FEDERAL COURT OF AUSTRALIA

Veolia Transport Sydney Pty Ltd v Mifsud [2012] FCA 1472

THE COURT ORDERS THAT:

1.    The appeal is allowed.

2.    The decisions of the Federal Magistrate made on 22 December 2011 and 29 March 2012 are set aside.

3.    There is no order as to costs in respect of the appeal.

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

REASONS FOR JUDGMENT

1    In May 2011 the Respondent to this appeal, Mr Anthony Mifsud, filed an Application in the Federal Magistrates Court seeking (inter alia) a declaration that the Appellant, Veolia Transport Sydney Pty Ltd (“Veolia Transport”) had breached cl 41 of the Veolia Transport (Metro Light Rail) Union Collective Agreement 2008 (the “Collective Agreement”).

2    On 22 December 2011 a Federal Magistrate published his reasons for decision for concluding that cl 41 had been breached and that monies (for a redundancy payment pursuant to the Collective Agreement and pre-judgment interest) should be paid to Mr Mifsud: Mifsud v Veolia Transport Sydney Pty Ltd [2011] FMCA 913. On 29 March 2012, the Federal Magistrate published reasons for his further decision that a pecuniary penalty should not be ordered and that Veolia Transport should pay Mr Mifsud’s costs: Mifsud v Veolia Transport Pty Ltd [2012] FMCA 167.

3    A Notice of Appeal was filed in this Court on 17 April 2012 by Veolia Transport along with an Interlocutory Application seeking a stay of the Federal Magistrate’s orders. A stay was granted by her Honour Justice Jagot on 8 May 2012.

4    Mr Mifsud filed a Notice of Objection to Competency on 2 May 2012. The objection to competency has since been abandoned.

5    The two issues pursued on the appeal are whether the Federal Magistrate properly construed and applied cl 41 of the Collective Agreement in determining that Veolia Transport had breached that provision and whether he erred in ordering the Appellant to pay costs.

THE FACTS & CLAUSE 41

6    The dispute between Mr Mifsud and Veolia Transport is within a narrow factual and legal compass.

7    Mr Mifsud commenced employment with Veolia Transport in 1997. He was first employed as a light rail driver. He suffered a back injury in about 2002. After a period of time performing restricted duties, he was ultimately employed as a shift officer.

8    The relevant facts commence in August 2009 when Veolia Transport abolished the position of shift officer. On 27 August 2009 Veolia Transport offered Mr Mifsud the position of customer service officer. Mr Mifsud declined and requested a voluntary redundancy. Thereafter Mr Mifsud was largely absent from work – either on stress leave or annual leave. He returned to work for a limited number of days in October 2009. From October 2009 through to January 2010 he was again absent from work on stress leave. In February and March 2010 he was certified unfit for work due to his back injury and stress.

9    A medical report was provided by Mr Mifsud’s medical practitioner, Dr Coorey, on 15 March 2010. A meeting was held with Dr Coorey on that date. A letter dated 19 March 2010 was then forwarded by Veolia Transport to Mr Mifsud which stated in relevant part as follows (without alteration):

During the meeting on 15 March, Dr Coorey clarified your medical condition and we discussed the prospect of your returning to work or returning to work on suitable duties.

Dr Coorey has reported that your back condition is degenerative and that work on the Light Rail would make the condition more painful possibly requiring surgery. Dr Coorey indicated that you would be unable to perform normal duties and would be unlikely to be able to resume normal duties within a reasonable period. I understand that you concur with Dr Coorey’s assessment.

Based on Dr Coorey’s prognosis of your condition and the likelihood that you will be unable to ever return to full duties as a Customer Services Officer, Veolia Transport Sydney considers that medical termination is appropriate.

Therefore, on the expiry of your sick leave entitlements, termination will be effected.

10    Mr Mifsud’s claim was that the redundancy process set up under cl 41 of the Collective Agreement had not been completed as at 19 March 2010. He claimed that Veolia Transport had not “exhausted” the “redundancy opportunities” as at the date his services were terminated for the purposes of cl 41.1.3 and that he was entitled to the redundancy payments set forth in cl 41.1.5.

11    Clause 41 of the Collective Agreement relevantly provides as follows:

41.0    REDUNDANCY

(i)    If, for any reason, VTS determines that it has too many permanent employees in any part(s) of the enterprise, and that it is unable to rely upon natural attrition to reduce workforce levels, the Company will consult with the employee’s party to this Agreement.

41.1.1     Redeployment within the Company

(i)     Employees in positions which the Company deems redundant may be offered redeployment within the Company where vacancies needing their competencies exist and if it is financially viable for the Company to redeploy. Those employees accepting offers of redeployment may be required to undertake training to refresh their competencies or develop new competencies relevant to the new position.

41.1.2     Voluntary Redundancy

(i)     If there are no opportunities for redeployment, invitations for expressions of interest in voluntary redundancy shall be made by the Company. The criteria for invitations will be determined by the Company following consultation with the Consultative Committee and staff. Notwithstanding the invitations, the Company has the right not to formally offer redundancy to employees who express an interest.

41.1.3    Involuntary Redundancy

(i)     The Company shall only apply involuntary redundancies when it is satisfied that redeployment and voluntary redundancy opportunities have been exhausted. The Company will base its selection of employee(s) for redundancy on the Company’s need for competencies, qualification and experience at that time.

41.1.4    Notice of Redundancy

…

41.1.5    Redundancy Payments

(i)    Employees shall receive severance payment of three (3) weeks for every year of service or part thereof (pro rata) in voluntary/involuntary redundancy situations to a maximum of fifty two (52) weeks. Payments will be calculated on the relevant base wage.

(ii)    Employees shall also receive payment for the following:

(a)    unused accrued annual leave;

(b)    pro rata unused long service leave after five (5) years of continuous service.

(iii)    The above payments will not be offset against accumulated superannuation benefits.

(iv)    Temporary employees will not be eligible for any redundancy payments.

(v)    …

(vi)    Procedures to give effect to this clause shall be developed in consultation with the employer and the Consultative Committee and staff.

(vii)    …

12    The Federal Magistrate referred to the offer made by Veolia Transport in 2009 and made the following findings:

[38]     Veolia Transport was apparently unwilling to offer Mr Mifsud a promotion to a position of controller. It was, in my view, reasonable for Veolia Transport to take the view that it would be inappropriate to transfer Mr Mifsud to the position of driver because of the medical restrictions impacting upon his employment. At the time Mr Mifsud was offered redeployment to the position of customer service officer in 2009, it was reasonable for Veolia Transport to conclude that such redeployment was reasonable and appropriate (subject to the maintenance of Mr Mifsud’s salary) because the duties of a customer service officer were common to some of those of a shift officer (albeit that those of a customer service officer were more restricted than those of a shift officer) which Mr Mifsud had been performing for four years. Mr Mifsud’s complaint at the time the redeployment was offered in 2009 was not that his medical condition prevented him from performing the duties of a customer service officer but, rather, that the position offered was unacceptable as it was a demotion.

The Federal Magistrate thereafter went on to conclude that “… the liability to make a redundancy payment under clause 41.1.5 was enlivened”. The reasons for decision thus relevantly state:

[41]    In my view, properly interpreted, cl 41 in the collective agreement leaves the question of a redundancy payment to management’s discretion, subject to the proviso that that discretion must be exercised lawfully. An employee cannot self select for a voluntary redundancy unless that is offered. Neither can an employee self select for an involuntary redundancy. An involuntary redundancy becomes payable if the company is satisfied that it is the only available option. A redundancy payment on involuntary redundancy is payable under clause 41.1.3 where the company is satisfied that redeployment and voluntary redundancy opportunities have been exhausted. … Ultimately, Veolia Transport chose to accept the medical opinion of Mr Mifsud’s doctor that the position of customer service officer was unsuitable. Veolia Transport did not have to accept that opinion, but elected to. Just as an employee cannot self select for an involuntary redundancy, neither can the company avoid the consequences of closing off all options for a redundant employee. By accepting the medical opinion of Dr Coorey and terminating the employment of Mr Mifsud on medical grounds, in my view, the liability to make a redundancy payment under cl 41.1.5 was enlivened. There was no basis on which the company could be satisfied that redeployment opportunities had not been exhausted. The evidence does not support any basis upon which the company could assert any opportunity for it to retain the competency, qualifications and experience of Mr Mifsud at the time of his termination.

The Federal Magistrate there concluded, it should be noted, that there was “… no basis on which the company could be satisfied that redeployment opportunities had not been exhausted”.

13    At least two facts are not in issue in the present appeal, namely:

(i)    the fact that Mr Mifsud was offered redeployment to the position of customer service officer in 2009 and that he rejected that offer; and

(ii)    the fact that his services were terminated on medical grounds.

Although Counsel for Mr Mifsud accepted these facts, it was submitted that the termination of Mr Mifsud’s services in March 2010 had to be considered in the context in which that termination took place and the circumstances peculiar to Mr Mifsud.

THE OBJECT AND PURPOSE OF CLAUSE 41

14    The principles to be applied in construing an industrial agreement were not put in issue on the appeal. Nor was the object and purpose of redundancy provisions generally put in issue.

15    What was said to be in issue was the correct construction of the particular terms of cl 41 and its application to the facts.

16    At a very general level it was thus common ground that the words used in an agreement are to be given their “natural and ordinary meaning”: cf. City of Wanneroo v Holmes (1989) 30 IR 362 at 378 per French J (as his Honour then was). See also: BHP Billiton Iron Ore Pty Ltd v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union of Workers (Western Australian Branch) [2006] WASCA 124 at [20]-[21], 153 IR 397 at 401-402 per Pullin J (Wheeler and Roberts-Smith JJ agreeing). Any other approach, it has been said, “would lead to industrial anarchy”: Norwest Beef Industries Limited v Australian Meat Industry Employees Union of Workers (WA Branch) (1984) 12 IR 314 at 331 per Olney J. “If the words of an award have an unambiguous meaning, then that is the meaning that should be ascribed to them and there is no need for the court to consider the expressed or supposed intention of the drafters of the award”: Manildra Flour Mills (Manufacturing) Pty Ltd v National Union of Workers [2012] FCA 1010 at [50] per Cowdroy J. See: Boncardo, ‘Enterprise Agreements and Contracts: Convergent and Divergent Approaches To Interpretation’ (2011) 18 JCULR 56 at 60-63.

17    The terms of industrial agreements, it was also accepted, are to be understood in the industrial context in which they appear: AMCOR Limited v Construction, Forestry, Mining and Energy Union [2005] HCA 10, 222 CLR 241. Gleeson CJ and McHugh J there observed:

[2]    The resolution of the issue turns upon the language of the particular agreement, understood in the light of its industrial context and purpose, and the nature of the particular reorganisation. There is nothing inherent in the idea of redundancy that justifies an expectation either that redundancy payments will, or that they will not, become payable in the event of a reconstruction, merger, or takeover …

Redundancy payments were there sought pursuant to cl 55 of the Australian Paper/Amcor Fibre Packaging Agreement 1997. Gummow, Hayne and Heydon JJ there also similarly observed:

[30]    Clause 55.1.1 must be read in context. It is necessary, therefore, to have regard not only to the text of cl 55.1.1, but also to a number of other matters: first, the other provisions made by cl 55; secondly, the text and operation of the Agreement both as a whole and by reference to other particular provisions made by it; and, thirdly, the legislative background against which the Agreement was made and in which it was to operate.

Kirby J there said of the Agreement there under consideration that it:

[94]    … bears the common hallmarks of colloquial language and a measure of imprecision. Doubtless this is a result of the background of the drafters, the circumstances and possibly the urging of the preparation, the process of negotiation and the omission to hammer out every detail — including possibly because such an endeavour would endanger the accord necessary to consensus and certification by the Commission.

His Honour continued:

[96]    The nature of the document, the manner of its expression, the context in which it operated and the industrial purpose it served combine to suggest that the construction to be given to cl 55.1.1 should not be a strict one but one that contributes to a sensible industrial outcome such as should be attributed to the parties who negotiated and executed the Agreement. Approaching the interpretation of the clause in that way accords with the proper way, adopted by this Court, of interpreting industrial instruments and especially certified agreements. I agree with the following passage in the reasons of Madgwick J in Kucks v CSR Ltd [(1996) 66 IR 182 at 184], where his Honour observed:

“It is trite that narrow or pedantic approaches to the interpretation of an award are misplaced. The search is for the meaning intended by the framer(s) of the document, bearing in mind that such framer(s) were likely of a practical bent of mind: they may well have been more concerned with expressing an intention in ways likely to have been understood in the context of the relevant industry and industrial relations environment than with legal niceties or jargon. Thus, for example, it is justifiable to read the award to give effect to its evident purposes, having regard to such context, despite mere inconsistencies or infelicities of expression which might tend to some other reading. And meanings which avoid inconvenience or injustice may reasonably be strained for. For reasons such as these, expressions which have been held in the case of other instruments to have been used to mean particular things may sensibly and properly be held to mean something else in the document at hand.”

See also: Shop Distributive and Allied Employees’ Association v Woolworths SA Pty Ltd [2011] FCAFC 67 at [14]-[18] per Marshall, Tracey and Flick JJ; Public Service Association (SA) Inc v South Australia [2012] SASCFC 66 at [32] to [38], 113 SASR 49 at 57-58 per Stanley J (Doyle CJ and Vanstone J agreeing).

18    The “industrial heritage” of the present Collective Agreement, it was further accepted, was to be found in the Sydney Light Rail (State) Award 1997 – an award of the Industrial Relations Commission of New South Wales. It was further accepted that provisions such as cl 41 could be traced back to the Termination, Change and Redundancy Case (1984) 8 IR 34 and the Termination, Change and Redundancy Case (Supplementary Decision) (1984) 9 IR 115.

19    In AMCOR Limited, Gummow, Hayne and Heydon JJ set forth the “Legislative background” to such redundancy provisions as follows:

The legislative background — awards and redundancy

[42]     In 1981, the Australian Council of Trade Unions made claims that led, ultimately, to the making of awards providing terms governing the termination of employment, providing for consultation about major changes likely to have significant effects on employees, and providing for terms governing what was to happen in cases of redundancy. The Commission first published reasons determining issues of principle. Having heard further submissions from the parties, the Commission then published a supplementary decision in which it settled the form of order to be made.

[43]    The Commission said, in its supplementary decision, that it had “some difficulty in finding a suitable expression” to make its intention clear about what constituted “redundancy”. In its earlier decision, it had referred to a number of definitions of redundancy. Chief among those was the decision by Bray CJ in R v Industrial Commission (SA); Ex parte Adelaide Milk Supply Co-operative Ltd [(1977) 16 SASR 6 at 8] which was understood [(1984) 8 IR 34 at 56] as emphasising that redundancy refers “to a job becoming redundant and not to a worker becoming redundant”.

[44]    For present purposes, what is important is that the Commission appears to have been seeking a form of words that would accommodate two features. First, as was said in the Commission's supplementary decision [(1984) 9 IR 115 at 128], it “did not intend the redundancy provisions to apply where an employee is dismissed for reasons relating to his/her performance, or where termination is due to a normal feature of a business”. Secondly, the Commission did not intend redundancy provisions to be engaged by the transmission of a business. In its earlier decision, the Commission had emphasised that it did “not envisage severance payments being made in cases of succession, assignment or transmission of a business”. That is, the Commission regarded termination of employment by a particular employer as not sufficient to engage the redundancy obligations, even if that employer was ceasing any participation in the particular business. The focus of the provision was upon the work undertaken by the employee (the “job”), not upon the identity of either the employee or the employer. The relevant inquiry was whether employment in a particular kind of work then being undertaken was to come to an end. If that employment was to come to an end, it was necessary to consider why that was to happen. Was it because the employer no longer wanted the job, then being done by the employee, done by anyone? Or was it “due to the ordinary and customary turnover of labour”? And, as the Commission's evident concerns about drafting show, these alternatives were not, and are not to be, understood as exhausting the cases that might have to be considered.

20    The terms of cl 41, it was thus accepted, were to be construed largely by reference to the terms used in the clause itself, the object and purpose of such provisions, the Collective Agreement as a whole and the “industrial heritage” from which such provisions emerged.

THE TERMINATION OF SERVICES ON MEDICAL GROUNDS

21    Counsel for Veolia Transport advanced two broadly expressed submissions, namely:

(i)    once a reasonable offer of redeployment had been made to Mr Mifsud and rejected, as it had been in 2009, he could not thereafter reserve to himself an entitlement to claim a redundancy payment. Had he accepted that offer of redeployment, no question could thereafter arise as to him being redundant. An employee, it was contended, could not refuse a reasonable offer of redeployment and thereby unilaterally become entitled to redundancy payments by reason of being “involuntary[ily] redundant”. The employee need not accept the offer of redeployment; but rejection of the offer does not carry with it the entitlement to redundancy payments set forth in cl 41.1.5; and

(ii)    once the services of an employee are terminated for a reason other than redundancy such as dismissal for cause, the terms of cl 41 cannot thereafter be invoked. Absent any suggestion that a termination for cause or (more relevantly) termination upon medical grounds is but a cloak to avoid the entitlements to redundancy payments provided for by cl 41, that clause – so it was submitted – no longer applies. An employee whose services are terminated for misconduct could not, it was submitted, be entitled to redundancy payments even if the “process” set forth in cl 41 had started but not concluded.

Both of these submissions are accepted. Either is a sufficient basis upon which the appeal should be allowed.

22    As to the first submission, the Federal Magistrate concluded that the offer of redeployment was “reasonable and appropriate” at the time the offer was made: [2011] FMCA 913 at [38]. That finding cannot be confined (as Counsel for Mr Mifsud argued it should be) to a finding regarding the reasonableness and appropriateness of the offer in light of Mr Mifsud’s qualifications. Mr Mifsud’s salary was to be maintained.

23    For the purposes of cl 41.1.1 of the Collective Agreement, it is concluded that Veolia Transport had “offered redeployment within the Company …”. Clause 41.1.5(i), it is further concluded, is to be construed such that the situation following the rejection of a reasonable offer of employment was thereafter not an “involuntary redundancy situation …”. Such is the natural and ordinary meaning of the terms of cl 41 in its entirety and, more specifically, cll 41.1.1 and 41.1.5(i). Once the offer was made in 2009, there thereafter remained no entitlement to redundancy payments pursuant to cl 41.

24    As to the latter submission, there was no challenge to the fact that Mr Mifsud’s services were terminated on medical grounds. By the time his services were terminated in March 2010, it was accepted that his medical condition was such that “the position of customer service officer was unsuitable for him”. The Federal Magistrate relevantly concluded:

[35]     Mr Henry and Mr Mifsud met on 5 March 2010. Mr Mifsud, during that meeting, referred to his back condition and a workers compensation issue concerning that back condition. He also referred to a blood pressure problem. Subsequently, Mr Henry arranged an appointment with Dr Coorey to discuss Mr Mifsud’s medical condition and options for him to return to work. Mr Henry and Mr Mifsud met with Dr Coorey on 15 March 2010. Another officer from Veolia Transport also attended. Dr Coorey orally expressed the opinion that, given Mr Mifsud’s degenerative back condition, the position of customer service officer was unsuitable for him. Dr Coorey confirmed that opinion in a report dated the same day. Mr Henry met Mr Mifsud on 19 March 2010 and advised him, in the light of Dr Coorey’s prognosis, that Veolia Transport had formed the view that a medical termination was the only available option. This was confirmed by letter dated the same day.

The Federal Magistrate returned to Mr Mifsud’s medical condition shortly thereafter and observed:

[39]     Mr Mifsud’s stress condition, which prevented him from working for some time in 2009, may be put to one side. That was a temporary condition which arose from uncertainty concerning his employment. It is reasonable to suppose that that stress condition would be resolved once the uncertainty had been removed. The fact was that Mr Mifsud wanted a redundancy payment and sought that consistently with the support of his union.

[40]     Ultimately, Veolia Transport accepted the medical opinion of Mr Mifsud’s doctor, Dr Coorey, that his degenerative back condition rendered the position of customer service officer unsuitable for him. It is not open to me to go behind that opinion as both parties rely upon it. It may have been convenient for Mr Mifsud to rely on the opinion in support of his claim for a redundancy. It may also have been convenient for the company to rely on the opinion to support its decision that there should be a medical termination. The question to resolve is which of the parties is mistaken concerning the question of whether Mr Mifsud is, in the circumstances, entitled to the redundancy payment he seeks.

25    The difficulty for Mr Mifsud, it is respectfully concluded, is not only that the offer made in August 2009 brought to an end any potential entitlement to redundancy payments pursuant to cl 41. The additional difficulty is that the facts surrounding the eventual termination of his services in March 2010 also ended any entitlement to redundancy payments.

26    Mr Mifsud’s services were terminated in March 2010 on medical grounds. There was no suggestion that the termination of his services was anything other than a decision made bona fide upon the basis of (at least) the medical report of Dr Coorey.

27    Clause 41, it is concluded, does not apply to those circumstances where the reasons for the termination of an employee are not related to a “job” or a “position” being no longer available and where a decision to terminate is founded upon reasons peculiar to a particular employee – such as misconduct or medical unfitness. By way of contrast, the concept of redundancy is that “… a job becomes redundant when the employer no longer desires to have it performed by anyone. A dismissal for redundancy seems to be a dismissal, not on account of any personal act or default of the employee dismissed or any consideration peculiar to him, but because the employer no longer wishes the job the employee has been doing to be done by anyone”: The Queen v Industrial Commission of South Australia; Ex parte Adelaide Milk Supply Co-operative Limited (1977) 16 SASR 6 at 8 per Bray CJ. Appl’d: Short v F W Hercus Pty Limited (1993) 40 FCR 511 at 521 per Burchett J; Dibb v Commissioner of Taxation [2004] FCAFC 126 at [33], 136 FCR 288 at 401-402 per Spender, Dowsett and Allsop JJ; Encyclopaedia Britannica Australia Ltd v David Campbell [2009] NSWCA 286 at [68] per Sackville AJA (Giles and Macfarlan JJA agreeing); Whittaker v Unisys Australia Pty Ltd [2010] VSC 9 at [92], 26 VR 668 at 685 per Ross J. For a redundancy to arise it may not be “necessary for the work to have disappeared altogether”: Quality Bakers of Australia Ltd v Goulding (1995) 60 IR 327 at 332-333 per Beazley J. Whatever be the exact reach of the term “redundancy”, it does not extend to the dismissal of an employee for cause.

28    The conclusion that cl 41 on its proper construction does not apply to those circumstances where the dismissal of an employee occurs by reason of a “personal act or default … or [on the basis of a] consideration peculiar to him” is dictated by:

    the terms of cl 41, in its entirety, and in the application of that clause to those circumstances where an employer decides that it “has too many permanent employees … and that it is unable to rely upon natural attrition to reduce workforce levels …”;

and

    the terms of cl 41.1.3 and the application of that provision to those circumstances where an employer is “apply[ing] involuntary redundancies …”.

The conclusion is only further supported by a consideration of:

    the object and purpose of provisions such as cl 41– particularly the fact that they are not intended to apply “where an employee is dismissed for reasons relating to his/her performance, or where termination is due to a normal feature of a business …”.

Clause 41 cannot be construed as continuing to apply to those circumstances which may arise where consideration is initially being given to making a particular employee’s “job” redundant but where circumstances intervene and lead to the termination of his services for cause.

29    It would also be a curious conclusion to be reached on the facts if – as is maintained by Veolia Transport – Mr Mifsud had effectively rejected an offer an alternative position suitable and appropriate for him at the time the offer was made in August 2009 and yet remained entitled to redundancy payments the following year.

30    Mr Mifsud, it is thus concluded, did not fall within cl 41.1.5 – the situation in which he found himself at the time of the termination of his services was not a “redundancy situation”.

COSTS

31    The second of the two matters to be resolved on appeal is whether or not the Federal Magistrate was correct in concluding that the conduct of Veolia Transport fell within s 570(2)(b) of the Fair Work Act 2009 (Cth) and that costs should be paid on an indemnity basis.

32    Section 570 provides as follows:

Costs only if proceedings instituted vexatiously etc.

(1)    A party to proceedings (including an appeal) in a court (including a court of a State or Territory) 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 subsection (2) or section 569 or 569A.

(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)    the court is satisfied of both of the following:

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

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

33    Section 570 of the Fair Work Act had its counterpart in s 347 of the Workplace Relations Act 1996 (Cth). The object of s 347 was said to be “to free parties from the risk of having to pay the costs of an opposing party, subject to a saving designed to protect a party against whom a proceeding (including an appeal) has been instituted vexatiously or without reasonable cause”: Construction, Forestry, Mining and Energy Union v Employment Advocate [2001] FCA 1767 at [4] per Lee, Finn and Merkel JJ. Subsequently, another Full Court said of s 347 that “the object that s 347(1) seeks to achieve is plain enough: it is to give effect to a policy choice about the controversial issue of whether costs should ordinarily follow the event or whether they should ordinarily be borne by the party incurring them”: Commonwealth of Australia v Construction, Forestry, Mining and Energy Union [2003] FCAFC 115 at [10], 129 FCR 271 at 274. Black CJ, Tamberlin and Sundberg JJ went on to observe that “it would be quite contrary to this object to read s 347(1) narrowly …”: [2003] FCAFC 115 at [11].

34    Where a proceeding involves the enforcement of a right that owes its existence to the Fair Work Act, s 570 applies even though the Court may also be exercising the jurisdiction conferred by s 39B of the Judiciary Act 1903 (Cth): Australasian Meat Industry Employees’ Union v Fair Work Australia (No 2) [2012] FCAFC 103, 203 FCR 430. Neither the form of the application nor the identity of a respondent as an “officer of the Commonwealth” is conclusive: [2012] FCAFC 103 at [32], 203 FCR at 438. Appl’d: Australian Industry Group v Fair Work Australia (No 2) [2012] FCAFC 138.

35    Section 570, however, is not a provision which precludes an order for costs being made in respect to “industrial matters”, broadly described. Even though it may readily be accepted that the object of s 570 (and its predecessors) is to reflect a long-standing “policy choice” and should not be given any “narrow” construction, it nevertheless remains a provision subject to a number of limitations.

36    One limitation is potentially found in the constraint that there be “proceedings … in a court” exercising jurisdiction under the Fair Work Act. The term “proceeding” is not defined in the Dictionary to the Act found in s 12. It may well be the case, however, that an application filed in a court which is an abuse of process does not constitute a “proceeding”. Cases in which an applicant claims, for example, damages for a contravention of the Act which cannot be substantiated in any meaningful way may constitute an abuse of process. Little difficulty may be experienced in cases where an applicant claims what may be regarded by an opponent as a “very optimistic” amount by way of damages; but in those cases where an applicant claims an amount by way of damages which is unsustainable on any rational basis may attract different considerations.

37    A second limitation is also potentially found in that s 570 only serves to protect a “party” to a proceeding. There is thus no express limitation upon the power of the Court to order – in an appropriate case – costs against a non-party.

38    A third limitation is that the proceeding must be one in which the court is “exercising jurisdiction under [the Fair Work] Act …”. Where this Court, for example, is exercising its appellate jurisdiction, s 570 has no application because the Court is exercising the jurisdiction conferred by s 24 of the Federal Court of Australia Act 1976 (Cth) and not jurisdiction conferred by the Fair Work Act: Construction, Forestry, Mining and Energy Union v CSBP Ltd (No 2) [2012] FCAFC 64, 202 FCR 149. Similarly, an appeal to the High Court arises under s 73 of the Constitution and thus is not covered by s 570 of the Fair Work Act: Board of Bendigo Regional Institute of Technical and Further Education v Barclay (No 2) [2012] HCA 42 at [9], 86 ALJR 1253 at 1254 per Heydon J.

39    But these matters may presently be left to one side. The provision of relevance to this appeal is s 570(2)(b), namely the statutory exception to s 570(1) which applies where the court is “satisfied that the party’s unreasonable act or omission caused the other party to incur the costs …”.

40    It is sufficient for present purposes to note that Counsel for Mr Mifsud did not submit that the order for costs made by the Federal Magistrate should not be set aside if the appeal is allowed.

CONCLUSIONS

41    It follows that the appeal is to be allowed.

42    Neither party sought their costs of the appeal. Accordingly, the appropriate order is that there be no order as to costs in respect of the appeal.

The Orders of the Court Are:

1.    The appeal is allowed.

2.    The decisions of the Federal Magistrate made on 22 December 2011 and 29 March 2012 are set aside.

3.    There is no order as to costs in respect of the appeal.

Associate:

Dated:    21 December 2012