Federal Court of Australia

Mount v Dover Castle Metals Pty Ltd (Costs) [2025] FCA 402

ORDERS

THE COURT ORDERS THAT:

1.    The respondents’ interlocutory application filed on 13 March 2025 be dismissed.

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

REASONS FOR JUDGMENT

KATZMANN J

1    Ryan Mount was summarily dismissed from his employment with Dover Castle Metals Ltd (DCM) three weeks into a 12-month fixed term contract. In his originating application and supporting statement of claim he alleged that DCM was in breach of his contract in doing so and he made numerous allegations against DCM of contraventions of the general protection provisions in Pt 3-1 of the Fair Work Act 2009 (Cth) (FW Act) and the whistleblower protection provisions in Pt 9.4AAA of the Corporations Act 2001 (Cth). He sought compensation under both the FW Act and the Corporations Act, the latter under ss 1317AD and 1317AE(1), declarations that DCM and its directors (collectively “the respondents”) had contravened s 340 of the FW Act and ss 1317AAE and 1317AC of the Corporations Act, and civil penalties for contraventions of the FW Act. Mr Mount abandoned his claims under the FW Act and by an amended originating application, filed a month before the commencement of the trial, the relief sought in respect of those claims was removed and claims for exemplary damages and pecuniary penalties under s 1317G of the Corporations Act were added.

2    All the claims under the Corporations Act were dismissed. With respect to the alleged contraventions of s 1317AAE or 1317AC, I held that Mr Mount did not have standing to seek compensation or pecuniary penalties. In any event, I was not satisfied that the respondents had engaged in the conduct complained of. With respect to the claims under ss 1317AD and 1317AE(1), I was satisfied that DCM and Mr Tucker had discharged their respective onus of proof. While Mr Mount managed to prove that DCM were not entitled to summarily dismiss him, he failed to prove that he had suffered any loss on that account as the income he had earned after he was dismissed exceeded the amount he would have earned with DCM had he remained in its employ for the full term of his contract. In the result his application was dismissed: Mount v Dover Castle Metals Pty Ltd [2025] FCA 191 (the principal judgment or “PJ”).

3    In a case of this nature there are limited circumstances in which a party may recover costs. In their closing submissions the respondents foreshadowed an application for costs if they were successful. I therefore reserved the question of costs, to be determined on the papers, and made orders timetabling the filing of any application, supporting affidavits and submissions.

4    The respondents’ interlocutory application was filed on 13 March 2025. It seeks orders that Mr Mount pay its costs on an indemnity or, in the alternative, a party and party basis on and from 26 July 2022, 16 August 2023, 8 March 2024 or such other date as the Court thinks just under s 43 of the Federal Court of Australia Act 1976 (Cth) (FCA Act) and either s 570(2)(b) of the FW Act or s 1317AH(3)(b) of the Corporations Act. The application was supported by an affidavit of the same date sworn by the respondents’ solicitor, Paul Almond, to which some 50 pages of documents were exhibited.

5    This judgment is concerned with that application. Familiarity with the principal judgment is assumed.

The stay application

6    Mr Mount has filed an appeal from the principal judgment. In his submissions he contended that for two reasons any order that he pay costs would prejudice him and the appeal. The first reason was that the costs paid pursuant to the order may not be recoverable if the appeal were to succeed having regard to the respondents’ financial position. But there is no evidence of the respondents’ current financial position. The second reason was that Mr Mount “will face financial prejudice in circumstances where he is required to attend to the ongoing Appeal proceedings”. But that is generally the case for any disaffected litigant who lodges an appeal. In his submissions Mr Mount sought an order staying the respondents’ application until the determination of the appeal and, in the alternative, a stay on enforcement of any costs order the Court is minded to make until the determination of the appeal. It appeared that, on reading Mr Mount’s submissions, the respondents were concerned about the absence of any formal application for a stay and the lack of evidence to support an order for a stay so the parties agreed on orders that would enable Mr Mount to file an application and any affidavit(s) in support with provision for evidence in response. As that course would only generate more costs, I informed the parties that I would dispense with the need to file an application, that I was not inclined to grant Mr Mount a stay of the respondents’ application, but that I was inclined to stay the enforcement of any costs order I might make. The parties informed the Court that they were content with that course.

7    I am not disposed to make an order staying the respondents’ application. The usual course is for the trial judge to determine costs. If the trial judge chooses not to do so, the appellate court may determine the costs or it may remit the question of the costs of the trial to the trial judge. If I were to order that the respondents’ application be stayed and the appeal were dismissed, that would mean that the appellate court itself would have to decide the question of the costs of the trial or it would have to remit the question to another judge as I will retire before the appeal is heard, let alone determined. In my opinion neither of those options is desirable. Rather, the preferable course is that I decide the respondents’ application and, if I decide it in the respondents’ favour, stay the enforcement of the order until the determination of the appeal. That is what I intend to do.

The applicable law

8    Section 43(1) of the FCA Act gives the Court jurisdiction to award costs in any proceedings other than proceedings in respect of which the Act or any other Act provides that costs must not be awarded, subject (relevantly) to s 570 of the FW Act. Except as provided by any other Act, the award of costs is in the discretion of the Court: FCA Act, s 43(2).

9    Section 570(1) of the FW Act relevantly provides that a party to court proceedings in relation to a matter arising under the Act may be ordered to pay costs incurred by another party to the proceedings only in accordance with subs (2). Section 1317AH(2) of the Corporations Act imposes a similar restriction on the power to order that a claimant pay costs incurred by another party to court proceedings in relation to a matter arising under s 1317AE in which a claim is made for an order under s 1317AE(1). Section 570(2) lists three alternative conditions for such an order, s 1317AH(3) lists two, which correspond to the first two alternatives in s 570(2). They are that the court is satisfied that the party against whom the order is sought instituted the proceedings vexatiously or without reasonable cause, or that the party’s unreasonable act or omission caused the other party to incur the costs.

10    Section 570(2)(b) of the FW Act and s 1317AH(3)(b) of the Corporations Act, upon which DCM relies, imposes the second alternative condition.

11    The respondents accept that these provisions apply to Mr Mount’s entire case, including his common law claim for breach of contract, which reflects the position under the FW Act: see Melbourne Stadiums Ltd v Sautner (2015) 229 FCR 221 (Tracey, Gilmour, Jagot and Beach JJ at [157], White J agreeing at [173]).

12    Provided one of the conditions is satisfied, the power to make a costs order is in the discretion of the Court: Ashby v Slipper (No 2) [2014] FCAFC 67; 314 ALR 84; 144 ALD 10 at [7] (Mansfield, Siopis and Gilmour JJ).

13    Speaking of s 570 of the FW Act, Burley J observed in Salama v Sydney Trains (No 2) [2021] FCA 1200 at [11] that:

[The section] reflects a [policy] choice on the part of the legislature that costs should not ordinarily follow the event, but rather that they should ordinarily be borne by the party incurring them: Commonwealth of Australia v Construction, Forestry, Mining and Energy Union [2003] FCAFC 115; 129 FCR 271 at [10] (Black CJ, Tamberlin and Sundberg JJ); Augusta Ventures Ltd v Mt Arthur Coal Pty Ltd [2020] FCAFC 194 at [102] (White J, with whom Middleton J agreed at [89]). It has been said that the policy ensures 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) that those with genuine grievances and an arguable evidentiary and legal basis for them are put off commencing or continuing proceedings: Ryan v Primesafe [2015] FCA 8; 323 ALR 107 at [64] (Mortimer J); Trustee for The MTGI Trust v Johnston (No 2) [2016] FCAFC 190 at [8] (Siopis, Collier and Katzmann JJ). The discretion must be exercised with caution because of the exceptional nature of the power in an otherwise no-costs jurisdiction, and a case for its exercise should be clearly demonstrated: Saxena v PPF Asset Management Ltd [2011] FCA 395 at [6] (Bromberg J). That is because, absent caution, there is a potential to discourage parties in the complete and robust pursuit of claims for contravention of the FW Act. Accordingly, a person will rarely be ordered to pay the costs of the proceedings. However, it is not necessary to prove that there are exceptional circumstances warranting the making of an order: Celand v Skycity Adelaide Pty Ltd [2017] FCAFC 222; 256 FCR 306 at [74] (Logan J, Bromberg J agreeing at [161], Charlesworth J in dissent on the question of costs); Australian Workers Union v Leighton Contractors Pty Ltd (No 2) [2013] FCAFC 23; 232 FCR 428 at [7] (Dowsett, McKerracher and Katzmann JJ).

14    In Ryan v Primesafe at [64], in a passage endorsed by the Full Court in MTGI Trust, Mortimer J observed:

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. Insofar 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.

15    These considerations apply equally to the exercise of the power to award costs in proceedings to which s 1317AH applies. Section 1317AH was among the suite of provisions added to Pt 9.4AAA of the Corporations Act in 2019. Its purpose was to ensure that whistleblowers or others seeking remedies under that Act for victimisation were not deterred from bringing proceedings by the prospect of adverse costs orders: Explanatory Memorandum to the Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2017 at [2.20], [2.115]-[2.116]. In Quinlan v ERM Power Ltd (No 2) [2021] QSC 51; 7 QR 406, the first judicial consideration of s 1317AH, Bowskill J, as the Chief Justice then was, drew on some of the authorities on s 570 (and its predecessor, s 824 of the Workplace Relations Act 1996 (Cth) (WR Act)) to make the following observations (at [7]). First, whether a party has conducted itself so as to enliven the power will depend on the particular circumstances of the case. Second, as to unreasonableness, “there is a distinction between a party who pursues arguments which are ultimately abandoned or rejected by the Court and a party who prosecutes a case which is misconceived in the sense of being incompetent or insupportable”. Third, merely because a claimant does not conduct the litigation in the most efficient way does not mean that their conduct is “unreasonable” for the purpose of s 1317AH. And fourth, in order to give effect to the statutory purpose, a court should not too readily find the conduct of a claimant to be unreasonable.

16    In the present case, despite the similarities between the relevant provisions of the FW Act and the Corporations Act, the respondents submitted that it was incumbent on the Court to decide under which provision it is exercising the discretion to award costs.

17    The respondents relied on The Environmental Group Ltd v Bowd (No 2) [2019] FCA 1227, which was concerned with a matter arising under the FW Act and the Corporations Act, before the commencement of Pt 9.4AAA of the Corporations Act. The relevant provision of the Corporations Act at the time was s 1335(2), which provided that the costs of any proceeding before a court under the Act were to be borne by such a party to the proceeding as the court in its discretion directs. In Bowd Steward J decided (at [30]) that s 1335(2) of the Corporations Act, being general in scope, should “give way” to the more specific provision in s 570 of the FW Act, applying the principle in Goodwin v Phillips (1908) 7 CLR 1 at 14 (O’Connor J). In the present case, the respondents submitted that s 570 of the FW Act is more specific than s 1317AH because the latter imposes no constraints on the capacity of the Court to order costs against a respondent. Mr Mount did not take issue with this submission and I accept it, although it makes no practical difference in the present case.

18    I also accept the respondents’ submission (also unchallenged) that, notwithstanding the abandonment by Mr Mount of his general protections claims in February 2024, the proceedings continued to be “in relation to a matter arising under [the FW] Act”. The respondents pointed to the fact that Mr Mount still sought relief for “annual leave calculated in accordance with applicable legislation”, which must be a reference to the National Employment Standards in the FW Act. Given the breadth of the relationship between the proceedings and the FW Act contemplated by s 570 (see the discussion in Joseph v Parnell Corporate Services Pty Ltd (2021) 284 FCR 546 at [90]–[121] per Logan, Katzmann and Snaden JJ), by parity of reasoning with the cases on federal jurisdiction (see, for example, Unilan Holdings Pty Ltd v Kerin (1993) 44 FCR 481 at 481 per Neaves, Ryan and Gummow JJ and Moorgate Tobacco Co Ltd v Phillip Morris Ltd (1980) 145 CLR 457), it is also arguable that, unless the original claims under the general protections provisions of the FW Act were colourable (a proposition for which the respondents did not contend), the proceedings did not cease to relate to a matter “arising under” the FW Act when Mr Mount determined not to press those claims. On the other hand, in McDonald v Parnell Laboratories (Aust) Pty Ltd (No 2) (2007) 164 FCR 591 at [18] Buchanan J was satisfied that, whatever view was taken of the operation of s 824 of the WR Act, there was “no restriction on the award of costs from that source on and from the abandonment of reliance on the WR Act”. But it is unnecessary to determine the point here.

19    It follows that in this proceeding the Court’s power to award costs is limited by s 570 of the FW Act.

20    In Melbourne Stadiums at [166], Tracey, Gilmour, Jagot and Beach JJ observed that it was “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) and its predecessors”, citing McDonald as an example. The Court has a discretion to award indemnity costs in such a case: Sabapathy v Jetstar Airways (No 2) [2021] FCAFC 68 at [15] (Logan, Flick and Katzmann JJ). In McDonald Buchanan J considered that a “very imprudent” decision not to accept the respondent’s offer was “an unreasonable act or omission” which caused the respondent to incur costs and which warranted an order for costs on an indemnity basis (at [20]–[31]). By the same token, however, not every failure to accept a reasonable settlement offer will amount to an unreasonable act or omission for these purposes: Dorsch v HEAD Oceania Pty Ltd (Costs) [2024] FCA 832 at [34] (Raper J). In Cook v Australian Postal Corporation (2018) 264 FCR 72 at [57] Rares, Perry and Charlesworth JJ felt that “it would not be right” in such a proceeding to hold that a mere failure to accept an offer of compromise amounted to an unreasonable act within the meaning of s 570 of the FW Act.

21    If the power is enlivened, the Court is required to exercise it in the way that best promotes the facilitation of the just resolution of disputes according to law and as quickly, inexpensively and efficiently as possible: FCA Act, s 37M(3). The parties to a civil proceeding before the Court are bound to conduct the proceeding, including negotiations for settlement of the dispute to which the proceeding relates, in a way that is consistent with the overarching purpose: s 37N(1). And in exercising the discretion to award costs in a civil proceeding, the Court is bound to take into account any failure to comply with that duty: s 37N(4).

22    The principles governing the award of indemnity costs in circumstances such as these where the application is based on a refusal to accept an offer of settlement, which was not an offer of compromise under the Federal Court Rules 2011 (Cth), were summarised by Wigney J in Australian Competition and Consumer Commission v Colgate-Palmolive Pty Ltd (No 5) [2021] FCA 246; 151 ACSR 26 at [7]–[12]. Omitting the references to the authorities his Honour cited, they are as follows.

23    First, the “usual rule” is that an order for costs means costs as between party and party (see r 40.01). The discretion to depart from the usual rule “will not be exercised unless there is some special or unusual feature or the justice of the case so requires”.

24    Second, the purpose of a costs order is to compensate the successful party, not to punish the unsuccessful one, and the purpose of an award of indemnity costs is to fully compensate a party for costs they incurred when the court concludes that it was unreasonable for the party against whom the order is sought to have to subject the first party to the expenditure of costs.

25    Third, the circumstances in which a party’s conduct has been considered unreasonable include: where the party, properly advised, should have known they had no chance of success or persisted in what on a proper consideration was a hopeless case; where, to the knowledge of the losing party, the case was “foredoomed to fail”; where the application is wholly untenable and misconceived; and where the party persists in prosecuting a case without regard to its evidentiary difficulties.

26    Wigney J emphasised at [11]:

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

27    Fourth, in making the assessment, it is necessary to guard against engaging in hindsight reasoning.

28    The purpose of these principles was explained by the Full Court (Gilmour, Jagot and Nicholas JJ) in Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd (No 2) [2011] FCAFC 141 at [19]. It is “to ensure that, when one party makes another an offer that contains a genuine element of compromise, the recipient of the offer is compelled to give real consideration to the costs and benefits of prosecuting its claim by reason of the prospect of suffering an indemnity costs order should its failure to accept the offer prove unreasonable”.

The basis of the respondents’ application

29    The respondents’ application is based on three settlement offers made on and after 25 July 2022. All the respondents’ offers were made without prejudice and two of the three were made “without prejudice save as to costs” and expressed to be made in accordance with the principles in Calderbank v Calderbank [1975] 3 All ER 333; [1975] 3 WLR 586. All were in clear terms and, with the exception of the last, were also supported by reasoned argument. In contrast to the offers made by Mr Mount, however, none of the three offers expressly foreshadowed that the respondents would seek indemnity costs in the event that the offer was not accepted.

30    The respondents submit that, in failing to accept any of these offers, Mr Mount acted unreasonably and, in doing so, caused the respondents to incur the costs of the proceedings after those dates. The respondents submitted that Mr Mount’s conduct during the settlement negotiations and his response to a notice to produce “were in direct contradiction” of his obligations under s 37N of the FCA Act.

31    The application for indemnity costs is based on the contention that, by 26 April 2022 or 27 May 2022, at the latest Mr Mount should have been aware that, even if he had succeeded on liability, he would not obtain an order for compensation and that the proceedings would be dismissed, indeed, that he had “no chance of success”. By 8 March 2024, the respondents contend, Mr Mount would not have been able to obtain an order for penalties and should have been aware that his claim for damages had “no chance of success”.

Background

32    The respondents made their first settlement offer on 11 November 2021, within a month of the commencement of the proceeding, although an earlier offer had been made before the proceeding was filed. That offer was to settle without admissions on a full and final basis on the following terms: that the proceeding be dismissed; that the parties enter into a deed releasing the respondents, Luke Stewart, and the current and former directors, officers, employees, agents and contractors of DCM from liability in the proceeding and all claims Mr Mount has or may have in connection with his “engagement” by DCM, its termination, and under the FW Act and the Corporations Act; within 14 days of him executing his counterpart of the deed, that DCM pay Mr Mount $220,000 less tax and inclusive of superannuation and annual leave); that the parties agree not to disparage each other; that Mr Mount returns to DCM all documents and information in his possession in connection with his “engagement” and the work he performed and to destroy all electronic copies; and that the terms would be kept confidential unless disclosure was required by the Australian Tax Office or other government authority. The offer was available for acceptance until 25 November 2021.

33    On 16 November 2021 Bromwich J dismissed Mr Mount’s application for preliminary discovery and awarded costs in favour of the respondents. Consequently, on 22 November 2021 the 11 November offer was withdrawn. Instead, the respondents offered to settle on the same terms but with a reduction for those costs as agreed or taxed. That offer was left open for acceptance until 25 November 2021.

34    On 1 December 2021 Mr Mount, through his then solicitors, responded in an inflammatory way, denying all allegations, which he described as “baseless but unsurprising, being entirely consistent with [their] ongoing victimisation of [Mr Mount] as a protected whistleblower”. He contended that he was being “scapegoat[ed]” for the respondents’ contraventions of the Corporations Act, then said to be under investigation by ASIC. He made a counteroffer of $398,149.64, made up of $298,149.64, being the balance said to be owing under the contract; $120,000 in penalties under the FW Act and the Corporations Act and “general damages”; less $20,000 for the respondents’ costs of the preliminary discovery proceeding. He declined to agree to a release from any action in defamation. That offer was open for acceptance until 5.00pm on 15 December 2021.

35    On 11 April 2022 I ordered that the matter be referred to a Registrar of the Court for mediation. A mediation took place on 18 May 2022.

The offers upon which the respondents rely and some other relevant facts

Offer 1 – 25 July 2022

36    The first offer upon which the respondents rely was made on 25 July 2022 (Offer 1). At that stage, there had been two case management hearings but evidence was yet to be filed.

37    Offer 1 was an offer to pay Mr Mount $130,000 “less applicable tax” and involved the respondents waiving their claim for costs in the preliminary discovery proceedings (taxed at $30,316.14) and the parties entering into a deed of release on certain terms, including:

•    Full and final settlement of all issues including in connection with the engagement, employment, termination, defamation, reputation, statutory claims and everything else;

•    Mutual releases by Mr Mount and [the respondents] and a release by Mr Mount in favour of all other current and former DCM directors and Luke Stewart;

•    Covenant by Mr Mount not to sue in favour of DCM, current and former directors of DCM and Luke Stewart;

•    Mutual confidentiality;

•    Mutual non-disparagement;

•    Return by Mr Mount of all DCM property including communications he sent and received using his personal Gmail email account and Axiom email account in connection with his engagement by DCM and the work he performed;

•    Following return of property, Mr Mount permanently destroys all such documents and information in electronic form;

•    Acknowledgement by Mr Mount that he has been paid all entitlements in connection with his engagement and the termination of his engagement with DCM; and

•    Proceedings are discontinued with each of the parties bearing their own costs.

38    The offer was open for acceptance until 5pm on 1 August 2022.

39    By the time this offer was made Mr Mount had earned from other work in excess of the $255,606.54 he would have received from DCM had he not been dismissed (PJ [682]). The money was paid by Oldfields Holdings Limited and Hall Chadwick. Hall Chadwick paid him $16,500. Oldfields paid him in four tranches from 5 October 2021 to 4 January 2022 (totalling $60,000), which he admitted in cross-examination were fees paid for work he performed or services he rendered (PJ [678]), and a total of $387,750 from which he derived a net benefit of $302,500 excluding GST (PJ [681]).

Offer 2 – 15 August 2023

40    The second offer upon which the respondents rely was made a little over a year later, on 15 August 2023 (Offer 2). By this stage, the parties had filed and served their affidavits and outlines of evidence in chief, had participated in a mediation, and the matter had been set down for a hearing estimated to last 15 days, commencing on 11 March 2024. That offer involved the respondents paying either $392,044.94, “subject to tax withholding”, which I take to mean subject to tax being withheld, that is, gross, or $372,964.20, not subject to tax being withheld, that is, net of tax, and on the same terms as Offer 1. At that stage Mr Mount had not disclosed any of the income he had received from work he performed during the period from 10 April 2021, when his employment was terminated, to 18 March 2022, when his contract would have come to an end in the ordinary course.

The notice to produce

41    On 7 November 2023 the respondents served a notice on Mr Mount requiring him to produce a number of documents including, relevantly:

All records showing remuneration earned and fees invoiced or received from 10 April 2021 to 18 March 2022 (inclusive) by any of:

a.    You;

b.    Balclutha Advisors (ABN 39 909 335 079) (Balclutha); or

c.    Catla Management Inc, a company registered or formerly registered in the British Virgin Islands (Catla Management).

In cross-examination Mr Mount described Balaclutha as a company he used for “doing business on the side” of which he was the sole director.

42    Mr Mount resisted the production of the documents, contending that a notice to produce was “not a substitute for discovery” and on 21 November 2023 filed an interlocutory application seeking to set it aside. On 13 December 2023 a Registrar of the Court made orders relieving Mr Mount from the need to comply with certain paragraphs of the notice to produce, but not the paragraph in which the above documents were sought, and required the documents to be produced within a week.

The discontinuance of the general protection claims and its sequelae

43    On 30 November 2023 the parties attended another mediation.

44    On 6 February 2016 Mr Mount formally abandoned his claims under the general protections provisions of the FW Act x. At the same time he added a claim for exemplary damages under s 1317AE of the Corporations Act.

45    On 4 March 2024 the respondents filed, and I infer also served, their outline of opening submissions in which, among other things, they drew Mr Mount’s attention to the unambiguous terms of s 1317J of the Corporations Act, which limits the persons who may apply for a declaration of contravention, a pecuniary penalty order or a compensation order. The effect of that section meant that he had no standing to seek a pecuniary penalty or compensation order for any contravention of s 1317AC or 1317AAE (PJ[155]–[160]).

The failure to disclose post-termination earnings

46    Neither in his further amended originating application nor his further amended statement of claim did Mr Mount disclose that he had earned any income since DCM had dismissed him. Instead he claimed the full value of the salary he would have been paid had he served the full term of his contract with DCM, plus superannuation and annual leave calculated on that amount. He filed four affidavits in the proceeding, three in chief, one in reply. He made no mention of the work he performed for Oldfields or Hall Chadwick in any of them, let alone the income he derived from that work. The information only came to light as a result of the respondents issuing a notice to produce and then only after Mr Mount had resisted production. While he may have had good reason to complain about the breadth of the notice (as a Registrar of the Court apparently found), there was no good reason not to produce the records of his earnings after his employment with DCM had been terminated.

47    In their defence to the further amended statement of claim filed after those records were produced, the respondents added a plea that Mr Mount had “fully mitigated any loss or damage which he may otherwise have suffered as a result of the termination of [his] Contract” with DCM because of the income he had received, through Balclutha, from Oldfields and Hall Chadwick for services he and/or Balclutha provided between 10 April 2021 and 17 March 2022, when his contract would have come to an end in the ordinary course. In his reply, Mr Mount pleaded that any income he earned from Oldfields and Hall Chadwick was “collateral and extraneous to the breach or repudiation of the contract and could have been earned even if [he] had still been in employment” and, in any event, “the success fee income received from Oldfields … was earned by [his] labour or provision of services after 17 March 2022”. But he filed no evidence to support that plea. And in cross-examination, Mr Mount effectively conceded that the success fee was earned at least in part as a result of his efforts the previous year. I found that none of the earnings he derived from Oldfields and Hall Chadwick were collateral or extraneous to the breach of repudiation of his employment contract with DCM (PJ[684]–[698]).

Offer 3 – 8 March 2024

48    Offer 3 was made through the respondents’ senior counsel on 8 March 2024, three days before the hearing was due to begin. By this offer the respondents indicated their preparedness to settle on the following terms:

(1)    DCM would pay Mr Mount $200,000 in full satisfaction of all claims;

(2)    the proceeding would be dismissed with no order as to costs;

(3)    DCM would release Mr Mount from the judgment debt with respect to the preliminary discovery proceeding; and

(4)    The parties would enter a deed of release “containing the usual terms, including a non-disparagement covenant”.

49    The offer was expressed to be open for acceptance until it was withdrawn in writing.

50    On 10 March 2024, the day before the hearing began, Mr Mount, through his senior counsel, responded with a counter offer. By the counter offer Mr Mount offered to accept $490,000 inclusive on the terms offered by DCM but with an apology from DCM in these terms:

Dover Castle Metals Pty Ltd (“Dover”) wishes to make public that the termination of Ryan Mount’s engagement as Dover’s CEO in April 2021 was not because of any concerns Dover held with Ryan’s conduct or performance as CEO of Dover. Ryan completed his duties as CEO of Dover with skill and professionalism. Any damage to Ryan’s reputation caused by his termination as CEO of Dover was unintentional and Dover apologises unreservedly to Ryan for any harm that may have been caused to him, his family or reputation from his time with Dover.

51    That offer was left open for acceptance “until withdrawn in writing or until her Honour commences delivering her judgment/ruling on the standing point”, whichever occurred first.

The arguments

52    The respondents submitted that Mr Mount’s failure to accept each and any of the relevant offers was unreasonable for the following reasons.

53    First, at the time he received each of Offers 1, 2 and 3 he had no entitlement to damages (or, presumably, compensation) and he knew he had no such entitlement, such that none of the offers required him to compromise his claims. The respondents noted that Mr Mount’s failed to refer in his affidavits to his earnings from Oldfields or Hall Chadwick; resisted producing the documents that would have disclosed them; and delayed producing them when required by the Court to do so. Mr Mount’s response to the offers showed he had “an unrealistic and unreasonable expectation” of the amount he might receive if he succeeded, particularly when he had fully mitigated his loss before he received Offer 1.

54    Second, Mr Mount’s conduct in settlement negotiations and in relation to the notice to produce was antithetical to his obligations under s 37N of the Act. They argued that this was not a mere instance of a party achieving a worse result than he would have achieved had he accepted his opponent’s offer. Rather, “it is an instance of a party rejecting reasonable offers in circumstances where he had already made good his loss and resisting attempts to provide clearly relevant material regarding mitigation”.

55    Third, by the time of Offer 3, the documents which disclosed his post-termination earnings had been provided to the respondents and he was aware that they would likely be tendered in evidence at the hearing and his damages claim would fail.

56    The respondents also pointed to three particular claims, which I infer they consider were unreasonable. The first was the claim for exemplary damages, not made until the filing of the amended statement of claim on 6 February 2024, which the respondents argued was baseless as the matters upon which Mr Mount relied to justify the claim would not have supported an award of exemplary damages. The second was Mr Mount’s claim that his reputation had been damaged by any of the disparaging statements Mr Tucker had made about him. With respect to that claim the respondents referred to Mr Mount’s failure to adduce any evidence to support it. The third was the claim for penalties. The respondents noted that, although Mr Mount had standing to seek penalties under the FW Act, he abandoned the FW Act claims on 6 February 2024, had no standing to seek penalties under the Corporations Act and no reasonable prospects of persuading the Court that he did.

57    In these circumstances the respondents argued that it was unreasonable to have put them to the cost of lengthy trial.

58    The respondents submitted that costs should be awarded on an indemnity basis because at all relevant times Mr Mount should have known that, even if he succeeded on liability, he would not obtain an order for compensation and the proceeding would be dismissed. They also submitted that by 8 March 2024 Mr Mount should have known that he would not have been able to obtain an order for pecuniary penalties and should have been aware that his claim for damages had no chance of success.

59    Mr Mount resists any order for costs.

60    He submitted that, even where reasonable offers are rejected, the Court has a discretion to dismiss a costs application and the mere refusal of offers that were more favourable to him than the judgment does not justify departure from the general rule. He also submitted that the rejection of an offer must be unreasonable in the circumstances in which it was made and that this involves assessing the state of the proceeding and the offeree’s prospects of success at the time the offer was made; the extent of the compromise reflected by the offer; and “whether the offeree had adequate time and opportunity” to properly consider the offer. These submissions may be accepted. They were, and are, uncontroversial.

61    Mr Mount advanced three arguments against the respondents’ application.

62    First, he submitted, it is clear from the judgment that the proceedings had merit and therefore it could not be said that it was “wholly unreasonable” for him to reject any of the offers. There is no basis to suggest that he should have known that the proceeding was hopeless from the date of the first offer. The mere weakness of an arguable case is not enough to support an award of indemnity costs.

63    Second, he submitted that the costs discretion should not be exercised in such a way as to “unduly deter parties from bringing or defending proceedings ‘for fear that they will retrospectively be found not to have been justified in doing so’”, citing Leach v The Nominal Defendant (QBE Insurance (Australia) Ltd) (No. 2) [2014] NSWCA 391 per McColl JA at [23]. In that case, the Court of Appeal upheld a decision to refuse to make an indemnity costs order as the central issue was not straightforward, even with all the facts determined in the plaintiff’s favour.

64    Third, he submitted that his case had “reasonable legal prospects” and “genuine and reasonable steps were taken to resolve the matters in dispute”, consistent with his obligations under s 37N of the FW Act. He asserted that he had “approach[ed] all negotiations in good faith with the preparedness to compromise in order to achieve an agreement”. He argued that his claim was “complex” and “held valid legal prospects”. Consequently, he contended that it would be “contrary to the intents and purposes of costs principles to subject [him] to a punitive indemnity costs order based on the decision to pursue a valid claim with legal prospects.

Consideration

65    From the outset, the respondents steadfastly resisted Mr Mount’s claims. Each of the relevant offers they made represented a genuine and substantial compromise of their position. The question is whether it was unreasonable of Mr Mount not to accept any of them.

66    Most of Mr Mount’s arguments were not to the point.

67    With respect to the first, as the respondents pointed out in their submissions in reply, their application was not made on the basis that Mr Mount’s case was hopeless or weak. Rather, it was brought on the basis that, at the time the relevant offers were made, Mr Mount had fully mitigated his loss such that acceptance of any one of the offers would have resulted in a “windfall” for him.

68    The second of Mr Mount’s arguments does not engage with the respondents’ submissions either. Leach is an inapt analogy. The complexities of this case were largely of Mr Mount’s own making, as is apparent from the principal judgment. Whatever the complexities of the whistleblower claims, however, once he abandoned his general protection claims under the FW Act he had no prospect of obtaining any pecuniary penalties because, as I explained in the principal judgment, he had no standing to do so. That meant that, putting aside his claim for exemplary damages and for damage to his reputation (brought against only one of the respondents, George Tucker), to which I will come shortly, the amount of money he could recover from the respondents was limited to any loss he had suffered as a result of the premature termination of his employment contract. Yet the amount he recovered from work he performed in the remaining months of that contract far exceeded the amount he would have been paid had the contract run its full term (PJ[672]). There was no substance to Mr Mount’s claims that his post-employment income was “collateral or extraneous” or that the amount he was paid as a success fee for income received from Oldfields Holdings was earned by the deployment of his labour or the provision of his services after the date when his contract with DCM would have expired. As I observed in the principal judgment, he filed no evidence in support of those claims and the evidence he did file was inconsistent with it (PJ[674]–[698]).

69    I agree with the respondents that Mr Mount’s conduct in failing to disclose his earnings and resisting production of the records of those earnings until compelled to do so was inconsistent with his obligations under s 37N of the FCA Act. On the other hand, I do not accept the respondents’ contention that the proceedings were doomed to fail once the general protection claims were discontinued because the claim for compensation could not be sustained, not least because, if Mr Mount’s claims under ss 1317AD and 1317AE had been successful, the Court might have been persuaded to grant declaratory relief reflecting that outcome.

70    Mr Mount did not take issue with the respondents’ submission that it was unreasonable for Mr Mount to reject each of the offers upon which they relied because at the time those offers were made he knew he was not entitled to damages because he had mitigated his loss. While he also sought general damages for “hurt, humiliation and distress” because the company car had been “forcibly” towed from his property and taken possession of some personal items that were left in it (but returned within days), that claim had no prospects of success. Mr Mount ultimately conceded that he had no contractual right to the vehicle after his employment was terminated and DCM was entitled to repossess it, yet he refused to do so. It was because Mr Mount refused to comply with DCM’s reasonable demands for its return that caused the vehicle to be towed away, not the termination of his contract as he had alleged.

71    Neither did Mr Mount take issue with the respondents’ submission that by 8 March 2024, when Offer 3 was made, he should have known that in the event he had succeeded he would not have been able to recover pecuniary penalties. By that time he had informed the respondents and the Court that he was abandoning his general protection claims. And, as I have said, the claim for pecuniary penalties under the Corporations Act was doomed to fail.

72    Nor did Mr Mount take issue with the respondents’ submission to the effect that, even if he had been able to make out his claim under s 1317AD, he had no reasonable prospect of recovering an award of exemplary damages. And he adduced no evidence to support his claim that his reputation had been damaged by any of the statements made by Mr Tucker. None of the witnesses to whom Mr Tucker made disparaging comments about Mr Mount testified that they thought any less of him as a result. See PJ[360]–[362]. At all events, the claim that he suffered a detriment by reason of those comments was only made against Mr Tucker. Consequently, if he had succeeded, any award of damages could only have been made against Mr Tucker. Even if it were not unreasonable to bring that claim, it could have little bearing on the reasonableness or otherwise of accepting the respondents’ offers which included settlement of the numerous other claims against DCM and the directors who were allegedly involved in the alleged contraventions of ss 1317AAE, 1317AC and 1317AD of the Corporations Act or the breach of contract claim for wrongful dismissal.

73    Moreover, nowhere in his submissions did Mr Mount complain that any of the terms upon which the three offers were made were unreasonable. Nor did he submit that he would have been satisfied with declaratory relief alone. Indeed, his counteroffers indicate otherwise.

74    Nevertheless, I am not persuaded that it was unreasonable for Mr Mount to reject either Offer 1 or Offer 2. At the time those offers were made he had not discontinued his general protection claims. That means that, notwithstanding the fact that he had fully mitigated his loss, had he pursued those claims and prevailed, he may have recovered civil penalties under s 546 of the FW Act as he had originally sought and maintained until he discontinued the general protection claims. Those claims consisted of allegations that DCM had taken adverse action against him in contravention of s 340 of the FW Act and that the other respondents were involved in those contraventions. They were claims that DCM took adverse action against him when it dismissed him for having exercised certain “workplace rights” or for proposing to exercise other workplace rights. The maximum penalty for a contravention of s 340 was 60 penalty units in the case of an individual and five times that amount (300) for a body corporate: see FW Act, s 546(2). At the time of the alleged contravention the value of a penalty unit was $210. It follows that the maximum penalty that could have been awarded against DCM was $63,000 and the maximum penalty that could have been awarded against each of the other respondents was $12,600, totalling $100,800. Since the primary, if not the sole, purpose of civil penalties is to deter further contraventions (Australian Building and Construction Commissioner v Pattinson (2022) 274 CLR 450 at [9] per Kiefel CJ, Gageler, Keane, Gordon, Steward and Gleeson JJ (ABCC v Pattinson)), if Mr Mount had succeeded in those claims he had a good chance of receiving a substantial sum in penalties.

75    Moreover, despite the fact that Mr Mount had fully mitigated his loss by the time these offers were made and notwithstanding the lack of attention to this issue in the costs submissions made on his behalf, I am not satisfied that the claim for exemplary damages under s 1317AE, based on his dismissal, was “foredoomed to fail”. While the matters addressed in the respondents’ submissions would unlikely suffice to justify an award of exemplary damages, the respondents’ submissions do not take into account the contextual factors raised in the particulars. The purpose of an award of damages is “to punish the [wrongdoer] for conduct showing a conscious and contumelious disregard for the [applicant’s] rights and to deter [the wrongdoer] from committing like conduct again”: XL Petroleum (NSW) Pty Ltd v Caltex Oil (Australia) Pty Ltd (1985) 155 CLR 448 at 471 (Brennan J), cited with approval by Mason CJ, Brennan, Deane, Dawson and Gaudron JJ in Lamb v Cotogno (1987) 164 CLR 1 at 9, although their Honours observed that the intended deterrence “extends beyond the actual wrongdoer and the exact nature of his wrongdoing”. Since the considerations governing the assessment of compensation or compensatory damages on the one hand and exemplary damages on the other are very different, “[t]here is no necessary proportionality between the assessment of the two categories”: XL Petroleum at 471. And while civil penalties under the FW Act would have served the deterrent purpose, they would not have served to punish the respondents as the concept of punishment has “no part to play” in the determination of civil penalties: Pattinson v Australian Building and Construction Commissioner (2020) 282 FCR 580 at [35] (Allsop CJ, White and Wigney). The task of fixing a civil penalty under s 546 of the FW Act involves considering what sum is reasonably appropriate to protect the public interest from future contraventions of the Act: ABCC v Pattinson at [71]).

76    Offer 3 was made after the general protection claims had been abandoned and after the respondents had served their outline of opening submissions which drew attention to the insuperable barrier to Mr Mount’s claims under ss 1317AAE and 1317AC of the Corporations Act. As I have indicated, however, I am not satisfied that Mr Mount’s claim for exemplary damages was hopeless or unarguable. What that award might have been is difficult to say and I received sub-optimal assistance from the parties on this question. Still, it could well have exceeded the amount of the respondents’ offer.

Conclusion

77    I have some sympathy with the respondents’ position. As I have already said, they made reasonable offers of settlement. With the benefit of hindsight, Mr Mount’s decision to reject each of Offers 1, 2 and 3 was certainly imprudent, if not foolish. Ultimately, however, viewed prospectively rather than retrospectively, I am not persuaded that his conduct in doing so was an unreasonable act or omission which warrants an adverse costs order. Even if I were satisfied that the jurisdiction to award costs had been enlivened, I would not have exercised my discretion in the respondents’ favour.

Addendum

78    Yesterday morning the parties were informed that judgment would be delivered at 9:30am today. At that time the judgment was ready for publication. At 10:23pm Mr Mount’s lawyers

lodged for filing a set of supplementary submissions. It was improper of them to do so. Not only did they not have leave to file supplementary submissions, they did not seek leave. Accordingly, I have paid no regard to them.

Associate:

Dated:    29 April 2025

SCHEDULE OF PARTIES