Whelan v Cigarette & Gift Warehouse Pty Ltd

1. The amended interlocutory application be dismissed.
2. The applicants on the application (respondents in the substantive proceeding) pay the costs of the respondent to that application (applicant in the substantive proceeding) to be taxed, if not agreed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

LOGAN J: 1 Mr Andrew Whelan has instituted proceedings in this Court under the Fair Work Act 2009 (Cth) (Fair Work Act). He claims as to the proceeding as originally constituted that Cigarette & Gift Warehouse Pty Ltd (Cigarette & Gift Warehouse) contravened s 340 of the Fair Work Act by terminating his employment with that company on the basis of a sham reason. His claim is that he was dismissed because he had refused a request that his wife sign a non-disclosure agreement after attending a party at the company's managing director's home. In the alternative, he alleges that Cigarette & Gift Warehouse, by its agent Mr Beynon made misleading or deceptive representations contrary to the Competition and Consumer Act 2010 (Cth) (Competition and Consumer Act) as to the terms of his employment. That Competition and Consumer Act claim was added by amendment in original institution of the proceedings. Mr Whelan seeks declaratory relief, the imposition of pecuniary penalties and damages in an amount of $5,489,612.41 in respect of the alleged contravention of section 340 with a further sum of $5,518,398.53 referable to superannuation payments, less such sum if any as might be ordered to be paid to him in respect of pecuniary penalties under s 545(2)(b) of the Fair Work Act. 2 Also since the original institution of the proceedings, Cigarette & Gift Warehouse for its part has made a cross-claim against Mr Whelan. That cross-claim is grounded upon an alleged loan by that company to Mr Whelan of $70,000 for the alleged purpose of his purchasing a boat. Cigarette & Gift Warehouse have defended the claim by original action, as has Mr Whelan the cross-claim. The proceedings have reached the stage where the trial has commenced. The trial commenced on 14 March 2017 and was adjourned part heard on 17 March 2017. It is to be resumed for the hearing of further evidence on 8 and 9 May 2017 with 23 May 2017 also reserved in the event that those two days prove insufficient to conclude the hearing of the proceedings. 3 On its amended interlocutory application filed in court today by leave, the original having been filed on 21 April 2017, Cigarette & Gift Warehouse seeks two orders. First, the ordering of security for costs in respect of its prospect of costs, and secondly, an order in the nature of a freezing order referable to the judgment it apprehends it will secure in respect of its cross-claim. 4 First, the security for costs question. I deal first with the security for costs question. This is not the first occasion upon which Cigarette & Gift Warehouse has made a security for costs application. Such an application was heard and determined summarily by me, coincidentally, as it happened then also in my capacity as general duty judge, on 27 February 2017. The reasons given for the dismissal of that application are compressed, but in effect, it was dismissed because it was made at such a late stage, the matter already having been listed for trial for some time. Lateness of an application is, of course, not a consideration which precludes the ordering of security for costs, but it is always a relevant consideration. Further, that security for costs was not ordered on an earlier occasion, does not preclude the bringing of a further application on new materials. Once again, that an application was earlier refused is relevant, but it is far from determinative. 5 Yet further, as against an individual it is not the case that impecuniosity, relative or absolute, precludes the ordering of security for costs. That such an order might prevent a person from pressing a claim is always relevant, but again not determinative. If a proceeding brought by an impecunious person were patently vexatious or otherwise doomed to fail, that would be and has in the past been a relevant consideration in respect of the ordering of security for costs. 6 With respect to the particular claim or proceeding instituted by Mr Whelan, these general principles must be applied against the background of the application of s 570 of the Fair Work Act, which provides: Costs only if proceeds 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 This particular provision means that the general discretion in respect of the ordering of costs otherwise applicable and found in s 43 of the Federal Court of Australia Act 1976 (Cth) (Federal Court of Australia Act) is not qualified. Yet further, that s 570 of the Fair Work Act is applicable because the proceeding is one of a class falling within its capture is also relevant in relation to the exercise of the power under s 56 of the Federal Court of Australia Act to make an order in respect of security for costs. 8 The long and the short of it is that, in a case such as the present, it by no means follows that costs will follow the event, either in respect of the Fair Work cause of action or, for that matter, in respect of the Competition and Consumer Act cause of action. The better view is that s 570 of the Fair Work Act applies to the whole of the claim and to each aspect of the claim in the proceeding brought by Mr Whelan: see as to this Melbourne Stadiums Ltd v Sautner (2015) 229 FCR 221, to which I was helpfully and most properly referred by Mr Roney QC for Cigarette & Gift Warehouse. 9 As I understood the submissions made on behalf of Cigarette & Gift Warehouse, it was accepted that s 570(2) was pertinent in respect of the question as to whether security for costs ought to be ordered. The particular paragraph in that section, which featured in submissions, was s 570(2)(b). More particularly, it was put that I would be satisfied that Mr Whelan's unreasonable act or omission, in respect of the pressing of particular paragraphs in affidavits of evidence-in-chief made by him and relied upon by him at trial, was unreasonable and had caused Cigarette & Gift Warehouse and Mr Beynon to incur the costs of the resumption of the trial. In other words, the effect, so it was submitted, of the pressing of the tender of particular paragraphs in the affidavits in the face of objection had occasioned the case to run on beyond its allocated four days. 10 There are a number of observations to make about that particular contention. The first is, perhaps obviously, that it is one best judged by the trial judge, Collier J. By the time Cigarette & Gift Warehouse gave notice to the court of a disposition to seek security for costs, it was quite impossible for her Honour to list the case at a time mutually convenient to the parties, if at all, prior to her having to undertake duty in Papua New Guinea in the exercise of an additional commission. That being so, the parties were offered the alternative of either the application being entertained by me, again in my capacity as general duty judge or, failing that, the application coming on after her Honour's return to Australia and, in all likelihood, on the first day of the resumed trial, or very proximate to that. That, of course, presented something of Hobson's choice to Cigarette & Gift Warehouse, but it was a choice nonetheless made. 11 There was, of course, a further choice, which was not to press the application at all. In hindsight at least, and perhaps even in prospect, that was the choice which ought to have been made. That naturally leads to the second observation, which is not unrelated to the preferable course of the application being heard by the trial judge. That is, that there were particular objections taken, the fate of which is disclosed in a table which appears to one of Mr Nyst's affidavits read in conjunction with affidavits made by Mr Whelan, which were filed pursuant to direction and record the fate of particular objections. The extent to which those objections were or were not unreasonably not conceded is a matter best judged by the trial judge. That apart, it appears that there were, again for reasons which are perhaps better understood by the trial judge, late discussions before the commencement of the trial between the parties. There are many reasons why that might occur. Some can be as banal but very real as an inability, because of the demands of other cases in one's practice to give earlier attention than one might wish to a particular dialogue with the opposing party. 12 The end result, though, is that it is far from pellucid that the objections were unreasonably not conceded. That particular objections were upheld is necessary but not sufficient to demonstrate that s 570(2)(b) would operate in a way which made it inherently likely that a costs order would be made. Yet further, just to focus upon the fate of particular objections and it appears to have taken a goodly portion of the first day needed to resolve these does not in my view give a complete picture as to why the case was unable to be completed within the allocated time. It may very well be that for the best or even worst of reasons, and the trial judge again is in the best place to judge these, particular cross-examination went longer than anticipated or particular witnesses' answers under cross-examination prompted cross-examination to continue in circumstances where it otherwise might not have continued. 13 It is certainly possible to find, either in the exercise of appellate or original jurisdiction, cases to which s 570 of the Fair Work Act or an analogue in earlier legislation was applicable, where the court has ordered costs against an individual. These outcomes are invariably fact specific and greatly informed by the pressing of particular issues in circumstances where, however honestly they were pressed, it can be seen objectively that the terms of s 570(2)(b) were engaged. 14 It remains the case that observations made by the Full Court in Construction, Forestry, Mining and Energy Union v Clarke (2008) 170 FCR 574 at [29] are applicable. In essence, what the Full Court observed there is that, while the discretion in respect of the ordering of costs should be exercised to prevent parties engaging in unreasonable acts and omissions which put the other party to undue expense, judges should be careful not to exercise that discretion with too much haste, given that to do that might discourage parties for fear of an adverse costs order, from pursuing litigation under, in that case, the Workplace Relations Act 1996 (Cth), in the manner which they deem best. Those sentiments remain applicable in respect of the operation of s 570 of the Fair Work Act. 15 There is another reason, which is wholly factual, why I am not disposed to order any security for costs. It is a foundation of the application that Mr Whelan is, in the face of an unmeritorious claim and defence to counterclaim, disposing of assets. As to that, Mr Whelan has deposed, in an affidavit filed on 24 April 2017, after usual business hours, as to the nature of those disposals. He deposes, and this is not as I apprehend it challenged, that there is nothing new about his intention to sell particular properties (and there are two of these) in Townsville. He states that he expressly advised Mr Beynon of his intention to sell these whilst he was employed with Cigarette & Gift Warehouse. He makes particular reference in this regard to a document attached to one of Mr Nyst's affidavits. That reference does not appear to me to be misplaced. 16 Mr Whelan deposes to having acquired these properties for investment purposes in 2001, with the benefit, although perhaps he no longer sees it that way, of interest only finance secured by mortgage. These properties were acquired for a price of $220,000 each. His later experience is that he has not recovered sufficient rent to pay the loan debt as well as outgoings. The end result of that is that he decided to sell these properties in July or August of 2015. They have been on the market since then. Market conditions, he deposes, have been such that he was unable to sell the properties without offering a significant reduction in the sale price originally sought. The sale price for each of the particular properties was $128,000. In turn, that has meant that Mr Whelan personally has received nothing in the hand from the sale proceeds. Rather, he is left in a position of still owing some $200,000 to the ANZ Bank. 17 Notwithstanding this misfortune, he deposes that he has been meeting, from his other income and assets, his legal fees in respect of these proceedings, as well as proceedings in the Queensland District Court. 18 As to the latter proceedings, it is put on behalf of Cigarette & Gift Warehouse that Mr Whelan has become subject to a costs order, the result of an unsuccessful application to transfer the District Court proceeding to the Supreme Court. The amount of costs to which Mr Whelan is subject as a result of that order is presently controversial. Suffice it to say, Cigarette & Gift Warehouse assert that the amount is some $63,000, whereas Mr Whelan, for his part, asserts that it is rather closer to $13,000. The costs have yet to be assessed. 19 One of the foundations then, in respect of the security for costs application, is that, as a matter of discretion, that there exists already a costs order against Mr Whelan, should sound in the making of another order relating to costs. The difficulty with that is that I am just not satisfied at all that there is any occasion for the making of any security for costs order. Further, on analysis, it seems to me that there is, in substance, either no new material, or no new material of any weight, which takes the position beyond that which prevailed as at 27 February 2017. All that has occurred since then is that a contested trial, the merits of which I cannot judge, has commenced and, further, that properties have been sold at a loss, but that the existence of those properties being on the market was known prior to 27 February 2017. 20 It only comes to this: (1) As to the security for costs application, I am not satisfied that this is a case where it is so inherently likely that there would be a costs order made against Mr Whelan, in respect of what are presently prospective costs, by virtue of the applicability of s 570(2)(b), that I should, in advance, order security in respect of those costs. (2) As to the freezing order, the position, with respect to such an order, in terms of principle was described by Edelman J, then a judge of this Court, in Insolvency Guardian Melbourne Pty Ltd v Carlei (2016) 111 ACSR 236. To make such an order is exceptional. Cigarette & Gift Warehouse would have to show firstly, a good, arguable case in respect of its cost claim. Secondly, and beyond a good, arguable case, they would have to show sufficient prospect of success in respect of that claim that a judgment obtained as a consequence would be enforced by the court and, further, a danger that a prospective judgment would be wholly or partly unsatisfied because Mr Whelan might dispose of, or diminish in value, his assets. Suspicion as to the latter is not sufficient. Mr Whelan has provided, as far as I can see, a complete explanation in respect of the recent sales of the properties in Townsville. He was not obliged to keep holding those properties and making repayments on the loans indefinitely. It does not at all surprise me that he was placed in the position of having to discount those properties in order to sell them. It is just his commercial misfortune that he has encountered that. 21 I am also conscious that the cross-claim is defended. It depends, in part, on an asserted oral agreement, and the evidence is yet to be completed, as to the merits of that particular case. Once again, whatever that merit might be, the trial judge is much better placed than I to assess that. However that may be, any judgment secured may itself be the subject of having to be set off against a judgment awarded in favour of Mr Whelan, in respect of his claims. Those claims have, with respect, an ambitious quality about them in relation to quantum. Nonetheless, it is by no means difficult to see how, were he to enjoy forensic success in respect of each or even one of them, that the amount awarded would be far in excess of that which is the subject of the amount of any cross-claim. 22 So the long and the short of it is that I am also not satisfied that this is in any way an appropriate case for the making of a freezing order, even one which would admit of the allowance of a particular limit, or the drawing of particular expenses. As to the latter, I am not even persuaded that the suggested limit of $1000 per week would be a reasonable one, having regard to the personal circumstances of Mr Whelan, as deposed to in his affidavit. For these reasons then, the amended application filed by leave today by Cigarette & Gift Warehouse, is dismissed. 23 For the reasons that I have set out above, costs having been sought by Mr Whelan, my view is that, insofar as s 570 intrudes in respect of the exercise of the discretion as to costs, that s 570(2)(b) is engaged. In other words, this is an application which did not, in my view, enjoy a reasonable prospect of success, with the consequence that it visited, unreasonably, costs upon Mr Whelan in respect of the hearing and determination of the amended interlocutory application. I am not satisfied that the case is one for the awarding of indemnity costs, although I do not consider it unreasonable that such a submission was made on behalf of Mr Whelan. 24 The categories in respect of which indemnity costs may be awarded are not closed. Particular occasions for the awarding of such costs are, as is well-known, set out in Sheppard J's judgment in Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225. I have taken that into account, but in the end I am not persuaded that the case is one for other than the ordinary party and party costs. It might be thought that there is some tension between a conclusion that s 570(2)(b) is applicable and that position but it is, nonetheless, one where, ordinarily, costs are awarded on a party and party basis. I certify that the preceding twenty-four (24) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Logan.