REASONS FOR JUDGMENT

Introduction

1                     Employment Services Australia Pty Ltd applies by notice of motion for a stay of execution of orders made by the Full Court of this Court. The respondent to the application is Ms Malgorzata Poniatowska. There is another respondent to the application, Mr Remo Lotito, but he has taken no part in the application. I will refer to Ms Poniatowska as the respondent. The applicant seeks a stay of execution pending the hearing and determination of an application by it for special leave to appeal to the High Court of Australia and, if special leave is granted, pending the hearing and determination of the appeal.

2                     The Full Court delivered its decision on 27 July 2010. The Court ordered that the appeal to it by the applicant be dismissed, that a cross-appeal by the respondent be dismissed and that the appellant pay 90 per cent of the respondent’s costs: Employment Services Australia Pty Ltd v Poniatowska [2010] FCAFC 92. Those orders were entered on 23 August 2010.

3                     The appeal and cross-appeal were from orders made by a single judge (Mansfield J) of this Court. Relevantly for present purposes, and leaving aside orders for costs, Mansfield J made an order that the applicant pay to the respondent by way of compensation for unlawful discrimination contrary to s 46PO of the Human Rights and Equal Opportunity Commission Act 1986 (Cth) (“the HREOC Act”) the sum of $466,000, which sum includes interest. Among other findings, Mansfield J found that by reason of the conduct engaged in by the applicant leading to the termination of the respondent’s employment, the applicant engaged in sex discrimination contrary to s 14(2) of the Sex Discrimination Act 1984 (Cth) (“the SD Act”) and unlawful discrimination contrary to s 46PO of the HREOC Act (Poniatowska v Hickinbotham [2009] FCA 680).

4                     On 3 August 2009, Mansfield J made an order staying his principal orders “pending the hearing and determination of the appeal”. That order was made upon the applicant paying the sum of $50,000 to the respondent on account of the damages payable by the applicant to the respondent and upon provision of a bank guarantee in relation to the balance of the judgment (Employment Services Australia Pty Ltd v Poniatowska [2009] FCA 821).

The Relevant Principles

5                     I was referred to a number of cases which discuss the relevant principles for an application for a stay of execution pending an application for special leave to appeal to the High Court. I will not refer to them all because there was no dispute between the parties as to the relevant principles. In Jennings Construction Ltd v Burgundy Royale Investments Pty Ltd [No 1] (1986) 161 CLR 681 Brennan J (as his Honour then was) said (at 685):

“In exercising the extraordinary jurisdiction to stay, the following factors are material to the exercise of this Court's discretion. In each case when the Court is satisfied a stay is required to preserve the subject-matter of the litigation, it is relevant to consider: first, whether there is a substantial prospect that special leave to appeal will be granted; secondly, whether the applicant has failed to take whatever steps are necessary to seek a stay from the court in which the matter is pending; thirdly, whether the grant of a stay will cause loss to the respondent; and fourthly, where the balance of convenience lies.

In the present case the respondent submits that special leave is unlikely to be granted. It is undesirable to canvass the arguments in advance. I do not, however, think that the prospect of a grant of special leave is insubstantial.”

6                     I was also referred to Marconi’s Wireless Telegraph Co Ltd v The Commonwealth [No 3] (1913) 16 CLR 384 at 386 at 386; Commissioner of Taxation v Myer Emporium Ltd [No 1] (1986) 160 CLR 220 at 222-223 per Dawson J; Bryant v Commonwealth Bank of Australia (1996) 134 ALR 460 at 463-465 per Kirby J.

7                     An assessment of the prospects of obtaining special leave to appeal involves a consideration of whether there is a matter of public importance or a miscarriage of justice as well as whether there is an arguable case of error.

The Facts

8                     The applicant put before me its Amended Application for Special Leave to Appeal. It contains six grounds in support of the application. In oral submissions the applicant’s counsel explained, and expanded upon, those grounds. I was later provided with the applicant’s Summary of Argument and its Draft Notice of Appeal. I will return to consider the prospects of special leave to appeal being granted by the High Court.

9                     The applicant put forward evidence in support of a finding which it seeks that, if a stay of execution is not granted, the respondent’s financial position is such that there will be no reasonable prospect of the applicant recovering moneys paid pursuant to the judgment at first instance. The evidence establishes to my satisfaction the following:

1.         The respondent owns only one piece of real property which has a recorded capital value of $700,000.

2.         There are two mortgages over the property and a charge to the Legal Services Commission pursuant to the Legal Services Commission Act 1977 (SA).

3.         The mortgages appear to secure a total indebtedness of $630,000.

4.         The respondent is a defendant to proceedings in the Magistrates Court in which a firm of solicitors formerly acting for her claim of the sum of $11,424 in outstanding legal fees. The respondent defends the proceedings by disputing the amount of the claim. She also states that she is unable to pay the account until completion of the Federal Court proceeding.

5.         The respondent did not have employment for a period of at least two years prior to 7 July 2009.

6.         The respondent is involved in criminal proceedings which are presently before the High Court on an application for special leave to appeal by the prosecution.

10                  The respondent put forward evidence in response which establishes to my satisfaction the following:

1.                  The respondent’s employment by the applicant was terminated on 21 February 2006. She had paid employment for a four-month period between 22 May 2006 and 30 September 2006. She has not worked since the latter date.

2.                  The respondent is a single parent who is raising two teenage children. She has separated from her ex-husband (that occurred in 2003) and she has no family in Australia. She has relied on Centrelink benefits as a source of income and she currently receives a single parenting payment of $600.00 per fortnight.

3.                  The respondent has been compelled to extend the loan secured by the mortgage over her house in order to meet living expenses. She is unable to meet her mortgage repayments and is currently in default of her repayments to the extent of $26,000. She has been served with a default notice by solicitors acting for the mortgagee, the Australian and New Zealand Banking Group Limited.

4.                  The respondent was prosecuted for breaches of the Social Security Act 1991 (Cth). She was convicted but those convictions were set aside by the Full Court of the Supreme Court of South Australia. The Commonwealth Director of Public Prosecutions has applied for special leave to appeal to the High Court against the orders made by the Full Court of the Supreme Court.

5.                  The respondent acknowledges the debt to her former solicitors.

6.                  The respondent has incurred fees to her current solicitors and counsel and will incur further fees to defend the application for special leave in this proceeding.

7.                  The respondent claims that her extremely difficult financial position is the direct result of the applicant terminating her employment.

11                  It seems to me that having regard to these findings I can make the following two important findings. First, even though, as the respondent’s counsel pointed out, some of the judgment moneys are likely to be used in relation to the respondent’s mortgage debt and that would be an avenue of recovery for the applicant if it was ultimately successful, the respondent’s financial position is such that it would be fair to conclude that if a stay of execution is not granted there will be no reasonable prospect of the applicant recovering moneys, or a substantial part of the moneys, paid pursuant to the judgment at first instance. Secondly, the respondent is presently in extreme financial difficulty and if a stay of execution is granted she may suffer severely, including by possibly losing her house.

Issues on the Application

12                  There are prospects of obtaining special leave to appeal. This is not a case where I can say there is no, or very little, prospect of obtaining special leave. It is far more difficult to assess the prospects accurately and to conclude that they are, or are not, substantial or not insubstantial.

13                  I reject the respondent’s submission that because there are other grounds upon which liability might have been based, including breach of an implied term of mutual trust and confidence, the applicant has no prospect of obtaining special leave. Those other grounds were not grounds relied on by the trial judge and it cannot be said that they are so clearly correct that I should reject the application having regard to them.

14                  The Amended Application for Special Leave to Appeal contains a number of grounds. Not surprisingly, some appear to me to be stronger than others. I think that it is appropriate for me to take the strongest ground and to consider the prospects of obtaining special leave with respect to that ground.

15                  The two sections of the SD Act which are relevant are s 14(2) and s 5. Those sections provide as follows:

“5  Sex discrimination

(1)        For the purposes of this Act, a person (in this subsection referred to as the discriminator) discriminates against another person (in this subsection referred to as the aggrieved person) on the ground of the sex of the aggrieved person if, by reason of:

(a)        the sex of the aggrieved person;

(b)        a characteristic that appertains generally to persons of the sex of the aggrieved person; or

(c)        a characteristic that is generally imputed to persons of the sex of the aggrieved person;

the discriminator treats the aggrieved person less favourably than, in circumstances that are the same or are not materially different, the discriminator treats or would treat a person of the opposite sex.

(1A)     To avoid doubt, breastfeeding (including the act of expressing milk) is a characteristic that appertains generally to women.

(2)        For the purposes of this Act, a person (the discriminator) discriminates against another person (the aggrieved person) on the ground of the sex of the aggrieved person if the discriminator imposes, or proposes to impose, a condition, requirement or practice that has, or is likely to have, the effect of disadvantaging persons of the same sex as the aggrieved person.

(3)        This section has effect subject to sections 7B and 7D.

…

14  Discrimination in employment or in superannuation

…

(2)        It is unlawful for an employer to discriminate against an employee on the ground of the employee’s sex, marital status, pregnancy or potential pregnancy:

(a)        in the terms or conditions of employment that the employer affords the employee;

(b)        by denying the employee access, or limiting the employee’s access, to opportunities for promotion, transfer or training, or to any other benefits associated with employment;

(c)                    by dismissing the employee; or

(d)        by subjecting the employee to any other detriment.”

16                  The thrust of the applicant’s argument is that the trial judge and the Full Court misconstrued these sections or erred in applying the sections to the facts of the case. The point the applicant seeks to make may be identified by setting out passages from the dissenting judgment in the Full Court. Dowsett J said (at [2]-[4]):

“2         The area in which I disagree is the line of reasoning by which the learned primary Judge concluded that the conduct by the appellant (‘Employment Services’) leading up to, and including the respondent’s dismissal from her employment constituted discrimination on the ground of her sex.  His Honour’s reasoning appears at [312] to [314] which paragraphs are set out in the joint reasons.  Fairly clearly, his Honour found that the respondent’s dismissal was ‘because she was a female who would not tolerate sexual harassment and the robust work environment’.  His Honour then concluded that this was different from the way in which Employment Services would have treated a male person.  This conclusion is said to be ‘manifestly evident in the way Mr Flynn and Mr Lotito were treated in relation to their conduct towards Ms Poniatowska’. 

3          Employment Services has always asserted that at least part of Mr Flynn’s conduct was not associated with his employment.  To that extent his conduct was not, from its point of view, in any sense analogous to that of the respondent.  However it seems to me that there is a more fundamental defect in his Honour’s approach.  It is, in my view, not possible to infer anything about the probable treatment of a male person who complained about sexual harassment (presumably by a female) from the way in which Employment Services dealt with male persons against whom complaints had been made of such harassment.

4          His Honour’s approach implicitly assumes that Employment Services found the respondent’s conduct disruptive of established relationships and attitudes in the workplace and therefore of its operation.  The conduct of a man in complaining about sexual harassment by a woman would be equally disruptive of established relationships and attitudes.  There is no reason to believe that he, or his complaints would have been treated differently from the way in which the respondent and her complaints were treated.  In my view the necessary inference is simply not available, either by reference to the way in which Employment Services treated Mr Flynn and Mr Lotito or otherwise from the evidence.”

The majority in the Full Court (Stone and Bennett JJ) dealt with the submission that it was not open to the primary judge to draw the inference that the respondent was treated differently from a male in a similar position in the following passage in their reasons (at [112]-[115]):

112       The primary Judge did not err in his choice of comparator, based upon his factual findings.  His Honour appreciated that the question posed by s 5 was necessarily to be answered on a theoretical basis.  His Honour considered that, if male perpetrators were sympathetically treated, male complainants would not have been terminated.  That is not, however, the complete answer to the question.  It is apparent from the primary Judge’s description of this particular working environment that, on the evidence, his Honour concluded that it was an environment in which women would be targeted and be uncomfortable and, accordingly, more likely to complain than would men.  That would lead to the situation that a male employee of this company would not have been sexually harassed in the first place or have found the work environment intolerable.  He would not then have become a complainant.  That is, Ms Poniatowska became a complainant because of her sex.  It follows that the fact that Ms Poniatowska became a perceived problem as a complainant was because of her sex.  While there may have been female employees who were not sexually harassed and did not complain and female employees who were sexually harassed and did not complain, that is not to the point.

113       The characteristics of Ms Poniatowska were that she was a female:

•           who was sexually harassed; and

•           subjected to a robust work environment that she could not tolerate; and

•           had complained of each such treatment;

•           such that she was considered an impediment to the smooth running of ESA’s business.

114       It is apparent from the primary Judge’s reasoning that he did not consider that a male would be considered by ESA to have those characteristics.  It was necessarily because she was a female that she was in that position.  His Honour found that Mr Hickinbotham, and therefore ESA, would not have taken the same approach to a male who was sexually harassed and had complained.  That is, he would not have considered that male to be an impediment to the smooth running of the business.  It was all of those factors that resulted in the termination of her employment.  The primary Judge found that she was dismissed by reason of those factors, all of which followed from her sex.

115       A further answer to ESA’s submissions is that the primary Judge did not ask the wrong question.  His Honour recognised, correctly, that s 5 raised a hypothetical question.  There was no evidence to assist his Honour in answering the question by reference to the correct male comparator.  While ESA says that his Honour could have drawn different inferences from the evidence, that is not to the point.  Nor is it to the point that we may have answered the question differently.  ESA has not established appellable error in the way in which the primary Judge answered the question posed by s 5 of the SD Act.”

17                  There appear to be two strands in the reasoning of the majority of the Full Court. The first is that it was open to the trial judge to draw the inference that the respondent was treated less favourably than a male would have been treated in similar circumstances. The dissenting judgment suggests that it is reasonably arguable that the majority erred in reaching that conclusion. The other strand of reasoning starts from the proposition that the workplace environment was one in which women would be targeted and be uncomfortable and, accordingly, more likely to complain than men. The applicant contends that such a starting point is erroneous because the trial judge made no such finding. On the face of it, there is support for that contention. The majority then followed a chain of reasoning which the applicant described as reasoning from “remote” cause to effect. That reasoning was erroneous, submits the applicant, because it is not the test prescribed by the words, “by reason of” in s 5 of the SD Act. Those words require an examination of the mental processes of the person who made the decision. I think the point is reasonably arguable and appears to raise an important point as to the proper construction of s 5. In turn it may be said that that section is a key section in the SD Act.

18                  In my opinion based on the material and arguments before me, the applicant has a not insubstantial prospect of obtaining special leave to appeal. When this conclusion is coupled with the first finding in [11] above, there is a prima facie case for a stay.

19                  However, the balance of convenience must also be considered and this is where the second finding in [11] becomes important.

20                  I asked the parties for further submissions on the question of whether I could order a stay of part only of the judgment. I subsequently received written submissions. Neither party suggested that I could not order a stay subject to the payment of a part of the judgment moneys. I think that is right, although it is important to note that in the ordinary case the Court would limit its function to a “once and for all” determination of the appropriate amount.

21                  I have reached the conclusion that I should order a stay subject to a condition that the applicant pay the respondent the sum of $100,000 in addition to the amount already paid and on similar terms to the amount already paid, a condition that it proceed expeditiously with its application for special leave and a condition that it provide a bank guarantee in relation to the balance of the judgment moneys. The stay should remain in place until the application for special leave is determined, or if granted, until the appeal is determined but with either party having liberty to apply. I will hear the parties as to the precise form of the orders.

Associate:

Dated:         24 September 2010