Federal Court of Australia

Beaumont Hills Dental Surgery Pty Ltd v Goodarzi [2022] FCA 625

ORDERS

THE COURT ORDERS THAT:

1.    The prospective respondent pay the prospective applicant’s costs, including the costs of the interlocutory application filed by the prospective applicant on 28 September 2021, on an indemnity basis.

2.    The costs be paid forthwith.

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

REASONS FOR JUDGMENT

KATZMANN J

1    This is a dispute about costs in relation to an application for preliminary discovery which was ultimately settled in favour of the prospective applicant. The prospective applicant, Beaumont Hills Dental Surgery Pty Ltd (BHDS), operates a dental practice in which the prospective respondent, Behnoosh Goodarzi, a dentist, used to work. BHDS seeks orders that Dr Goodarzi pay its costs forthwith on an indemnity basis, including costs incurred in relation to an interlocutory application made after the orders for discovery were made. It relies on two affidavits of Sudhir Sivarajah, a lawyer with Harmers Workplace Lawyers who act for BHDS, and two affidavits of Dr Payam Poursoltan, the principal of the practice.

2    The application was opposed for three reasons: first, because the preliminary discovery application was related to a proposed cross-claim in proceedings brought by Dr Goodarzi against BHDS seeking relief under the Fair Work Act 2009 (Cth) (FW Act) and costs in proceedings to which the FW Act applies are generally not recoverable; second, because Dr Goodarzi ultimately consented to the orders for preliminary discovery sought by the company; and third, because the interlocutory application was said to be premature, unnecessary and, in the end, not pressed.

Background

3    Dr Goodarzi worked at a dental surgery operated by BHDS from 27 January 2012 until 10 March 2020. Three days after she left the practice, solicitors for BHDS wrote to her expressing concerns about suspected misuse of confidential information belonging to the practice. In its letter the solicitors wrote:

We are instructed that you worked as a contractor dentist at the Practice on 4 days per week. During your work as a contractor at the Practice, Beaumont allowed you to:

1.    use the Practice’s facilities;

2.    access its patient database to record dental notes in the client’s patient records and electronic patient file;

3.    arrange appointments for you to treat patients’ on its behalf in which the Practice then invoiced the patients for dental fees. The practice paid you as a contractor a percentage of the fees collected from patients that accords to industry standards across Sydney in dental practices.

On 9 March 2020, Dr Payam Poursoltan handed you a written contract to record in writing your pre-existing contractual relationship with Beaumont. We understand you became upset and you did not sign the document. During your time contracting for Beaumont you had common law duties to act in good faith and maintain confidentiality to Beaumont. Your common law obligations of confidentiality towards our client and patients of the Practice continue.

You attended the Practice for 3 hours on Tuesday 10 March 2020. You have not returned to the practice since then. The electronic records show that on Tuesday morning when in the Practice, without authority you amended the invoices of patients waiting for Invisalign aligners, who had an outstanding balance on their treatment/aligners to zero, with the effect of robbing the practice of fees due.

It now appears you have acted against your common law obligations towards our client insofar:

1.    You have contacted patients of the Practice with a view to:

a.     ask them to cancel their appointments at the practice;

b.    tell them about your departure from the practice;

c.     encourage patients to collect their Invisalign aligners for the next two months prematurely.

2.    For you to contact the Practice’s patients would require you to hold their personal confidential records.

3.    You have deleted patient Invisalign and ‘Clincheck’ models for patients from the Invisalign ‘Dr Site’ and diverted that information for your personal viewing only.

4.    There are missing daily patient sheets for patients you have treated;

5.    You were the main practitioner administering Botox treatment to patients. After you left the practice on Tuesday, 10 March 2020, the folder containing the Botox treatments including patient confidential information, patient consent forms, patient photos etc (“the Botox Folder”) has been reported as missing.

6.    You have contacted patients for ulterior motives that are to your personal and financial benefit, or in an attempt to harm the Practice. Patients have contacted the Practice and have advised of your unsolicited contact. Patients’ information and dental records are confidential to patients and the Practice. If it is found you have used confidential patient records taken from the Practice to contact patients for your personal gain or to harm the Practice, then our client will be entitled to be compensated for fees lost, or harm suffered, as a result of your actions.

4    The solicitors went on to foreshadow an application for an urgent injunction to restrain Dr Goodarzi from misusing her position, patient records and other confidential information in her possession unless she returned the records and property belonging to BHDS within three days. Dr Goodarzi did not agree to the solicitors’ demands and vehemently denied any wrongdoing. Through her solicitors, she subsequently made a number of allegations of wrongdoing against Dr Poursoltan.

5    On 9 July 2020 Dr Goodarzi filed proceedings in this Court against BHDS and Dr Poursoltan in which she alleged that she had been employed by BHDS and seeking relief under the FW Act, amongst other things. BHDS and Dr Poursoltan denied the allegations.

6    On 6 August 2020, the solicitors for BHDS wrote to Dr Goodarzi’s solicitors to foreshadow a potential cross-claim and asked Dr Goodarzi inform them of any communications she had had with former patients of its practice who had become her patients. Dr Goodarzi’s solicitors declined to do so, asserting that BHDS had no reasonable basis to bring the cross-claim. BHDS reiterated its request in a letter dated 27 August 2020 and foreshadowed making an application for preliminary discovery. In their reply of 31 August 2020, Dr Goodarzi’s solicitors maintained that the request by BHDS had “no legitimate basis” and stated that “[a]ny such application seeking preliminary discovery…will be strenuously opposed”.

The application for preliminary discovery

7    On 4 September 2020 BHDS filed an application for orders for preliminary discovery in accordance with r 7.23 of the Federal Court Rules 2011 (Cth) (the Rules). The orders they sought were in the following terms:

1.    Beaumont Hills Dental Surgery Pty Ltd, the Prospective Applicant, applies under Federal Court Rule 7.23 for an order that Dr Behnoosh Goodarzi give discovery to the Prospective Applicant of:

a.    the Prospective Respondent’s telephone records (including any landline and mobile telephone numbers, whether personal or business) for the period from 1 March 2020 until the date that these orders are made.

b.    records of all communications, for the period from 1 March 2020 until the present time, between Dr Goodarzi and any person who has been a patient of Beaumont Hills Dental Surgery Pty Ltd, and treated by Dr Goodarzi, such communications including, but not limited to:

(i)    text messages;

(ii)    emails;

(iii)    messages sent through Instagram;

(iv)    messages sent through Facebook; and

(v)    messages sent through any other social media platform.

2.    Costs.

8    The application was supported by an affidavit of Dr Poursoltan. In the affidavit Dr Poursoltan stated that the application was “intended to inform a potential cross-claim”. He deposed that he was concerned that Dr Goodarzi was using confidential information belonging to the practice for her own personal use and described the matters which had caused him to develop those concerns. He said that his concerns were heightened when he learned that she was planning on setting up a practice of her own and rose even higher after she left the practice and a large number of patients whom she had regularly treated at the practice cancelled their appointments. Dr Poursoltan believes that Dr Goodarzi is likely to have taken documents from the practice containing the names and phone numbers of at least some of BHDS’s patients including those who have since left the practice. But he said he did not have enough information to decide whether to sue her for misuse of confidential information because he did not know whether she used the confidential information to make the initial contact with those patients.

9    On 6 October 2020 I made orders for the filing of evidence and submissions in relation to the preliminary discovery application and referred Dr Goodarzi’s proceedings to mediation. Submissions were filed by BHDS on 11 November 2020, by Dr Goodarzi on 25 November 2020 and by BHDS (in reply) on 2 December 2020. Settlement discussions and mediation took place in the period between January and March 2021. The mediation was unsuccessful and on 28 April 2021 the preliminary discovery application was fixed for hearing on 15 June 2021.

10    In the meantime, on 10 June 2021 Dr Goodarzi’s then lawyers (CLH) wrote to Harmers agreeing to comply with the orders for preliminary discovery sought by BHDS telling them that Dr Goodarzi could produce a bundle of documents by 4 pm the next day provided BHDS agreed to make certain undertakings. BHDS agreed to the undertakings. Consequently, on 15 June 2021 orders were made by consent, subject to the undertakings, requiring Dr Goodarzi to give discovery forthwith of all the records sought in BHDS’s application (June orders).

11    At the same time, a timetable was fixed for the filing of submissions in relation to any costs application and for the question of costs to be determined on the papers.

Non-compliance with the discovery orders

12    Despite the representation made on Dr Goodarzi’s behalf and the terms of the June orders, discovery of the relevant documents was not provided “forthwith”. On 18 June 2021 Harmers wrote to CLH complaining about the delay, demanding that the material be produced as a matter of urgency in accordance with the court orders. By 24 June 2021, and nine days after the orders had been made, nothing had been done, prompting Harmers to email CLH pleading for a response.

13    On 28 June 2021 CLH sent Harmers copies of the following documents purportedly in accordance with the June orders: a call log of Dr Goodarzi’s business phone number; the phone bills in relation to her mobile number without identifying the numbers called; and various emails (first tranche of documents). No social media records or text messages were produced. Moreover, in breach of rr 7.25 and 20.17, Dr Goodarzi did not file a list of documents or a supporting affidavit.

14    On 30 June 2021 Harmers wrote to CLH expressing concerns that the records produced did not comply with the June orders and called upon Dr Goodarzi to rectify the situation by no later than 11 am on 1 July 2021.

15    The matter returned to court on 2 July 2021. On that day I made orders (July orders) requiring that, by 6 July 2021, Dr Goodarzi:

(1)    give discovery of any material which has not already been produced but falls within the scope of order 1 of the June orders, including but not limited to Dr Goodarzi’s itemised telephone usage records as produced by the external service provider in relation to her personal and business mobile(s) and landline(s), and social media records; and

(2)    file and serve an affidavit setting out:

(a)    the inquiries she made in order to comply with order 1 of the June orders (as varied by (1) above); and

(b)    confirmation that the records produced pursuant to that order are the entire records that fall within the scope of the orders and that there are no other records which are within Dr Goodarzi’s possession that fall within the scope of those orders.

16    On 5 July 2021 CLH filed a notice of ceasing to act and I made an order, by consent, extending the time for compliance with the July orders to 13 July 2021. Even then, Dr Goodarzi did not comply.

17    On 8 July 2021 HWL Ebsworth were appointed to act for Dr Goodarzi.

18    On 13 July 2021 a list of documents was filed by HWL Ebsworth on behalf of Dr Goodarzi and an affidavit from her (second tranche of documents).

19    On 20 July 2021 HWL Ebsworth sent a letter to Harmers attaching further documents (third tranche of documents). Ten days later they emailed Harmers with a further list of documents, an affidavit from Dr Goodarzi, and a letter containing a link to additional documents covered by the July orders (fourth tranche of documents).

20    On 9 August 2021 I ordered that the time for compliance with order 1 of the July orders be further extended until 6 September 2021.

21    On 16 August 2021 HWL Ebsworth emailed a further list of documents (fifth tranche of documents), “confirm[ing] that [Dr Goodarzi] has now produced all records that she has in her custody, possession or control responsive to the orders for preliminary discovery made on 15 June 2021”.

22    Harmers did not accept this assurance. On 2 September 2021 they wrote to HWL Ebsworth identifying a number of obvious deficiencies in the discovery and calling on the firm to ensure they were rectified by 6 September 2021. They pointed out that the records produced by Coles Mobile did not contain text message communications over a six week period from April to June 2021. They referred to statements by Dr Goodarzi in her 13 July affidavit that in or around “June 2020” she deleted all her Instagram messages from her professional Instagram account and all her Facebook messages received from anyone who was seeking her services as a dentist but had produced no Instagram or Facebook messages for the following 12 months.

23    The deficiencies were not rectified as requested. HWL Ebsworth wrote to Harmers on 9 September 2021 explaining that the text message logs had not been produced because Coles Mobile had undertaken the task manually but did not explain why the earlier records that were produced did not refer to text messages. They also advised that Dr Goodarzi had already confirmed that there were no further records to be produced of messages sent through Instagram and Facebook.

24    On 10 September 2021 HWL Ebsworth emailed Harmers yet attaching another list of documents (sixth tranche of documents).

25    On 28 September 2021 BHDS filed an interlocutory application seeking leave to cross-examine Dr Goodarzi on her affidavits. In the alternative BHDS sought orders that Dr Goodarzi give discovery of any material not already produced and a further affidavit of Dr Goodarzi setting out the inquiries she had made in order to comply with order 1 of the June and July orders and confirming that the records produced are the entire records falling within the scope of the orders and that she is in possession of no other records (September application). The application was supported by an affidavit from Dr Poursoltan which called into question the reliability of the assertions Dr Goodarzi had made in her first affidavit. For example, Dr Goodarzi had produced only one text message, despite her call logs showing that there were over 120 text messages. Further, despite evidence of extensive use of social media to promote her business, she had produced only one exchange with one patient of BHDS and one exchange with a potential patient.

26    As BHDS contended in submissions filed the same day, while Dr Goodarzi had attributed the failure to discover these messages to having dropped her phone and selectively deleting her social media messages, her conduct raised serious questions about the legitimacy of the inquiries she had made. Noting that there was no explanation from Dr Goodarzi for selectively deleting her social media messages in June 2020 and that as early as March 2020 she had been directed not to communicate through social media with patients of the practice, BHDS submitted that it was inherently unlikely she would take that step unless she were trying to conceal evidence of wrongdoing. It also pointed out that Dr Goodarzi’s evidence that she had deleted the messages in June 2020 was inconsistent with her retaining one of those messages. Moreover, it submitted that her statement that she had deleted the messages in June 2020 did not explain why she had not discovered messages created after that date when Dr Poursoltan was aware of two patients of the practice who had exchanged social media messages with Dr Goodarzi in or around early 2021. Finally, BHDS pointed to Dr Goodarzi’s failure to comply with the July order to file and serve an affidavit setting out the inquiries she undertook to comply with the June orders, to explain what, if any, inquiries she made to find the social media messages, or to identify any steps taken to recover the deleted messages.

27    On 11 October 2021 Dr Goodarzi swore another affidavit, effectively acceding to the alternative order sought by BHDS in its September application. In this affidavit, Dr Goodarzi disclosed that she had been regularly deleting her communications with former patients of the BHDS practice from June 2020 until at least 15 June 2021 and had disposed of the phone containing, most, if not all, the deleted data in May 2021 — while the application for preliminary discovery was pending.

28    BHDS concluded that almost all of the material the subject of the preliminary discovery application had been destroyed and there were no further documents to be discovered. In these circumstances and, since she had provided a further affidavit, BHDS considered that there was no utility in pursuing its interlocutory application but pressed its application for costs, seeking an order that they be paid on an indemnity basis.

Relevant legislation and principles

29    Section 43(1) of the Federal Court of Australia Act 1976 (Cth) (FCA Act) provides that, subject to subs (1A) (which applies to representative proceedings) s 18 of the Public Interest Disclosure Act 2013 (Cth), and s 570 of the FW Act, the Court or a Judge has jurisdiction to award costs in all proceedings before the Court apart from proceedings in respect of which the FCA Act or any other Act provides that costs must not be awarded. Except as provided by any other Act, the award of costs is in the discretion of the Court or Judge: FCA Act, s 43(2). Costs may be awarded on an indemnity basis or otherwise: FCA Act, s 43(3)(g).

30    Section 570 of the FW Act relevantly provides that:

(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:

…

(b)    the court is satisfied that the party’s unreasonable act or omission caused the other party to incur the costs[.]

  …

31    The Court is bound to interpret and apply all these provisions and to exercise any of the powers they confer in the way that best promotes the overarching purpose of the legislation, which is to facilitate the just resolution of disputes according to law and as quickly, inexpensively and efficiently as possible: FCA Act, s 37M. That purpose includes the following objectives:

(a)    the just determination of all proceedings before the Court;

(b)    the efficient use of the judicial and administrative resources available for the purposes of the Court;

(c)    the efficient disposal of the Court’s overall caseload;

(d)    the disposal of all proceedings in a timely manner;

(e)    the resolution of disputes at a cost that is proportionate to the importance and complexity of the matters in dispute.

32    Furthermore, the parties have a duty to conduct any proceeding in the Court in a way that is consistent with the overarching purpose: FCA Act, s 37N(1). In exercising the discretion to award costs, any failure to comply with that duty must be taken into account: FCA Act, s 37N(4).

33    The breadth of the Court’s power under s 43 is not to be read down otherwise than by judicial principle in conformity with its amplitude: DSE (Holdings) Pty Limited v InterTAN Inc [2004] FCA 1251 at [14] (Allsop J). There is no general rule which applies to costs in an application for preliminary discovery. Each case turns on its own facts. But the extraordinary nature of the jurisdiction which allows a person to have compulsory access to the private affairs of another in order to decide whether they have a case against the other (C7 Pty Ltd v Foxtel Management Pty Ltd [2001] FCA 1864 at [17] per Gyles J) is a factor to be taken into account in the exercise of the Court’s discretion. It may lead to closer than usual scrutiny of the extent to which a successful prospective applicant should recover costs: ObjectiVision Pty Ltd v Visionsearch Pty Ltd (No 3) [2015] FCA 304 at [23] (Perry J); Cobankara v Australia and New Zealand Banking Group Ltd [2017] FCA 419 at [20] (Mortimer J). There is authority for the proposition that a prospective respondent is entitled “to remain passive” and put the prospective applicant to proof: for example, Procter v Kalivis (No 3) [2010] FCA 1194 at [17] (Besanko J); J & A Vaughan Super Pty Ltd v Becton Property Group Limited [2013] FCA 340 at [13] (Kenny J). In Panasonic Australia Pty Ltd v Ngage Pty Ltd [2006] NSWSC 399; 69 IPR 595 at [41] Young CJ in Eq thought that the general position in a contested application for preliminary discovery was that costs should follow the event and, where there is no contest there was much to be said for the prospective applicant paying their own costs.

34    In a number of cases where a successful application has led to the commencement of a substantive proceeding, the Court has ordered that the costs of the application should be costs in the substantive proceeding: see Pfizer Ireland Pharmaceuticals v Samsung Bioepis AU Pty Ltd (No 2) [2019] FCA 657 at [25] (3)–(4). On the other hand, there is also authority to the contrary. In C7 at [50], for example, Gyles J did not think that approach had merit since an application for preliminary discovery is a discrete application that may never lead anywhere. He could not see any reason why a party who is out of pocket because of costs should await “some indefinite future event”. Similarly, in Steffen v ANZ Banking Group [2009] NSWSC 883 at [31] McDougall J doubted the merit of the approach. He was of the opinion that ordinarily the determination of the costs of an application for preliminary discovery should not abide the outcome of the substantive proceeding.

35    A convenient summary of the relevant authorities appears in the judgment of Burley J in Pfizer at [25]. Having reviewed those authorities myself, I respectfully agree with his Honour’s conclusion that they disclose “an emerging thread” that a prospective respondent who takes an adversarial approach to an application may be required to pay some or all of the costs if a prospective applicant is successful. His Honour explained (at [26]–[27]):

The rationale behind that approach may be explained by the extraordinary nature of the preliminary discovery jurisdiction, which is intended to facilitate the making of sensible decisions concerning the commencement of proceedings, before proceedings have been formulated. Accordingly, whilst an adversarial approach is not prohibited, it is to be discouraged. Preliminary discovery is not a process by which potential parties are to open up new fronts for litigation warfare, but a procedure by which the efficient conduct of litigation is promoted …

Where a prospective respondent elects to enter the fray and vigorously contest the application, it becomes exposed to the risk that it should bear a costs consequence similar to the position it would be in were it a party to proceedings proper. Where the contest on an application is limited to the prospective applicant being put to proof of the elements of r 7.23, then even a successful prospective applicant may be liable to pay the costs. Conversely, where each point is hard fought, the prospective respondent is exposed to the risk that it will be visited with some or all of the costs in the event they are unsuccessful. In such circumstances, it may be inappropriate to defer a costs order to the outcome of any prospective litigation.

36    Ordinarily, costs are payable on a party and party basis. The ordinary principle is reflected in r 40.01 of the Rules. Rarely, however, if at all, do costs awarded on this basis indemnify a party for all costs incurred. Nevertheless, and in spite of the breadth of the Court’s jurisdiction, an order for indemnity costs will not be made unless the case has some “special or unusual feature” which would justify a departure from the ordinary course: see, for example, Cirillo v Consolidated Press Property Ltd (formerly known as Citicorp Australia Ltd) (No 2) [2007] FCA 179 at [3] (Finn J). One such feature is where there is evidence of particular misconduct that causes loss of time to the Court and to other parties: Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225 at 233 (Shepherd J). Another is where the Court is of the opinion that the party against whom the order is made unreasonably caused the other party to incur costs: Hamod v New South Wales [2002] FCAFC 97; 188 ALR 659 at [20] (Gray J, Carr and Goldberg JJ agreeing); Melbourne City Investments Pty Ltd v Treasury Wine Estates Limited (No 2) [2017] FCAFC 116 at [3]–[5] (Jagot, Yates and Murphy JJ).

The arguments

37    BHDS submitted that, although consent orders were made in the preliminary discovery application, costs should be awarded against Dr Goodarzi because she opposed the application for more than six months, putting BHDS to considerable expense, only agreeing to the orders sought a few days before the hearing and in circumstances where Dr Goodarzi was deleting and disposing of material the subject of the application since June 2020.

38    BHDS also submitted that Dr Goodarzi should pay its costs since the making of the discovery orders on 15 June 2021 as the costs were incurred because of Dr Goodarzi’s failure to comply with the Court’s orders and as she had destroyed the documents the subject of the orders and did not reveal what she had done until October 2021, after the application to cross-examine her had been filed.

39    As I indicated in my opening remarks, Dr Goodarzi opposed the orders sought on three bases.

40    First, she submitted that the preliminary discovery application was related to a proposed cross-claim to proceedings brought by Dr Goodarzi under the FW Act, which has since been filed, and therefore s 570 of the FW Act applies, restricting the Court’s capacity to award costs.

41    Second, and in the alternative, since Dr Goodarzi ultimately consented to the orders for preliminary discovery, any contest involved no more than the preparation of two sets of submissions by BHDS.

42    Third, the costs incurred in the period Dr Goodarzi was producing documents and in relation to the application to cross-examine should not be awarded against Dr Goodarzi because she was producing documents as they became available to her and the application to cross-examine was premature, unnecessary and not finally pressed.

Consideration

Does s 570 of the Fair Work Act apply to limit the Court’s power?

43    It is convenient to deal first with Dr Goodarzi’s argument that the FW Act applies. The argument turns on the meaning of “proceedings … in a court … in relation to a matter arising under this Act”. More particularly, it turns on the extent of the relationship between the proceedings brought by Dr Goodarzi and the application brought by BHDS.

44    Section 570(1) limits the power of the Court to make an order for one party to pay another party’s costs “in relation to a matter arising under [the] Act”. In such a case, s 570(2) provides that the party may be ordered to pay the costs only if, relevantly, “the court is satisfied that the party’s unreasonable act or omission caused the other party to incur the costs”.

45    The phrase “in relation to” has been described as one is of “wide and general import”: Energy Australia Yallourn Pty Ltd v Automotive, Food, Metal, Engineering, Printing and Kindred Industries Union (2018) 264 FCR 342 at [98] (Rares and Barker JJ), citing Fountain v Alexander (1982) 150 CLR 615 at 629 (Mason J). In Joseph v Parnell Corporate Services Pty Ltd (2021) 284 FCR 546 the Full Court (Logan, Katzmann and Snaden JJ) said neither the legislative context nor the drafting history suggests that the relationship between the proceeding and the matter arising under the Act should be a narrow one ([113]–[115]).

46    The test for determining whether a proceeding is in relation to a matter arising under the Act is whether the proceeding relates to a right or duty sought to be enforced which owes its existence to a provision of the Act: cf. Re McJannet; Ex parte Australian Workers’ Union of Employees (Qld) (No 2) (1997) 189 CLR 654 at 656; Energy Australia at [99]–[103] (Rares and Barker JJ), [139] (Flick J). As BHDS submitted, the right to which the present proceeding relates does not owe its existence to the FW Act, but to the Federal Court Rules, specifically Div 7.3 of the Rules. BHDS did not apply for any relief under the FW Act. Nor were the rights to relief BHDS believed it might have rights conferred by the FW Act.

47    It is beside the point that the purpose of the application for preliminary discovery was, as Dr Poursoltan put it, “to inform a potential cross-claim” in the proceeding Dr Goodarzi brought against BHDS which does relate to a matter arising under the FW Act. The preliminary discovery application is not brought in Dr Goodarzi’s proceeding. It is an entirely separate proceeding. This proceeding is not a claim in relation to a matter arising under the FW Act merely because some or all of the rights to relief BHDS was contemplating were ultimately asserted in its cross-claim. As Gyles J observed in C7 at [50], an application for preliminary discovery is a discrete application which may never lead anywhere. The fact that it did in this case is not enough.

48    It is true, as Dr Goodarzi submitted, that, where a proceeding is brought which includes claims made under the FW Act but which also encompasses claims in the accrued or associated jurisdiction of the Court, the whole of the proceeding is subject to the costs limitation: Stanley v Service to Youth Council Inc (No 3) (2014) 225 FCR 357 at [28] (White J); Melbourne Stadiums Ltd v Sautner (2015) 229 FCR 221 at [157] (Tracey, Gilmour, Jagot and Beach JJ), [173] (White J). But this is not such a proceeding. That proceeding is the one brought by Dr Goodarzi against BHDS. Whether or not costs incurred in connection with the cross-claim in that proceeding are subject to the limitation in s 570 remains to be seen.

49    In Joseph v Parnell, the Full Court held that a cross-claim is a separate proceeding heard for convenience with the primary claim (at [103]–[104]) and, on the facts in that case, that there was a sufficient connection or relationship between it and the primary claim to satisfy the terms of s 570(1) such that the cross-claim was a proceeding in relation to a matter arising under the FW Act (at [121]). Based on Joseph v Parnell, Dr Goodarzi argued that s 570 must apply to a preliminary discovery application made for the purpose of exploring a cross-claim with a connection to a proceeding that seeks relief under the FW Act. She contended that, if the contemplated cross-claim would be covered by s 570, then a preliminary discovery application must be.

50    I am unable to accept Dr Goodarzi’s argument.

51    While the relevant relationship is not intended to be narrow, it is not as broad as she would have it. The intention of the section is to capture causes of action raised in the one proceeding in which a non-colourable claim under the FW Act is raised and, at least in some circumstances, in a cross-claim filed in that proceeding. It is not concerned with an entirely separate proceeding in which no matter arising under the FW Act is raised.

52    The legislative history, explored at length in Joseph v Parnell and elsewhere, does not support the extreme position advanced by Dr Goodarzi.

53    In Joseph v Parnell at [109] the Full Court cited the following passage in Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union v ALS Industrial Australia Pty Ltd (No 2) (2015) 235 FCR 366 at [12] where Dowsett, Tracey and Katzmann JJ discussed the legislative purpose of the amendment which substituted the phrase “in relation to a matter arising under this Act” for the original phrase “exercising jurisdiction under the Act”:

Section 570(1), in its present form, commenced operation on 1 January 2013. The words “in relation to a matter arising under this Act” replaced the words “exercising jurisdiction under this Act”. The explanatory memorandum for the amending bill said that the “amendment confirms that the FW Act is generally a ‘no costs’ jurisdiction (including in appeal proceedings).” This change broadened the limitation on the Court’s power to award costs in proceedings under the FW Act …

54    In Joseph v Parnell at [114] the Full Court also referred to the introduction of the so-called “no costs” jurisdiction:

While previously there were some restrictions on costs, it was the amendment [to the Conciliation and Arbitration Act 1904 (Cth)] introduced in 1973 which abolished the general power of both the Commission and the Industrial Court to order costs against parties in proceedings arising under the Conciliation and Arbitration Act. It relevantly provided that “a proceeding, including an appeal, before the Court, or before a court of a State or Territory, in a matter arising under [the] Act … shall not be ordered to pay any costs incurred by any other party to the proceeding except where the party against whom the order is made instituted the proceeding vexatiously or without reasonable cause”. In his second reading speech, the relevant Minister, Hon Clyde Cameron MHR, said that the abolition of the power to order costs was part of the government’s policy of “bringing the courts to the people, of overcoming the deterrent which often prevents a person from seeking to right a wrong because of the burden of costs he might incur where his argument has failed to carry the day” …

55    The legislative history does not support the extreme position advanced by Dr Goodarzi.

56    In Joseph v Parnell at [116]–[121] the Court held that the relevant relationship existed because of three matters, none of which is present here: first, the existence of a common substratum of facts in the two proceedings; second, the fact that the matters pleaded in the cross-claim were an answer to Mr Joseph’s claim under the FW Act; and third, the fact that Parnell’s defence sought to set off any obligation it might be found to have against the damages awarded to Mr Joseph in the FW proceeding, based on the matters pleaded in the cross-claim.

How should the general discretion be exercised?

57    Dr Goodarzi submitted that, since the orders in the preliminary discovery application were ultimately made by consent, there should be no order as to the costs up to this point, citing the following observations of McHugh J in Re Minister for Immigration and Ethnic Affairs; Ex Parte Lai Qin (1997) 186 CLR 622 at 625:

Ordinarily, the power is exercised after a hearing on the merits and as a general rule the successful party is entitled to his or her costs. Success in the action or on particular issues is the fact that usually controls the exercise of the discretion. A successful party is prima facie entitled to a costs order. When there has been no hearing on the merits, however, a court is necessarily deprived of the factor that usually determines whether or how it will make a costs order

If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings.

58    Dr Goodarzi claimed that the only costs BHDS incurred were the costs of preparing its application and supporting material and submissions and those costs would have been incurred regardless of Dr Goodarzi’s attitude.

59    She also submitted that no costs should be awarded after the making of the consent orders because there was nothing exceptional about the way in which she provided discovery and nothing unreasonable about her behaviour.

60    Finally, she argued that the interlocutory application to cross-examine her should never have been made so that on that application costs should be awarded in her favour or, in the alternative, there should be no order as to costs.

61    I reject all of these arguments.

62    First, this is not a case in which neither party won or lost. Here, BHDS was the victor. After months of opposition, Dr Goodarzi effectively capitulated to BHDS, agreeing to all its proposed orders save as to costs. There was no element of compromise. The same goes for BHDS’s interlocutory application because, by filing her October 2021 affidavit, Dr Goodarzi effectively agreed to the alternative order BHDS had sought in its interlocutory application. The fact that BHDS did not pursue its request for leave to cross-examine her is immaterial in the circumstances.

63    In a case such as this, there is no reason why the Court should not exercise its discretion in favour of applicant. As Burchett J said in One.Tel Ltd v Commissioner of Taxation (2000) 101 FCR 548 at 553:

[I]t is important to draw a distinction between cases in which one party, after litigating for some time, effectively surrenders to the other, and cases where some supervening event or settlement so removes or modifies the subject of the dispute that, although it could not be said that one side has simply won, no issue remains between the parties except that of costs. In the former type of case, there will commonly be lacking any basis for an exercise of the Court’s discretion otherwise than by an award of costs to the successful party.

64    These remarks are not at odds with what McHugh J said in Qin. In Qin at 624, before the passage upon which Dr Goodarzi relied, McHugh J observed that:

In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action.

65    Unreasonable behaviour by one of the parties was not the only example his Honour gave. He also said that there will be some cases in which a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if a full trial had taken place (at 625). As Dr Goodarzi agreed to all the orders BHDS had sought in its application (except the order for costs), it is reasonable to infer that this situation obtains here.

66    Second, in any event this is not a case in which both parties acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled. While BHDS acted reasonably throughout, the evidence indicates that Dr Goodarzi’s conduct was unreasonable from the outset. Before BHDS filed its application, Dr Poursoltan wrote to Dr Goodarzi asking her to provide the material the subject of the application. Dr Goodarzi, on the other hand, asserted that there was no legitimate basis to seek the information and indicated that any such application would be “strenuously opposed”. She actively maintained that position until a few days before the scheduled hearing. The only costs that were spared were the costs of a hearing.

67    Third, contrary to Dr Goodarzi’s submission, the costs of preparing the application, supporting material and submissions would not have been incurred in any event. If Dr Goodarzi had agreed to the request by BHDS, its application would never have been brought. In those circumstances, it is open to the Court to infer that she had no proper basis for refusing to provide the information.

68    Fourth, Dr Goodarzi also acted unreasonably by denying she had had contact with patients and destroying the evidence that could have shown otherwise after she received Dr Pousoltan’s request when she knew that an application was likely to be made and while the application was still on foot.

69    Fifth, her conduct after the making of the consent orders was also unreasonable.

70    Dr Goodarzi failed to comply with either the June or July orders. BHDS was put to unnecessary expense in attempting to enforce the orders. She withheld important information. Only after BHDS went to the trouble of filing the September application did she disclose that she had continued to communicate with former BHDS patients, deleted almost all the records of those communications and disposed of the mobile phone which contained the deleted data a month before the preliminary discovery application was due to be heard.

71    BHDS was repeatedly forced to remind Dr Goodarzi of her obligations under the orders. Dr Goodarzi’s conduct caused BHDS to lose time and incur additional costs. Her behaviour was inconsistent with her duty under s 37N of the FCA Act. It would not be the best way to promote the overarching purpose of the civil practice and procedure provisions to decline to make an order for costs. In fact, the best way to promote that purpose is to make the orders BHDS sought.

72    For these reasons, the general discretion should be exercised in BHDS’s favour.

Conclusion

73    Having regard to her conduct, Dr Goodarzi should be ordered to pay BHDS’s costs forthwith and on an indemnity basis.

74    Since I have found that Dr Goodarzi’s conduct was unreasonable and her unreasonable conduct caused BHDS to incur unnecessary costs, even if I am wrong in concluding that s 570(1) of the FW Act does not apply, I would nonetheless make the same order under s 570(2)(b).

Associate:

Dated:    30 May 2022