FEDERAL COURT OF AUSTRALIA

Hartnett Legal Services Pty Ltd v Ballantyne (No 2) [2015] FCA 1027

THE COURT ORDERS THAT:

1.    The appellants pay the respondent’s costs of the second day of the hearing on 24 April 2015, including the respondent’s costs of preparation for the second day.

2.    There otherwise be no order as to the costs of the application for leave to appeal and the appeal.

3.    There be no order as to the costs of the hearing before the Federal Circuit Court of Australia.

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

REASONS FOR JUDGMENT

1    On 22 July 2015, I granted leave to appeal against an interlocutory judgment of the Federal Circuit Court of Australia and allowed the appeal: Hartnett Legal Services Pty Ltd v Ballantyne [2015] FCA 744.

2    The Federal Circuit Court had given default judgment against the appellants in circumstances where they failed to file a “response” in accordance with r 4.03 of the Federal Circuit Court Rules 2001 (Cth). I ordered that the orders of the Federal Circuit Court be set aside.

3    The parties have now filed written submissions as to costs. The issues in dispute are:

(a)    who should pay the costs of the application for default judgment in the Federal Circuit Court;

(b)    who should pay the costs of the application for leave to appeal and the appeal.

4    It is common ground that s 570 of the Fair Work Act 2009 (Cth) applies in this case. Section 570 limits the circumstances in which a Court can award costs in relation to a matter arising under the Fair Work Act. It provides, relevantly:

570    Costs only if proceedings instituted vexatiously etc.

(1)    A party to proceedings (including an appeal) in a court…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)…

(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

Costs of the application in the Federal Circuit Court

5    The appellants submit that they should be awarded their costs of the application at first instance because the respondent’s application for default judgment was brought without reasonable cause, and because the respondent’s unreasonable acts caused the appellants to incur costs.

6    The respondent asserts that the power to award costs of the application at first instance is not enlivened because the application for default judgment was an interlocutory application and the expression “proceedings” in s 570(2) does not encompass interlocutory applications. The respondent makes this bare assertion without providing any argument as to why this is so or referring to any authority on the point. The respondent also submits that it was reasonable to bring the application and that its conduct was not unreasonable.

7    There does not appear to be any authority which deals directly with the question of whether the word “proceedings” in s 570(2) of the Fair Work Act encompasses interlocutory applications. However, there is such authority in respect of s 347(1) of the Industrial Relations Act 1988 (Cth), a predecessor of s 570. Section 347(1) provided:

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

8    It may be seen that s 347 of the Industrial Relations Act has been substantially re-enacted as s 570(1) and (2)(a) of the Fair Work Act. I do not think that the slight differences in the wording of those provisions affect the present issue.

9    In Shackley v Croatian Club Ltd (1996) 141 ALR 736, Wilcox CJ (with whom von Doussa J agreed) held at 745 that the word “proceeding” in s 347(1) of the Industrial Relations Act referred “not only to a principal action (or ‘proceeding’) between parties, but also to any subsidiary application made during the course of the principal action”. I consider that the word “proceedings” in s 570(1) and (2)(a) similarly encompasses interlocutory applications.

10    There is no reason to construe “proceedings” in s 570(2)(b) any differently. Words are assumed to be used consistently in a statute: Registrar of Titles (WA) v Franzon (1975) 132 CLR 611 at 618, Minister for Immigration and Multicultural and Indigenous Affairs v SZAYW (2005) 145 FCR 523 at [14]. The purpose or policy of s 570(2)(a) is to free parties from the risk of having to pay their opponents’ costs, while at the same time protecting those parties who are forced to defend proceedings that have been instituted vexatiously or without reasonable cause: Australian Workers Union v Leighton Contractors Pty Ltd (No 2) [2013] FCAFC 23 at [7]. The purpose or policy of s 570(2)(b) must be to protect parties who incur costs as a result of an opponent’s unreasonable acts or omissions. It would be anomalous if costs could be awarded against parties which engage in unreasonable conduct in a principal proceeding, but not in an interlocutory application.

11    In my opinion, the word “proceedings” in s 570(1) and (2) has a meaning that extends to interlocutory proceedings. The Court is not precluded from awarding costs in relation to an interlocutory application in the circumstances described in s 570(2).

12    There were aspects of the conduct of both parties before the Federal Circuit Court that can be described as unreasonable. The respondent should not have commenced an application for default judgment for such a minor default without first giving the appellants the chance to remedy the default. The appellants’ conduct in failing to provide their town agent with adequate instructions, apparently on the mistaken premise that their position was unassailably correct, was arrogant and treated the Court and the respondent with a degree of contempt. In these circumstances, the Court’s discretion should be exercised in favour of making no order as to costs of the application before the Federal Circuit Court.

Costs of the appeal

13    The appellants submit that they should have their costs of the appeal because they were successful and because the respondent acted unreasonably in refusing an offer to settle the appeal. That offer was for the parties to consent to the judgment being set aside on the basis that each party bear its own costs.

14    Failure to accept a reasonable offer of compromise may constitute an unreasonable act for the purposes of s 570(2)(b) of the Fair Work Act: Melbourne Stadiums v Sautner (2015) 317 ALR 665 at [166]. However, I do not consider that it was unreasonable for the respondent to have refused the appellants’ offer. The offer was not one strictly capable of being accepted because the parties cannot consent to an appeal being allowed – it would still have been necessary for the appellant to appear at a hearing to demonstrate error in the judgment of the primary judge. In addition, as the appellants’ town agent made no submissions as to the exercise of the primary judge’s discretion, it was difficult for the respondent to properly assess the merits of the proposed appeal at the time the offer was made. In fact, the appellants’ argument was not fully revealed until the hearing of the appeal. Further, the principal grounds of the appeal, dealing with the question of whether the appellants were in default, ultimately failed. In these circumstances, the respondent’s rejection of the offer was not unreasonable.

15    The appellants also submit that the respondent acted unreasonably by leading the primary judge into error by contending for a test which this Court found was the wrong test. A party does not necessarily act unreasonably merely by making a legal submission which an appellate court later finds to be wrong. In any event, if the appellants’ town agent had been properly instructed, he could have made the submissions about the exercise of the primary judge’s discretion eventually made in the appeal instead of remaining silent.

16    The appellants also submit that they should have their costs because the respondent’s counsel “pressed for findings” before the Federal Circuit Court regarding the candour and conduct of the second appellant that were not sustainable on the evidence. The respondent’s counsel certainly made strong submissions concerning the second appellant’s conduct, but I do not accept that he pressed for findings as to such conduct. While some of the primary judge’s comments were not justified, I do not think that those comments can be attributed to the conduct of the respondent’s counsel.

17    In these circumstances, the discretion under s 570(2) of the Fair Work Act to award the appellants their costs of the appeal is not enlivened.

18    The respondent seeks part of his costs of the appeal. The appellants’ notice of appeal described approximately 22 alleged errors on the part of the primary judge. The appellants’ outline of submissions filed in advance of the hearing addressed only some of the alleged errors. However, at the hearing of the appeal, the appellants indicated that all the alleged errors, except one, were pressed. I heard oral argument upon all the grounds that were pressed. The respondent then applied for an adjournment on the basis that he required an opportunity to consider the grounds argued that were not dealt with in the written outline. I granted the adjournment and the matter subsequently came on for further hearing on another day.

19    The appellants’ failure to address all their grounds in their outline of submissions caused the adjournment of the hearing and the necessity for the second day of the hearing. The appellants’ conduct was unreasonable. In these circumstances, it is appropriate that the appellants’ pay the respondent’s costs of the second day of the hearing, including the costs of preparation for the second day.

Associate:

Dated:    18 September 2015