FEDERAL COURT OF AUSTRALIA

Australian Workers Union v Leighton Contractors Pty Limited (No 2)

[2013] FCAFC 23

THE COURT ORDERS THAT:

1.     The application for costs brought by the third, fourth and fifth respondents be dismissed.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

the court

1    On 29 January 2013 this Court dismissed an application brought by the Australian Workers’ Union (“AWU”) for constitutional writs directed to Fair Work Australia: Australian Workers’ Union v Leighton Contractors Pty Limited [2013] FCAFC 4. The order the AWU sought to quash was an order refusing permission to appeal from a decision of a Senior Deputy President approving the making of three enterprise agreements.

2     The AWU argued that the enterprise agreements were not validly made under the Fair Work Act 2009 (Cth) (“the Act”) because the man who signed them on behalf of the fifth respondent, the CFMEU, (Mr Close) did not at the time have authority under the CFMEU’s rules to do so.

3    Dowsett J dismissed the application because he rejected the construction of the rules advanced by the AWU. Katzmann J did so because she found there was no jurisdictional error, a necessary precondition to the grant of relief, and because she, too, held that the construction of the rules advanced by the AWU was wrong. McKerracher J agreed with both Dowsett and Katzmann JJ on this point. Dowsett J (with whom McKerracher J agreed on this aspect) also thought that there was much to be said for the view expressed by Gummow J in Australian Capital Television Pty Ltd v Minister for Transport and Communications (1989) 86 ALR 119 at 157-8 that the rule in Turquand’s case (known as the indoor management rule) applied to allow the respondents to support their case that what took place was in order and, if necessary, would have invoked it. Katzmann J thought not, but held that s 793 of the FW Act applied to make Mr Close’s conduct the conduct of the CFMEU because it was engaged in on CFMEU’s behalf and was within the scope of his apparent authority. In any event, her Honour considered that by its actions the CFMEU had ratified Mr Close’s acts, the effect of which was to validate them retrospectively.

4    The Court gave the parties the opportunity to make submissions as to costs. The third, fourth and fifth respondents took advantage of the opportunity to seek an order that the AWU pay their costs. No application was brought by the first two respondents. The AWU opposes the application.

5    It is common ground that the disposition of the application turns on the application of s 570 of the Act, which limits the circumstances in which costs may be awarded in a proceeding of this kind. Section 570(1) relevantly provides that a party to proceedings in a court exercising jurisdiction under the Act may be ordered to pay another party’s costs only in accordance with s 570(2). Section 570 applies because the right or duty AWU sought to have enforced owes its existence to a provision of the Act: Australasian Meat Industry Employees’ Union v Fair Work Australia (No 2) (2012) 289 ALR 552; [2012] FCAFC 103 at [16]; Construction, Forestry, Mining and Energy Union v Australian Industrial Relations Commission (2001) 203 CLR 645 at 660 [42]–[43]; Re Polites; Ex parte Hoyts Corporation Pty Ltd (1991) 173 CLR 78 at 93.

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 the following;

(i)    the party unreasonably refused to participate in a matter before FWA:

(ii)    the mater arose from the same facts as the proceedings.

6    The basis of the respondents’ application is that the Court would be satisfied that the AWU instituted the proceedings “without reasonable cause”. The question, then, is what is meant by a want of reasonable cause.

7    In Khiani v Australian Bureau of Statistics [2011] FCAFC 109 (“Khiani”) the Full Court endorsed the summary of the authorities provided by Reeves J in Nimmo, in the matter of an application for an inquiry relating to an election for an office in the Australian Education Union (NT Branch) (No 2) [2011] FCA 728 at [27]- [30]. 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 Limited v The Hon 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.

8    We would emphasise, however, that these principles relate to the question of whether the jurisdiction to award costs is enlivened. Even if the Court has jurisdiction to make a costs order, it retains the discretion to refrain from exercising it in an appropriate case.

9    Here, Katzmann J not only found that the decision of the Full Bench was not infected by jurisdictional error, she observed at [59] that the AWU did not submit that it was. The AWU’s submissions on this point related to the approval of the agreement (a decision of the Senior Deputy President), not to the decision of the Full Bench to refuse permission to appeal. Understandably the respondents rely on this observation, submitting that in those circumstances it could not be said that the proceeding had reasonable prospects of success. Otherwise the respondents point to the dismissal of the AWU’s arguments and another observation made by Katzmann J at [99] (McKerracher J agreeing at [34]) to the effect that in the circumstances of the case, even if jurisdictional error were shown, her Honour would have refused relief on discretionary grounds.

10    The AWU submits that it could not be said that the case was “inarguable” at the time it brought the application and the facts apparent to the AWU at that time did not change. It contends that for a number of reasons the proceeding was never one that was bound to fail. It relies on the following circumstances:

(a)    None of the respondents applied to have the matter struck out at any stage.

(b)    The application was listed for hearing before the Full Court at the request of all the parties (except for FWA which entered a submitting appearance), who filed a joint submission seeking that the application be heard by the Full Court. In so doing, the respondents “conceded and contended” that there were seven significant points of issue, including whether any error on the part of FWA was a jurisdictional error. We note parenthetically that the Chief Justice may direct that a matter in the original jurisdiction be exercised by a full court only if he considers it to be of sufficient importance to justify the giving of a direction to that effect: Federal Court of Australia Act 1976 (Cth), s 20(1A).

(c)    There was a paucity of authority on many of the matters in issue;

(d)    At no time did the respondents submit that the AWU’s case was bound to fail on the authorities or the facts;

(e)    The discretionary point now raised was said in the joint submissions to be a significant point in issue;

(f)    The respondents’ position is affected by the wisdom of hindsight, based on the Court’s views of the merits of the AWU’s case;

(g)    “If the significant points in issue had been determined in favour of the AWU, the jurisdictional finding may well have been able to be differently characterised”; and

(h)    The Court was divided on a key issue – the operation of the indoor management rule.

11    The AWU points out that at a directions hearing before Reeves J, rather than calling on the Court to dismiss the matter the respondents contended that there were serious issues to be tried. In those circumstances, the AWU argues the Court should conclude that all active parties considered that the proceedings were not instituted without reasonable cause. We note that on that day (15 March 2012) his Honour ordered the parties to file “joint submissions identifying what, if any, facts are in issue and why the question to be tried is so significant that it should go directly to a hearing before the Full Court”.

12    We are unimpressed by most of these arguments. The mere fact that an application for summary dismissal is not brought does not establish that there was no basis for doing so, neither does the fact that the respondents “conceded and contended” that there were “seven significant points of issue”. The fact that the respondents contested the AWU’s case does not mean that there was any merit in its argument. Indeed, it rather suggests that the respondents thought there was none. Nor does it matter that the respondents’ position is reached with the benefit of the Court’s views. The question whether the proceedings were instituted without reasonable cause is not determined by the attitude of the respondents; it is determined objectively: Spotless at [13]. The division of opinion of the Court on the operation of the indoor management rule is of no consequence. It only arose for consideration if the AWU succeeded on its main argument. And Katzmann J (who doubted it applied) would have come to a conclusion that the agreement was valid for other reasons, not least because by its conduct the CFMEU should be taken to have ratified Mr Close’s actions.

13    In our view, the proceedings did not enjoy reasonable prospects of success when they were instituted. For any one of the various reasons given in the principal judgment they were bound to fail. Consequently, the Court has jurisdiction to make the orders sought. Nevertheless, we have concluded that this is a case in which the jurisdiction should not be exercised. We have come to this conclusion because of the parties’ joint submission that, save in one respect, the case raised important questions about the making of enterprise agreements under the Act and the Court would be interpreting some provisions of the Act for the first time. A case that is bound to fail is hardly of sufficient importance to justify the giving of a direction that it be referred to a Full Court. That the respondents joined with the AWU to submit that a Full Court should hear the case does indicate, as the AWU argues, that they were not of the opinion that the case was hopeless. While that makes no difference to whether the Court has the power to make a costs order, we think it is relevant to whether the power should be exercised. In these circumstances we are not disposed to do so.

Associate:

Dated:    1 March 2013