FEDERAL COURT OF AUSTRALIA Construction, Forestry, Mining and Energy Union v Bengalla Mining Company Pty Limited (No 2) [2013] FCA 362 Citation: Construction, Forestry, Mining and Energy Union v Bengalla Mining Company Pty Limited (No 2) [2013] FCA 362 Parties: CONSTRUCTION, FORESTRY, MINING AND ENERGY UNION v BENGALLA MINING COMPANY PTY LIMITED (ACN 053 909 470) File number: NSD 1794 of 2012 Judge: KATZMANN J Date of judgment: 22 April 2013 Catchwords: INDUSTRIAL LAW – Costs – Fair Work Act 2009 (Cth), s 570 – allegations of unlawful adverse action not pressed after closing submissions – allegations based on a letter from the employer to the employee where the union had informed the employer that it had no objection to a letter in the same form being sent – whether amendment of statement of claim to make the allegations and the maintenance of those allegations were unreasonable acts within the meaning of s 570(2) – whether Court's discretion to award costs should be exercised in the employer's favour – manner in which discretion should be exercised. Legislation: Fair Work Act 2009 (Cth), ss 342, 570 Workplace Relations Act 1996 (Cth), ss 347(1A), 824(2) Workplace Relations Amendment (Work Choices) Act 2005 (Cth) Cases cited: Construction, Forestry, Mining and Energy Union v Bengalla Mining Company Pty Limited [2013] FCA 267 Construction, Forestry, Mining and Energy Union v Clarke (2008) 170 FCR 574 Community and Public Sector Union v Telstra Corporation Limited (2000) 101 FCR 45 Goldman Sachs JB Were Services Pty Ltd v Nikolich (2007) 163 FCR 62 Heidty Chrysler Australia Ltd (1976) 26 FLR 257 Paras v Public Service Body Head of the Department of Infrastructure (No 3) (2006) 152 FCR 534 Date of hearing: Determined on the papers Date of last submissions: 15 April 2013 Place: Sydney Division: FAIR WORK DIVISION Category: Catchwords Number of paragraphs: 37 Counsel for the Applicant: Mr A M Slevin Solicitor for the Applicant: Slater & Gordon Counsel for the Respondent: Mr Y Shariff Solicitor for the Respondent: Herbert Smith Freehills IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY FAIR WORK DIVISION NSD 1794 of 2012 BETWEEN: CONSTRUCTION, FORESTRY, MINING AND ENERGY UNION Applicant AND: BENGALLA MINING COMPANY PTY LIMITED (ACN 053 909 470) Respondent JUDGE: KATZMANN J DATE OF ORDER: 22 APRIL 2013 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The applicant pay: (a) the respondent's costs of and incidental to the filing of the amended defence; (b) 25% of the respondent's costs of and incidental to the preparation and filing of its affidavits and submissions; and (c) 10% of the respondent's costs of the hearing. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY FAIR WORK DIVISION NSD 1794 of 2012 BETWEEN: CONSTRUCTION, FORESTRY, MINING AND ENERGY UNION Applicant AND: BENGALLA MINING COMPANY PTY LIMITED (ACN 053 909 470) Respondent JUDGE: KATZMANN J DATE: 22 APRIL 2013 PLACE: SYDNEY REASONS FOR JUDGMENT 1 In this matter the applicant union applied for a number of declarations to the effect that the respondent ("Bengalla") had engaged in adverse action against one of its members, Adam Dever, in contravention of the Fair Work Act 2009 (Cth) ("FW Act"). It also sought civil penalties for the contraventions. The application was supported by a statement of claim. The statement of claim was amended to plead additional allegations of adverse action and two further declarations were added to the application. After closing submissions the union decided not to press the additional allegations. 2 On 28 March 2013 I dismissed the application: Construction, Forestry, Mining and Energy Union v Bengalla Mining Company Pty Limited [2013] FCA 267. In the reasons for judgment I noted that no costs application had been made or foreshadowed and said that I would make no order for costs. Yet, upon the pronouncement of the orders Bengalla indicated that it wanted to consider whether to make a costs application and it has now done so. Its application is that the union pay 25% of its costs as taxed or agreed. The application is opposed. 3 Section 570 of the FW Act limits the circumstances in which a costs order may be made. One of those circumstances is where the Court is satisfied that one party's unreasonable act or omission caused the other party to incur the costs: s 570(2)(b). It is upon this basis that Bengalla makes its application. It submits that the union's conduct in making and pursuing the additional claims was unreasonable. It contends that the time and expense it incurred in responding to those claims fairly represents 25% of its costs. No evidence was adduced of the time and expense that might support the contention. Bengalla simply pointed to the work performed in relation to the additional allegations. 4 Mr Dever is a member of and office-holder in the union. The claims advanced in the amended statement of claim related to Mr Dever's unauthorised absences from work to attend board of management meetings of his district branch of the mining and energy division of the union. Mr Dever had applied for leave without pay to attend the meetings. Bengalla refused to grant his application because, as it informed him, he had outstanding accrued leave and under the company's leave policy employees were required to use their accrued leave before being considered for unpaid leave. Mr Dever chose not to use his accrued leave and absented himself from work to attend board of management meetings on both 29 August and 12 November 2012 without Bengalla's permission. After the first unauthorised absence, Bengalla sent Mr Dever a letter warning him, in effect, that further unauthorised absences could result in the termination of his employment. 5 The allegations the subject of this costs application relate to the second unauthorised absence on 12 November 2012. They were said to be based solely on a letter that Patrick Korman, Bengalla's Maintenance Manager, wrote to Mr Dever on 21 December 2012 ("the 21 December letter" or "the letter"). The salient parts of the letter read as follows: Unless the employee has approved leave the employee is expected to attend work as normal. This is consistent for all employees of Bengalla. On this basis, we would in the usual course of events, implement disciplinary action in accordance with the applicable Performance Policy. The decision about the extent of disciplinary action would take into account any previous disciplinary action, including warnings you have received in the past about similar behaviour. I note you received a written warning letter dated 18 September 2012 for unauthorised absence from work for date of 29 August 2012. However, in light of the proceedings that the [union] has recently commenced in the Federal Court of Australia (NSD1794 of 2012) – which alleges that disciplinary action against you for this absence is unlawful – we have determined to defer the decision about imposing disciplinary action, pending the outcome of those proceedings. While it is, of course, not possible to foreshadow the outcome of those proceedings, I expect that if the [union] is not successful in its claims, the company will then proceed to make a decision about any disciplinary action to be taken against you in relation to your absence on 12 November 2012, in accordance with its usual policies and procedures. (Emphasis added.) 6 The union's case was that the threat to take adverse action was contained in the paragraph I have emphasised. 7 The background to the sending of this letter is as follows. 8 At the first directions hearing the union sought expedition on the basis that further disciplinary action had been threatened. I asked Bengalla's counsel whether he was in a position to give an undertaking that no steps would be taken to adversely affect Mr Dever's employment until the application had been finally determined and invited him to seek instructions. He indicated that the union's solicitors had sought undertakings and that discussions were continuing. I then made directions by consent for the filing of pleadings and affidavits and listed the matter for hearing on 18 March 2003. 9 There then followed a flurry of correspondence between the solicitors for the parties. Initially, Bengalla's solicitors informed the union's solicitors that Bengalla considered that Mr Dever's action on 12 November 2012 warranted disciplinary action but Bengalla proposed (without any admissions) that in the light of the proceedings it would defer "implementing" any disciplinary action. It was, however, a condition of the deferral that that Mr Dever give certain undertakings. At the same time Bengalla insisted that it had not taken and was not proposing to take any disciplinary action against him for the absence on 12 November. The union emphatically rejected the proposition that Mr Dever give the undertakings sought. On 14 December 2012, in an apparent attempt to forestall a claim for interlocutory relief, Bengalla's solicitors informed the union's solicitors that Bengalla intended to write to Mr Dever and attached a copy of the letter it proposed sending. 10 On 18 December 2012, after further exchanges of correspondence and discussions between counsel, Bengalla's solicitors wrote again to the union's solicitors offering to give undertakings to Mr Dever and the Court to defer any decision to implement disciplinary action against Mr Dever in respect of his absence from work on 12 November 2012 pending the determination of the proceeding and to write to Mr Dever "in the form proposed" in its 14 December letter. They explained that their purpose was to preserve the status quo. Bengalla also undertook to re-credit any annual leave Mr Dever might take on 5 February 2013 (when another board of management meeting was due to be held) if the Court were to determine that he had been subject to unlawful adverse action as alleged in the application. The solicitors sought confirmation that the union had no objection to the proposed undertakings and: will not raise any allegation that proffering the undertaking or communicating to Mr Dever in the form proposed constitutes contempt of Court or any attempt by [Bengalla] to influence the outcome of the proceedings or the Court or any attempt by [Bengalla] to thwart the likely relief that your client may obtain or otherwise interfere with the subject matter of the proceedings. 11 In their reply, the union's solicitors provided that confirmation and stated: The issue of threatened action by your client was raised at the first Directions Hearing in this matter and was the subject of some comment of her Honour Justice Katzmann. However, your initial attempt to "resolve this issue" was to seek that my client procure an undertaking from Mr Dever. This was hardly a constructive approach and not one designed to deal with the issue raised at the Directions Hearing. In any event, without making any concessions for the purposes of these proceedings and reserving all of its rights, my client has no objection to the form of the undertaking now proposed to be given by your client … I further advise that my client has no objection to your client writing to Mr Dever in the form proposed in your letter of 14 December 2012. 12 The letter Mr Korman sent on 21 December 2012 was in identical terms to what Bengalla's solicitors had proposed in the 14 December letter. 13 By this time the union had filed its statement of claim. The statement of claim relevantly alleged that Mr Dever applied for unpaid leave on 12 November 2012 to attend a meeting of the board of management of his district branch of the union, that the application had been refused and that when Mr Dever advised his supervisor, Julian Blason, that he nevertheless intended to attend, Mr Blason threatened him with disciplinary action if he was absent from work on that day. The alleged threat was said to constitute adverse action under the FW Act because it was taken for a prohibited reason (that Mr Dever had proposed to engage in industrial activity) and therefore contravened the Act. The union later filed an amended statement of claim in which it made additional allegations that Mr Korman threatened to take disciplinary action in the 21 December letter and that in so doing Bengalla engaged in adverse action for a prohibited reason in contravention of the FW Act. The amended statement of claim was filed, together with an amended application, on 6 February 2013. The allegations of threatened disciplinary action by Mr Blason were not pursued and were formally abandoned at the hearing. Why the union did so is a mystery. Why it chose to replace them by the new allegations is even more baffling. During the course of closing submissions I raised concerns with the union's counsel about the use to which the 21 December letter was being put when the union, through its solicitors, had said that it had no objection to the letter being sent. Counsel then sought instructions and the additional claims were not pressed. 14 Bengalla contends that the following acts of the union were unreasonable and added to its costs: • indicating to it that it had no objection to Bengalla writing to Mr Dever in the form in which it did; and • after the letter had been sent, amending its statement of claim to allege that the letter contained a threat that contravened the FW Act. 15 The union denied that it had acted unreasonably. It advanced the following arguments. 16 First, the union urged the Court not to conclude that the additional allegations were without foundation. It submitted that it was justified in making them. It contended that, on the authorities, a threat was a warning of an intention to inflict harm and the 21 December 2012 letter contained such a warning. 17 Secondly, the union pointed out that its solicitor had sworn an affidavit which was read in the proceeding and had not been required for cross-examination "on the reasonableness or otherwise of the letter". 18 Thirdly, the union submitted that the statement that the union had no objection to Bengalla writing to Mr Dever in the form that it ultimately did should be read with the preceding paragraph in which it had reserved all its rights and made no concessions "for the purposes of the proceedings". 19 Fourthly, the union stated that Bengalla had been given a draft of the amended statement of claim on 24 January 2013 and consented to it being filed. 20 Section 570 relevantly provides: (1) A party to proceedings … in a court … exercising jurisdiction under this Act may be ordered to pay costs incurred by another party to the proceedings only in accordance with subsection (2) … (2) The party may be ordered to pay costs only if" (a) …; (b) the court is satisfied that the party's unreasonable act or omission caused the other party to incur the costs; or (c) … 21 It is common ground that the principles that apply to the operation of para (b) are the principles that were enunciated in Construction, Forestry, Mining and Energy Union v Clarke (2008) 170 FCR 574, which dealt with the equivalent provision in the Workplace Relations Act 1996 (Cth) (s 824(2)). There the Full Court emphasised (at [28]) that what was required was both the engagement in an unreasonable act or omission, and a causal connection between that act or omission and the costs the other party incurred. It also observed (at [29]) that there is a distinction between pursuing arguments which are ultimately abandoned or rejected and bringing a proceeding which is "misconceived in the sense of being incompetent or unsupportable". It pointed out that simply failing to conduct litigation in the most efficient way does not invite the exercise of the Court's discretion to award costs. It encouraged caution and discouraged haste in making a costs order on this basis. But it did not otherwise define what sort of conduct might amount to an unreasonable act or omission sufficient to enliven the Court's jurisdiction to make an order and the Act itself does not do so. 22 The Explanatory Memorandum to the Fair Work Bill notes (in cl 2228) that the ability of the courts to award costs in workplace relations matters has been limited since 1904. (The legislative history before the enactment of the FW Act was summarised by the Full Court in Goldman Sachs JB Were Services Pty Ltd v Nikolich (2007) 163 FCR 62 at 64 [86].) The Explanatory Memorandum goes on to point out that the limited jurisdiction to award costs is "part of a policy of discouraging legalism in proceedings before industrial courts". 23 Section 824(2) was inserted into the Workplace Relations Act by the Workplace Relations Amendment (Work Choices) Act 2005 (Cth) ("Work Choices"). Section 824(2) provided: Despite subsection (1) if a court hearing a proceeding (including an appeal) in a matter arising under this Act (other than an application under section 663) is satisfied that a party to the proceeding has, by an unreasonable act or omission, caused another party to the proceeding to incur costs in connection with the proceeding, the court may order the first-mentioned party to pay some or all of those costs. 24 Before this amendment a costs order could only be made in a matter arising under the Act (and its predecessors) if the proceeding had been brought vexatiously or without reasonable cause. The Explanatory Memorandum to the Work Choices Bill provides little guidance on the proper approach to deciding whether an act or omission is unreasonable. It notes (in cl 2643) that a costs order under the subsection (initially s 347(1A)) can be made irrespective of the outcome of the proceeding. It provides an "illustrative example" of parties who continually disregarded the court's directions by filing documents late and continually raised frivolous arguments during the proceedings. I see no reason, however, why the Court's power should be limited to circumstances of this kind. Young J expressed a similar opinion in Paras v Public Service Body Head of the Department of Infrastructure (No 3) (2006) 152 FCR 534. The section refers to "an unreasonable act or omission", not to a course of conduct. 25 "Unreasonable" can mean several things. The Macquarie Dictionary definition is: 1. not reasonable; not endowed with reason. 2. not guided by reason or good sense. 3. not agreeable to or willing to listen to reason. 4. not based on or in accordance with reason or sound judgement. 5. exceeding the bounds of reason; immoderate; exorbitant. 26 It seems to me that if the union's conduct can be characterised as not endowed or guided by reason or good sense, or not based on or in accordance with reason or sound judgment, it would be unreasonable within the meaning of s 570. While the Court should not rush to the conclusion that a costs order should be made, neither should it baulk at the prospect if the circumstances warrant it. No party should assume that any old allegation may be made in proceedings arising under the FW Act because it is unlikely to be penalised in costs. 27 Certainly, the mere fact that the union made allegations of wrongdoing which it later failed to pursue does not mean that its actions were unreasonable. But this case does not simply concern the making of allegations which were not pressed. There was in my view no proper foundation for making the allegations in question in the first place or in pursuing them until the heel of the hunt, especially when the folly of doing so was exposed by the evidence Bengalla had served. 28 Bengalla submitted that the 21 December letter did not constitute or include a threat to take adverse action. Rather: [t]he letter does no more than reflect the industrial compromise that has been reached between the parties in view of the commencement of proceedings. This compromise reflects the fact that if any action is taken against Mr Dever in relation to the Second Unauthorised Absence, it will be conditioned upon the outcome of these proceedings (including the prospect that no action may be taken at all). If the outcome of these proceedings in that the Applicant Union succeeds, then there is no "threat" at all because no action will be taken against Mr Dever. If the outcome is that [Bengalla] succeeds, then it follows that there is no "threat" of "adverse action" in the relevant sense. Either way, it is artificial to construe what has occurred as a threat given the circumstances that prevail and the sensible compromise that has been reached. 29 I agree. While threatening to take disciplinary action would amount to adverse action under the FW Act (see FW Act, s 342), to threaten someone within the meaning of s 342 involves communicating an intention to inflict harm on the person; "the essence of a threat is that it be made for the purpose of intimidating a person" (Community and Public Sector Union v Telstra Corporation Limited (2000) 101 FCR 45 at 48–9 [15]). On any reasonable view, the letter conveyed no such intention. It contained no threat. To the contrary, it contained assurances on Bengalla's part that it would not take any action in relation to Mr Dever's absence from work on 12 November 2012 until the outcome of the proceeding was known. It is true that Mr Korman indicated that, "in the usual course of events" the company would implement disciplinary action. But he made it clear that no decision would be made on the subject until the case was over and Mr Dever's position would be protected. He was telling Mr Dever, in effect, that the company would abide by the decision of the Court. That was not a communication of an intention to harm or intimidate Mr Dever. It was a communication of an intention not to. 30 The union submitted that: [It] was dealing with a situation in which circumstances relevant to the factual substratum of the proceeding were still unfolding. The contest between the parties over [Bengalla's] treatment of Mr Dever for attending [board of management] meetings was squarely raised by the Originating Application. The attendance by Mr Dever at the 12 November meeting and the resulting treatment by [Bengalla] was within the scope of that controversy. The [union's] intent was to ensure that no further disciplinary action would be taken against Mr Dever until the controversy was resolved. The acceptance of the proposal that an undertaking be given and a letter be sent to Mr Dever by the union achieved that aim and cannot be said to have acted unreasonably for doing so. 31 I find the submission difficult to understand. The question is not whether the union acted unreasonably in accepting Bengalla's proposal that an undertaking be given and a letter be sent to Mr Dever. The question is whether it was unreasonable to make and pursue the allegation that Bengalla was threatening further disciplinary action in the 21 December letter. There is no evidence about what the union's intention was, but assuming the submission reflects it, the amendments to the statement of claim were unnecessary. The undertakings and the assurances given in the letter fully protected Mr Dever "until the controversy was resolved". In the circumstances, if the reason the amendments were made was for the arguably collateral purpose of ensuring that no further disciplinary action was taken "until the controversy was resolved", their inclusion might be said to be an abuse of process. 32 Whether or not the amendments amounted to an abuse of process, it was in my view unreasonable for the union to make and pursue them. I have come to that view for two reasons. First, as I have explained, the 21 December letter upon which the amendments were said to be based provides no foundation for the allegations made in them. Secondly, the letter was sent only after the union had, in effect, given Bengalla the green light. The union's solicitors did reserve the union's rights and did make it clear that the union made no concessions, but their advice that the union did not object to the form of the proposed letter would have signalled to Bengalla that its contents were also unobjectionable. To turn around afterwards and rely on the letter to support an additional contravention of the Act and potentially another civil penalty is unfathomable. 33 It is irrelevant that Bengalla did not seek to cross-examine the union's solicitor on his affidavit. He said nothing in his affidavit about the reasons the union had applied to amend the statement of claim. Further, whether or not a party acts unreasonably does not call for a self-assessment. The test is not, in my view, a subjective one (cf. Heidty Chrysler Australia Ltd (1976) 26 FLR 257 at 275 per Northrop J dealing with the question of whether a proceeding is instituted without reasonable cause). 34 Nor do I see why Bengalla's consent to the filing of an amended statement of claim makes any difference. Bengalla's consent to the filing of the statement of claim does not make the union's conduct reasonable. At no time did it accept that the letter included any threat of adverse action. Doubtless it thought it was in a position to meet the allegations. 35 There is no doubt that the union's conduct in advancing the additional allegations added to Bengalla's costs. Its lawyers would have had to take further instructions, file and serve an amended defence, and the affidavits and submissions were necessarily more extensive than they would otherwise have been. 36 The fact that the union's conduct was unreasonable, however, only gives the Court the power to make a costs order. It does not require that it exercise it. I have given anxious consideration to whether I should do so. After all, the union acted responsibly in deciding not to press the additional allegations. But by the time it reached this decision all the additional costs had been incurred. In the circumstances I am satisfied that Bengalla should recover the costs it incurred in meeting the additional allegations. The next question is how the costs should be calculated. 37 The union submits that on any fair measure the claims relating to the unauthorised absence on 12 November 2012 did not occupy a quarter of the proceeding. That might be so. But no alternative submission was advanced. The amended defence was concerned exclusively with meeting the additional allegations. Approximately one quarter of each of the affidavits filed by Bengalla relates to the additional allegations. But little hearing time was taken up with the issues arising from them. I propose that the union should pay all the costs of and incidental to the filing of the amended defence, and 25% of the costs of and incidental to the preparation and filing of Bengalla's affidavits and submissions. A perusal of the transcript suggests that about 13% of the time of the hearing was occupied with the additional allegations. Allowing for the possibility that some of the evidence about the later events might have emerged in or arising out of cross-examination in any event, I would allow 10% of the costs of the hearing. I will make orders to that effect. I certify that the preceding thirty-seven (37) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Katzmann. Associate: Dated: 22 April 2013