FEDERAL COURT OF AUSTRALIA

Zhao v TTS & Associates Pty Ltd (No 2) [2020] FCA 1063

ORDERS

THE COURT ORDERS THAT:

1.    The respondent’s application for costs is dismissed.

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

REASONS FOR JUDGMENT

SNADEN J:

1    On Friday, 3 July 2020, I dismissed an application made by the applicant, Ms Zhao, for leave to appeal from a judgment of the Federal Circuit Court of Australia: Zhao v TTS & Associates Pty Ltd [2020] FCA 922 (Snaden J). I published reasons for doing so, which concluded (at [42]) as follows:

Section 570(1) of the FW Act likely prohibits the awarding of costs in the present application. Nonetheless, the respondent indicated a wish to be heard on that issue. In addition to dismissing the present application, I will make orders giving the respondent until 10 July 2020 to file, should it wish to, written submissions on the question of costs; and for the applicant to file submissions in reply by 17 July 2020. Subject to either party requesting otherwise, I will make further orders with respect to costs on the papers.

2    Orders consistent with those observations were made. As they contemplated, the parties filed submissions as to costs. In short, the respondent sought an award of costs in respect of its successful opposition to the application for leave to appeal. The applicant, unsurprisingly, resisted that course. Neither party having requested a further hearing on the issue (as the court’s orders invited them to if they considered one necessary)—and given the relative simplicity of the issue in question—it is appropriate that the question of costs be addressed on the papers. For the reasons that follow, there will be no order made as to costs.

3    The application that was the subject of the Federal Circuit Court judgment from which leave to appeal was sought was brought under pt 3-1 of the Fair Work Act 2009 (Cth) (hereafter, the “FW Act”). It concerned the termination of the applicant’s employment with the respondent in July 2018. The respondent appears to accept—and I consider it the case in any event—that the application for leave to appeal was a proceeding in a matter arising under the FW Act. In order that the court might make any award of costs in respect of it, the respondent needs to demonstrate that the circumstances fall within one of the exceptions to the general prohibition against that course for which s 570 of the FW Act provides. That section is relevantly in the following terms:

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)…

(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

…

4    The respondent advances two bases upon which it says that the court should award it its costs of successfully defending the application for leave to appeal. First, it submits that the applicant acted unreasonably by not accepting an offer or offers that it made to her to settle the underlying dispute concerning the termination of her employment (out of which the proceeding in the Federal Circuit Court and the present proceeding each arose). Second, it submits that the applicant’s application for leave to appeal was instituted without reasonable cause “…and potentially vexatiously”. I address each contention in turn.

Unreasonable act or omission

5    By its written submission concerning costs, the respondent asserts that it offered to resolve the underlying dispute about the termination of the applicant’s employment by paying her $18,750.00. That offer was made on 31 August 2018 during a conciliation conference in the Fair Work Commission and was later reiterated in writing by correspondence dated 7 September 2018. The respondent says that the applicant countered that offer by demanding $450,000.00. Later, after the Federal Circuit Court dismissed the applicant’s application in that court (and a subsequent application to set aside that dismissal), the applicant reduced her offer to $70,000.00. The respondent contends that the applicant acted unreasonably, and in a manner that caused it to incur costs herein, by “…fail[ing] to accept the offer of compromise [that it] put forward…or, at the very least, [by failing to] construct a counteroffer that was proximate to an outcome she could reasonably achieve should she be successful…”

6    Respectfully, those submissions are misconceived. The only offers that the respondent appears to have made were made well before the application for leave to appeal was filed in this court. The respondent cannot be understood to have made any offer to resolve that proceeding, the rejection of which might be impugned as unreasonable. The applicant’s rejection of an offer that was last made in August and September of 2018 cannot amount to an unreasonable act or omission that has occasioned the incurring of costs in a proceeding commenced more than 18 months later. The position might have been different had the respondent offered to settle the application for leave to appeal on the same basis that it offered to settle the broader dispute in September of 2018: see, for example: PIA Mortgage Services Pty Ltd v King (No 2) [2020] FCAFC 53, [20] (Rangiah, Charlesworth and Snaden JJ); Melbourne Stadiums Ltd v Sautner (2015) 229 FCR 221, 255 [166] (Tracey, Gilmour, Jagot and Beach JJ, with whom White J agreed on that issue). There is no evidence that that occurred here.

7    More to the point, the applicant’s most recent offer of compromise—$70,000.00—is not obviously excessive having regard to the nature of the claim that she sought to ventilate. Even assuming that a failure on her part to put a counter offer “…that was proximate to an outcome she could reasonably achieve” might amount to an unreasonable act or omission—a proposition that, respectfully, is by no means clear—I do not accept that the applicant should fairly be thought to have failed in that regard. For equivalent reasons, it was not unreasonable—even though, with the benefit of hindsight, it was inadvisable—for the applicant to reject the offer that was made in August and September of 2018. The respondent’s offer was not so plainly attractive that the only course reasonably open to the applicant was to accept it.

8    There was no unreasonable act or omission on the applicant’s part that led the respondent to incur costs that it should herein be permitted to recover under s 570(2) of the FW Act.

Existence of reasonable cause

9    The respondent submits that the applicant’s application for leave to appeal was instituted without reasonable cause. Respectfully, I do not accept that submission. A matter will not be devoid of reasonable cause merely because it fails. In Baker v Patrick Projects Pty Ltd (No 2) (2014) 145 ALD 548 (Dowsett, Tracey and Katzmann JJ), a Full Court of this Court endorsed (at [9]) what was said about the application of s 570(2)(a) of the FW Act in Construction, Forestry, Mining and Energy Union v Corinthian Industries (Australia) Pty Ltd (No 2) [2014] FCA 351 (Pagone J). There, Pagone J said (at [8]) that:

…[t]o 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, 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) 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.

10    The Full Court in Baker identified some “minor modification[s]” of the test when applied to appeals and judicial review proceedings. At [10], the Court observed that:

…[i]n 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 (Wilcox CJ).

11    The judgment from which the applicant sought leave to appeal involved the exercise of a judicial discretion (namely, to refuse to set aside an earlier order dismissing an application in default of appearance). In order that she might have a prospect of overturning it on appeal, the applicant needed to demonstrate that the court’s discretion miscarried in any one or more of the ways famously outlined by the High Court in House v R (1936) 55 CLR 499, 504-505 (Dixon, Evatt and McTiernan JJ). That is precisely what she sought to do.

12    Although there was a degree of ambition to at least some of her submissions concerning the existence of House v R-type error, I do not accept that all of them were so hopeless that the respondent might clear the very high hurdle established by s 570(2)(a) of the FW Act. For example, insofar as concerned the applicant’s contentions about the prejudice that the reinstatement of her application in the Federal Circuit Court would visit upon the respondent, I considered that the applicant had “little, if any, prospect” of establishing error in a House v R sense. I came to a similar conclusion in respect of the contentions that she advanced about her culpability for having not attended the hearing that took place before the Federal Circuit Court on 25 February 2019 (in consequence of which her proceeding before that court was initially dismissed). To succeed presently, the respondent would need to show that the applicant had no such prospects (or no such reasonable prospects), such that her application for leave to appeal had, by necessity, to fail. That is not what I found, nor a submission that I would accept.

13    Likewise, I would not accept the submission—if it is made—that the application for leave to appeal was commenced vexatiously. By its written submissions, the respondent observed that “…it could be argued that the leave to appeal [application], if anything, was instituted vexatiously by an applicant simply not happy with the decision made by the FCCA”. If that should be understood as a submission that the application for leave to appeal was instituted vexatiously, I do not accept it. The applicant was plainly unhappy with the Federal Circuit Court’s refusal to set aside its earlier decision to dismiss her proceeding, as of course she would be. That is not nearly sufficient to establish that her application for leave to appeal from that judgment should be impugned as vexatious: that is, as a mechanism for vexing the respondent, or for achieving some improper purpose not sufficiently connected to the vindication of what the applicant considered were her legal rights.

14    The application for leave to appeal was not instituted vexatiously or without reasonable cause.

Conclusion

15    The respondent has not established that the present circumstances enliven any of the exceptions to the prohibition against the awarding of costs for which s 570(1) of the FW Act provides. There shall be no order as to costs.

Associate:

Dated:    27 July 2020