FEDERAL COURT OF AUSTRALIA

Australian Rail, Tram and Bus Industry Union v Railway Employment Co Pty Ltd [2015] FCA 710

THE COURT ORDERS THAT:

1.    The applicant have leave to discontinue the proceeding on the basis that each party bear its own costs of the proceeding.

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

REASONS FOR JUDGMENT

1    By application dated 15 April 2015, the applicant (Union) sought an order that, in discontinuing the proceeding, it be not liable to pay the respondents’ costs. I indicated to the parties that, unless there was objection, I intended to deal with the application on the papers. There was no objection, and I am satisfied that this is an appropriate application to be addressed on the papers and without a hearing. The third respondent (Mr Evans) contested the application on his own behalf and purportedly on behalf of the second respondent (Masked Fox). Being a company, Masked Fox must not proceed, without leave, otherwise than by a lawyer (r 4.01(2) Federal Court Rules 2011 (Cth) (Rules)). Mr Evans did not seek leave to proceed on behalf of Masked Fox. Nevertheless, for the purposes of this application I am prepared to treat his material as having been advanced on his and Masked Fox’s behalf.

2    For reasons set out below, I have come to the view that it is appropriate to make an order that the Union have leave to discontinue the proceeding on the basis that there be no order as to costs. In order to explain why I have come to that conclusion, it is necessary to set out the background to this matter and to the Union’s application.

Overview of the claim

3    By originating application dated 6 June 2014, the Union sought relief against the first respondent (Railway Company), Masked Fox, and Mr Evans. The Union’s case theory appears to be that Mr Evans, as guiding mind of Railway Company and of Masked Fox, attempted to procure that employees of Railway Company would be transferred to the employ of Masked Fox and become entitled to lesser pay, but that the scheme did not work (in that the employees never transferred) and in the result the employees were unpaid and constructively dismissed, constituting adverse action and breach of s 50 of the FW Act. Mr Evans’s liability was said to arise (inter alia) out of actual knowledge of the breaches of s 50 and s 340(1), intent to participate therein, and that he had aided, abetted, counselled, procured, induced, was knowingly concerned in, or conspired with others to effect, those breaches. Masked Fox’s accessorial liability for the s 340(1) breaches was alleged to arise in a similar way.

4    In slightly longer form, the Union alleged that up to March 2014 Railway Company provided labour in the form of locomotive drivers to Metro Trains Melbourne. Mr Evans was sole shareholder of Railway Company and it was alleged that, notwithstanding his sister Ms Lopez was sole director and secretary, he was its controlling mind. In June 2013, employees transferred from the Regional Port Enterprizes Pty Ltd (Regional Port), of which Mr Evans was director, secretary, and sole shareholder, to Railway Company. Those persons were covered by the Regional Port Enterprizes Pty Ltd Agreement 2012–2016, and the agreement was alleged to be transferable so that it continued to cover them (Railway Company Agreement). In December 2013, the Fair Work Commission approved the Masked Fox Personnel Pty Ltd Agreement 2013–2017 (Masked Fox Agreement). The Masked Fox Agreement provided for lower hourly rates than the Railway Company Agreement. In January 2014 Railway Company purported to cease to trade and it is alleged that Mr Evans attempted to procure that the employees transfer to Masked Fox and be paid at Masked Fox Agreement rates. That led to disputation including as to whether the employees were employees of Railway Company or of Masked Fox, whether entitlements previously accrued would be paid and (if so) by whom, and the rates at which they would be paid. In March 2014 Masked Fox’s CFO emailed the employees saying that payments from Masked Fox would be temporarily suspended “until this particular issue is resolved.” The employees came to the view that they would no longer be paid for performing work for Railway Company, and did not perform further work.

5    The Union alleges that no transfer of employment was ever agreed, that the employees remained employees of Railway Company, and that each was constructively dismissed by the repudiation of his contract of employment. Various breaches of s 340(1) of the FW Act were said to have thereby arisen (Adverse Action Breaches). Mr Evans was alleged to have advised, encouraged, or incited Railway Company to engage in the Adverse Action Breaches, for a prohibited reason, and thus to have breached s 340(1) of the FW Act by operation of s 362. Masked Fox was alleged to be accessorily liable because it had actual knowledge of the Adverse Action Breaches and that they were taken for a prohibited reason, it intended to participate in them, it aided, abetted, counselled or procured, or induced, or was knowingly concerned, or conspired with others to effect them, and therefore was “involved” in the contraventions (within s 550 of the FW Act). The same was alleged as against Mr Evans. It was further alleged that Railway Company failed to comply with the Railway Company Agreement in that it failed to provide payslips, underpaid minimum superannuation contributions, failed to deposit salary sacrifice amounts into superannuation funds, failed to pay out accrued annual leave on termination, failed to pay redundancy entitlements, and underpaid wages. Each is alleged to be a breach of s 50 of the FW Act (Section 50 Breaches). Mr Evans is said to be accessorily liable for the Section 50 Breaches for the same reasons as for the Adverse Action Breaches.

The parties’ submissions and evidence

6    The Union submitted that r 26.12(7) of the Rules is subject to s 570 of the FW Act, citing Ryan v Primesafe [2015] FCA 8 (Mortimer J). It submitted that none of the s 570(2) criteria could be made out. The Union submitted that it commenced the proceeding on a proper basis and without malice, and repeated paragraphs of its statement of claim. It set out conduct of Mr Evans that it said was unreasonable and precipitated its decision to discontinue. In reply to an affidavit made by Mr Evans dated 20 May 2015 the Union lodged an affidavit of Mr Marcello (“Mark”) Marotta (the secretary of the relevant branch of the Union) sworn on 26 May 2015 (about which more will be said later).

7    Mr Evans relied on a letter dated 28 April 2015 and an affidavit dated 20 May 2015. In summary form, his answer to the Union’s case theory was that liability for unpaid amounts rested solely with Railway Company or Regional Port, and therefore that the claims against him and Masked Fox were frivolous, malicious, and without substance or basis in fact. He had never been a director of Railway Company nor had he controlled or directed its operations. He said that the allegations made against him were not supported by evidence, were not properly particularised, and were "manifestly groundless," "without sufficient grounds," and had "no substantial prospect of success." He described the Union’s allegations as “mere allegations of fact,” and said that there was no apparent factual or legal basis for his or Masked Fox’s accessorial liability. Those are matters that go to the “without reasonable cause” aspect of s 570(2)(a). Mr Evans further stated that an article published in The Age newspaper (newspaper article) was an attempt to discredit him and Masked Fox, constituted contempt of court, and showed that the proceeding was issued for the purpose of causing trouble and annoyance. That goes to the “vexatious” aspect of s 570(2)(a). In reply to the Union’s criticisms of his non-participation in this proceeding, he deposed that his and Masked Fox’s failures to file defences were caused by Masked Fox’s cessation of trade as at 30 September 2014 as a result of the magnitude of legal expenses, for which reason he also terminated the retainer of the lawyers that had been on the record for Masked Fox. He alleged that for more than a year prior he had not had ongoing and regular access to an email at the domain maskedfox.com.au (Maskedfox Email), at which the Union had attempted to contact him. The "organisation to which the address belongs," he said, had facilitated his access to the Maskedfox Email for the purposes of the proceeding.

8    Mr Evans provided a competing history to that set out in the Union’s pleadings. He deposed that in July 2013 a contract was entered into between Railway Company, Regional Port, and RLG Pty Ltd (RLG), whereby Regional Port sold its assets to RLG with payment made by way of a transfer of Regional Port’s employees and their entitlements to Railway Company. He deposed that the contract was void ab initio for want of consideration, which "implicitly caused a 'roll back' of the relevant entitlements to [Regional Port], thereby eliminating [Railway Company's] liability for these amounts." He deposed that on 6 January 2014, Ms Lopez caused Railway Company to cease to trade, that since that time they had been estranged, and that Masked Fox offered employment to the employees. He deposed that many accepted, and that those employees “consented to or were deemed to have consented to have a transfer to and commencement of employment with [Masked Fox].”

9    He deposed that on 13 February 2014 Mr A Hore of Masked Fox received an email from Metro Trains conveying a rumour that certain drivers would be “downing tools” the next day. Mr Evans had a meeting that day with (inter alia) Messrs Stephenson, and Ackland (two of the subject employees). He said that at that meeting “[Masked Fox] reiterated its recognition of the [Railway Company] leave entitlements for the [Masked Fox] Drivers and also offered to amend the terms of the [Masked Fox Agreement] by individual agreement … .” On 24 February 2014 Mr Evans attended a further meeting with Messrs A Hore, Marotta, Ackland, and Stephenson at which (he alleges) Mr Marotta attempted to intimidate, bully, and blackmail Masked Fox into paying entitlements arising from the employment of the employees with Regional Port and with Railway Company.

10    On 14 March 2014, following an exchange of letters in regard to a possible resolution of the issue, Mr A Hore of Masked Fox sent an email to certain employees saying that Masked Fox had been advised that it was not their employer, that that put them in a difficult legal and OH&S position, that all payments from Masked Fox would be temporarily suspended, and that Masked Fox offered them temporary employment until the matter was resolved. The employees did not respond and ceased to turn up for shifts. On 20 March 2014 Masked Fox wrote to the employees saying that it accepted their stance that they were not and had not ever been Masked Fox's employees, and offering to pay amounts that it considered they were owed. Thereafter, the dispute escalated: the Union’s lawyers alleged by letter the existence of a deliberate scheme involving the structuring of corporations, creation of the Masked Fox Agreement and “transfer” of the employees from Railway Company to Masked Fox, with a view to avoid paying employee entitlements and to reduce employees' conditions and wages; Mr Evans responded that the allegations were "utterly unfounded and absurd;" an action was commenced in the Fair Work Commission; Mr Evans lodged a response disputing liability.

11    In Mr Marotta’s affidavit in reply he denied vexatious intent in institution of the proceeding. He deposed that certain identified allegations in the pleadings were based on what he had been told by employees (who were Union members), that others were based on what he had seen and heard when meeting with Mr Evans, and that still others were based on ASIC searches. He deposed that he genuinely believed the allegations to be true. He deposed that he instructed the discontinuance of the proceeding not because he considered the claim lacked reasonable prospects, but because the respondents’ failure to participate and comply with Court orders caused him to believe that the Union would face difficulties in continuing the proceeding and enforcing any orders made against the respondents. He rejected that the newspaper article was a contempt of court.

The law relating to costs

12    Section 43(1) of the Federal Court of Australia Act 1976 (Cth) (FC Act) provides as follows:

43    Costs

(1)    The Court or a Judge has jurisdiction to award costs in all proceedings before the Court (including proceedings dismissed for want of jurisdiction) other than proceedings in respect of which this or any other Act provides that costs must not be awarded. This is subject to:

(a)    subsection (1A); and

(b)    section 570 of the Fair Work Act 2009; and

(c)    section 18 of the Public Interest Disclosure Act 2013.

13    Section 570 of the FW Act provides as follows:

570 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) in relation to a matter arising 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.

Note:    The Commonwealth might be ordered to pay costs under section 569. A State or Territory might be ordered to pay costs under section 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 the FWC;

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

14    Rule 26.12(7) of the Rules provides thus:

(7)    Unless the terms of a consent or an order of the Court provide otherwise, a party who files a notice of discontinuance under subrule (2) is liable to pay the costs of each other party to the proceeding in relation to the claim, or part of the claim, that is discontinued.

15    In Travaglini v Raccuia [2012] FCA 620, McKerracher J held that the effect of subrule (7) was that there was a “prime facie entitlement on the part of the party not discontinuing to costs” (at [36]). Foster J reached a similar conclusion in El-Debel v Secretary, Department of Immigration and Border Protection (2014) 141 ALD 611 at [17] (see also Primesafe at [106] (Mortimer J)). With respect, I agree with their Honours. But, as Mortimer J said in Primesafe, in a matter arising under the FW Act r 26.12(7) must be reconciled with s 570 of the FW Act. Her Honour reconciled the provisions thus (at [106]): “That reconciliation must give priority to the terms of s 570, otherwise the purpose of that provision could be frustrated. It is difficult to see any room for the presumption in r 26.12(7) to operate in proceedings arising under the [FW Act].”

16    Section 43(1) of the FC Act, by importing s 570 of the FW Act, limits the Court’s jurisdiction to order costs in matters arising under the FW Act. Thus, in Ashby v Slipper (No 2) (2014) 314 ALR 84, the Court (Mansfield, Siopis and Gilmour JJ) held that because no finding had been sought or made in terms of s 570(2)(a) or (b) of the FW Act, jurisdictional facts necessary to enliven s 43 of the FC Act had not been established and the making of an order for costs was precluded (at [39]). Thus, a Court could not order, on the discontinuance of a matter arising under the FW Act, that the applicant pay the respondent’s costs (or the reverse), unless one or more of the jurisdictional facts in s 570(2) of the FW Act had been established. But the default position under r 26.12(7) – that the discontinuing party is liable for costs of the other parties – is self-executing and does not rely on an order of the Court. There is a question whether the self-executing aspect purports to operate even in matters arising under the FW Act. Arguably, no question of jurisdiction (under s 43 of the FC Act) to make an order would there arise, because no order is or need be sought. Further, the self-executing aspect is arguably not directly affected by s 570 of the FW Act, which limits only the circumstances in which “a party may be ordered by the court to pay costs” (emphasis added), and again no order is or need be sought. On the other hand, if the self-executing aspect of r 26.12(7) does purport to give rise to entitlement to costs in non-discontinuing parties in matters arising under the FW Act, real questions may arise as to whether the rule is invalid as being repugnant either to its enabling act or to the FW Act.

17    Those are not, however, questions that arise in the present matter. Here, no notice of discontinuance has yet been filed, r 26.12(7) is not engaged, and so the self-executing aspect of r 26.12(7) is not relevant except in one sense. That sense is that r 26.12(7) reflects what Foster J called a “more general policy of the law … that a party … should usually have to pay the costs of the other parties occasioned by the bringing of the proceeding and their subsequent abandonment” (El-Debel at [17]). That is relevant in informing how the broad costs discretion is exercised. Section 570 is relevant for similar, though stronger, reasons. I say similar because, like r 26.12(7), s 570 does not directly apply: it applies only to the Court’s ability to order that a party “pay costs incurred by another party,” and thus not where the order sought is one that there be no order as to costs, or that the parties bear their own costs. I say stronger because the policy considerations underlying s 570 are manifest in two Acts of Parliament (s 570 FW Act and s 43(1)(b) FC Act), rather than only in a piece of delegated subordinate legislation (the Rules), and because the s 570 policy considerations are sufficiently weighty that the Parliament saw fit in their furtherance to constrain the Court’s jurisdiction to award costs. Further, if s 570 considerations were not taken into account in exercising a costs discretion on discontinuance, there would be odd results. Assume a claim with an arguable evidentiary and legal basis: if the applicant prosecuted the claim to judgment and was unsuccessful, without more s 570 would prevent an award of costs against the applicant. Was it really intended that if the same claim was discontinued prior to judgment, the applicant would have, by virtue of r 26.12(7), a greater exposure to costs than if it pressed on? In the ordinary case, I cannot think so.

18    It appears to me that the policy underpinning s 570 strongly (indeed almost determinatively) informs the Court’s exercise of discretion when determining under s 43 of the FC Act whether to make an order that the parties bear their own costs or that there be no order as to costs in a matter arising under the FW Act. I would go so far as to say that, unless the Court is satisfied that one of the criteria set out in s 570(2) is established, such an order ought be made, if applied for, almost as a matter of course. In those circumstances, the policy underpinning r 26.12(7) would ordinarily be of some, but minimal, weight. I think that this is the same reconciliation to which Mortimer J referred in Primesafe.

19    It follows that the s 570(2) criteria are relevant to the exercise of discretion in this case. The purpose of s 570 is largely settled: it is to avoid the discouragement (by the spectre of an adverse costs order) of the pursuit of “genuine grievances” with an arguable evidentiary and legal basis: Primesafe at [64] (Mortimer J); see also Saxena v PPF Asset Management Ltd [2011] FCA 395 at [6] (Bromberg J), Construction, Forestry, Mining and Energy Union v Clarke (2008) 170 FCR 574 at [29] (Tamberlin, Gyles and Gilmour JJ), Ashby (No 2) at [35] (Mansfield, Siopis and Gilmour JJ). The discretion conferred by the confined terms of s 570(2) should be exercised cautiously, and the case for its exercise should be clear: Saxena at [6] (Bromberg J); Primesafe at [64] (Mortimer J). Beyond those general principles it is necessary to say something more about s 570(2)(a) and (b), which were the paragraphs upon which Mr Evans relied in resisting the Union’s application.

Want of reasonable cause / unreasonable acts or omissions

20    In Baker v Patrick Projects Pty Ltd (No 2) [2014] FCAFC 166 at [9], a Full Court of this Court approved a summary given by Pagone J in Construction, Forestry, Mining and Energy Union v Corinthian Industries (Australia) Pty Ltd (No 2) [2014] FCA 351 at [8], as follows:

To exercise the discretion conferred by [s 570(2)(a) of the FW Act] the Court must be satisfied that the claims were, relevantly, instituted without reasonable cause. That is not established merely because a party fails in the claims: R v Moore; ex parte Federated Miscellaneous Workers Union of Australia [1978] HCA 51; (1978) 140 CLR 470, 473. The relevant provisions reflect ‘a policy of protecting a party instituting proceedings from liability for costs’ and costs will rarely be awarded unless justified by exceptional circumstances: see Kangan Batman Institute of Technology and Further Education v Australian Industrial Relations Commission (2006) 156 FCR 275 at [60]. In Kangan Batman Institute it was said by the Full Court at [60] that ‘a proceeding will be instituted without reasonable cause if it has no real prospects of success, or was doomed to failure’. In Kanan v Australian Postal and Telecommunications Union [1992] FCA 539; (1992) 43 IR 257 Wilcox J indicated at 264 that one way of testing whether a proceeding was instituted ‘without reasonable cause’ was to ask whether, upon the facts apparent to the applicant at the time of instituting the proceeding, there was no ‘substantial prospect of success’. His Honour went on to say that a proceeding lacks a reasonable cause where it is clear that it must fail on the applicant’s own version of the facts.

21    In Australian Workers Union v Leighton Contractors Pty Limited (No 2) [2013] FCAFC 23, Dowsett, McKerracher and Katzmann JJ summarised the principles thus (at [7]):

(1)    The purpose or policy of the section is to free parties from the risk of having to pay their opponents’ costs in matters arising under the Act, while at the same time protecting those parties who are forced to defend proceedings that have been instituted vexatiously or without reasonable cause.

(2)    It follows from the protection offered by s 570(2) that a person will rarely be ordered to pay the costs of a proceeding. But it is not necessary to prove that there are exceptional circumstances warranting the making of an order: Spotless Services Australia Limited v The Hon Senior Deputy President Jeanette Marsh [2004] FCAFC 155 … at [12]–[13] (to the extent that the Full Court in [Kangan] held otherwise, we would respectfully disagree).

(3)    The relevant question is whether the proceeding had reasonable prospects of success at the time it was instituted, not whether it ultimately failed: [Moore] at 473 per Gibbs J; Kangan at [60]. In [Kanan] at 264-5 (approved in Kangan) Wilcox J said

If success depends on 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.

22    As Logan, Bromberg and Katzmann JJ explained recently in Construction, Forestry, Mining and Energy Union v BHP Coal Pty Ltd (No 2) [2015] FCAFC 97 at [13]–[17], those approaches are the same and the apparent distinction in regard to “exceptional circumstances” is really one without a difference. With respect, I agree, and will proceed on that basis.

23    As to s 570(2)(b), Mr Evans identified the Union’s unreasonable act or omission as being that it “failed to evidence its claims” against him and Masked Fox. The tenor of his submissions also lead me to believe that he was further asserting, in effect, that the continued prosecution of a hopeless case was unreasonable. That raises many of the same questions as s 570(2)(a).

Proceedings instituted vexatiously

24    In Attorney-General v Wentworth (1988) 14 NSWLR 481 at 491, Roden J set out three tests for whether litigation might be regarded as vexatious (in the context of determining whether to declare a person a vexatious litigant):

It seems then that litigation may properly be regarded as vexatious for present purposes on either objective or subjective grounds. I believe that the test may be expressed in the following terms:

1.    Proceedings are vexatious if they are instituted with the intention of annoying or embarrassing the person against whom they are brought.

2.    They are vexatious if they are brought for collateral purposes, and not for the purpose of having the court adjudicate on the issues to which they give rise.

3.    They are also properly to be regarded as vexatious if, irrespective of the motive of the litigant, they are so obviously untenable or manifestly groundless as to be utterly hopeless.

Wentworth was applied by a Full Court of this Court in von Reisner v Commonwealth (2009) 177 FCR 531 at [27] (see also Singh v Secretary, Department of Families, Housing, Community Services and Indigenous Affairs (2011) 122 ALD 114 at [14]–[16] (Bromberg J)).

25    Mr Evans presses the first sense of the word (as to which see also Oceanic Sun Line Special Shipping Company Inc v Fay (1988) 165 CLR 197 at 247 per Deane J). He stated in his affidavit that the newspaper article and the Union’s amendment of its pleadings showed that the proceeding was issued “for the purpose of causing trouble or annoyance.” Mr Evans does not appear to allege that the proceeding was brought for a collateral purpose (the second sense), except in so far as to bring a proceeding for the purpose of annoyance or embarrassment might itself constitute a collateral purpose. The third sense overlaps with the “without reasonable cause” aspect of s 570(2)(a).

discussion

Was the proceeding instituted without reasonable cause?

26    In short, no: I am not satisfied that the Union’s institution of proceedings meets any of the tests set out in Baker / Corinthian or Leighton. The shortest way of reaching that conclusion is to ask, consistently with authority, whether – on the Union’s version of the facts – it was clear that the Union must fail. The unequivocal answer is that it was not. The pleadings were internally consistent, did not rely on any obviously untenable propositions of law, and the facts alleged therein (if made good) would arguably have established a cause of action known to the law and given rise to an entitlement to relief. A more detailed analysis likewise reveals that the Union’s case cannot be said to have been commenced without reasonable basis.

27    The Union alleges that Railway Company is primarily liable because it took adverse action against employees and because it underpaid various amounts. Mr Evans’s submissions do not traverse many of these primary allegations. He alleges that the tripartite contract dated July 2013 was void ab initio so that Railway Company had no liability for entitlements accrued prior to that date. But, that allegation is (at best) arguable, and even if correct, that would not affect Railway Company’s liability after July 2013. Further, while there is some issue as to whether the employees became employed by Masked Fox or continued in the employment of Railway Company, the Union’s case (that they remained employees of Railway Company) is not so obviously untenable as to lack a reasonable basis and indeed it was accepted by Masked Fox in letters dated 20 March 2014 to the employees (Exhibit RE-9 to Mr Evans’s affidavit). Mr Evans does not appear to dispute that in early 2014 some employees were paid at the Masked Fox Agreement rate (rather than the Railway Company Agreement rate), that Mr Power was not paid at all during January 2014, and that the subject employees were not paid at all after around 14 March 2014. He does not traverse the claim of constructive dismissal by Railway Company. As to its reason, while his affidavit paints a different picture of the conduct and motivations of persons involved to that alleged by the Union, I cannot say that one or other account is obviously untenable or lacks a reasonable basis nor could it be said that the adverse action claim predicated thereupon lacks a reasonable basis (especially in light of the presumption in s 361 of the FW Act). That being so, I would not hold that the Union’s primary case as against Railway Company was without prospects of success or was instituted without reasonable cause.

28    The case against Mr Evans and Masked Fox was predicated on success in the primary case and was one of accessorial liability. Neither Mr Evans nor Masked Fox filed a defence, but I understand from Mr Evans’s material that he hotly contests the veracity of the claim that he was guiding mind of Railway Company, that there was any scheme as contemplated by the Union’s pleadings, or that in any event he or Masked Fox was party to it. Mr Evans has earlier and on similar grounds denied wrongdoing, as is apparent from exhibit RE-13 of his affidavit being a “Form F8A—Employer response to general protections application” dated 14 April 2014, which included this statement:

Ray Evans was not involved in any matter related to the staff in any way as an individual. He was uninvolved in matters relating to [Railway Company] as he was simply a train driver – another employee just like the staff. The Applicant alleges that Ray Evans was a Director of [Railway Company]. This is entirely false. As per the above and attached ASIC Extract, Pamela Lopez is and has always been the Director of [Railway Company].

29    Annexed thereto was the first page of an ASIC search showing the directorship of Railway Company, but not its shareholding. Exhibit RE-11 to Mr Evans’s affidavit contained a letter to the Union’s solicitors dated 25 March 2014, including this statement:

Ms Lopez and Mr Evans do share both maternal and paternal D.N.A., however, we are estranged and Ms Lopez ran her own companies, including [Railway Company], as her own and independently. I was simply an employee as a train driver.

30    Paragraph 11 of Mr Evans’s affidavit dated 20 May 2015 contains a statement that his estrangement with Ms Lopez commenced as and from 6 January 2014 when she is alleged to have procured that Railway Company cease trading.

31    But, there are facts available on the face of the ASIC searches (annexed to the affidavits of Mr Burgio and Mr Marotta) that link Mr Evans and Masked Fox with Railway Company:

(1)    Mr Evans was, from 26 February 2014 to at least April 2015, sole shareholder of Railway Company. It appears from the ASIC search at Exhibit MM-1 to the affidavit of Mr Marotta that the previous shareholder was Ms Lopez and that the change to the shareholding that had the effect of leaving Mr Evans as sole shareholder occurred with the lodgement of a Form 484N that was received, processed, and effective on 26 February 2014. Mr Evans was also, as and from 22 December 2013, sole director and secretary of Masked Fox (prior to that time it was Ms Lopez). A later search revealed that for the period April to July 2014 Mr R Hore was sole director, but that in July 2014 Mr Evans resumed his former directorship and that in August 2014 Mr Hore ceased to be a director.

(2)    The registered office for Railway Company (54 Alma Terrace, Newport (Alma Terrace)) was the same as the address given as Mr Evans’ address in his capacity as director and shareholder in the Masked Fox search, and was the same as the registered office of Masked Fox and its holding company Masked Fox Group Pty Ltd (MFG) from January 2014 to February 2014. A later search showed that Alma Terrace had again become Masked Fox’s registered office (from November 2014) and its principal place of business (from August 2014). Alma Terrace was also the registered office of the company Regional Port Enterprizes (Aust) Pty Ltd (Regional Port Aust), the involvement of which (if any) was not explained but in regard to which an ASIC search was in evidence. Regional Port Aust’s director from 12 April 2013 to at least 4 March 2014 (the date of the search) was Ms Lopez and its sole shareholder from 26 February 2014 to at least 4 March 2014 was Mr Evans.

(3)    The principal place of business for Railway Company (“Gate Lot 93 Rear” Unit Railway, 424–432 Footscray Road, West Melbourne) was the same as the principal place of business for Regional Port Aust (whose sole shareholder was Mr Evans), and was at the same street address as the principal place of business (from November 2012) of Regional Port (of which Mr Evans was sole director, secretary, and shareholder). In Regional Port’s case the address was described as “Railway Lot 93 Gate F” 424–432 Footscray Road.

(4)    The addresses 54B Albemarle Street, Williamstown North, and 54A Albemarle Street, Williamstown North, appear in a number of contexts in the ASIC searches. 54B Albemarle was given as Mr Evans’s address in his capacity as shareholder of Railway Company and of Regional Port Aust. 54A Albemarle was given as Masked Fox’s registered office (for the period February 2014 to November 2014) and its principal place of business (for the period August 2013 to July 2014), MFG’s registered office and principal place of business (from August 2013 to January 2014 and from February 2014), and as the registered office and principal place of business of a once sole shareholder of MFG, the company Don Diego Holdings Pty Ltd. I accept that 54A Albemarle and 54B Albemarle are different addresses, but they suggest to me at least some connection.

32    Certainly it would be wrong to attempt to determine Mr Evans’s involvement in Railway Company on this application. But, I will say that Mr Evans’s statements to the Commission in April 2014 and to the Union’s solicitors in March 2014 that he was just an employee of Railway Company is difficult to reconcile with the fact that at the time of making those statements he was the beneficial holder of 100 per cent of the issued share capital in that company. Similarly, his statement to the Commission that he was not a director of Railway Company, while true, conceals by omission that he was at that time sole shareholder (as did the annexing of only the first page of the ASIC search). Also, the fact that the transfer of all issued shares in Railway Company from Ms Lopez to Mr Evans occurred in February 2014 is not, on its face, consistent with his statement that as from January 2014 he had been estranged from her. Further, Mr Marotta deposed that he was in attendance at meetings wherein Mr Evans purported to speak as to what would happen to employees of Railway Company were the Masked Fox Agreement to be made (statement of claim [32(b)(i)]; affidavit [9(b)]), and he deposes that the allegation that Mr Evans was controlling mind of Railway Company was based on his meetings with employees of Railway Company and that he genuinely believes the allegation to be true and correct (affidavit [9(a)]). It may well be that Mr Evans has answers to all of those matters. But they seem to me to take the allegation that Mr Evans was the controlling mind of Railway Company out of the category of the unsustainable and into the category of the arguable even if ultimately disproved. The allegation may or may not have stood to scrutiny at trial, but it was not without foundation.

33    It is appropriate to deal specifically with Mr Evans’s submission that the Union had only advanced “mere allegations of fact” in support of its application relating to costs, by which he meant “unsupported by evidence.” I reject that submission. The allegations were supported by affidavits of Mr Burgio (annexing ASIC searches and other documentary evidence) and an affidavit of Mr Marotta (setting out primary evidence, the basis of other allegations in the evidence of Union members, and annexing still more documentary evidence).

34    I am comfortably satisfied that there was an arguable evidentiary and legal basis for the allegations put against Mr Evans and against Masked Fox. The claim was not self-evidently doomed to fail, nor was it clear on the Union’s version of the facts that it must have failed. I am satisfied that the claim was instituted with reasonable cause. The s 570(2)(a) criterion is not established. As to s 570(2)(b), for the same reasons given above, the maintenance of the proceeding was not unreasonable. So far as I am aware, no new information came to light during the course of the proceeding that demonstrated or tended to demonstrate the falsity of the Union’s allegations and rendered the continuance of the proceeding unreasonable. To the contrary, Mr Marotta’s evidence was that he continues to genuinely believe in the truth of the allegations and that discontinuance was motivated by the respondents’ conduct rather than perceived weakness in the applicant’s case. Mr Evans also asserted that the Union had acted unreasonably in failing to evidence its claims. There are two short reasons why that submission should not be accepted: first, there was evidence before me that took the allegations out of the “without foundation” category; second, no defences having yet been filed and no orders having been made as to the filing of evidence, it was not yet necessary for the Union to have adduced comprehensive evidence in support of its allegations. The s 570(2)(b) criterion is not established.

Was the proceeding instituted vexatiously?

35    I am not satisfied that the proceeding was instituted vexatiously. It may be that their issuance annoyed, troubled, and perhaps even embarrassed Mr Evans or Masked Fox, but there is nothing in the evidence that suggests (either subjectively or objectively) that that was the purpose. Mr Marotta expressly denied that that was his purpose in instructing (on behalf of the Union) that the proceeding be issued. I accept his evidence, which settles the subjective question. Further, on their face and in context there is nothing to suggest that the proceeding was brought otherwise than for the purpose for which it appears to have been brought – to recover amounts said to be owing to the Union’s members, to seek relief in regard to adverse action, and to obtain other associated relief. It does not seem to be denied by Mr Evans that certain employees have not received the entirety of their wages and entitlements, or that the employees are no longer employed by any of the respondents to the action. Whether any shortfall creates liability in Regional Port, Railway Company, Masked Fox, Mr Evans, some combination of those entities, or indeed none of them, whether the employees were constructively dismissed, and whether adverse action was taken against them, are matters that would (it seems) have been disputed if the matter had proceeded to trial. But, the proceeding is, on its face, for the purpose of seeking relief arising out of the alleged shortfall and adverse action for the benefit of the employees from the entities that the Union has come to believe are liable, on grounds that I have already said are not unreasonable. That is not vexatious.

36    The newspaper article does not alter my view. Without more, commenting on an ongoing court proceeding does not constitute a contempt of court. There is nothing contemptuous in the article and I reject Mr Evans’s submission to that effect. Nor do I think there is anything vexatious in the comments of Mr Burgio and Mr Marotta as recorded in the article. It merely sets out in shorter (and slightly more extravagant) form, the allegations in the statement of claim. In so far as Mr Burgio referred to Mr Evans having engaged in a “pattern of corporate scheming,” that is a colloquial way of putting the allegation that is put in longer form in this proceeding against Mr Evans, Masked Fox, and Railway Company. The allegation might be accurate, or it might be inaccurate, and that might have been determined if the proceeding was prosecuted to completion. But, outlining for the purpose of quotation in a newspaper article the pith and substance of allegations made in a court proceeding does not render the proceeding vexatious, nor does it necessarily reveal that it was vexatious when commenced. There is nothing in the article that suggests the proceeding was vexatiously issued. On the contrary, what is said affirms that the proceeding was issued so as to seek compensation for employees and penalties against those found to have breached the FW Act.

37    Finally, and shortly, the Union’s amendment of pleadings does not disclose vexatiousness in institution of proceedings. What the amendment did was add the Section 50 Claims and amend the Adverse Action Claims (including by abandoning claims in regard to one employee, who was to still be the subject of a Section 50 Claim). This does not reveal anything about the purpose of instituting proceedings, and in any event the real substance of the allegations (especially against Mr Evans and Masked Fox) remained broadly the same.

Exercise of discretion as to costs

38    None of the limbs of s 570(2) of the FW Act has been established. As I set out above, that weighs heavily against the ordering of costs in exercise of my discretion. There are other factors that weigh against such an order. It is apparent from the letters and emails to Mr Evans that are annexed to his affidavit that he has been aware of this proceeding for some time. For a few months, Andrew Bell was on the record for Masked Fox (but not for Mr Evans), and Mr Evans deposes to having withdrawn Andrew Bell’s instructions on behalf of Masked Fox. That again necessitates the conclusion that he was aware of the proceeding against Masked Fox and himself. Yet, Mr Evans has not participated in this proceeding until this issue of costs arose. He did not lodge a defence. He did not comply with any Court order. He did not attend directions hearings, applications, or the Court-ordered mediation on 23 December 2014. He did not communicate with the Union’s solicitors or the Court in regard to the proceeding until the issue of costs arose. His first explanation for those matters – Masked Fox’s cessation of trade as at 30 September 2014 – is not convincing. It is elementary that Mr Evans is a separate legal entity to Masked Fox and its resources are not (or at least, should not be) the same as his. Also, an ASIC search annexed to Mr Marotta’s affidavit revealed that in November 2014 Masked Fox continued to exist, was not in external administration, and indeed had recently changed its name to Regional Port Enterprizes (Vic) Pty Ltd.

39    Mr Evans’s other explanation – that he did not have ongoing and regular access to the Maskedfox Email and that he was only given that access by the “organisation to which [it] belongs” to “facilitate addressing these Proceedings” – is also unconvincing for two reasons: first, he did not, in fact, “address these Proceedings” (except now that the issue of costs has arisen); and, second, he was aware of the proceeding and might, if he had been so inclined, have communicated to the Union’s solicitors that another email address (or another mode of communication) was a better means of contact.

40    Masked Fox’s conduct was slightly but not significantly better. While, for a time, it participated in the proceeding, it too did not lodge a defence, comply with Court orders, or attend mediation. It ultimately withdrew its solicitors’ instructions, did not appoint others, and (like Mr Evans) ceased to participate in the proceeding until this issue of costs arose.

41    I have no difficulty accepting Mr Marotta’s evidence that his reasons for instructing discontinuance of the proceeding were that he foresaw difficulties in prosecuting the proceeding and enforcing orders (if any). It seems to me that a factor counting against Masked Fox’s and Mr Evans’s opposition to the Union’s application is that they both failed to comply with the Rules and with Court orders, and more generally failed to participate in a meaningful way in this proceeding. As it turned out, those failures caused the Union to decide to discontinue the proceeding. Whether deliberate or not, the respondents should not be compensated for the costs of obstruction through non-compliance.

42    While I note the countervailing consideration created by the prima facie entitlement of r 26.12(7), that does not in my mind outweigh the s 570 factors, and still less does it outweigh the combination of the s 570 factors and the other matters I have identified. Accordingly, I will order that the Union have leave to discontinue on the basis that the parties bear their own costs of the proceeding.

Associate:

Dated:    16 July 2015