Costs: Consideration
80 Ultimately, I found that the respondents had breached s 340(1) of the FW Act by taking adverse action against the applicant (namely dismissing him) as a result of his inquiries about payment of a bonus or establishment of a bonus plan, and s 44(1) of the FW Act by their failure to pay him his statutory entitlements.
81 As a general rule the Fair Work jurisdiction is no costs. An order for costs in Fair Work matters is unusual and limited to circumstances contemplated by s 570 of the FW Act. Relevantly, s 570 of the FW Act provides:
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) of 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.
82 In Australian Workers Union v Leighton Contractors Pty Ltd (No 2) [2013] FCAFC 23; (2013) 232 FCR 428, the Full Court explained at [7]:
In our view the authorities establish the following principles:
(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 Jeanette 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 264-5 (approved in Kangan) Wilcox J said:
If success depends on 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.
83 More recently the Full Court explained in Trustee for The MTGI Trust v Johnston (No 2) [2016] FCAFC 190 at [8]:
Section 570 of the FW Act confers discretion on the Court to order costs in Fair Work matters where proceedings were instituted vexatiously or without reasonable cause. Not only must this discretion be exercised judicially according to the terms defining it, it must be exercised with caution because of the exceptional nature of the power in an otherwise no-costs jurisdiction. The case for its exercise should be clearly demonstrated: Saxena v PPF Asset Management Ltd [2011] FCA 395 at [6]. As Mortimer J observed (correctly, in our opinion) in Ryan v Primesafe [2015] FCA 8 at [64]:
The reason for caution is the potential for discouraging parties' pursuit in a complete and robust way of the claims for contravention which they seek to make under the Fair Work Act, or the defence of such claims. The policy behind s 570 is to ensure that the spectre of costs being awarded if a claim is unsuccessful does not loom so large in the mind of potential applicants (in particular, in my opinion) that those with genuine grievances and an arguable evidentiary and legal basis for them are put off commencing or continuing proceedings. It is an access to justice provision. Insofar as it operates to the benefit of respondents, it is designed to ensure respondents feel free to pursue arguable legal and factual responses to the claims made against them.
(cf Barker J in Pettit v Evolution Mining Ltd [2016] FCA 1304 at [62].)
84 Further, earlier this year in Macushla Pty Ltd (Trading as Sunnytop Bakery Ciabatta Della Nonna) v El Souki [2019] FCA 643 Snaden J observed:
[15] In Baker v Patrick Projects Pty Ltd (No 2) (2014) 145 ALD 548 (Dowsett, Tracey and Katzmann JJ), a Full Court of this Court endorsed (at [9]) what was said about the application of s 570(2)(a) of the FW Act in Construction, Forestry, Mining and Energy Union v Corinthian Industries (Australia) Pty Ltd (No 2) [2014] FCA 351 (Pagone J). There, Pagone J, at [8], said that:
…[t]o exercise the discretion conferred by [s 570(2)(a) of the FW Act] the Court must be satisfied that the claims were, relevantly, instituted without reasonable cause. That is not established merely because a party fails in the claims: R v Moore; ex parte Federated Miscellaneous Workers Union of Australia (1978) 140 CLR 470, 473. The relevant provisions reflect 'a policy of protecting a party instituting proceedings from liability for costs' and costs will rarely be awarded unless justified by exceptional circumstances: see Kangan Batman Institute of Technology and Further Education v Australian Industrial Relations Commission (2006) 156 FCR 275 at [60]. In Kangan Batman Institute it was said by the Full Court at [60] that 'a proceeding will be instituted without reasonable cause if it has no real prospects of success, or was doomed to failure'. In Kanan v Australian Postal and Telecommunications Union (1992) 43 IR 257 Wilcox J indicated at 264 that one way of testing whether a proceeding was instituted 'without reasonable cause' was to ask whether, upon the facts apparent to the applicant at the time of instituting the proceeding, there was no 'substantial prospect of success'. His Honour went on to say that a proceeding lacks a reasonable cause where it is clear that it must fail on the applicant's own version of the facts.
[16] The Full Court in Baker identified some "minor modification[s]" of the test when applied to appeals and judicial review proceedings. At [10], the Court observed that:
…[i]n such proceedings the focus changes to whether, having regard to the facts apparent to the appellant at the time of instituting the appeal or the application for judicial review, there were no reasonable prospects of success. In evaluating these prospects regard may be had to the reasons for judgment or decision under appeal or review, as the case may be, and the grounds relied on to challenge the judgment or decision: see Imogen Pty Ltd v Sangwin (1996) 70 IR 254 at 257 (Wilcox CJ).
85 In this case in the appeal the Full Court noted the proposition that litigation is not a "free for all". The submissions of both parties in claiming and counter-claiming detailed costs, to the point of identifying and quantifying individual cost items in taxable form, come perilously close in my view to being a "free for all".
86 The primary litigation in this case was hard-fought and bitter. There was considerable variance between Mr Whelan's claims, and those which were substantiated in the trial. Similarly, the respondents failed in their cross-claim for an advance they had allegedly made to Mr Whelan.
87 However the relevant question is whether a proceeding was instituted vexatiously or without reasonable cause, not whether it ultimately failed. Mr Whelan was successful in his claims of contravention of the FW Act by the respondents, but unsuccessful in recovering bonuses he claimed were owed to him and in respect of his contract claims. I do not, however, consider his claims referable to bonuses either vexatious or unreasonable - indeed the issue of bonuses was ultimately decisive in the proceedings to the extent that the adverse action taken against him was referable to his bonus inquiries. Further, while Mr Whelan was unsuccessful in his contract claims, the nature of the relationship between the parties (in particular his personal relationship with Mr Beynon as the apparent face of the first respondent) was such that Mr Whelan's claims could not be described as futile from the outset.
88 On the other hand, to the extent that the respondents resisted Mr Whelan's application, I do consider this to be unreasonable. That the respondents relied on a premise for Mr Whelan's dismissal which the Court did not accept, and that they continued to maintain this reliance, was an issue which has been addressed in penalties. However the respondents' position was also referable to the fact that Mr Whelan could be dismissed with a mere two weeks' notice at any time, for any reason; to the very poor relationship between the parties at the time of the dismissal; to the importance the respondents placed on publicity by reference to the Zoo Magazine article; and to their (as I found, warranted) concern that Mr Whelan could or would do harm to their business. I do not see the respondents' conduct as falling within the parameters of s 570 of the FW Act.
89 Further, while the respondents were not successful in respect of their cross-claim, I am satisfied that the premise of the cross-claim was plausible on the evidence before the Court, and that it cannot be said they instituted the cross-claim vexatiously or without reasonable cause.
90 I take a different view however in relation to the respondents withholding Mr Whelan's statutory entitlements, particularly their refusal to pay Mr Whelan his unused leave entitlements in accordance with s 90(2) of the FW Act. I understand that this was a position the respondents maintained until judgment was given. Even if I had been persuaded that Mr Whelan was dismissed for gross misconduct, that the respondents were entitled to dismiss him without giving him notice or payments in lieu of notice, and that therefore adverse action had not been taken against him in relation to his dismissal, Mr Whelan's statutory entitlement to unused paid leave in accordance with s 90(2) remained undisturbed. In the course of the primary judgment I noted that any right to withhold Mr Whelan's unused paid leave entitlements required satisfaction of conditions prescribed by s 324(1) of the FW Act, and that the respondents claimed the right to withhold the payments because of a right under the general law to set-off. As I further noted at [159]-[160] of the primary judgment, a claimed right of set-off in this case in no way satisfied the terms of s 324(1) of the FW Act.
91 This conduct of the respondents was a deliberate denial of Mr Whelan's right to receive those entitlements, to the point that he was obliged to institute Court action to recover them. I am satisfied that the respondents' resistance of this aspect of Mr Whelan's claim was at all times unreasonable, and motivated by Mr Beynon's determination not to "pay (Mr Whelan) a fucking cent". I am satisfied that this conduct constituted an unreasonable act or omission which caused Mr Whelan to incur costs within the meaning of s 570(2)(b) of the FW Act.
92 The parties have also made extensive submissions concerning each other's conduct in the course of the trial, which they each say caused them to unnecessarily incur costs. This includes:
The respondents adding to their alleged reasons for the dismissal of Mr Whelan, particularly following the evidence of Ms Parnia Marshall;
The decision of Mr Whelan not to call certain witnesses at the hearing or rely on their evidence (namely Tracey Whelan, Connor Summers, Masimba Wagoneka and Greg Bull);
The decision of the respondents not to call Mr Beynon as a witness or rely on his evidence;
The applications by the applicant for discovery and/or production of documents;
The amendments of the pleadings, including the counterclaim, and a vacated application hearing on 2 March 2016; and
Objections by the respondents to evidence of the applicant, which were conceded.
93 Developments during the course of the proceedings which resulted in amendments to the pleadings, as well as case management developments referable to discovery, objections to evidence, and production of documents, are not uncommon features of litigation in the ordinary course.
94 Amendment to pleadings is unremarkable in circumstances where the nature of a case changes referable to emerging evidence: see for example Federal Court Rules 15.15, 16.53, 16.55 and 16.56 and Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 at 193. I also note, for example, that orders were made by the Court by consent of the parties on 29 February 2016 to amend the pleadings, and that a hearing listed for 2 March 2016 was vacated as a result of this agreement between the parties.
95 Both parties elected not to call witnesses in respect of whom affidavits had been sworn, however the decisions not to call those witnesses were forensic choices of the parties, and in my view there was nothing sinister or untoward about those decisions. In particular:
Insofar as concerns the decision of the applicant not to call his four witnesses, I note the submission of the applicant that this decision was made against a background of anxiety of the applicant to complete the trial within the listed period. This is an unremarkable proposition, and in my view, a reasonable forensic approach.
The fact that Mr Beynon did not give evidence was a forensic choice of the respondents in respect of the burden of proof which fell on them pursuant to the provisions of the FW Act, and was their decision in the context of the litigation as it developed. I note the affidavit of Mr Brendan Nyst, solicitor for the respondents, dated 9 May 2019 in which Mr Nyst deposes that the respondents decided not to call Mr Beynon for reasons including their evaluation of the strength of the applicant's case and because of costs implications. In my view these justifications are not unreasonable. The applicant complains about the wastage of legal costs on his part in preparation for cross-examination of Mr Beynon, however it is rather likely that the failure of Mr Beynon to give evidence would have actually aided the applicant in his case in circumstances where the burden of proof had shifted to the respondents.
96 To the extent that the respondents complain that they had extensive objections to evidence of the applicant and that the applicant conceded those objections, I note the submission of the applicant that these concessions were a forensic choice, in the interests of progressing the trial. In my view, this is not an unreasonable approach. However even to the extent that time was taken up on the first day of the trial by argument over the admissibility of Mr Whelan's evidence, I do not consider this unreasonable conduct on the part of the applicant as alleged by the respondents. Again, time spent resolving objections to evidence is unfortunately unremarkable in the context of litigation, and does not, in my view, fall within the parameters of s 570 of the FW Act.
97 Finally, to the extent that the parties engaged in extensive discovery exercises, including a notice to produce issued by the applicant to the respondents during the course of the hearing, I again note that this unfortunately is not an uncommon feature of litigation where parties choose to minimise their level of professional co-operation in progressing the litigation (notwithstanding the provisions of ss 37M and 37N of the Federal Court of Australia Act 1976 (Cth)), where emotions are running at a high level between the parties, and where one party - in this case the respondent - had an advantage at all times over the other in relation to relevant evidentiary material. The breadth of discovery sought by the applicant was not the subject of objection or application by the respondents, and I do not understand that the applicants pressed allegations of failure by the respondents to discover purported documents which otherwise existed.
98 Further, notwithstanding the respondents' complaints concerning the notice to produce served by the applicant on the respondents on the fifth day of the hearing, and the extent of work apparently required of the respondents to comply with it, the applicant submits that the notice sought only one document - namely a report consisting of about 50 pages referred to by Ms Ozioko in her cross examination. The applicant submits that any forensic advantage that might have existed by way of putting the content of the document to the second respondent in cross examination fell away, as the second respondent failed to give evidence. Again, developments of this nature are unremarkable in litigation, particularly when parties elect not to call witnesses late in the proceedings.
99 Other than in relation to the deliberate decision of the respondents to resist the applicant's statutory entitlement to unpaid leave, in my view it cannot be said that proceedings were instituted by either the applicant or the respondents vexatiously or without reasonable cause, or that there were unreasonable acts or omissions which caused the other party to incur costs, within the meaning of s 570 of the FW Act.
100 I consider it would be fair for the respondents to pay the applicant 10% of his costs, referable to that aspect of their conduct which was unreasonable.
101 Otherwise, I consider that the standard rule as applies in Fair Work proceedings is applicable, and there should be no order as to costs.
I certify that the preceding one-hundred-and-one (101) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Collier.