Federal Court of Australia

Heal v Sydney Flames Basketball Pty Ltd (No 2) [2024] FCA 794

ORDERS

THE COURT NOTES THAT:

A.    On 23 May 2024, the Court made the following declaration:

The respondent contravened s 536(1) of the Fair Work Act 2009 (Cth) during the period between March 2021 to January 2023 by failing to give the applicant payslips within one working day of paying him in relation to the performance of work.

B.    At the commencement of the hearing on 12 July 2024, insofar as it concerned costs, counsel for the applicant notified the Court that the applicant’s application for costs with respect to the contractual claims that he had advanced in the proceedings was withdrawn.

THE COURT ORDERS THAT:

1.    The respondent is to pay a penalty pursuant to s 546 of the Fair Work Act 2009 (Cth) in the sum of $5,000 to the applicant within 14 days of the making of these orders, being by 4.30 pm on Friday, 2 August 2024.

2.    The respondent’s application for costs be dismissed.

3.    The parties are to confer and seek to reach agreement if any costs orders are to be sought by the respondent with respect to its costs thrown away by the applicant’s late withdrawal of his application for costs.

4.    If agreement cannot be reached on the matter identified in Order 3 of these orders within 7 days of the making of these orders, being by 4.30 pm on Friday, 26 July 2024, the parties are to arrange for this matter to be relisted and provide short minutes and brief submissions with respect to any application made by the respondent for its costs.

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

REASONS FOR JUDGMENT

HALLEY J:

A.     Introduction

1    On 19 April 2024, I made orders in these proceedings providing for judgment in favour of the applicant, Shane Heal, on his breach of contract claims and with respect to an admitted failure by the respondent, Sydney Flames Basketball Pty Ltd, to provide payslips to Mr Heal, but otherwise dismissed his claims under the Fair Work Act 2009 (Cth) (FW Act): Heal v Sydney Flames Basketball Pty Ltd [2024] FCA 401 (Principal Judgment or PJ).

2    I also made orders that the parties were to provide short minutes of order giving effect to the Principal Judgment, including a timetable for the provision of submissions and any further evidence on penalty with respect to the admitted payslips claim.

3    The parties have now filed competing submissions on penalty. In addition, the parties have filed competing submissions on an application by Mr Heal for his costs with respect to the breach of contract claims, and an application by the respondent for 40% of its costs of the proceedings pursuant to s 570(2)(b) of the FW Act.

4    At the commencement of the hearing on 12 July 2024, in so far as it concerned costs, counsel for Mr Heal advised that his client did not press his application for costs with respect to the breach of contract claims.

5    Mr Heal relied upon his affidavits affirmed on 5 May 2023, 13 June 2023 and 27 June 2024, and an affidavit of his solicitor, Phillip Tiernan, the principal of Tiernan Lawyers, sworn on 14 June 2024, in support of his submissions on penalty. Neither Mr Heal nor Mr Tiernan was cross examined.

6    The respondent relied upon an affidavit of Erica Archibald, the Chief Financial Officer of the respondent, in support of its submissions on penalty. Ms Archibald gave evidence of the circumstances in which Mr Heal had not been provided with payslips and the steps taken by the respondent to remedy its failures to comply with its FW Act obligations to provide him with payslips. Ms Archibald was cross examined briefly. I accept that she gave evidence truthfully and to the best of her recollection.

7    The respondent also relied upon an affidavit from its solicitor, Warren Davis, a principal of Ovartis Lawyers. Mr Davis gave evidence of estimates of costs incurred by the respondent, that he had prepared, in support of the respondent’s application for costs. Mr Davis was not cross examined.

8    These reasons for judgment are to be read in conjunction with the Principal Judgment. I note in particular that references to the “Team” are references to the women’s basketball team known as the Sydney Flames.

9    For the reasons that follow, I have determined that (a) an appropriate penalty to be imposed on the respondent with respect to the payslips contravention of the FW Act, in order to achieve specific and general deterrence, is a penalty in the amount of $5,000, and (b) the respondent’s application for costs pursuant to s 570(2)(b) of the FW Act is to be dismissed.

B.     Penalty

B.1.     Overview

10    Mr Heal did not receive payslips from the respondent in the period from the commencement of his employment until 18 February 2022.

11    On 18 February 2022, Mr Heal received his payslips for the period up to that date from Alex Talia, Financial Controller, in response to a request from Mr Heal for his payslips.

12    After 18 February 2022, however, Mr Heal continued not to receive his payslips, until he made a request for his outstanding payslips through his solicitor on 13 February 2023.

13    On 20 February 2023, the respondent provided Mr Heal with his outstanding payslips.

14    On 23 May 2024, following the delivery of the Principal Judgment on 19 April 2024 , the Court made a declaration in the following terms:

The respondent contravened s 536(1) of the Fair Work Act 2009 (Cth) during the period between March 2021 to January 2023 by failing to give the applicant payslips within one working day of paying him in relation to the performance of work.

B.2.     Submissions

15    Mr Heal submits that substantial penalties are necessary for the purposes of both specific and general deterrence and the penalties should be paid to him personally in accordance with the “usual order” for payment to be made to the person applying for the penalty.

16    Mr Heal submits that the contraventions gave rise to two distinct courses of conduct. The first period was from when he commenced employment with the respondent until he made a request for his outstanding payslips in February 2022. He contends that the second period was from 18 February 2022 until February 2023 (I note that for present purposes, given the terms of the declaration of contravention, the second period concluded in January 2023). He submits that the second period is factually distinct from the first period because during the second period the respondent was expressly on notice that he had not been receiving payslips but continued not to take adequate steps to ensure that he was provided with his payslips.

17    Mr Heal submits that he was prejudiced by the respondent’s failures to provide him with payslips because in the absence of payslips he was not informed of his precise entitlements, including by way of example, his entitlements to sponsorship revenue, and was left to enforce his rights by way of these proceedings.

18    Mr Heal submits that the provision of payslips to him in February 2022, and then a year later in February 2023, was not corrective action by the respondent because it was only done in response to his requests and there was no evidence that the respondent had taken any steps at those times to investigate or rectify the causes of his non-receipt of payslips.

19    Mr Heal submits that after providing a discount for the early admission of liability by the respondent for the payslips contraventions, a penalty of at least 50% of the maximum penalty of $66,600 for the first alleged course of conduct (in relation to payslips not provided in the period March 2021 to 18 February 2022) and $82,500 for the second alleged course of conduct (in relation to payslips not provided in the period 18 February 2022 to relevantly, January 2023), should be imposed in order to achieve an appropriate level of specific and general deterrence. This would lead to the imposition of an aggregate penalty of $74,550 ($33,300 + $41,250).

20    The respondent submits that the contravention arose out of a single course of conduct and that a penalty in the range of 5 to 10% of the maximum penalty ($4,125 to $8,250), less 25% for its acknowledgement and then admission of the contravention at the earliest opportunity, should be imposed for its contravention of s 536 of the FW Act.

21    The respondent submits that having regard to Ms Archibald’s evidence, the Court can infer that the contravention arose from inadvertence, which militates against any need for specific deterrence. The respondent further submits that it has taken corrective action since the contravention period, which also demonstrates the lack of any need for specific deterrence.

22    The respondent submits that there is a reduced need for general deterrence, where the contravention was inadvertent, no costs were saved by the respondent in failing to provide Mr Heal with his payslips, and Mr Heal did not suffer any loss as a result of not receiving payslips.

23    The respondent submits that the contravention commenced and largely occurred (other than with respect to one month) while a lower penalty unit of $222 applied, and that the Court should have regard to this factor when assessing penalty.

24    The respondent submits that an admission of liability indicates an acceptance of wrongdoing and a reduced risk of recurrence. It submits that it promptly admitted the contravention, and thus should be entitled to a 25% discount pursuant to the framework outlined in Fair Work Ombudsman v 85 Degrees Coffee Australia Pty Ltd [2024] FCA 576 at [58] (Bromwich J).

B.3.     Relevant principles

25    Section 546 of the FW Act provides:

(1)     The Federal Court, the Federal Circuit and Family Court of Australia (Division 2) or an eligible State or Territory court may, on application, order a person to pay a pecuniary penalty that the court considers is appropriate if the court is satisfied that the person has contravened a civil remedy provision.

Note 1: Pecuniary penalty orders cannot be made in relation to conduct that contravenes a term of a modern award, a national minimum wage order or an enterprise agreement only because of the retrospective effect of a determination (see subsections 167(3) and 298(2)).

Note 2: Pecuniary penalty orders cannot be made in relation to conduct that contravenes a term of an enterprise agreement only because of the retrospective effect of an amendment made under paragraph 227B(3)(b) (see subsection 227E(2)).

Determining amount of pecuniary penalty

(2)     Subject to this section, the pecuniary penalty must not be more than:

(a)     if the person is an individual—the maximum number of penalty units referred to in the relevant item in column 4 of the table in subsection 539(2); or

(b)     if the person is a body corporate—5 times the maximum number of penalty units referred to in the relevant item in column 4 of the table in subsection 539(2).

(2AA)     Despite paragraph (2)(b), if:

(a)     the civil remedy provision is a selected civil remedy provision; and

(b)     the person is a body corporate; and

(c)     when the application for the order is made, the person is not a small business employer;

the pecuniary penalty must not be more than 5 times the amount worked out in accordance with paragraph (2)(b).

Payment of penalty

(3)     The court may order that the pecuniary penalty, or a part of the penalty, be paid to:

(a)     the Commonwealth; or

(b)     a particular organisation; or

(c)     a particular person.

Recovery of penalty

(4)     The pecuniary penalty may be recovered as a debt due to the person to whom the penalty is payable.

No limitation on orders

(5)     To avoid doubt, a court may make a pecuniary penalty order in addition to one or more orders under section 545.

26    The principles governing the imposition of civil penalties are well established and are not in dispute.

27    For present purposes it is sufficient to provide the following summary.

28    The primary, if not sole, purpose of imposing a civil penalty is the promotion of the public interest by the deterrence of further contraventions of the FW Act: Australian Building and Construction Commissioner v Pattinson (2022) 274 CLR 450; [2022] HCA 13 at [9] (Kiefel CJ, Gageler, Keane, Gordon, Steward and Gleeson JJ); Fair Work Ombudsman v Commonwealth Bank of Australia [2024] FCA 81 at [36] (Bromwich J).

29    An appropriate penalty is one that goes no further than considered reasonably necessary to deter future contraventions “of a like kind” by the contravener and others: Pattinson at [9]-[10]; Commonwealth Bank at [36].

30    The assessment of an appropriate penalty requires regard to be had to “the conduct giving rise to the contravention, the circumstances of the contravener, and factors indicating the risk of future contraventions”: Commonwealth Bank at [36]; Pattinson at [58]-[60].

31    A list of factors informing the assessment of an appropriate penalty under the former Trade Practices Act 1974 (Cth) was set out in Trade Practices Commission v CSR Ltd [1990] ATPR 41-076; [1990] FCA 521 (French J), and was referred to in Pattinson at [18]. These factors include:

(a)    the nature and extent of the contravening conduct;

(b)    the amount of loss or damage caused;

(c)    the circumstances in which the conduct took place;

(d)    the size of the contravening company;

(e)    the deliberateness of the contravention and the period over which it extended;

(f)    whether the contravention arose out of the conduct of senior management or at a lower level;

(g)    whether the company has a corporate culture conducive to compliance with the applicable legislation, as evidenced by education programs and disciplinary or other corrective measures in response to an acknowledged contravention; and

(h)    whether the company has shown a disposition to cooperate with the authorities responsible for the enforcement of the applicable legislation in relation to the contravention.

32    As the High Court observed in Pattinson at [19], the above list of factors includes matters concerning both the character of the contravening conduct, such as (a), (b) and (c), as well as the character of the contravener, such as (d), (g) and (h).

33    The list of factors, however, should not be regarded as a “rigid catalogue of matters for attention” as if it were a legal checklist. The Court’s task is to determine what an “appropriate” penalty is, in the circumstances of the particular case: Pattinson at [19].

34    The maximum penalty for a corporation for a breach of s 536(1) of the FW Act during the contravention period was 300 penalty units: s 539(2) (item 29 of the table) and s 546(2) of the FW Act.

35    A penalty unit during the contravention period was $222 up to 31 December 2022, and subsequently $275: s 12 of the FW Act; s 4AA of the Crimes Act 1914 (Cth). Where a contravention spans two or more penalty periods, the Court will generally apply the higher penalty unit for the purpose of determining the maximum penalty, but, when assessing the penalty, take into account whether the contravening conduct had occurred during a period or periods in which the value of the penalty unit was lower: Fair Work Ombudsman v Grouped Property Services Pty Ltd (No 2) [2017] FCA 557 at [396]-[401] (Katzmann J).

36    Based on a penalty unit of $275, the maximum penalty is $82,500.

37    Section 557(1) of the FW Act provides:

(1)     For the purposes of this Part, 2 or more contraventions of a civil remedy provision referred to in subsection (2) are, subject to subsection (3), taken to constitute a single contravention if:

(a)     the contraventions are committed by the same person; and

(b)     the contraventions arose out of a course of conduct by the person.

38    The object and purpose of s 557 of the FW Act is to ensure that an offender is “not punished twice for what is essentially the same criminality”: Rocky Holdings Pty Ltd v Fair Work Ombudsman (2014) 221 FCR 153; [2014] FCAFC 62 at [18] (North, Flick and Jagot JJ).

39    The power conferred by s 546(3) of the FW Act is ordinarily exercised by awarding any penalty to the successful applicant: Sayed v Construction, Forestry, Mining and Energy Union (2016) 239 FCR 336; [2016] FCAFC 4 at [101] (Tracey, Barker and Katzmann JJ); PIA Mortgage Services Pty Ltd v King (2020) 274 FCR 225; [2020] FCAFC 15 at [63] (Rangiah and Charlesworth JJ).

B.4.     Consideration

40    Timely provision of payslips is a fundamental employee entitlement. The failure to provide payslips to Mr Heal in both the period from March 2021 to 18 February 2022 and then again in the period from 18 February 2022 to January 2023 establishes a serious deficiency in the payroll procedures and systems of the respondent.

41    Contrary to Mr Heal’s submissions, in my view the failure to provide payslips in the two periods arose out of a single course of conduct, being a failure that was due to not having in place a sufficiently robust and reliable payroll system and procedures to ensure that Mr Heal was provided with his payslips within the time frames specified in s 536(1) of the FW Act. I accept that the applicant’s knowledge during the period from 18 February 2022 to January 2023 that Mr Heal had not received payslips between March 2021 and 18 February 2022 made its failure to take further steps to ensure that Mr Heal received payslips after 18 February 2022 more serious. That knowledge did not, however, change the fundamental nature of the contravention, it remained a failure to provide payslips to Mr Heal, which arose out of the same underlying set of factual circumstances described in [4343] below.

42    For the reasons that follow, I am satisfied that a penalty of $5,000, after discounting the penalty for the early admission of liability, is a sufficient penalty to achieve both specific and general deterrence.

43    First, the contravention was inadvertent. I accept the explanation provided by Ms Archibald that the failure to provide payslips to Mr Heal arose out of the use of an incorrect email address for Mr Heal. The email entered in the respondent’s automated payroll system for Mr Heal was shaneheal@gmail.com, not the correct email address, shaneheal1@gmail.com. The similarity of the two email addresses and the error of failing to insert a “1” next to a “l” provides an objective explanation of how easily the error might have been made inadvertently.

44    Second, the contravention by the respondent was a failure to provide payslips to only one employee.

45    Third, there is a reduced need for specific and general deterrence given that (a) payslips were always created for Mr Heal, (b) they were promptly provided on request to Mr Heal in February 2022 and February 2023, (c) no costs were saved by the respondent in otherwise failing to provide the payslips to Mr Heal, and (d) Mr Heal has not suffered any economic loss.

46    Nor am I persuaded that any delay in the provision of payslips had any bearing on the need for Mr Heal to litigate his contractual claims for sponsorship commission. Mr Heal gave evidence at the substantive hearing of the proceedings that he was aware of his contractual entitlement to sponsorship income and acknowledged he had made no request for any payment prior to the commencement of proceedings, in the case of the Workplace Law sponsorship (relevant for FY22/23) because “[w]ell, it wouldn’t mean I wouldn’t claim it at the end of the financial year” and in the case of the Architectural Signs sponsorship (relevant for FY21/22) because of “bad accountancy”.

47    Fourth, the respondent has taken corrective action. It has introduced a new payroll management system which not only notifies employees of when they receive a payslip through an associated app but also sends an email to each employee attaching their payslip. This reduces the need for specific deterrence.

48    Fifth, the respondent made an early admission of liability. An admission of liability is an indication of an acceptance of wrongdoing and thereby reduces the risk of recurrence and reduces the need for specific deterrence: 85 Degrees Coffee at [53]. Had it not been for the early admission of liability by the respondent, I would have imposed a penalty in the order of $7,500 in order to achieve sufficient specific deterrence.

49    I am also satisfied that, consistent with the usual practice, the penalty of $5,000 should be paid to Mr Heal.

C.     Respondent’s Application for costs

C.1.     Overview

50    The principal claims advanced by Mr Heal in the proceedings were his general protection claims. These claims were based on the exercise of alleged “Initial Workplace Rights” that Mr Heal contended gave rise to the “Initial Adverse Actions” and together with the exercise of the alleged “Further Workplace Rights”, also gave rise to the “Further Adverse Actions”.

C.2.     Submissions

51    The respondent seeks a costs order against Mr Heal on the basis that each of the alleged Initial Workplace Rights was not, even on Mr Heal’s evidence, capable of amounting to the exercise of a workplace right for the purposes of s 341(1)(c) of the FW Act. The Initial Workplace Rights comprised the “Alleged Playing Schedule Complaint”, the “Alleged Jackie Young Complaint”, the “Alleged Meg Jeffers Complaint” and the “Alleged Victoria Denholm Complaint”.

52    The respondent submits that it was no part of Mr Heal’s case that he used the word “complaint” or any similar term or that he sought any redress.

53    Further, the respondent submits that the Alleged Playing Schedule Complaint and the Alleged Jackie Young Complaint concerned events that occurred substantially earlier than the suspension decision alleged to be included in the Initial Adverse Actions, and the Alleged Meg Jeffers Complaint was “an incidental conversation about a fringe player”.

54    Alternatively, the respondent submits that once Mr Heal was served with the respondent’s evidence-in-chief, it was unreasonable for him to continue his claim that each of the Initial Workplace Rights involved the exercise of a workplace right and was an operative reason for his suspension or the subsequent alleged adverse actions.

55    The respondent submits that the analysis undertaken by Mr Davis in his affidavit shows that approximately 30% of its affidavit evidence and written submissions were devoted specifically to the Initial Workplace Rights and whether they were operative reasons for Mr Heal’s suspension.

56    In addition to the claim for costs with respect to the claims based on whether the Initial Workplace Rights were operative reasons for Mr Heal’s suspension, the respondent submits that further specific acts or omissions of Mr Heal, each of which was maintained up to and in final submissions, were unreasonable and caused it to incur further costs (Additional Unreasonable Conduct).

57    The respondent relies on the estimate made by Mr Davis in his affidavit that the costs that it incurred by reason of the Additional Unreasonable Conduct represented 10% of its total costs.

58    The respondent submits that a costs order should therefore be made that the applicant is to pay 40% of its costs incurred after 31 March 2023 (being the date of service of the statement of claim) up to and including the hearing on 7 August 2023, as agreed or assessed. The order is only sought from the service of the statement of claim on the basis that the proceedings were commenced on an urgent basis and the unreasonableness of the reliance on the claims based on the Initial Workplace Rights may not initially have been apparent to Mr Heal.

59    Mr Heal submits that the matters raised by the respondent do not enliven the s 570(2) discretion, and in any event, the discretion should not be exercised in the circumstances.

60    Mr Heal submits that he had a genuine belief that was honestly held that the reason for his suspension was because of his exercise of the Initial Workplace Rights, and that he had the benefit of the statutory presumption in s 361 of the FW Act. He submits that it is not reasonable to place on him the expectation that he should have known that the factual detail of his evidence would bear shortcomings when applying the law of what constitutes a “complaint” within the meaning of the FW Act, such that he would fall short in establishing that a workplace right had been exercised.

61    Mr Heal submits that it was not unreasonable for him to have maintained the Initial Workplace Rights claims following the receipt of the respondent’s evidence, because (a) there plainly existed a conflict and tension between accounts given by witnesses for the respective parties, (b) the intent or operative reasons behind Mr Heal’s suspension called for an inquiry into the mental processes of the person responsible for that action, which in turn required cross examination of the respondent’s witnesses, (c) the question of whether there existed the exercise of a workplace right includes the consideration of what constitutes a “complaint” and “redress”, involved questions of law, or mixed questions of law and fact, which were arguable, and (d) it could not be said that it was “clear” that Mr Heal’s claims would fail, where there existed a genuine controversy in relation to each of the claims.

62    Mr Heal submits that each element of the Additional Unreasonable Conduct, at its highest, are the type of matters giving rise to mere “inefficiency” which do not rise to the higher standard of unreasonableness to be adopted for the purpose of s 570(2)(b) of the FW Act.

C.3.     Relevant principles

63    Section 570 of the FW Act 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.

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

(2)     The party may be ordered to pay the costs only if:

(a)     the court is satisfied that the party instituted the proceedings vexatiously or without reasonable cause; or

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

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

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

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

64    The discretion conferred by the confined terms of s 570(2) of the FW Act should be exercised cautiously, and the case for its exercise should be clear: Ryan v Primesafe (2015) 323 ALR 107; [2015] FCA 8 at [64] (Mortimer J). As her Honour explained:

The reason for caution is the potential for discouraging parties’ pursuit in a complete and robust way of the claims for contravention which they seek to make under the Fair Work Act, or the defence of such claims. The policy behind s 570 is to ensure that the spectre of costs being awarded if a claim is unsuccessful does not loom so large in the mind of potential applicants (in particular, in my opinion) that those with genuine grievances and an arguable evidentiary and legal basis for them are put off commencing or continuing proceedings. It is an access to justice provision. In so far as it operates to the benefit of respondents, it is designed to ensure respondents feel free to pursue arguable legal and factual responses to the claims made against them.

65    None of the above propositions, however, deny the Court’s ability to find that the preconditions in s 570(2) exist, where the factual circumstances warrant it. The legislative policy behind s 570 is not inconsistent with the requirements for proceedings to be conducted reasonably, fairly and efficiently: Ryan at [65].

66    As Mortimer J stated at [66]:

Section 570, and the conditions it imposes on the Court’s general costs discretion under s 43 of the Federal Court Act, is not a licence to parties to ignore the requirements of s 37M of the Federal Court Act, nor the Court’s power to order costs against parties who fail to comply with their obligations under s 37N. The content of ss 37M and 37N, and parties’ obligations to assist the Court in achieving the objectives set out in s 37M, must be reconciled with access to justice provisions such as s 570(1). That reconciliation occurs through a focus on the reasonableness of parties’ conduct, the appropriateness of the Court processes undertaken by them, the timeliness of their compliance with Court orders or steps in the proceeding, and the existence of a substantive legal and factual basis for the claims made and arguments put.

67    In Ryan, Mortimer J agreed with a submission made by the third respondent, a solicitor of the first respondent, that his joinder to the proceeding was “manifestly inappropriate and entirely unreasonable” and was without a sufficient factual or legal foundation. Her Honour stated that this was sufficient to justify a costs order against the applicant’s solicitor, once the inappropriateness of the claim was brought to his attention. Her Honour concluded that it was the applicant’s solicitor rather than the applicant that should bear the costs, as the applicant had an “understandable impression” that the third respondent had a role in his employment coming to an end: Ryan at [74]-[75].

68    The protection offered by s 570(2) of the FW Act is such that a person will rarely be ordered to pay the costs of a proceeding, however, it is not necessary to prove that there are exceptional circumstances warranting the making of an order: Spotless Services Australia Limited v The Hon Senior Deputy President Jeanette Marsh [2004] FCAFC 155 at [12]-[13] (Wilcox, Marshall and Jacobson JJ); Australian Workers Union v Leighton Contractors Pty Limited (No 2) [2013] FCAFC 23 at [7] (Dowsett, McKerracher and Katzmann JJ).

69    In considering whether a proceeding has been instituted “without reasonable cause”, there is a distinction between the pursuit of an argument which does not succeed, and the institution of a proceeding which is misconceived in the sense of being incompetent. This distinction may assist in determining whether conduct is unreasonable for the purposes of s 570(2)(b). The prosecution of an incompetent or hopeless case can be regarded as an unreasonable act. Conversely, the pursuit of a contentious, and ultimately unsuccessful argument is not an unreasonable act: Australian and International Pilots Association v Qantas Airways (No 3) (2007) 162 FCR 392; [2007] FCA 879 at [36] (Tracey J).

70    It is well established that a failure to accept a reasonable offer of compromise may constitute an unreasonable act or omission for the purposes of s 570(2)(b): Howard v Merdaval Pty Ltd t/as North Essendon Auto Spares) (No 2) [2020] FCA 1762 at [7] (O’Callaghan J); Peters v Commonwealth of Australia (No 2) [2022] FCA 135 at [28] (Anderson J); Cultural Office of Embassy of State of Kuwait v Solima [2022] FCA 692 at [43] (Thawley J).

71    The following further principles can be distilled from applications for costs that have been made under s 570(2)(b), noting however, that each application must be understood in its own context with respect to the specific circumstances in which it arose:

(a)    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; neither the late abandonment by a respondent 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”: Construction, Forestry, Mining and Energy Union v Clarke (2008) 170 FCR 574; [2008] FCAFC 143 at [29]-[30] (Tamberlin, Gyles and Gilmour JJ);

(b)    if a claim has not been shown to be brought without reasonable cause so as to fall within s 570(2)(a), an alternative claim for a costs order under s 570(2)(b) needs to point to the act relied upon being in itself inherently unreasonable in some way; the filing of evidence in the ordinary way in relation to a claim that has not been shown to be brought without reasonable cause, albeit one that was abandoned, does not render the filing of that evidence an unreasonable act: Tran v Kodari Securities Pty Ltd (No 2) [2020] FCA 1819 at [27] (Bromwich J);

(c)    an appellants’ late withdrawal of contentions does not amount to an unreasonable act or omission in circumstances where a respondent did not suggest that the withdrawn contentions were speculative or foredoomed to failure, or that the appellants deliberately or carelessly delayed their withdrawal; it is only when regard is had in combination, to both the timing of the withdrawal and the quality of the withdrawn contention and the circumstances in which the withdrawal was effected that it is possible to determine whether a particular withdrawal trespasses into the realm of unreasonableness: PIA Mortgage Services Pty Ltd v King (No 2) [2020] FCAFC 53 at [14]-[17] (Rangiah, Charlesworth and Snaden JJ);

(d)    an application for costs on the basis that it is unreasonable for an applicant to raise an argument that was abandoned three days before a hearing may be refused on the basis that the factual basis for the argument was the same as an argument concerning whether the first respondent was an employee or an independent contractor, and it would therefore be difficult to assess the “additional” costs caused by the argument: EFEX Group Pty Ltd v Bennett (No 2) [2023] FCA 798 at [8] (Besanko J);

(e)    the maintenance of an unmeritorious appeal may be held to be an unreasonable act which caused the respondent to incur costs in circumstances where an appellant is required to persuade a Full Court that a primary judge’s findings are contrary to incontrovertible facts, uncontradicted testimony or were glaringly improbable, and the matters relied upon in the notice of appeal are not capable of doing so: Dahdah v Platinum Distributors Australia Pty Ltd (Costs) [2023] FCAFC 102 at [19] (Rangiah, Goodman and McElwaine JJ);

(f)    an assertion that the continued prosecution of a hopeless class is unreasonable may not be accepted where there is an arguable evidentiary and legal basis for the allegations, the claim is not self-evidently doomed to fail, or where it is not clear on the applicant’s version of the facts that it must fail: Australian Rail, Tram and Bus Industry Union v Railway Employment Co Pty Ltd (2015) 237 FCR 290; [2015] FCA 710 at [34] (Bromberg J);

(g)    the lack of precision in the identification of issues to be resolved does not constitute an unreasonable act or omission: Fair Work Ombudsman v Hu (No 2) [2019] FCAFC 175 at [9] (Flick, Reeves and Bromberg JJ);

(h)    the refusal to produce an expert report, until shortly prior to the hearing of an interlocutory application seeking production, may not be an unreasonable act or omission where the applicant has a “reasonable argument” that it was not relevant to the proceeding, however, where the same position is taken with respect to documents with “a clear case for production”, the late production may constitute an unreasonable act: Sivwright v St Ives Group Pty Ltd [2022] FCA 136 at [26], [32]-[33] (Jackson J);

(i)    a failure to respond to correspondence from an opposing solicitor with respect to a failure to file an amended statement of claim in accordance with a time specified in court orders is “far from ideal”, “regrettable” and “unsatisfactory”, but is not conduct that amounts to unreasonableness within the meaning of s 570(2)(b), as unreasonableness is not established by inefficiency in the conduct of litigation: Tablot v Tesolin Consulting Pty Ltd t/as Ray White Quakers Hill [2023] FCA 925 at [38]-[42] (Goodman J);

(j)    the failure by a party to attend a Court ordered mediation may constitute an unreasonable act or omission causing the other party to incur costs: Rossetti v Aus Gold Mining Group Pty Ltd [2018] FCA 1649 at [14] (Burley J); and

(k)    the “withdrawal” from a matter following an unsuccessful mediation, where the respondent did not do the usual things by way of defence of the proceedings, such as not communicating with the applicant or the court, not filing or serving any submissions, not attending the hearing and not otherwise pursuing its defence, may be considered to be unreasonable, but the Court must also be satisfied that costs incurred by an applicant in prosecuting his case were costs incurred because of the respondent’s unreasonable conduct: Payne v Secure Melbourne Protective Services Pty Ltd (No 2) [2023] FCA 1579 at [7]-[13] (Snaden J).

C.4.     Consideration

C.4.1.    Initial Workplace Rights

72    I am not satisfied that the respondent has established an entitlement to costs with respect to the costs that it incurred in responding to the Initial Workplace Rights claims on either its primary or alternative contentions.

73    I address first, the respondent’s primary contention.

74    The respondent’s application for costs with respect to the alleged Initial Workplace Rights claims raises for consideration the interrelationship between s 570(2)(a) and s 570(2)(b) of the FW Act.

75    The exception to the general no costs rule in s 570(2)(a) is engaged where the Court is satisfied that the proceedings were instituted by a party vexatiously or without reasonable cause. It can only apply against an applicant (or a cross-claimant). The respondent does not seek to rely on this exception. It is no part of the respondent’s claim for costs that Mr Heal acted vexatiously or instituted the proceedings, including the allegations based on the exercise of the alleged Initial Workplace Rights, without reasonable cause.

76    Rather, the respondent relies only on the exception to the general no costs rule in s 570(2)(b). That exception is engaged if the Court is satisfied that a party’s “unreasonable act or omission” caused the other party to incur costs. It can be applied against both an applicant and a respondent (and a party to a cross claim).

77    In circumstances where a respondent has succeeded on s 570(2)(a) on the basis that a proceeding was commenced without reasonable cause or vexatiously, the Court has readily accepted that the maintenance of the proceeding also constitutes an unreasonable act or omission for the purposes of s 570(2)(b): Dahdah at [13], [19], [28].

78    The respondent in its application for costs with respect to the alleged Initial Workplace Rights claims is making an allegation that the maintenance of those claims was an unreasonable act or omission, but is not submitting that Mr Heal instituted the proceedings without reasonable cause. I accept that the respondent could not rely on s 570(2)(a), given its forensic decisions to seek costs only from the filing of the statement of claim, rather than the commencement of the proceedings, and not to seek its costs with respect to the Further Workplace Rights claims.

79    Nevertheless, the basis on which the respondent seeks to enliven s 570(2)(b) is to demonstrate that the Initial Workplace Rights claims were “not capable of amounting to an exercise of a workplace right for the purposes of s 341(1)(c) of the FW Act”. The respondent submits that the Court can reach that conclusion in circumstances where it has not accepted those claims on the basis of Mr Heal’s own evidence and other deficiencies in the claims, including the absence of any allegation that Mr Heal used the word “complaint” or a similar term and the lack of temporal connections between alleged complaints and alleged adverse action.

80    Hence, unlike the claim for costs referrable to the Unreasonable Additional Conduct, the unreasonable acts or omissions with respect to the Initial Workplace Rights claims are, in effect, taking steps in the proceedings to pursue those claims. Significantly, the matters relied upon by the respondent in support of its primary claim for costs are all matters alleged to have been known to Mr Heal at the time that the statement of claim was filed, it is not a case in which a party is made aware of new information or material after the commencement of the proceedings that causes the continued pursuit of the claim to be unreasonable. I do not accept that merely taking steps to pursue a claim that is not otherwise found to have been commenced without reasonable cause or vexatiously, can, without more, constitute unreasonable acts or omissions for the purposes of s 570(2)(b) of the FW Act. As Tracey J explained in Qantas Airways, the prosecution of an incompetent or hopeless case may be regarded as an unreasonable act, but the pursuit of a contentious, and ultimately unsuccessful argument is not an unreasonable act: Qantas Airways at [36].

81    Further, while the findings I made with respect to the Initial Workplace Rights claims that are relied upon by the respondent are made in circumstances where I largely accepted Mr Heal’s evidence, ultimately the question of whether the alleged rights being exercised were workplace rights for the purposes of s 341(1)(c) of the FW Act and whether the Initial Adverse Actions constituted adverse action under s 342(1) of the FW Act, were legal questions. Each necessarily involved a characterisation by the Court of evidence of conversations and other communications between Mr Heal and employees or officers of the respondent, the content of which was largely admitted. The factual or legal basis for the claims may have been weak and problematic but this was not a case in which the claims were advanced without any factual or legal basis. The “smoke screen” case theory was always going to be difficult to establish, but it was not a theory that was fanciful or purely speculative. Significant tensions had emerged between Mr Heal and the senior management of the respondent with respect to the Team’s schedule, the recruitment of players and the performance of the Team. The investigation of the players’ complaints had proceeded at a very rapid pace and the potential witnesses that Mr Heal had nominated had not been interviewed or contacted by the independent investigator.

82    An additional difficulty with the claim for costs with respect to the Initial Workplace Rights claims is the means by which those costs can be quantified in circumstances where the exercise of the Initial Workplace Rights was also relied upon by Mr Heal as the reason, together with the exercise of the Further Workplace Rights, for the Further Adverse Actions. Moreover, the 30% estimate made by Mr Davis in his affidavit is based on counting the number of paragraphs in the primary judgment, affidavits and written submissions alleged to be devoted to each of the Initial Workplace Rights claims, Mr Heal’s suspension and other Initial Adverse Actions. Paragraphs are notoriously of different lengths and often do not have any discernible correlation to the amount of time spent in their preparation. Legal costs incurred in preparing affidavits and written submissions, however, are typically incurred by reference to the time spent on the task in recognition of the artificiality of simply adding up lines of text. Further, the number of paragraphs devoted to an issue in a judgment is a very imprecise guide to its relative significance.

83    The respondent’s alternative contention proceeds on the flawed premise that it was unreasonable for Mr Heal to continue with the Initial Workplace Rights after he was served with the respondent’s evidence in chief. It is alleged that after being served with that evidence Mr Heal became aware that (a) each of Paul Smith, Robyn Denholm and Victoria Denholm denied knowing, prior to Mr Heal’s suspension, of his alleged exercise of the Initial Workplace Rights and he had no basis to challenge that evidence, (b) the scope and extent of the allegations made by the players against him, and (c) the respondent’s management team had given sworn evidence that they suspended him because of the players’ complaints and his only chance to succeed was to make good his “elaborate and inherently implausible” theory that the players’ complaints had been used as a smoke screen to suspend him.

84    I do not accept that the decision by Mr Heal to continue with the Initial Workplace Rights claims, after being served with the respondent’s evidence in chief, was an unreasonable act or omission for the purposes of s 570(2)(b) of the FW Act. The case theory underpinning Mr Heal’s claims with respect to his alleged exercise of the Initial Workplace Rights was that the players’ complaints had been used by the respondent’s management as a “smoke screen” to suspend him. Whether that theory could be made good would ultimately turn on whether the Court was prepared to accept the various denials of Mr Smith, Robyn Denholm and Victoria Denholm and their evidence as to the reasons for suspending Mr heal and taking the other Adverse Actions . That would necessarily involve an assessment of their credibility and the weight to be given to their evidence by reference to the apparent logic of events and the extent to which it was corroborated by contemporaneous documents.

85    Further, and in any event, the respondent did not adduce any evidence of the quantum of its costs that it had incurred in responding to the Initial Workplace Rights claims, after it had served its evidence in chief on Mr Heal.

C.4.2.    Additional Unreasonable Conduct

86    In my view, the Additional Unreasonable Conduct relied upon by the respondent does not amount to unreasonable conduct that would engage the exception to the general no costs rule in s 570(2)(b) of the FW Act.

87    The Additional Unreasonable Conduct is alleged by the respondent to comprise Mr Heal’s effective abandonment in final submissions of his pleaded allegation of a breach of reg 3.42(1) of the Fair Work Regulations 2009 (Cth) (failure to provide employment records) and an allegation for the first time of a breach of reg 3.42(3) (failure to provide employment records on time) and the following acts or omissions of Mr Heal:

(a)    The alleged Fourth Adverse Action (alleged failure to address Victoria Denholm’s behaviour and thus provide Mr Heal with a safe workplace) was “inherently problematic” (J, [173]).

(b)    The alleged First, Second and Third Adverse Actions were all in reality (and should always have been pleaded as) a single instance of adverse action (J, [175], [176]).

(c)    The alleged Fifth Adverse Action, as Mr Heal was informed by the Defence and in correspondence, did not involve any identified conduct of Sydney Flames and was evasive, ambiguous and likely to cause embarassment (J, [239], [240]).

(d)    The Seventh Adverse Action was either the same as the Sixth (as the Court treated it (J, [250])), or was evasive, ambiguous and likely to cause embarassment.

(e)    In his reply evidence, Mr Heal raised as a new matter the response of Sydney Flames to a “fundamentally different” (J, [209]) allegation made by Shyla Heal, causing Sydney Flames to have to file further affidavits.

(f)    Despite repeated requests for particulars, Mr Heal never ‘unbundled’ his pleaded allegations of adverse action taken because of his alleged exercises of workplace rights, meaning that Sydney Flames’ evidence and submissions had to deal with all alleged workplace rights in respect of each pleaded adverse action.

(Footnotes omitted.)

88    My finding that the claim made by Mr Heal arising from his conversation with Victoria Denholm after the Team’s loss in Perth, of an alleged failure to provide him with a safe workplace (paragraph (a) above) was problematic does not carry with it any necessary conclusion that it was a claim that was unreasonable. It must be acknowledged that the absence of any request by Mr Heal for specific steps to be taken to protect him from Victoria Denholm and Mr Heal’s concessions that he did not feel unsafe or physically threatened by her were significant matters telling against his claim. Nevertheless, there was at the very least, a pointed observation made to Mr Heal about the Team’s performance by a person in a position of considerable power, given the Denholm’s significant financial interest in the respondent. The lack of a safe workplace complaint was always directed not at Mr Heal’s physical security, but rather at the security of his tenure as Head Coach of the Team. In my view, the claim cannot be characterised as hopeless, incompetent or otherwise cross the threshold to constitute unreasonableness for the purposes of s 570(2)(b).

89    Four of the matters relied upon by respondent, are largely no more than criticisms of the manner in which Mr Heal pleaded or particularised his causes of action (paragraphs (b), (c), (d) and (f) above). At most, they could be said to be contentions that Mr Heal was pursuing claims in a manner that was “imprecise”, “inefficient”, “far from ideal”, “regrettable” or “unsatisfactory”, but it is not conduct that could reasonably be characterised as “unreasonable” for the purposes of s 570(2)(b).

90    The raising of a “fundamentally different” matter, being allegations about the different approach taken by the respondent to complaints that Shyla Heal made, requiring the filing of further affidavits (paragraph (e) above), may well have been thought to be of marginal relevance to the establishment of the “smoke screen” theory. It was not a matter, however, that could be dismissed as fanciful, vexatious, or unreasonable. Its relevance ultimately turned on my assessment of the degree of similarity between the players’ complaints against Mr Heal and Shyla Heal’s complaints against Mr Fuller.

91    The question of whether the late pursuit of a claim (in this case a delay in the provision of employment records), falls outside a pleaded case is often contestable. I am satisfied that was the case here given the apparent relationship between an existing claim, the failure to provide employment records, and the new claim, a failure to provide employment records within prescribed time periods. The late withdrawal of a claim that the respondent failed to provide employment records, may well in proceedings not brought under the FW Act have led to an order for costs thrown away. I am not persuaded, however, that it constituted unreasonable conduct for the purposes of s 570(2)(b), as a matter of impression and degree, as explained by Rangiah, Charlesworth and Snaden JJ in a similar context in PIA Mortgage Services at [14]-[17]. Further and in any event, these issues occupied a relatively insignificant proportion of the hearing. They were at best, incidental and peripheral claims that had no bearing on the substantive general protection claims advanced by Mr Heal.

92    Moreover, and in any event, the respondent has not adduced any evidence to support its contention that an appropriate global estimate of its costs incurred in responding to the Additional Unreasonable Conduct was 10% of its total costs incurred in defending the proceedings. I accept that the task of quantifying the costs incurred by the respondent in responding to the Additional Unreasonable Conduct would be inherently problematic but in large part this is driven by the granularity with which it has been identified. Costs often have to be assessed with a broad brush but there is a limit to the width of the judicial broad brush, particularly in circumstances when that broad brush is being applied in a context that is generally exempt from its application.

D.     Disposition

93    For the foregoing reasons, a civil penalty of $5,000 is to be imposed on the respondent for failing to provide payslips to Mr Heal, and the application by the respondent for Mr Heal to pay 40% of its costs of the proceedings is to be dismissed.

94    The parties will be given an opportunity to make submissions with respect to any application by the respondent for its costs thrown away by Mr Heal’s late withdrawal of his application for costs in relation to the breach of contract claims.

Associate:

Dated:    19 July 2024