World Avenue Pty Ltd v Kenichiro Tsunashima

Grounds 1 to 3 9On 1 June 2010 Mr Tsunashima signed a document described as a pledge. In the course of his judgment his Honour described the pledge as "a promise that could be prosecuted pursuant to the principles of contractual law". That finding is not the subject of challenge and the proceedings in the Local Court proceeded at all times on that basis. 10The pledge is in the following terms: "With regard to having World Avenue sponsor my application for permanent residency in Australia, I, Kinichiro Tsunashima, have received payment for expenses associated with my application, the cost of submitting the visa application to the Australian Department of Immigration, the cost of Migration Act consultancy fees, and other costs related to my application. Once I have obtained permanent residency in Australia, I hereby pledge that regardless of the reason, if I resign from World Avenue for personal reasons within 5 years or am dismissed for having caused harm to the company, I will immediately pay back all the expenses borne by World Avenue in association with my application for permanent residency in Australia. Provided, however, that this shall not apply if I am terminated at the company's own convenience. Of the costs associated with my application, I shall personally pay all expenses associated with the health check for myself and for my dependants who will also be applying for residency at the same time, as well as for my IELTS test and all other costs incurred in compiling the necessary documentation. I confirm that I understand the content of this Pledge and hereby request World Avenue to sponsor my application for permanent residency in Australia." 11On 6 August 2010 World Avenue and Mr Tsunashima signed a contract of employment. 12In or around October 2011 Mr Tsunashima began to suffer from depression. He was subsequently declared unfit for work. He made a workers' compensation claim. As a result of his illness and his inability to attend to his work, Mr Tsunashima exhausted all of his entitlements to sick leave and annual leave and eventually took leave without pay. 13During October, November and December 2011, Mr Tsunashima provided medical certificates to World Avenue in support of his position and with respect to his unimproving medical status. Lawyers for both sides eventually became involved. On 20 December 2011 Mr Tsunashima was given a medical certificate that expressed the opinion that he would be unfit for his usual occupation until at least 25 January 2012. Mr Tsunashima's solicitor wrote to World Avenue that same day in terms that included the following: "As our client has already exhausted his sick leave, he wishes to use his annual leave instead. In the correspondence received from you today, you have stated that you will not agree to the use of annual leave, however either way, as stated above the reality is that our client will not be able to attend work, for which reason it would seem, would it not, that you have no option to agree to the taking of annual leave in accordance with section 88.2 of the Fair Work Act 2009." 14World Avenue stopped paying Mr Tsunashima on 22 December 2011. On 12 January 2012, World Avenue's solicitor wrote to Mr Tsunashima's solicitor demanding the return of certain equipment and saying, amongst other things, the following: "It appears that your client has, without notice, not returned to work since October last year. Although part of the period of his absence may be explicable as sick leave entitlements, the medical certificates provided do not particularise the illness complained of. Our client assumes, in the absence of any other explanation, that your client has quit or abandoned his employment." 15That provoked a response that included the following: "Our client has not quit or abandoned his employment. He is currently on annual leave which was duly notified to your client. We note that our client has provided your client with a relevant medical certificate and notice of his annual leave. Finally, we are instructed that there has been an underpayment of $703.15 in his last wage paid on 3 January 2012...without any explanation. Please rectify this underpayment forthwith." 16On 23 January 2012, Mr Tsunashima's solicitor wrote to World Avenue's solicitor attaching a medical certificate and advising that he intended to apply for workers' compensation. The medical certificate expressed the opinion that Mr Tsunashima was suffering from depression, that the injury occurred in October 2011, and that it occurred as a result of alleged harassment by World Avenue so that Mr Tsunashima's employment was a substantial contributing factor. 17On 30 January 2012 World Avenue's solicitor wrote to Mr Tsunashima's solicitor making demands in respect of the issues in what became the Local Court proceedings. The letter included the following: "In reference to the last two paragraphs of your letter, given the current circumstances, our client regards your client as having abandoned his employment since 21 December 2011. Our client is not required to pay wages to your client from that date." 18The reply to that letter included the following: "As we notified you on behalf of our client, he has not abandoned his employment. He has taken sick leave and subsequently, when he exhausted his sick leave entitlements, he has taken annual leave. We note that your client stopped paying our client since 22 December 2011. This is unlawful since our client is on annual leave. We demand that payment be made forthwith. ... 1. Payment of the expenses relating to the [permanent residency application]. Our client has not left the employment." 19His Honour dealt with the issue in his reasons for judgment in the following way: "That [30 January 2012 letter] indicates to me that the employer/plaintiff had determined not to pay anyway since 21 December 2011 purportedly on the basis that the plaintiff had abandoned his employment and then subsequently the requests for the return of the furniture and the like which, of course, was provided it says on p 3 para 3 'as part of the salary package during his employment.' The defendant's solicitors kept advising the plaintiff's solicitors that as far as he was concerned he was still employed. He hadn't abandoned his employment. I interpret that letter, in all the circumstances, of a relationship between the parties, in all of the course of correspondence, the threat by the plaintiff (as said) suing for unpaid benefits which he is still entitled to do even whilst employed; that the plaintiff company realising in my view that there was this outstanding claim of a large sum, and referring to Mr Stephenson's submissions and the authority relied upon, I would have, in any event, without even reading the submissions, in my view interpreted that letter as a constructive dismissal of the defendant. But even if I had not formed the view that it was a constructive dismissal, in my view the defendant did not leave his employment, on my construction of the pledge, by way of resignation. By the time it got to the point where he was fit to be able to return to some form of work with the employer, however impracticable that would have been, he had effectively already been dismissed. The way I interpret the pledge is that the circumstances that surrounded the defendant's cessation of employment with the plaintiff did not fall within my construction of that pledge and that alternatively I find that he was dismissed by his employer. Accordingly, it wasn't for having caused harm with the company, but rather simply dismissed in other circumstances other than harm to the company and that the circumstances upon which did not fall within that pledge. I find, accordingly, on a contractual basis, that there is no breach of that contract. As I said earlier, that's on the basis that I find that it was a contractual relationship. I find that the employment plaintiff perhaps, in some respects from their own point of view, justifiably dismissed the employee that had threatened to sue them for hundreds of thousands of dollars for unpaid benefits." 20World Avenue contended in this Court that his Honour was incorrect in finding that it had constructively dismissed Mr Tsunashima. It submitted that he had constructively resigned from his employment, in the sense that he repudiated the employment agreement by conduct in refraining from returning to work and in continuing to do so even after he became fit to resume at least some of his duties. World Avenue contended further that, on the true construction of the pledge, such constructive resignation activated Mr Tsunashima's liability to repay the permanent residency application expenses. 21Mr Tsunashima emphasised that his Honour found in his favour on alternative bases. First, upon the basis that he had been constructively dismissed. Secondly, upon the basis that even if he had resigned, Mr Tsunashima did not do so "for personal reasons" within the meaning of that expression as used in the pledge.

Grounds 4 and 5 22Local Court Practice Note Civ 1 provided as follows: "20.1 This provision applies to proceedings in the General Division in which the amount claimed does not exceed $20,000 and to all matters transferred from the Small Claims Division to the General Division. 20.2 Unless the Court otherwise orders, this provision applies to proceedings no matter when commenced. 20.3 Unless the Court in a particular case determines otherwise, the discretion of the Court as to costs incurred after the first defence is filed will be exercised as if a Maximum Costs Order had been made in the proceedings at the time of filing of the first defence in the terms set out below. Costs up to and including the filing of the first defence will not be included in the amount specified in the Maximum Costs Order, but may be ordered in addition to that amount. 20.4 The Maximum Costs Order for the proceedings for claims between $10,000 and $20,000 is as follows: (a) Where the plaintiff succeeds - 25% of the amount awarded by the Court. (b) Where the defendant succeeds - 25% of the amount claimed by the plaintiff." 23World Avenue's claim as originally filed in the Local Court was for $24,626.60. At the point when his Honour proceeded to deliver his decision, World Avenue had indicated through its counsel that its claim had been reduced to one for $15,916.30 plus the claim for the specific return of the chattels. The first indication of any proposal to reduce the claim or to seek to amend the statement of claim to reflect the changes was on the morning of the first day of the hearing. In the events that occurred, no amended statement of claim was ever filed. 24His Honour subsequently raised the question of whether or not the cost capping provisions in the Practice Note issued on 23 March 2011 applied, and noted that Mr Tsunashima had made no application to the Local Court in accordance with that Practice Note. His counsel explained that that was because no application could be made until World Avenue reduced the quantum of its claim, and that that had only occurred earlier that day. Later on the same day counsel for Mr Tsunashima indicated that he anticipated that he would be instructed to make an application in relation to the costs. His Honour noted in response that given what had occurred, he saw no utilitarian value in then making any special order about costs but confirmed that Mr Tsunashima's interests concerning costs would be protected. 25World Avenue contended in this Court that his Honour's discretion miscarried as a consequence of the way in which he interpreted clause 20 of the Local Court Practice Note Civ 1. World Avenue submitted that when his Honour came to deliver his decision on costs, he erroneously found that the practice note was inapplicable and so declined to make a maximum costs order. World Avenue submitted that this amounted to an error of law.

Leave to appeal - discussion 26World Avenue submitted that in each case leave to appeal should be granted because the issues raised by it have merit and are likely to succeed. The claim for recovery of the residency visa application costs is said to involve important points of employment law, being the proper characterisation of the ending of a contract of employment in a case where the employee simply refuses to return to work, claims illness but makes no real or genuine attempt to substantiate the illness relied upon. 27The issue relating to costs is said to raise the question of the interpretation of an important section of the relevant Local Court Practice Note. It is the only practice note governing the civil jurisdiction of the Local Court. There has been an amendment to the relevant provisions of that practice note relating to maximum costs orders since the case was heard. However, World Avenue submits that the same construction issue is likely to arise in relation to the amended provisions, being the question of whether an amendment of a statement of claim to reduce the quantum sought has the effect of automatically imposing maximum costs orders in the absence of an order by the court to the contrary. 28Mr Tsunashima vigorously opposed any grant of leave. 29There is no right of appeal on a question of fact alone. This Court has no authority to engage in a fact finding process on the merits of the case, even if the appeal involves a mixed question of fact and law: B & L Linings Pty Ltd v Chief Commissioner of State Revenue [2008] NSWCA 187; (2009) 74 NSWLR 481 at [38] - [70] and [144] - [150]; Nichols v Lee [2008] NSWSC 1243 at [61]; Ken Wolf Real Estate Pty Ltd v O'Halloran [2012] NSWSC 993 at [50] - [53]. 30In the present case his Honour found as a fact that Mr Tsunashima did not abandon his employment, did not resign from his employment and was injured in the course of his employment. He submitted that World Avenue could not challenge those findings in this appeal. 31An applicant for leave must demonstrate something more than that the Court below was arguably wrong in the conclusion arrived at: Carolan v AMF Bowling Pty Ltd [1995] NSWCA 69 and Be Financial Pty Ltd as trustee for Be Financial Operations Trust v Das [2012] NSWCA 164. Where small claims are involved, it is important that there be early finality in the determination of the litigation lest the costs involved become disproportional to the amount in dispute: Young v Kruger [2012] NSWSC 628 and Ion v Danutz [2012] NSWSC 941. It is ordinarily only appropriate to grant leave to appeal in matters that involve significant or important issues of principle, questions of general public importance or an injustice which is reasonably clear, in the sense of going beyond what is merely arguable: Jaycar Pty Ltd v Lombardo [2011] NSWCA 284 at [46] and Be Financial at [33]. 32In circumstances where leave to appeal is sought in respect of a question of costs, the threshold is very high. Having regard to the fact that there is such a wide discretion involved in decisions about costs, the test to be applied is not whether the appellate court would or would not have made the same order but whether there is no ground upon which the costs order in question could have been made by the court below. It is necessary for a manifest error to be demonstrated to take the case out of the ordinary situation: see A Team Diamond Headquarters Pty Ltd v Main Road Property Group Pty Ltd [2009] VSCA 208; (2009) 25 VR 189. 33The evidence adduced before his Honour below established that Mr Tsunashima was suffering from depression substantially contributed to by his employment. He was a Japanese national who hoped to secure an Australian residency status. His Honour found that Mr Tsunashima could not initially return to work and that, on medical advice, he used up all of his sick leave and attempted to use up his annual leave. He found that Mr Tsunashima was under a great deal of stress and pressure and that he ultimately came to grief attempting to meet the expectations of his employer. 34It had been the evidence before his Honour that Mr Tsunashima had been told by his employer that if he did not have any will to work, he should quit his job, go back to Japan and that his superannuation should be repaid. On an occasion in October 2011 his employer even telephoned Mr Tsunashima at 4.00am for no apparent good reason. There was evidence that other employees had been threatened with court proceedings if they caused trouble. 35The learned Magistrate was very critical of the claims brought by World Avenue against Mr Tsunashima and of the way in which he had been treated. His Honour made it clear that he would have dismissed the claims that were abandoned if they had ultimately been pressed.

Leave to appeal - disposition Permanent residency visa application fees 36A proper construction of the pledge lies at the heart of his Honour's conclusions about how the relationship of employer and employee that existed between World Avenue and Mr Tsunashima came to an end. His Honour found as a fact that Mr Tsunashima did not resign from his employment with World Avenue. Whatever else may be said about the circumstances that applied at the time he ceased to work for it, no question can therefore arise concerning the issue of whether Mr Tsunashima resigned "for personal reasons". 37Moreover, his Honour found that Mr Tsunashima had been constructively dismissed. World Avenue has made a worthwhile case that such a conclusion may arguably not have been available as a matter of law. However, for present purposes, that still leaves open the question of whether or not he was dismissed, constructively or otherwise, "for having caused harm to" World Avenue. That was a question of fact for determination by his Honour. World Avenue contended in this Court that that concept encompassed or comprised any situation in which it terminated Mr Tsunashima's employment for his breach or repudiation of the employment contract. While I have some considerable doubt about the correctness of that contention, it can be put aside for present purposes. 38What is significant is that in any assessment of the permanent residency visa application fees issue, a need arises to construe the terms of the pledge in order to arrive at a conclusion concerning Mr Tsunashima's liability to account to World Avenue for the money expended on his behalf. The pledge is an idiosyncratic document not otherwise apparently in common or general use and conspicuously crafted and tailored for the needs of the individual parties to these proceedings. It has no apparent relevance to a wider commercial community, and its proper meaning invites neither interest as a matter of construction of employment contracts in general nor does it involve significant consequences for the parties to the pledge in particular. The proceedings are not therefore an obviously appropriate vehicle for determination of important matters of law or procedure. 39There is no basis in my opinion for a grant of leave to appeal on grounds 1 to 3 and leave to appeal should be refused. Costs 40During the course of argument, his Honour indicated that it was his view that the practice note did not strictly apply and that it was a matter that he could take into account in the exercise of his discretion. He indicated that Mr Tsunashima was obliged to defend proceedings originally commenced for a sum in excess of $20,000 in the General Division of the Court. He said that because Mr Tsunashima was "victorious", the practice note did not apply "in the current circumstances". 41Practice Note 20.3 specifically states that the discretion of the Court as to costs incurred after the first defence is filed will be exercised as if a maximum costs order had been made in the proceedings "[u]nless the Court in a particular case determines otherwise". It seems clear beyond doubt that that is precisely what occurred. His Honour heard competing submissions about costs and determined, as he was entitled to do, that Mr Tsunashima should not be limited to costs calculated by reference to the amount of the claim as it was ultimately configured. There may have been any number of matters that informed his decision in that respect, including possibly the way that he appears to have felt Mr Tsunashima had been treated by World Avenue in the circumstances, or the likely inadequacy of a limited costs order having regard to the length of the hearing and the issues in dispute. World Avenue does not suggest that his Honour's discretion miscarried because he fell into some identifiable House v The King error. It contends that he was bound to apply the practice note strictly according to its terms. Unfortunately for that submission, the very terms of the practice note indicate that he was not so constrained and was expressly authorised by the practice note to determine otherwise. 42If that were in any doubt, his Honour was otherwise authorised by s 69 of the Local Court Act to make the costs order that he made. That section is in the following relevant terms: "69 Costs (1) The Court may award costs in application proceedings at its discretion and may determine by whom, to whom and to what extent costs are to be paid in or in relation to application proceedings. (2) ... (3) This section is subject to this Act, the rules and any other Act." 43There is no basis in my opinion for a grant of leave to appeal on either of the costs issues identified in grounds 4 or 5 and leave to appeal on these grounds should also be refused.

Orders 44In the circumstances the summons seeking leave to appeal should be dismissed with costs.

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