FEDERAL COURT OF AUSTRALIA

Cugara v Frankston City Council [2012] FCA 1299

THE COURT ORDERS THAT:

1.     The appeal be allowed.

2.    The orders made by the Federal Magistrates Court on 20 June 2012 be set aside.

3.    The respondent’s application for costs be remitted to the Federal Magistrates Court for determination

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

REASONS FOR JUDGMENT

1    Mr Ludwig Cugura was dismissed from his employment by the Frankston City Council (“the Council”). He commenced a proceeding in the Federal Magistrates Court under Parts 3-1 and 4-1 of the Fair Work Act 2009 (Cth) (“the Act”). He alleged that the Council had taken adverse action against him because of a disability from which he suffered and because of his family responsibilities.

2    Mr Cugura’s application was dismissed: see Cugura v Frankston City Council [2012] FMCA 340. The order dismissing the application was accompanied by an order requiring the parties to file and serve any written submissions in relation to costs. Having considered the written submissions the learned Federal Magistrate ordered that Mr Cugura pay the respondent’s costs “calculated in accordance with Schedule 1 of the Federal Magistrates Rules 2001”. His Honour also made orders for written submissions to be filed as to the calculation of costs under those Rules: see Cugura v Frankston City Council (No 2) [2012] FMCA 530. These orders were made on 20 June 2012.

3    By notice dated 10 July 2012, Mr Cugura sought to appeal from the costs order made on 20 June 2012. No challenge was made to the order dismissing his application.

4    Mr Cugura subsequently made an application for leave to appeal against the costs order should that be necessary. The application for leave to appeal and the appeal were listed before me pursuant to s 25(1AA)(a) of the Federal Court of Australia Act 1976 (Cth) (“the FCA Act”).

5    The arguments on the application for leave and upon the appeal if leave were granted, were heard together.

6    The answer to the question of whether or not leave was required to bring the appeal turned on the question of whether his Honour’s order, on 20 June 2012, was interlocutory in nature. Had his Honour done no more than order that Mr Cugura pay the Council’s costs of the application the order would not have been interlocutory in form: see Hall v Nominal Defendant (1966) 117 CLR 423. I do not consider that, by adding that the costs payable should be calculated in accordance with the Federal Magistrates Court Rules 2001 and requiring submissions to be made as to that calculation, the order thereby became interlocutory in nature. His Honour had made a final order requiring that Mr Cugura was to be liable for the Council’s costs. All that was left was the process of calculating those costs which was to be undertaken consistently with the Rules.

7    In any event, I would have granted leave to appeal notwithstanding that the appeal was lodged more than seven days after the publication of the orders. The notice of appeal was lodged within the twenty-one day period prescribed by the Federal Court Rules 2011 for the lodging of appeals against decisions of the Federal Magistrates Court: see Rule 36.03. Mr Cugura’s solicitor frankly admitted that, if an error had been made, it had resulted from her mischaracterisation of the nature of the order. The Council advised the Court that, were leave necessary, it would not oppose its grant.

8    Litigation under the Act is normally conducted on a no cost basis. The Council sought an order for the payment of its costs under s 570 of the Act. Relevantly that section provides that:

“(1)    A party to proceedings (including an appeal) in a court … exercising jurisdiction under this Act may be ordered by the court to pay costs incurred by another party to the proceedings only in accordance with sub-section (2) …

(2)    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)    …”

9    The Federal Magistrate dismissed the Council’s costs claim insofar as it relied on s 570(2)(a). No cross appeal is brought from this aspect of his Honour’s decision.

10    His Honour accepted that the Council was entitled to its costs on the normal basis under s 570(2)(b).

11    The Federal Magistrate accepted submissions from the Council that Mr Cugura had been responsible for a number of unreasonable acts or omissions which had caused it to incur the costs.

12    The acts and omissions on which the Council relied were:

    Notwithstanding the abandonment on the first day of the four day trial of a number of claims made in pre-trial contentions of fact and law, Mr Cugura required the attendance for cross-examination of a number of the Council’s witnesses who had filed defensive affidavits which had dealt only with the abandoned claims.

    The failure of Mr Cugura to respond to an offer by the Council, made well before trial, to settle the proceeding on the basis that Mr Cugura would discontinue the proceeding and each party would bear its own costs.

13    In his pre-trial contentions Mr Cugura had alleged that the Council had done a number of things which constituted adverse action against him within the meaning of s 342 of the Act. His affidavit material identified the individuals concerned and the prejudicial action which he said each had taken against him.

14    On the first day of the trial he abandoned all of his allegations of adverse action save termination of his employment. In doing so he narrowed significantly the issues in dispute in the proceeding. What remained was the issue of whether he had been terminated for one of two proscribed reasons. He claimed that his employment had been terminated because of a physical disability from which he suffered and his parental responsibilities.

15    The Council filed affidavit material which responded to the full range of Mr Cugura’s original claims. In all there were eight deponents to these affidavits. Once the issues had been narrowed the evidence of three of these deponents was no longer of any relevance. Significant parts of the evidence of some of the other deponents was also no longer relevant.

16    Despite this Mr Cugura required all of the deponents to attend for cross-examination and his counsel cross-examined these witnesses on matters which were no longer relevant. The result was that the trial took almost a day longer than it would have otherwise have done.

17    Mr Cugura submitted that he was entitled to require the attendance of all of the Council’s witnesses and to cross-examine them on all issues.

18    Not surprisingly, the Federal Magistrate disagreed. He said:

“ … I don’t accept it was necessary to require all of the respondent’s witnesses for cross-examination in the face of the applicant abandoning those parts of the claim referred to in submissions filed prior to trial. This occurred on the first day of the trial and before the evidence had begun. The weakness of the applicant’s claims was recognised by abandoning those matters on the first day of the trial. However, a very large proportion of evidence at the trial was not relevant to the ultimate question the Court was required to consider in the context of whether the applicant’s physical disability was disassociated from the reason/s for his termination.”

His Honour accepted that, “the applicant’s approach to the conduct of the trial resulted in the respondent incurring legal costs.”

19    The power to award costs under s 570 of the Act is discretionary in nature. The exercise of that discretion will not lightly be interfered with. Any such intervention could only occur if one or more of the errors identified in House v The King (1936) 55 CLR 499 at 504-5 is established. No such error is apparent in his Honour’s reasons in relation to this first basis on which he determined to award costs against Mr Cugura.

20    The Federal Magistrate also took into account what he described as Mr Cugura’s “refusal” of an offer made to him by the Council on 2 September 2011.

21    On that date the Council’s solicitors wrote to Mr Cugura who was, at that time, unrepresented. The letter advised Mr Cugura that the Council held the firm view that his claim could not succeed. Various reasons for that opinion were given. The Council offered, on a “commercial basis”, to settle the matter on the basis “that the parties walk away and bear their own costs.” It invited Mr Cugura to discontinue his claim. It warned him that a failure to do so would constitute an unreasonable act or omission for the purposes of s 570 of the Act. It warned him that, should it be necessary, the Council would rely upon this letter to support an application for its costs, The letter concluded by asking Mr Cugura to advise the solicitors “by 4:00pm on Friday 9 September 2011 whether you intend to discontinue your claim.” (Original emphasis).

22    The Federal Magistrate noted that the Council’s offer “was not expressed to expire at a particular point in time” and that Mr Cugura had not thereafter sought to have the Council “re-put the offer.”

23    The Federal Magistrate accepted that, although contentions of fact and law had been exchanged prior to the making of the offer, Mr Cugura was not provided with the Council’s affidavits until the following month and was only then able to obtain legal assistance in considering them. His reasons imply that he considered that, at that time, it would have been appropriate for Mr Cugura to invite the Council to re-open its offer. This did not happen.

24    His Honour concluded this section of his reasons with the following observations:

“The letter from the respondent to the applicant was an offer to terminate the proceedings in their entirety in return for both parties bearing their own costs. I accept that the application faced a number of hurdles and certainly with the benefit of hindsight the offer should have been considered when the respondent’s case was known to the applicant. Whilst the refusal of the offer at the time it was made may not have been unreasonable given the evidential case of the respondent as to the reason for the termination was not challenged by the applicant and the way the trial was conducted on behalf of the applicant its refusal appears in light of those matters more so.”

25    Mr Cugura contended that the Federal Magistrate had misstated a number of material facts in dealing with this aspect of the Council’s costs claim. He submitted that the Federal Magistrate was wrong to say that the offer was not expressed to expire at a particular time. This had led him to consider that the offer remained open in October 2011 when Mr Cugura had the opportunity of considering it and responding to it in the light of the respondent’s affidavit evidence.

26    The Council faintly suggested that, properly construed, the letter could be understood as advising Mr Cugura that the offer remained open indefinitely.

27    I do not accept this submission. Mr Cugura was, to the Council’s knowledge, unrepresented at the time at which the letter was sent.

28    In my view a layman reading the letter would have understood that he only had until 4pm on 9 September 2011 to advise the solicitors that he had decided to discontinue the proceeding in order to take advantage of the offer which the letter contained. It is, therefore, likely that Mr Cugura would not have given any further consideration to the issue of settlement on the terms proposed at the time at which he received the Council’s affidavits or thereafter.

29    Mr Cugura also submitted that the Federal Magistrate had erred when he recorded that Mr Cugura had refused the offer.

30    In one part of his reasons the Federal Magistrate said that he had no evidence before him that Mr Cugura had given any consideration to the offer and that he might have completely ignored it. It was also possible that it had been “considered and rejected.” Whether or not that had occurred was not disclosed by the evidence. In the passage quoted above at [25], the Federal Magistrate twice used the word “refusal”. When first used it could be understood as referring to a hypothetical situation. The context in which the word is used a second time does not admit this possibility; it treats the refusal as a fact.

31    To this extent I consider that the Federal Magistrate exercised his discretion on the basis of a material and wrongful finding of fact. A deliberate decision to refuse a reasonable offer of settlement is a factor which would normally weigh more heavily in favour of a finding of unreasonable action than would a mere failure to respond by an unrepresented litigant.

32    I have considered the possibility that his decision to make an order under s 570(2)(b) of the Act could have been supported by his findings in relation to the conduct of the trial standing alone. His reasons do, however, suggest that he treated the two major considerations in a cumulative manner. So much is suggested by the fact that his consideration of the two issues is linked by a paragraph which reads: “[h]owever this isn’t the only argument the respondent has on this ground” and the fact that his ultimate finding was only made after he had considered both bases for the costs claim.

33    His Honour conducted the trial. He is far better placed than I am to make an assessment of the way in which Mr Cugura conducted his case, the extent to which this unnecessarily extended the trial and whether this conduct, either standing alone or in conjunction with Mr Cugura’s failure to respond to the Council’s 2 September 2011 offer, constituted unreasonable acts or omissions for the purposes of s 570(2)(b).

34    In my view the appropriate course is for the appeal to be allowed and the matter remitted to the Federal Magistrate for further consideration.

Associate:

Dated:    20 November 2012