FEDERAL COURT OF AUSTRALIA Construction, Forestry, Mining and Energy Union v Decmil Engineering Pty Ltd [2016] FCA 615 File number: VID 121 of 2016 Judge: TRACEY J Date of judgment: 3 June 2016 Catchwords: INDUSTRIAL LAW – application for costs under s 570(2) of the Fair Work Act 2009 (Cth) – where applicant seeking leave to amend originating application and pleadings to correct name of party – whether application made without reasonable cause enlivening s 570(2)(a) of the Fair Work Act 2009 (Cth) – whether making of application against incorrect party constituted "unreasonable act" under s 570(2)(b) of the Fair Work Act 2009 (Cth) – whether failure to agree to consent orders amending originating application and pleadings amounted to an unreasonable act or omission under s 570(2)(b) of the Fair Work Act 2009 (Cth) or breach of ss 37M and 37N of the Federal Court of Australia Act 1976 (Cth) Legislation: Fair Work Act 2009 (Cth) ss 501, 502, 570(1), 570(2)(a), 570(2)(b) Federal Court of Australia Act 1976 (Cth) ss 37M, 37N Date of hearing: 13 May 2016 Date of last submissions: 20 May 2016 Registry: Victoria Division: Fair Work Division National Practice Area: Employment & Industrial Relations Category: Catchwords Number of paragraphs: 36 Counsel for the Applicant: Ms S Fitzgerald Solicitor for the Applicant: Construction, Forestry, Mining and Energy Union Solicitor for the First and Third Respondents: Ms C Donald of Lavan Legal Solicitor for the Second Respondent: Mr E Willis of Holding Redlich ORDERS VID 121 of 2016 BETWEEN: CONSTRUCTION, FORESTRY, MINING AND ENERGY UNION Applicant AND: DECMIL ENGINEERING PTY LTD First Respondent LLOYD BAM Second Respondent MARK REEVES Third Respondent JUDGE: TRACEY J DATE OF ORDER: 3 JUNE 2016 THE COURT ORDERS THAT: 1. The applicant pay the first and third respondents' costs incurred prior to 20 May 2016 as assessed consistently with these reasons. 2. The applicant's application for the payment of its costs be refused. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT TRACEY J: 1 This proceeding was commenced on 5 February 2016. The applicant ("the Union") seeks declarations that the respondents have contravened, either directly or vicariously, ss 501 and 502 of the Fair Work Act 2009 (Cth) ("the Act") and the imposition of pecuniary penalties on them. 2 The proceeding arises out of events which the Union alleges occurred on a building site in Hastings in late 2015 and early 2016. In its statement of claim the Union alleges that two of its officials were, on a number of occasions, refused access to the site. On each occasion entry had been sought for the purpose of enquiring into suspected contraventions of occupational health and safety legislation. 3 The Union alleged that the first respondent, Decmil Engineering Pty Ltd ("Decmil Engineering"), was the head contractor of the project at the site and the occupier of the site. It was also alleged that the first respondent was responsible for the management and control of work on the site and that the other respondents were, at relevant times, its employees. 4 On 1 March 2016 Ai Group Workplace Lawyers Pty Ltd ("Ai Group") filed a notice of appointment of lawyer on behalf of Decmil Engineering. On 31 March 2016 the same solicitor filed a notice that it was acting for the third respondent, Mr Mark Reeves. 5 On 29 March 2016 the second respondent, Mr Lloyd Bam, gave notice that Holding Redlich was acting on his behalf. 6 On 13 April 2016 Lavan Legal filed a notice that it had been instructed to act for the first and third respondents in place of their former solicitor. 7 On 20 April 2016 Lavan Legal wrote to the Union's solicitor raising a number of issues. The letter advised the Union that Decmil Engineering was neither the head contractor nor the occupier at the site. Nor was it responsible for the management and control of the site or the employer of the second and third respondents. 8 The Union was advised that the true position was that the head contractor, occupier and entity responsible for the management and control of the site was Eastcoast Development Engineering Pty Ltd ("Eastcoast"). The second and third respondents were employed by Decmil Australia Pty Ltd ("Decmil Australia"). Both Eastcoast and Decmil Australia were wholly owned subsidiaries of Decmil Group Ltd. 9 Lavan Legal sought confirmation from the Union that it would amend its application and statement of claim to reflect what Eastcoast and Decmil Australia said was the true legal position. 10 On the following day the Union's solicitor advised Lavan Legal that, subject to confirmation of the accuracy of the information supplied by Lavan Legal, the Union would apply to amend its application and pleadings. 11 On 2 May 2016 the Union filed an interlocutory application seeking leave to substitute Decmil Australia and Eastcoast as respondents in place of Decmil Engineering. The application was supported by an affidavit affirmed by the Union's in-house solicitor on 29 April 2016. The Union subsequently filed a proposed amended application and a proposed amended statement of claim naming Eastcoast and Decmil Australia as respondents in place of Decmil Engineering. 12 A case management hearing had been fixed for 6 May 2016. 13 In anticipation of the hearing, on 3 May 2016, Lavan Legal wrote to the Union's solicitors. It said that: "3. … in an effort to resolve the matters before that hearing by consent, my clients have prepared the attached minute of consent orders. 4. In circumstances where the applicant improperly joined the first respondent to the proceedings, in my view they ought to be removed (and not 'substituted' as foreshadowed in the Application) from the proceedings. Given this, the minute seeks the removal of the first respondent as a party to the proceedings pursuant to rule 9.08 of the Federal Court Rules 2011. 5. As the first respondent was improperly joined, it ought not bear any costs of the proceedings. Given this, it seeks an order for full indemnity of its costs incurred in the proceedings to date, up to and including any costs associated with your client's Application (or the first respondent's removal from the proceedings), to be dealt with at the upcoming case management hearing. 6. Further, as you are aware, I also act for the third respondent in these proceedings. As a result of your client's conduct in improperly joining the first respondent to the proceedings, he will necessarily incur costs thrown away since the commencement of the proceedings including costs incurred as a result of preparing to plead to your client's misconceived statement of claim. To the extent that he has incurred such costs, he seeks those costs on a party-party basis in any event. However, to the extent that he has incurred costs associated with your client's Application (or the first respondent's removal from the proceedings), he seeks those costs on an indemnity basis, subject to the usual reasonableness limitations, payable forthwith." 14 On 5 May 2016 the Union's solicitor declined to consent to the making of the orders proposed by the first and third respondents' solicitors. In particular, the Union objected to the making of any costs order because, it said, the error in identifying the appropriate respondents had been contributed to by Decmil Engineering and Decmil Engineering had waited for over two months before advising the Union of the error. 15 The case management hearing was subsequently relisted for 13 May 2016. 16 It was attended by counsel representing the Union, the solicitor for Decmil Engineering and Mr Reeves and the solicitor for the second respondent, Mr Lloyd Bam. The solicitor for Decmil Engineering advised the Court that she did not have instructions to act on behalf of Eastcoast or Decmil Australia. 17 Decmil Engineering did not oppose the granting of leave to the Union to amend its application and statement of claim in the terms contained in the proposed amended versions dated 12 May 2016. It also sought an order that it be removed as a respondent. Orders granting leave and removing Decmil Engineering as a respondent were made. The Union subsequently filed, on 19 May 2016, an amended application and an amended statement of claim in the proposed terms. 18 The Union sought its costs of its interlocutory application to amend its application and statement of claim. 19 Decmil Engineering sought its costs, on an indemnity basis, on the ground that it should never have been named as a respondent. Mr Reeves sought his costs thrown away. 20 Both the Union and Decmil Engineering made written and oral submissions in support of their costs applications. Both accepted that, normally, costs would not be awarded in a proceeding such as the present because of the provisions of s 570(1) of the Act. Both, however, argued that its costs application could succeed because the exceptions, provided for in s 570(2), were engaged. Unsurprisingly, there was a degree of overlap between the respective arguments of the parties, supporting their applications and resisting that advanced by their opponent. 21 Section 570(1) and (2) of the Act relevantly provides that: "(1) A party to proceedings (including an appeal) in a court (including a court of a State or Territory) in relation to a matter arising under this Act may be ordered by the court to pay costs incurred by another party to the proceedings only in accordance with subsection (2) or section 569 or 569A. … (2) The party may be ordered to pay the costs only if: (a) the court is satisfied that the party instituted the proceedings vexatiously or without reasonable cause; or (b) the court is satisfied that the party's unreasonable act or omission caused the other party to incur the costs; or (c) ..." 22 The Union's application was supported by an affidavit, affirmed by its in-house lawyer, Ms Kristen Reid. She had prepared the Union's application and statement of claim. She deposed that she had identified Decmil Engineering as an appropriate respondent for two reasons. The first was that she had been informed by a Union organiser that members of the Union were employees of Decmil Engineering and were working at the site in Hastings. The organiser had told her that the employees were engaged to perform work there under terms and conditions contained in an agreement entitled the Decmil Engineering Enterprise Agreement 2015 ("the Agreement"). The organiser had also provided her with a copy of a report, prepared by WorkSafe Victoria, which identified Decmil Engineering as the party responsible for the site. This information led her to the belief that Decmil Engineering "was the employer of the employees working on the Project, the lead contractor on the Project and was responsible for the premises." She had not been disabused of these assumptions until she received the letter from Lavan Legal dated 20 April 2016. 23 The Agreement was approved by the Fair Work Commission on 4 February 2015 and was expressed to operate from 11 February 2015. It applied to Decmil Engineering and some of its employees. It was not site specific. It applied to work undertaken by the company's employees "throughout Australia where no in-term Project Specific Agreement covers or applies to the employee". No explanation was provided as to the factual basis upon which the organiser advised Ms Reid that the agreement applied to Decmil Engineering employees engaged on the Hastings site. The advice is not consistent with earlier correspondence between Decmil Engineering and the Union, relied on for other purposes in the course of the Union's argument. By letter, dated 12 October 2015, Decmil Engineering advised the Union that it already had in place an in-term enterprise agreement that covered the project on the Hastings site. 24 The entry report, to which the Union referred, was dated 2 February 2016. It had been prepared by a workplace inspector. It recorded, in its first paragraph, that inspectors had attended at the Hastings site "as a result of a complaint received by WorkSafe. The complaint alleged that the duty holder at this workplace (Decmil Engineering Pty Ltd) refused entry to the workplace by two separate [authorised representatives of a registered employee organisations]". What the form thus disclosed was that it was the person or persons who had made a complaint to WorkSafe who had identified Decmil Engineering as the "duty holder" at the site. Decmil Engineering had not acknowledged that it occupied this role but the Union's position was that it had not disavowed the assertion. That claim was supported by no more than Ms Reid's assertion that, to her knowledge, Decmil Engineering had not disputed that it had been properly identified as "the duty holder". She does not explain what enquiries she made, between 4 February 2016 when she received a copy of the WorkSafe report, and 5 February 2016, when the proceeding was commenced, in an effort to determine whether or not Decmil Engineering had sought to clarify its role at the site. 25 It appears that Ms Reid took no steps to verify any of the information supplied to her by the organiser. He could have been asked, for example, about why he asserted that the Agreement applied to workers at the site. An enquiry of Decmil Engineering could have established the true position. No such enquiry was made. 26 At the hearing on 13 May 2016 the Union advanced two further arguments in support of its costs claim. The first was that Decmil Engineering could have avoided incurring costs by acting with greater celerity in advising the Union that the assumptions, on which its case was pleaded, were wrong. Although the proceeding had been commenced on 5 February 2016, it was not until 20 April 2016 that the Union was advised of its errors. 27 It is doubtful that any significant costs were incurred in the intervening period. Under directions, made by consent, defences were not due to be filed until 22 April 2016. Early in April Decmil Engineering and Mr Reeves changed their solicitor. It thus fell to Lavan Legal to prepare their defences. Having taken instructions Lavan Legal was alerted to the Union's errors and promptly advised the Union of them. It does not appear that the former solicitors devoted any or any sufficient time to taking instructions and drafting a defence. This is a matter to which I will return when considering Decmil Engineering and Mr Reeves' applications for their costs. For present purposes it is sufficient to note that any such delay did not cause the Union to incur additional costs. The errors would have required correction in any event. 28 The delay was, however, also relied on as part of a second additional submission that Decmil Engineering, Mr Reeves and their solicitors had failed to comply with the obligations imposed on them by ss 37M and 37N of the Federal Court of Australia Act 1976 (Cth) ("the FC Act"). These sections require parties to act consistently with the overarching purpose of civil practice and procedure, which is to facilitate the just resolution of disputes according to law and as quickly, inexpensively and efficiently as possible. In exercising the discretion to award costs in a civil proceeding, the Court must take into account any failure to comply with the duty imposed on parties to act consistently with the overarching purpose. 29 The Union argued that these requirements had been breached. In addition to the delay, it relied on the response of Lavan Legal to its proposal that consent orders should be agreed to in order to obviate the need for there to be a hearing to deal with the Union's interlocutory application. Non-compliance, it was argued, constituted an unreasonable omission for the purposes of s 570(2)(b) of the Act. 30 The difficulty which the Union confronts in this regard is that, while Decmil Engineering and Mr Reeves could both, reasonably, have been expected to agree to the Union amending its application and statement of claim, they were not obliged to consent to orders that did not provide for payment of their costs. The Union was not prepared to consent to such an order. In these circumstances an interlocutory hearing was unavoidable. 31 I do not consider that either Decmil Engineering or Mr Reeves or their solicitors acted inconsistently with the requirements of the FC Act. 32 The Union has not made good its claim that either of the respondents did anything which attracted the operation of s 570(2)(b) of the Act. As a result no order for payment of costs can be made: see s 570(1). 33 Decmil Engineering and Mr Reeves initially contended that a costs order should be made in their favour because the exception, provided for in s 570(2)(b) of the Act, applied. During oral submissions they broadened their argument to invoke the exception provided for in s 570(2)(a). 34 They argued that the Union had acted unreasonably by commencing the proceeding against Decmil Engineering and alleging that Mr Reeves was one of the company's employees. This was because the Union had failed to make enquiries prior to the commencement of the proceeding, which, had they been made, would have yielded the information necessary to identify appropriate respondents. For similar reasons they contended that the Union had instituted the proceedings against Decmil Engineering without reasonable cause. Decmil Engineering sought the award of costs on an indemnity basis because of the Union's failure to make such enquiries and its subsequent failure "to properly acknowledge its mistake or the seriousness of its error." 35 I accept that the Union's failure to make prudent, proper and reasonable enquiries led it to commence and prosecute the proceeding against Decmil Engineering and Mr Reeves and thereby caused these parties to incur unnecessary costs. As a result, the discretion, conferred on the Court by s 570(2) of the Act, is enlivened. 36 No order for indemnity costs is warranted. Decmil Engineering and Mr Reeves should have their costs on the usual basis. Decmil Engineering was joined as a party when it should not have been. Mr Reeves was wrongly identified as an employee of Decmil Engineering who allegedly contravened provisions of the Act. It was necessary for them to engage solicitors. Their costs should be confined to those incurred following their retainer of Lavan Legal. There is no evidence that they incurred costs through their original retainer of Ai Group and, even if such costs had been incurred, they ought not to be able to claim twice for costs incurred to the extent that there was duplication of the work done by successive solicitors. Mr Reeves remains a party to the proceeding. It is possible that some of the costs which he has incurred relate to matters which will have on-going relevance. His costs should be confined to those thrown away by reason of the Union's amendment of its case against him. I certify that the preceding thirty-six (36) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Tracey. Associate: Dated: 3 June 2016