FEDERAL COURT OF AUSTRALIA Finance Sector Union of Australia v Commonwealth Bank of Australia [2005] FCA 548 INDUSTRIAL LAW – Costs – second strike-out application in respect of further demurrable statement of claim – proceedings based on complex and lengthy enterprise bargaining agreement – difficult issues of documentary construction – no order as to costs having regard to particular circumstances Workplace Relations Act 1996 (Cth) s 347(1) and 412(1) Finance Sector Union of Australia v Commonwealth Bank of Australia [2004] FCA 898 referred to Commonwealth v Construction Forestry Mining and Energy Union (2003) 129 FCA 271 cited General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 cited Lindsey v Philip Morris Ltd [2004] FCA 9 cited Heidt v Chrysler Australia Ltd (1976) 26 FLR 257 cited FINANCE SECTOR UNION OF AUSTRALIA v COMMONWEALTH BANK OF AUSTRALIA N 1303 OF 2002 CONTI J 5 MAY 2005 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 1303 OF 2002 BETWEEN: FINANCE SECTOR UNION OF AUSTRALIA APPLICANT AND: COMMONWEALTH BANK OF AUSTRALIA RESPONDENT JUDGE: CONTI J DATE OF ORDER: 5 MAY 2005 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. There be no order as to the costs of the Bank's further successful strike-out application determined on 30 March 2005 in favour of the Bank. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 1303 OF 2002 BETWEEN: FINANCE SECTOR UNION OF AUSTRALIA APPLICANT AND: COMMONWEALTH BANK OF AUSTRALIA RESPONDENT JUDGE: CONTI J DATE: 5 MAY 2005 PLACE: SYDNEY REASONS FOR JUDGMENT 1 On 30 July 2004 I ordered that the amended statement of claim of the Finance Sector Union of Australia ('the Union') pleaded against the Commonwealth Bank of Australia ('the Bank') be struck out, upon the ground that it did not plead, or plead adequately, contravention or breach of obligations or conditions on the Bank's part of the material elements of clause 18 of the Commonwealth Bank of Australia Retail Banking Services Enterprise Bargaining Agreement 2002 ('EBA'), such as were necessary to sustain a viable cause of action. I shall hereafter refer to the amended statement of claim as the 'first pleading'. However I granted to the Union leave to file and serve a further amended statement of claim within 28 days. 2 In response to the leave to replead so granted, the Union filed a further amended statement of claim on 27 August 2000 ('the second pleading'). Following upon another strike-out application thereafter made by the Bank, on 30 March 2005 I ordered that the second pleading be also struck out, and that the proceedings be dismissed, largely by reason of the construction of clause 18 of the EBA. I directed that the parties provide written submissions upon the issue as to the costs of the Bank's further successful strike-out application. Detailed submissions in writing were subsequently provided in relation to that costs issue by both parties. It is common ground that the Bank's strike-out application constituted a proceeding within s 347 of the Workplace Relations Act 1996 (Cth) ('the Act'). I will adopt, for the purposes of these reasons, the same abbreviations as were used in my reasons for judgment of 30 March 2005. 3 Section 347(1) of the Act provides as follows: 'A party to a proceeding (including an appeal) in a matter arising under this Act (other than an application under section 170CP) shall not be ordered to pay costs incurred by any other party to the proceeding unless the first-mentioned party instituted the proceeding vexatiously or without recoverable cause.' In my reasons for judgment of 30 March 2005, I cited authority of this Court to the effect that a strike-out application falls in principle within the scope of the s 347(1) notion of proceeding, and that s 347(1) of the Act was in any event not to be read narrowly. I made reference to the decision of a Full Court of the Federal Court in Commonwealth of Australia v Construction, Forestry, Mining and Energy Union (2003) 129 FCR 271, where in the joint judgment of Black CJ, Tamberlin and Sundberg JJ, the following appears (at 274-275): 'In an action brought to enforce a right given by the Act, it would be quite contrary to this object to read s 347(1) narrowly such that interlocutory proceedings about, for example, discovery were not seen as proceedings "in the matter" at the heart of the principal proceeding and were instead seen as proceedings in a separate matter, defined according to the narrower and subsidiary controversy about discovery… In the present case, inspection of the copy document could have been sought only for the purposes of the principal proceeding and as an interlocutory step in the resolution of the matter that the principal proceeding had been brought to resolve. In those circumstances what may be seen as separate proceedings concerning the inspection of the document and the claim for immunity, are properly to be regarded as proceedings "in" the principal matter... It has not been suggested that the Union acted in any respect vexatiously or without reasonable cause in respect of the proceedings concerning the copy document so there is no question of the proviso applying. In these circumstances, s 347(1) precludes the making of any order as to the costs of the proceedings concerning the production of the copy document, either at first instance or on appeal…' 4 The Bank submitted that the Union's second pleading failed for the same reason as the first pleading, in that it failed effectively to aver that the employment positions of the employees in question were abolished, and that the second pleading sought to aver that the positions of the relevant employees had not been made redundant, yet that averment involved the same issue which had been determined adversely to the Union in my earlier reasons for judgment. In any event, the Bank contended that it would not have been put to the expense of its second strike-out application, if the Union had pleaded from the outset the further or additional material contained in the second pleading. Moreover it was emphasised by the Bank that although having been given the opportunity to replead its cause of action, following upon the leave granted for that purpose on 30 July 2004: (i) the Union accepted the Court's invitation to replead; (ii) the Union decided that it was necessary to aver the content, causes of action and particulars thereafter contained in the second pleading; (iii) nevertheless the second pleading did not address the fundamental issues of construction of the EBA that led to the first pleading being struck out; (iv) instead the second pleading constituted merely an attempt to improve the basic theme of the first pleading, namely that the Bank had made employees redundant who were not redundant, by altering the framework of the expression of its claims at a superficial level; (v) in the light of my reasons for judgment of 30 July 2004, particularly at [31] thereof, the second pleading had no prospects of being upheld, and had been therefore advanced without reasonable cause. 5 The Union contended on the other hand that the second pleading 'occasioned significant and bona fide debate on the part of the parties'. So much may be readily acknowledged. The fact that the pleading of a cause of action is shown not to be sustainable, by reason of a Court's conclusion as to the true construction or interpretation of the governing instrument the focus of a strike-out application, does not necessarily mean that any different construction or interpretation would be vexatious or devoid of any reasonable argument to the contrary. I was referred to what was said by the High Court in General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 130, where in the reason for judgment of Barwick CJ, the following well-known passage appears: '… great care must be exercised to ensure that under the guise of achieving expeditious finality a plaintiff is not improperly deprived of his opportunity for the trial of his case by the appointed tribunal. On the other hand, I do not think that the exercise of the jurisdiction should be reserved for those cases where argument is unnecessary to evoke the futility of the plaintiff's claim. Argument, perhaps even of an extensive kind, may be necessary to demonstrate that the case of the plaintiff is so clearly untenable that it cannot possibly succeed.' I was also referred to Lindsey v Philip Morris Ltd [2004] FCA 9, where for the reasons for judgment of Kenny J, proceedings were dismissed on the basis that the pleading disclosed no reasonable cause of action, and was frivolous and vexatious, in spite of the fact that this determination was only made after lengthy argument. The applicant was ordered to pay the respondent's costs of the proceedings. 6 In the present circumstances however, what was involved in the two interlocutory proceedings which I resolved in favour of the Bank was the true meaning and interpretation of essentially one of the principal aspects of the operation or otherwise of a very extensive and complex instrument involving many matters not in issue between the parties. 7 The Union submitted however that since my reasons for judgment addressed a strike-out application initiated by the Bank as the moving party in relation to a pleaded statement of claim (being of course the second pleading) nevertheless the Bank's successful application to strike-out the second pleading could not ground an application for costs within the operation of s 347 of the Act. That was said to be because by virtue of the explicit terms of s 347 of the Act, costs may only be awarded against the party which instituted the proceeding vexatiously or without reasonable cause, emphasis being made on the word instituted. It was argued by the Union that the proceeding which had been instituted, and in relation to which an award of costs is presently sought by the Bank, was that initiated by the Bank in the form of its strike-out application, and not the proceeding for the imposition of penalties initiated by the Union. Thus the starting point was said by the Union to be the determination of what is the proceeding which is the focus of the application for costs. The answer to that question was said by the Union to be that it is not the Bank's strike-out application that could be said to be the proceeding in respect of which costs are sought, since '… pursuant to s 347 costs can only be brought in respect of "a proceeding" initiated by the party against which costs are sought'. I would reject that submission, since the Bank's strike-out application was not '… a proceeding… arising under this Act', but rather an interlocutory proceeding authorised by the Federal Court Rules, and in particular Order 20 rule 2. Proceedings arising under the Act refers to those matters concerning which jurisdiction is conferred by the Act. 8 The Union further submitted that once it is accepted that the issue as to costs arises from the Union's application to replead, that issue has been 'effectively answered' by the Court's reasons for judgment upon the efficacy of the second pleading. In that regard, I was referred to [51] of those subsequent reasons, where I expressed the view that the second pleading 'has occasioned significant and bona fide debate on the part of both parties'. Moreover I there described the outcome of my reasons for judgment as the Bank's 'successful demurrer to a pleading which was fairly arguable', the Union's emphasis being upon the latter expression 'fairly arguable'. The Union therefore contended that the conclusion should therefore be drawn that the second pleading 'raised arguable points of law such that it could not be said that the proceeding to determine whether leave should be granted to amend the claim in the form of the revised Statement of Claim was one that was "vexatious or without reasonable cause".' 9 Remaining as I do of the view that the second pleading did occasion 'significant and bona fide debate on the part of both parties' in relation to critical issues of interpretation of a very comprehensive document, I have reached the conclusion that I should not make an order for costs adversely to the Union arising out of the further strike-out proceedings which were concluded by my reasons for judgment of 30 March 2005, subject of course to the appeal since instituted by Union. It is true that the Union has been afforded two opportunities to plead a viable cause of action based on the EBA, but I would not characterise the second pleading as frivolous or vexatious, or to adopt the description of Northrop J in Heidt v Chrysler Australia Ltd (1976) 26 FLR 257 at 272 in relation to the operation of the precursor s 197A of the Conciliation and Arbitration Act 1904 (Cth), as 'an abuse of process'. I would infer that the drafting and settling of the EBA would have occupied a substantial amount of bilateral thought and negotiation, in order to ultimately produce its complex contractual provisions. In the case of a commercial agreement made between traders or business operators, a successful demurrer to two successive originating pleadings purportedly based upon that document would each have attracted an adverse order as to costs in favour of the successful party. However the complex area of documentary interpretation I have now twice addressed required a broad and detailed conspectus to be undertaken in order to resolve the complex issues of construction which fell for my consideration. 10 In this unique context to the Bank's second successful strike-out application and the restrictive legislative policy inherent in s 347(1) of the Act, I am not persuaded that I should make any costs order in favour of the Bank against the Union in relation to the proceedings which led to my reasons for judgment of 30 March 2005. I certify that the preceding ten (10) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Conti. Associate: Dated: 5 May 2005 Counsel for the Applicant: RC Kenzie QC with I Taylor Solicitor for the Applicant: Turner Freeman Counsel for the Respondent: RJ Ellicott QC and PR McGuire Solicitor for the Respondent: Freehills Date of Hearing: 25 November 2004 Date of Judgment: 5 May 2005