Federal Court of Australia

Stolz v Registered Clubs Association of New South Wales [2022] FCA 1451

ORDERS

THE COURT ORDERS THAT:

1.    The applicant’s interlocutory application dated 29 July 2022 be dismissed.

2.    The respondent’s interlocutory application dated 29 July 2022 be dismissed.

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

REASONS FOR JUDGMENT

GOODMAN J

introduction

1    In this proceeding, the applicant’s case includes an allegation that on or about 8 November 2019, the respondent published a circular that was defamatory of the applicant, in that it conveyed a series of imputations, including an imputation that the applicant is a person of bad character (bad character imputation). The respondent’s defences to this allegation include a defence of justification under s 25 of the Defamation Act 2005 (NSW) on the basis that, it says, the bad character imputation is substantially true.

2    By an interlocutory application dated 14 June 2022, the respondent sought to amend its defence by providing further particulars of its contention that the bad character imputation is substantially true. That application was listed for hearing on 13 July 2022. On 12 July 2022, the parties agreed upon consent orders. On that day, I made orders: granting leave to the applicant to file a Second Further Amended Statement of Claim, deleting the allegation that the circular contained the bad character imputation; dismissing the respondent’s interlocutory application; for the filing of any applications for costs arising out of the respondent’s interlocutory application or the applicant’s amendment to his Further Amended Statement of Claim (FASOC); and for submissions on such applications. Both parties filed an application seeking an order for costs, supported by affidavit evidence and written submissions. The parties agreed that the question of costs would be determined on the papers.

3    For the reasons set out below, each of the applications for costs is dismissed.

BACKGROUND

4    In view of the scope of the dispute between the parties as evident from their submissions, it is necessary to set out the background in some detail.

5    On 10 February 2020, the applicant filed his Statement of Claim in the then Federal Circuit Court of Australia. On 25 March 2020, he filed an Amended Statement of Claim (ASOC). Paragraphs 30 and 32 of the ASOC provided:

30.    On or about 8 November 2019 the Respondent published a written document in the form of circular (the circular) to:

a.    each of the directors of the member clubs;

b.    each of the chief executive officers of the member clubs.

(a copy of said circular is attached as Schedule A hereto)

…

32.    The circular in its natural and ordinary meaning conveyed the following imputations, each of which was defamatory of the Applicant:

a.    the Applicant, through a private company Amethyst Industries Pty Ltd (Amethyst), had infringed the Respondent’s trademarks;

b.    the infringement was flagrant;

c.    the Applicant is of bad character;

d.    the Applicant has no regard for the Respondent’s legal rights;

e.    the Applicant has no regard for the Respondent’s intellectual property rights;

f.    the Applicant has no regard for each of the member club’s interests in preserving the Respondent’s intellectual property rights; and

g.    the Applicant has no regard for each of the member club’s interests in preserving the Respondent’s intellectual property rights.

6    The respondent’s initial Defence, filed on 15 June 2020, contained the following response to paragraph [32] of the applicant’s ASOC:

32    As to paragraph 32 of the Claim, ClubsNSW says:

(a)    the paragraph is vague, embarrassing and cannot be pleaded to; and

(b)    the pleaded imputations at (c)-(g) do not arise from the Circular.

7    On 19 March 2021 and after the proceeding had been transferred into this Court in November 2020, the respondent filed an Amended Defence to the ASOC and in response to paragraph [32] of the ASOC, pleaded the following (without alteration):

32    As to paragraph 32 of the Claim, ClubsNSW says:

(a)    says the paragraph is vague, embarrassing and cannot be pleaded is liable to be struck out; and

(b)    under cover of this objection admits that the pleaded imputations in subparagraph (a) arise from the Circular;

(a)    says that:

(i)    the pleaded imputation in sub-paragraph (b) does not differ in substance from sub-paragraph (a) and in any event is not pleaded as an imputation concerning Mr Stolz;

(ii)    the pleaded imputations in sub-paragraph (a), (b), (d), (e), (f) and (g) do not differ in substance from each other and therefore are liable to be struck out;

(b)    deniesy that the pleaded imputations in sub-paragraphs (c)-(g) do not arise from the Circular;

(c)    further or in the alternative, relies on a defence of justification under s 25 of the Defamation Act 2005 (NSW) (Defamation Act) as the imputations pleaded in sub-paragraphs (a)-(b) and (d)-(g) are substantially true:

PARTICULARS

…

IX.    Further particulars to be supplied.

(d)    relies on a defence of justification under s 25 of the Defamation Act as the imputation pleaded in sub-paragraph 30(c) of the Claim is substantially true:

PARTICULARS

I.    ClubsNSW repeats and relies upon the particulars in paragraph 32.

II.    Mr Stolz performed work for his own various business ventures and engaged with the Liberal Party during his working hours as a full-time employee of ClubNSW without the consent or authorisation of ClubsNSW in breach of his Employment Contract dated 15 September 2017.

III.    Mr Stolz exaggerated the state of his health and was not truthful in giving evidence about either the light or his use of bedding before the Australian Industrial Relations Commission: see: Troy Graham Stolz v Australian Protective Service – S 9631 [2000] AIRC 250.

IV.    During the election campaign for 2017 Local Government elections, Mr Stolz falsely claimed that he had no close association with any property developer when Mr Stolz was the owner and director of a company known as Stolz Holdings Pty Ltd which conducted business in the area of property development.

V.    Further particulars will be provided.

…

8    As is apparent from paragraph [32] of the Amended Defence, the respondent contended that the imputations pleaded at paragraph [32] of the ASOC were substantially true, with the bad character imputation at paragraph [32(c)] of the ASOC being substantially true for the reasons particularised at paragraph [32(d)] of the Amended Defence; and the remaining imputations being substantially true for the reasons particularised at paragraph [32(c)] of the Amended Defence.

9    On 28 May 2021, the applicant filed the FASOC. Paragraphs [30] and [32] of the FASOC were in the same form as in the ASOC. On 2 July 2021, the respondent filed its Defence to the FASOC. Paragraph [32] of the Defence to the FASOC is in the following form (without alteration):

32.    As to paragraph 32 of the Claim, ClubsNSW says:

(a)    says the paragraph is vague, embarrassing and cannot be pleaded is liable to be struck out; and

(b)    under cover of this objection admits that the pleaded imputations in sub-paragraph (a) arise from the Circular;

   (a)    says that:

(i)    the pleaded imputation in sub-paragraph (b) does not differ in substance from sub-paragraph (a) and in any event is not pleaded as an imputation concerning Mr Stolz;

(ii)    the pleaded imputations in sub-paragraph (a), (b), (d), (e), (f) and (g) do not differ in substance from each other and therefore are liable to be struck out;

(b)    deniesy that the pleaded imputations in sub-paragraphs (c)-(g) do not arise from the Circular;

(c)    further or in the alternative, relies on a defence of justification under s 25 of the Defamation Act 2005 (NSW) (Defamation Act) as the imputations pleaded in sub-paragraphs (a)-(b) and (d)-(g) are substantially true;

PARTICULARS

…

(d)    relies on a defence of justification under s 25 of the Defamation Act as the imputation pleaded in sub-paragraph 320(c) of the Claim is substantially true;

PARTICULARS

I.    ClubsNSW repeats and relies upon the particulars in paragraph 32(c).

II.    Mr Stolz performed work for his own various business ventures and engaged with the Liberal Party during his working hours as a full-time employee of ClubsNSW without the consent or authorisation of ClubsNSW in breach of his Employment Contract dated 15 September 2017.

III.    Mr Stolz exaggerated the state of his health and was not truthful in giving evidence about either the light or his use of bedding before the Australian Industrial Relations Commission: see: Troy Graham Stolz v Australian Protective Service – S 9631 [2000] AIRC 250.

IV.    During the election campaign for 2017 Local Government elections, Mr Stolz falsely claimed that he had no close association with any property developer when Mr Stolz was the owner and director of a company known as Stolz Holdings Pty Ltd which conducted business in the area of property development.

V.    Further particulars will be provided.

...

10    In March 2022, the applicant changed solicitors and on 8 April 2022, the respondent provided the applicant’s new solicitors with a proposed Amended Defence to the FASOC which proposed the insertion of the following further particulars under paragraph [32(c)] of its Defence:

Other conduct

XI.    Mr Stolz engaged in conduct which, if left unrestrained, would constitute contempt of court by:

a.    embarking on a pattern of behaviour calculated to bring pressure to bear on ClubsNSW in respect of its conduct of separate but related proceedings, through suggesting to media how their reportage of the proceedings should be themed;

b.    providing the media with selected solicitor’s correspondence;

c.    making materially misleading comments on his GoFund me website;

d.    making public adverse statements about ClubsNSW’s financial affairs and use of members’ funds; and

e.    publicly calling into question whether the separate but related proceedings will be determined impartially.

See: Registered Clubs Association of New South Wales v Stolz (No 2) [2021] FCA 1418 and the Affidavits of Ms Fernandez of 14 July 2021 and 18 August 2021.

11    On 6 May 2022, the applicant’s solicitors wrote to the respondent’s solicitors advising that the applicant did not consent to the proposed amendment for the following reasons:

… In our view, the proposed amendment is in the nature of a cross claim, is non-responsive to the further amended statement of claim and is otherwise irrelevant. We note that the proposed amendment is pleaded in the particulars to paragraph 32, which in turn pleads a defence that the imputations are “substantially true”. Paragraph 32(a) to (g) in the further amended statement of claim relates to a circular sent by the Respondent. We submit that the alleged contempt of court simply cannot go to whether the imputations in 32(a) to (g) are “substantially true” on either a factual basis or on the basis that any alleged contempt took place well after the circular was issued by the Respondent.

12    On 11 May 2022, the respondent’s solicitors wrote to the applicant’s solicitors in the following terms:

We refer to your letter dated 6 May 2022. We are instructed to write to you as follows.

1    As you will know, particular X of paragraph 32(c) of the Defence to Further Amended Statement of Claim, filed on 2 July 2021, (Defence) states that ‘further particulars are to be supplied’.

2    In this circumstance, and given that Mr Stolz does not consent to the Court granting leave to ClubsNSW to file and serve the proposed Amended Defence, we are writing instead to supply Mr Stolz with further particulars referred to in particular X of paragraph 32(c) of the Defence, in the form attached to this letter (Further Particulars).

3    ClubsNSW will rely on the affidavit of Ms Joanne Ede, filed on 23 March 2022, to support the Further Particulars.

4    Should Mr Stolz wish to oppose the supply of the Further Particulars and tender of Ms Ede’s affidavit at the hearing, we note that the supply of the Further Particulars and evidence should cause no prejudice to him, as:

(a)    ClubsNSW has put Mr Stolz on notice about the existence of further particulars to the Defence; and

(b)    the hearing of the Application is set down for the end of this year, in December 2022, which is over six months from now.

Please let us know if you would like to discuss, and/or have any questions.

13    On 24 May 2022, the applicant’s solicitors wrote to the respondent’s solicitors in the following terms:

1.    We refer to your letter dated 11 May 2022.

2.    Our position remains as articulated in our letter dated 6 May 2022 i.e. your proposed amendment to your client’s particulars of truth are unable (even if accepted) to prove the truth of the imputation in question. That is the basis upon which our client opposed leave to amend.

3.    As you would be aware, the Federal Court Rules 2011 (Cth) require the necessary particulars to be contained in a pleading. Parties are not entitled to expand their case by simply adding further particulars without the leave of the Court or the consent of the other parties on the basis that the party has foreshadowed that “further particulars will be provided”. Your proposed approach would have perverse results that would undermine well-established principles of case management.

4.    The standard practice when amending particulars of justification in defamation proceedings is to seek leave or consent to amend the pleading in the usual way. In that regard, we draw your attention to Roberts-Smith v Fairfax Media Publications Limited (No 5) [2020] FCA 1067. Given the manifest inability of the proposed particulars to prove the truth of the relevant imputation, we anticipate that the Court would not grant leave even if it were properly sought.

5.    Accordingly, any attempt to rely upon the new particulars at trial (without obtaining leave to amend before trial) will be opposed on the grounds of relevance. Such conduct would be an unreasonable act that would require our client to incur unnecessary costs and we put you on notice that our client will seek costs pursuant to the exception in section 570(2)(b) of the Fair Work Act 2009 (Cth).

14    On 14 June 2022, the respondent filed its interlocutory application, supported by an affidavit of Ms Jacqueline Anne Seemann Charak (Ms Seemann), seeking leave to file the proposed Amended Defence to the FASOC. On 16 June 2022, orders were made for the filing and exchange of submissions concerning the interlocutory application; and for the hearing of that application on 13 July 2022. On 23 June 2022, the respondent filed a written outline of submissions in support of its application.

15    On 4 July 2022 at 12:47pm, the respondent’s solicitors enquired of the applicant’s solicitors as to whether the applicant intended to file any submissions in reply, noting that the orders made on 16 June 2022 required the applicant to do so by 1 July 2022. At 3:00pm on that day, the applicant responded in the following terms:

1.    We refer to the interlocutory application filed 14 June 2022.

2.    That application seeks leave to amend the Defence to Further Amended Statement of Claim to add additional particulars (the New Particulars) to paragraph 32(c) of the Defence (consistently with the Proposed Further Amended Defence served 15 February 2022) or, alternatively, to rely upon further particulars to that paragraph (consistently with your correspondence of 11 May 2022).

3.    Section 32(c) of the Defence to Further Amended Statement of Claim pleads a defence of justification in relation to “the imputations pleaded in sub-paragraphs (a)-(b) and (d)-(g)” of paragraph 32 of the Further Amended Statement of Claim. Those imputations are:

a.    the Applicant, through a private company Amethyst Industries Pty Ltd)(Amethyst) (Amethyst), had infringed the Respondent’s trademarks;

b.    the infringement was flagrant;

…

d.    the Applicant has no regard for the Respondent’s legal rights;

e.    the Applicant has no regard for the Respondent’s intellectual property rights;

f.    the Applicant has no regard for each of the member club’s interests in preserving the Respondent’s intellectual property rights; and

g.    the Applicant has no regard for each of the member club’s interests in preserving the Respondent’s intellectual property rights.

4.    The Applicant’s consistent position, as expressed in our correspondence of 6 May 2022 and 24 May 2022, is that the New Particulars are incapable of proving the truth of the imputations in question. Your client has never sought to articulate the basis upon which it contends to the contrary.

5.    Ms Seeman’s Affidavit of 14 June 2022 expresses the view that the New Particulars are relevant “because they go to the substantial truth of the imputation that Mr Stolz is of bad character”. That affidavit does not address the relevance of the New Particulars to the matters pleaded in subparagraphs (a)-(b) and (d)-(g) of paragraph 32 of the Further Amendment Statement of Claim to which paragraph 32(c) of the Defence to Further Amended Statement of Claim is responsive.

6.    Similarly, in your client’s submissions served on 23 June 2022, there is not one reference to how the New Particulars are said to be capable of proving the particulars to which paragraph 32 of the Defence to Further Amended Statement of Claim. Instead, those submissions assert that paragraph 32(c) is “relevant to establishing that the Applicant is of bad character” (Submissions, para 12) and that it is “ClubsNSW’s case … that engaging in conduct of [the kind referred to by the New Particulars] establishes the substantial truth of the imputation that the Applicant is of bad character” (Submissions, para 14).

7.    Paragraph 32(c) of the Defence to Further Amended Statement of Claim does not seek to justify the imputation that the Applicant is of bad character. The justification defence to that imputation is pleaded in paragraph 32(d). The Interlocutory Application is concerned only with paragraph 32(c) (as has been consistently foreshadowed in the abovementioned correspondence). Our client has dealt with the previous application to amend and the proposed giving of further particulars on this basis.

8.    Please confirm by not later than 4pm on 5 July 2022 whether your client’s application is as stated in the Interlocutory Application, or whether it is as suggested in the Affidavit and Submissions filed in support.

9.    If the former, please explain on what basis the New Particulars are said to be capable of establishing the truth of the imputations pleaded at paragraph 32(a)-(b) and (d)-(g) of the Further Amended Statement of Claim. If the latter, please confirm whether your client will be seeking to amend the Interlocutory Application.

10.    If your client intends to amend the Interlocutory Application, our client reserves the right to seek costs on the basis that your client has engaged in an unreasonable act that has caused him to incur costs: Fair Work Act 2009 (Cth) s 570(2)(b).

11.    Our client will serve his submissions in relation to the Interlocutory Application once your client has made its position clear in relation to the above.

(emphasis in original)

16    On 4 July 2022 at 6:12pm, the respondent replied in the following terms:

We refer to your letter of today's date. We are instructed to respond as follows.

The reference to paragraph 32(c) in the interlocutory application and supporting materials is a typographical error. It should be a reference to paragraph 32(d). Similarly, the references to particulars X and XI of paragraph 32(c) should be references to particulars V and VI respectively of paragraph 32(d).

ClubsNSW will shortly file an amended interlocutory application correcting these typographical errors. We attach a copy of what will be filed. We will provide a sealed copy once it is available.

It is clear from the affidavit of Ms Seemann at paragraph 25 and ClubsNSW’s written submissions at paragraph 11 that ClubsNSW always intended to provide further particulars to its defence of justification in relation to the alleged imputation that your client was of ‘bad character’. Although the typographical errors are unfortunate, we do not see how there could have been any real confusion as to ClubsNSW’s intention, or why, if there was, it could not have been resolved before today by a request for clarification.

In those circumstances, ClubsNSW rejects the assertion that it has engaged in an unreasonable act that has caused Mr Stolz to incur costs.

If this clarification causes your client to change his position opposing the interlocutory application, please advise us. Otherwise, we look forward to receiving your client’s written submissions as soon as possible.

17    On 6 July 2022, the applicant’s solicitors replied:

Your client now appears to have entirely changed its position. With respect, your explanation that it is a typographical error is wholly unsatisfactory. Indeed, if it were a typographical error, the submissions in support of the interlocutory application would have engaged the defence at 32(d) rather than explicitly referring to 32(c) and the submissions refer to the Applicant’s alleged infringement of intellectual property and his alleged attempt to deliver anti-money laundering services to members. Your submissions do not engage with 32(d) at all.

Your client’s proposed amendments to paragraph 32(c) of the Further Amended Defence plainly relate to the imputations pleaded in “sub-paragraphs (a)-(b) and (d)-(g)”. This proposed further amendment defence (sic) was served on our client in or about 3 December 2021 at which time the Court directed your client to serve a proposed amended defence by 24 February 2022. Further, Ms Seeman’s affidavit of 1 December 2021 does not raise any matters concerning your client’s defence of justification in relation to the alleged imputation that our client was of ‘bad character’.

For avoidance of doubt, we do not consent to your client’s proposed amendment to its application.

Our consistent position is that the proposed particulars are incapable of providing the truth of the imputations in question.

We write to notify you that we are instructed not to press paragraph 32(c) of the Further Amended Statement of Claim dated 28 July 2021 at trial. In light of our position, we consider your client’s application to be otiose. Your interlocutory application in is hopeless, and for these reasons we invite you to withdraw it.

18    On 11 July 2022, the respondent’s solicitors wrote to the applicant’s solicitors in the following terms:

We refer to your email below.

Our client’s position is that:

•    it always intended, and still intends (subject to what we say below), to seek leave to amend the particulars of subparagraph 32(d) of the Further Amended Defence (FAD) which responds to the allegation of bad character in subparagraph 32(c) of the Further Amended Statement of Claim (FASOC);

•    despite the typographical errors identified in our previous email, that intention was clear in the affidavit and submissions filed by our client; and

•    to the extent that intention was not clear to your client, the situation could have been clarified well before 3.00pm on 4 July 2022, almost three days after your client’s submissions in response to the interlocutory application were due.

However, we note that your client is now instructing you that he wishes to withdraw subparagraph 32(c) of the FASOC. We assume that your client will seek the Court’s leave to amend the FASOC to do this. Our client is prepared to consent to your client having that leave, and to its interlocutory application being dismissed (since subparagraph 32(d) of the FAD would fall away) and the hearing on 13 July 2022 being vacated, but only on the basis that your client agrees to pay our client’s costs thrown away by your client withdrawing subparagraph 32(c). Our client considers that it should receive those costs in circumstances where:

•    your client is seeking to withdraw this allegation at a late stage, after multiple rounds of pleading amendments and after evidence has been filed;

•    our client has expended considerable time and expense in responding to the allegation in subparagraph 32(c) in its pleadings and evidence; and

•    your client has provided no explanation for why the allegation is being withdrawn at this late stage.

In these circumstances, our client is prepared to consent to orders in the following terms:

1.    The Applicant has leave to file a Second Further Amended Statement of Claim deleting subparagraph 32(c) by 14 July 2022.

2.    The Respondent’s interlocutory application filed on 14 June 2022 is dismissed.

3.    The hearing of the Respondent’s interlocutory application on 13 July 2022 is vacated.

4.    The Applicant is to pay the Respondent’s costs thrown away by reason of the amendment referred to in order 1.

Please let us know as soon as possible, and in any event by 11am on Tuesday 12 July 2022, whether your client will consent to these orders.

(emphasis in original)

19    On the same day, the applicant’s solicitors responded in the following terms:

We refer to your email of 11 July 2022 at 12.59pm.

Our client’s position is as follows:

1.    On or around 1 December 2021, your client notified our client that it would seek to amend its Further Amended Defence. On or around 15 February 2022, your client served a proposed amended Defence.

2.    Ms Seeman’s affidavit of 1 December 2021 did not raise any matters concerning your client’s defence of justification in relation to the alleged imputation that our client was of ‘bad character’.

3.    The Applicant’s consistent position, as expressed in our correspondence of 6 May 2022 and 24 May 2022, is that the New Particulars are incapable of proving the truth of the imputations in question. Your client has never sought to articulate the basis upon which it contends to the contrary.

4.    On or around 4 July 2022, you client changed its position on the basis that the reference to paragraph 32(c) in the interlocutory application and supporting materials is a “typographical error”. On 5 July 2022, your client sought to amend its interlocutory application.

5.    From 4 July 2022, your client has sought to advance, at a late stage of the proceedings, a new proposed amendment to its Further Amended Defence, after multiple rounds of pleadings and after evidence has been filed.

6.    Our client has expended time and expense in responding to your proposed further amended defence and interlocutory application. On 4 July 2022, our client expressly reserved the right to seek costs on the basis that your client has engaged in an unreasonable that has caused him to incur costs.

In the circumstances, our client is prepared to consent to orders in the following terms:

1.    The Applicant has leave to file a Second Further Amended Statement of Claim deleting subparagraph 32(c) by 14 July 2022.

2.    The Respondent’s interlocutory application filed on 14 June 2022 is dismissed.

3.    The hearing of the Respondent’s interlocutory application on 13 July 2022 is vacated.

4.    The costs of the Applicant’s application for leave to file a Second Further Amended Statement of Claim and the Respondent’s application for leave to amend its Further Amended Defence be reserved.

It is apparent that the parties are broadly in agreement about the appropriate path forward, save for the issue of costs. As is usual practice in the Federal Court, costs are dealt with at the conclusion of the proceeding. To avoid unnecessary time and expense, we propose the issue of costs be reserved and dealt with in due course.

We also write to notify you that counsel for the Applicant briefed to appear at the hearing of 13 July 2022 has today, unfortunately, tested positive for COVID-19. Accordingly and in the event that your client does not consent to our proposed orders, we will be seeking leave for counsel to appear via AVL shortly.

Please let us know as soon as possible, and in any event by 11am on Tuesday 12 July 2022, whether your client will consent to these orders.

(emphasis in original)

20    The parties ultimately agreed to the consent orders which I made on 12 July 2022, the content of which has been described at [2] above; and the hearing scheduled for the following day was vacated.

21    On 14 July 2022, the applicant filed its Second Further Amended Statement of Claim (2FASOC), which differed from the FASOC by the deletion of the allegation concerning the bad character imputation.

22    The essence of the above chronological account of relevant events is as follows:

(1)    the applicant propounded a claim in defamation which included a contention that the circular conveyed the bad character imputation;

(2)    in its Defence to the FASOC (and in earlier iterations of that Defence) the respondent contended that the bad character imputation was substantially true. This contention was supported by a series of particulars;

(3)    the respondent proposed to supplement those particulars but its proposed amendment was to paragraph [(32(c)] of the Defence to the FASOC, when it should have been to paragraph [32(d)] of that Defence;

(4)    there followed correspondence between the applicant’s solicitors and the respondent’s solicitors;

(5)    the respondent filed its interlocutory application seeking leave to amend paragraph [32(c)] (rather than [32(d)]) of its Defence to the FASOC, together with submissions in support of that application;

(6)    the applicant did not file his submissions in accordance with the Court’s orders and on 4 July 2022 the applicant’s solicitors wrote to the respondent’s solicitors in terms which made clear the error in paragraph numbering in the respondent’s proposed amendment;

(7)    the respondent replied promptly, indicating that there had been a typographical error and provided an amended interlocutory application;

(8)    on 6 July 2022, the applicant maintained its opposition to the proposed amendment but also indicated that it would not press [32(c)] of the FASOC, rendering the respondent’s interlocutory application otiose; and

(9)    orders were made by consent, providing, inter alia, for the amendment of the FASOC so as to remove the allegation of the bad character imputation in paragraph [32(c)]; and for the dismissal of the respondent’s interlocutory application.

the applications for costs orders

23    Each party seeks an order that the other pay its costs on an indemnity basis, or alternatively on a party and party basis. The applicant relies upon an affidavit of Ms Natalija Nikolic affirmed on 12 July 2022, and the respondent relies upon affidavits of Ms Seemann affirmed on 29 July 2022 and 5 August 2022. The affidavit evidence largely addresses the sequence of events set out above. In addition, Ms Seemann’s affidavit evidence includes:

(1)    details of the extent of work undertaken to prepare evidence relating to the defence of the allegation of the bad character imputation; and

(2)    evidence that the proposed amendment to the Defence to the FASOC was intended to be an amendment to the particulars to paragraph [32(d)] (which responds to paragraph [32(c)] of the FASOC); and that the references to amending the particulars to paragraph [32(c)] of the Defence to the FASOC were made in error, which error first came to Ms Seemann’s attention upon receipt of the 4 July 2022 email from the applicant’s solicitors.

Legal framework

24    Section 43 of the Federal Court of Australia Act 1976 (Cth) provides the Court with a wide discretion as to costs subject to, inter alia, s 570 of the Fair Work Act 2009 (Cth) (FW Act), which provides:

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.

(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.

(emphasis added)

25    There is no dispute that this is a proceeding in relation to a matter under the FW Act and thus that s 570 of that Act applies. It is also common ground that ss 569 and 569A of the Act are not presently relevant.

26    Section 570(2) sets out three alternative necessary conditions for the exercise of the discretion. If none of those conditions is satisfied then the costs discretion may not be exercised. If one or more of those conditions is satisfied, then the discretion is enlivened. The applicant and the respondent each contend that the Court’s discretion to award costs is enlivened by s 570(2)(b) on the basis that the Court should be satisfied that unreasonable acts and omissions of the other caused them to incur costs. The relevant principles with respect to the application of the condition in s 570(2)(b) were conveniently summarised by Halley J in BDR21 v Australian Broadcasting Corporation (No 2) [2021] FCA 1347 at [26]:

(a)    the occasions on which costs will be awarded under s 570 of the FW Act are likely to be exceptional: Mutch v ISG Management Pty Ltd (No 2) [2020] FCA 954 (Mutch) at [8] (Bromberg J);

(b)    the touchstone for the exercise of the power is unreasonableness, not negligence or inefficiency: Fair Work Ombudsman v Grouped Property Services Pty Ltd (No 3) [2017] FCA 810 (Grouped Property Services) at [26] (Katzmann J); Tucker v State of Victoria [No 2] [2021] VSCA 182 (Tucker) at [32(h)] (Kyrou, McLeish and Sifris JJA);

(c)    the fact that a party has conducted litigation inefficiently, made belated concessions, or adopted a misguided approach may be relevant to, but will not be conclusive of, the question of unreasonableness: Mutch at [8] (Bromberg J) citing Construction Forestry, Mining and Energy Union v Clarke (2008) 170 FCR 574; [2008] FCAFC 143 (Clarke) at [29] (Tamberlin, Gyles and Gilmour JJ) and Hutchinson v Comcare (No 2) [2017] FCA 370 (Comcare (No 2)) at [8] (Bromberg J); Tucker at [32(h)];

(d)    the term “unreasonableness” is not conducive to precise definition, rather it is to be understood as controlling the extent of the limitation on the making of a costs order pursuant to s 570 of the FW Act and it takes much of its meaning from the underlying reason for that limitation: Mutch at [7];

(e)    unreasonableness is to be determined objectively, it is a question of impression and degree and is to be assessed by reference to the particular circumstances of a given case: Tucker at [32(g)] citing PIA Mortgage Services Pty Ltd v King [No 2] [2020] FCAFC 53 at [15] (Rangiah, Charlesworth and Snaden JJ);

(f)    it is well settled that the limitation imposed by s 570 of the FW Act seeks to provide access to justice by ensuring that the fear of an adverse costs order does not discourage litigants from pursuing good claims: Mutch at [7] citing Trustee for The MTGI Trust v Johnston (No 2) [2016] FCAFC 190 at [8] (Siopis, Collier and Katzmann JJ); Ryan v Primesafe [2015] FCA 8 at [64] (Mortimer J); Comcare (No 2) at [8] (Bromberg J);

(g)    if the power to make an order pursuant to s 570 of the FW Act is enlivened then in determining whether to exercise its discretion to make an order, the Court is bound by s 37M(3) of the Federal Court of Australia Act 1976 (Cth) (FCA Act) to exercise that discretion in the way that best promotes the overarching purpose of any statutory provision on a matter of practice and procedure referred to in s 37M of the FCA Act: Grouped Property Services at [26] (Katzmann J).

27    The withdrawal of a claim may amount to an unreasonable act or omission under s 570(2)(b) of the FW Act in certain circumstances. It is a question of impression and degree, assessed by reference to the particular circumstances of the case at hand: Construction, Forestry, Mining and Energy Union v Clarke [2008] FCAFC 143; (2008) 170 FCR 574 at 582 [28]. In that case, the Full Court (Tamberlin, Gyles and Gilmour JJ) explained at 582 [28] to [29] with respect to a predecessor provision, namely s 824(2) of the Workplace Relations Act 1996 (Cth):

28.    We turn now to s 824(2) of the WR Act. This provision carves out another exception to the usual rule in s 824(1) that costs orders are not to be made in respect of proceedings in a matter arising under the WR Act. The exception applies when two criteria are satisfied. The first criterion is that one party must have engaged in “an unreasonable act or omission”. As the reasoning of Tracey J in Australian and International Pilots Association v Qantas Airways Ltd (No 3) (2007) 162 FCR 392 and Siopis J in McAleer v The University of Western Australia (No 2) (2007) 161 IR 151 demonstrates, whether a party has conducted itself or its litigation in such a way as to cross this threshold will depend on the particular circumstances of the case. The second criterion is that the act or omission of one party must have “caused another party to the proceeding to incur costs in connection with the proceeding”. Once both criteria are satisfied, then the Court “may” in its discretion order the party which has engaged in the unreasonable act or omission to pay some or all of the costs of the other party.

29.    In our view, the respondent has not engaged in “an unreasonable act or omission”. As the authorities indicate, there is a distinction between a party who pursues arguments which are ultimately abandoned or rejected by the Court and a party who commences a proceeding which is misconceived in the sense of being incompetent or unsupportable: Australian and International Pilots Assn 162 FCR at 402; Standish v University of Tasmania (1989) 28 IR 129 at 138–139. Simply because a party does not conduct its litigation in the most efficient way does not mean that the Court should exercise its discretion in s 824(2) of the WR Act to make a costs order. In our view, neither the late abandonment of some of its defence, nor the use of a notice of contention to advance a previously minor and ultimately unsuccessful argument, crosses the threshold of being “an unreasonable act or omission” for the purposes of s 824(2). True it is that the concession ultimately given by the respondent that it regarded the decision of Nicholson J as erroneous could have been given earlier. However, it was a concession which was, in light of the decision of this Court on the substantive appeal, properly made and beneficial to the appellants. Although it is arguable that the lateness of the concession may have put the appellants to some extra costs, we are of the view that it cannot be characterised as “unreasonable” in the circumstances of this case. Indeed, while courts should use the discretion in s 824(2) to ensure that parties to litigation arising from the WR Act do not engage in unreasonable acts and omissions which put the other party to undue expense, they should also be careful not to exercise the discretion with too much haste, given that such haste may discourage parties, for fear of an adverse costs order, from pursuing litigation under the WR Act in the manner which they deem best.

(emphasis added)

28    More recently, the Full Court (Rangiah, Charlesworth and Snaden JJ) in PIA Mortgage Services Pty Ltd v King (No 2) [2020] FCAFC 53 explained at [14] to [17]:

14.    The narrowing of issues that are to be ventilated before a court is always to be encouraged. By itself, the withdrawal of an otherwise live contention cannot amount to unreasonableness of the sort to which s 570(2)(b) of the FW Act refers, no matter when it occurs.

15.    Unreasonableness may, however, arise by reason of the nature of the contention that is withdrawn or the circumstances in which that withdrawal occurs (or both). A litigant who fails until the proverbial eleventh hour to withdraw a speculative contention might more readily be thought to have committed an unreasonable omission for the purposes of s 570(2)(b) of the FW Act than would a litigant who withdraws an arguable contention at the same point or earlier. Similarly, the failure to withdraw a contention before the eleventh hour might more readily qualify as an unreasonable omission if there is reason to think that the party withdrawing it could, with proper care, have withdrawn it more promptly. In combination, the timing of the withdrawal, the quality of the withdrawn contention and the circumstances in which the withdrawal was effected inform whether a particular withdrawal trespasses into the realm of unreasonableness. It is, in that sense, that unreasonableness is a question of impression and degree, to be assessed by reference to the particular circumstances of a given case: Construction, Forestry, Mining and Energy Union v Clarke (2008) 170 FCR 574, 582 [28] (Tamberlin, Gyles and Gilmour JJ).

16.    Here, the respondent’s submission does not rise beyond a complaint that the appellants withdrew what they withdrew at a relatively late stage of the proceeding. He says, simply enough, that had he been notified of the withdrawals sooner than he was, it would not have been necessary for him to incur costs in respect of their defence. That, with respect, is undoubtedly (if not axiomatically) so; but it is not nearly sufficient. To impugn the withdrawal of otherwise live contentions as unreasonable, the respondent needs to point to something more than simply the late stage at which they occurred: there needs to be something about the circumstances within which a particular withdrawal was effected or the quality of what was withdrawn (or both) that enlivens the spectre of unreasonableness.

17.    The respondent says nothing about the quality of the contentions that were withdrawn or the circumstances within which those withdrawals took place (other than that they occurred at a late stage). He does not, for example, suggest that the withdrawn contentions were speculative or foredoomed to failure, or that the appellants deliberately or carelessly delayed their withdrawal, such that the prohibition against the awarding of costs that would otherwise apply might properly be circumvented. Having not been addressed on them, it is not possible for the court to make an assessment as to the quality of the contentions in question and there is no evidence to suggest that their withdrawal was delayed by ineptitude or sharp practice. It might well be that the appellants, perhaps assisted by the penetrating light of an imminent hearing, simply made a forensic choice to narrow what they wished to ventilate before the court. That, without more, is not unreasonable.

Applicant’s application for costs of the respondent’s application to amend its Defence to the FASOC

29    I turn now to consider the applicant’s application for costs of the respondent’s application to amend its Defence to the FASOC.

30    The applicant submits that the respondent acted unreasonably in pursuing its interlocutory application and failing to withdraw it. The essence of the applicant’s submission is that:

(1)    by reason of the correspondence from the applicant’s solicitors dated 6 and 24 May 2022 and 4 July 2022 (see [11], [13] and [15] above), the respondent was on notice that its interlocutory application was “doomed to fail”;

(2)    faced with this correspondence, the respondent should have abandoned that application well ahead of the day before that application was to be heard; and

(3)    instead, the respondent persisted with an incompetent and unsupportable application, causing the applicant to incur costs that he would not have incurred if the respondent had not done so.

31    I do not accept these submissions, for the following reasons.

32    First, the question of the reasonableness of the respondent’s conduct in pursuing its interlocutory application falls for consideration in a context in which that application was withdrawn and not determined on its merits. The difficulties faced by a Court in determining the question of costs without a determination of the merits, and the usual position that in such circumstances there is to be no order as to costs, are well-established: see Re Minister for Immigration and Ethnic Affairs; ex parte Lai Qin [1997] HCA 6; (1997) 186 CLR 622; Nichols v NFS Agribusiness Pty Ltd [2018] NSWCA 84; (2018) 97 NSWLR 681.

33    Secondly, and in this context, the Court is not in a position to determine whether the proposed further particulars contained allegations that were “doomed to fail”. Further, the applicant’s proposition that the proposed amendments were doomed to fail is based upon the proposed amendments being amendments to paragraph [32(d)] of the Defence to the FASOC. In other words, no allowance has been made for the error described by Ms Seemann (or that the respondent proposed to proceed upon an amended application which remedied that error).

34    Thirdly, I do not regard the 6 and 24 May 2022 letters from the applicant’s solicitors as setting out, with any clarity, the point that was ultimately made on 4 July 2022, namely that the proposed amendment could not succeed because it was directed to paragraph [32(c)] of the Defence to the FASOC (which did not respond to paragraph [32(c)] of the FASOC), rather than paragraph [32(d)] of that Defence (which did so respond).

35    Fourthly, once the applicant had set out its position with clarity on 4 July 2022, the respondent responded, within hours, indicating that there had been a typographical error and providing a further, corrected, version of the amendment application. The promptness of this response supports the respondent’s position that there had been a typographical error, as does the nature of the error made (namely, an assumption that paragraph [32(c)] of the Defence to the FASOC responded to paragraph [32(c)] of the FASOC). In this regard, I reject the applicant’s submission that I should not accept Ms Seemann’s evidence that this was an error, particularly when the applicant did not seek the opportunity to test Ms Seemann’s sworn evidence on this point.

36    Finally, whilst the respondent’s interlocutory application was withdrawn, the withdrawal cannot be regarded as a capitulation or surrender by the respondent on this issue such as to found unreasonable behaviour, in circumstances where the reason for the withdrawal was that there was no longer any need to defend paragraph [32(c)] of the FASOC once the applicant indicated that it did not press that paragraph. As the applicant’s solicitors acknowledged on 6 July 2022 (see [17] above), the respondent’s interlocutory application became otiose once the applicant’s solicitors indicated that the applicant no longer pressed the allegation concerning the bad character imputation.

The respondent’s application for costs of the applicant’s amendment to the FASOC

37    I turn now to consider the respondent’s application for costs of the applicant’s amendment to the FASOC so as to withdraw the allegation concerning the bad character imputation in paragraph [32(c)] of that pleading. The essence of the respondent’s submissions is that:

(1)    the allegation concerning the bad character imputation was part of the applicant’s case since its inception until it was withdrawn by the filing of the 2FASOC on 14 July 2022;

(2)    the making of that allegation and its withdrawal more than two years later when the respondent’s interlocutory application was on foot was unreasonable in circumstances where:

(a)    no explanation has been provided for its withdrawal;

(b)    the absence of an explanation leaves open the inference that the applicant came to a realisation, to which he should have come after the filing of the respondent’s Amended Defence in March 2021, that he had made a tactical error in putting his character in issue in the proceeding; and

(c)    the applicant should have known that the allegation concerning the bad character imputation would cause the respondent to incur substantial time and costs in defending that allegation.

38    I do not accept these submissions, for the following reasons.

39    First, as a general proposition, the withdrawal of an allegation and its consequent narrowing of the issues requiring resolution is to be encouraged. As the Full Court stated in PIA Mortgage at [14]:

The narrowing of issues that are to be ventilated before a court is always to be encouraged. By itself, the withdrawal of an otherwise live contention cannot amount to unreasonableness of the sort to which s 570(2)(b) of the FW Act refers, no matter when it occurs.

40    Secondly, the withdrawal occurred well before trial and cannot be considered to have been an “eleventh-hour” withdrawal. In any event, to establish unreasonable conduct something more is needed then simply withdrawal at a late stage: PIA Mortgage at [16]. There is no other vitiating factor in the present case. In this regard, the respondent does not challenge the quality of the allegation that was withdrawn (for example, by suggesting that it was a speculative contention without substance).

41    Thirdly, the absence of any explanation for the amendment is not relevant. As the amendment was made pursuant to an order to which the respondent consented, there was no occasion for the applicant to explain why the amendment was sought.

42    Finally, in any event, the absence of an explanation for the amendment application provides no basis for an inference that the reason for that application was that the applicant had made a tactical error. To draw such a conclusion would be to engage in speculation, not inference.

conclusion

43    For the reasons set out above, I am not satisfied for the purposes of s 570(2)(b) of the FW Act that either party acted unreasonably. It follows that the discretion to award costs is not enlivened, and that each of the parties’ applications for costs should be dismissed. I will make orders accordingly.

Associate:    

Dated:    5 December 2022