FEDERAL COURT OF AUSTRALIA Director of the Fair Work Building Industry Inspectorate v Adams [2015] FCA 420 Citation: Director of the Fair Work Building Industry Inspectorate v Adams [2015] FCA 420 Parties: DIRECTOR OF THE FAIR WORK BUILDING INDUSTRY INSPECTORATE v SCOTT ADAMS & OTHERS File number: WAD 73 of 2015 Judge: GILMOUR J Date of judgment: 19 March 2015 Catchwords: PRACTICE AND PROCEDURE – urgent application for leave to appeal –whether primary judge's decision to set aside notices to admit attended by sufficient doubt to warrant reconsideration – penalty privilege for pecuniary penalty claims under the Fair Work Act 2009 (Cth) – notices to admit and the penalty privilege – application dismissed Legislation: Fair Work Act 2009 (Cth) s 539 Federal Court of Australia Act (1976) (Cth) ss 37A, 37M-37P Federal Court Rules 2011 (Cth) Pt 22 Cases cited: Adam P. Brown Male Fashions Proprietary Limited v Philip Morris Incorporated (1981) 148 CLR 170 Decor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397 MacDonald v Australian Securities and Investments Commission (2007) 73 NSWLR 612 Samsung Electronics Co. Limited v Apple Inc (2013) FCAFC 138 The Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission (2002) 213 CLR 543 Trade Practices Commission v Abbco Iceworks Pty Limited (1994) 52 FCR 96 Date of hearing: 19 March 2015 Place: Perth Division: FAIR WORK DIVISION Category: Catchwords Number of paragraphs: 26 Counsel for the Applicant: Mr RL Hooker Solicitor for the Applicant: Corrs Chambers Westgarth Counsel for the Respondents Ms KA Vernon (except 31st and 75th): Solicitor for the Respondent Slater + Gordon Lawyers (except 31st and 75th): IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY FAIR WORK DIVISION WAD 73 of 2015 BETWEEN: DIRECTOR OF THE FAIR WORK BUILDING INDUSTRY INSPECTORATE Applicant AND: SCOTT ADAMS & OTHERS Respondent JUDGE: GILMOUR J DATE OF ORDER: 19 MARCH 2015 WHERE MADE: PERTH THE COURT ORDERS THAT: 1. Leave to appeal be refused. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY FAIR WORK DIVISION WAD 73 of 2015 BETWEEN: DIRECTOR OF THE FAIR WORK BUILDING INDUSTRY INSPECTORATE Applicant AND: SCOTT ADAMS & OTHERS Respondent JUDGE: GILMOUR J DATE: 19 MARCH 2015 PLACE: PERTH REASONS FOR JUDGMENT 1 This is an urgent application by the applicant for leave to appeal from an order of a judge of the Court made on 13 March 2015 setting aside notices to admit served by the applicant on the respondents other than those two who did not enter an appearance. 2 The application is supported by two affidavits by Mr Nicholas Ellery affirmed on 17 March 2015. I will now turn to the background. Background 3 On 5 February 2014, the applicant commenced proceedings against the respondents for relief, including the imposition of pecuniary penalties pursuant to s 539 of the Fair Work Act 2009 (Cth) (the FW Act). Each of the respondents is an individual. Those that have entered an appearance have filed defences in which they claim, in a number of respects, privilege against self-exposure to a penalty. Those that did not enter an appearance have not filed a defence. 4 By way of an interlocutory application dated 24 February 2015, the respondents applied for orders to set aside the notices to admit dated 10 February 2015. Legal principles 5 The grant of leave to appeal or not involves the exercise of discretion, which is not at large. The principles generally applicable are well established. First, whether in all the circumstances the decision was attended with sufficient doubt for it to be reconsidered by the Full Court, and second, to consider whether substantial injustice would result if leave were refused supposing the decision to be wrong: Decor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397 at 398-399. 6 As was stated by the High Court in Adam P. Brown Male Fashions Proprietary Limited v Philip Morris Incorporated (1981) 148 CLR 170 at 177: [A]ppellate courts exercise particular caution in reviewing decisions pertaining to practice and procedure. 7 This principle, which is of general application, has been followed assiduously in this Court. A recent example is the decision of the Full Court in Samsung Electronics Co. Limited v Apple Inc (2013) FCAFC 138. Accordingly, that this is an application for leave to appeal from an order pertaining to practice and procedure is relevant to the exercise of the discretion. 8 The authorities establish that civil procedure rules, including as to pleadings, discovery and interrogatories and subpoenas must not undermine the penalty privilege: Trade Practices Commission v Abbco Iceworks Pty Limited (1994) 52 FCR 96 at 128-129 (per Burchett J) and 143 (per Gummow J); The Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission (2002) 213 CLR 543 at 559 and MacDonald v Australian Securities and Investments Commission (2007) 73 NSWLR 612 at [63]-[66]. 9 The primary judge acknowledged, nonetheless, the principle that, to the extent possible, existing civil practice rules should be applied. His Honour took the view that the notices in this case were not distinguishable from other interlocutory processes that have been found not to be available where the penalty privilege applies, and should therefore be set aside as a whole. In doing so, his Honour considered the interaction of s 37M of the Federal Court of Australia Act (1976) (Cth) (the FCA Act), the penalty privilege and r 22 in Pt 22 of the Federal Court Rules 2011 (Cth) (the Rules). His Honour concluded in his ex tempore reasons that it could not be argued at all convincingly that s 37M(1) is a statutory provision whereby the Parliament has sought to pierce, let alone fully abrogate, the penalty privilege. 10 Although his Honour did not state so in terms, I apprehend that what his Honour had in mind was the proposition articulated, for example, in MacDonald by Mason P, as his Honour then was, at [39] where his Honour stated: [T]he law of privilege confers substantive rights to which procedural rules must yield unless there is clear statutory authority to the contrary. 11 I take the primary judge to have concluded that s 37M(1) was not such an express statutory provision. Consideration 12 The primary question here is whether there is sufficient doubt attending the conclusion of the primary judge that the notices would, in the context of the procedure found under Pt 22 of the Rules, pose a real risk that the penalty privilege would be traversed. 13 The applicant submits that the notices to admit could stand in a way where the penalty privilege was not undermined. It contends that the notices can be traversed by a recipient through a notice by observing r 22.02 without undermining the privilege and in turn giving effect to the overarching purpose enacted in s 37M of the FCA Act. 14 It further contends that, having regard to the text of Pt 22 considered in its context and likely practical operation, a workable balance between the potentially competing goals in s 37M(1)(a) and (b) can be achieved. Finally, it submits that the operation of the scheme in Pt 22 of the Rules for the exercise of the Court's ultimate discretion as to costs, far from giving rise to any compulsion upon a respondent which should thereby undermine the privilege, in fact operates compatibly with a reconciliation of the themes and purposes in s 37M(1) and (2). 15 I will set out here in full Pt 22 of the Rules. Part 22—Admissions 22.01 Notice to admit facts or documents A party (the first party) may serve on another party (the second party) a notice, in accordance with Form 41 (the notice to admit), requiring the second party, for the purpose of the proceeding only, to admit the truth of any fact and the authenticity of any document specified in the notice to admit. Note: Authenticity of a document is defined in the Dictionary. 22.02 Notice disputing facts or documents The second party may, within 14 days after service of the notice to admit, serve on the first party a notice of dispute, in accordance with Form 42, disputing the truth of any fact or the authenticity of any document specified in the notice to admit. 22.03 Disputing party to pay costs if document is proved etc If a party serves a notice of dispute under rule 22.02 and the truth of any fact or the authenticity of any document disputed in the notice is proved, the party that served the notice of dispute must pay the costs of proving the truth of the fact or the authenticity of the document. 22.04 Facts or documents taken to be admitted if not disputed If the second party does not serve a notice of dispute in accordance with rule 22.02, the second party will be taken to have admitted the truth of each fact or the authenticity of each document specified in the notice to admit. Note: The Court may dispense with compliance with this rule—see rule 1.34. 22.05 Deemed admission A party (the first party) will be taken to have admitted the authenticity of any document specified in another party's list of documents for which inspection has been permitted unless: (a) the authenticity has been denied in the first party's pleadings or affidavits; or (b) the first party has given the other party notice within 14 days after inspection was permitted that the authenticity of the document is denied. Note: The Court may dispense with compliance with this rule—see rule 1.34. 22.06 Withdrawal of admissions A party may apply for the leave of the Court to withdraw an admission made under this Part. 22.07 Judgment on admissions If a party makes an admission, another party may apply to the Court for any judgment or order to which the party is entitled on the admission. 16 Now, I do not understand that the applicant is contending that the respondents have to make admissions of fact or as to the authenticity of documents. Rather, the submission is to the effect that each has to determine whether or not to do so and at least to serve a notice of dispute under r 22.02, this in turn triggering potential adverse cost consequences. It is necessary therefore to understand what is required by r 22.02. 17 It, in effect – that is to say in practical terms – requires a party on whom a notice to admit is served, and who does not wish to be susceptible to the deemed admission provision in r 22.04, to serve on the party giving the notices to admit a notice of dispute. That notice is to be in accordance with Form 42 and is such as to dispute the truth of any fact or the authenticity of any document specified in the notice to admit. 18 The notices to admit in this case require the truth of certain facts material to the proof of the applicant's case, and an admission as to the authenticity of certain documents also material to the proof of the applicant's case. Plainly if there were any compulsion on the respondents to admit either of those categories, that would be a direct and immediate subversion of their respective penalty privileges. 19 Many but not all of the facts the subject of the notices were "not admitted" in the defence and the penalty privilege was claimed in relation to those allegations. The applicant makes the following submissions as to the actual way in which the notices could operate under Pt 22 of the Rules such as not to traverse the penalty privilege. It contends that if the notices to admit were to stand and the remainder of the process under Pt 22 was left to run its course, subject to any specific order or qualification, the respondents, acting on their lawyer's advice, would be required to traverse each component of the notice and evaluate whether they wish to continue to invoke the privilege in its entirety, or only partially and, if so, with respect to what factual issues are presented for determination on the pleadings. Such a process would necessitate that the respondents take into account the potential for an adverse exercise of discretion as to costs, if any, given acts or omissions by them in the conduct of the litigation were found in due course to have been unreasonable. This, the applicant contends, does not mean that the respondents have been "compelled" to do anything. 20 The applicant further contends that the likely course of such a decision making process manifests the implementation of the overarching purpose enacted by s 37M of the FCA Act in a manner that balances the ends reflected in s 37M(1)(a) and (b). The applicant contends that far from compelling, requiring or pressuring a respondent invoking the privilege to do anything against his or her will, it reflects the necessary reality of all contemporary civil litigation. It submits that this reality should not be undermined by characterising litigation for the imposition of a civil penalty as being in a unique category for the operation of ss 37M to 37P and the achievement of the overarching purpose. I do not accept those submissions. 21 Significantly, none of the facts in respect of which admission was sought in the notices to admit were actually denied in the defence of the respondents. There is an obvious distinction, in my opinion, in this context between a non-admission of a fact and a denial. That certain allegations were "not admitted" is no mere happenstance. In some cases which are not relevant to the notice, allegations made in the statement of claim are, in fact, denied. The defence of non-admission is the path by which each respondent has elected, as they are entitled to, to put the applicant to proof in relation to those facts upon which the applicant relies in order to make out its case and expose the respondents to a penalty. 22 The notice to admit requires the respondents to admit to the truth or the authenticity of the facts and the documents respectively. In order to avoid the deemed admission provision in r 22.04 of the Rules, the respondents would require to serve on the applicant a notice of dispute under r 22.02 disputing the truth of any fact or the authenticity of any document. If the respondents were to do so and the facts disputed or authenticity of documents disputed were established, the respondents would potentially be liable under r 22.03 to pay the costs of proving the truth of the facts alleged and the authenticity of the documents in question. 23 This, of course, would encounter the problem in the proceeding which is under the FW Act is ordinarily a no-costs jurisdiction, subject to the exception found in s 570(2). In passing, I very much doubt that the exception found there could ever be invoked merely on the ground that the respondents put the applicant to proof. How could it be said to be unreasonable to do the very thing which each is entitled to do in resting upon their penalty privilege? I understood counsel for the applicant to accept that proposition and that in order for the exception to operate there would require to be something more. That concession seems to me to have been properly made. 24 In my view, the practical need for the respondents, who have the benefit of penalty privilege, to have to convert a non-admission which is central to their privilege entitlement into denials has more than a mere potential costs consequence. For example, it might well be relevant to their credit as witnesses should they in due course elect to give evidence, or potentially detract from a plea in mitigation should the case against them be made out. The penalty privilege is one which does not require the respondents to assist the applicant in any way whatsoever in proving the case against them, be that directly or indirectly. The rule of practice found in Pt 22 of the Rules may not be invoked to abrogate the privilege. 25 If any respondent failed to serve a notice of dispute, the respondent will be taken to have admitted the truth of each fact or the authenticity of each document. In order to avoid this, the respondent would require to convert, in effect, non-admissions pleaded in its defence to denials with the potential consequences, some of which I have outlined. To put the respondent to a penalty proceeding in that position is inimical to the penalty privilege which each relies upon. 26 For these reasons, I am not satisfied that the order made on 13 March 2015 is attended by sufficient doubt to want reconsideration by the Full Court. I will accordingly refuse leave to appeal. I certify that the preceding twenty-six (26) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gilmour. Associate: Dated: 5 May 2015