Federal Court of Australia

Peters v Commonwealth of Australia (No 2) [2022] FCA 135

ORDERS

THE COURT ORDERS THAT:

1.    The Applicant pay the Respondent’s costs on an indemnity basis from the expiry of the Third Offer on 19 January 2021 until judgment in the sum of $106,423.93.

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

REASONS FOR JUDGMENT

ANDERSON J:

INTRODUCTION

1    On 22 December 2021, I delivered Reasons for Judgment and made orders dismissing the proceeding and reserving costs: Peters v Commonwealth of Australia [2021] FCA 1624 (Primary Judgment). I also made directions requiring the Respondent to file any application for costs by way of written submissions together with any supporting affidavit by 7 February 2022. The Respondent, in compliance with that direction, filed submissions in support of an application for costs and an affidavit of Jialing Chen affirmed 7 February 2022 with annexures JC-1 to JC-7. On 8 February 2022, my Associate wrote to the Applicant inviting her to file with the Court any written submissions in response to the Respondent’s application for costs by 17 February 2022.

2    On 16 February 2022 the Applicant filed submissions on costs.

3    The Applicant in this proceeding by her Amended Statement of Claim dated 30 August 2019 (ASOC) made numerous allegations which can be summarised into three principal allegations as follows:

(1)    that the Australian Taxation Office (ATO) contravened s 351(1) of the Fair Work Act 2009 (Cth) (FW Act) by taking unlawful adverse action against Ms Peters because of her age (Age Discrimination Claim);

(2)    that the ATO contravened s 340(1) of the FW Act by taking the following adverse action against Ms Peters:

(a)    by Assistant Commissioner Smillie issuing a “direction” in an email on 14 October 2011 about “charging” Ms Peters with a breach of the Australian Public Service Code of Conduct in relation to voicemail messages Ms Peters left on Maria Krassaris’ mobile phone (misconduct charges);

(b)    by directing Ms Peters to relocate to the ATO’s Queen Street premises on 18 October 2011;

(c)    by making misrepresentations to Ms Peters, and to medical advisers and rehabilitation providers, to the effect that misconduct proceedings were on foot against Ms Peters and that she could not return to work until she was medically fit to face the misconduct charges;

(d)    by failing to provide Ms Peters with a return to work plan, or suitable duties, or any duties and thereby excluding her from returning to the workplace;

(e)    by failing or refusing to pay Ms Peters remuneration for the period during which Ms Peters alleges that she was ready, willing and able to work;

(3)    that the ATO discriminated against Ms Peters in contravention of s 15 of the Disability Discrimination Act 1992 (Cth) (DD Act) and s 351(1) of the FW Act by refusing to admit her to her employment, or pay her any remuneration after she had suffered an episode of disability due to psychological illness (Disability Discrimination Claim).

4    In the Primary Judgment I rejected each of the Aged Discrimination Claim, the Adverse Action Claims and the Disability Discrimination Claim.

5    The Respondent applies for a lump sum costs order under s 43(3)(d) of the Federal Court of Australia Act 1976 (Cth) (FCA Act) and r 40.02(b) of the Federal Court Rules 2011 (Cth) (Rules). The Respondent also applies under ss 43(1) and 43(3)(g) respectively for an order of costs on an indemnity basis.

6    The Respondent applies for its costs of the proceeding to be fixed in a lump sum of $442,795.57 comprised of the following:

(i)    on a party-party basis costs from the commencement of the proceeding until the date of the expiry of the Third Offer on 18 January 2021 in the sum of $336,371.64; and

(ii)    on an indemnity basis from the day after the expiry of the Third Offer on 19 January 2021 until the date of judgment on 22 December 2021 in the sum of $106,423.93.

relevant law

7    Section 570 of the FW Act expressly limits the Court’s broad discretion to award costs conferred under s 43 of the FCA Act in respect of a party to “proceedings in a court in relation to a matter arising under the [FW Act]”. The purpose or policy of s 570 of the FW Act is to free parties from the risk of having to pay the opponents costs in matters arising under the FW Act, while at the same time protecting parties who are forced to defend proceedings that have been instituted vexatiously or without reasonable cause: Australian Workers’ Union v Leighton Contractors Pty Limited (No 2) [2013] FCAFC 23; 232 FCR 428 at [7] (Leighton (No 2)).

8    The term “proceeding” is not defined in the FW Act but, in the context of s 570 of the FW Act, it differs from the term “matter”. In Melbourne Stadiums Ltd v Sautner (2015) 229 FCR 221 (Sautner), Tracey, Gilmour, Jagot and Beach JJ at [156] stated:

“Matters”, in the sense of claims or causes of actions or their underlying controversies, are raised in a proceeding or proceedings, which is or are prosecuted in the Court.

9    In this case, the Applicant commenced a “proceeding” (VID 1061 of 2017) in this Court, which she prosecuted through to judgment. The Applicant agitated claims for “general protections” under Part 3-1 of the FW Act specifically, s 340 and s 351. Each of these Part 3-1 claims are “matters” within the meaning of s 570(1) of the Act. It follows that this is a proceeding in relation to a “matter” arising under the FW Act. The presence of statutory claims under the Federal Discrimination Statutes do not alter the conclusion that this is a proceeding in relation to a “matter” arising under the FW Act as the s 570 prohibition applies to the whole proceeding: The Environmental Group Ltd v Bowd (No 2) [2019] FCA 1227 per Steward J at [29] and Sautner per Tracey, Gilmour, Jagot and Beach JJ at [155]-[157].

10    In proceedings in relation to a “matter” arising under the FW Act, a party will rarely be ordered to pay the costs of a proceeding, but it is not necessary to prove exceptional circumstances warranting the making of a costs order: Leighton (No 2) at [7(2)].

11    As I observed in Pal v Commonwealth of Australia (No 2) [2021] FCA 37 (Pal) at [22] once an exception under s 570 is enlivened, it is within the Court’s general discretion to decide if any award is to be made, and its terms.

12    Section 570 of the FW Act provides:

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) or section 569 or 569A.

    Note: The Commonwealth might be ordered to pay costs under section 569. A State or Territory might be ordered to pay costs under section 569A.

(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

(c)     the court is satisfied of both of the following:

(i)     the party unreasonably refused to participate in a matter before the FWC;

(ii)     the matter arose from the same facts as the proceedings.

13    The Respondent applies for costs under s 570(2)(a) and s 570(2)(b).

14    The phrase in s 570(2)(a) “without reasonable cause” is not defined in the FW Act. However, a well-established litmus test is to ask whether, upon the facts apparent to the Applicant at the time of instituting the proceeding, there were no substantial prospects of success: Reeve v Ramsay Health Care Australia Pty (No 2) [2012] FCA 1322 per Barker J at [10], in Pal at [8] and in Leighton (No 2) at [10].

15    A failure to accept a reasonable offer of compromise is capable of constituting an “unreasonable act or omission” for the purposes of s 570(2)(b) of the FW Act: Patrick Stevedores Holdings Pty Limited v Construction, Forestry, Maritime, Mining and Energy Union (No 5) [2021] FCA 1645 (Patrick) at [6]. For the purposes of s 570(2)(b) of the FW Act, “unreasonable” does not equate to “exceptional”. Consideration must be given to the context in which the act or omission occurred and all relevant circumstances assessed: Patrick at [6].

RESPONDENT’S SUBMISSIONS

16    The Respondent submits that the Court in the Primary Judgment made a number of dispositive findings that the Applicant’s claims either lacked jurisdiction, were brought out of time or were not established by her in circumstances where she bore the onus to prove her claims: Primary Judgment at [315], [339], [341], [426]-[432] and [433]. The Respondent submits that the Applicant did not prove any contested aspect of any of her claims. The Respondent submits that the Applicant made concessions under cross-examination that were fatal to her claims and detrimental to her credibility and her version of events: Primary Judgment at [38].

17    The Respondent submits that the proceeding was based on facts known to the Applicant at the time of commencement of the proceeding and that the Applicant did not have substantial prospects of successfully proving her claims. The Respondent submits that s 570(2)(a) of the FW Act is satisfied.

18    The Respondent also submits that as a consequence of the Respondent making four Calderbank offers (see Calderbank v Calderbank [1975] 3 All ER 333) to compromise the proceeding which either lapsed or were rejected s 570(2)(b) has been satisfied.

19    The Respondent by its submissions relies upon the last two Calderbank offers to enliven the no costs exception under s 570(2)(b) of the FW Act. The Third Offer dated 21 December 2020:

(a)    was made after the filing of the Respondent’s comprehensive evidence;

(b)    remained open for 4 weeks, and expired on 18 January 2021;

(c)    contained a considerable compromise including a payment of $233,000;

(d)    was made when the Applicant’s prospects were poor;

(e)    was clearly expressed and set out in detail why the claims were unlikely to succeed including due to statutory limitations; and

(f)    foreshadowed an indemnity costs application if the offer of compromise was refused.

20    The Fourth Offer dated 24 November 2021, was made five days prior to trial and a week after a failed third mediation and was materially in the same terms as the Third Offer, save that:

(a)    it was for $237,159.39 taking into account interest; and

(b)    it remained open for five days.

21    The Respondent submits that the failure of the Applicant to accept either the Third Offer or the Fourth Offer constituted an “unreasonable act or omission” enlivening the no cost exception in s 570(2)(b) of the FW Act.

applicant’s submissions

22    The Applicant’s submissions are brief and are largely irrelevant to the Respondent’s claim for costs under s 570 of the FW Act.

23    In short, the Applicant submits as follows:

(a)    The Applicant is a self-represented litigant.

(b)    The Applicant was ready, willing and able to return to work when the medical experts advised she was fit to do so.

(c)    The Respondent failed or refused to provide a return to work plan to assist her return to work.

(d)    The Applicant had little experience in a courtroom setting.

(e)    The Applicant does not have the necessary funds to cover the Respondent’s costs.

(f)    The Applicant had no income from 2011 to 2014.

(g)    The Applicant was not entitled to Centrelink benefits during this time.

(h)    The Applicant is reliant on the Age Pension.

(i)    The Respondent was well represented at the trial.

(j)    The Respondent contended the Applicant had little prospect of success in the Proceedings and the Applicant considered not continuing.

(k)    The Applicant decided to continue with her action.

(l)    Unfortunately, the Applicant was not successful.

consideration

24    For the reasons given in the Primary Judgment, I dismissed each of the Age Discrimination Claim, the Adverse Action Claims and the Disability Discrimination Claim. A proceeding is not brought “without reasonable cause” for the purposes of s 570(2)(a) of the FW Act simply because a party fails in the claims advanced. I am not satisfied that the Applicant at the time of instituting the proceeding was sufficiently aware of the objective evidence which was ultimately relevant to each of the Age Discrimination Claim, the Adverse Action Claims and the Disability Discrimination Claim. The Applicant was necessarily only aware of those matters and circumstances to which she was a party. The Applicant was not aware of the evidence surrounding the decision-making process that occurred at the ATO which ultimately led to the Applicant being made redundant. For these reasons, I am not satisfied that the Applicant instituted the proceeding “without reasonable cause” and therefore the exception to the no cost rule under s 570(2)(a) of the FW Act is not enlivened.

25    The Third Offer dated 21 December 2020 and the Fourth Offer dated 24 November 2021 made by the Respondents to compromise the proceeding were, in my opinion, reasonable and may be said to have been generous offers to compromise the proceeding. This is especially so, when considering Ms Peters annual remuneration as an APS Level 3 employee at the ATO was in the order of $53,000 - $62,000 during the relevant period, in accordance with the pay rates under the ATO Enterprise Agreement 2011, which commenced operation on 30 November 2011 with a nominal expiry date of 30 June 2014, and continued to apply to the parties until termination of Ms Peters' employment with the ATO, where Ms Peters accepted an offer of voluntary redundancy on 28 April 2014.

26    The Third Offer dated 21 December 2020 provided for a payment to the Applicant of $233,000 comprising the Respondent’s assessment of the Applicant’s “best case” as follows:

(a)    past economic loss (including superannuation): $64,022.20;

(b)    interest on past economic loss: $27,235.17;

(c)    non-economic loss: $50,000;

(d)    pecuniary penalties: $51,000;

(e)    future economic loss (including superannuation): $31,768.11; and

(f)    interest on future economic loss: $9,344.63.

27    The Fourth Offer dated 24 November 2021 increased the settlement sum offered to the Applicant to $237,159.39 and was derived by the Respondent’s assessment of the Applicant’s “best case” as follows:

(a)    past economic loss (including superannuation): $64,022.20;

(b)    interest on past economic loss (calculated to 30 November 2021): $29,767.77;

(c)    non-economic loss: $50,000;

(d)    pecuniary penalties: $51,000;

(e)    future economic loss (including superannuation): $31,768.11; and

(f)    interest on future economic loss: $10,601.31.

28    In my view, it was unreasonable for the Applicant to reject the Third and Fourth Offers which were made after the Applicant had been served with the comprehensive evidence of the Respondent, which was filed with the Court between 5 June 2020 and 1 September 2020. The Applicant, after having read the Respondent’s evidence together with the explanations provided by the Respondent in the Third and Fourth Offers as to why those offers were reasonable, should have appreciated the attractiveness of the Third and Fourth Offers and considered whether it was realistically possible to achieve a more beneficial result in prosecuting her claims to judgment. The Applicant was wholly unrealistic in believing that she could obtain an outcome as good as or better than the Third and Fourth Offers.

29    I find that the Applicant’s failure to accept the Third and Fourth Offers constituted an “unreasonable act or omission” for the purposes of s 570(2)(b) of the FW Act.

30    The Respondent seeks a costs order on a party-party basis from the commencement of the proceeding until the expiry of the Third Offer on 18 January 2021 and on an indemnity basis from 19 January 2021 being the day after the expiry of the Third Offer until the date of judgment on 22 December 2021 in a lump sum fixed at $442,795.57.

31    The principles relevant to an award of costs other than as between party and party including an order that costs be awarded on an indemnity basis were recently summarised by Wigney J in Australian Competition and Consumer Commission v Colgate-Palmolive Pty Ltd (No 5) [2021] FCA 246 at [6]-[12] as follows:

6    The Court’s discretionary power to award costs derives from s 43 of the Federal Court of Australia Act 1976 (Cth) (FCA Act). The usual rule is that an order for costs means costs “as between party and party”: r 40.01 of the Rules; see also the definition of “costs” in the Dictionary in Sch 1 of the Rules; Mango Boulevard Pty Ltd v Whitton [2015] FCA 1352 at [12]. A party or person who is entitled to costs may, however, apply for an order that costs be awarded in their favour “other than as between party and party”: r 40.02(a) of the Rules. That includes an order that costs be awarded on an indemnity basis.

7    The discretion to award costs on a basis other than as between party and party, including on an indemnity basis, is “unfettered, save that it must be exercised judicially and not arbitrarily or capriciously”: Australian Competition and Consumer Commission v The Construction, Forestry, Mining and Energy Union (No 4) [2018] FCA 684 at [96]. The discretion must also be exercised in light of the requirement that the Court consider any failure by a party to comply with the overarching purpose of the civil practice and procedure provisions to facilitate the just resolution of disputes according to law as quickly, inexpensively and efficiently as possible: see ss 37N(4), 37M(1) of the FCA Act; LFDB v SM (No 2) [2017] FCAFC 207 at [7].

8    The discretion to depart from an order for party and party costs will not be exercised unless there is some special or unusual feature or the justice of the case so requires: Cirillo v Consolidated Press Property Ltd (formerly known as Citicorp Australia Ltd) (No 2) [2007] FCA 179 at [3]; Seven Network Ltd v News Ltd (2009) 182 FCR 160; [2009] FCAFC 166 at [1102]; Melbourne City Investments Pty Ltd v Treasury Wine Estates Limited (No 2) [2017] FCAFC 116 at [5].

9    The purpose of a costs order is to compensate the successful party, not to punish the unsuccessful one: King v Yurisich (No 2) [2007] FCAFC 51 at [19], citing Latoudis v Casey (1990) 170 CLR 534; Seven Network at [1099]. An award of indemnity costs is to “serve the purpose of compensating a party fully for costs incurred, as a normal costs order could not be expected to do, when the court takes the view that it was unreasonable for the party against whom the order is made to have subjected the innocent party to the expenditure of costs”: Hamod v New South Wales (2002) 188 ALR 659; [2002] FCAFC 97 at [20]; see also Kazal v Independent Commission Against Corruption and Ors (No 2) [2020] NSWSC 17 at [60]-[62]; Cirillo at [4]-[5]; Melbourne City Investments at [5].

10    The circumstances in which it may be found to be unreasonable for the successful party to be subjected to the expenditure of any costs are not fixed or closed, but have been found to include, relevantly: where “the applicant, properly advised, should have known that he had no chance of success” (Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Ltd (1988) 81 ALR 397 at 401; De Alwis v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCAFC 77 at [7]); where the moving party “persists in what should on proper consideration be seen to be a hopeless case” (J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers (WA Branch) (No 2) (1993) 46 IR 301 at 303); where the applicant’s case was “always clearly foredoomed to fail” and “they ought to have known this to be so” (Smolle v Australian and New Zealand Banking Group Ltd (No 2) [2007] FCA 1967 at [25]); where an application is “wholly untenable and misconceived” (Henke v Carter [2002] FCA 492 at [22]); and where an applicant persists in prosecuting a proceeding without regard to the evidentiary difficulties in the case (Yates Property Corporation Pty Ltd v Boland (No 2) (1997) 147 ALR 685 at 693): see generally Melbourne City Investments at [5]; Seven Network at [1102]; Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225 at 233.

11    Two things should perhaps be noted about these descriptions of the types of cases in which an indemnity costs order may be warranted. First, they use expressions which suggest a high degree of certainty concerning the deficiencies in the losing party’s case. It would appear not to be enough that the losing party’s case was simply weak or tenuous. Second, and relatedly, the deficiencies must be sufficiently manifest and clear such that it can be inferred that the losing party would or should have appreciated them when the action was commenced or continued, at least if they had given proper consideration to, or been properly advised about, the merits of their case.

12.    In assessing whether a case can be said to “have no chance of success”, or to be “hopeless” or “foredoomed to fail”, and that the losing party should have known that to be the case, it is also necessary to be wary of reasoning with the benefit of hindsight. As Goldberg J said in Re Kingsheath Club of the Clubs Ltd (in liq) [2003] FCA 1589 at [5], it is “easy with hindsight to make an observation that an action has no chance of success, after the matter has been fully argued and has enjoyed considered attention of experienced solicitors and senior and junior counsel”.

32    In my opinion, after the Applicant received the Respondent’s evidence which was prior to receipt of the Third and Fourth Offers, the Applicant should have appreciated that her case was untenable and misconceived and that it was unreasonable for the Applicant to subject the Respondent to the expenditure of costs of the trial. I am of that opinion because the Applicant did not lead any evidence to refute the evidence put on by the Respondent. Prior to trial, the Applicant advised the Respondent that she would not be challenging the affidavit evidence of 9 of the 12 witnesses relied on by the Respondent. At trial, the Applicant did not challenge the evidence deposed to by the three witnesses that the Applicant required for cross-examination. In these circumstances, the Applicant should have realised that persisting with prosecuting the proceeding would have no prospect of success.

33    The Applicant, in my opinion, demonstrated a total disregard to complying with the overarching purpose of the civil practice and procedure provisions to facilitate the just resolution of disputes according to law as quickly, inexpensively and efficiently as possible: ss s 37N(4), 37M(1) of the FCA Act; LFDB v SM (No 2) [2017] FCAFC 207 at [7].

34    For the reasons given, I am satisfied that the circumstances of this case are special or unusual so that justice of the case requires a departure from an order for party-party costs.

35    I have considered the affidavit of Jialing Chen affirmed 7 February 2022 and am satisfied that the costs sought by the Respondent on an indemnity basis from the expiry of the Third Offer on 19 January 2021 until judgment are not unreasonable and are appropriate in the circumstances. I will therefore make an order that the Applicant pay the Respondent’s costs on an indemnity basis from the expiry of the Third Offer on 19 January 2021 until judgment in the sum of $106,423.93.

Associate:

Dated:    22 February 2022