FEDERAL COURT OF AUSTRALIA

Kerrisk v DC Holdings WA Pty Limited (No 2) [2014] FCA 196

THE COURT ORDERS THAT:

1.    There be no order for costs on the application for summary judgment.

2.    There be no order for costs on the applicants' application for costs.

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

REASONS FOR JUDGMENT

1    On 18 November 2013, the Court gave judgment dismissing the respondent’s interlocutory application for summary judgment. See Kerrisk v DC Holdings WA Pty Limited [2013] FCA 1217. The applicants now seek an order that its costs of that application be payable on an indemnity basis and forthwith by the respondent.

2    The question is whether the applicants are entitled to an order for costs and, if so, what the terms of any order should be.

Are the applicants entitled to an order for costs?

3    The proceeding arises under the Independent Contractors Act 2006 (Cth) (IC Act).

4    Section 17 of the IC Act provides:

(1)     A party (the first party) to a proceeding (including an appeal) in a matter arising under this Part must not be ordered to pay costs incurred by any other party to the proceeding unless the first party instituted the proceeding vexatiously or without reasonable cause.

(2)     Despite subsection (1), if a court hearing a proceeding (including an appeal) in a matter arising under this Part is satisfied that a party (the first party) to the proceeding has, by unreasonable act or omission, caused another party to the proceeding to incur costs in connection with the proceeding, the court may order the first party to pay some or all of those costs.

(3)     In this section:

costs includes all legal and professional costs and disbursements, and expenses of witnesses.

5    Section 17 of the IC Act is in relevantly similar terms to s 824 of the now repealed Workplace Relations Act 1996 (Cth) (WR Act).

6    There is no debate between the parties that authorities bearing on the proper understanding of the concepts of a “matter” and a “proceeding” in relation to s 824 of the WR Act are also relevant to the proper understanding of s 17 of the IC Act.

7    In particular, it is accepted that the respondent’s application for summary judgment was a “proceeding in a matter” arising under Pt 3 of the IC Act and so s 17 of the IC Act is enlivened.

8    The applicants first contend that the proceeding, being the application for summary judgment, was instituted by the respondent “without reasonable cause” for the purposes of s 17(1).

9    The applicants accept there is a distinction between the pursuit of an argument which does not succeed and the institution of a proceeding which is misconceived and submits that in this case the application for summary judgment falls into the latter category.

10    The applicants contend that at the time the respondent made its application, it knew that there existed controversies of fact (and mixed fact and law) including:

(1)    whether or not the respondent was the owner of the dental practice conducted at the premises;

(2)    whether or not Dr Kerrisk performed dentistry and related services as an “independent contractor” to the respondent.

11    The applicants contend it was clear when the proceeding was instituted that the determination of whether Dr Kerrisk is to be properly characterised as an independent contractor for the purposes of the IC Act was a mixed question of fact and law and that the factual controversy as to whether or not he was the owner of the dental practice was material, if not pivotal to that determination.

12    The applicants further contend that the resolution of the controversy was also going to require evidence as to the substance of the relationship between the parties including the way the parties’ contractual obligations were carried out.

13    The applicants say that notwithstanding these points, the respondent essentially submitted that there were only questions of law relevantly in issue and that the Court was in a position to determine them without the need for the matter to proceed to trial. Further that there was no attempt by the respondent to adduce any evidence other than the facilities and services agreement (FSA), the associateship deed, and some of the pleadings in the proceedings then current between the parties in the Supreme Court of Western Australia. As a result, the Court was left uninformed about the way in which the parties’ obligations were carried out in practice, notwithstanding that the respondent bore the onus of demonstrating that the applicants’ case had no reasonable prospects of success.

14    Accordingly, the applicants submit that this was a matter which should obviously have proceeded to trial.

15    The respondent says the application for summary judgment centred on two propositions:

(1)    For the purposes of s 5 of the IC Act the “services” which are the subject of the contract must be provided by the “independent contractor” to the other party to the contract; and

(2)    The applicants could not establish that they provide services to DC Holdings under the FSA.

16    The respondent accepts that the first proposition is the subject of conflicting authorities but contend it cannot be said that such a position was unarguable.

17    As to the second proposition, it says it is a narrow one and did not require a consideration of the entirety of the relationship as submitted on behalf of the applicants. The proposition is that by reason of the fact that the applicants did not provide services to the respondent, they could not be in an independent contractor relationship with the respondent.

18    The respondent says the applicants submitted that they did provide services to the respondent because the dental practice was owned by the respondent, not the applicants. Further, it is observed that in the case pleaded by the applicants they rely only upon specific clauses of the FSA to make good that proposition. Nothing in their outline of submissions on the summary judgment application suggested that they would argue that the substance of the relationship is anything other than as presented by the written agreements. Further, that the current state of the pleading does not permit such an argument.

19    The respondent notes that in oral submissions it argued that even if the applicants satisfied the Court that the practice was owned by the respondent, the applicants used the licences granted to them to operate the practice for their own benefit and in so doing do not provide any services to the respondent.

20    The respondent submits it cannot be said that is was not open to the Court to determine the issue on the case as pleaded and the written agreements tendered. There was no issue of fact between the parties at the time the interlocutory application was made. What was in issue was the legal conclusion to be drawn from the facts as pleaded, being who owned the practice for which the applicants are alleged to have provided dentistry and related services.

21    The respondent further submits that the applicants will need to amend the statement of claim to make the case that they now wish to argue.

22    In broad terms, I accept the submissions made on behalf of the respondent. I do not consider that at the time the summary application was made it was plainly not open to argue the independent contractor point.

23    I also accept that there was a real issue as to whether or not the applicants could establish that they provided services to the respondent under the FSA.

24    This is one of those applications for summary judgment where, in my view, it could not be said at the time of the making of the application that there was no prospect of the application succeeding.

25    The applicants further contend that, even if it is not possible to say that the proceeding was instituted without reasonable cause, costs may be awarded against the respondent pursuant to s 17(2) of the IC Act, if the Court concludes that it has “by unreasonable act or omission” caused the applicants to incur costs in connection with the proceeding.

26    In this regard, the prosecution of an application that is bound to fail can be regarded as “an unreasonable act”: see Australian and International Pilots Association v Qantas Airways Limited (No 3) [2007] FCA 879; (2007) 162 FCR 392 at [36] in relation to s 824(2) of the WR Act.

27    The applicants say that on 21 October 2013 they sent a letter to the respondent to which no response was received. The letter invited the respondent to discontinue the proceeding forthwith and foreshadowed an application for costs if the respondent failed to discontinue and was unsuccessful.

28    The applicants submit that in circumstances where the proceeding instituted was misconceived and fundamentally lacking in merit and had no prospect of success and the respondent had the benefit of detailed written submissions from the applicant identifying the arguments that were ultimately upheld by the Court in dismissing the application, it was unreasonable for the respondent to have continued to prosecute its application after receiving the applicants’ letter.

29    In my view, for the reasons discussed above in relation to whether or not the proceeding had reasonable cause, those submissions cannot be made out. It cannot be said the summary judgment application was bound to fail. The sending of the letter did not alter this position.

30    In Construction, Forestry, Mining and Energy Union v Clarke [2008] FCAFC 143; (2008) 170 FCR 574, the Full Court considered the “unreasonable act or omission” cost exception at [28] and [29]. As the Court ultimately indicated, there is a distinction between a party who pursues arguments which are ultimately abandoned or rejected by the Court and a party who commences a proceeding which is misconceived in the sense of being incompetent or unsupportable, and simply because a party does not conduct its litigation in the most efficient way does not mean that the Court should exercise its discretion to make a costs order.

31    Those observations, in my view, are apposite here. The respondent has run an argument that the Court could reasonably consider but which the Court has ultimately rejected. Rejection does not necessarily mean the application was an unreasonable act.

conclusion and order

32    I do not consider the circumstances described in s 17(1) or s 17(2) of the IC Act apply in this case. As a result, there should be no order as to costs on the summary judgment application, or on this application for costs.

1.    There be no order for costs on the application for summary judgment.

2.    There be no order for costs on the applicants’ application for costs.

Associate:

Dated:    10 March 2014