FEDERAL COURT OF AUSTRALIA

Fair Work Ombudsman v Priority Matters Ltd [2016] FCA 1415

ORDERS

THE COURT ORDERS THAT:

1.    Order 2 of the Orders of Judge Street of the Federal Circuit Court of Australia dated 21 October 2016, in Proceedings No. SYG 3209/2013 be stayed pending the determination of this appeal.

2.    The Court reserves the costs of the interlocutory application.

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

ORDERS

THE COURT ORDERS THAT:

1.    Order 2 of the Orders of Judge Street of the Federal Circuit Court of Australia dated 21 October 2016, in Proceedings No. SYG 3210/2013 be stayed pending the determination of this appeal.

2.    The Court reserves the costs of the interlocutory application.

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

ORDERS

THE COURT ORDERS THAT:

1.    Order 1 of the Orders of Judge Street of the Federal Circuit Court of Australia dated 21 October 2016, in Proceedings No. SYG 1743/2014 be stayed pending the determination of this appeal.

2.    The Court reserves the costs of the interlocutory application.

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

ORDERS

THE COURT ORDERS THAT:

1.    Order 1 of the Orders of Judge Street of the Federal Circuit Court of Australia dated 21 October 2016, in Proceedings No. SYG 3228/2013 be stayed pending the determination of this appeal.

2.    The Court reserves the costs of the interlocutory application.

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

ORDERS

THE COURT ORDERS THAT:

1.    Order 3 of the Orders of Judge Street of the Federal Circuit Court of Australia dated 21 October 2016, in Proceedings No. SYG 1780/2014 be stayed pending the determination of this appeal.

2.    The Court reserves the costs of the interlocutory application.

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

REASONS FOR JUDGMENT

MARKOVIC J:

1    On 16 November 2016 I heard the applicant’s, Fair Work Ombudsman’s, applications for a stay of orders that had been made in five proceedings in the Federal Circuit Court of Australia (Federal Circuit Court) on 21 October 2016. The effect of the orders the subject of the applications for a stay was to require the Fair Work Ombudsman to pay, pursuant to s 570(2) of the Fair Work Act 2009 (Cth) (Fair Work Act), a fixed sum of $800,000 as the costs of Kia Silverbrook and Janette Lee, who were respondents, in the case of Mr Silverbrook in each of the proceedings in the Federal Circuit Court, and in the case of Ms Lee, in one of the proceedings in the Federal Circuit Court (the Costs Orders). The Fair Work Ombudsman has filed notices of appeal in this Court seeking to appeal from the orders made and judgment given by the primary judge including the Costs Orders.

2    The applications came before me as duty judge on an urgent basis because the last day for complying with the Costs Orders was 18 November 2016. After hearing from the parties I made the orders sought by the Fair Work Ombudsman and granted a stay of the Costs Orders made by the primary judge in each of the Federal Circuit Court proceedings pending determination of the appeals. These are my reasons for making those orders.

background

3    The Costs Orders the subject of the applications for a stay were in substantially identical terms in each proceeding. In effect, they required the Fair Work Ombudsman to pay, as a single set of costs, $800,000 as the costs of Mr Silverbrook in proceedings SYG 3209 of 2013, SYG 3210 of 2013, SYG 3228 of 2013, SYG 1743 of 2014 and SYG 1780 of 2014 and the costs of Ms Lee in proceedings SYG 1743 of 2014. Mr Silverbrook was a respondent to each of the proceedings in which the Costs Orders were made and Ms Lee was a respondent to only one of those proceedings.

4    The proceedings in the Federal Circuit Court that gave rise to the Costs Orders concerned alleged contraventions by various corporate employers of the Fair Work Act in relation to employee entitlements. Mr Silverbrook was a director of each of the corporate employers and was a respondent to each of the proceedings and Ms Lee was joined to one of the proceedings because she was a director of the relevant corporate employer. The primary judge heard the five proceedings together first hearing issues of “alleged contraventions including the making of any orders in respect of underpayments” i.e. liability issues. His Honour made orders and gave judgment on those issues on 17 June 2016. In doing so in each case his Honour made an order that further directions were to be made for hearing as to penalty and costs, as applicable: Fair Work Ombudsman v Priority Matters Pty Ltd & Anor and Fair Work Ombudsman v Superlattice Solar Pty Ltd & Anor and Fair Work Ombudsman v Geneasys Pty Ltd & Anor and Fair Work Ombudsman v Kia Silverbrook & Anor and Fair Work Ombudsman v Mpowa Pty Ltd & Anor [2016] FCCA 1474 (Priority Matters).

5    There followed on 21 October 2016 there followed a hearing on penalty and costs at the conclusion of which the primary judge gave an ex tempore judgment and, among others, made the Costs Orders. His Honour’s reasons have not yet been published.

6    On 9 November 2016 the Fair Work Ombudsman filed five notices of appeal seeking to appeal from, among others, orders made in Priority Matters and from the Costs Orders. In each case in the notices of appeal the Fair Work Ombudsman also seek as order 1 a stay of the Costs Orders. On 15 November 2016 the Fair Work Ombudsman filed the interlocutory applications for a stay of the Costs Orders which were required to be satisfied by 18 November 2016.

The evidence

7    In support of the interlocutory applications, the Fair Work Ombudsman relied on an affidavit affirmed by Jasmine Therese Dennis, Special Counsel with the Office of the Fair Work Ombudsman. Ms Dennis’ evidence in support of each application is substantially the same. She deposes to the following:

(1)    the evidence filed by the respondents in the Federal Circuit Court proceedings on the issue of costs was that their costs, including those of Mr Silverbrook and Ms Lee, were $1.2 million, most of these costs had not been paid and were a personal debt of Mr Silverbrook and Ms Lee and the respondents, including Mr Silverbrook and Ms Lee, had suffered irreparable financial and solvency damage;

(2)    based on searches conducted of the Personal Property Securities Register and Land and Property Information (LPI):

(a)    Mr Silverbrook does not own any assets; and

(b)    Ms Lee does not own any assets but an historical search of LPI records in Ms Lee’s name showed that she had transferred six properties between 1996 and 2016; and

(3)    she is not aware of any other assets held by Mr Silverbrook or Ms Lee which could be used to effect reimbursement of the Costs Orders should the Fair Work Ombudsman be successful in its appeals.

8    The Fair Work Ombudsman also relied on a letter dated 17 July 2015 from Keypoint Law, the solicitors for the respondents, which sets out the basis upon which that firm acted for the respondents, other that Geneasys Pty Ltd, in the Federal Circuit Court proceedings (the Costs Agreement) and a tax invoice from Keypoint Law dated 15 August 2016 addressed to Mr Silverbrook and Ms Lee for their work representing those respondents for whom they acted in the Federal Circuit Court proceedings in accordance with the Costs Agreement (the Tax Invoice).

9    The Costs Agreement provides that Keypoint Law will only be entitled to receive payment in the event of a “successful outcome” as that term is defined in the Costs Agreement. It further provides that, in the event of a successful outcome, Keypoint Law will charge an additional 25% “uplift” premium on its fees. The Tax Invoice is for a total of $728,166.83 inclusive of GST and notes that, in accordance with the Costs Agreement, Keypoint Law is entitled to charge an additional 25% uplift on account of achieving a successful outcome.

10    The respondents relied on a letter dated 31 October 2016 from their solicitors to the Office of the Fair Work Ombudsman in which under the heading “Payment of Costs”, their solicitors referred to the Costs Orders and requested that the costs be paid as one single set of costs in the fixed amount of $800,000 into an account in the name of Keypoint Law Pty Limited, details of which were provided. The letter concludes:

Please confirm that you will ensure that cleared funds will be available in the account on or before 18 November 2016 so that your client will be in compliance with the 28 day payment deadline as advised by Judge Street in response to your client’s senior counsel’s enquiry on 21 October 2016 (at T33.7-33.10).

(emphasis in original)

11    After a short adjournment, granted at the request of the solicitor for the respondents, I granted leave to the respondents to file in Court an affidavit affirmed on 16 November 2016 by Adam Gascoigne-Cohen, a solicitor in the employ of Keypoint Law. The requirement for an adjournment arose to enable the respondents to put evidence before the Court of the effect of a stay on them and, in particular, a letter referred to by their solicitor, Mr Argy, in oral submissions which had been written to the respondents by Keypoint Law.

12    Mr Gascoigne-Cohen’s affidavit annexes:

(1)    a letter dated 16 November 2016 which he said had been sent earlier that day to Mr Silverbrook and Ms Lee and others, the contents of which were approved by Mr Argy on 15 November 2016 before he left Sydney (Appeal Costs Agreement); and

(2)    an email from Mr Silverbrook and Ms Lee to Mr Argy, a consulting principal at Keypoint Law, and Mr Gascoigne-Cohen sent during the adjournment at 11.41 am on 16 November 2016.

13    In his affidavit, Mr Gascoigne-Cohen also gave evidence on information and belief from Mr Silverbrook and Ms Lee that if Keypoint Law could not act they would be prejudiced because of the difficulty of briefing new legal representatives, the logistical and practical difficulties of which are compounded by Mr Silverbrook’s poor health and that as a result of Mr Silverbrook’s health and Ms Lee’s role as carer it would be impractical for them both to come to Sydney in the foreseeable future to brief lawyers or participate in court proceedings. Mr Gascoigne-Cohen also said that since March 2016 neither he nor Mr Argy have been able to meet with Mr Silverbrook in person and had been limited to taking instructions by telephone and email.

14    Mr Gascoigne-Cohen’s affidavit does not clearly set out when the Appeal Costs Agreement, which was the letter that had been referred to in submissions by Mr Argy, was sent. Mr Gascoigne-Cohen was cross-examined. It became apparent both before and, as a result of his cross-examination, that the Appeal Costs Agreement was sent during the adjournment. Although Mr Argy sought the adjournment for the purpose of putting before the Court a letter that had been sent, the letter had not been sent prior to the adjournment. Mr Gascoigne-Cohen, who was sitting in Court at the time the relevant submissions were made, gave evidence that, although he was aware that the Appeal Costs Agreement had not been sent, he did not hear Mr Argy inform the Court that the letter had been sent. I accept Mr Gascoigne-Cohen’s evidence in that regard. I also accept Mr Gascoigne-Cohen’s evidence that the letter had been approved by Mr Argy before his departure from Sydney on 15 November 2016 and that the only changes that were made to the letter by Mr Gascoigne-Cohen before its dispatch were to remove highlighting from parts of it, change its date and remove Mr Argy’s name from the signature block.

15    The ambiguity in Mr Gascoigne-Cohen’s affidavit about the time at which the Appeal Costs Agreement was sent is unfortunate. However, I accept the respondents’ submission that there was no intention to mislead the Court in that respect.

16    In cross-examination Mr Gascoigne-Cohen also gave evidence that during the adjournment allowed by the Court he and Mr Argy had two discussions by telephone with Mr Silverbrook and Ms Lee. The first took place at about 11.05 am, shortly after the adjournment was granted as Messrs Argy and Gascoigne-Cohen left the Court, and the second took place at the offices of Keypoint Law. Mr Gascoigne-Cohen said he could only partially hear the first conversation and that he was present for most but not all of the second conversation. Mr Gascoigne-Cohen’s recollection of these conversations was very limited. He recalled that in the second discussion Mr Argy told Mr Silverbrook and Ms Lee that he was going to send them a letter. The Appeal Costs Agreement was sent after that discussion at 11.32 am.

17    Unlike the Costs Agreement, the Appeal Costs Agreement is not a conditional costs agreement. It relevantly provides:

This letter contains our offer to enter into a costs agreement with you. If you accept our offer, then this letter along with our attached Terms of Engagement will govern our provision of legal services in this matter to you. These documents also contain mandatory disclosures under applicable legal profession legislation.

…

A.    Our client

We confirm that we will be acting in this matter for KIA SILVERBROOK, JANETTE LEE, PRIORITY MATTERS PTY LTD (ACN 089 759 973), SUPERLATTICE SOLAR PTY LTD (ACN 147 948 605) and MPOWA PTY LTD (ACN 153 099 168) (individually and together “you”). We will take our instructions from either of you individually, with each of you having authority to issue instructions on behalf of the other. If you would like us to accept instructions from any further parties, please let us know.

B.    Scope of work

You current instructions are for us to act for you in each of the following five sets of appellate proceedings brought by the Fair Work Ombudsman (FWO) against you in the Federal Court of Australia:

•    Fair Work Ombudsman v Priority Matters Pty Ltd ACN 089 759 973 & Anor (NSD1939/2016)

•    Fair Work Ombudsman v Superlattice Solar Pty Ltd ACN 147 948 605 & Anor (NSD1940/2016)

•    Fair Work Ombudsman v Kia Silverbrook & Anor (NSD1941/2016)

•    Fair Work Ombudsman v Kia Silverbrook (NSD1942/2016)

•    Fair Work Ombudsman v Mpowa Pty Ltd ACN 153 099 168 & Anor (NSD1943/2016)

Should you wish to vary the scope of our instructions at any time, please feel free to discuss this with us.

…

Estimate of Total Legal Costs

At this stage, we estimate that our total professional fees in your matter will be $150,000 plus GST; and that total disbursements will be $500 plus GST. Accordingly, our estimate of total legal costs in this matter $150,500 plus GST.

…

Costs on account and payable terms

It is our usual policy to require costs on account of our anticipated professional fees and disbursements.

In this case, the amount that you will be required to pay will depend on how much of our prior invoices have been paid by the time any court appearance is necessary. At this stage we should indicate that we will need a minimum of $250,000 paid towards our previous accounts to be able to act on the appeals, as well as an acceptable payment plan entered into for the balance. As you will appreciate, we became entitled to our fees under our previous letter of engagement at the time judgement was given on 17 June. Since that time we continued to act for you as a gesture of goodwill until judgement was delivered on 21 October, as well as contesting multiple subpoenae and pressing a Notice to Produce. We regret the need to take this stance but if the FWO is able to obtain a stay on the costs order made in your favour by Judge Street, or otherwise continues to refuse to pay, we will need you to provide some funds for us to continue.

Our invoices are payable within 30 days of issue.

18    The email from Mr Silverbrook and Ms Lee sent at 11:41am on 16 November 2016, according to Mr Gascoigne-Cohen after dispatch of the Appeal Costs Agreement, provides:

The consequences of a stay order are catastrophic for us.

It is not practical to transfer these Five Matters to a different law firm. Personal circumstances have changed dramatically in relation to our ability to assist a law firm since Kia Silverbook’s major heart attack in April 2016, which led to permanent heart damage. Janette Lee is Kia Silverbrook’s full-time carer, so she also does not have the same amount of time as she previously did.

To run the appeal, it is essential that Philip Argy and Keypoint Law stay on the case. It is not a matter of the cost of bringing another law firm up to speed. It is also a matter that Kia Silverbrook is not well enough to do so, and that Janette no longer has the time. The FWO are well aware of this, and medical reports have been provided from Westmead Hospital and the cardiac surgeon.

The Five Matters are extremely complex, with many hundreds of pages of affidavits, many thousands of pages of exhibits, and hundreds of pages of submissions.

At Paragraph 83 of his primary judgement, Judge Street wrote: “The evidence and submissions on liability involved the calling of 13 witnesses and occupied 9 days of hearing and more than 22 large folders of affidavits and exhibits.”

Philip Argy and Adam Gascoigne-Cohen have now been on this case for more than a year, and have incurred more than $800,000 in legal fees. As the FWO have appealed virtually all aspects of the case, any new lawyers would have to become familiar with the entire case. This would likely costs hundreds of thousands of dollars, which we do not have.

All of our companies have been destroyed by the action of the Kaiser Entities and the FWO. None are trading.

Neither Kia Silverbrook or Janette Lee are employed, as this complex case has been a full time job, and Kia Silverbrook is no-longer well enough to work. We are supported by the generosity of friends. However, our friends are not wealthy enough to fund this complex case.

Kia Silverbrook is also too ill to run the case, and has no legal background.

In his judgements relating to the Five Matters, Judge Street described the FWO’s conduct as “unfair” eight times, “unreasonable” eleven times, “improper” six times and “inappropriate” five times.

We are up against a well funded Government department that appears willing to take any measures to win this case, whether they meet the obligations of a Model Litigant or not. This is not the first time that the FWO has taken measures to ensure that we are unrepresented.

Legal principles

19    The Fair Work Ombudsman made her applications for a stay of the Costs Orders pursuant to r 36.08 of the Federal Court Rules 2011 (Cth) which relevantly provides:

36.08 Stay of execution or proceedings under judgment appealed from

(1)    An appeal does not:

(a)    operate as a stay of execution or a stay of any proceedings under the judgment subject to the appeal; or

(b)    invalidate any proceedings already taken.

(2)    However, an appellant or interested person may apply to the Court for an order to stay the execution of the proceeding until the appeal is heard and determined.

20    The principles governing the exercises of the Court’s discretion in determining whether to grant a stay are not in contention. In Wooldridge v Australian Securities and Investments Commission [2015] FCA 349, Middleton J at [9] and [11] set out the relevant principles as follows:

9    In Alexander v Cambridge Credit Corp Ltd (Receivers Appointed) (1985) 2 NSWLR 685, the New South Wales Court of Appeal identified a number of principles guiding the exercise of discretion in granting a stay. Relevantly for the stay application before me the Court said (at 694-5):

…The onus is upon the applicant to demonstrate a proper basis for a stay that will be fair to all parties. The mere filing of an appeal will not, of itself, provide a reason or demonstrate an appropriate case, nor will it discharge the onus which the applicant bears. The Court has a discretion whether or not to grant the stay and, if so, as to the terms that would be fair. In the exercise of its discretion, the Court will weigh considerations such as the balance of convenience and the competing rights of the parties before it. Where there is a risk that if a stay is granted, the assets of the applicant will be disposed of, the Court may, in the exercise of its discretion, refuse to grant a stay. Sometimes as a condition of the grant of a stay, where funds are available, a court will impose on the applicant the payment of the whole, or part, to the judgment creditor. Even where no order is made for the payment of part of a verdict, it is not at all unusual for the Court, in the exercise of its discretion, to grant a stay on terms that the appellant give to the judgment creditor security in terms defined by the Court as appropriate to the fair adjustment of the rights of the parties.

…

Two further principles can be mentioned. The first is that where there is a risk that the appeal will prove abortive if the appellant succeeds and a stay is not granted, courts will normally exercise their discretion in favour of granting a stay. Thus, where it is apparent that unless a stay is granted an appeal will be rendered nugatory, this will be a substantial factor in favour of the grant of a stay. Secondly, although courts approaching applications for a stay will not generally speculate about the appellant's prospects of success, given that argument concerning the substance of the appeal is typically and necessarily attenuated, this does not prevent them considering the specific terms of a stay that will be appropriate fairly to adjust the interest of the parties, from making some preliminary assessment about whether the appellant has an arguable case.

(citations omitted)

…

11    It is to be first appreciated that a first instance decision is not, and should not be treated as, a provisional decision. This is reflected in and acknowledged by r 36.08(1) of the Federal Court Rules 2011 (Cth). As Gleeson CJ observed in Swain v Waverley Municipal Council (2005) 220 CLR 517, at [2], the “system does not regard the trial as merely the first round in a contest destined to work its way through the judicial hierarchy until the litigants have exhausted either their resources or their possibilities of further appeal”. There is a prima facie assumption that the judgment the subject of the appeal is correct. The Court should not deprive a person of the fruits of victory by granting a stay unless the circumstances warrant the Court’s intervention.

21    In Flight Centre Limited v Australian Competition and Consumer Commission [2014] FCA 658 at [9], Rangiah J summarised the principles as follows:

9    I was not referred to any authorities in which an application for a stay of a pecuniary penalty order had been considered. The application fell to be determined having regard to the nature of the order and upon general principles. Those principles include the following:

(a)    There is an onus on the applicant to demonstrate a proper basis for a stay that will be fair to all parties.

(b)    There is a prima facie assumption that the judgment appealed from is correct.

(c)    There is a prima facie assumption that the Court should not deprive a litigant of the benefit of a judgment in its favour.

(d)    The Court has a broad discretion as to whether to grant a stay, and it is not necessary for an applicant for a stay to demonstrate special or exceptional circumstances. It is sufficient that the applicant demonstrates a reason or an appropriate case to warrant the exercise of discretion in its favour.

(e)    The mere filing of an appeal will not, of itself, provide a reason or demonstrate an appropriate case.

(f)    A stay will usually be granted if there is a real risk that the applicant will suffer prejudice or damage, if a stay is not granted, which will not be redressed by a successful appeal.

(g)    In the exercise of its discretion, the Court will weigh considerations such as the balance of convenience and the competing rights of the parties before it.

[Alexander v Cambridge Credit Corporation Ltd (1985) 2 NSWLR 685 at 694; Powerflex Services Pty Ltd v Data Access Corporation (1996) 67 FCR 65 at 66; McLean Technic Pty Ltd v Digi-Tech (Australia) Ltd (2002) 55 NSWLR 737 at [18]].

CONSIDERATION

22    The respondents submitted that the applications for a stay had to be viewed in context and against the unusual circumstances of the Federal Circuit Court proceedings. In that regard, they submitted that:

(1)    the primary judge handed down his judgment on liability on 17 June 2016. No appeal was filed by the Fair Work Ombudsman in relation to that judgment at that time despite bringing other applications for determination in the Federal Circuit Court proceedings. The respondents submitted that the appeals were not competent because they were out of time insofar as the Fair Work Ombudsman sought to appeal from the orders and judgment in Priority Matters and no application for an extension of time in which to appeal had been filed;

(2)    on 31 October 2016 the Fair Work Ombudsman was provided with details of where to pay the amount of the Costs Orders. There was no objection to that course;

(3)    the Fair Work Ombudsman then served notices of appeal;

(4)    the power to award costs against a party in proceedings under the Fair Work Act is limited to the circumstances set out in s 570(2) and relevantly where “the Court is satisfied that the party’s unreasonable act or omission caused the other party to incur costs”;

(5)    the Costs Orders were the subject of a contested application which followed findings by the primary judge of unreasonable conduct in Priority Matters. The primary judge gave the Fair Work Ombudsman the opportunity to argue on 21 October 2016 that the costs claimed were not incurred by reason of that unreasonable conduct;

(6)    the primary judge made findings about the Fair Work Ombudsman’s conduct. The Court was taken to the primary judge’s judgment in Priority Matters at [284], [288], [291] and [292] in that part of the judgment where the primary judge considered as application in a case for contempt and costs brought by the Fair Work Ombudsman in one of the proceedings. That application sought to have a solicitor “dealt with for contempt”: Priority Matters at [283];

(7)    at [292] of Priority Matters there was a clear finding:

The effect of this strategy was one where Mr Silverbrook lost the potential representation by Ms Inverarity in these proceedings and but for the taking over of the matters by Mr Argy the position is that Mr Silverbrook and the companies may have been unrepresented. I regard the conduct of the FWO in relation to this strategy in the filing of the contempt application and the keeping of it alive until the close of the respondents’ case as unreasonable conduct that has caused the respondent companies, Mr Silverbrook and Ms Lee to incur costs within the meaning of s.570 of the Fair Work Act 2009.

(8)    Mr Silverbrook and Ms Lee were essentially “acquitted” by the primary judge who found that they were not liable as accessories;

(9)    on 21 October 2016, the primary judge gave extensive ex tempore reasons. His Honour took the amount claimed for costs, $1.2m, and applied a 20% reduction for party/party costs and a further 10% reduction to account for costs incurred by the corporate respondents, to arrive at the amount of $800,000;

(10)    without some payment the respondents will be unrepresented in the appeal proceedings because they have no money; and

(11)    a stay will severely impact if not completely imperil the respondents’ ability to run the appeals and referred to the email dated 16 November 2016 where Mr Silverbrook and Ms Lee said it was not practical for them to transfer the proceedings to another firm and that, given Mr Silverbrook’s illness, he cannot put the time and effort into briefing someone new.

23    There is a prima facie assumption that the judgment appealed from is correct and that the respondents should not be deprived of the benefit of a judgment in their favour. It is a matter for the applicant for the stay to demonstrate that, in all the circumstances, the matter is an appropriate one for the granting of a stay. In my opinion, the Fair Work Ombudsman discharged that onus such that the stays should be granted.

24    First, the respondents’ submission that the appeals are incompetent, insofar as they seek to appeal from Priority Matters, because the Fair Work Ombudsman has not filed her notices of appeal in time must be rejected. The orders and judgment in Priority Matters were interlocutory. Any appeal from them would need to be with the Court’s leave. But the bifurcation of the appeal process as between liability and penalty in proceedings of the nature that were before the primary judge has been discouraged by this Court. In Quincolli Pty Ltd v Fair Work Ombudsman [2012] FCA 373 Jagot J held at [6] and [8]:

6    In short, there is no point granting the applicants an extension of time if the applicants cannot also obtain a grant of leave to appeal. Consistent with the respondent’s submissions and the authorities to which I have been taken, the decision of the FMC is an interlocutory decision in that it does not finally determine all of the rights of the parties. Accordingly, in order to grant leave to appeal, I need to be satisfied that substantial injustice will result from a refusal of leave to appeal. Viewed objectively, however, I consider that substantial injustice cannot result from a refusal of leave to appeal and that the interests of justice would be subverted by the grant of leave to appeal.

…

8    In other words, I agree with Rares J’s view that interlocutory appeals of this nature should be discouraged, because in this matter there can be an expeditious and prompt determination of the penalty, and if the applicants are dissatisfied with the result as a whole, then they will have a right to appeal in respect of the whole of the decision. The applicants’ interests, which no doubt are genuine and important to them, in not being subjected to adverse publicity in relation to a penalty hearing cannot outweigh the other interests to which I have referred. For these reasons, it follows that I am of the view that the application for leave to appeal cannot succeed.

25    The penalty and costs orders having been made so that the rights of the parties are finally determined, it is open to the Fair Work Ombudsman to appeal in respect of the whole of the decision which she has now done.

26    Secondly, having regard to the relatively low threshold and despite the fact that I did not have available to me the primary judge’s reasons delivered on 21 October 2016, I accept the submission of the Fair Work Ombudsman that there is an arguable case on appeal in relation to the Costs Orders concerning whether:

(1)    there was a miscarriage in the exercise of the primary judge’s discretion in the making of the Costs Orders given that where they were made as a fixed sum in the absence of any evidence of what was said to constitute a reasonable amount of costs in the circumstances or any evidence of the apportionment of costs as between the various respondents, including Mr Silverbrook and Ms Lee, and the absence of any evidence going to the extent to which the costs were said to have been incurred because of the conduct of the Fair Work Ombudsman;

(2)    the primary judge made his findings in Priority Matters about the conduct of the Fair Work Ombudsman without giving her notice of his intention to do so;

(3)    the primary judge approached the proceedings through a false prism namely that it was incumbent on the Fair Work Ombudsman to approach the Australian Taxation Office (ATO) and to ask it to release funds owing to some of the corporate respondents so that they could pay employee entitlements;

(4)    the primary judge misconstrued s 570 of the Fair Work Act by finding that conduct of the Fair Work Ombudsman prior to the commencement of the proceedings, that is the decision to commence the proceedings rather than contacting the ATO to pay moneys to the respondents, meant that the proceedings should never have been commenced; and

(5)    the primary judge had a mistaken view of accessorial liability applying incorrect principles in determining that Mr Silverbrook and Ms Lee were not liable.

27    Thirdly, there is a real risk that in the absence of a stay of the Costs Orders the appeal would be rendered nugatory. The evidence shows that the proceeds of the Costs Orders are to be paid into an account held by Keypoint Law presumably in part payment of the amount owing to that firm for having acted in the Federal Circuit Court proceedings. Keypoint Law is not a party to the appeal and in the event the Fair Work Ombudsman was successful in her appeals and the Costs Orders were set aside she would be left to pursue Mr Silverbrook and Ms Lee for repayment of the Costs Orders. The evidence is that they have no assets. No undertaking was proffered from Keypoint Law to repay the moneys should the Fair Work Ombudsman be successful in her appeals nor was any comfort given by Mr Silverbrook and Ms Lee.

28    In Australian Federation of Consumer Organisations Inc v Tobacco Institute of Australia Ltd (1991) ATPR 41-138, Morling J considered an application by a respondent for an appellant to pay it a certain amount by way of costs before the resolution of the appeal to which they were party. The respondent had a costs order in its favour which was not yet quantified. His Honour identified the critical question in the application as being whether there should be a stay of the costs order. In considering that question Morling J, noting that he proceeded on the assumption success on the appeal would lead to a reversal of the costs order already made, observed at 52,992:

21.    Then Mr Bennett submits that the decided cases do not generally favour stays of costs orders. What is said in Alexander's Case rather diminishes the weight of this submission. But in any event I think the cases disclose that there is a well-settled approach that a stay will normally be granted where a payment of money by an appellant pursuant to an order of a trial judge will be irrecoverable in the event that an appeal against the trial judge's decision is successful.

22.    Another matter relied upon by Mr Bennett was that because of the great expense incurred by the respondent in resisting the proceedings at first instance, it may be inferred that the payment of costs is not a matter of major significance to the respondent. In other words, it is said that it is more the commercial aspects of the litigation which are important to the respondent, rather than the actual costs of it. That may be so, but it does not negate the fact that if I decline to grant the stay, the consequence will be that a very substantial sum of money would have to be paid by the respondent and will be irrecoverable if the appeal succeeds.

(emphasis added)

29    The Fair Work Ombudsman is in a similar position. That is the assumption is that if she is successful in her appeals the Costs Orders would be reversed and, if paid prior to determination of the appeals, on the available evidence the moneys paid to Mr Silverbrook and Ms Lee will be irrecoverable.

30    The respondents relied on the judgment of Murphy J in Phone Directories Company Australia Pty Ltd v Telstra Corporation Limited (No 3) [2015] FCA 924 in which his Honour refused to grant a stay of a costs order. But the circumstances of that case can be distinguished from the respondents’ circumstances. His Honour gave six reasons for refusing the stay including that Phone Directories Company Australia Pty Ltd (PDCA) was supported by a related company which had significant turnover and sufficient assets to meet the costs that would be payable if the appeal was successful and PDCA held valuable assets in the form of trade marks. There is no such evidence here as to assets or the ability of another party to repay the Costs Orders should the Fair Work Ombudsman be successful in her appeals.

31    Fourthly, the position of ongoing legal representation is not clear on the evidence. The Appeal Costs Agreement requires a minimum payment of $250,000 on account of “previous accounts” and the entry into of an acceptable payment plan for the balance for Keypoint Law to be able to act in the appeals. The email from Mr Silverbrook and Ms Lee dated 16 November 2016, which was sent after despatch of the Appeal Costs Agreement, does not respond to the Appeal Costs Agreement. While it seems to be common ground that Mr Silverbrook and Ms Lee have no assets they do not say in their email that they do not have the means to pay the amount sought on account in the Appeal Costs Agreement. They say that it would be difficult, given their personal circumstances, costly and, in effect, inconvenient to brief new lawyers, particularly in light of Keypoint Law’s familiarity with the case. The practical and perhaps regrettable result of the granting of the stays may be that Keypoint Law ceases to act for the respondents leaving them in the position of having to retain new lawyers. However, that in my view is not sufficient to outweigh the real risk that if successful on appeal the Fair Work Ombudsman would be in a position of being unable to recoup the Costs Orders.

costs

32    Senior counsel for the Fair Work Ombudsman asked that costs on the interlocutory applications be reserved so that these reasons could be considered. I made orders to that effect. I will make orders for the filing of submissions in support of any application for costs that is to be made.

Associate:

Dated:    25 November 2016