FEDERAL COURT OF AUSTRALIA

King v Patrick Projects Pty Ltd (No 2) [2017] FCA 388

ORDERS

THE COURT ORDERS THAT:

1.    The applicants pay the respondents’ costs of the application on an indemnity basis.

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

REASONS FOR JUDGMENT

GILMOUR J:

Introduction

1    The applicants’ statement of claim was struck out and the originating application dismissed by orders made on 9 September 2016: King v Patrick Projects Pty Ltd [2016] FCA 1110 (Judgment). The respondents were given liberty to apply on the question of costs.

2    The respondents seek costs in this matter against the applicants on an indemnity basis pursuant to s 570(2) of the Fair Work Act 2009 (Cth) (Fair Work Act) and s 43 of the Federal Court of Australia Act 1976 (Cth). I ordered on 1 March 2017 that the question of costs be heard on the papers.

Background

3    The applicants pursued their claim in the Fair Work Commission and were unsuccessful. They then sought leave to appeal to the Full Bench of the Fair Work Commission, which refused leave. Nonetheless the Full Bench considered the substance of the Applicants’ appeal and held that it was without merit.

4    Thereafter, in November 2015, the applicants’ instituted proceedings in this Court based on the same legal and factual dispute which had been determined by the Fair Work Commission.

5    On 5 May 2016, the respondents, by their solicitors, informed the applicants that they considered the applicants’ claim lacked a reasonable cause of action and was an abuse of the Court’s processes. They explained to the applicants why this was the case. The applicants were also put on notice of the respondents’ intention to seek costs against them pursuant to s 570(2) of the Fair Work Act.

6    The applicants filed two outlines of submissions dated 8 February and 8 March 2017. There was a considerable degree of overlap as between them. Accepting that they were to some extent prepared by the lay applicants with some assistance from a legal practitioner, they were nonetheless almost entirely unhelpful. To a significant degree they sought to reactivate this matter on its merits. They contained confidential material concerning communications between the parties with a view to a settlement of these proceedings. These I have not read nor taken into account. There was no real attempt to deal with the gravamen of the core issue namely whether, as the respondents submit, the applicants commenced these proceedings “without reasonable cause” and are amenable to an adverse costs order pursuant to s 570(2)(a) of the Fair Work Act.

The relevant legal principles

7    Subsection 570(2) of the Fair Work Act, upon which the respondents rely, relevantly provides as follows:

(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 ...

8    I have previously discussed the legal principles informing the ordering of costs under s 570(2) of the Fair Work Act in Fair Work Ombudsman v Skilled Offshore (Australia) Pty Ltd (No 2) [2015] FCA 1509. In that decision, at [7]–[10] and [13], I accepted the following legal principles as 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].

    …

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.

…

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

9    In addition to the principles that I have outlined above, it is well-established that the Court’s powers to make cost orders pursuant to s 570(2) of the Fair Work Act must be exercised cautiously for public interest reasons: Australian Workers Union v Leighton Contractors Pty Ltd (No 2) (2013) 232 FCR 428 at [7]–[8].

10    Costs orders made pursuant to protective provisions such as s 570(2) of the Fair Work Act are not designed to punish litigants for undertaking an unreasonable course of action: Kanan v Australian Postal and Telecommunications Union (1992) 43 IR 257 at 265. Rather, a cost order is made on the basis that a measure of indemnity should be conferred upon respondents for the costs incurred in responding to unreasonably instituted proceedings: Kanan at 265.

11    The following principles specific to s 570(2)(a), on which the respondents rely, are in addition to the principles that I have outlined above, and are similarly uncontroversial.

12    The particular requirements of s 570(2)(a) were the subject of a Full Court decision in Baker v Patrick Projects Pty Ltd (No 2) [2014] FCAFC 166. In that case, the Full Court considered the phrase “without reasonable cause” and, at [9], endorsed the following summary of authorities relating to the meaning and application of this phrase by Pagone J in Construction, Forestry, Mining and Energy Union v Corinthian Industries (Aust) Pty Ltd (No 2) [2014] FCA 351 at [8]:

… 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) 140 CLR 470 at 473; [1978] HCA 51. 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; 237 ALR 672; [2006] FCAFC 199 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) 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.

13    The Full Court went on to say of this summary, at [10], that:

10.    This test requires some minor modification when applied to the institution of an appeal or judicial review proceedings. In such proceedings the focus changes to whether, having regard to the facts apparent to the appellant at the time of instituting the appeal or the application for judicial review, there were no reasonable prospects of success. In evaluating these prospects regard may be had to the reasons for judgment or decision under appeal or review, as the case may be, and the grounds relied on to challenge the judgment or decision: see Imogen Pty Ltd v Sangwin (1996) 70 IR 254 at 257 per Wilcox CJ

(emphasis added)

14    This formulation of the relevant test was accepted by another Full Court in Kennedy v Secretary, Department of Industry (No 4) [2017] FCAFC 7 where the “relevant question” from Barker was held, at [8], to be “whether there were facts apparent to the party at the time of instituting the appeal that, viewed objectively, would demonstrate that there were no reasonable prospects of success” (emphasis added).

15    It is worth also noting that courts have accepted that cost orders made pursuant to s 570(2)(a) of the Fair Work Act and which relate to proceedings instituted “without reasonable cause” are not restricted to exceptional cases. Although an award for costs under s 570 will generally be ‘an exceptional order’ in that it is a divergence from the usual course, it is now widely accepted that there is no need to demonstrate exceptional circumstances in order to enliven the Court’s jurisdiction to award costs: Spotless Services Australia Ltd v Marsh [2004] FCAFC 155 at [12] affirmed in Construction, Forestry, Mining and Energy Union v BHP Coal Pty Ltd (No 2) (2015) 230 FCR 337 at [15]–[17].

The present case

16    Early in the history of the proceedings the applicants were given approximately five months to re-plead their claim. They filed a substantially amended claim on 19 April 2016 which then became the subject of the respondents’ successful strike out application. The strike-out application was made on 11 May 2016 pursuant to r 16.21(e) of the Federal Court Rules 2011 (Cth) on the basis that the pleading failed to disclose a reasonable cause of action. As I stated in my Judgment at [15], this required the respondents to demonstrate that the applicants’ case was so untenable that it could not possibly succeed. Put another way, they needed to establish that the applicants’ claim was hopeless and would have no chance of success if the action were to proceed to hearing.

17    In my Judgment, I allowed the respondents’ application on the ground of r 16.21(e), finding that it had no cause of action and was bound to fail: Judgment at [16] and [25]. Moreover, I found that, under r 16.21(f), the proceeding was an abuse of process given the history of the proceedings and, in particular, the fact that the applicants’ claims had failed before the Fair Work Commission and the Full Bench had refused permission to appeal: Judgment at [30]–[31].

18    This Court’s jurisdiction over decisions of the Fair Work Commission extends only to judicial review of those decisions. The source and scope of this jurisdiction was helpfully summarised by Collier J in Reihana v Mastercare Highrise Cleaning Services Pty Ltd [2014] FCA 353 at [19] as follows:

Pursuant to the [Fair Work Act], appeals from decisions of the Fair Work Commission can be heard by a Full Bench, in the way of a rehearing (ss 605, 607 and 614). There is no appeal from a decision of the Fair Work Commission (sitting as either a single member or the Full Bench) to this court, however judicial review of decisions of the Fair Work Commission is available pursuant to s 39B of the Judiciary Act 1903 (Cth).

19    The applicants’ originating application and statement of claim in this Court, as both originally filed and subsequently amended, did not purport to seek review of the Full Bench’s refusal nor was argument directed to any error on the part of the Full Bench. This alone would render the proceedings as having been commenced ‘without reasonable cause’.

20    Finally, I concluded in my Judgment that the applicants should not have leave to re-plead as I could not discern any viable claim open to them: Judgment at [32]–[33].

21    Thus, the respondents submit that their costs in this matter were incurred while resisting a hopeless claim. I accept their submission. At the time that the applicants instituted proceedings, the applicants’ claim had been unsuccessful in the Fair Work Commission and the substance of that claim had subsequently been considered by the Full Bench which had held that it was without merit: respondents’ subs at [6]. The Full Bench in King and Ors v Patrick Projects Pty Ltd [2015] FWCFC 6323, at [44]–[45], had specifically said of the substance of the applicants’ claims that:

[44]    A new agreement has been entered into between the parties and approved by the Commission, rendering the previous Agreement no longer relevant. As such, the appeals have no utility even if they were to proceed with an extension of time and would be dismissed on a no utility basis in any event.

[45]    We have reviewed all the relevant material before the Commission and we are not persuaded that an arguable case of appealable error has been demonstrated by the Concurrent Applicants in A1, A2 and A3. No basis upon which the public interest is attracted has been identified.

22    The applicants therefore had knowledge of the reasons of the Fair Work Commission and the Full Bench for rejecting the substance of the applicants’ claim when the applicants instituted proceedings on the same legal and factual dispute in this Court: Baker at [10]. Knowledge of these reasons renders it apparent that at the time of instituting the proceedings there was no “substantial prospect of success”: Kanan v Australian Postal and Telecommunications Union (1992) 43 IR 257 at 264 per Wilcox J. Further, viewed objectively, such knowledge would lead to the conclusion that attempts to re-litigate were “without reasonable cause” for the purposes of s 570(2)(a) of the Fair Work Act.

23    The ordering of costs on an indemnity basis, in circumstances where an applicant has persisted with a hopeless claim despite having the opportunity to re-plead, is a well-recognised category in which an order for indemnity costs is appropriate: Danthanarayana v Commonwealth of Australia [2016] FCAFC 114 at [40].

24    I find for the purposes of s 570(2)(a) that these proceedings were instituted without reasonable cause and in circumstances where the applicants have persisted with a hopeless claim despite the opportunity to re-plead. I will order that the applicants pay the respondents’ costs upon an indemnity basis.

Associate:

Dated:    13 April 2017

SCHEDULE OF PARTIES