconceived at its inception. It was not dismissed out of hand, but instead after careful consideration. The fact that the cross-claim was dealt with in 11 paragraphs is not a reflection upon the strength or otherwise of the arguments advanced in support of, or in opposition to, the cross-claim. An application for summary judgment would have failed.
13. It follows that the application by Qantas for costs of the cross-claim should be dismissed.

D. Conclusion

1. For the reasons set out above, both applications for costs should be dismissed. I will make orders accordingly. I certify that the preceding twenty-three (23) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Goodman.