WESTERN AUSTRALIAN INDUSTRIAL MAGISTRATES COURT

CITATION : 2015 WAIRC 00279

DELIVERED : Wednesday, 1 April 2015

FILE NO. : M 186 OF 2013

Applicant

AND

MVJ Enterprises Pty Ltd

Respondent

CatchWords : Respondent employer’s application for costs pursuant to section 570 of the Fair Work Act 2009; Claimant successful at Trial on liability but largely unsuccessful as to quantum; whether proceedings instituted without reasonable cause; whether Claimant’s unreasonable act or omission caused the Respondent to incur costs; whether proper cause for the award of costs.

Legislation : Fair Work Act 2009, section 570

Industrial Magistrates Courts (General Jurisdiction) Regulations 2005

Instruments : Educational Services (Post-Secondary Education) Award 2010 (MA000075)

Case(s) referred to in reasons:

Kyra Phillips v MVJ Enterprises Pty Ltd (2015 WAIRC 00204)

Suda Ltd v Sims (No. 2) [2014] FCCA 190

Chileshe v E & M Business Trust [2014] FCCA 1381

Reeve v Ramsay Health Care Australia Pty Ltd (No. 2) [2012] FCA 1322

Melbourne Stadiums Ltd v Sautner [2015] FCAFC 20

Construction, Forestry, Mining and Energy Union v Clarke (2008) 170 FCR 574

Result : Costs application is refused

Representation:

Claimant : Mr N Marouchak of MKI Legal appeared for the Claimant.

Respondent : Mr G Douglas of Douglas Cheveralls Lawyers appeared for the Respondent.

REASONS FOR DECISION

Introduction

1            Ms Kyra Phillips resigned from her employment with MVJ Enterprises Pty Ltd (the Respondent) in September 2013.

2            At that time she was in dispute with her employer about her pay.  Ms Phillips believed, based on information received from Fair Work Australia (as it was then known) and the Fair Work Ombudsman, that her employer had failed to comply with the Educational Services (Post-Secondary Education) Award 2010 (MA000075) (the Award) and had thereby underpaid her.

3            Following her resignation Ms Phillips was offered an amount of $5,904.79, in full and final satisfaction of any claim that she might have with respect to underpayment.  She rejected that offer, believing that she was entitled to much more.

4            On 19 December 2013 Ms Phillips, unrepresented, instituted these proceedings claiming $49,000.00.  On 16 January 2014 the Respondent defended the claim.

5            The dispute between the parties had become bitter very early on. Such is discernible from correspondence passing between them.  The bitterness has continued throughout the course of these proceedings and still continues. Such is apparent from the annexures attached to the submissions on costs received from Ms Phillips.  I can have regard to those materials (see Regulation 35(4) of the Industrial Magistrates Courts (General Jurisdiction) Regulations 2005 (IMC) Regulations)).

6            Given the degree of hostility between the parties it is unsurprising that the unrepresented parties failed, pre-trial, to resolve the issues between them.  The parties were so entrenched in their respective positions that settlement was never likely and it was clear that the proceedings would be hard fought.

7            On 21 May 2014 the Respondent appointed lawyers to act for it.

8            On 11 June 2014 the claim was listed for a two day hearing commencing on 22 October 2014 and continuing the next day. Ultimately the Trial lasted 4 days.

9            On 17 September 2014 Ms Phillips appointed lawyers to act for her.  She was represented on a pro bono basis pursuant to the Western Australian Law Society Law Access Pro Bono Referral Scheme.

10         At 4.04pm on Friday 10 October 2014, the Respondent’s lawyer sent to Ms Phillips’ lawyer an email in which the Respondent offered to settle the claim.  The Respondent offered $3,000.00 in full and final satisfaction of the claim on the basis that each party bear their own costs. At 6:08pm the same day Ms Phillips’ lawyer responded by email rejecting the offer.

11         When the Trial commenced Ms Phillips amended her claim. She asserted that she was owed either $65,721.96 or $32,823.59, depending on whether certain transitional provisions of the Award applied.  In the end result Ms Phillips was only able to prove that she was entitled to recover $375.82 (see Kyra Phillips v MVJ Enterprises Pty Ltd (2015 WAIRC 00204)).

Costs Application

12         The Respondent contends that Ms Phillips should pay its costs because:

1. she instituted the proceedings without reasonable cause; and/or
2. her unreasonable act or omission caused the Respondent to incur costs.

Determination

13         Section 570(2) of the Fair Work Act 2009 (FW Act) provides that a party may be ordered to pay the costs only if:

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

b) the Court is satisfied that the party’s unreasonable act or omission caused the other party to incur costs.

14         Section 570(2) of the FW Act was enacted to ensure that litigants involved in proceedings under the FW Act are not exposed to costs being awarded against them save in limited circumstances (see Suda Ltd v Sims (No. 2) (Suda) [2014] FCCA 190 per Lucev J at 20).

15         The policy behind section 570(2) is that a Claimant who believes, in good faith that a set of facts exist that entitles him or her to a legal remedy, ought not to be penalised by a costs order if either:

a) the evidence leads a Court to make a different finding as to the facts; or

b) the Claimant was mistaken about the application of the law to the facts (see Chileshe v E & M Business Trust [2014] FCCA 1381 at [39]).

Were the Proceedings Instituted Without Reasonable Cause (section 570(2)(a), FW Act)?

16         In Reeve v Ramsay Health Care Australia Pty Ltd (No 2) [2012] FCA 1322 Barker J said at paragraph 10:

“It is now well accepted that one way of testing whether a proceeding is instituted ‘without reasonable cause’, for the purpose of a provision such as s 570, it to ask whether upon the facts apparent to the applicant at the time of instituting the proceeding, there were no substantial prospects of success. If success depends upon resolution in the applicant’s favour of one or more arguable points of law, it is inappropriate to say that the proceeding was instituted ‘without reasonable cause’. But where on the applicant’s own version of the facts it is clear the proceeding must fail, it may be said that it lacks a reasonable cause…”.

17         The Respondent suggests that at the time the proceedings were instituted Ms Phillips knew that she did not possess the minimum teaching qualification required by the Respondent and therefore there was no reasonable prospect that a Court would find that she ought to have been assessed as a Category D Level 9 teacher.

18         I reject that contention. It was always Ms Phillips’ contention that she was a Level 9 teacher based on her teaching experience.  Indeed, she had every reasonable prospect of success had the Court accepted her evidence about her teaching experience. On her own version of the facts she was a Category D Level 9 teacher notwithstanding that she was unable to prove it.

19         Despite her failure to prove that she was a Category D Level 9 teacher she was nevertheless successful in her claim. I have found that Ms Phillips was underpaid $375.82.  In those circumstances I cannot see how it can be argued that she initiated the proceedings without reasonable cause. The fact that she was not able to prove the quantum she says she was owed does not undermine her legitimate cause of action.

20         The Respondent submits that there is a second, independent basis on which the Claimant unreasonably commenced and continued the proceedings, that being by her failure to accept a reasonable offer of compromise (see Melbourne Stadiums Ltd v Sautner [2015] FCAFC 20). 

21         Ms Phillips was initially offered $5,904.79 and then $3,000.00 on 10 October 2014.  If the second offer had been accepted prior to Trial the cost of the Trial would have been avoided. The Respondent contends that Ms Phillips’ non-acceptance of the offers has resulted in her unreasonably proceeding with her claim, and that the unreasonableness of her actions is to be judged against the fact that she only recovered $375.82.

22         I observe that the first offer was made prior to the commencement of proceedings.  At that time, based on advice received, Ms Phillips genuinely believed she was entitled to a much higher sum.  She believed she had a strong case. Without the benefit of legal representation Ms Phillips could not have envisaged anything but success.  In those circumstances it was not unreasonable for her to have rejected the offer and to have commenced proceedings.

23         I now turn to consider the non-acceptance of the second offer. I observe that subsection 570(2)(a) of the FW Act relates only to the institution of proceedings. It appears that the Respondent’s submissions concerning the continuation of proceedings must be considered in the context of section 570(2)(b)  rather than subsection 570(2)(a) of the FW Act.

24         Either way, it was not unreasonable for Ms Phillips to have rejected the October 2014 offer because of the following reasons:

a)      the offer was made late, not long before the Trial, in circumstances where the dispute had been protracted and bitter. Given the history of the matter, it was unlikely that such a low offer made at such a late stage would have been accepted; and

b)     had Ms Phillips’ evidence about her prior teaching experience been accepted she would have recovered a vastly greater amount than that offered.

25         The Respondent contends that another reason why a finding should be made that the proceedings were conducted without reasonable cause is because the claim contained manifestly unreasonable and unsustainable grounds which were ultimately abandoned. They included the payment at 1.5 hours for each hour of teaching conducted, and further, a claim for a 20% global uplift in certain circumstances.

26         The unsustainable aspects of Ms Phillips’ claim were abandoned after she became legally represented. The fact that her claim initially contained unsustainable aspects did not vitiate her claim as a whole or otherwise render its institution unreasonable. Indeed, much of her claim remained arguable at Trial.

27         The Respondent contends that because Ms Phillips was relying on her inherently suspect and uncorroborated account of her own experience, her evidence would not have been able to sustain her claims, particularly given that she had made false and misleading statements in writing as to her qualifications.

28         At the time Ms Phillips commenced the proceedings she would not have contemplated that the Court would have found her not to be credible. It would be entirely inappropriate for Ms Phillips to be penalised by an adverse discretionary costs order because she incorrectly pre-judged how her testimony would be received.

29         In any event, the Court did not make a positive finding that Ms Phillips had not accumulated the teaching experience required for a Category D Level 9 teacher, but rather, that she had not been able to prove the extent of teaching experience she asserted.

30         This Court was unprepared to accept her uncorroborated evidence as to experience. She simply did not come up to proof on that element.  In those circumstances, I cannot see how it can be said that it was unreasonable for Ms Phillips to have instituted the proceedings.

Did the Claimant Commit an Unreasonable Act or Omission Causing Costs (section 570(2)(b), FW Act)?

31         The Respondent submits that if the Court is unwilling to award costs pursuant to section 570(2)(a), then in the alternative it should make a partial award of costs pursuant to section 570(2)(b) of the FW Act.

32         It submits that Ms Phillips unnecessarily engaged in conduct which caused the Respondent to incur costs.

33         The alleged acts are:

a) the change to her claim made on the first day of Trial when she abandoned her claims for 1.5 hours’ pay for each hour worked and her claim for 20% extra in certain circumstances; and

b) the introduction at Trial of Exhibits 30 and 31 (previously undiscovered), which revised her claim and particularised the quantum of her claim in the alternative, dependent upon whether the transitional Award provisions applied.

34         I observe that the introduction of Exhibits 30 and 31, together with the abandonment of part of Ms Phillips’ claim did not materially affect the course of the Trial or its conduct. The issue of quantum played a somewhat secondary role to the issue of liability being her correct level.

35         The claim expressed in the alternative was easily addressed and disposed of at Trial. Further, the abandonment of part of the claim and the introduction of Exhibits 30 and 31 helped delineate and clarify the issues to be determined, including quantum. Ms Phillips’ actions in abandoning the misguided parts of her claim truncated the issues to be determined.

36         The Respondent also argues that Ms Phillips’ failure to respond to its Notice to Admit resulted in further cost. I observe that the notice was issued following the first 2 days of Trial and prior to its resumption on 4 February 2015.  Ms Phillips was not required to respond to the notice because it had been issued without authority (see Regulation 32 of the IMC Regulations).  In any event, any failure to admit even if it had been required did not materially affect the length of the Trial or unduly burden the Respondent. The issues raised by the Respondent were expeditiously dealt with under further cross-examination.

37         In Suda  His Honour Lucev J, in dealing with subsection 570(2)(b) of the FW Act, adopted what was said by the Full Court of the Federal Court of Australia in Construction, Forestry, Mining and Energy Union v Clarke (2008) 170 FCR 574 at 382 per Tamberlin, Gyles and Gilmour JJ (Clarke).  Their Honours observed that the exercise of the discretion is not necessarily engaged because:

a) a party does not conduct litigation efficiently;

b) a concession is made late;

c) a party may have acted in a different or timelier fashion; or

d) a party adopted a genuine but misguided approach.

38         Those observations are apposite in this case. Ms Phillips’ conduct was not such that it would enliven a costs order against her.

Discretion

39         Subsection 570(1) of the FW Act provides:

“A party to proceedings (including an appeal) in a court (including a Court of a State or Territory) in relation to a matter arising under this Act may be ordered by the court to pay costs incurred by another party to the proceedings only in accordance with subsection (2) or section 569 or 569A.”

40         I observe that sections 569 and 569A of the FW Act have no application in this instance.

41         Subsection 570(1) of the FW Act clearly indicates that whether or not costs are ordered is entirely discretionary.  The discretion is, however, subject to the constraints imposed by subsection 570(2). 

42         In Suda Lucev J repeated what was said in Clarke, that the Court ought not to exercise its discretion to award costs (under section 570(2) of the FW Act) “with too much haste”.  That position is to be considered against the policy behind section 570(2) of the FW Act which is to ensure that workers are not dissuaded from taking legitimate action to recover entitlements because of the prospect of an adverse costs order being made.

43         The question to be asked in any event is whether this is a proper case for the award of costs.

44         This protracted and bitter dispute may well have been avoided if the Respondent had done what it was required to do, that is, to identify Ms Phillips’ salary level upon commencement of the Award. Its omission in that regard played a significant role in what has subsequently transpired. The uncertainty as to her salary level could and should have been avoided. If at the commencement of Award, the Respondent had identified Ms Phillips to be a Level 1 teacher, and she had disagreed with it, then she could have resigned, or alternatively the parties could have come to some agreement as to her level. As it was, her level was left undetermined and subject to disputation.  The Respondent is not without fault in what occurred.  Its omission significantly contributed to the existence of the dispute.

45         The Respondent’s own conduct militates against an award of costs. I would exercise my discretion against the award of costs irrespective of subsection 570(2) of the FW Act.

46         The application for costs is refused.

G CICCHINI

INDUSTRIAL MAGISTRATE