FEDERAL COURT OF AUSTRALIA Hamberger (Employment Advocate) v Williamson & Construction, Forestry, Mining and Energy Union [2001] FCA 189 COSTS - application for costs order against applicant and two non-party witnesses of applicant - whether s347 of the Workplace Relations Act 1996 (Cth) operates to prevent order for costs against applicant - whether applicant instituted the proceeding vexatiously or without reasonable cause - whether non-party witnesses should be subject to an adverse costs order - whether non-party witnesses played an active part in the conduct of the litigation and have an interest in the subject of the litigation and, if so, whether the interests of justice require that an order for costs against non-party witnesses be made - whether the payment of costs should be ordered on an indemnity basis Workplace Relations Act 1996 (Cth) ss298P(3), 347(1) Evidence Act 1995 (Cth) s138 Hamberger (Employment Advocate) v Williamson and Construction, Forestry, Mining and Energy Union [2000] FCA 1644 referred to Thompson v Hodder (1989) 21 FCR 467 followed Kanan v Australian Postal and Telecommunications Union (1992) 43 IR 257 followed Nilsen v Loyal Orange Trust (1997) 76 IR 180 applied Nicolson v Heaven & Earth Gallery Pty Ltd (1994) 1 IRCR 199 applied Cook v Pasminco Ltd (No 2) [2000] FCA 1819 referred to Knight v F. P. Special Assets Ltd (1992) 174 CLR 178 followed Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225 referred to Re Wilcox; Ex parte Venture Industries Pty Ltd (No 2) (1996) 72 FCR 151 referred to Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 applied connect.com.au Pty Ltd v GoConnect Australia Pty Ltd [2000] FCA 1148 referred to Yates v Boland [2000] FCA 1895 applied JONATHAN HAMBERGER, THE EMPLOYMENT ADVOCATE v IAN WILLIAMSON AND CONSTRUCTION, FORESTRY, MINING AND ENERGY UNION V82 OF 1999 MARSHALL J MELBOURNE 9 MARCH 2001 IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY V82 OF 1999 BETWEEN: JONATHAN HAMBERGER, THE EMPLOYMENT ADVOCATE APPLICANT AND: IAN WILLIAMSON FIRST RESPONDENT CONSTRUCTION, FORESTRY, MINING AND ENERGY UNION SECOND RESPONDENT JUDGE: MARSHALL J DATE OF ORDER: 9 MARCH 2001 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. John Joseph Lyten and Lee Duncan Carson pay the respondents' costs of the proceeding; such costs to include all costs incurred by the respondents except insofar as they are of an unreasonable amount or have been unreasonably incurred, so that subject to these exceptions, the respondents are completely indemnified for their costs. 2. The respondents' motion otherwise be dismissed. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY V82 OF 1999 BETWEEN: JONATHAN HAMBERGER, THE EMPLOYMENT ADVOCATE APPLICANT AND: IAN WILLIAMSON FIRST RESPONDENT CONSTRUCTION, FORESTRY, MINING AND ENERGY UNION SECOND RESPONDENT JUDGE: MARSHALL J DATE: 9 MARCH 2001 PLACE: MELBOURNE REASONS FOR JUDGMENT 1 On 23 November 2000, the Court delivered its reasons for judgment in Hamberger (Employment Advocate) v Williamson and Construction, Forestry, Mining and Energy Union [2000] FCA 1644. The application of the applicant, Mr Hamberger, which alleged two contraventions of s298P(3) of the Workplace Relations Act 1996 (Cth) ("the Act"), was dismissed. These reasons should be read together with the Court's reasons in Hamberger. 2 The first contravention was dismissed because there was no evidence that if a relevant threat had been made, it had been communicated to its alleged target. The second contravention was dismissed because the Court excluded certain evidence pursuant to s138 of the Evidence Act 1995 (Cth). The excluded evidence consisted of a tape recording and the transcript of it. By dealing with the alleged second contravention in this way it was not necessary for the Court to consider the effect of the tape recording vis-ŕ-vis any breach of s298P(3) of the Act insofar as it concerned persons other than Mr Lyten. 3 By Notice of Motion dated 30 November 2000, the respondents applied for a costs order against Mr Hamberger, Mr John Lyten and Mr Lee Carson. The motion was heard on 11 December 2000. Mr Herman Borenstein, of counsel, appeared for the respondents. Mr Justin Bourke, of counsel, appeared for Mr Hamberger and also for Messrs Lyten and Carson. Mr Hamberger 4 Pursuant to s347(1) of the Act, costs will only be awarded against Mr Hamberger if it can be shown that he "instituted the proceeding vexatiously or without reasonable cause". 5 In Thompson v Hodder (1989) 21 FCR 467, after reviewing some relevant authorities, a Full Court of this Court said (at 470): "It is apparent from these authorities that an applicant who has the benefit of the protection of s 347 will only rarely be ordered to pay the costs of a proceeding in exceptional circumstances." 6 The test for determining whether a proceeding has been instituted without reasonable cause was examined by Wilcox J in Kanan v Australian Postal and Telecommunications Union (1992) 43 IR 257 where his Honour said (at 264 to 265): "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. That is the situation in the present case. The qualification of s 347 applies. The Court has power to order costs against the applicant." 7 Assuming the first contravention alleged by Mr Hamberger to be an unsustainable one, the question arises whether the second alleged contravention had no substantial prospect of success at the time the proceeding was instituted. 8 The second contravention was dismissed after the exclusion of pivotal evidence upon which it was based. It could not have been known at the time the proceeding was instituted that the Court would exercise its discretion under the Evidence Act to refuse to admit the excluded evidence. Much depended on the way the case proceeded and how the relevant witnesses dealt with questions when being cross-examined. 9 However, Mr Borenstein contended that the second contravention was always doomed to fail having regard to Mr Lyten not being an employee of Mr Carson's company. Mr Bourke submitted that if the excluded evidence had been admitted it would have disclosed a breach of s298P of the Act in respect of persons other than Mr Lyten. While there is no point in now determining what is a moot issue, it suffices to say that Mr Bourke's contention in that respect is not an unarguable one. 10 Accordingly, I do not consider that when this proceeding was instituted it could be described as one which had no substantial prospect of success. In my view, the success of the second alleged contravention depended upon the resolution in Mr Hamberger's favour of arguable points of law including the largely "unchartered waters" of the impact of s138 of the Evidence Act. I do not consider that the proceeding fits the "exceptional" description, referred to in Thompson, as being one which was instituted "without reasonable cause". 11 Mr Borenstein also submitted that the proceeding was instituted vexatiously. As North J said in Nilsen v Loyal Orange Trust (1997) 76 IR 180 (at 181): "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 … ." 12 Mr Borenstein relied on certain observations at [22] in Hamberger in which the Court effectively made comments critical of Mr Hanley for not foreseeing the possibility of Mr Lyten secretly taping a conversation with the first respondent. Further reliance was placed on Mr Hanley's alleged lack of concern over the true employment status of Mr Lyten and the applicant's failure to make full disclosure at an interlocutory hearing. 13 A proceeding cannot be said to have been instituted vexatiously by reference to conduct which occurred after it was instituted. The failure to make full disclosure at an interlocutory hearing can only be confirmatory of other evidence that the proceeding was instituted vexatiously, if that other evidence exists. I do not believe that it does exist. Mr Hanley's failure to find out Mr Lyten's true employment status is not evidence of an intention to harass or embarrass the respondents. It was evidence of Mr Hanley being misled by Mr Lyten. Further, Mr Hanley's failure to perceive what Mr Lyten may have done with respect to the tape recording, whilst regrettable, is not so reprehensible as to amount to vexation. 14 In my opinion, the applicant did not institute the proceeding vexatiously. Accordingly, s347(1) of the Act operates to prevent the Court from making any costs order against Mr Hamberger. Mr Lyten and Mr Carson 15 The respondents submitted that Mr Lyten and Mr Carson should be subject to an adverse costs order. Mr Lyten and Mr Carson cannot claim the protection of s347(1) of the Act. The Court has the power to make costs orders in matters arising under the Act against third parties: see Nicolson v Heaven & Earth Gallery Pty Ltd (1994) 1 IRCR 199 at 202, per Wilcox CJ in the context of the Industrial Relations Court of Australia. The considerations referred to by Wilcox CJ in Nicolson at 202 also apply to this Court: see Cook v Pasminco Ltd (No 2) [2000] FCA 1819 at [10] and [61] to [65], per Lindgren J. 16 In Knight v F. P. Special Assets Ltd (1992) 174 CLR 178 at 192-193, Mason CJ and Deane J referred to a "category of case" where it would be appropriate to make a costs order against a non-party. Their Honours mentioned "circumstances … where the non-party has played an active part in the conduct of the litigation and where the non-party … has an interest in the subject of the litigation". It was held that in those cases: "an order for costs should be made against the non-party if the interests of justice require that it be made." 17 Mr Lyten and Mr Carson each had an interest in the subject of the litigation. Mr Hamberger sought orders from the Court that the respondents pay compensation to Mr Lyten and to Mr Carson's company. Each of them had an interest in the result of the proceeding. Accordingly, in my view, Mr Lyten and Mr Carson come within the "circumstances" referred to in Knight as being non-parties with an interest in the subject of the litigation. 18 The next question for determination is whether the interests of justice require that a costs order be made against Mr Lyten and Mr Carson. Mr Bourke submitted that no costs order of that sort should be made because it would discourage people from complaining to the Employment Advocate. Mr Borenstein countered that submission by contending that there were good public policy reasons for discouraging the type of conduct which the Court has found that Mr Lyten and Mr Carson engaged in. 19 I consider that the interests of justice require a costs order to be made against Mr Lyten. It was Mr Lyten who was the catalyst for the application to the Court. Mr Lyten also engaged in the following reprehensible conduct: · he misled the Employment Advocate as to his employment status; · he deliberately concocted a situation designed to provoke the respondents into an alleged breach of the Act; · he was untruthful with the first respondent during the course of the taped conversation; and · he gave highly suspect and implausible oral evidence before the Court as referred to in Hamberger,including evidence contradicting previous affidavit evidence of his own. 20 Mr Carson's involvement in the matter was essentially that of a willing aide to Mr Lyten in the charade which Mr Lyten orchestrated. Mr Carson's conduct, whilst unprofessional and unsatisfactory, was not as pernicious as that of Mr Lyten. The real vice in Mr Carson's position is that he attempted to give legitimacy to Mr Lyten's actions by giving apparent independent support to them. Although he was not the instigator of the chain of events that led to the proceeding being instituted and continued, he was a willing participant in the whole episode. I consider that costs should also be awarded against Mr Carson. 21 In deciding to make costs orders against Mr Lyten and Mr Carson, the Court is cognisant of the fact that each of those men was subpoenaed to give evidence. However, there was no indication given to the Court that it was necessary to subpoena them to secure their attendance. There was no suggestion that either of them was unprepared to give oral evidence. Indemnity Costs 22 The ordinary practice of the Court is that the payment of costs is not ordered on an indemnity basis but on a party and party basis. Some special or unusual feature is required to be present before the Court should depart from that usual practice: see Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225 at 233, per Sheppard J. See also Re Wilcox; Ex parte Venture Industries Pty Ltd (No 2) (1996) 72 FCR 151 at 156 - 158, per Cooper and Merkel JJ. 23 In Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 at 401, Woodward J said that: "I believe that it is appropriate to consider awarding "solicitor and client" or "indemnity" costs, whenever it appears that an action has been commenced or continued in circumstances where the applicant, properly advised, should have known that he had no chance of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motive, or because of some wilful disregard of the known facts or the clearly established law. Such cases are, fortunately, rare. But when they occur, the court will need to consider how it should exercise its unfettered discretion." 24 I agree, with respect, with those views of his Honour: see also connect.com.au Pty Ltd v GoConnect Australia Pty Ltd [2000] FCA 1148, per Emmett J. I consider that indemnity costs should be awarded against Mr Lyten given that he was instrumental in the proceeding being instituted, and was prepared to artificially manufacture evidence to support the success of the proceeding and give incredible and contradictory evidence during the proceeding. The proceeding was commenced at Mr Lyten's instigation in support of an ulterior motive, that is, to attempt to implicate the second respondent in an alleged breach of the Act. The proceeding commenced in circumstances where its success was dependent on Mr Lyten's deception not being detected by the Court. The result was an enormous waste of public money both in the conduct of the case by the applicant and its hearing by the Court. Unfortunately, the respondents were also put to considerable expense in defending their interests in Court. 25 Mr Carson's conduct was less reprehensible but without his willing co-operation, Mr Lyten's deceitful episode would never have risen beyond an idea incapable of implementation. In the circumstances, it is also appropriate that an award of indemnity costs be made against him. Yates v Boland 26 After the Court reserved its judgment on the motion, a Full Court delivered reasons for judgment on 21 December 2000 in Yates v Boland [2000] FCA 1895. The parties were requested to provide brief written submissions on the effect of Yates by 23 February 2001. 27 Yates applied the passage from the judgment of Mason CJ and Deane J in Knight, referred to above at [16]. See Yates at [10]. The Full Court in Yates said at [11] that the passage in Knight at 192-193 "was an appropriate guide to the exercise of discretion …". Yates also dealt with the question of indemnity costs. The trial judge in Yates (Branson J) followed the approach of Sheppard J in Colgate-Palmolive as I have at [22] above. The Full Court found no error in her Honour's approach. I am not persuaded to take a different view from those expressed earlier in these reasons for judgment on account of Yates, rather it is confirmatory of the proper application of Knight and of Colgate-Palmolive. 28 In written submissions made on behalf of Messrs Lyten and Carson it was pointed out that Yates "highlights that a very relevant consideration in any exercise of the discretion whether to make an order for costs against a non-party is whether that non-party was given early notice of the risk of such an application". No notice of any such application was made in this matter until the notice of motion was served. However, as the respondents submitted in their written submissions, "the particular facts of the case have excluded that opportunity". It was not until Messrs Lyten and Carson gave evidence in the proceeding that the gravity of their conduct became clear. Counsel for Messrs Lyten and Carson conceded that "failure to warn" is not determinative of an application for costs against a non-party. In this matter there was no realistic opportunity for such a warning to be given. The failure to give such a warning is not a factor of such significance in this matter to bring me to the view that no indemnity costs order should be made against Messrs Lyten and Carson. Order 29 The Court will order in respect of the respondents' motion of 30 November 2000 that John Joseph Lyten and Lee Duncan Carson pay the respondents' costs of the proceeding; such costs to include all costs incurred by the respondents except insofar as they are of an unreasonable amount or have been unreasonably incurred, so that subject to these exceptions, the respondents are completely indemnified for their costs. The respondents' motion will otherwise be dismissed. I certify that the preceding twenty-nine (29) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Marshall. Associate: Dated: 9 March 2001 Counsel for the Applicant: Mr J Bourke Solicitor for the Applicant: Australian Government Solicitor Counsel for Messrs Lyten/Carson: Mr J Bourke Solicitor for Messrs Lyten/Carson: Australian Government Solicitor Counsel for the 1st Respondent: Mr H Borenstein Solicitor for the 1st Respondent: Ryan Carlisle Thomas Counsel for the 2nd Respondent: Mr H Borenstein Solicitor for the 2nd Respondent: Slater and Gordon Date of Hearing: 11 December 2000 Completion of Written Submissions: 23 February 2001 Date of Judgment: 9 March 2001