REASONS FOR JUDGMENT
1 The main proceeding from which the present application arises is a claim for damages for breach of contract, contraventions of the Australian Consumer Law and the Fair Work Act 2009 (Cth), and for civil penalties. The applicant, Leo Rossetti, alleges that he had a fixed-term contract of employment which was unlawfully terminated and he is owed some of his wages for the period during which he worked for the respondents, payment for the loss of the balance of the fixed term, unpaid superannuation contributions, and payment in lieu of notice of termination. In the alternative, Mr Rossetti alleges that he was engaged as an independent contractor and entitled to the same, or largely the same, relief. The hearing is listed for two days on 1 and 2 August 2019.
2 By an interlocutory application filed on 5 July 2019 the respondents sought orders, amongst other things, excusing them from serving any outline of oral evidence or submissions before the close of the applicant's case (the first proposed order), granting them leave to amend their defence and vacating the hearing dates. The application is supported by affidavits from the second respondent, Sha Zhou, the sole director of the first respondent (the company), and her solicitor, Ying Zhang. Neither of the deponents was required for cross-examination.
3 The basis for the first proposed order was that the respondents wished to raise the privilege against self-exposure to penalties (the penalty privilege), which would entitle them to an order of this nature. Evidence in support of the claim to the penalty privilege was included in the affidavits but in submissions filed on 9 July 2019, the claim for the first proposed order was not pressed, the relevant passages in the affidavits were not read at the hearing, and the following day an affidavit was filed from Ms Zhou in which she deposed that she no longer wished to claim the privilege.
4 The application was strenuously opposed.
5 The onus of satisfying the Court the amendments should be allowed rests with the respondents: Dye v Commonwealth Securities Ltd (No 2) [2010] FCAFC 118 at [17].
6 The application for leave to amend the defence is made under r 16.53 of the Federal Court Rules 2011 (Cth) (Rules). A proposed form of amended defence is annexed to Ms Zhang's affidavit of 5 July 2019. In a second affidavit sworn on 9 July 2019, Ms Zhang sets out the basis for the new allegations captured by the amended defence. By the proposed amendments, the respondents seek to raise a new defence to the claim for payment for the loss of the balance of the alleged fixed term contract, and to the claim for payment for a notice period. The respondents seek to rely on Mr Rossetti's conduct during his work for the company in three particular respects as constituting incompetence and/or gross negligence that would justify summary dismissal and would mean that he was not entitled to those payments even if he otherwise succeeded in establishing the alleged fixed term contract.
7 The Court's power to grant leave derives from r 1.41. The Court's discretion is broad, but it is not unfettered. Like any power under the Rules, it must be exercised in the way that best promotes the overarching purpose of the civil practice and procedure provisions: Federal Court of Australia Act 1976 (Cth) (FCA Act), s 37M(3). That purpose is the facilitation of the just resolution of disputes according to law and as quickly, inexpensively, and efficiently as possible: FCA Act, s 37M(1). The parties are also required to conduct the proceeding in a way that is consistent with the overarching purpose: FCA Act, s 37N(1). The overarching purpose includes a number of objectives, which extend beyond the interests of the parties to the litigation: see FCA Act, s 37M(2).
8 It was common ground that in deciding whether or not to exercise the discretion to allow the amendment of pleadings the Court should consider the following matters, drawn from Tamaya Resources Limited (in liq) v Deloitte Touche Tohmatsu (A Firm), in the matter of Tamaya Resources Limited (in liq) [2015] FCA 1098 at [127] and derived from Aon Risk Services v Australian National University (2009) 239 CLR 175:
(1) the nature and importance of the amendment to the party who seeks it;
(2) the extent of the delay and the costs associated with the amendment;
(3) where there is delay, the explanation for it;
(4) any actual or presumptive prejudice flowing from the amendment;
(5) the parties' choices in the litigation and the consequences of those choices;
(6) the detriment to other litigants in the Court; and
(7) the potential loss of public confidence in the legal system which can arise when a court is seen to accede to applications made without adequate explanation or justification.
9 It was also common ground that if leave were granted to the respondents to amend their defence the hearing dates will have to be vacated. This is a matter of considerable concern to Mr Rossetti. The affidavit filed on his behalf by his solicitor, Ethan Brawn, discloses that he is not currently in receipt of income, is presently dependant on Centrelink benefits and savings, and has funded this proceeding from his and his partner's savings and from selling assets. The maintenance of this action has apparently caused him and his family both financial and emotional stress. He hopes to see it determined without further delay.
10 As the plurality observed in Aon at [98]-[102], parties are entitled to a proper opportunity to plead their case, but the opportunity is not unlimited. Delay and costs may make it unjust to accede to a late amendment. An order for costs may not adequately compensate the other party and so achieve a just resolution. "Non-compensable inconvenience and stress on individuals are significant elements of modern litigation": Bomanite Pty Ltd v Slatex Corp Aust Pty Ltd (1991) 32 FCR 379 at 392 (French J). It follows that a just resolution does not require that a party be allowed to raise any arguable case at any point in the proceeding, on payment of costs. In some cases it may properly be concluded that a party has had sufficient opportunity to plead their case and that it is too late for a further amendment, having regard to the other party and other litigants awaiting trial dates: Aon at [102]. The question here is whether this is such a case.
11 The matter has had a long and sorry history.
12 The originating application was filed on 22 January 2018. It was supported by a statement of claim filed the same day. An amended originating application was filed on 9 March 2018 correcting minor errors in the original. No defence was filed until 17 April 2018.
13 On 17 September 2018 Ms Zhou failed to attend a Court-ordered mediation. The following month Burley J ordered that the respondents pay Mr Rossetti's costs thrown away as a result. He regarded her behaviour as unreasonable and her explanation for non-attendance unsatisfactory: Rossetti v Aus Gold Mining Group Pty Limited [2018] FCA 1649.
14 Four orders have been made requiring the respondents to serve outlines of any oral evidence they intend to give. None of those orders was complied with. The first of these orders was made by Burley J on 8 October 2018. The deadline was 21 December 2019. On 20 December 2019 his Honour made a second order to the same effect. This time the deadline was fixed at 8 February 2019. No application was made to vary the order. On 8 March 2019 Burley J set this matter down for hearing for two days on 25 and 26 July 2019, no doubt on the well-founded assumption that the respondents were not intending to adduce any evidence.
15 No cross-claim has ever been filed but in November 2018 the first respondent filed a statement of claim in the Supreme Court of New South Wales seeking nearly $900,000 in damages from Mr Rossetti. Two causes of action are pleaded, one in contract, one in tort. The pleading goes on to detail instances of alleged breaches of contract and negligence, and to particularise the damages. Mr Rossetti is described in the pleading as an independent contractor.
16 On or about 4 April 2019, on the initiative of Mr Brawn, and with the consent of the company's solicitor, Ms Zhang, an application was made to the Supreme Court to stay that proceeding pending the outcome of the action in this Court. The same day, notwithstanding the failure of the respondents to comply with the orders made by Burley J relating to the service of outlines of evidence, Ms Zhang told Mr Brawn that the respondents wanted to put on evidence in this matter. Mr Brawn told her that if they wanted to do so she could make an application. In the ensuing months, however, no such application was made.
17 On 18 June 2019, after the matter was re-docketed, the hearing dates were varied by consent to 1 and 2 August 2019. Despite the inaction and the looming hearing dates, I was told by Mr Blank of counsel, who then appeared for the respondents, that they did wish to adduce evidence and that they were in a position to serve an outline of that evidence by close of business that day. I was persuaded to give them a further opportunity to do so. At the same time, however, I required the respondent to file an affidavit explaining their non-compliance with the Court's orders. I stipulated that the affidavit identify the nature of their proposed evidence, the number of witnesses they wished to call, the anticipated length of the evidence, and the orders they sought. An affidavit from Ms Zhang was filed on 21 June 2019 but it only purported to explain part of the period of non-compliance and it did not identify the nature of the evidence, its anticipated length, or the orders that were sought.
18 The amendments to the defence foreshadowed by the respondent raise substantially new issues. In effect, they seek to rely on some of the matters raised in the statement of claim to justify non-payment of the entitlements Mr Rossetti claims are due to him. In short, they allege that Mr Rossetti was incompetent and conducted himself in relation to three matters in a way amounts to "grave negligence" entitling the company to summarily dismiss him. Although Mr Rossetti has been aware of the allegations for many months now, if not longer, until a week ago there was no suggestion that he would have been required to meet them in this proceeding. I was informed that, apart from requesting particulars of the allegations in the statement of claim with unsatisfactory results, no steps have yet been taken to investigate them.
19 In her affidavit Ms Zhou deposed that, although her lawyers had retained counsel earlier, the first time she learned that incompetence or serious negligence on Mr Rossetti's part would provide a defence to part of his claim, was when she first conferred with her current counsel, Mr Moorhouse, at the end of last month. She said that, had she known earlier that the company could raise those matters in their defence, she would have instructed her lawyers to do so. She maintained that on numerous occasions when she was represented by another firm of solicitors (from about February 2018 to February 2019) she complained about Mr Rossetti's conduct, including the alleged incompetence or serious negligence. She said she told her previous solicitor on two separate occasions that she wanted the company to bring a cross-claim against Mr Rossetti if that were possible. On the second such occasion she stated that she was informed that it was too late to do so and she was bound to bring her claim in the Supreme Court.
20 Mr Moorhouse informed the Court that, if the interlocutory application was successful, an application would be made for leave to file a cross-claim to the same effect as the Supreme Court statement of claim and the Supreme Court proceeding would be discontinued.
21 This application has been brought at a very late stage. It follows a course of conduct by the respondents which Mr Rossetti's counsel, Mr O'Sullivan, correctly characterised as inconsistent with their obligations under s 37N of the FCA Act. Having repeatedly breached Court orders, why should the Court now grant them this indulgence? Mr Rossetti is understandably anxious to have his case heard and determined as quickly as possible and, in particular, on the dates fixed for hearing. If he ultimately succeeds, he would recover interest but that does not help him in the short term. Moreover, no costs order will alleviate all his anxieties. Then there is the effect of the adjournment. Adjourning the hearing would result in the existing dates being wasted.
22 On the other hand, there was no dispute that the proposed amendments raise an arguable defence and that they are important to the respondents. Nor was it disputed that if the underlying facts are made out, the respondents would have a complete answer to the largest single component of Mr Rossetti's claim. Although the delay is unsatisfactory, it has been explained. Through his counsel, Mr Rossetti accepted the explanation. In these circumstances, there is no reason why I should not, too. The explanation, in substance, was that the delay was due to poor legal advice and was not attributable to the respondents themselves. As Lord Denning MR remarked in Salter Rex & Co v Ghosh [1971] 2 QB 597 at 601, "[w]e never like a litigant to suffer by the mistake of his lawyers". Once the respondents were aware of the potential new defence, they acted promptly to bring the matter before the Court.
23 Furthermore, even if the interlocutory application were dismissed, Mr Rossetti would still face the prospect of defending the Supreme Court proceeding. True it is, as Mr O'Sullivan submitted, that were he to succeed in establishing that he was employed by one or other respondent, that would give rise to an issue estoppel in the Supreme Court proceeding. But Mr Moorhouse told the Court that the statement of claim would be amended to plead an employment relationship in the alternative.
24 The Court has a statutory obligation to avoid a multiplicity of proceedings. If I were to refuse the relief sought in the interlocutory application, which would have the indirect effect of preventing the respondents from raising the foreshadowed cross-claim, that obligation would not be discharged.
25 The final consideration is the matter of costs.
26 The respondents agreed to pay any costs wasted as a result of the amendment and the vacation of the hearing dates. In fact they sought an order to this effect in their interlocutory application. Moreover, they volunteered to pay those costs forthwith. They did not, however, agree to pay the costs of, and incidental to, the interlocutory application.
27 In the ordinary course, a party who successfully seeks an indulgence from the Court will be required to pay the costs incurred by an opponent. Although this proceeding raises several causes of action only one of which is based on the Fair Work Act, this is a proceeding "arising under" the Fair Work Act within the meaning of s 570 of that Act: Melbourne Stadiums Ltd v Sautner (2015) 229 FCR 221 at [157]. Section 570 relevantly provides that:
(1) A party to proceedings … in a court ... 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) …
(2) The party may be ordered to pay the costs only if:
…
(b) the court is satisfied that the party's unreasonable act or omission caused the other party to incur the costs … .
28 For present purposes, the effect of s 570 is that the Court could only order the respondents to pay Mr Rossetti's costs if it is satisfied that the respondents' "unreasonable act or omission" caused him to incur costs.
29 If the power were not enlivened, that circumstance would count against the respondents in the balancing exercise. But neither party advanced such an argument.
30 Mr O'Sullivan submitted that the respondents had engaged in unreasonable acts or omissions which have resulted in Mr Rossetti incurring further legal costs. He pointed to their failure to amend the defence, presumably in a timely fashion; the making of the application seeking an order in relation to penalty privilege and then abandoning it; and filing affidavits which contained materially incorrect information.
31 Apart from referring to the constraints imposed on the Court by s 570, Mr Moorhouse did not seek to be heard on the question of costs. It is implicit in the respondents' request for an order that they pay any costs wasted as a result of the amendment and the vacation of the hearing dates that they accept that those costs would have been incurred as a result of unreasonable act(s) or omission(s) on their part. There is no reason to take a different position with respect to the costs incurred in defending the interlocutory application.
32 Even though Ms Zhou has provided an explanation for the delay in bringing the application, it was unreasonable for the respondents not to seek to amend the defence much earlier, well before the proceeding was listed for hearing. Indeed, the matters they now wish to raise should have been included in the defence in the first place. It is not suggested that the information upon which it is based only recently came to the respondents' attention. Had a timely application been made, there is every prospect that Mr Rossetti would have consented to it.
33 In any case, there is no doubt that the application for the first proposed order was unreasonable and that it caused Mr Rossetti to incur unnecessary costs. The affidavit from Mr Brawn was prepared partly in answer to the claim for penalty privilege. His evidence disclosed correspondence from Ms Zhang from February 2018 in which she had invoked the privilege on Ms Zhou's behalf. Subsequent conduct, following a change in solicitors, indicated that Ms Zhou had had a change of heart. Mr Rossetti's position was that the privilege had been waived over a year ago and, on the face of things, that position was supported by Mr Brawn's affidavit. At the first return date for the interlocutory application Mr O'Sullivan was prepared to argue the point. The privilege claim was only abandoned after the respondents' legal representatives read Mr Brawn's affidavit.
34 I am therefore satisfied that I have the power to award costs and, in the absence of any argument to the contrary, that I should exercise that power in Mr Rossetti's favour. This will mitigate the prejudice caused by the respondents' application - but only up to a point.
35 I am sympathetic to Mr Rossetti's position. When all the relevant matters are weighed in the balance, however, I am persuaded that the orders the respondents seek should be made. But costs should not be limited in the way the respondents proposed. The respondents should not just pay the costs wasted as a result of the amendments to the defence and the vacation of the hearing dates but also the costs of, and incidental to, the interlocutory application. Moreover, all those costs should also be payable forthwith. I am satisfied that the interests of justice call for a departure from the ordinary position reflected in r 40.13 of the Rules. Mr Rossetti asked that any costs be paid on an indemnity basis. Had the respondents pressed their application to be excused from providing outlines of oral evidence because of the penalty privilege I would have acceded to it. Since they did not, it seems to me that costs should be paid on the ordinary basis.
36 To further mitigate the prejudice caused to Mr Rossetti by the lateness of the application and having regard to the respondents' conduct of the litigation up to this point, I intend to impose strict time limits on the further management of the case. The parties should be mindful of the extent of the Court's powers under ss 37P(5) and (6) of the FCA Act in the event of non-compliance with the Court's directions about procedural matters, including adherence to time limits.
I certify that the preceding thirty-six (36) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Katzmann.