| [2018] FWC 3286 [Note: An appeal pursuant to s.604 (C2018/3656) was lodged against this decision.] |
| FAIR WORK COMMISSION |
DECISION |
Fair Work Act 2009
s.402 - Application for costs orders against lawyers and paid agents under s.401
Charles Parletta Real Estate Pty Ltd
v
Ms Maria D’Ortenzio
and
Mr Nicola Minicozzi
COMMISSIONER PLATT |
ADELAIDE, 14 JUNE 2018 |
Application for costs pursuant to s.400A, s.401 and s.611 of the Fair Work Act 2009 – application made vexatiously – unreasonable act – no reasonable prospects of success – costs awarded against applicant.
[1] This is an application by Charles Parletta Real Estate Pty Ltd (CPRE) seeking an order for costs against Ms Maria D’Ortenzio and her representative, Mr Nicola Minicozzi pursuant to s. 611 and/or s.400A of the Fair Work Act 2009 (the Act).
[2] The application is made following the dismissal of an earlier application made pursuant to s.394 of the Act by Ms D’Ortenzio. 1 The reasons for this decision are recorded in Maria D’Ortenzio v Charles Parletta Real Estate Pty Ltd T/A LJ Hooker Glynde2.
[3] On 31 March 2018 Directions were issued for the filing of submissions and replies by all parties. The parties were advised that in the absence of any factual dispute the matter would be determined on the papers. On 20 April 2018 the parties advised that I should determine the matter based on the submissions without conducting a hearing.
[4] At the time of the dismissal the Respondent traded as LJ Hooker Glynde. In the period after the dismissal CPRE changed its structure and it no longer trades as LJ Hooker Glynde. To the extent necessary, I exercise my power under s.586 to amend the name of the Respondent by deleting the reference to “trading as LJ Hooker Glynde”.
[5] The key allegations relied upon to support the dismissal of Ms D’Ortenzio were detailed at paragraph [203] of the decision and are reproduced below:
• The breakdown of the working relationship.
• A communication to the National Australia Bank and Commonwealth Bank of Australia whereby the banks were advised of an impending litigation against LJ Hooker Glynde.
• The conversation with Mr Adcock of LJ Hooker concerning allegations that Mr Parletta had engaged in improper conduct.
• The communication to Mr Bonomi (LJ Hooker St Peters) advising that Mr Parletta had engaged in improper conduct.
• Failing to disclose the true nature of transactions made in the course of her sales duties on behalf of Mr Minicozzi in a manner which denied the LJ Hooker franchisor of a contractual benefit.
• The deficiencies identified by the HR Room Report.
[6] At paragraphs [205] to [226] of the decision I made findings in respect of the allegations which are reproduced below:
“Breakdown of the working relationship
[205] It appears that prior to 2015 there was a harmonious working relationship between Ms D’Ortenzio and Mr Parletta, however at around the time Ms D’Ortenzio commenced a relationship with Mr Minicozzi, things began to change for the worst. This is not intended to be any reflection upon Mr Minicozzi.
[206] It appears that the driver for the growing disharmony was Ms D’Ortenzio’s 15% shareholding and her view that she would receive the value of this shareholding upon Mr Parletta’s sale of the business. Ms D’Ortenzio appeared frustrated with the time it was taking for the sale to occur and this together with her desire to change her work life balance drove the status of her relationship with Mr Parletta from discontent to dysfunction.
[207] I have discounted the apparent differences in Ms D’Ortenzio’s temperament which I have received evidence on and observed her demeanour to be more driven, demanding and confrontational compared to Mr Parletta’s relaxed, conciliatory, and conflict avoiding approach. I have treated the occasional instance of inappropriate language (e.g. ‘va fungula’) or statements like ‘If you don’t like it sack me’, and displays of frustration (e.g. thumping of the table, and arguments in front of Mr Mazzone) to these temperament differences.
[208] I formed the view that at times Ms D’Ortenzio sought to downplay the conflict between her and Mr Parletta. Her evidence was inconsistent on the topic at first. In answer to the proposition that her relationship with Mr Parletta was unworkable Ms D’Ortenzio said ‘maybe not.’ In her statement Ms D’Ortenzio contended that ‘Mr Parletta had implemented a deliberate campaign to manage her out of the business, yet in cross-examination she sought to downplay that observation. Ms D’Ortenzio’s evidence on the status of her working relationship with Mr Parletta was not credible.
[209] When the evidence is considered, the signposts of dysfunction are omnipresent, breakdown of relationships with Ms Conti and Ms D’Angelo, the decision to require communications between her and Mr Parletta in writing, verbal threats made towards Mr Parletta regarding the communications with the banks and Mr Bonomi and her own evidence of the lack of trust to name a few. It is clear from the totality of the evidence that the work relationship started to deteriorate in 2015 and by the time of the dismissal was poisoned to the point of being totally dysfunctional.
[210] Ms D’Ortenzio sought to make a distinction between the status of her relationship with Mr Parletta as a shareholder and her relationship as an employee. Ms D’Ortenzio accepted that the trust was lost in the shareholder context but appeared to contend that the employment relationship was unaffected. I do not accept this distinction, it is clear that the lack of trust applied to the entire relationship.
[211] In cross-examination, Ms D’Ortenzio agreed that she was suing LJ Hooker Glynde for unpaid commissions, had two Supreme Court actions underway, an underpayment of wages claim in the South Australian Employment Tribunal and was the respondent in a claim suit from LJ Hooker Glynde in respect of an alleged overpayment of wages. This is not indicative of a working relationship.
Communications with the National Australia Bank and Commonwealth Bank of Australia
[212] It is not in dispute that Ms D’Ortenzio instructed Mr Minicozzi to write to the Commonwealth Bank of Australia and the National Australia Bank seeking information to assist with the taking of proceedings against LJ Hooker Glynde. I have no doubt that this communication would have raised questions about the conduct of the LJ Hooker Glynde business by the banks.
[213] I find that this communication was in breach of the specific terms of Ms D’Ortenzio’s contract of employment relating to her obligation to further the business and reputation of the employer, and not to damage or expose the property or goodwill of the employer and adversely impacted the working relationship between Ms D’Ortenzio and Mr Parletta.
Conversation with Mr Adcock of LJ Hooker concerning allegations that Mr Parletta had engaged in improper conduct
[214] There is no dispute that Ms D’Ortenzio raised concerns with Mr Adcock that Mr Parletta had engaged in conduct which breached the requirements of the Land Agents Act 1994 (SA) on the basis that it could adversely impact the LJ Hooker brand.
[215] Whilst I have doubt as to the real motivations of Ms D’Ortenzio, I accept Mr Adcock’s evidence that he was the appropriate person to deal with complaints of this nature and saw nothing improper in Ms D’Ortenzio’s approach. I find no impropriety on Ms D’Ortenzio’s behalf in this respect.
Communication to a prospective purchaser of LJ Hooker Glynde advising that Parletta had engaged in improper conduct
[216] It is clear that Ms D’Ortenzio instructed Mr Minicozzi to contact Mr Bonomi who was the representative of a prospective purchaser of Mr Parletta’s business on or about 30 June 2017. Mr Minicozzi could only have become aware of the information that he discussed with Mr Bonomi because of Ms D’Ortenzio. I believe from Ms D’Ortenzio’s evidence that she was well aware of what was to be discussed by her solicitor, Mr Minicozzi. Mr Bonomi’s account of the conversation was not challenged and Mr Minicozzi was present during the Hearing. I do not propose to draw an adverse inference on the basis of Mr Minicozzi not giving evidence.
[217] The information Mr Minicozzi relayed to Mr Bonomi on Ms D’Ortenzio’s behalf had the effect of impugning not only Mr Parletta but the entire LJ Hooker Glynde office. The communication had the effect of putting the sale in jeopardy.
[218] Mr Bonomi is not in a similar position to Mr Adcock and there does not appear to be any other plausible explanation as to why Ms D’Ortenzio would orchestrate this communication other than to prevent or impede the sale of the LJ Hooker Glynde business.
[219] I find that Ms D’Ortenzio’s conduct in instructing Mr Minicozzi to communicate the information about Mr Parletta’s alleged breaches of the Land Agents Act 1994 (SA) to Mr Bonomi was treacherous, a breach of the express terms of her employment contract and fatally damaged her working relationship with Mr Parletta.
Failing to disclose the true nature of transactions made in the course of her sales duties which denied the LJ Hooker Franchisor of a contractual benefit
[220] There is no dispute that Ms D’Ortenzio reduced her commission on services provided to Mr Mazzone and Mr Minicozzi. There does not appear to have been any impropriety on behalf of Ms D’Ortenzio in reducing her commission. The effect of this action was, however, to reduce the franchisee fee which would have been payable by LJ Hooker Glynde. Whilst this is a breach of Ms D’Ortenzio’s obligations as an employee, I find that the impact on LJ Hooker was an unintended consequence probably due to an oversight on Ms D’Ortenzio’s behalf.
Deficiencies identified by the HR Room Report
[221] Ms D’Ortenzio’s written response to the allegations put to her arising from the HR Room Report asserts that whilst she undertook a number of duties that fell outside her sales duties (including hiring of staff and remuneration) she was not responsible for the HR function of the business, and secondly her lack of qualifications or experience. I have rejected this position and found that Ms D’Ortenzio’s role included the HR functions with the support of external service providers.
[222] I find that Ms D’Ortenzio unilaterally reduced Ms D’Angelo’s remuneration as a punitive response for the loss of a property management contract.
[223] I find that Ms D’Ortenzio did not document (or cause to be documented) employment arrangements of a number of employees and did not record the provision of a Fair Work Statement to new employees as identified in the HR Room Report.
[224] I find that Ms D’Ortenzio increased her salary without express permission from Mr Parletta.
[225] Ms D’Ortenzio grew into her role over a long period of time. Considering her lengthy experience, she should have known that the conduct described above was not an appropriate course to take.
[226] The other issues raised in the HR Room Report can, when considering the size and nature of the LJ Hooker Glynde business, be described as either aspirational (e.g. mapping of employee classifications to the Award, consistency of ordinary hours across classifications, rosters, retention of recruitment notes) or relatively minor (e.g. recording of TOIL, lack of documentation of flexible working arrangements). That is not to say these issues have not been correctly identified, or should not be addressed.”
[7] At paragraphs [241] to [249] of the decision I made comment as to Ms D’Ortenzio’s awareness of the allegations against her as detailed below.
[241] Ms D’Ortenzio was invited to respond to the findings contained in the provided HR Room Report (as modified by the Minter Ellison correspondence dated 21 June 2017) and allegations in relation to the commissions concerning the properties managed for Mr Mazzone and Mr Minicozzi.
[242] A face to face meeting was scheduled but this meeting was rescheduled for 26 June 2017. The face to face meeting did not occur at the request of Ms D’Ortenzio and a written response to the allegations was provided on 23 June 2017. The provision of a written response had the effect of truncating the disciplinary process.
[243] Ms D’Ortenzio contends that the allegations relied upon at the Hearing were not put to her for her comment before the dismissal.
[244] It appears to me that the specific allegations that she acted contrary to the interests of LJ Hooker Glynde in respect of her communications with the Bank, Mr Adcock (in his role as the South Australian Franchisee Manager) and Mr Bonomi (as a prospective purchaser of LJ Hooker Glynde) were not put to her. In addition, the allegations concerning the deterioration of her work relationship with Mr Parletta and other staff was not specifically put to her.
[245] It is possible that had Ms D’Ortenzio attended a face to face meeting, these topics may have been discussed, however, it was open to LJ Hooker Glynde (who by this time were represented by Minter Ellison) to put in writing any further allegations not contained in the communications to date upon which they sought to rely.
[246] Whilst it was not put to Ms D’Ortenzio that the working relationship had completely and irretrievably broken down, many of the factual allegations relied upon to reach that conclusion were put to her. However, the allegations concerning the communications with the Bank and Mr Bonomi which are of considerable force in the characterisation of the working relationship as totally dysfunctional were not.
[247] In Crozier v Pallazo Corporation Pty Ltd (t/as Noble Park Storage and Transport) the Full Bench stated:
“As a matter of logic procedural fairness would require that an employee be notified of a valid reason for their termination before any decision is taken to terminate their employment in order to provide them with an opportunity to respond to the reason identified. Section 170CG(3)(b) and (c) would have very little (if any) practical effect if it was sufficient to notify employees and give them an opportunity to respond after a decision had been taken to terminate their employment. Much like shutting the stable door after the horse has bolted.’ However whilst the absence of procedural fairness may lead to a conclusion that the termination was harsh, unjust or unreasonable, each case turns of its facts.”
[248] When I consider the evidence given by Ms D’Ortenzio during the Hearing, there is no real contest that her relationship with Mr Parletta was totally dysfunctional by the time the dismissal occurred.
[249] Had Ms D’Ortenzio given the explanation put forward at the Hearing as to her reasons for instructing Mr Minicozzi to advise the banks about her intentions to take proceedings against LJ Hooker Glynde and her reasons for advising a prospective purchaser of the business, that Mr Parletta had been involved in improper conduct, I do not believe it would have changed the outcome. Ms D’Ortenzio’s explanations were unconvincing and I suspect the true motive for the making of these allegations was to prevent the sale and require Mr Parletta to purchase her shares.
[8] At paragraphs [235] to [239] I detailed my findings as to the existence of a valid reason, as follows:
[235] I have no hesitation in finding that Ms D’Ortenzio’s conduct has resulted in the complete breakdown of the working relationship between Ms D’Ortenzio and Mr Parletta at the time of the dismissal and that this was a valid reason for dismissal.
[236] In this matter the contract of employment contained a specific term requiring Ms D’Ortenzio to further the business and reputation of the employer and not to damage or expose the property or goodwill of the employer.
[237] It is clear to me that Ms D’Ortenzio’s conduct in instructing Mr Minicozzi to communicate with the banks and Mr Bonomi was antithetical to furthering the business and reputation of LJ Hooker Glynde and would have had an adverse impact on the property or goodwill, either through loss of reputation or the cancellation or delay of the sale. I find that Ms D’Ortenzio’s conduct in this regard was a valid reason for dismissal.
[238] Ms D’Ortenzio was a senior employee, I find that her failure to disclose the true nature of transactions made in the course of her sales duties concerning transactions on behalf of Mr Mazzone and Mr Minicozzi in a manner which denied the LJ Hooker franchisor of a contractual benefit was a valid reason for her dismissal.
[239] Finally I find that the poor execution of her responsibilities as Office Manager, specifically the unilateral reduction of Ms D’Angelo’s remuneration as a result of a disciplinary matter, failing to appropriately document conditions of employment of personnel employed at LJ Hooker Glynde and increasing her personal remuneration absent of any express agreement with Mr Parletta was a breach of her employment obligations and which despite her lack of human resources knowledge, should have been recognised as obvious departures from the standard required.
[9] After considering each of the factors detailed in s.387 of the Act, I concluded that the termination of Ms D’Ortenzio’s employment was not harsh, unjust or unreasonable.
[10] CPRE submitted that it was open for the Commission to make a costs order against Ms D’Ortenzio on the following basis:
[11] CPRE submits:
• It is evident that Ms D’Ortenzio’s motive, and predominant purpose in instituting these proceedings was to seek revenge against Mr Parletta. Her actions after being suspended on 12 May 2017 demonstrate that she would do whatever it took to get back at Mr Parletta. Ms D’Ortenzio stated as much to Mr Adcock on 30 June 2017.
• That the Commission should make a costs order pursuant to s.611(2)(a) for the costs incurred by CPRE from 8 August 2017.
[12] CPRE submits:
• It is open to the Commission to find that an application has been instituted without reasonable cause if on the applicant’s own version of the facts, the application must fail. 3
• That at the time of making the application Ms D’Ortenzio knew that her dismissal was warranted given her conduct both prior to and following her suspension on 12 May 2017. In particular CPRE submits that Ms D’Ortenzio knew that contacting the banks and Mr Bonomi completely destroyed her employment relationship and justified her dismissal.
• Given the knowledge Ms D’Ortenzio had prior to making the application, it is open to the Commission to exercise its discretion and make a costs order against Ms D’Ortenzio pursuant to s.611(2)(a) for costs incurred by CPRE from 8 August 2017.
[13] CPRE submits:
• That a reasonable person in the position of Ms D’Ortenzio would have determined that their application had no reasonable prospects of success at or before the time of filing the application for the same reasons advanced in the submissions relating to s.611(2)(a) immediately above.
• That Ms D’Ortenzio’s conduct, which was described as treacherous by the Commission, meant that her application was completely lacking in merit and manifestly untenable.
• All the circumstances were personally and intimately known to Ms D’Ortenzio before she lodged the application.
• It is open to the Commission to exercise its discretion and make a costs order against Ms D’Ortenzio pursuant to s.611(2)(b) for costs incurred by CPRE from 8 August 2017. In the alternative CPRE submits that a reasonable person in the position of Ms D’Ortenzio would have formed the view that there were no reasonable prospects of success upon receiving the material filed by CPRE on 19 October 2017. The material sets out the full weight of the case against Ms D’Ortenzio and clearly disclosed aspects of her behaviour that, if true and correct, amounted to serious misconduct warranting dismissal. If this is the case then costs should be awarded from 19 October 2017 onwards.
[14] CPRE contends that:
• the institution and maintenance of an application in the face of poor prospects of success has been held to be an unreasonable act: Roy Morgan Research Ltd v Baker. 4
• the commencement of the unfair dismissal application by Ms D’Ortenzio was an unreasonable act as:
• Ms D’Ortenzio’s motive and predominant purpose in instituting these proceedings was to seek revenge against Mr Parletta.
• At the time of making the application Ms D’Ortenzio knew that her dismissal was warranted given her conduct both prior to and following her suspension on 12 May 2017. In particular CPRE submits that Ms D’Ortenzio knew that contacting the banks and Mr Bonomi completely destroyed her employment relationship and justified her dismissal; and
• All the circumstances were personally and intimately known to Ms D’Ortenzio before she lodged the application.
[15] CPRE’s primary position is that costs should be awarded against Ms D’Ortenzio from 8 August 2017, the day following the lodgement of the Ms D’Ortenzio unfair dismissal application.
[16] In the alternative, CPRE submits that a reasonable person in the position of Ms D’Ortenzio would have formed the view that the application had no reasonable prospects of success upon receiving the material filed by CPRE on 19 October 2017 and that costs should be awarded from 20 October 2017.
[17] In the further alternative, CPRE submits that a reasonable person in the position of Ms D’Ortenzio would have formed that view at the conclusion of her evidence on 29 November 2017 and that costs should be awarded from that point onwards.
[18] CPRE seeks that the Commission exercise its discretion to award indemnity costs or in the alternative party-party costs.
[19] CPRE submits that the Commission may award costs against a lawyer or paid agent under s.401 of the Act and that the jurisdictional requirements have been met in this instance.
[20] CPRE submits that costs should be awarded against Mr Minicozzi pursuant to s.401(1A) of the Act on the basis that:
• He encouraged Ms D’Ortenzio to start and continue the application when it should have been reasonably apparent to him that Ms D’Ortenzio had no prospects of success.
• Mr Minicozzi was intimately involved in the issues between Ms D’Ortenzio and Mr Parletta since early 2015 and that he suggested that she correspond with the banks in 2017 and that this conduct was found to be breach of Ms D’Ortenzio’s contract of employment and a valid reason for the dismissal.
• Ms D’Ortenzio gave evidence that Mr Minicozzi suggested that he contact Mr Bonomi on her behalf on 30 June 2017, and that this conduct was found to have been treacherous and fatally damaged her working relationship with Mr Parletta.
• Mr Minicozzi is legally qualified and filed the application.
• Mr Minicozzi should have known that the interactions with the banks and Mr Bonomi would have resulted in the unfair dismissal application having no prospects of success.
[21] CPRE’s primary position is that costs should be awarded against Mr Minicozzi from 8 August 2017.
[22] In the alternative, CPRE submits that a reasonable person in the position of Mr Minicozzi would have formed the view that the application had no reasonable prospects of success upon receiving the material filed by CPRE on 19 October 2017 and that costs should be awarded from 20 October 2017. CPRE submits that the test in s.401(1A) is the same as s.611(2)(b) and is an objective one and that the test should be measured against a higher standard when applied to legally qualified and trained individuals: Baker v Salva Resources Pty Ltd. 5
[23] CPRE seeks that the Commission exercise its discretion to award indemnity costs or in the alternative party-party costs.
[24] Ms D’Ortenzio submitted an affidavit and a submission.
[25] Ms D’Ortentzio’s affidavit advised that:
• In early 2017 she was in dispute with CPRE concerning her shareholding and employment issues. She sought the advice of Mr Minicozzi with respect to the employment issues. Mr Minicozzi advised that he was not an expert in this area but would seek advice from an industrial barrister. A meeting between Ms D’Ortenzio, Mr Minicozzi and the industrial barrister was held on 11 May 2017. Mr Minicozzi then briefed the barrister and there were extensive communications. The barrister’s involvement continued until 25 October 2017 and she provided advice in relation to a number of issues concerning the dismissal, options and preparation for the matter for arbitration, together with advice regarding an underpayment of wages claim and a workers compensation matter.
• Ms D’Ortenzio did not ask for a formal assessment of the merits of her case.
• Ms D’Ortenzio had numerous discussions with Mr Minicozzi concerning her case but was never advised that her case was not arguable or might have been considered vexatious or without reasonable cause.
• In late October 2018 Ms D’Ortenzio terminated her instructions to Mr Minicozzi and the barrister and engaged Mr Blairs from Wearing Law. Mr Blairs did not advise Ms D’Ortenzio that the case was not arguable or that it had no reasonable prospects of success.
[26] Ms D’Ortenzio did not provide any further information as to any legal advice that she had received.
[27] CPRE did not seek to challenge the statement provided by Ms D’Ortenzio.
[28] Ms D’Ortenzio submitted that s.611(1) of the Act provides that ordinarily each party bears their own costs subject to the exceptions contained in s.611(2) of the Act.
[29] The relevant authority as to the application of s.611(1) is Church v Eastern Health 6.
[30] Ms D’Ortenzio submits her case was at all times arguable, that there were questions of fact and law to be determined by the Commission in deciding whether or not she was entitled to a remedy and that she was at all times acting on legal advice to that effect as detailed in her affidavit.
[31] Ms D’Ortenzio submits her case is not one of those rare cases which fall within the exceptions to s.611(1) of the Act.
[32] The reasons provided by CPRE for her dismissal on 3 July 2018 (sic) were the allegations contained in the HR Room Report and the breakdown in the relationship. These reasons were confirmed in the Form F3 Employer Response dated 28 August 2017.
[33] In paragraphs [6] and [7] of the substantive decision the Commission summarised the respective positions of the parties which outlined the issues in dispute.
[34] The findings made by the Commission were not unilaterally in favour of CPRE, and the Commissioner found that Ms D’Ortenzio was not provided with an opportunity to respond to all of the allegations against her.
[35] Ms D’Ortenzio submits that the decision discloses a complex case with multiple elements for determination and competing evidence in relation to a number of significant aspects. Whilst unsuccessful, Ms D’Ortenzio’s case was arguable on the evidence and not all significant aspects fell in favour of CPRE.
[36] Ms D’Ortenzio accepts that Nilsen v Loyal Orange Trust 7 is the relevant authority for the consideration of whether an application is vexatious.
[37] Ms D’Ortenzio submits her motive was to obtain a remedy for what she believed was an unfair dismissal.
[38] Ms D’Ortenzio was described by a witness to be ‘direct’ with people and ‘quite excitable’. The conflict between her and Mr Parletta was at times heated and she had threatened to take [Parletta] down.
[39] Ms D’Ortenzio was entitled to vigorously pursue her rights and in doing so does not make her claim vexatiously. Her comments are not sufficient to determine the application was vexatious. The other proceedings brought in other jurisdictions are not yet finalised and are not a proper basis to characterise this application as vexatious.
[40] Ms D’Ortenzio agrees that Church 8 is the relevant authority.
[41] Ms D’Ortenzio contends that it was never clear that on her own version of the facts her application must fail.
[42] Ms D’Ortenzio contended that the breakdown of the relationship was due to Mr Parletta’s conduct, that she was denied procedural fairness and her personal circumstances.
[43] The determination by the Commission that the contact with the banks and Mr Bonomi was a valid reason for her dismissal involved the determination of fact and law by the Commission.
[44] The Commission found that Ms D’Ortenzio was denied procedural fairness. The Commission found that there was no impropriety in contacting Mr Adcock which was one of the key planks CPRE relied upon to justify the dismissal.
[45] That Ms D’Ortenzio was unsuccessful in persuading the Commission as to the cause of her breakdown with Mr Parletta, or that her dismissal was unfair did not render the application without reasonable cause.
[46] Ms D’Ortenzio notes that there is no suggestion she failed to comply with any orders of the Commission, or failed to participate in conciliation, conference or Hearing, or failed to consider a reasonable settlement offer.
[47] Ms D’Ortenzio notes that the Form F3 Employer Response did not allege that the commencement of the application was an unreasonable act and that the three grounds ultimately argued by CPRE were not contained in the Employers Response.
[48] Ms D’Ortenzio accepts she was put on notice of the evidence to be called against her upon receipt of the CPRE material but was not advised of any potential costs application.
[49] Ms D’Ortenzio acknowledged an adverse finding of credit, but submits that the comments made by the Commissioner at the conclusion of Ms D’Ortenzio’s evidence did not go that far and were made prior to any other witness being heard and CPRE’s witnesses being tested.
[50] Ms D’Ortenzio refers to Hyde v RS Thomas & Co 9 where it was stated:
“I think it asks too much of parties to anticipate evidence as it falls in the course of proceedings as the interpreted by the Commission. The relevant tests can only apply as to the state of the evidence at the time the application was made. In instances where findings of credit are made – as in this case – it is not possible to determine with any degree of accuracy what should have been reasonably known by the Cost Respondent himself at an earlier time.”
[51] Ms D’Ortenzio accepts that the test is an objective one as described by CPRE, “that it would have been reasonably apparent to Ms D’Ortenzio that the application had no reasonable prospects of success”: Walker v Mittagong Sands (T/A Cowra Quartz). 10
[52] Ms D’Ortenzio rejects CPRE’s contention that the application was manifestly untenable or groundless or so lacking in merit or substance as to be not reasonably arguable.
[53] Ms D’Ortenzio rejects CPRE’s submission that a reasonable person in her position would have known that her application had no reasonable prospect of success at the time of filing, on receiving the materials filed by CPRE on 19 October 2017 or following the conclusion of her evidence.
[54] Ms D’Ortenzio contends that her relationship with CPRE was complicated by the fact that she was also a shareholder and her disputes with Mr Parletta over the shareholder issues.
[55] Ms D’Ortenzio did not rely on the opinion of Mr Minicozzi.
[56] Ms D’Ortenzio extended her legal representation to include an industrial barrister and later to Mr Blairs neither of whom are the subject of this costs application.
[57] Ms D’Ortenzio submits that a reasonable person would rely on the advice of her legal representatives, properly instructed in relation to their prospects of success.
[58] Mr Minicozzi submits he was the solicitor representing Ms D’Ortenzio at the time the application was lodged and up to 31 October 2017.
[59] CPRE has not advanced any facts which establish that Mr Minicozzi encouraged Ms D’Ortenzio to pursue the application.
[60] CPRE contends that Mr Minicozzi suggested that Ms D’Ortenzio contacted the banks and Mr Bonomi which is at odds with their cross-examination of Ms D’Ortenzio which was based on the premise that Ms D’Ortenzio instructed Mr Minicozzi to contact the banks and Mr Bonomi.
[61] There is no evidence that Mr Minicozzi encouraged Ms D’Ortenzio to commence or continue with the application.
[62] Mr Minicozzi at all times relied on advice of counsel in relation to the application, as Ms D’Ortenzio was aware that he was not an expert in the industrial relations jurisdiction.
[63] At no time did Counsel suggest that the claim should not be pursued as the prospect of success was poor.
[64] It is noted that a costs application has not been made against Mr Blairs.
[65] No costs should be entertained beyond the date Mr Minicozzi ceased acting for Ms D’Ortenzio.
[66] The application for indemnity costs is misconceived and there is no basis in line with the decision in Stanley v QBE Management Services Pty Ltd 11.
[67] The power to award costs is discretionary and subject to specified statutory prerequisites. The presumption under the Act is that each party bears their own costs.
[68] Section 401(1A) of the Act provides as follows:
“401 Costs orders against lawyers and paid agents
…
(1A) The FWC may make an order for costs against the representative for costs incurred by the other party to the matter if the FWC is satisfied that the representative caused those costs to be incurred because:
(a) the representative encouraged the person to start, continue or respond to the matter and it should have been reasonably apparent that the person had no reasonable prospect of success in the matter; or
(b) of an unreasonable act or omission of the representative in connection with the conduct or continuation of the matter.
(2) The FWC may make an order under this section only if the other party to the matter has applied for it in accordance with section 402.
(3) This section does not limit the FWC’s power to order costs under section 611.
[69] At paragraph 1611 of Explanatory Memorandum to the Fair Work Bill 2008 it states:
1611. These provisions are designed to deter lawyers and paid agents from encouraging others to bring speculative unfair dismissal claims, particularly claims they know have no reasonable prospects of success, or to unreasonably encourage a party to defend a claim or make a jurisdictional argument where there is no prospect of the argument succeeding.
[70] Section 611 of the Act provides as follows:
“Costs
(1) A person must bear the person’s own costs in relation to a matter before the FWC.
(2) However, the FWC may order a person (the first person) to bear some or all of the costs of another person in relation to an application to the FWC if:
(a) the FWC is satisfied that the first person made the application, or the first person responded to the application, vexatiously or without reasonable cause; or
(b) the FWC 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.
Note: The FWC can also order costs under sections 376, 400A, 401 and 780.
(3) A person to whom an order for costs applies must not contravene a term of the order.
Note: This subsection is a civil remedy provision (see Part 4-1).
[71] Section 400A of the Act provides as follows:
“400A Costs orders against parties
(1) The FWC may make an order for costs against a party to a matter arising under this Part (the first party ) for costs incurred by the other party to the matter if the FWC is satisfied that the first party caused those costs to be incurred because of an unreasonable act or omission of the first party in connection with the conduct or continuation of the matter.
(2) The FWC may make an order under subsection (1) only if the other party to the matter has applied for it in accordance with section 402.
(3) This section does not limit the FWC’s power to order costs under section 611.“
[72] A decision to award costs pursuant to s.400A of the Act requires a consideration of whether Ms D’Ortenzio, and separately Mr Minicozzi, by some unreasonable act or omission caused CPRE to incur costs.
[73] Section 400A was inserted into the Act by virtue of the Fair Work Amendment Act 2012. The Explanatory Memorandum to the Fair Work Bill 2012 states:
“168. Item 4 inserts a new section 400A to enable the FWC to order costs against a party to an unfair dismissal matter (the first party) if it is satisfied that the first party caused the other party to the matter to incur costs by an unreasonable act or omission in connection with the conduct or continuation of the matter.
169. As with the new power to dismiss applications under section 399A, the power to award costs under section 400A is not intended to prevent a party from robustly pursuing or defending an unfair dismissal claim. Rather, the power is intended to address the small proportion of litigants who pursue or defend unfair dismissal claims in an unreasonable manner. The power is only intended to apply where there is clear evidence of unreasonable conduct by the first party.
170. The FWC’s power to award costs under this provision is discretionary and is only exercisable where the first party (whether the applicant or respondent) causes the other party to incur costs because of an unreasonable act or omission. This is intended to capture a broad range of conduct, including a failure to discontinue an unfair dismissal application made under section 394 and a failure to agree to terms of settlement that could have led to the application being discontinued.”
[74] There is no dispute that the Commission has power under s.400A(1A) to make a costs order against a representative.
[75] Mr Minicozzi’s multiple roles in this matter as a support person, life-partner and solicitor to Ms D’Ortenzio is unusual and perhaps explains his engagement as a solicitor despite professing not to have any expertise in the industrial relations jurisdiction.
[76] I accept Mr Minicozzi’s submission that there is no evidence that his interactions with the banks and Mr Bonomi were other than at the behest of Ms D’Ortenzio.
[77] It is difficult to accept Mr Minicozzi’s suggestion that Ms D’Ortenzio did not ask him for an opinion as to her merits of her claim. In the circumstances, it would have been prudent for him to have provided Ms D’Ortenzio some advice as to the prospects of her application (either his own or from Counsel).
[78] I have considered the multiplicity of roles that Mr Minicozzi held and my observations of Ms D’Ortenzio interaction with counsel at the substantive Hearing. It is clear to me that Ms D’Ortenzio was the driver of her application.
[79] The fact that CPRE has not chosen to seek costs against Ms D’Ortenzio’s other representatives does not impact on my consideration of costs in respect of Mr Minicozzi.
[80] Having regard to the circumstances of Mr Minicozzi, including the fact that the relationship between him and Ms D’Ortenzio was not limited to a lawyer/client relationship, and that his conduct was at the behest of Ms D’Ortenzio, I do not consider it appropriate to exercise my discretion to make an order for costs pursuant to s.401(1A) of the Act against him.
[81] The meanings of the terms ‘vexatiously’ and ‘without reasonable cause’ were discussed in Church 12. The Full Bench in that decision said the question of whether an application was made vexatiously looks to the motive of the applicant in making the application. An application is made vexatiously where the predominant purpose is to harass or embarrass the other party or to gain a collateral advantage.3
[25] The meaning of the term ‘vexatious’ was considered by Asbury C in Mokomoko v Zennforce Protection Group Pty Ltd 13:
[13] The circumstances in which an application will be found to have been made vexatiously were discussed by Justice North in Nilsen v Loyal Orange Trust as follows:
“The next question is whether the proceeding was instituted vexatiously. This looks to the motive of the applicant in instituting the proceedings. It is an alternative ground to the ground based on lack of reasonable cause. It therefore may apply where there is a reasonable basis for instituting the proceedings. This context requires the concept to be narrowly construed. A proceeding will be instituted vexatiously where the predominant purpose in instituting the proceeding is to harass or embarrass the other party, or to gain a collateral advantage.”
[14] In Attorney-General v Wentworth Roden J observed that litigation may be regarded as vexatious on objective or subjective grounds and that the test could be expressed as follows:
“1. Proceedings are vexatious if they are instituted with the intention of annoying or embarrassing the person against whom they are brought;
2. They are vexatious if they are brought for collateral purposes, and not for the purpose of having the Court adjudicate on the issues to which they give rise.
3. They are also properly to be regarded as vexatious if, irrespective of the motive of the litigant, they are so obviously untenable or manifestly groundless as to be utterly hopeless...”
[footnotes omitted]
[82] At the substantive Hearing Ms D’Ortenzio gave evidence that:
• On 25 January 2017 Ms D’Ortenzio in a conversation with Mr Parletta about the sale of his business stated if Mr Parletta failed to take ownership of the transaction and drive, she would hold him accountable. 14 (emphasis added)
• On or about 13 April 2017 at a meeting with Mr Parletta to discuss the shareholding issues, Ms D’Ortenzio said to Mr Parletta ‘You lie all the time. I can be a good actress too’ and ‘I will bring you down’ 15, a similar conversation occurred in Mr Minicozzi’s office in April 2016 where Ms D’Ortenzio was said to have referred to Mr Parletta as a ‘piece of shit’ and said to him ‘You know what I am capable of and you know what a good actress I am, I will bring you down’. (emphasis added)
• She said to Mr Parletta in the presence of Mr Mazzone words to the effect, ‘I will bring you down, I will get you for everything you have done”. 16 (emphasis added)
[83] Ms D’Ortenzio’s contention that this application was motivated by her desire to obtain a remedy for her unfair dismissal claim is undermined by the fact that at the time the application was lodged Ms D’Ortenzio was well aware of the correspondence that she caused Mr Minicozzi to send to the banks, and the conversation she arranged to be had with Mr Bonomi - a prospective purchaser of the business. 17 Her argument that these were the actions of a shareholder lacks credibility. When I take into account the evidence given by Ms D’Ortenzio as detailed in paragraph [80] above, it is obvious that her motivation in commencing this application was to inflict as much damage on Mr Parletta as possible. I find that Ms D’Ortenzio’s application was vexatious.
[84] The correspondence with the Banks and communications with Mr Bonomi fatally wounded the working relationship between her and Mr Parletta. These events were directed to occur by Ms D’Ortenzio. The dismissal letter informed Ms D’Ortenzio of the reliance on the misconduct (based on the HR Room Report) and the breakdown of the professional relationship. Viewed objectively it should have been evident to Ms D’Ortenzio that at the time the application was lodged there was no reasonable basis for her to commence the claim.
[85] I find that Ms D’Ortenzio’s application was made without proper cause.
[86] The facts relied upon by CPRE under this heading are a mirror of the facts relied upon to assert that the claim was vexatious. I find that Ms D’Ortenzio’s conduct in continuing the matter in light of the knowledge of her conduct was unreasonable and that it should have been easily discernible to an objective person in Ms D’Ortenzio’s position. Ms D’Ortenzio should have realised that her case had no prospects of success after reviewing CPRE’s material filed on 19 October 2017.
[87] I find that the continued prosecution of the matter post-23 October 2017 (allowing some time to review and digest the material) was an unreasonable act in connection with the conduct and continuation of the matter.
[88] Whilst Ms D’Ortenzio was not provided with an opportunity to respond to the entirety of the allegations made against her prior to the dismissal, she was well aware prior to the application being lodged, that she instituted the communications with the banks and the conversation with Mr Bonomi. 18 I have previously found that these two events fatally wounded the working relationship between her and Mr Parletta. Viewed objectively it should have been evident to Ms D’Ortenzio that at the time she lodged her application it was without prospect of success. This position should have been placed beyond doubt after a review of CPRE’s material provided on 19 October 2017.
[89] I find that the application did not have any prospects of success at the time of lodgement and in the alternative from 23 October 2017 after the provision of CPRE’s material and allowing some time to review and digest the information.
[90] CPRE have contended it is appropriate for the costs to be calculated on an indemnity basis and rely on the authority in Stanley 19, on the basis that the proceedings were commenced for an ulterior motive, or a party persists in what is, when properly considered, a hopeless case. Ms D’Ortenzio’s submission did not canvas this issue.
[91] It is extremely rare for the Commission to order indemnity costs and therefore a high level of caution must be exercised. I agree with the remarks of Mortimer J in Ryan v Primesafe 20 in relation to s.570 of the Act, which I note is almost identical to s.611 of the Act:
“[64] … 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.”
[92] A Full Bench of the AIRC in Goffett v Recruitment National Pty Ltd 21 set out the principles generally adopted when considering an application for costs on an indemnity basis:
“[49] In Australian Transport Insurance Pty. Ltd. v Graeme Phillips Road Transport Insurance Pty. Ltd Woodward J dealing with a costs application in the Federal Court of Australia isolated the following principle in relation to indemnity costs:
“Courts in both the United Kingdom and Australia have long accepted that solicitor and client costs can properly be awarded in appropriate cases where ‘there is some special or unusual feature in the case to justify the court exercising its discretion in that way’ (Preston v Preston (1982) 1 All ER 41 at 58). It is sometimes said that such costs can be awarded where charges of fraud have been made and not sustained; but in all the cases I have considered, there has been some further factor which has influenced the exercise of the court’s discretion - for example, the allegations of fraud have been made knowing them to be false, or they have been irrelevant to the issues between the parties: see Andrews v Barnes (1888) 39 Ch D 133; Forester v Read (1870) 6 LR Ch App Cases 40; Christie v Christie (1873) 8 Ch App Cases 499; Degmam Pty Ltd (In Liq) v Wright (No 2) (1983) 2 NSWLR 354.” (emphasis added)
[50] In Oshlack v Richmond River Council, Gaudron and Gummow JJ said:
“It may be true in a general sense that costs orders are not made to punish an unsuccessful party. However, in the particular circumstance of a case involving some relevant delinquency on the part of the unsuccessful party, an order is made not for party and party costs but for costs on a ‘solicitor and client’ basis or on an indemnity basis. The result is more fully or adequately to compensate the successful party to the disadvantage of what otherwise would have been the position of the unsuccessful party in the absence of such delinquency on its part.”“ (emphasis added)
[93] In Colgate-Palmolive Co v Cussons Pty Ltd 22, Sheppard J set out some useful examples of circumstances that warrant the exercise of the discretion to award indemnity costs:
“… it is useful to note some of the circumstances which have been thought to warrant the exercise of the discretion. I instance the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud (both referred to by Woodward J in Fountain and also by Gummow J in Thors v Weekes (1989) 92 ALR 131 at 152; evidence of particular misconduct that causes loss of time to the Court and to other parties (French J in Tetijo); the fact that the proceedings were commenced or continued for some ulterior motive (Davies J in Ragata) or in wilful disregard of known facts or clearly established law (Woodward J in Fountain and French J in I-Corp (supra); the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions (Davies J in Ragata); an imprudent refusal of an offer to compromise (eg Messiter v Hutchinson (1987) 10 NSWLR 525; Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 at 724 (Court of Appeal); Crisp v Keng (unreported, Court of Appeal, NSW, Kirby P, Priestley JA, Cripps JA, No 40744/1992, 27 September 1993) and an award of costs on an indemnity basis against a contemnor (eg Megarry V-C in EMI Records (supra)).” (emphasis added)
[94] I further note Mortimer J’s remarks in Primesafe about Colgate-Palmolive:
“[114] One theme which might be said to run through the factors listed by Harper J in Ugly Tribe, and by Sheppard J in Colgate-Palmolive 46 FCR 225, is a level of blameworthiness which involves conscious or deliberate choices to flout the norms by which litigation is usually conducted, and courts expect it to be conducted. I cannot be satisfied on the evidence before me that Mr McDonald’s conduct is attended by that level of disregard. His choice to name Mr Humphery-Smith was unusual. He failed to articulate a proper factual and legal basis for it in his pleading, or in particular when sought. Whether he did so with some ulterior motive or purpose, or wilfully closing his eyes to his professional obligations, are not conclusions I am prepared positively to reach on the evidence before me.” (emphasis added)
[95] Whilst I have found that Ms D’Ortenzio claim was vexatious and without proper cause and had little prospect of success from the outset, I do not believe that the delinquency described in Oshlack was present at that time. Whilst it is arguable that the delinquency was present after Ms D’Ortenzio’s receipt and review of CPRE’s material, at the conclusion of her evidence Ms D’Ortenzio should have realised that her case was in tatters and regardless of the evidence of the CPRE witnesses, was doomed to fail. At that point I invited Ms D’Ortenzio to consider her position in light of the evidence. Ms D’Ortenzio determined to proceed. I find her conduct in continuing the application after that point was delinquent.
[96] Pursuant to 611(2) and s.400A of the Act, I order costs on a party-party basis from 8 August 2017 and on an indemnity basis from the conclusion of Ms D’Ortenzio’s evidence on 29 November 2017.
[97] At the Hearing of the cost application, the parties requested that in the event I make an order as to costs they be provided with a period to seek to agree the quantum of costs. I will allow a period of 14 days from the date of this decision for this to occur. If the costs are not agreed within that timeframe, CPRE is to lodge the assessment in the Commission for referral to Deputy President Clancy (or his nominee) for the purposes of taxing the costs within 28 days from the date of this decision.
[98] The costs are to be paid within 28 days of the date of this decision, or the date the costs are taxed by the Commission, whichever is the latter.
[99] An Order giving effect to this decision will be issued.23
COMMISSIONER
Final written submissions:
CPRE 29 March 2018.
Mr N. Minicozzi 12 April 2018.
Ms M. D’Ortenzio 12 April 2018.
CPRE in Reply 19 April 2018.
Printed by authority of the Commonwealth Government Printer
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1 U2017/8572
3 Zornada v St John Ambulance (Western Australia) Inc (2013) 237 IR 48 at [35].
4 [2014] FWCFB 1175 at [25]-[28].
5 [2011] FWAFB 4014 at [10].
6 [2014] FWCFB 810 (‘Church’).
7 (1997) 76 IR 180.
9 [2014] FWC 7391 at [33].
10 [2011] FWA 2225 at [43].
11 [2013] FWCFB 8666 (‘Stanley’).
14 [2018] FWC 1002 at [32].
15 [2018] FWC 1002 at [36].
16 [2018] FWC 1002 at [42].
17 [2018] FWC 1002 at [66].
18 [2018] FWC 1002 at [66].
20 [2015] FCA 8 (‘Primesafe’).
22 (1993) 46 FCR 225 at 233.