FEDERAL COURT OF AUSTRALIA

Construction, Forestry, Mining and Energy Union v Clarke [2008] FCAFC 143

COSTS – proceedings in a matter arising under Workplace Relations Act 1996 (Cth) – whether respondent’s conduct of proceedings involved an unreasonable act or omission.

WORDS AND PHRASES – “unreasonable act or omission”.

Federal Court of Australia Act 1976 (Cth) ss 24(1)(a), 25(5)

Workplace Relations Act 1996 (Cth) ss 170MN(1), 170NC, 170NF, 170NG, 178(1), 178(4), 824(1), 824(2)

Federal Court Rules O 52 r 18(1), O 52 r 22(3), O 62 r 3

Clarkev Powell, Molina & CFMEU (2005) 169 IR 1 related

Construction, Forestry, Mining and Energy Union v Clarke (2005) 144 FCR 226 related

Construction, Forestry, Mining and Energy Union v Clarke (2006) 149 IR 224 related

Construction, Forestry, Mining and Energy Union v Clarke (2007)156 FCR 291 related

Construction, Forestry, Mining and Energy Union v Clarke (2007) 164 IR 299 related

Australian and International Pilots Association v Qantas Airways Ltd (No 3) (2007) 162 FCR 392 referred to

Commonwealth of Australia v Construction, Forestry, Mining and Energy Union (2003) 129 FCR 271 considered

Construction, Forestry, Mining and Energy Union v Australian Industrial Relations Commission (2001) 203 CLR 645 cited

Maritime Union of Australia v Geraldton Port Authority (2000) 94 IR 404 referred to

McAleer v The University of Western Australia (No 2) (2007) 161 IR 151 referred to

Jordan v Aerial Taxi Cabs Co-operative Society Ltd (No 2)(2001) 108 IR 263 referred to

Re Commonwealth of Australia; Ex parte Marks (2000) 177 ALR 491 cited

Re McJannet; Ex parte Australian Workers’ Union of Employees, Queensland (1997) 189 CLR 654 cited

Re Polites; Ex parte Hoyts Corporation Pty Ltd No 2 (1991) 173 CLR 78 referred to

Shackley v Australian Croatian Club Ltd (1996) 141 ALR 736 referred to

Shanahan v Australian Industrial Relations Commission (No 2) (2006) 236 ALR 612 referred to

Standish v University of Tasmania (1989) 28 IR 129 cited

Tristar Steering and Suspension Australia Limited v Industrial Relations Commission of New South Wales (No 2) (2007) 159 FCR 274 cited

CONSTRUCTION, FORESTRY, MINING AND ENERGY UNION, MICHAEL POWELL and WALTER VINICIO MOLINA v MARCUS THOMAS CLARKE

WAD 88 of 2006

TAMBERLIN, GYLES AND GILMOUR JJ

14 AUGUST 2008

PERTH

THE COURT ORDERS THAT:

1.                  The motion of the respondent dated 12 April 2007 be allowed;

2.                  Order 2 of 9 February 2007 in this matter, which provides that “The respondent pay the appellants’ costs of and incidental to the motion”, be set aside;

3.                  In lieu of Order 2 of 9 February 2007, there be no order as to costs;

4.                  The motion of the appellants dated 29 June 2007 be dismissed;

5.                  In respect of the judgment delivered on 8 June 2007, there be no order as to costs;

6.                  In respect of the respondent’s motion dated 12 April 2007 and the appellants’ motion dated 29 June 2007, there be no order as to costs.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

REASONS FOR JUDGMENT ON COSTS

The Court:

1                     These reasons concern two notices of motion, one filed by the appellants and the other filed by the respondent.  Each notice of motion relates to issues of costs in respect of two different applications before the Court.

Background

2                     The factual background to this matter has been summarised in an earlier decision of this Court: see Construction, Forestry, Mining and Energy Union v Clarke (2006) 149 IR 224.  We shall not reiterate it.

3                     The procedural background has also, up to a point, been summarised by earlier decisions of the Full Court: see Construction, Forestry, Mining and Energy Union v Clarke (2007) 164 IR 299; Construction, Forestry, Mining and Energy Union v Clarke (2007)156 FCR 291.  It is useful briefly to repeat that background, and note recent developments.

4                     In 2004, the respondent alleged before the Industrial Magistrate’s Court of Western Australia that the appellants had (i) engaged in industrial action before the nominal expiry date of a certified agreement, contrary to s 170MN(1) of the Workplace Relations Act 1996 (Cth) (“the WR Act”), and (ii) breached a term of a certified agreement, namely the dispute resolution procedures, contrary to s 178(1) of the WR Act.  The application was successful against each of the appellants, and monetary penalties were imposed under ss 170NF and 178(4) of the WR Act: Clarkev Powell, Molina & CFMEU (2005) 169 IR 1.

5                     The appellants appealed to this Court from the judgment of the Industrial Magistrate.  The matter was listed before Nicholson J.  A preliminary question arose as to whether it was permissible for Nicholson J to exercise as a single judge the appellate jurisdiction of the Court.  An appeal from a judgment of a court can be heard either by a single judge or a Full Court if that court is one “of summary jurisdiction”: s 25(5) of the Federal Court of Australia Act 1976 (Cth) (“the FCA Act”).  Nicholson J held that the Industrial Magistrate’s Court was a court of summary jurisdiction, and accordingly concluded that it was open for the appeal to be heard either by a single judge or a Full Court: see Construction, Forestry, Mining and Energy Union v Clarke (2005) 144 FCR 226 at [30].  On 8 August 2005, the Chief Justice determined that the appeal should be heard by a single judge.  Nicholson J subsequently heard and dismissed the appeal: CFMEU 149 IR 224.

6                     On 3 April 2006, the appellants appealed to the Full Court from the decision of Nicholson J.  The respondent filed a Notice of Objection to Competency seeking to dismiss the appeal as incompetent, arguing that an appeal cannot lie to the Full Court from a decision of a single judge where that judge has already exercised the Court’s appellate jurisdiction.  On 9 February 2007, the Full Court rejected this argument, dismissed the respondent’s Notice of Objection to Competency, and ordered that “[t]he respondent pay the appellants’ costs of and incidental to the motion”: CFMEU 156 FCR 291 (“the first Full Court decision”). 

7                     On 12 April 2007, the respondent filed a notice of motion seeking orders that:

1.         The Order of the Court in [the first Full Court decision] that “the            respondent pay the appellants’ costs of and incidental to the motion”           be set aside.

2.         In lieu thereof it be ordered that, in respect of the Respondent’s Notice of Objection to Competency of 2 June 2006, there be no order as to    costs.

The parties arranged for this notice of motion to be heard at the same time as we heard the substantive appeal from the decision of Nicholson J.

8                     We heard the substantive appeal on 21 May 2007.  At that hearing, the parties sought to have the respondent’s motion of 12 April 2007 determined “on the papers”.  We allowed them to do so.  In respect of the substantive appeal, we allowed the appeal, set aside the orders of both Nicholson J and the Industrial Magistrate, and dismissed the proceeding in the Industrial Magistrate’s Court: Construction, Forestry, Mining and Energy Union v Clarke (2007) 164 IR 299 (“the second Full Court decision”).

9                     After the second Full Court decision had been delivered on 8 June 2007, the appellants filed a notice of motion on 29 June 2007 seeking the following orders:

1.                  The Respondent pay the Appellants’ costs of and incidental to the proceedings in [the matter].

2.                  In the alternative, that the Respondent pays such of the Appellant’s [sic] costs as thrown away by reason of the Respondent’s late abandonment of any reliance on the decision of Nicholson J ….

The parties sought to have the appellants’ motion also determined “on the papers”.  We allowed them to do so. 

10                  These reasons address the issues arising from both the respondent’s notice of motion dated 12 April 2007 and the appellants’ notice of motion dated 29 June 2007.

Which Full Court should deal with the motions?

11                  Before determining the issues arising from the two motions, a preliminary issue must be addressed, namely, whether we as the second Full Court should determine both the respondent’s motion and the appellants’ motion.  Undoubtedly, we should deal with the appellants’ motion.  It was filed and seeks orders in relation to the second Full Court decision, which we delivered on 8 June 2007.  However, the respondent’s motion was filed and seeks orders in relation to the first Full Court decision, which was delivered by the differently constituted first Full Court on 9 February 2007. 

12                  Although each motion arises from different applications before differently constituted Full Courts, they raise the same point of law and are part of the same proceeding before the Court (WAD 88 of 2006).  As a matter of practicality, therefore, it is sensible for us to determine both motions at the same time, especially since the parties have supplied us with written submissions in respect of both motions and, by orders which the parties proposed by consent and which we made on 18 July 2007, have stated that the motions be “heard and determined” by the present Full Court.

Submissions

13                  The central issue to be determined in respect of both motions is whether a costs order should be made pursuant to s 824 of the WR Act.  Although the respondent’s motion relates to the costs order made by the first Full Court and the appellants’ motion relates to the costs of the substantive appeal heard and determined by us as the second Full Court, they raise the same legal points.  Accordingly, we shall consider together the submissions made by the parties in respect of both those motions.

14                  Section 824(1)-(2) of the WR Act provides:

Costs only where proceeding instituted vexatiously etc.

(1)  A party to a proceeding (including an appeal) in a matter arising under this Act (other than an application under section 663) must not be ordered to pay costs incurred by any other party to the proceeding unless the first‑mentioned party instituted the proceeding vexatiously or without reasonable cause.

(2)  Despite subsection (1), if a court hearing a proceeding (including an appeal) in a matter arising under this Act (other than an application under section 663) is satisfied that a party to the proceeding has, by an unreasonable act or omission, caused another party to the proceeding to incur costs in connection with the proceeding, the court may order the first-mentioned party to pay some or all of those costs.

15                  It is worth noting that s 824 of the WR Act substantially replicates s 347 of a superseded version of the WR Act.  Significant amendments were made to the WR Act in 2006, pursuant to amending legislation which was known popularly as the “WorkChoices” reform.  The amendments came into force on 27 March 2006.  The respondent submits that, while s 347 of the pre-reform WR Act should be applied because the proceeding was commenced before 27 March 2006, it also states that s 824 of the post-reform WR Act can be applied in the alternative without altering the outcome of the dispute.  Given that the appellants submit that s 824 of the post-reform WR Act is the proper provision to apply, we will apply that provision.

16                  On the application of s 824 to the present case, the respondent submits that the first Full Court decision dismissing its Notice of Objection to Competency was a proceeding in a matter arising under the WR Act and therefore, pursuant to s 824 of the WR Act, no order can be made against the respondent to pay the appellants’ costs unless the respondent had instituted the proceeding vexatiously or without reasonable cause.  The respondent relied on the conclusion of Wilcox CJ (then Chief Justice of the Industrial Relations Court of Australia) in Shackley v Australian Croatian Club Ltd (1996) 141 ALR 736 at 745 (with whom von Doussa J agreed) that the word “proceeding” in s 347 of the pre-reform WR Act not only refers to the principal action between the parties, but also to any subsidiary application made during the course of the principal action.  His Honour continued at 745 by giving content to the word “matter” used in s 347, and stating that it was different to a “proceeding” and that “[a] ‘matter’ is the controversy that gives rise to a legal proceeding, or perhaps several legal proceedings.”  This, the respondent says, is supported by the dicta of Nicholson J in Maritime Union of Australia v Geraldton Port Authority (2000) 94 IR 404 at [72] and Madgwick J in Jordan v Aerial Taxi Cabs Co-operative Society Ltd (No 2) (2001) 108 IR 263.

17                  The respondent submits that, applying the above principles to the present case, its Notice of Objection to Competency is a proceeding in a matter arising under the WR Act, aimed at determining a justiciable controversy between the parties, namely, those issues which we note at [4] above.  The respondent traces the origins of the Notice of Objection to Competency back to the originating process before the Industrial Magistrate’s Court, and says that it was a proceeding which was instituted within the broader context of this “matter”.  It follows from such a conclusion, it is said, that the first Full Court did not have power to make the relevant costs order, and that the relief sought in its motion dated 12 April 2007 should be granted.

18                   In response, the appellants submit that the respondent’s Notice of Objection to Competency did not relate to the enforcement of any right or duty conferred or created by the WR Act, and therefore s 824 has no application.  The appellants argue that the test for determining whether a proceeding is a matter arising under the WR Act for the purposes of s 824 is “whether the right or the duty that is sought to be enforced owes its existence to a provision of the [WR] Act”: Re McJannet; Ex parte Australian Workers’ Union of Employees, Queensland (1997) 189 CLR 654 at 656; see also Re Commonwealth of Australia; Ex parte Marks (2000) 177 ALR 491 at [25]; Construction, Forestry, Mining and Energy Union v The Australian Industrial Relations Commission (2001) 203 CLR 645 at [42]-[43].  The appellants say this test is not satisfied.  They say that the only right or duty put in issue when the respondent filed its Notice of Objection to Competency related solely to the right of appeal, which the appellants had exercised pursuant to s 24(1)(a) of the FCA Act.  Accordingly, it is said, s 824 has no application in this case, and the court is free to make orders as to costs in its discretion.

19                  The appellants also submit that s 824(2) of the WR Act applies in a way that justifies the costs order made by the first Full Court.  The “unreasonable act or omission” which the appellants say the respondent engaged in is the late abandonment in the appeal before the second Full Court of any reliance on the correctness of the decision of Nicholson J, and the subsequent advancement of a new point of law (introduced by way of Notice of Contention) which had not been raised before Nicholson J.  That new point of law was said to be whether any accessorial liability arose for the alleged breaches of the WR Act.  The appellants say that the proper course for the respondents was to acknowledge that the foundation of the decision of Nicholson J was unsupportable, and that his Honour and the Industrial Magistrate had erred.  The failure to do so was cast as an unreasonable omission for the purpose of s 824(2).  In addition, it is said, the filing and prosecution of the Notice of Contention in circumstances where the respondent was said to be advancing a new case before the second Full Court was an unreasonable act for the purposes of s 824(2).

20                  Accordingly, the appellants say, either because s 824 has no application in relation to the Notice of Objection to Competency, or because the respondent engaged in an “unreasonable act or omission” for the purposes of s 824(2), the appellants were entitled to the costs order made by the first Full Court and the relief sought by the respondent in its motion dated 12 April 2007 should be refused, and the relief sought by them in the motion dated 29 June 2007 should be granted.  Finally, the fact that costs were not sought by the appellants in their Notice of Appeal is said not to be fatal to the application for such a costs order being made before judgment is entered: see O 62 r 3 of the Federal Court Rules; Tristar Steering and Suspension Australia Limited v Industrial Relations Commission of New South Wales (No 2) (2007) 159 FCR 274.

21                  In response, the respondents submit that the appellants were wrong to submit that the only right or duty which arose in the proceeding instituted by the Notice of Objection to Competency was the right of appeal under the FCA Act.  It argued that to characterise that proceeding as only giving rise to that limited right was to conflate the distinction between the broader concept of a “matter” and the narrower concept of a “proceeding” (which exists within or as a part of a “matter”).  The “matter” remains the case which was brought under the WR Act (see [4] above), from which any relevant right or duty arises.  In this case, it is said that the rights and duties arising in the context of the Notice of Objection to Competency did not originate in the FCA Act, but rather are sourced in the enactment which gives rise to the “matter” before the Court, namely, the WR Act.

22                  In relation to s 824(2) of the Act, the respondent submits that it did not engage in an “unreasonable act or omission” warranting the displacement of the usual prohibition on costs orders contained in s 824(1) of the Act.  It says that the point of law concerning accessorial liability was not raised as “a new case” before the second Full Court, but was in fact an argument advanced before both the Industrial Magistrate and Nicholson J, and to which his Honour referred.  In light of this context, the respondent says that we ought not to hold that it had excluded reliance on a finding of indirect involvement or on the decision of Nicholson J per se.  It filed the Notice of Contention simply in order to clarify its position, rather than fundamentally alter it.  This, it was said, was an appropriate course to take, or at least not an “unreasonable” one, given that there could be no certainty as to the way in which the appellants would develop their grounds of appeal.

23                  Finally, in response, the appellants stressed, among other things, that there was no mention of accessorial liability or indirect involvement in the reasons of the Industrial Magistrate, and that the case run on appeal before us was therefore a new case not based on any findings by the Industrial Magistrate.  The appellants also reinforced the point that the respondent belatedly abandoned reliance on the reasons of Nicholson J, citing in support our conclusion in CFMEU164 IR 299 at [16], which reflected the concession made by the respondent at the hearing that at least part of the reasons of Nicholson J were in error.

Reasoning

24                  In our view, the prohibition on the making of costs orders contained in s 824(1) applies to both the respondent’s notice of motion dated 12 April 2007 and the appellants’ notice of motion dated 29 June 2007.  We note that the exception to this prohibition contained in s 824(1) – namely, where the proceeding was instituted vexatiously or without reasonable cause – has no relevance to the case presently before us, and the parties did not maintain otherwise.

25                  The text of s 824(1) is straightforward and unambiguous.  The “proceedings” to which the respondent’s and appellants’ notices of motion respectively relate are the Notice of Objection to Competency heard by the first Full Court and the Notice of Appeal (and Notice of Contention) heard by us as the second Full Court.  The fact that s 824(1) of the WR Act clarifies that the term “proceeding” is to be understood as “including an appeal” demonstrates two points of importance.  The first, and most obvious, is that the Notice of Appeal to which the appellants’ motion relates is a “proceeding” par excellence for the purpose of s 824.  The second is that the term “proceeding” should, as held by Wilcox CJ in Shackley 141 ALR at 745, be understood as a subset or subsidiary part of the broader “matter” which gives rise to the justiciable controversy before the Court.  They are not the same thing.  This distinction between “matter” and “proceeding” is confirmed by the use in s 824(1) of different words to signify these respectively different concepts.

26                  We reject the submission of the appellants that the right or duty put in issue by the Notice of Objection to Competency related solely to the right of appeal under s 24(1)(a) of the FCA Act.  This submission is not supported by the text of s 824(1) of the WR Act.  The text of the provision requires that one must look to the enactment from which the matter before the Court arises, not merely the proceeding.  If the enactment thus identified as the source of the matter is the WR Act, then no costs order can be made.  In this case, the justiciable controversy is whether the appellants engaged in industrial action before the nominal expiry date of a certified agreement contrary to s 170MN(1) of the WR Act, and whether they breached a term of a certified agreement contrary to s 178(1).  Although in the course of litigating this controversy particular proceedings were instituted pursuant to provisions in the FCA Act (s 24(1)(a) for the Notice of Appeal) and the Federal Court Rules (O 52 r 18(1) for the Notice of Objection to Competency and O 52 r 22(3) for the Notice of Contention), that is not to the point.  The matter arises out of the WR Act, and consequently the usual prohibition in s 824(1) on the making of costs orders applies. 

27                  The reference by the appellants to the line of authority beginning with Re McJannet 189 CLR at 656 does not advance their argument.  The relevant authorities were recently considered by the Full Court in Tristar 159 FCR 274, and are analysed in the judgment of Buchanan J at [6]–[15].  This case is closer to Re Polites; Ex parte The Hoyts Corporation Pty Ltd (1991) 173 CLR 78 and Shanahan v Australian Industrial Relations Commission (No 2) (2006) 236 ALR 612 than Re McJannet 189 CLR 654 and Tristar 159 FCR 274.  The cases relevant to this point typically regard the “matter” (that is, not the “proceeding”) as the lynchpin of the prohibition contained in s 824(1) (or its predecessor, s 347(1)).  A good example of this is the decision of the Full Court in Commonwealth of Australia v Construction, Forestry, Mining and Energy Union (2003) 129 FCR 271.  In that case, the matter was held to arise under ss 170NC and 170NG of the WR Act, with certain steps in the litigation process, including an application for leave to appeal and the appeal itself, being regarded as separate proceedings “in” the broader “matter”.  The reasoning in that case supports our conclusion that the prohibition on the making of costs orders in s 824(1) applies to both the respondent’s and the appellants’ notices of motion.  Both of them are “proceedings” which are to be considered as part of or “in” the broader “matter” arising under the WR Act.

28                  We turn now to s 824(2) of the WR Act.  This provision carves out another exception to the usual rule in s 824(1) that costs orders are not to be made in respect of proceedings in a matter arising under the WR Act.  The exception applies when two criteria are satisfied.  The first criterion is that one party must have engaged in “an unreasonable act or omission”.  As the reasoning of Tracey J in Australian and International Pilots Association v Qantas Airways Ltd (No 3) (2007) 162 FCR 392 and Siopis J in McAleer v The University of Western Australia (No 2) (2007) 161 IR 151 demonstrates, whether a party has conducted itself or its litigation in such a way as to cross this threshold will depend on the particular circumstances of the case.  The second criterion is that the act or omission of one party must have “caused another party to the proceeding to incur costs in connection with the proceeding”.  Once both criteria are satisfied, then the Court “may” in its discretion order the party which has engaged in the unreasonable act or omission to pay some or all of the costs of the other party.

29                  In our view, the respondent has not engaged in “an unreasonable act or omission”.  As the authorities indicate, there is a distinction between a party who pursues arguments which are ultimately abandoned or rejected by the Court and a party who commences a proceeding which is misconceived in the sense of being incompetent or unsupportable: Australian and International Pilots Association 162 FCR at 402; Standish v University of Tasmania (1989) 28 IR 129 at 138-139.  Simply because a party does not conduct its litigation in the most efficient way does not mean that the Court should exercise its discretion in s 824(2) of the WR Act to make a costs order.  In our view, neither the late abandonment of some of its defence, nor the use of a notice of contention to advance a previously minor and ultimately unsuccessful argument, crosses the threshold of being “an unreasonable act or omission” for the purposes of s 824(2).  True it is that the concession ultimately given by the respondent that it regarded the decision of Nicholson J as erroneous could have been given earlier.  However, it was a concession which was, in light of the decision of this Court on the substantive appeal, properly made and beneficial to the appellants.  Although it is arguable that the lateness of the concession may have put the appellants to some extra costs, we are of the view that it cannot be characterised as “unreasonable” in the circumstances of this case.  Indeed, while courts should use the discretion in s 824(2) to ensure that parties to litigation arising from the WR Act do not engage in unreasonable acts and omissions which put the other party to undue expense, they should also be careful not to exercise the discretion with too much haste, given that such haste may discourage parties, for fear of an adverse costs order, from pursuing litigation under the WR Act in the manner which they deem best. 

30                  The appellants in this case suggest that the respondent’s best course was, upon responding to the appeal to this Full Court, “to concede that the foundation of … the decision of Nicholson J was unsupportable … and also concede that the Industrial Magistrate erred”.  We do not accept this proposition.  Ideal as this outcome may have been for the appellants, the respondent was entitled to meet the appeal.  The mere fact that it could have done so in a different or timelier fashion is not sufficient, in itself, to warrant the making of an adverse costs order against it, particularly where the usual practice in litigation arising from the WR Act is to make no orders as to costs.

31                  Accordingly, we are of the view that the first criterion for the exercise of discretion in s 824(2) is not made out, namely, that there was no “unreasonable act or omission” by the respondent.  Given this, we do not need to consider whether the appellants incurred any costs, or whether the discretion to make the costs order should ultimately be exercised.

Orders

32                  The Court orders that:

1.                  The motion of the respondent dated 12 April 2007 be allowed;

2.                  Order 2 of 9 February 2007 in this matter, which provides that “The respondent pay the appellants’ costs of and incidental to the motion”, be set aside;

3.                  In lieu of Order 2 of 9 February 2007, there be no order as to costs;

4.                  The motion of the appellants dated 29 June 2007 be dismissed;

5.                  In respect of the judgment delivered on 8 June 2007, there be no order as to costs; and

6.                  In respect of the respondent’s motion dated 12 April 2007 and the appellants’ motion dated 29 June 2007, there be no order as to costs.

Associate:

Dated:         14 August 2008