FEDERAL COURT OF AUSTRALIA

Fair Work Ombudsman v Skilled Offshore (Australia) Pty Ltd (No 2)

[2015] FCA 1509

THE COURT ORDERS THAT:

1.    The parties bring in a minute of orders by 4.00 pm WST on 1 February 2016 to reflect these reasons including as to final interest orders in the event those can be agreed.

2.    There be liberty to apply in relation to the quantum of interest in the event that this cannot be agreed.

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

REASONS FOR JUDGMENT

1    On 18 September 2013, the Court made findings that the second respondent (the MUA) contravened the Workplace Relations Act 1996 (Cth) (WR Act) and the Fair Work Act 2009 (Cth) (FW Act): see Fair Work Ombudsman v Offshore Marine Services Pty Ltd (No 2) [2013] FCA 943 (MUA Liability Judgment). I will refer to Offshore Marine Services Pty Ltd as “OMS”. OMS later changed its name to Skilled Offshore (Australia) Pty Ltd. On 8 October 2013, the Court made declarations of contravention.

2    On 27 March 2015, the Court gave reasons for decision with respect to the questions of penalty and compensation, based upon the declarations: Fair Work Ombudsman v Skilled Offshore (Australia) Pty Ltd [2015] FCA 275 (Compensation Judgment). The Court ordered as follows:

(a)    A penalty of $79,200.00 be imposed on the MUA for its contraventions of the WR Act and the FW Act.

(b)    The MUA pay Mr Bruce Love $352,100.00 and Mrs Lynne Love $371,200.00 (Compensation order).

(c)    OMS pay the MUA one-third of the sums in order 2.

(d)    Liberty granted to the parties to be heard on the question of any interest that should be paid in respect of the Compensation order as well as on the question of costs.

3    The applicant (the FWO) now applies to the Court for the following further orders with respect to interest and costs:

(a)    the MUA pay the applicant's costs of and incidental to the MUA Liability Judgment, to be taxed (if not agreed) on an indemnity basis;

(b)    the MUA pay to Mr Bruce Love pre-judgment interest on the sum of $352,100.00, such amount of interest to be fixed in the amount of $61,568.56; and

(c)    the MUA pay to Mrs Lynne Love pre-judgment interest on the sum of $371,200.00, such interest to be fixed in the amount of $77,497.28.

4    The Full Court of the Federal Court delivered judgment, on appeal, and substituted $134,000 and $196,000 for the compensation amounts outlined above at [2(b)], respectively: Maritime Union of Australia v Fair Work Ombudsman [2015] FCAFC 120. The parties subsequently filed amended calculations of interest, taking into account these sums.

Costs

The relevant legal principles

5    A party to proceedings under the FW Act, by s 570(1), may be ordered to pay the other party’s costs only in accordance, relevantly, with s 570(2). Subsection 570(2) relevantly provides as follows:

(2)    The party may be ordered to pay the costs only if:

…

(b)    the court is satisfied that the party's unreasonable act or omission caused the other party to incur the costs; or ...

6    The following legal propositions advanced by the MUA are uncontroversial.

7    Satisfaction of s 570 of the FW Act as an express limitation on the Court’s broad discretion to award costs under s 43 of the Federal Court of Australia Act 1976 (Cth) (FCA Act): s 43(1)(c); Melbourne Stadiums Ltd v Sautner (2015) 229 FCR 221 at [140] per the majority.

8    The purpose of s 570 is to ensure that litigants, including respondents, are not deterred from "complete[ly] and robust[ly]" defending claims for contravention: Ryan v Primesafe (2015) 323 ALR 107 at [64].

9    In light of this purpose, "costs will rarely be awarded under [s 570] and exceptional circumstances are required to justify the making of such an order": Ashby v Slipper (No 2) (2014) 144 ALD 10 at [35], adopting what was said in Council of Kangan Batman Institute of Technology and Further Education v Australian Industrial Relations Commission (2006) 156 FCR 275 at [60], which concerned the similar provision in the former Workplace Relations Act 1996 (Cth). Courts should be particularly cautious before finding that a party has an engaged in an unreasonable act or omission, lest that discourages parties from pursuing litigation in the manner which they deem best: Construction, Forestry, Mining and Energy Union v Clarke (2008) 170 FCR 574 at [29] (CFMEU v Clark).

10    That a party has a "self-evidently weak case" is not enough to warrant a costs order. There must be "a higher level of criticism or disapprobation": Clarke v Dixie Cummings Enterprises Pty Ltd [2013] FCA 987 at [14]. Indeed, costs were not awarded against the FWO in Fair Work Ombudsman v Valuair Limited (No 3) [2014] FCA 1182 even though elements of the FWO's case were "artificial and unsatisfactory" and "potentially bizarre": at [12]-[17] cross-referencing to the liability decision – Fair Work Ombudsman v Valuair Ltd (No 2) (2014) 224 FCR 415.

11    Where a party relies on s 570(2)(b), the Court must be satisfied of two matters: there must be an unreasonable act or omission; and that act or omission must have "caused" costs to be incurred: CFMEU v Clarke at [28].

12    The pursuit of a case by a party in circumstances where, on the materials before the party at the time, there was no substantial prospect of success may constitute an unreasonable act or omission: Reeve v Ramsay Health Care Australia Pty Ltd (No 2) [2012] FCA 1322 at [17]-[18]. However, that an argument is ultimately not accepted does not mean it is unreasonable to put it: Construction, Forestry, Mining and Energy Union v Corinthian Industries (Australia) Pty Ltd (No 2) [2014] FCA 351 at [11].

13    Even if the Court is satisfied of a s 570(2) precondition, it retains a discretion not to order costs: Corinthian at [12].

Grounds for costs claim

14    The FWO contends that the MUA's relevant acts and omissions in the part of the proceeding that concerned the MUA's liability for the contraventions were unreasonable and unreasonably caused the FWO to incur the costs of that part of the proceeding.

15    The FWO, in its written submissions, relied upon two particular acts or omissions of the MUA:

(a)    the making of a "no case submission" by the MUA which was not reasonably arguable, and which amounted to an unreasonable act; and/or

(b)    the MUA's failure to call its officer, Mr Chris Cain, as a witness, or otherwise to make admissions with respect to his conduct towards the Loves and in relation to the "OMS employment practice" and the "MUA membership practice", as those phrases are defined in the MUA Liability Judgment at [4] and [5].

16    Furthermore, in its written submissions, the FWO conceded that in advancing its costs claim it did not submit that the MUA was not entitled to defend the proceeding brought against it by the applicant, and to raise in its defence all reasonably arguable matters (including by way of a reasonably arguable no case submission). Such an approach it acknowledged, correctly in my opinion, could never be held to amount to an unreasonable act or omission, and it does not contend otherwise.

17    Nonetheless, the FWO, on the hearing of its application, submitted that it was seeking costs because the MUA defended the proceeding when it had no actual defence.

18    Counsel for the FWO in argument characterised the initial grounds relied upon as being demonstrative of his new wider submission that the MUA never had any defence.

19    The background facts are not controversial and are drawn from the parties’ respective written submissions.

20    The FWO commenced the proceedings by application and statement of claim on 28 June 2011.

21    The Court delivered judgment against OMS on 17 May 2012: Fair Work Ombudsman v Offshore Marine Services Pty Ltd [2012] FCA 498 (OMS Liability Judgment).

22    The FWO then filed five further affidavits on 10 and 13 August 2012, including the initial affidavits of Mr and Mrs Love as well as a brief initial outline of Ms Tamianne McSherry’s evidence.

23    On 8 November 2012, the matter was set down for hearing the first available date after 1 February 2013. The hearing was ultimately set for three days from 3 April 2013. The affidavit of Ms McSherry was served on the MUA on or about 28 March 2013.

24    The day before the hearing the FWO filed further affidavits, including the detailed affidavit of Ms McSherry and a further affidavit of Mr Love.

25    It was also only in the week before the hearing that the FWO served the draft Amended Application and Amended Statement of Claim. Leave to file those documents was given on 3 April 2013.

26    The following emerges from this background.

27    The affidavit of Ms McSherry, served on the MUA on or about 28 March 2013 and filed the day before the hearing, contained evidence regarding her intention to employ the Loves had they obtained membership of the MUA. It also contained evidence regarding conversations between her and MUA representatives during which, Ms McSherry said, in effect, they encouraged or incited her not to employ non-MUA members: see, for example, at [14], [16]. This evidence was obviously important to the FWO's case that the MUA's conduct had prejudiced the Loves in their prospective employment. The MUA was not obliged to accept this evidence without testing it.

28    As to the MUA's knowledge of the case generally prior to the filing of the FWO’s evidence, the MUA at the request of its solicitors was provided with copies of the documents referred to in the Statement of Claim on or about 21 October 2011. This included the pre-employment forms referred to at [17] of Ms McSherry's affidavit and the emails referred to at [24]-[29] of her affidavit. The documents provided also included additional emails between Ms McSherry and the Loves and documents and emails between the MUA and employees of OMS. Furthermore, the MUA was provided with the Statement of Agreed Facts between the FWO and OMS on 13 January 2012 and the material filed by the FWO in relation to the hearing on 17 April 2012.

29    The affidavits of the Loves disclosed inconsistencies between the evidence they had given to the FWO investigators and their evidence they had given for the purpose of the proceedings, as was pointed out at [75] and [87] of the MUA Liability Judgment. It is not to the point that those inconsistencies did not relate to Mr Cain’s involvement in the matter.

30    Almost two years after the FWO had commenced the proceedings, and in the week before the hearing, the FWO wrought a fundamental change to its case by means of the Amended Application. It was only then that the FWO claimed that the MUA was directly liable for contraventions. The direct liability claims ended up comprising two-thirds of the contraventions in which the MUA was found to have engaged.

31    Even so, the claim that the MUA was directly liable, and not only liable as an accessory, was based on essentially the same facts and circumstances, of which the MUA had been aware since at least 2011 and certainly by August 2012 when the majority of the applicant's affidavit material was filed.

32    More significantly the FWO case depended on the Court accepting the evidence of the Loves. There were inconsistencies between the Loves' affidavit evidence and the evidence they gave to the FWO investigators. Cross-examination exposed further inconsistencies, as was noted at [87] of the MUA Liability Judgment. I concluded that those inconsistencies were immaterial (at [87]-[88]). However, in my view, the MUA was entitled to defend the proceedings by cross-examining the Loves in order to test the cogency and reliability of their evidence. These were not merely peripheral issues. The ultimate findings of the Court on these issues was, self-evidently, not known prior to or during the trial.

33    Contrary to the FWO’s submission, there was no requirement that the MUA “put” a positive defence to witnesses called by the FWO.

34    The two grounds initially relied upon in the costs application do not demonstrate that the MUA had no defence.

35    The FWO appears to invite the Court to find that it was unreasonable for the MUA not to admit facts which the "Court had already found to exist (based on a statement of agreed facts)" in the OMS Liability Judgment. That invitation should not be accepted. The MUA was not a party to the statement of agreed facts and was not bound by the findings in the OMS Liability Judgment.

36    I do not accept the FWO’s submission that the MUA's approach to the liability part of the proceeding went beyond a legitimately assertive and properly based defensive position but rather was extremely unreasonable as it included taking unarguable or groundless points, or points that were not reasonably arguable. I do not accept, although I ruled against the no case submission, that it was unarguable. I made no finding to that effect.

37    In any event it could never be the case that in not calling Mr Cain, and in making a no case submission, the MUA should be ordered to pay the FWO’s costs of the proceeding in relation to MUA’s liability. It was not submitted that there should be some more limited costs order.

38    The FWO submits that the MUA could have and should have made more admissions than it did. I reject this submission. It had no such obligation nor was it unreasonable to put the FWO to proof of its case.

39    I accept the MUA’s submission that this is not an "exceptional" case in which costs should be awarded under s 570 of the FW Act. As I have observed, the FWO's case was, in part, dependent on the Court accepting the credibility and reliability of the FWO's witnesses. The FWO's evidence contained inconsistencies appropriate for the MUA to test in cross-examination. I accept the MUA’s submission that the fact that the Court ultimately did not accept the MUA's case does not mean that it was unreasonable for the MUA to prosecute it. That the FWO, or even the Court, might consider the MUA's case to have been weak again does not mean that it was unreasonable for the MUA to defend these civil penalty proceedings: Clark v Dixie Cummings Enterprises Pty Ltd at [14].

40    I refuse the application for costs.

Interest

41    The FWO seeks that the Court award interest on the sums of compensation awarded to the Loves pursuant to the Compensation Order.

Interest up to judgment (pre-judgment interest)

42    Section 51A of the Federal Court of Australia Act 1976 (Cth) (FCA Act) relevantly provides:

51A Interest up to judgment

(1)    In any proceedings for the recovery of any money (including any debt or damages or the value of any goods) in respect of a cause of action that arises after the commencement of this section, the Court or a Judge shall, upon application, unless good cause is shown to the contrary, either:

(a)    order that there be included in the sum for which judgment is given interest at such rate as the Court or the Judge, as the case may be, thinks fit on the whole or any part of the money for the whole or any part of the period between the date when the cause of action arose and the date as of which judgment is entered; or

(b)     without proceeding to calculate interest in accordance with paragraph (a), order that there be included in the sum for which judgment is given a lump sum in lieu of any such interest.

(2)    Subsection (1) does not:

(a)     authorize the giving of interest upon interest or of a sum in lieu of such interest;

…

(d)    limit the operation of any enactment or rule of law which, apart from this section, provides for the award of interest; or

(e)     authorize the giving of interest, or a sum in lieu of interest, otherwise than by consent, upon any sum for which judgment is given by consent.

(3)    Where the sum for which judgment is given (in this subsection referred to as the relevant sum) includes, or where the Court in its absolute discretion, or a Judge in that Judge's absolute discretion, determines that the relevant sum includes, any amount for:

…

(b)     compensation for loss or damage to be incurred or suffered after the date on which judgment is given; or

…

interest, or a sum in lieu of interest, shall not be given under subsection (1) in respect of any such amount or in respect of so much of the relevant sum as in the opinion of the Court or the Judge represents any such amount.

…

43    The award of interest is mandatory unless good cause is shown, and to that extent, the Court exercises a discretion: Re Australian Guarantee Corporation Limited v Border Printing Services Pty Ltd [1989] FCA 194 at [12] and [16].

44    The calculation of the sum of pre-judgment interest is in the discretion of the Court. However, the Court will be guided by Practice Note CM 16: Pre-Judgment Interest (the Practice Note). This provides that the Court will have regard to the rates agreed upon by the Discount and Interest Rate Harmonisation Committee, that rate being 4% above the cash rate last published by the Reserve Bank of Australia (RBA) before the relevant period commenced.

45    If the Court is satisfied that there is "good cause to the contrary", it must not order interest under s 51A: Hanave Pty Ltd v LFOT Pty Ltd (2004) 136 FCR 566 at [45] (per Kiefel J).

46    It is common ground that there is no good cause why an order for interest should not be made in the Loves' favour.

47    The issue is as to the period across which interest should be ordered. The FWO submits that the period ought commence on the date when the cause of action arose, 1 August 2009. The MUA submits that interest should be calculated to run only from 18 December 2013, when the FWO first sought compensation from the MUA.

48    Alternatively, the MUA submits that it should not be required to pay interest for a period equal to the period between the MUA Liability Judgment and the Compensation Judgment, being a period of 555 days caused by the FWO's unreasonable delay in seeking compensation.

49    The cause of action arose on 1 August 2009, when, but for the MUA's contravening conduct, the Loves would have obtained employment with OMS (as found by the Court). The Loves attended the MUA Fremantle office and completed their MUA membership applications on 25 February 2009. By 1 August 2009, the MUA had not granted the Loves MUA membership and had done so in contravention of the WR Act and FW Act.

50    The Court made the Compensation Order on 27 March 2015 and calculated compensation based on the periods of:

(a)    1 August 2009 to 31 July 2015 for Mr Love; and

(b)    1 August 2009 to 31 July 2014 for Mrs Love.

51    Applying the Practice Note from 1 August 2009 to the date of the Compensation Order of 27 March 2015, Mr Love would be entitled to pre-judgment interest in the sum of $61,568.56 and Mrs Love $77,497.28.

52    There is no dispute as to the basis for or calculation of those amounts if I were to order interest from 1 August 2009.

53    The MUA makes the following submissions as to the law, which I accept.

54    A party's delay in seeking interest can also warrant the Court in awarding interest for part only of the time between when the cause of action arose and the date on which judgment was entered: H K Frost Holdings Pty Ltd (in liq) v Darvall McCutcheon (a firm) [1999] FCA 795 at [11]; ICT Pty Limited v Sea Containers Limited [2006] NSWSC 1280 at [13]-[19]. In particular, where a party has unreasonably delayed in applying for interest, it may be appropriate for interest to accrue only from the time when interest is claimed: Simonius Vischer & Co v Holt & Thompson [1979] 2 NSWLR 322 at 339.

55    The MUA points out that the FWO did not apply for compensation until 18 December 2013, after the liability proceedings and a little more than two years after the proceedings had been commenced. Even then the FWO did not apply for interest. The prospect of interest was first foreshadowed by the FWO in its written submissions on compensation and interest filed on 28 July 2014: the FWO did not seek interest in the Originating Application filed on 28 June 2011, the Amended Application filed on 3 April 2013, or the Further Amended Application filed on 18 December 2013. That said the FWO put the MUA on notice of the claim for compensation on 12 April 2013. It could be anticipated that in due course a claim for interest would likely be made at some point. The FWO did not seek to have it argued together with the compensation proceedings.

56    As the MUA submits one consequence of the FWO's delayed applications for compensation is that it was necessary to duplicate the cross-examination of the Loves and of Ms McSherry. It is also likely to have delayed the period for which interest would run. It further submits that had the FWO acted diligently, it is not unlikely that the Compensation order could have been made well before 27 March 2015 or even that the compensation and liability proceedings could have been heard concurrently. That it submits is particularly so because the central evidence in both iterations of the proceedings was that of the Loves and of Ms McSherry and accordingly it is not unlikely that an order for interest could have been made as part of the order for compensation.

57    The MUA submits that there has been unnecessary delay by the FWO in seeking both compensation and interest which has prolonged these proceedings as well as the period for which interest could run. I accept, in this respect, that the MUA is not a commercial trading entity which could arguably be expected to have obtained “practice note” rates of return on cash.

58    I accept that there has been a delay in the prosecution of the claim, on behalf of the Loves, by the FWO. Had, for example, the compensation and interests claims been run at the same time as the liability proceeding against the MUA then the judgment for compensation and interests would likely have been delivered on or about 18 September 2013, the date of the MUA Liability Judgment.

59    The Compensation Judgment was delivered on 27 March 2015. As mentioned, judgment has been delivered by the Full Court in the appeal.

60    The period between the judgment at first instance and payment following delivery of judgment in the appeal will be subject to post judgment interest.

61    The converse of this is that the MUA has not been liable to pay any compensation sum until 27 March 2015. It has had the use of that money between the putative earlier compensation judgment on 18 September 2013 and the actual Compensation Judgment on 27 March 2015. However, I accept that it would not gain a return on those funds (assuming they were invested) at the same rate as the pre-judgment interest rate of 4% above the RBA cash rate. However, they would have received some interest return.

62    I consider that justice will be served if the MUA is ordered to pay interest on the compensation as follows:

(1)    1 August 2009 - 18 September 2013 (putative compensation judgment date) at the pre-judgment interest rate.

(2)    19 September 2013 - 25 March 2015 (actual compensation judgment date) at the interest rate(s) obtainable from time to time over that period from its bankers on deposits equivalent to the combined judgment sums payable to the Loves.

Orders

63    I will grant the parties liberty to apply as to the final orders in respect to interest. However, it may be that they can agree the interest to be paid in light of these reasons and the judgment of the Full Court in the appeal.

64    I will order the parties to bring in a Minute of Orders by 1 February 2016 to reflect these reasons including as to final interest orders in the event those can be agreed. Further, there be liberty to apply in relation to the quantum of interest in the event that this cannot be agreed.

Associate:

Dated:    23 December 2015