FEDERAL COURT OF AUSTRALIA

Australasian Meat Industry Employees Union [No. 2] v State of South Australia [1999] FCA 818

INDUSTRIAL LAW – costs – application for costs by successful respondent – finding that the proceedings were commenced by the applicants without reasonable cause but costs denied on the ground that respondent failed to discover a letter that would have shown that the applicants would fail – applicants proceeded to trial in ignorance of the letter.

Workplace Relations Act 1996 (Cth), s 347

Federal Court Rules, O 35, r 7

Heidt v Chrysler Australia Ltd (1976) 27 FLR 257 cited

Thompson & Ors v Hodder & Ors (1989) 21 FCR 467 cited

R v Moore; Ex parte Federated Miscellaneous Workers’ Union of Australia (1978) 140 CLR 470 cited

Foxcroft v Ink Group Pty Ltd (1994) 125 ALR 677 referred to

Hatchett v Bowater Tutt Industries Pty Ltd (No 2) (1991) 28 FCR 324 referred to

Commonwealth of Australia v Northern Land Council & Anor (1991) 30 FCR 1 cited

Matter No. 92 of 1997

AUSTRALASIAN MEAT INDUSTRY EMPLOYEES UNION & OTHERS [No. 2] v STATE OF SOUTH AUSTRALIA

VON DOUSSA J

ADELAIDE

15 JUNE 1999

THE COURT ORDERS THAT:

1. The respondent’s application for costs of the action dismissed.

2. The order for costs made on 9 December 1998 be set aside.

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

EX TEMPORE REASONS FOR JUDGMENT

1                     This is an application for costs made pursuant to s 347 of the Workplace Relations Act 1996 (Cth) (the Act) by the respondent in these proceedings who was successful at trial. Section 347 provides that:

“A party to a proceeding (including an appeal) in a matter arising under this Act (other than an application under section 170CP) shall 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                     The proceedings concerned an application by the Australasian Meat Industry Employees Union and some sixty-seven members of the Union, for remedies under s 178 of the Act. Section 347 therefore applies to the proceedings, and costs can only be awarded if the Court is satisfied that the proceedings were instituted by the applicants vexatiously or without reasonable cause.

3                     In Heidt v Chrysler Australia Ltd (1976) 27 FLR 257 at 272 Northrop J said in relation to the earlier version of this section:

“The policy of s 197A of the Act is clear. It is designed to free parties from the risk of having to pay the costs of an opposing party. At the same time the section provides a protection to parties defending proceedings which have been instituted vexatiously or without reasonable cause. This protection is in the form of conferring a power in the court to order costs against a party who in substance, institutes proceedings which in other jurisdictions may constitute an abuse of the process of a Court.”

4                     In Thompson & Ors v Hodder & Ors (1989) 21 FCR 467 a Full Court of this Court, after referring to Heidt v Chrysler and also to the observations of Gibbs J, as he then was, in R v Moore; Ex parte Federated Miscellaneous Workers’ Union of Australia (1978) 140 CLR 470 at 473, observed that:

“It is apparent from these authorities that an applicant who has the benefit of the protection of s 347 will only rarely be ordered to pay the costs of a proceeding in exceptional circumstances.”

5                     The respondent relies in particular on an observation of Wilcox CJ in the Industrial Relations Court of Australia in Foxcroft v Ink Group Pty Ltd (1994) 125 ALR 677 at 681 where the learned Chief Justice relied on the following passage from Kanan v Australian Postal and Telecommunications Union (1992) 43 IR 257 at 264-265:

“It seems to me that one way of testing whether a proceeding is instituted ‘without reasonable cause’ is to ask whether upon the facts apparent to the applicant at the time of instituting the proceeding, there was no substantial prospect of success. If success depends upon 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.”

The respondent contends that the present proceedings come within that test.

6                     Judgment was delivered in the principal proceedings on 10 May 1999. As I have indicated, the applications of the Union and the sixty-seven members were dismissed. The central issue was whether the applicants were “employees who had been offered employment” by a purchaser of the Gepps Cross Abattoir within the meaning of a Redundancy Agreement. The applicants contended that they were not persons who came within that definition and for that reason were entitled to enhanced redundancy payments.

7                     As explained in the reasons, the dispute arose because from the date of settlement of the sale of the abattoir on 24 January 1997 until 7 April 1997 no actual work was made available to the applicants (other than the Union) by the purchaser. During that time there were many meetings, and proceedings for unfair dismissal were taken by the applicants against the purchaser, and a notification of an industrial dispute was given by the applicants which alleged that they were employed by the purchaser. These events, to a greater or lesser extent, supported the conclusion that the applicants had been offered employment although, as the reasons for decision record, on 27 February 1997 the Union had also written to the Asset Management Task Force representing the respondent, asserting that the applicants had not been offered employment within the meaning of the Award. As events happened, the applicants (other than the Union) commenced actual work at the abattoir on 7 April 1997 and thereafter have worked regularly for the purchaser.

8                     I held that within the meaning of the Redundancy Agreement the applicants had been offered employment from on or before 24 January 1997. For that reason they failed. I also noted that the offers that had been made before 24 January 1997 were not further clarified by the applicants before they commenced actual work on 7 April 1997.

9                     Had these proceedings been commenced in March or early April 1997, I could understand that the applicants may have had grounds for believing that they had not been offered employment within the meaning of the Redundancy Agreement, and there would have been an arguable basis upon which they could have launched the proceedings.

10                  However, that was not the period when the proceedings were commenced. They were commenced on 26 November 1997, at a time when the applicants (other than the Union) had been at work for some months. Absent any clarification of the terms upon which they were returning to actual work on 7 April 1997, it seems to me that had their position been adequately reviewed at 26 November 1997, it would have been apparent that there was no real likelihood that the proceedings could succeed.

11                  The Redundancy Agreement in clause 8 provided for a sick leave bank which could be accessed by former employees of the abattoir who had accepted employment with the purchaser. The significance of that clause does not appear to have dawned to either side to the litigation until the final day of the trial when addresses were being made. At that point counsel for the respondent was informed that some of the applicants had actually drawn against the sick leave bank. Evidence of that fact in my view would have been fatal to the claims of the applicants had it been led in the course of the trial. The fact that sick leave credits had been drawn from the sick leave bank shows that the employees had in fact been offered employment which they had accepted within the meaning of the Redundancy Agreement.

12                  In support of the application for costs, the respondent has exhibited a letter dated 3 October 1997 which was written by the Primary Industries Department of South Australia on the respondent’s behalf to the then proprietors of the abattoir suggesting a way in which sick leave credits could be handled. That letter leaves me with the impression that the applicants themselves may not have been fully aware of the fact that some of their sick leave claims were being reimbursed to the purchaser by or on behalf of the respondent. Nevertheless, the letter does show that had inquiries been made shortly before the proceedings were instituted in November 1997 about the significance of the sick leave bank, it is likely that the applicants’ solicitors would have learned that some at least of the applicants were receiving sick leave credits, and the solicitors would have been alerted to the fact that very strong evidence against the validity of the case existed.

13                  In saying that, I do not overlook Mr Heywood-Smith’s argument this morning that there is no conclusive evidence that any of the sixty-seven applicants had actually received a payment of sick leave from the sick leave bank by 24 November 1998. It seems to me the probability is that at least some of them had by that time. In my view had reasonable inquiries been made on the applicants’ behalf about the significance of the sick leave bank shortly before the proceedings were issued, facts would have emerged which should have alerted the Union and the solicitors acting for it to the fact that the proposed claims had no substantial prospect of success.

14                  The claim for costs made today is directed only to the Union. The respondent’s counsel explained this by saying that the Union was the party that had spearheaded the proceedings on behalf of the applicants. It was the Union that had negotiated the Redundancy Agreement, and therefore had knowledge of it. It was the Union that had the greatest capacity about the time the proceedings were being commenced to realise the significance of clause 8, to gather information about it, and to get advice which would have indicated the lack of prospect of success.

15                  In my opinion the threshold in s 347 has been crossed in this case. In my opinion it should have been apparent to those launching the proceedings that there was little prospect of success by virtue of the fact that these employees had gone back to work without any further clarification of the terms upon which they were accepting employment. Adding to that the avenues of inquiry that were open in relation to clause 8 leads to the conclusion that reasonable inquiries would have indicated that there was no substantial prospect of success at the date the proceedings were launched.

16                  However, to cross the threshold in s 347 does not necessarily mean that the costs will be awarded against the applicant. The Court retains a discretion in determining whether to award costs (see Hatchett v Bowater Tutt Industries Pty Ltd (No 2) (1991) 28 FCR 324 at 326. In my opinion the discretion as to costs should be exercised against the respondent in this case for the following reason. It is true, as the respondnet has argued, that the applicants and their advisers should have realised the significance of clause 8. It is equally true that the respondent and its advisers should have realised the significance of clause 8, and the respondent, perhaps more readily than the Union, had available to it the information that would have indicated that some at least of the applicants were claiming credits from the sick leave bank.

17                  More importantly, the respondent had it within its power to discover the letter of 3 October 1997, but at no time did so. The respondent was directed to give discovery on two occasions in the course of the proceedings, first on 12 February 1998 and secondly, on 30 July 1998. The respondent’s obligation in respect of those orders was to institute appropriate inquiries to see if servants or agents of the respondents were in possession of relevant documents. The documents that had to be discovered were those relating to any matter in question. In Commonwealth of Australia v Northern Land Council & Anor (1991) 30 FCR 1 at 23, the Full Court of this Court said:

“A document relates to a matter in question between the parties if it is ‘reasonable to suppose’ that the document ‘contains information which may – not which must – either directly or indirectly enable the party requiring the affidavit either to advance his own case or to damage the case of his adversary.’”

18                  In the present case the letter of 3 October 1997 was plainly damaging to the case of the applicants. It should have been discovered. Had it been discovered it would have alerted the advisers of the applicants to the fact that their proceedings had no substantial prospect of success and the case, I am prepared to infer, would not then have gone ahead. The failure to give discovery has meant that the parties have continued to litigate for some days in this Court on issues that they would not have pursued had the significance of clause 8 and the letter of 3 October 1997 been on the table.

19                  In those circumstances it seems to me that the proper exercise of the discretion is to award no costs at all to either side. That will appropriately reflect the omission of the respondent to give discovery of a document that should have been discovered. There will be no order as to costs in respect of the proceedings.

20                  It has been brought to my attention that inadvertently, without anyone addressing s 347, an order for costs was made against the respondent on 9 December 1998 following its failure to comply with interlocutory directions. The provisions of s 347 mean that the order should not have been made. The order has not been drawn up or sealed, and pursuant to the power in O 35, r 7, I set aside that order.

Associate:

Dated: 15 June 1999