[2011] FWA 2225 |
|
DECISION |
Fair Work Act 2009
s.611 - Application for costs
Wayne Stuart Walker
v
Mittagong Sands Pty Limited T/A Cowra Quartz
(U2010/1241)
COMMISSIONER THATCHER |
SYDNEY, 14 APRIL 2011 |
Employer to bear costs - misconduct had not occurred and manager found unreliable - comparison of tests in paragraphs 611(2)(a) and (b) - lesser and wider test in (b) - adoption of ‘no reasonable prospect of success’ criterion in Spencer
[1] Wayne Walker is seeking an order for costs under s.611 of the Fair Work Act 2009 (the FW Act) in respect of his successful application under s.394. On 8 December 2010 I found that his dismissal as a Leading Hand by Mittagong Sands Pty Limited T/A Cowra Quartz (Cowra Quartz) was harsh, unjust or unreasonable and ordered compensation in lieu of reinstatement. 1 The costs application was made to Fair Work Australia (FWA) on 14 December 2010, within the time limit prescribed by s.402 (Applications for costs orders) of the FW Act.
[2] Section 611 (Costs) of the FW Act includes:
(2) However, FWA may order a person (the first person) to bear some or all of the costs of another person in relation to an application to FWA if:
(a) FWA is satisfied that the first person made the application, or the first person responded to the application, vexatiously or without reasonable cause; or
(b) FWA is satisfied that it should have been reasonably apparent to the first person that the first person’s application, or the first person’s response to the application, had no reasonable prospect of success.”
[3] The grounds of the application relate to Cowra Quartz’ opposition to Mr Walker’s s.394 application. Specifically,
(a) Cowra Quartz ‘responded to the application ... without reasonable cause’ (paragraph 611(2)(a)); and
(b) ‘it should have been reasonably apparent to’ Cowra Quartz that its ‘response to the application, had no reasonable prospect of success.’(paragraph 611(2)(b)).
[4] Initially the material filed on behalf of Mr Walker in support of his costs application was documentation in relation to the previous proceedings. Following an objection from Cowra Quartz on the grounds that it was entitled to know with precision why the applicant asserts his application for costs, Mr Walker filed an outline of submissions that restated some of his submissions in the earlier proceedings and summarised many of my findings. It was only during the oral submissions on behalf of Mr Walker that I was referred to the legislation and case law.
[5] In its material Cowra Quartz referred me to a significant amount of case law in relation to the application of the criteria ‘without reasonable cause’ and ‘no reasonable prospect of success’. Its submissions can be summarised as: 2
(a) Mr Walker’s reliance on my findings in the arbitration decision to support his costs application is a flawed approach of reasoning backwards in an attempt to demonstrate that the relevant tests in paragraphs 611(2)(a) and (b) have been met.
(b) In arriving at my findings I had the benefit of a contested hearing and a reserved decision. In making my decision I was required to resolve conflicting factual matters and arguable points of law which is at odds with those tests. This was evidenced by my remarks at the conclusion of the hearing when I commented:
“... This is a serious matter. There’s a fair bit of evidence, and there’s a lot of conflicting evidence. I’ll need to read the material again and reflect, so I’m going to reserve my decision and issue it, I hope, within a few weeks. Thank you. This matter is adjourned.” 3
(c) The factual matters and arguable points of law included:
(i) whether Mr Walker had taken oil without permission;
(ii) evidentiary conflicts between lay witnesses called by each of the parties;
(iii) consideration of expert evidence;
(iv) whether Mr Walker had engaged in misconduct;
(v) whether Cowra Quartz had a valid reason for dismissing Mr Walker;
(d) The fact that Cowra Quartz’ evidentiary case was not accepted and its arguments proved unsuccessful is not a permissible reason to award costs.
[6] It is not necessary to set out all of the background facts in order to deal with the application. It is sufficient to note that it was Cowra Quartz’ case that the valid reason for Mr Walker’s dismissal was his theft of oil from a drum of oil in its workshop. Given there was no direct evidence of Mr Walker stealing the oil, it was critical to Cowra Quartz’ case that a sample of oil which was taken from a container, which was the property of Mr Walker, on the back of Mr Walker’s private utility without his knowledge came from the drum.
[7] A sample of oil which Mr Walker’s manager said he took from the container was, upon analysis, found to be oil from the drum. However a sample of oil which Mr Walker said he and his wife took from the container was, on analysis, found (subsequent to his dismissal) not to be oil from the drum. Clearly the samples were of different oils. My decision found (adjusting for the typographical errors in paragraphs 47 and 51 4):
(a) the manager to be an unreliable witness and preferred the evidence of Mr Walker (paragraph 58) (who I found to be a reliable witness - paragraph 53). I found Mrs Walker to be a truthful witness (paragraph 57);
(b) that the sample which Mr and Mrs Walker said came from the container and that they sent for analysis, was oil that was taken from the container (paragraph 61);
(c) that sample was not oil from the drum (paragraph 49(c));
(d) that sample was not the oil that the manager sent for analysis (paragraph 51, as adjusted);
(e) no misconduct in the form of theft had occurred (paragraph 86).
[8] I will consider the proper application of s.611 before applying the law to the facts.
Section 611
[9] Unlike the Workplace Relations Act 1996 (WR Act) which contained a specific provision governing the awarding of costs in unfair dismissal matters (s.658) as well as a general provision for costs (s.824), s.611 of the FW Act is a general provision for the awarding of costs against a party, which applies to unfair dismissal and other matters. Section 611 appears within Division 3 (Conduct of matters before FWA) of Part 5-1 (Fair Work Australia) of Chapter 5 of the FW Act.
[10] The provisions of the Explanatory Memorandum to the Fair Work Bill 2009 which relate to the clause that was to become s.611 stated:
“2353. Subclause 611(1) provides that generally a person must bear their own costs in relation to a matter before FWA.
2354. However, subclause 611(2) provides an exception to this general rule in certain limited circumstances. FWA may order a person to bear some or all of the costs of another person where FWA is satisfied that the person made an application vexatiously or without reasonable cause or the application or response to an application had no reasonable prospect of success.” (emphasis added)
[11] Thus subclause 611(1) provides that generally a person must bear their own costs in relation to a matter before Fair Work Australia (FWA). However, subclause 611(2) provides an exception to this general rule in certain limited circumstances. When FWA is satisfied that a prescribed circumstance exits, FWA is provided with a discretion to require a party to bear some or all of the costs of another party.
[12] Mr Walker’s costs application relies on paragraph 611(2)(a) (not including the ground of ‘vexatiously’) and paragraph 611(2)(b). Therefore consideration of the application involves:
(a) Whether FWA is satisfied that Cowra Quartz responded to the application without reasonable cause;
(b) Whether FWA is satisfied that it should have been reasonably apparent to Cowra Quartz that its response had no reasonable prospect of success; and
(c) Should FWA be so satisfied and its jurisdiction be enlivened, the exercise of a discretion as to whether or not Cowra Quartz should bear some or all of Mr Walker’s costs in relation to his application as an exception to the general rule that a person must bear their own costs in relation to a matter before FWA.
Without reasonable cause - paragraph 611(2)(a)
[13] I agree with Cowra Quartz’ submission that the test of ‘without reasonable cause’ is similar to the test applied by a court on an application for the exercise of the summary power to stay or strike out proceedings.
[14] Although the costs provisions relating to unfair dismissal proceedings that applied under the WR Act prior to the operation of the FW Act did not contain the expression, the criterion of ‘without reasonable cause’ is by no means new. The general costs provisions (which did not apply to unfair dismissal proceedings) in the various iterations of the WR Act, and, before that, the costs provision in s.347 (Costs only where proceedings instituted vexatiously, etc.) of the Industrial Relations Act 1988 enabled costs to be awarded against a party to proceedings if the party instituted the proceedings vexatiously or ‘without reasonable cause’. Also, under the WR Act up until the Workplace Relations Amendment (Termination of Employment) Act 2001 (the pre-2001 WR Act), the costs provisions relating to unfair dismissal proceedings enabled costs to be awarded against an applicant or union who made an unfair dismissal application vexatiously or ‘without reasonable cause’.
[15] In Henderson v Mainpoint Enterprises Australia Pty Ltd 5 (Henderson) the Commission agreed that the significant differences between the contexts of the costs provisions of the Industrial Relations Act 1988 and the pre-2001 WR Act in relation to unfair dismissal applications6 did not prevent guidance being obtained from decisions under the former legislation in relation to the proper interpretation to be given to the expression ‘without reasonable cause’ in the pre-2001 WR Act. For similar reasons, guidance can be can be taken from those earlier decisions (as well as more recent case law) in respect of the proper application of the expression ‘without reasonable cause’ in s.611(2) of the FW Act.
[16] In Re Christina Hatchett v Bowater Tutt Industries Pty Ltd (No 3), 7 when considering s.347 of the Industrial Relations Act 1988, Von Doussa J stated:
“8. The test imposed by the expression ‘vexatiously or without reasonable cause’ is similar to the one applied by a court on an application for the exercise of summary power to stay or strike out proceedings.”
[17] In General Steel Industries Inc v Commissioner for Railways (NSW) 8 (General Steel) Barwick CJ examined the principles applicable to the summary power to dismiss actions and stated:
“8. The plaintiff rightly points out that the jurisdiction summarily to terminate an action is to be sparingly employed and is not to be used except in a clear case where the Court is satisfied that it has the requisite material and the necessary assistance from the parties to reach a definite and certain conclusion. I have examined the case law on the subject, to some of which I was referred in argument and to which I append a list of references. ... It is sufficient for me to say that these cases uniformly adhere to the view that the plaintiff ought not to be denied access to the customary tribunal which deals with actions of the kind he brings, unless his lack of a cause of action - if that be the ground on which the court is invited, as in this case, to exercise its powers of summary dismissal - is clearly demonstrated. The test to be applied has been variously expressed; ‘so obviously untenable that it cannot possibly succeed’; ‘manifestly groundless’; ‘so manifestly faulty that it does not admit of argument’; ‘discloses a case which the Court is satisfied cannot succeed’; ‘under no possibility can there be a good cause of action’; ‘be manifest that to allow them’ (the pleadings) ‘to stand would involve useless expense’.
9. At times the test has been put as high as saying that the case must be so plain and obvious that the court can say at once that the statement of claim, even if proved, cannot succeed; or ‘so manifest on the view of the pleadings, merely reading through them, that it is a case that does not admit of reasonable argument’; ‘so to speak apparent at a glance’.
10. As I have said, some of these expressions occur in cases in which the inherent jurisdiction was invoked and others in cases founded on statutory rules of court but although the material available to the court in either type of case may be different the need for exceptional caution in exercising the power whether it be inherent or under statutory rules is the same. Dixon J. (as he then was) sums up a number of authorities in Dey v. Victorian Railways Commissioners [1949] HCA 1; (1949) 78 CLR 62 VOL CXII-9 where he says (1949) 78 CLR, at p 91; ‘A case must be very clear indeed to justify the summary intervention of the court to prevent a plaintiff submitting his case for determination in the appointed manner by the court with or without a jury. The fact that a transaction is intricate may not disentitle the court to examine a cause of action alleged to grow out of it for the purpose of seeing whether the proceeding amounts to an abuse of process or is vexatious. But once it appears that there is a real question to be determined whether of fact or law and that the rights of the parties depend upon it, then it is not competent for the court to dismiss the action as frivolous and vexatious and an abuse of process.’ ...”
[18] Relatively recently, in Spencer v Commonwealth of Australia, 9 (Spencer) French CJ and Gummow J, drawing on General Steel, Dey v Victorian Railways Commissioners10 and other cases, stated:
“24. The exercise of powers to summarily terminate proceedings must always be attended with caution. That is so whether such disposition is sought on the basis that the pleadings fail to disclose a reasonable cause of action [FOOTNOTE: General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125 at 128-130 per Barwick CJ; [1964] HCA 69.] or on the basis that the action is frivolous or vexatious or an abuse of process [FOOTNOTE Dey v Victorian Railways Commissioners [1949] HCA 1; (1949) 78 CLR 62 at 91 per Dixon J; [1949] HCA 1]. The same applies where such a disposition is sought in a summary judgment application supported by evidence. As to the latter, this Court in Fancourt v Mercantile Credits Ltd said [FOOTNOTE [1983] HCA 25; (1983) 154 CLR 87 at 99; [1983] HCA 25. See also Webster v Lampard [1993] HCA 57; (1993) 177 CLR 598 at 602-603 per Mason CJ, Deane and Dawson JJ; [1993] HCA 57]:
‘The power to order summary or final judgment is one that should be exercised with great care and should never be exercised unless it is clear that there is no real question to be tried’.
More recently, in Batistatos v Roads and Traffic Authority (NSW) [FOOTNOTE [2006] HCA 27; (2006) 226 CLR 256 at 275 [46]; [2006] HCA 27] Gleeson CJ, Gummow, Hayne and Crennan JJ repeated a statement by Gaudron, McHugh, Gummow and Hayne JJ in Agar v Hyde [FOOTNOTE [2000] HCA 41; (2000) 201 CLR 552 at 575-576 [57]; [2000] HCA 41] which included the following:
‘Ordinarily, a party is not to be denied the opportunity to place his or her case before the court in the ordinary way, and after taking advantage of the usual interlocutory processes. The test to be applied has been expressed in various ways [FOOTNOTE Dey v Victorian Railways Commissioners [1949] HCA 1; (1949) 78 CLR 62 at 91 per Dixon J; General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125 at 130 per Barwick CJ], but all of the verbal formulae which have been used are intended to describe a high degree of certainty about the ultimate outcome of the proceeding if it were allowed to go to trial in the ordinary way.’
...”
[19] Case law in respect of the proper application of the expression ‘without reasonable cause’ under predecessors to the FW Act is not inconsistent with the approach in Spencer.
[20] In Re Joseph Michael Kanan v Australian Postal and Telecommunications Union 11 Wilcox J, when considering the term ‘without reasonable cause’ in the general costs provision (s.347) of the Industrial Relations Act 198812 stated:
“26. Section 347 of the Industrial Relations Act sets out the general rule that a party to a proceeding in a matter arising under the Act ‘shall not be ordered to pay costs incurred by any other party to the proceeding’. But this rule is subject to a qualification: ‘unless the first-mentioned party instituted the proceeding vexatiously or without reasonable cause’. ...
27. I do not doubt that, in instituting this proceeding, Mr Kanan was motivated to obtain relief to which he considered himself entitled. ... But, for the qualification of s.347 to operate, it is sufficient that the proceeding be instituted ‘without reasonable cause’. A proceeding is not to be classed as being launched ‘without reasonable cause’ simply because it fails. As Gibbs J said in The Queen v Moore; ex parte Federated Miscellaneous Workers’ Union of Australia [1978] HCA 51; (1978) 140 CLR 470 at 473, speaking of the Conciliation and Arbitration Act equivalent of s.357 (s.197A):
‘... a party cannot be said to have commenced a proceeding ‘without reasonable cause’, within the meaning of that section, simply because his argument proves unsuccessful. In the present case the argument presented on behalf of the prosecutor was not unworthy of consideration and it found some support in the two decisions of this court to which I have referred. The fact that those decisions have been distinguished, and that the argument has failed, is no justification for ordering costs in the face of the prohibition contained in s.197A.’
28. In Standish v University of Tasmania [1989] FCA 166; (1989) 28 IR 129 at 139 Lockhart J applied the qualification in ordering costs against an applicant whose case he thought ‘misconceived’, rather than simply unsuccessful. But, as the Full Court pointed out in Thompson v Hodder (1989) 29 IR 339 at 342, ‘(t)here may be cases which could not be described properly as ‘misconceived’ but which would nevertheless be held to have been instituted ‘without reasonable cause’.
29. It seems to me that one way of testing whether a proceeding is instituted ‘without reasonable cause’ is to ask whether, upon the facts apparent to the applicant at the time of instituting the proceeding, there was no substantial prospect of success. If success depends upon the resolution in the applicant’s favour of one or more arguable points of law, it is inappropriate to stigmatise the proceeding as being ‘without reasonable cause’. But where it appears that, on the applicant’s own version of the facts, it is clear that the proceeding must fail, it may properly be said that the proceeding lacks a reasonable cause. That is the situation in the present case. The qualification of s.347 applies. The Court has power to order costs against the applicant.”
[21] In Henderson, when referring to the costs provisions relating to unfair dismissal applications under s.170CE of the pre-2001 WR Act, stated:
“In our view the following propositions can be extracted from the above authorities:
1. In determining whether a s.170CE application has been instituted ‘without reasonable cause’ the test is whether, upon the facts apparent to the applicant at the time of instituting the proceeding, there was no substantial prospect of success.
2. If the success of the application depends on the resolution in the applicant’s favour of one or more arguable points of law it is inappropriate to conclude that the proceedings were instituted ‘without reasonable cause’. An applicant is not liable to pay costs pursuant to s.170CJ(I) simply because an arguable point proves unsuccessful.
3. Where on the applicant’s own version of the facts it is clear that the proceeding must fail it can properly be said that the proceeding was instituted ‘without reasonable cause’.”
[22] In Council of Kangan Batman Institute of Technology and Further Education v Australian Industrial Relations Commission (Kangan v AIRC), 13 the Full Court of the Federal Court when considering the term ‘without reasonable cause’ in the general costs provision (s.347) of the WR Act14 stated:
“60. The question therefore arises whether, as contended by counsel for Ms Hart, the plaintiff instituted the proceeding vexatiously or without reasonable cause. A party does not institute proceedings without reasonable cause merely because that party fails in the argument put to the Court: R v Moore; Ex parte Federated Miscellaneous Workers’ Union of Australia (1978) 140 CLR 470 at 473 per Gibbs J. The section reflects a policy of protecting a party instituting proceedings from liability for costs, but that protection may be lost. Although costs will rarely be awarded under the section and exceptional circumstances are required to justify the making of such an order (see Heidt v Chrysler Australia Ltd (1976) 26 FLR 257 per Northrop J), a proceeding will be instituted without reasonable cause if it has no real prospects of success, or was doomed to failure: see Kanan v Australian Postal and Telecommunications Union (1992) 43 IR 257 per Wilcox J; see also Bostik (Aust) P/L v Gorgevski (No 2) (1992) 36 FCR 439; and Nilsen v Loyal Orange Trust (1997) 76 IR 180.
...
63. It is a matter of judgment, sometimes of fine judgment, in all the circumstances of a particular case whether a proceeding is brought without reasonable cause.”
[23] In Dowling v Fairfax Media Publications Pty Ltd 15 Moore J considered the term ‘without reasonable cause’ within the context of the same general costs provision of the WR Act as applied to Kangan v AIRC16 (renumbered as s.824(1)) and stated:
“52. The words of the s 824(1) of the WR Act require me to consider whether the proceeding was instituted vexatiously or without reasonable cause. In answering the question posed by s 824(1), I am required to undertake a qualitative assessment of the proceeding in its entirety, focussing of course on the party that ‘instituted’ the proceeding (see Australian Workers’ Union of Employees, Queensland v Etheridge Shire Council (No 2) [2009] FCA 58 at [27] per Spender J).
53. In considering whether a proceeding was instituted vexatiously or without reasonable cause for the purpose of s 824(1) it is necessary to distinguish between the situation where an applicant has merely been unsuccessful on the case he or she has sought to propound and the situation where the applicant’s case was entirely misconceived. In relation to the former category, an application is not commenced without reasonable cause simply because the applicant’s arguments are rejected by the Court: R v Moore; Ex parte Federated Miscellaneous Workers’ Union of Australia [1978] HCA 51; (1978) 140 CLR 470 at 473 per Gibbs J. However, in relation to the latter category it is likely that it can be said that the proceeding was instituted without reasonable cause such that a costs award is appropriate: Standish v University of Tasmania (1989) 28 IR 129 at 139 per Lockhart J. The comments of Wilcox J in Kanan v Australian Postal & Telecommunications Union (1992) 43 IR 257 at 264-265 are also useful in ascertaining whether a proceeding was instituted without reasonable cause. As his Honour said:
‘It seems to me that one way of testing whether a proceeding is instituted ‘without reasonable cause’ is to ask whether, upon the facts apparent to the applicant at the time of instituting the proceeding, there was no substantial prospect of success. If success depends upon the resolution in the applicant’s favour of one or more arguable points of law, it is inappropriate to stigmatise the proceeding as being ‘without reasonable cause’. But where, on the applicant’s own version of the facts, it is clear that the proceeding must fail, it may properly be said that the proceeding lacks a reasonable cause.’
In Heidt v Chrysler Australia Ltd (1976) 26 FLR 257 at 274-275 Northrop J said the following in respect of s 197A of the then Conciliation and Arbitration Act 1904-1975 (Cth), which was substantially in the same terms as s 824(1) of the WR Act:
‘In considering this matter the court must have regard to all the material properly before it. The test is not subjective to the party instituting the proceedings as at the time of the institution of the proceedings. The conduct of the opposing party prior to the institution of the proceedings may be relevant in deciding whether the proceedings were instituted vexatiously or without reasonable cause. The conduct of the opposing party both prior and subsequent to the institution of proceedings may be relevant to the discretion remaining in the court. It may be difficult to satisfy the test where disputed questions of fact arise and the proceedings eventually are dismissed because the court finds facts adverse to the party instituting the proceedings. Where the test is satisfied, having regard to the general policy of the section, the court may, nevertheless, in the exercise of its discretion, make no order as to costs.’”
No reasonable prospect of success - paragraph 611(2)(b)
[24] I do not agree with the submission of Cowra Quartz that under the current legislation the test of ‘no reasonable prospect of success’ is also the test under the general law for summary dismissal, notwithstanding that such a view of the expression may be supported by decisions of the Commission under a different costs regime relating to unfair dismissal proceedings under the WR Act.
[25] The Workplace Relations Amendment (Termination of Employment) Act 2001 made a number of amendments to s. 170CJ of the WR Act which related to the awarding of costs in unfair dismissal proceedings, including:
(a) the deletion of the provision (the former s.170CJ(1)) that enabled costs to be awarded against an applicant or union who made an unfair dismissal application vexatiously or without reasonable cause; and
(b) the insertion of a provision (s.170CJ(2) prior to the subsection being renumbered as 170CJ(1) when the Bill was amended in the Senate) that enabled the Commission to award costs against a party who made an unfair dismissal application or began proceedings relating to such an application in circumstances where it should have been reasonably apparent to the party that he or she had no reasonable prospect of success in relation to the application or proceeding.
[26] In the absence of a provision that enabled costs to be awarded where unfair dismissal applications were made without reasonable cause, decisions of the Commission applied to the provision of ‘no reasonable prospect of success’ a test similar to the one applied by a court on an application for the exercise of summary power to stay or strike out proceedings.
[27] This was notwithstanding that the Explanatory Memorandum to the Workplace Relations Amendment (Termination of Employment) Bill 2001 had stated:
“64. The test in proposed subsection 170CJ(2) relates to the merits of the application, but would not require the likelihood of success to be as low as the ‘vexatious or without reasonable cause’ criteria in subsection 170CJ(1). Where a party knew, or ought to have known, that it was likely the application or proceeding would fail, then the Commission would have the discretion to award costs, which is less than the level of certainty required under subsection 170CJ(1).”
[28] The deletion of the provision that had enabled costs to be awarded against an applicant or union who made an unfair dismissal application vexatiously or ‘without reasonable cause’ was by way of an amendment to the Bill moved by the Democrats in the Senate. The Parliamentary Debate on those amendments included the following:
“Senator MURRAY (Western Australia) (10.17 am) ... Secondly, we have also used the language ‘no reasonable prospect of success’ throughout, so that the more expansive test is available for consideration in those matters.
...
Senator JACINTA COLLINS (Victoria) (10.20 a.m.) - Senator Murray may well have convinced me with his comment in relation to the test. If I am correct, Senator Murray’s amendments have not dealt with ensuring that the Democrats’ test, as opposed to the government’s test, on the balance of probabilities was adjusted in all areas consequential to those other ones and, in fact, this amendment deals with that component. Is that correct?
Senator MURRAY (Western Australia) (10.21 a.m.) - As I said before, I am not firing on all cylinders today, but my remark really was in response to Senator Collins’s remark. Sometimes you learn in this place that you should not do that. Senator Collins said that I had almost picked up the government amendment in toto and just amended, I think, clause 4. I indicated that I had actually carried on the language we had used elsewhere in here. For instance, the government’s language did not include the phrase ‘no reasonable prospect of success’. That is really what I meant to say to Senator Collins.
Senator JACINTA COLLINS (Victoria) (10.21 a.m.) - On that basis, if this provision does actually carry out the Democrats’ intention to change the test in this particular provision, we will change our position and support it.” 17
[29] The test applied by the Commission came about as follows:
(a) In Wright v Australian Customs Service 18 (Wright) a Full Bench of the Commission construed the term ‘no reasonable prospect of success’ in the context of then s.170CF(4) of the WR Act which provided for the summary dismissal of an unfair dismissal application by the issue of an appropriate certificate, if the Commission concluded that the application had no reasonable prospect of success. In its decision the Full Bench, drawing upon relevant authority relating to the summary dismissal of proceedings in various jurisdictions, held that:
“... a conclusion that an application had no reasonable prospect of success should only be reached with extreme caution and where the application is manifestly untenable or groundless.” 19
(b) In GH Deane v Paper Australia Pty Ltd 20 (Deane) a Full Bench of the Commission construed the term ‘no reasonable prospect of success’ when considering an application for costs in relation to an appeal. In its decision the Full Bench, when considering the expression in s.170CJ(1) in the WR Act stated:
“[7] The expression ‘no reasonable prospect of success’ also appears in ss.170CF(2)(d), 170CF(3)(b) and 170CF(4). Section 170CF(4) provides for the summary dismissal of an application for relief pursuant to s.170CE, by the issue of an appropriate certificate, if the Commission concludes that the application has no reasonable prospect of success. The construction of the expression in that context was considered by a Full Bench of the Commission in Wright v Australian Customs Service [FOOTNOTE PR926115, 23 December 2002 at paras [23] - [27] and [32]]. In that case the Full Bench, drawing upon relevant authority relating to summary dismissal of proceedings in various jurisdictions, held that a conclusion that an application had no reasonable prospect of success should only be reached with extreme caution and where the application is manifestly untenable or groundless.
[8] Making due allowance for the caution which must attend the exercise of a discretion to summarily dismiss an application, it appears to us that the approach in Wright is one we should follow. In other words, unless, upon the facts apparent to the applicant at the time of instituting the appeal, the proceeding in question was manifestly untenable or groundless, the relevant requirement in s.170CJ(1) is not fulfilled and the discretion to make an order for costs is not available.”
(c) Numerous decisions of the Commission, in considering the ‘no reasonable prospect of success’ test in relation to the unfair dismissal costs provision in s.170CJ(1) (which was renumbered as s.658(1)) have adopted the test in Wright and Deane. These include:
(i) In Kangan Batman TAFE, 21 the Full Bench when considering an appeal against a decision in respect of s.170CJ(1) was faced with a situation where it was common ground between the parties ‘that in relation to a costs application pursuant to s.170CJ(1) the relevant test is set out in the passage in Deane to which we have referred earlier’,22 namely the manifestly untenable or groundless test.
(ii) In Papunya Community Council Inc v Stephen Hanley 23 the Full Bench of the Commission, when construing the term ‘no reasonable prospect of success’ in s.658(1) applied the manifestly untenable or groundless test.
[30] Turning to the operation of the FW Act, for the reasoning which I outline below I respectfully disagree with the decision in Mr Trent Geissler v QR Passenger Pty Ltd 24 that in applying the test of ‘no reasonable prospect of success’ in paragraph 611(2)(b) it is appropriate to rely on the ‘manifestly untenable or groundless’ criteria adopted in Deane.
[31] There are a number of differences in the current legislation and other developments since Wright was decided that require consideration when applying the proper application of the ‘no reasonable prospect of success’ test contained in paragraph 611(2)(b) of the FW Act.
[32] Firstly, the scheme of the FW Act for dealing with unfair dismissal disputes is substantially different to the WR Act when Wright was decided. The WR Act included a process where a matter would be conciliated (s.650), a certificate would be issued arising from that conciliation (s.650(2)(3)(4)) and an election could be made by the applicant to proceed to arbitration (s.651). There are no equivalent provisions in the current legislation. Further, the FW Act requires FWA not to hold a hearing unless it considers it appropriate to do so after taking into account whether a hearing would be the most effective and efficient way to resolve the matter (s.399). A certificate that the Commission had concluded that one or more grounds of an unfair dismissal application had no reasonable prospect of success at arbitration, which had the effect of dismissing the relevant ground, on which the decision in Wright was based, no longer exists.
[33] Secondly, it can readily be seen that s.611 makes a distinction between an application or response that is made ‘without reasonable cause’ and where it should have been reasonably apparent that the application or response ‘had no reasonable prospect of success’. Otherwise there would be no purpose in providing the distinctly different wording in paragraphs 611(2)(a) and (b).
[34] Thirdly, since Wright and Deane there have been decisions that have considered the meaning of the ‘no reasonable prospect of success’ test.
[35] In Ashley Smith v Barwon Region Water Authority 25 (Barwon) the Full Bench considered whether the Commissioner had applied the wrong test when, before issuing a s.650(5) certificate that the unfair dismissal application had no reasonable prospect of success at arbitration, had written to the applicant indicating a preliminary view that it would appear unlikely that the applicant would be successful in the event that the matter went to arbitration. The Full Bench stated:
“[23] It seems the phrase ‘reasonable prospects of success’ conveys something less than likelihood of success. Sheppard J in Ahern v Deputy Commissioner of Taxation, [FOOTNOTE (1983) 78 FLR 202 at 213] in the observation ‘... will be likely to succeed or at least have reasonable prospects of success’ indicates a less stringent test for determining whether a matter has prospects of success. This formulation would suggest there is a question of probability on the one hand and possibility on the other.
[24] In Westend Pallets Pty Ltd v Lally [FOOTNOTE (1996) 69 IR 1] a Full Bench of the Commission equated ‘reasonable prospects of success’ with ‘arguable case’ observing that:
‘The requirement for an arguable case of either legal error or that the discretion has been miscarried will mean that applicants must demonstrate that their case has a reasonable prospect of success. [FOOTNOTE ibid at 12]’
...
[47] We discuss in paragraph [23](sic) what the expression ‘reasonable prospects of success’ conveys. The applicant’s position is that in order to find that there is no reasonable prospect of success we must be satisfied the application is manifestly untenable or groundless. He relies on the decision of the Full Bench in Wright v Australian Customs Service. [FOOTNOTE PR926115] The respondent contends that the test to be applied is one that requires a real, fair or sensible prospect of success as opposed to one that is fanciful or remote. It submitted that only reasonable, not plausible inferences in favour of the applicant should be drawn in determining the issue. It called in aid of that proposition the decision of the Federal Court in Jefferson Ford Pty Ltd v Ford Motor Company of Australia Limited. [FOOTNOTE [2008] 167 FCR 372, at [132]].
[48] Having regard to the authorities cited in argument, and in particular, those to which we specifically refer, it seems to us that an application will have no reasonable prospect of success if it is so lacking in merit or substance as to be not reasonably arguable.”
[36] More importantly, in 2005 the Federal Court Act 1976 was amended to strengthen the powers of the court by broadening the grounds on which it can summarily dispose of unsustainable cases by inserting a new s.31A (Summary Judgement). In doing so, the provision adopts a ‘no reasonable prospect of success’ test’ 26 and s.31A(3) specifically provides that a proceedings not be hopeless or bound to fail for it to have no reasonable prospect of success. Similarly worded provisions were introduced by s.25A of the Judiciary Act 1903 and s.17A of the Federal Magistrates Act 1999.
[37] Whilst there is no equivalent to s.31A(3) in the FW Act, there are sound reasons for that provision, (and comparable provisions in the Judiciary Act 1903 and the Federal Magistrates Act 1999) in statutory settings which Deane found to be analogous, being of guidance for the proper application of the term ‘no reasonable prospect of success’ in paragraph 611(2)(b), namely:
(a) the provisions relating to federal courts assist explain why the term ‘no reasonable prospect of success’ is lower than the ‘vexatious or without reasonable cause’ criteria as the Legislature had originally intended;
(b) it assists explain why the different terminology appears in the tests in paragraphs 611(2)(a) and (b) and convey different meanings;
(c) that federal courts no longer needed to find that proceedings be ‘hopeless’ or ‘bound to fail’ to satisfy the ‘no reasonable prospect of success’ test (in relation to the exercise of a summary power to strike out proceedings) was part of the surrounding circumstances within which the FW Act was enacted.
[38] There has been a considerable amount of case law relating to the correct approach to the application of s.31A. In a decision in Davis v Insolvency and Trustee Services Australia (No 3) 27 dated 12 February 2010 Foster J referred to how s.31A had ‘lowered the bar’28 and summarised the principles that are of general application to the provision. More recently, on 1 September 2010 in its decision in Spencer the High Court considered the operation and application of the provision before setting aside the decision of a Full Court of the Federal Court of Australia.29
[39] In their decision in Spencer, whilst acknowledging that the criterion in s.31A may be satisfied upon grounds wider than those existing previously, French CJ and Gummow J relied on previous cases relating to the criterion of a reasonable prospect of success. Their Honours stated:
“22. In the Federal Court and in the Court of Appeal of Queensland, the criterion of a ‘reasonable prospect’ of success has been understood in analogous statutory settings to mean a ‘real’ rather than ‘fanciful’ prospect [FOOTNOTE White Industries Aust Ltd v Federal Commissioner of Taxation [2007] FCA 511; (2007) 160 FCR 298 at 312 [59] and cases there reviewed; Deputy Commissioner of Taxation v Salcedo [2005] QCA 227; [2005] 2 Qd R 232 at 235 per Williams JA]. This exegesis adds little to the words of s 31A. The section authorises summary disposition of proceedings on a variety of bases under its general rubric. It will apply to the case in which the pleadings disclose no reasonable cause of action and their deficiency is incurable. It will include the case in which there is unanswerable or unanswered evidence of a fact fatal to the pleaded case and any case which might be propounded by permissible amendment. It will include the class of case in the longstanding category of cases which are ‘frivolous or vexatious or an abuse of process’. The application of s 31A is not, in terms, limited to those categories.
...
25. Section 31A(2) requires a practical judgment by the Federal Court as to whether the applicant has more than a ‘fanciful’ prospect of success. That may be a judgment of law or of fact, or of mixed law and fact. Where there are factual issues capable of being disputed and in dispute, summary dismissal should not be awarded to the respondent simply because the Court has formed the view that the applicant is unlikely to succeed on the factual issue. Where the success of a proceeding depends upon propositions of law apparently precluded by existing authority, that may not always be the end of the matter. Existing authority may be overruled, qualified or further explained. Summary processes must not be used to stultify the development of the law. But where the success of proceedings is critically dependent upon a proposition of law which would contradict a binding decision of this Court, the court hearing the application under s 31A could justifiably conclude that the proceedings had no reasonable prospect of success.
26. Where an application under s 31A requires consideration of apparently complex questions of fact, then the caution uttered by Lord Hope is relevant [See above at [21]]. The importance of those considerations is amplified if the case involves resolution of issues of law and fact, or mixed law and fact.”
[40] However in their seminal decision in Spencer, a majority of members (Hayne, Crennan, Kiefel and Bell JJ) took a wider view of s.31A, and cautioned that it would be dangerous to seek to elucidate the meaning of the term ‘no reasonable prospect of successfully prosecuting’ therein by reference to earlier cases. Their Honours stated:
“53. In this respect, s 31A departs radically from the basis upon which earlier forms of provision permitting the entry of summary judgment have been understood and administered. Those earlier provisions were understood as requiring formation of a certain and concluded determination that a proceeding would necessarily fail. That this was the basis of earlier decisions may be illustrated by reference to two decisions of this Court often cited in connection with questions of summary judgment: Dey v Victorian Railways Commissioners [FOOTNOTE (1949) 78 CLR 62; [1949] HCA 1] and General Steel Industries Inc v Commissioner for Railways (NSW) [FOOTNOTE (1964) 112 CLR 125; [1964] HCA 69].
54. In Dey, the defendants moved for summary judgment on the grounds that the action was frivolous, vexatious and an abuse of process. In a passage often later cited, Dixon J said [FOOTNOTE [1949] HCA 1; (1949) 78 CLR 62 at 91] that ‘[a] case must be very clear indeed to justify the summary intervention of the court to prevent a plaintiff submitting his case for determination in the appointed manner by the court with or without a jury’. What Dixon J meant by ‘very clear’ was identified by his observation [FOOTNOTE [1949] HCA 1; (1949) 78 CLR 62 at 91.] that ‘once it appears that there is a real question to be determined whether of fact or law and that the rights of the parties depend upon it, then it is not competent for the court to dismiss the action as frivolous and vexatious and an abuse of process’ (emphasis added). And there would be a ‘real question’ unless the defendant could ‘show that it was so certain that [the question] must be answered in the [defendant’s] favour that it would amount to an abuse of the process of the court to allow the action to go forward for determination according to the appointed modes of procedure’ [FOOTNOTE [1949] HCA 1; (1949) 78 CLR 62 at 90] (emphasis added). The test identified by Dixon J in Dey can thus be seen to be a test requiring certain demonstration of the outcome of the litigation, not an assessment of the prospect of its success.
...
56. Because s 31A(3) provides that certainty of failure (‘hopeless’ or ‘bound to fail’) need not be demonstrated in order to show that a plaintiff has no reasonable prospect of prosecuting an action, it is evident that s 31A is to be understood as requiring a different enquiry from that which had to be made under earlier procedural regimes. It follows, of course, that it is dangerous to seek to elucidate the meaning of the statutory expression ‘no reasonable prospect of successfully prosecuting the proceeding’ by reference to what is said in those earlier cases.”
[41] Turning to the meaning ‘no reasonable prospect’ in s.31A their Honours continued:
“58. How then should the expression ‘no reasonable prospect’ be understood? No paraphrase of the expression can be adopted as a sufficient explanation of its operation, let alone definition of its content. Nor can the expression usefully be understood by the creation of some antinomy intended to capture most or all of the cases in which it cannot be said that there is ‘no reasonable prospect’. The judicial creation of a lexicon of words or phrases intended to capture the operation of a particular statutory phrase like ‘no reasonable prospect’ is to be avoided. Consideration of the difficulties that bedevilled the proviso to common form criminal appeal statutes [FOOTNOTE Weiss [2005] HCA 81; (2005) 224 CLR 300 at 312-318 [31] - [47]], as a result of judicial glossing of the relevant statutory expression, provides the clearest example of the dangers that attend any such attempt.
59. In many cases where a plaintiff has no reasonable prospect of prosecuting a proceeding, the proceeding could be described (with or without the addition of intensifying epithets like ‘clearly’, ‘manifestly’ or ‘obviously’) as ‘frivolous’, ‘untenable’, ‘groundless’ or ‘faulty’. But none of those expressions (alone or in combination) should be understood as providing a sufficient chart of the metes and bounds of the power given by s 31A. Nor can the content of the word ‘reasonable’, in the phrase ‘no reasonable prospect’, be sufficiently, let alone completely, illuminated by drawing some contrast with what would be a ‘frivolous’, ‘untenable’, ‘groundless’ or ‘faulty’ claim.
60. Rather, full weight must be given to the expression as a whole. The Federal Court may exercise power under s 31A if, and only if, satisfied that there is ‘no reasonable prospect’ of success. Of course, it may readily be accepted that the power to dismiss an action summarily is not to be exercised lightly. But the elucidation of what amounts to ‘no reasonable prospect’ can best proceed in the same way as content has been given, through a succession of decided cases, to other generally expressed statutory phrases, such as the phrase ‘just and equitable’ when it is used to identify a ground for winding up a company. At this point in the development of the understanding of the expression and its application, it is sufficient, but important, to emphasise that the evident legislative purpose revealed by the text of the provision will be defeated if its application is read as confined to cases of a kind which fell within earlier, different, procedural regimes.”
Proper application of tests in paragraphs 611(2)(a) and (b)
[42] For the purposes of s.611(2), in order to be ‘satisfied’ FWA must make an assessment and arrive at the required conclusion on the balance of probabilities.
[43] The term ‘reasonably apparent’ means that in undertaking its assessment FWA must act objectively. In this case, this means that FWA must form its own opinion as to whether it would have been apparent to a reasonable person in the position of Cowra Quartz (i.e., with the knowledge that was known or ought reasonably to have been known by it) that its response to Mr Walker’s application had no reasonable prospect of success. This objective assessment does not exclude consideration of matters of impression or interpretation as perceived by Cowra Quartz or its motivations. However FWA cannot, without more, rely on such matters as that would be to apply a subjective test. Rather FWA must, in considering matters such as views and motivations, apply an objective test by assessing their reasonableness and not rely on any that are unreasonable. 30
[44] In relation to the criteria ‘without reasonable cause’ and ‘no reasonable prospect of success’, I have concluded that:
(a) the criteria ‘no reasonable prospect of success’ in paragraph 611(2)(b) is lower and wider than the term ‘without reasonable cause’ referred to in paragraph 611(2)(a), which is similar to the test traditionally applied by a court to summarily dismiss actions. 31 Circumstances which satisfy the ‘without reasonable cause’ test would be likely to satisfy the ‘no reasonable prospect of success’ criterion, but the reverse would not necessarily apply.
(b) when FWA is required to form an opinion as to whether the application had a reasonable prospect of success, it is not to undertake an assessment of whether a certain and concluded determination could be made that the proceedings would necessarily fail. 32 The test in paragraph 611(2)(b) is not about whether there is no ‘real’ prospect of success and does not of necessity require that the proceedings were hopeless or bound to fail (by applying a test such as whether an application is manifestly untenable or groundless).33
(c) a similar approach should be taken by FWA to the construction of the expression ‘no reasonable prospect of success’ as was adopted by the majority of members of the High Court in Spencer in respect of the term ‘no reasonable prospect’, namely:
“No paraphrase of the expression can be adopted as a sufficient explanation of its operation, let alone definition of its content. Nor can the expression usefully be understood by the creation of some antinomy intended to capture most or all of the cases in which it cannot be said that there is ‘no reasonable prospect’. The judicial creation of a lexicon of words or phrases intended to capture the operation of a particular statutory phrase like ‘no reasonable prospect’ is to be avoided. ... Rather, full weight must be given to the expression as a whole.” 34
(d) it is a matter of judgement, sometimes of fine judgement, in all of the circumstances of a particular case whether an application or response had no reasonable prospect of success.
(e) an assessment of whether an application or response was made without reasonable cause or had no reasonable prospect of success should be undertaken with caution, particularly when the matter had not been determined by FWA and questions of fact and issues of law are important and in dispute.
[45] It follows from my consideration of the proper application of the tests in paragraphs 661(2)(a) and (b) that I do not agree with the Cowra Quartz submission that:
“... both limbs (a) and (b) posit tests which are similar to the tests applied by courts in summary dismissal proceedings - the power to summarily strike out or stay proceedings.” 35
[46] There appeared to be a consensus between the parties that, in respect of unfair dismissal proceedings that are determined by FWA:
(a) the point in time that the test in paragraph 611(2)(a) is assessed is when the parties file their evidence in response to FWA directions (and an assessment can be made on the uncontested material facts); and
(b) the point in time that the test in paragraph 611(2)(b) is assessed is, any time up until the parties complete their evidence and submissions, i.e., the arbitration process is completed. 36
It has not been necessary for me to decide on these issues and I decline to do so. 37
Consideration
[47] It is trite to say that under s.611 a party cannot be ordered to bear the costs of the other party simply because the party’s case proves unsuccessful.
[48] Cowra Quartz seeks to make too much of my closing comments at the arbitration hearing by submitting that my statement about reading the material and reflecting on it ‘provides in and of itself a complete answer to the s.611 application in the circumstances of this case’. 38 Given the requirement for FWA to act judicially and the conflicting evidence, the approach I took in rereading the material and reflecting on the evidence and submissions was unremarkable and no more than the adoption of a cautious and earnest approach to my statutory obligations.
[49] The dismissal of Mr Walker was ‘on the basis of theft.’ At the very heart of the arbitration proceedings was the factual contest on whether or not oil in the container on the back of Mr Walker’s utility was oil from the drum in the workshop. Cowra Quartz had evidence that a sample that its manager sent for analysis came from the drum. Mr Walker had evidence that showed that a sample he and Mrs Walker sent for analysis did not come from the workshop drum. In my decision I found that without Cowra Quartz having the evidence about the sample of oil ‘to say that the case against Mr Walker is flimsy and circumstantial is an overstatement.’ (paragraph 80(a)).
[50] It is to misunderstand the case, to submit that there was a factual contest between the experts that FWA needed to resolve by weighing up their competing evidence. The experts essentially agreed (paragraph 48). There was no dispute between the parties that:
(a) the sample of oil from the container that Mr and Mrs Walker sent for analysis (sample B2) was not the same oil as the samples of oil that the manager sent for analysis (samples A1 or A2); and
(b) the samples of oil that the manager sent for analysis (samples A1 and A2) were of the same oil.)
[51] Therefore the crux of the case was which of the different samples of oil that Mr Walker and the manager each said they took from the container actually came from the container on the back of Mr Walker’s utility.
[52] The success of Cowra Quartz’ response to Mr Walker’s application was dependent almost entirely on the evidence that the sample of oil which the manager sent for analysis came from Mr Walker’s container. The manager said it did.
[53] I preferred the evidence of Mr Walker (who I found to be a reliable witness) over the evidence of the manager. However this was not the usual type of case where simply some evidence is preferred over other evidence because there is a difference between witnesses’ genuine perceptions or recollection of events or the differences are of degree or the like.
[54] Rather, I found:
‘[58] A lot of the evidence of (the manager)(sic) was vague, inconsistent or improbable. His demeanour did not appear to be that of a truthful witness with a reasonable recollection of events for which he, as the manager of the quarry, was responsible.’
[55] A finding that a person is not a reliable witness is not made lightly. It means that the individual gave dishonest or misleading evidence, with the consequence that his or her evidence is rejected. As stated by the Full Bench in M Blagojevch: 39
“9. ... Adverse findings on credit are rarely made in Commission proceedings, certainly less frequently than they are made in civil proceedings. Perhaps there is something in the history and nature of the jurisdiction which makes the Commission reluctant to make adverse findings about the integrity of individuals. Certainly such findings are not often made in S.170CE applications. When they are made it is usually only because they are necessary to decide the case.”
[56] Whilst the Full Bench continued paragraph 9 of M Blagojevch with the following in the context of whether the party ‘had acted unreasonably’ under a provision of the WR Act, the thrust of the statement is equally apposite in the current context where FWA has to make an assessment of whether the prospects of success of a response to an unfair dismissal application ‘should have been reasonably apparent’.
“When the Commission is dealing with an application for costs pursuant to s.170CJ, however, it is required to examine the conduct of the party against whom the order is sought in order to assess whether that party’s conduct was reasonable. This means that the findings in the main application may require careful examination. Findings suggestive of dishonesty, even though the findings are indirect, may have a greater significance in that context.” (emphasis added)
[57] I found that the sample of oil sent for analysis by Mr and Mrs Walker was oil from the container.
[58] Further, I found that the samples that the manager sent for analysis were of different oil. Logic demands that implicit in that finding is that the samples of oil that the manager sent for analysis were not from the container on the back of Mr Walker’s utility.
[59] In saying that the sample of oil he sent for analysis was oil from the container, the manager gave evidence that I rejected. 40
[60] The totality of the manager’s evidence (and my finding he was an unreliable witness) do not support a proposition that the manager gave false evidence thinking it to be true.
[61] The findings I made are of sufficient character to indicate that I was of the view that the manager knowingly sent a sample of oil that was not from the container on the back of Mr Walker’s utility for analysis, i.e., he acted dishonestly. Even though I made no such explicit finding, this costs application should be dealt with on the basis that a finding of that character has been made and is implicit in my decision. 41
[62] This situation is far different to seeking to impute knowledge of certain facts to a party simply based on findings ultimately made by the tribunal in the matter.
[63] There was scant evidence of the involvement of persons employed by Cowra Quartz, other than Ms Martins who was not a decision-maker, in the disciplinary process and the decision to terminate Mr Walker’s employment. Rather the evidence was that the manager played a crucial role in the process and decision, namely:
(a) it was the manager who first raised with Mr Walker whether he had put oil from workshop drums into containers on the back of his utility.
(b) it was the manager who took a sample of oil from the container on the back of Mr Walker’s utility.
(c) it was the manager who sent a sample of oil that was not from Mr Walker’s container for analysis.
(d) the manager wrote to Mr Walker on 16 July 2010 (not just a letter under his signature block) saying that ‘the allegation of misappropriation has been concluded’ and that: ‘Given the seriousness of the misconduct, I am writing to inform you that you will be required to attend a formal disciplinary hearing...’ and that the meeting was to take place with ‘myself, with Michelle Rowe also in attendance.’ (The meeting did not eventuate as Mr Walker did not attend.)
(e) it was a letter under the manager’s signature block to Mr Walker’s solicitors that stood Mr Walker down and required him to attend another disciplinary meeting.
(f) at the next disciplinary meeting, it was the manager and the Group General Manager who met with Mr Walker.
(g) it was a letter under the manager’s signature block to Mr Walker’s solicitors that directed Mr Walker to attend the further meeting to give him a ‘final opportunity to respond to the findings’ of the investigation.
(h) at the further disciplinary meeting it was the manager who met with Mr Walker.
(i) following the final meeting, it was Ms Martins’ evidence that:
“... I received a telephone call from (the manager)(sic) concerning the disciplinary meeting with Mr Walker. We had a conversation to the following effect:
(The manager)(sic) said: ‘I have had another meeting with Wayne Walker this morning.’
I said: ‘ Did he agree to discuss the results of our testing?’
(The manager)(sic) said: ‘No he declined to comment again and as we have now given him several opportunities to put his case forward and he has chosen not to, I have terminated his employment as of today.’
I said: ‘I will draft a letter to him giving our reasons for termination.’” (Emphasis added)
(j) it was a letter under the manager’s signature block to Mr Walker’s solicitors which stated that Mr Walker’s employment was terminated on the basis of theft.
[64] Clearly, the manager was acting for and on behalf of the company. Mr Walker and his lawyers were to regard the manager as the nominated representative of his employer in respect of the allegation against Mr Walker and the dismissal process.
[65] In these costs proceedings Cowra Quartz submitted that ‘the company’ was entitled to rely on what the manager had told it and that in the application of the tests in paragraphs 611(2)(a) and (b) any frolic by the manager should not be visited on the company. 42
[66] I disagree. The manager was the individual authorised to act on behalf of Cowra Quartz. His authority was ostensible if not actual. The company chose to rely on the manager’s evidence and that evidence cannot somehow be disregarded. There was no evidence that the manager went on a frolic of his own, although there was no evidence which suggested that Ms Martins had any knowledge of the origin of the sample of oil that the manager sent for analysis.
[67] In the circumstances, given the manager’s crucial role in Cowra Quartz’ response to Mr Walker’s application (paragraph 52 above) (and there was no evidence by anyone else that they were responsible for Cowra Quartz’ response to Mr Walker’s unfair dismissal application), I do not accept that Cowra Quartz can claim that for the purposes of paragraphs 611(2)(a) and (b) the respondent should be absolved of responsibility for the role played by its nominated representative. A logical extension of the company’s submission would be that employers which are corporations would be shielded from an order to bear all or some of the costs of an unfair dismissal applicant in circumstances where the evidence that the corporation chooses to rely on is concocted or knowingly false.
[68] In my view the manager had sufficient actual or ostensible authority such that he should, in effect, be regarded as the ‘first person’ for the purposes of paragraphs 611(2)(a) and (b). In circumstances where a company’s nominated representative in the dismissal process acts dishonestly in relation to the crux of the employer’s response to the unfair dismissal application, the notion of legal entity cannot be used to defeat the application of s.611(2) to the corporation.
[69] At the time when Cowra Quartz filed its outline of submissions, witness statements and other documentary material on which it intended to rely in the arbitration proceedings, it was known within the corporation, by the manager at the least, that Cowra Quartz’ response to Mr Walker’s application was falsely based. Also, before the response was lodged, anyone else who had some responsibility within the company for the response would have, or should have, known of the analysis that had been lodged on behalf of Mr Walker, which demonstrated that the oil he had taken from the container was not oil from the drum 43 and chose not to accept it.
[70] This state of affairs continued throughout the arbitration proceedings up until the time I reserved my decision, notwithstanding that Cowra Quartz knew only too well that Mr Walker was vigorously challenging the finding that he had oil from the drum in his container. Cowra Quartz persisted with its opposition to the application, even subsequent the manager’s poor performance as a witness.
[71] Knowledge on the part of Cowra Quartz as to the illegitimacy of the sample of oil sent by the manager for analysis should be taken into account in assessing whether its response to Mr Walker’s application was made without reasonable cause. Once the truth became known Cowra Quartz’ opposition to Mr Walker’s application had to fail because there would have been no disputed fact as to whether Mr Walker had oil from the drum in his container. Therefore my assessment is that the company’s response was made without reasonable cause. For similar reasons, my assessment is that it should have been ‘reasonably apparent’ to the company that its opposition of Mr Walker’s application had no reasonable prospect of success. 44
[72] I am satisfied that based on the facts known to Cowra Quartz, its response to the application was made without reasonable cause (paragraph 611(2)(a)). Further, in respect of the lesser and wider test, I satisfied that a reasonable person in full knowledge of the facts as known to the manager, would have realised that when the truth became known Cowra Quartz’ response to the application had no reasonable prospect of success (paragraph 611(2)(b)).
Discretion
[73] Given that my findings have enlivened FWA’s jurisdiction under s.611(2), I must consider whether I exercise the discretion in favour of ordering that Cowra Quartz bear costs of Mr Walker in relation to his application, as an exception to the general rule that a person must bear their own costs in relation to a matter before FWA.
[74] In respect of FWA’s discretion, unlike the situation in most other jurisdictions where in litigation proceedings ‘costs follow the event’ and where a finding in favour of the successful party usually controls the exercise of the discretion, in this jurisdiction it does not necessarily follow that if FWA is satisfied that either of the limited circumstances in paragraphs 611(2)(a) or (b) apply, that the discretion will be exercised. As stated by the Full Bench in Brazilian Butterfly Pty Ltd v Alissia Charalambous 45 in relation to a similar provision under the WR Act:
“[4] The power to award costs conferred by s.170(2) is clearly discretionary in nature. It provides that where the Commission is ‘satisfied’ of certain matters then the Commission ‘may’ make an order for costs. [See Kurc Nominees v. Saddington, PR966909, Lacy SDP, Hamilton DP, Cribb C, 10 March 2006, at paragraphs 23-24] In Coal and Allied Operations Pty Ltd v Australian Industrial Relations Commission [(2000) 203 CLR 194] the High Court observed that: [at p 204 per Gleeson CJ, Gaudron and Hayne JJ]
‘Discretion’ is a notion that ‘signifies a number of different legal concepts’. In general terms, it refers to a decision-making process in which ‘no one [consideration] and no combination of [considerations] is necessarily determinative of the result.’ Rather, the decision-maker is allowed some latitude as to the choice of the decision to be made. The latitude may be considerable as, for example, where the relevant considerations are confined only by the subject-matter and object of the legislation which confers the discretion. On the other hand, it may be quite narrow where, for example, the decision-maker is required to make a particular decision if he or she forms a particular opinion or value judgment. (footnotes omitted)”
[75] Cowra Quartz did not submit that should I be satisfied of either of the criteria in paragraphs 611(2)(a) and (b), that there were reasons why I should not exercise my discretion to order that it bear all or some of Mr Walker’s costs.
[76] When FWA exercises its discretion to order that a party bear costs of another party, it has a further discretion to decide whether the costs to be borne are some or all of the costs of the other party (on a part-party or indemnity basis).
[77] Mr Walker was put to considerable expense to meet a case that was without substance. In the absence of the manager’s deliberate falsehood in purporting to send a sample of oil that was from Mr Walker’s container for analysis, Cowra Quartz had virtually no case.
[78] In all of the circumstances I propose to exercise my discretion by making an order for costs under s.611(2).
[79] In respect of the costs to be ordered, I am mindful that in taking a sample of oil from Mr Walker’s container without his authority and not advising Mr Walker of this until several days later and participating in the disciplinary proceedings against Mr Walker and the decision to dismiss him whilst knowing that the sample he sent for analysis was not the sample from Mr Walker’s container, the manager’s conduct demonstrated a wilful intention of wrongdoing.
[80] Such an intention, when it involves the serious consequences of a finding of theft, warrants the exercise of my discretion in favour of an order of costs on an indemnity basis. There is no conduct on the part of Mr Walker that would warrant my ordering that Cowra Quartz bear less than all of the costs of Mr Walker in relation to his application.
[81] In all of the circumstances of the case, I have decided to order that Cowra Quartz bear the legal and professional costs and disbursements incurred by Mr Walker in relation to his s.394 application on an indemnity basis up until the conclusion of the hearing on 26 November 2010.
[82] I order accordingly.
COMMISSIONER
Appearances:
Mr R Moore, Counsel for the Applicant
Mr P Ginters, Barrister for the Respondent
Hearing details:
2011
Sydney
March 11
2 Its written outline also included a submission that the material on behalf of Mr Walker that was not filed within the timetable contained in FWA’s Directions not be accepted. At the hearing Cowra Quartz indicated it had nothing to say about this and I indicated that a party’s late lodgement of submissions was usually dealt with by an application for an adjournment rather than an application to strike out the submissions. (PN10-PN11)
3 PN2944.
4 Paragraph 47 incorrectly referred to the sample from Mr Walker’s container and the sample from the diesel drum in his shed as Samples B1 and B2 respectively when, to accord with the expert evidence in paragraph 49, they should have been described as Samples B2 and B1 respectively. Further paragraph 51 referred to Mr Walker’s sample from his container as B1 when it should have been described as B2.
5 Print Q3750, 17 July 1998, per Ross VP, Watson SDP, Whelan C.
6 Section 347 of the Industrial Relations Act 1988 contained a prohibition against the awarding of costs except in specified circumstances (and a number of Full Bench decisions of the Commission determined that the provision did not apply to matters before the Commission) and s.170CJ of the WR Act expressly conferred upon the Commission the power to award costs in relation to termination of employment applications.
7 [1991] FCA 188; 28 FCR 324; (1991) 39 IR 31 (8 May 1991).
8 [1964] HCA 69; (1964) 112 CLR 125 (9 November 1964).
9 [2010] HCA 28 (1 September 2010).
10 As referred to in General Steel.
11 [1992] FCA 366 (31 July 1992).
12 s.347 (Costs only where proceedings instituted vexatiously etc.) included:
“(1) A party to a proceeding (including an appeal) in a matter arising under this Act shall not be ordered to pay costs incurred by any other party to the proceeding unless the first-mentioned party instituted the proceeding vexatiously or without reasonable cause.”
13 [2006] FCAFC 199, 160 IR 405, 415-416, per Black CJ, North & Mansfield JJ.
14 s.347 (Costs only where proceedings instituted vexatiously etc.) sincluded:
“(1) A party to a proceeding (including an appeal) in a matter arising under this Act (other than an application under section 170CP) shall not be ordered to pay costs incurred by any other party to the proceeding unless the first-mentioned party instituted the proceeding vexatiously or without reasonable cause.”
15 [2009] FCA 339 (9 April 2009).
16 Op cit.
17 Senate Official Hansard, 8 August 2001, page 25828.
18 PR926115, 23 December 2002, per Giudice P, Williams SDP, Foggo C.
19 Para 32.
20 PR932454, 6 June 2003, Giudice P, Williams SDP, Simmonds C.
21 PR958003, 13 May 2005, per Ross VP, Kaufman SDP, Foggo C.
22 At para 49.
23 PR974659, 27 November 2006, per Lawler VP, Harrison SDP, Raffaeli C.
24 [2010] FWA 1939, 13 October 2010, per Spencer C.
25 [2009] AIRCFB 769, 28 August 2009, per Lacy SDP, Ives DP, Grainger C.
26 Section 31A includes:
“Summary judgment
(1) The Court may give judgment for one party against another in relation to the whole or any part of a proceeding if:
(a) the first party is prosecuting the proceeding or that part of the proceeding; and
(b) the Court is satisfied that the other party has no reasonable prospect of successfully defending the proceeding or that part of the proceeding.
(2) The Court may give judgment for one party against another in relation to the whole or any part of a proceeding if:
(a) the first party is defending the proceeding or that part of the proceeding; and
(b) the Court is satisfied that the other party has no reasonable prospect of successfully prosecuting the proceeding or that part of the proceeding.”
27 [2010] FCA 69 at paras 5 & 6.
28 An expression previously used by Lindgren J in White Industries Aust Ltd v Federal Commissioner of Taxation [2007] FCA 511 (11 April 2007) at para 54.
29 Spencer v Commonwealth of Australia [2009] FCAFC 38 (24 March 2009), Black CJ, Jacobson & Jagot JJ.
30 Refer to decision of the Full Court of the Federal Court in Council of Kangan Batman Institute of Technology and Further Education v Australian Industrial Relations Commission, op cit at paras 41-47 & 61.
31 That test being referred to in General Steel, op cit, at paras 8-10 and in Dey v Victorian Railways Commissioners, (1949) 78 CLR 62; [1949] HCA 1.
32 Refer to the decision of Hayne, Crennan, Kiefel, and Bell JJ in Spencer, op cit, at para 52.
33 In Spencer, op cit, Hayne, Crennan, Kiefel, and Bell JJ stated that the two phrases ‘no real prospect’ and ‘no reasonable prospect’ convey very different meanings’. (at para 51)
34 At paras 58 & 60.
35 PN611 - PN614.
36 PN743.
37 I did not have the benefit of submissions of why, for example, the approach taken in Polynol Plastics Plastics (Aust) Pty Ltd v P. Moss [Print T2112, 20 October 2000, per Williams SDP, Acton SDP, Gay C, at para 13] does not apply.
38 PN365.
39 S9124, 15 August 2000, per Giudice P, Acton DP, Whelan C.
40 Of course, ‘... as a matter of logic and common sense, something more than mere rejection of a person’s evidence is necessary before there can be a positive finding that he or she deliberately lied in the giving of that evidence.’ [Decision of Brennan, Dawson, Toohey, and Gaudron JJ in Smith v New South Wales Bar Association, [1992] HCA 36, (1992) 176 CLR 256 (13 August 1992), at para 37.]
41 Whilst the decision of Moore J in Blagojevch v Australian Industrial Relations Commission, [2000] FCA 483 (18 April 2000), 98 IR 32, at para 15, made it clear that the tribunal ‘must determine whether an order for costs should be made by reference to the facts as found’ because ‘both the parties and the Commission would be constrained in their arguments about, and conclusions upon, questions of costs by any relevant findings of fact made by the Commission in determining the application itself’, in that decision, even though there had been no express finding that evidence had been deliberately concocted, according to the Full Bench in M Blagojevch, op cit, Marshall and Lehane JJ (at para 35), reached the view that findings of that character had been made. At para 36, Marshall and Lehane JJ found that ‘... on the Commissioner’s findings ... it is implicit that false evidence had been deliberately given’.
42 PN443.
43 There was no evidence that Mr Walker provided Cowra Quartz with the analysis he obtained prior to the company being served with the witness statement of Mr Garnon (an expert witness).
44 In the circumstances it is wrong to characterise the situation, as was submitted by Cowra Quartz, that: ‘The respondent came before this tribunal on the basis that its position and its belief was that the applicant had unlawfully removed oil from its premises.’ (PN393)
45 PR968915, 25 August 2006, per Lawler VP, Hamilton DP, Hingley C.
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