Zhang v The Royal Australian Chemical Institute Inc. (No. 2) [2004] FCA 1626

FEDERAL COURT OF AUSTRALIA

Zhang v The Royal Australian Chemical Institute Inc. (No. 2) [2004] FCA 1626

COSTS – action for unlawful dismissal – actions dismissed – costs – whether proceeding instituted "vexatiously or without reasonable cause" – s 170CS(1) of the Workplace Relations Act 1996 (Cth)

Workplace Relations Act 1996 (Cth) ss 170CK(2)(e), 170CS(1) Federal Court Rules O 20, r 2 Hatchett v Bowater Tutt Industries Pty Limited (1991) 39 IR 31 referred to He, in the matter of an Application for Writs of Mandamus and Certiorari or Constitutional Relief [2004] FCAFC 161 cited HILDA ZHANG v THE ROYAL AUSTRALIAN CHEMICAL INSTITUTE INC. V340 of 2004 FINKELSTEIN J 3 DECEMBER 2004 MELBOURNE

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY V 340 of 2004

BETWEEN: HILDA ZHANG

Applicant

AND: THE ROYAL AUSTRALIAN CHEMICAL INSTITUTE INC

Respondent

JUDGE: FINKELSTEIN J

DATE OF ORDER: 3 DECEMBER 2004

WHERE MADE: MELBOURNE

THE COURT ORDERS THAT:

The applicant pay the respondent's costs of this proceeding incurred on or after 28 June 2004, such costs to be taxed on a party and party basis. 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 V 340 of 2004

BETWEEN: HILDA ZHANG

Applicant

AND: THE ROYAL AUSTRALIAN CHEMICAL INSTITUTE INC

Respondent

JUDGE: FINKELSTEIN J

DATE: 3 DECEMBER 2004

PLACE: MELBOURNE

REASONS FOR JUDGMENT 1 On 29 October last I dismissed Ms Zhang's claim under s 170CK of the Workplace Relations Act 1996 (Cth) for unlawful termination for a prohibited reason. The application, which had been commenced on 17 March and had been the subject of two directions hearings, a motion and a failed mediation was finally disposed of on the respondent's application under the rules permitting a proceeding to be struck out if it disclosed no cause of action: O 20 r 2. 2 Ms Zhang's application was supported by two very detailed affidavits. Initially, the precise allegation she made against the respondent was not at all clear. Ms Zhang's husband, who appeared on her behalf, identified her claim as being that she was dismissed because she had filed a complaint against her employer involving allegations of violations of laws or regulations: see s 170 CK (2)(e). 3 In my reasons for dismissing the applicant's case I relied upon two decisions, the principal one being He, in the matter of an Application for Writs of Mandamus and Certiorari or Constitutional Relief [2004] FCAFC 161, a case in which the Full Court held that section 170CK(2)(e) only applied where the complaint had been made to "outside authorities" who have power to investigate the allegations made against the employer. The paragraph does not apply to complaints which may have been made directly to the employer. He's case is important in two respects. First the prosecutor in that case was Ms Zhang's husband, so he is aware of the decision. The second point, which is related to the first, is that Mr He would have been aware of the impact of that decision so far as Ms Zhang's application was concerned. 4 This becomes relevant in the following way. Following the dismissal of Ms Zhang's application, the respondent said that it intended to apply for costs. That is the subject of today's motion. Costs in relation to unsuccessful applications under section 170CK are dealt with by s 170CS. Section 170CS(1) provides: "(1) Subject to this section, a party to a proceeding under section 170CP must not be ordered to pay costs incurred by any other party to the proceeding unless the court hearing the matter is satisfied that the first-mentioned party: (a) instituted the proceeding vexatiously or without reasonable cause; or (b) caused the costs to be incurred by that other party because of an unreasonable act or omission of the first-mentioned party in connection with the conduct of the proceeding." 5 It will be apparent that there are two bases upon which costs may be claimed by a successful respondent. The first is if the initiating process was "instituted … vexatiously or without reasonable cause". That requires an investigation of the position at the date of the application which, as I have said, was 17 March. For present purposes, that was before the Full Court handed down its decision. 6 The second basis upon which costs can be claimed by a successful respondent is if the applicant was "unreasonable" in the conduct of the proceeding. That invites attention to the manner in which the applicant has acted or failed to act in the proceeding. 7 As a general principle it is proper to proceed on the basis that even if a case falls within one of the limbs of s 170CS(1), there is still a discretion whether or not to award costs against a party. I am aware of cases which have held that costs should only be awarded in exceptional circumstances, an approach which reflects the general policy of the Workplace Relations Act that parties who are not well off (and often in unlawful termination actions, unemployed) should not be deterred from bringing proceedings by the risk of an adverse costs order. As von Doussa J said in Hatchett v Bowater Tutt Industries Pty Limited (1991) 39 IR 31, 33 parties in unlawful termination actions are entitled to their "day in court". 8 Be that as it may, in dismissing Ms Zhang's application I relied heavily on He's case. Whilst I have sympathy for the respondent, I am not prepared to say, at least when the action was first commenced, that the proceeding was vexatious. In fact, I rather doubt that it was, bearing in mind the technical meaning of that word as used in the section. Whether or not the proceeding was brought without reasonable cause is more difficult. It might have been argued that section 170CK(2)(e) covered the case of a complaint made to an employer. The Full Court, of course, thought otherwise. Nevertheless, if I consider the position as at 17 March, the point was not so hopeless that I would describe it as being without reasonable cause. In any event I would not exercise my discretion to order costs in favour of the respondent on that account. 9 I think the position is different in relation to s 170CS(1)(b). Once the Full Court handed down its decision it would have been clear to Ms Zhang and her husband that the decision covered this case, making the applicant's claim hopeless. In that circumstance Ms Zhang's persistence in continuing the action was unreasonable. 10 The respondent is entitled to have its costs. Fixing the costs from the day the Full Court handed down its decision is unfair. I would allow Ms Zhang at least a week to read, digest and understand the effect of He's case. I propose to order that she pay the respondent's costs of the proceeding incurred on and after 28 June 2004, which is one week after the Full Court decision. I certify that the preceding ten (10) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finkelstein.