Federal Court of Australia

QNurses First Inc v Monash Health (No 2) [2022] FCA 277

ORDERS

THE COURT ORDERS THAT:

1.    The applicants be granted leave to discontinue the proceeding.

2.    There be no order as to costs.

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

REASONS FOR JUDGMENT

MORTIMER J:

Introduction and background

1    This proceeding concerns an action brought by a nurses’ association and one of its members, as a representative proceeding under r 9.21 of the Federal Court Rules 2011 (Cth). The applicants sought declaratory relief and pecuniary penalties in relation to alleged adverse action by the respondent, Monash Health, as the employer of the second applicant and the other allegedly affected employees. The factual context was Monash Health’s implementation of what it understood to be its obligations under the then applicable COVID-19 Mandatory Vaccination (Specified Facilities) Directions, made under s 200(1)(d) of the Public Health and Wellbeing Act 2008 (Vic).

2    Unless they were subject to any of the exceptions specified in the Directions, Monash Health required its employees (through a direction given to them), including the second applicant Ms Kallista, to be vaccinated against COVID-19 in order to perform their duties of employment. Certain employees, including Ms Kallista, did not wish to be vaccinated (referred to in these reasons as the relevant employees).

3    The adverse action identified by the applicants in their originating application was alleged breaches of terms of employment, and commencement or foreshadowed commencement of disciplinary action, one possible outcome of which could be termination of the employment of the relevant employees. This adverse action was alleged to have been taken because of the exercise or proposed exercise of a workplace right, being the relevant employees’ right to engage in consultation with their employer under cl 11 of the applicable enterprise bargaining agreement, and under s 35 of the Occupational Health and Safety Act 2004 (Vic), about the introduction of mandatory vaccinations against COVID-19 to their workplace, and the risks associated with such vaccinations.

4    The applicants sought interlocutory relief restraining Monash Health from terminating the employment of any of the relevant employees. On 1 November 2021 and prior to the hearing of the interlocutory application, Monash Health filed and served an affidavit of its Chief Executive Officer, Mr Andrew Stripp. Mr Stripp’s evidence was that he was the architect of Monash Health’s vaccination direction and the action taken in respect of those who did not comply with it. Mr Stripp deposed that he decided to take the alleged action against the relevant employees for reasons not proscribed by the Fair Work Act 2009 (Cth), namely: that the action was necessary for Monash Health to comply with a direction of Victoria’s Chief Health Officer made lawfully under the Public Health and Wellbeing Act. On 3 November 2021, the Court dismissed the applicants’ interlocutory application: see QNurses First Inc v Monash Health [2021] FCA 1372 (the interlocutory judgment). The Court concluded that the applicants’ case under s 340(1) of the Fair Work Act was “very weak”, and that any prejudice (such as termination of employment) “appears not to be of a kind that couldn’t be addressed by an award of damages at trial”.

5    Following the interlocutory judgment, the proceeding was allocated to me as docket judge, and listed for case management on 11 February 2022. Shortly prior to the case management hearing, the parties provided the Court with a minute of proposed consent orders to grant the applicants leave to discontinue the proceeding and permit Monash Health to file any application for costs thereafter. After raising the matter with the parties, the Court made orders to timetable the making of any costs application ahead of the discontinuance of the proceeding, rather than after it, as the parties had suggested.

6    On 18 February 2022, the applicants filed an application for leave to discontinue the proceeding, with no order as to costs. According to the applicants’ submissions, following the interlocutory judgment, Ms Kallista and the relevant employees have had their employment terminated, which means there is no utility in the relief sought in the present proceeding. The applicants recognised that, before Ms Kallista and any relevant employees can commence a further proceeding in this Court in relation to the termination of their employment, they will need first to go to the Fair Work Commission, by reason of s 370 of the Fair Work Act.

7    Monash Health did not oppose the application for leave to discontinue the proceeding. However, it sought an order that the first applicant pay:

(a)    the costs Monash Health incurred for the whole of the proceeding up to and including 1 November 2021, on a party-party basis; and

(b)    additionally, or in any case, the costs associated with the applicants’ application for interlocutory relief incurred by Monash Health after 1 November 2021, on an indemnity basis. The date of 1 November 2021 was said to be the date after which it should have been clear to the applicants that their interlocutory application would fail, in large part because of Mr Stripp’s affidavit evidence.

8    For the reasons that follow, leave to discontinue the proceeding will be granted, and there should be no orders as to the costs of the proceeding.

Legal framework

9    As a representative action commenced under r 9.21 of the Rules, the applicants must obtain leave to discontinue the proceeding: r 26.12(4). Monash Health’s submissions proceeded on this basis.

10    Subject to any different order, a party who files a notice of discontinuance is liable to pay the costs of each other party to the proceeding in relation to the claim, or part of the claim, that is discontinued: Rules r 26.12(7). This being a proceeding under the Fair Work Act, however, the Court’s power to award costs is subject to s 570 of that Act: see s 43(1)(b) of the Federal Court of Australia Act 1976 (Cth). Section 570 of the Fair Work 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 [Fair Work Commission];

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

11    The parties proceeded on the agreed basis that the Court’s power to order costs under s 570(2) is discretionary, and that Monash Health bears the onus of satisfying the Court that one or more of the criteria in s 570(2) exists and that the Court should exercise its discretion to order the payment of costs.

Whether the proceedings were commenced without reasonable cause

12    Monash Health submitted that, having regard to the applicants’ prospects of success at trial, the proceedings were commenced without reasonable cause, within the terms of s 570(2)(a).

13    According to Monash Health, the applicants’ adverse action case “always suffered from an obvious (and fatal) non sequitur” that the applicants and the group members had experienced adverse action because they did not comply with the vaccination direction, not because they sought to be consulted about it. Monash Health referred to passages in the interlocutory judgment that found that the material adduced by the applicants contained nothing to prove, nor even suggest, that the exercise or proposed exercise of the right to be consulted about the vaccination direction was a motivating reason for Monash Health’s adverse action against the applicants. The interlocutory judgment characterised the applicants’ case as “exceedingly weak” or “very weak”, “if it exists at all” (at [34], [38], [42]).

14    Further, and although the applicants did not raise this point, Monash Health submitted that s 361 of the Fair Work Act does not mean that every party who institutes proceedings under the Act does so with reasonable cause. First, Monash Health relied on the interlocutory judgment at [38], where the Court held that s 361 did not apply to interlocutory rulings. Monash Health contended that s 361 is an evidentiary provision and in that sense its application is a matter for trial, in terms of which party bears the onus of proof.

15    The applicants submitted that their contentions were “contestable”, and that was sufficient, relying on the high threshold set by s 570(2)(a), and the decision in Construction, Forestry, Mining and Energy Union v Corinthian Industries (Australia) Pty Ltd (No 2) [2014] FCA 351.

Section 570(2)(a): consideration

16    I do not accept the submissions of Monash Health. It is true that, for the purposes of the interlocutory hearing, Mr Stripp deposed to reasons for the giving of the vaccination directive to the relevant employees (and the consequent disciplinary action) which, he deposed, were based on Monash Health’s understanding that it must comply with the Victorian government’s direction, and did not depose to any prohibited reason motivating the conduct of Monash Health. Evidence of that nature is the commonplace response of an employer in any contested general protections claim. It is true it was not tested at the interlocutory hearing, but it is the exception that cross-examination is permitted on an interlocutory hearing.

17    Corinthian Industries provides a useful example of the high threshold in s 570(2)(a). In that case, the Construction, Forestry, Mining and Energy Union had abandoned two claims at trial. It was an adverse action case. The respondent sought costs under s 570 in respect of those two claims. Corinthian Industries was also a case where s 361 was engaged, and the respondent had adduced evidence about there being non-prohibited reasons for the alleged adverse action. Pagone J reiterated (at [8]) that whether proceedings were instituted “without reasonable cause” is not established simply because a claim fails. The proceeding should be capable of being described as “doomed to failure” when it was commenced. I respectfully agree. I would add that the presence in the text of s 570(2)(a) of the words “or vexatiously” gives an indication of the exceptional nature of the threshold.

18    At [9], Pagone J observed:

Applications under s 570(2)(a) are not occasions for courts to be invited to second guess forensic decisions made by litigants, but to compensate a party for costs incurred by them in defending proceedings which were instituted vexatiously or without reasonable cause.

19    I respectfully agree. Further, the significant level of the threshold, and the dangers in exercises of the discretion in s 570(2) which might be seen as undermining the primary legislative policy to which s 570(1) gives effect, are apparent from the observations of Jessup J in Clarke v Dixie Cummings Enterprises Pty Ltd [2013] FCA 987 at [14]:

It is true that I have found that the applicant’s resistance to the respondent’s privilege claim was without substance, and it might even be said that I regard this as a clear case. On the other hand, I think there is a danger of the exceptions in s 570(2) being used in circumstances in which the most that one can say is that the losing party had a self-evidently weak case. In my opinion, that is not the kind of situation to which s 570(2) is addressed. There must be a higher level of criticism or disapprobation which the court is able to express about a losing party’s case if the bars in paras (a) and (b) of s 570(2) are to be crossed by a party which succeeds on the application concerned.

(Emphasis added.)

20    I respectfully agree with those observations.

21    I do not consider that at the time the proceeding was issued it was doomed to fail. There was enough material in the application itself demonstrating the views of least some of the relevant employees (expressed directly or through the first applicant) that they wanted an adequate opportunity to be consulted about the vaccination directive, and were concerned to understand the risks and benefits associated with them being required to have a vaccination in order to work. As I explain below, the circumstances in which these directives were introduced was exceptional and novel. The suggestion that for objecting employees there may be other ways of ensuring a workplace is as safe as possible from COVID-19, other than by being vaccinated, was not fanciful.

22    The fact that, ahead of the interlocutory hearing, Monash Health filed an affidavit deposing to Monash Health’s case about the reasons for the alleged adverse action and the vaccination directive is incapable of affecting the operation of s 570(2)(a), which, as the text of the provision confirms, looks to the time the proceeding is commenced. See also Corinthian Industries at [10].

Whether the continued pursuit of interlocutory relief was unreasonable

23    Monash Health also submitted that the continued pursuit of interlocutory relief after 1 November 2021 was unreasonable. As I understood this submission, it sought to invoke s 570(2)(b) of the Fair Work Act. The “unreasonable act or omission” for the purposes of that paragraph was the continuation of the proceeding after the filing of Mr Stripp’s affidavit. Monash Health relied on the absence of any cross-examination of Mr Stripp at the interlocutory hearing, and the Court’s findings in the interlocutory judgment.

24    It submitted, relying again on the interlocutory judgment, that, as the Court had put it:

In effect, [the applicants] ask the court to act on the possibility that the evidence might be different once explored in a trial setting.

25    In advancing these submissions, Monash Health submitted there were “strong parallels” with the case of Peters v Commonwealth of Australia (No 2) [2022] FCA 135. In that case, the Court held that the applicant should have realised her case was untenable after receipt of the respondent’s evidence, in circumstances where she led no evidence to challenge it and did not seek to disturb it in cross-examination. Anderson J awarded indemnity costs in favour of the respondent.

Section 570(2)(b): consideration

26    The observation at [36] of the interlocutory judgment was made in the context of, and for the purposes of, determination of the interlocutory application. The Court went on to recognise (at [38]) that the question of whether adverse action was taken for a prohibited reason remained one for trial, where the applicants would have the benefit of s 361(1).

27    Peters provides no persuasive analogy. The observations on which Monash Health relies were made in the context of a final judgment, after a trial. Further, this was a situation where there had been a substantial offer of compromise made to the applicant, which had been rejected. These circumstances are not at all comparable with an unsuccessful application for an interlocutory injunction in a proceeding where otherwise no substantive steps had been taken after the proceeding was allocated to a docket judge, and discontinuance was promptly sought.

28    Given the view I have formed, it is not necessary to discuss the authorities on which Monash Health relied relating to indemnity costs.

Whether the Court should exercise its discretion to award costs

29    Strictly, it is not necessary to address this question, as Monash Health has not persuaded the Court that either of the two relevant conditions in s 570(2) is made out. However, it is appropriate to indicate that, in any event, I would not have been persuaded as a matter of discretion that any costs order should be made.

30    The context of the application in this proceeding is a significant factor in the exercise of discretion. Sitting behind the subject matter of the proceeding was a policy decision by the Victorian government to require individuals working in certain industries or facilities to be vaccinated against COVID-19. On any view, it was a measure of some extremity, designed, in the Victorian government’s opinion, to reflect the extreme nature of the threat faced by the Victorian community. While it is not the Court’s role to evaluate that policy choice, the extremity of the step of requiring certain workers to be vaccinated before they could work, and of therefore setting the scene for employers to terminate the employment of those workers who refused to be vaccinated, can be recognised. Individual employees were faced with a choice between being vaccinated or potentially losing their employment. That was the choice faced by the second applicant at the time she commenced the proceeding, and on the basis of the reason for the discontinuance, that potential was realised and her employment was terminated.

31    To make that observation is not to express any view about whether the termination was lawful or unlawful; rather, it is to note the fact that it occurred, and it occurred not for any reason related to the performance of employees’ duties but their failure to comply with a directive related to the protection of the Victorian community as a whole from the effects of COVID-19. Careful and informed consultation with employees about the benefits and risks of vaccination, even if they were ultimately going to have to be vaccinated to work, may not in principle have been an unreasonable or unjustifiable expectation, and in my opinion it is arguable that complaints about lack of consultation and lack of risk assessment by an employer were – in principle – capable of constituting a reason for adverse action, even if employer compliance with the Directions was another reason. As with all adverse action claims, any outcome would have been almost entirely fact dependent, and would have required close scrutiny of the conduct of the employer, on the evidence adduced and tested at trial, taking into account the effect of s 361(1) of the Fair Work Act.

32    Contrary to what might be drawn from [39] of the Court’s reasons in the interlocutory judgment, loss of employment is not in my respectful opinion a matter which is always readily and fully compensable by damages. Loss of employment is about much more than loss of income. The COVID-19 pandemic has taught the Victorian community that lesson. It is about the loss of companionship at work, of stimulation and engagement, about loss of opportunity for advancement in a particular workplace and in a particular position, about loss of a sense of value as a member of a particular team or of a particular workforce: see also my findings in Trego v Wesbeam Pty Ltd [2019] FCA 1030 at [78].

33    Therefore, I see no difficulty at all with the proposition that the first applicant, as a representative of a group of employees, and the second applicant on her own behalf, had a justifiable basis to commence the proceeding. They then sought to discontinue the proceeding at an appropriate point, and have reasonably conceded it now lacks utility because the employment of the relevant employees has been terminated. The fact that no interlocutory relief was granted represents nothing more than a failure to persuade the Court, at that stage of the proceeding, that such relief was appropriate. There is no basis for the operation of s 570(2) of the Fair Work Act. There will be no orders as to costs, consistently with the legislative policy in s 570(1) of the Fair Work Act.

Associate:

Dated:    24 March 2022