FEDERAL COURT OF AUSTRALIA

Fair Work Ombudsman v Valuair Limited (No 3) [2014] FCA 1182

THE COURT ORDERS THAT:

1.    The interlocutory applications for costs filed by the respondents be dismissed.

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

REASONS FOR JUDGMENT

1    On 24 July 2014 I dismissed claims against the first and second respondents that they had breached the terms of a federal award, the Aircraft Cabin Crew Award 2010 (Cth) (“the Award”), and claims against the third respondent that it was knowingly concerned in breaches of the Award (Fair Work Ombudsman v Valuair Limited (No 2) [2014] FCA 759) (“the Judgment”).

2    The proceedings were commenced under the Fair Work Act 2009 (Cth) (“the FW Act”). Section 570 of the FW Act erects a statutory bar to the award of costs in relation to a matter arising under the FW Act, unless the requirements of s 570(2) are satisfied. Section 570(2) provides:

570    Costs only if proceedings instituted vexatiously etc.

…

(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 the FWC;

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

3    The first and second respondents have sought costs, relying on both s 570(2)(a) and (b), in part on an indemnity basis. The third respondent has sought costs relying on either s 570(2)(a) or (b). The applicant resists any requirement to pay costs.

4    The applicant submitted that the applications for costs should not be entertained because they should have been made during the hearing of the proceedings, relying principally on McCracken v Phoenix Constructions (Queensland) Pty Ltd [2013] FCAFC 87 (“McCracken”). McCracken dealt with the appropriate practice to be followed on appeals to the Court. This is not such a case. McCracken accepted (at [18]) that there may be circumstances where it would not be appropriate to make submissions about costs during a hearing – e.g. where an offer has been made. This is such a case.

5    I accept that the Court will normally require a party to seek, or foreshadow, an application for costs at a hearing. If no special order for costs is sought there will often be no reason to defer the question and a party who refrains from taking that basic step may put their costs at risk (see e.g. Tristar Steering and Suspension Australia Ltd v Industrial Relations Commission of New South Wales (No 2) (2007) 159 FCR 274 at [26]). However, claims for indemnity costs based on offers or correspondence which cannot properly be disclosed during a hearing obviously stand in a different position. So also do claims for costs which must address the terms of s 570(2) of the FW Act. It would often not be appropriate for matters relying on s 570(2) to be ventilated during a hearing and before judgment.

6    There is no doubt about the power of the Court to deal separately with the question of costs. As a matter of discretion, I would not withhold costs from the respondents in the present matter if a proper basis for the award of costs was otherwise established. The applicant does not (and cannot) claim that it had no notice that costs would be sought if the proceedings were dismissed.

7    It is not claimed that the proceedings were instituted vexatiously. The basis upon which an order for costs is sought is, in the first instance, that the proceedings were instituted without reasonable cause or that some unreasonable act or omission by the applicant caused the respondents to incur costs.

8    In Council of Kangan Batman Institute of Technology and Further Education v Australian Industrial Relations Commission (2006) 156 FCR 275 (“Kangan”), a Full Court said (at [60]), in relation to similar requirements in the earlier Workplace Relations Act 1996 (Cth):

60    … A party does not institute proceedings without reasonable cause merely because that party fails in the argument put to the Court: R v Moore; Ex parte Federated Miscellaneous Workers’ Union of Australia (1978) 140 CLR 470 per Gibbs J at 473. The section reflects a policy of protecting a party instituting proceedings from liability for costs, but that protection may be lost. Although costs will rarely be awarded under the section and exceptional circumstances are required to justify the making of such an order (see Heidt v Chrysler Australia Ltd (1976) 26 FLR 257; 13 ALR 365 per Northrop J), a proceeding will be instituted without reasonable cause if it has no real prospects of success, or was doomed to failure: see Kanan v Australian Postal and Telecommunications Union (1992) 43 IR 257 per Wilcox J; see also Bostik (Australia) Pty Ltd v Gorgevski (No 2) (1992) 36 FCR 439; and Nilsen v Loyal Orange Trust (1997) 76 IR 180.

9    In Kanan v Australian Postal & Telecommunications Union (1992) 43 IR 257, in the passage to which the Full Court in Kangan was obviously referring, Wilcox J said (at 264-5):

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.

10    More recently, Jessup J said in Clarke v Dixie Cummings Enterprises Pty Ltd [2013] FCA 987 at [14]:

14    It is true that I have found that the applicant’s resistance to the respondent’s privilege claim was without substance, and it might even be said that I regard this as a clear case. On the other hand, I think there is a danger of the exceptions in s 570(2) being used in circumstances in which the most that one can say is that the losing party had a self-evidently weak case. In my opinion, that is not the kind of situation to which s 570(2) is addressed. There must be a higher level of criticism or disapprobation which the court is able to express about a losing party’s case if the bars in paras (a) and (b) of s 570(2) are to be crossed by a party which succeeds on the application concerned.

11    None of the observations cited above, may be substituted for the text of s 570(2), but they each sufficiently indicate (as does s 570 itself) that an award of costs in a matter arising under the FW Act is an exceptional, rather than a usual, order. That is an explicit legislative restriction which must be recognised and implemented. Furthermore, where the case turns on an arguable question of law, rather than incontestable facts, it will be rare that the test can be met.

12    The submissions by the first and second respondent, in support of their application for costs, were largely based upon the circumstance that the legal arguments which prevailed were pressed upon the applicant in correspondence before the hearing took place. The first and second respondents relied upon the fact that in the judgment I upheld their contention that the Award (and related provisions in the FW Act) applied to employment, rather than simply to work, in Australia. Submissions on behalf of the third respondent relied also on the same suggested deficiency in the applicant’s case.

13    In the judgment I discussed the basic premise on which, in a sense, the whole of the applicant’s case depended and rejected it. That basic premise was that the Award applied to work done by overseas-based cabin crew if that work was done in Australia. To focus its case, the applicant selected eight cabin crew and confined its attention to internal flights within Australia which it contended were not properly seen as an extension (before or after) of an overseas flight. Although, in the judgment, I criticised that distinction I have no doubt it was adopted in order to concentrate on the central issue which the applicant wanted to ventilate – the application of “Australian” awards to “Australian” work. In the judgment I also referred (at [41]) to the fact that certain rostering arrangements adopted in the period with which the proceedings were concerned “most clearly expose[d] the factual issue upon which the present proceedings are focussed”.

14    Although the respondents now have a judgment which vindicates their legal arguments, one way of testing whether the applicant’s case was entirely without merit is to ask what most likely would have happened if the respondents had sought summary judgment under s 31A of the Federal Court of Australia Act 1976 (Cth) (which they did not). Section 31A provides (relevantly here):

31A    Summary judgment

…

(2)    The Court may give judgment for one party against another in relation to the whole or any part of a proceeding if:

(a)    the first party is defending the proceeding or that part of the proceeding; and

(b)    the Court is satisfied that the other party has no reasonable prospect of successfully prosecuting the proceeding or that part of the proceeding.

(3)    For the purposes of this section, a defence or a proceeding or part of a proceeding need not be:

(a)    hopeless; or

(b)    bound to fail;

for it to have no reasonable prospect of success.

15    I have no doubt that an application of that kind would not have succeeded. It certainly could not have been said, in my view, that the proceeding was “doomed to fail” (see Kangan). On the contrary, although I described elements of the applicant’s case as “artificial and unsatisfactory” (see [83]) and the consequence of the suggested construction of the Award as “potentially bizarre” (see [110]), those reproaches were offered after the advantage of a full trial and comprehensive written and oral submissions. Although it may be argued (and has been in this case) that the conclusions I reached should have been apparent to the losing party well in advance, that is a counsel of perfection which I am not prepared to act upon in the present case.

16    In my view, it ought not be concluded that the requirements of s 570(2)(a) have been met.

17    The respondents took different approaches to the requirements of s 570(2)(b). The first and second respondents complained about procedural matters arising from the service of notices to produce, pursuing issues not supported by specific evidence and requiring witnesses for cross-examination which the applicant then decided not to cross-examine, although this last aspect was not finally pressed. It would be impossible to deal with matters at this level of procedural detail without conducting an inquiry into the thinking of those advising the applicant. The first and second respondents bear the onus of showing unreasonable conduct. Raising a legitimate criticism about procedural inconsideration (which criticism I will accept at face value for the purpose of the discussion) does not suffice to make out the test in s 570(2)(b). Many twists and turns in the litigious process have the potential to generate legal, or other, costs. Those perils of litigation obviously fall within the generally intended protection given by s 570 of the FW Act. Whether that should be so is not the matter for present inquiry.

18    The third respondent complained, in substance, that the applicant unreasonably caused it to incur costs by not discontinuing the proceedings at particular points in time when, it was submitted, it should have been obvious the applicant would lose. That argument is sufficiently covered by what I have already said.

19    There was one matter, in respect of which in my view no proper case was pleaded or pursued. It concerned allegations of failing to make superannuation contributions. I dealt with it in the judgment at [114]-[119]. However, that issue involved, by comparison with the rest of the case, such little time and attention that it could not independently afford a foundation to consider the award of costs under s 570 of the FW Act.

20    It follows that, in my view, no order for costs should be made against the applicant. No occasion arises to consider whether any costs awarded should be awarded on an indemnity basis.

21    Although the present applications are rejected, I do not do so on the basis that they either were unarguable or unreasonable. There will be no order for costs of the proceedings generally and no order for costs of the present interlocutory applications.

Associate:

Dated:    6 November 2014