Federal Court of Australia McConvill & Associates v Carbone [2022] FCA 265 Appeal from: Carbone v James McConvill & Associates [2021] FCCA 661 File number: VID 241 of 2021 Judgment of: SNADEN J Date of judgment: 23 March 2022 Catchwords: PRACTICE AND PROCEDURE – interlocutory applications – application to set aside subpoenas – subpoenas issued in support of application for security of costs – no utility to subpoenas – application to set aside subpoenas granted – application by respondents for security for costs in an appeal from the Federal Circuit Court of Australia – appeal in a matter arising under the Fair Work Act – effect of s 570 of the Fair Work Act – limited prospect of an order for costs given s 570 of the FW Act – not persuaded that appellants unable to satisfy adverse costs order – exercise of discretion –application for security for costs dismissed – application by appellants for stay of execution of judgment appealed from pending determination of appeal – no circumstances justifying stay – application for stay dismissed Legislation: Fair Work Act 2009 (Cth) s 570 Federal Court of Australia Act 1976 (Cth) s 56 Cases cited: Bell Wholesale Co Ltd v Gates Export Corporation (No 2) (1984) 2 FCR 1 Clack v Collins (No 1) [2010] FCA 513 Nolten v Groeneveld Australia Pty Ltd [2011] FCA 1494 Tait v Bindal People [2002] FCA 322 Division: Fair Work Division Registry: Victoria National Practice Area: Employment and Industrial Relations Number of paragraphs: 25 Date of hearing: 18 March 2022 Counsel for the Appellants: Mr M J Wyles Solicitor for the Appellants: Carter Newell Lawyers Counsel for the Respondent: Mr M G Rinaldi Solicitor for the Respondent: Cooper and Sanders Legal ORDERS VID 241 of 2021 BETWEEN: JAMES MCCONVILL & ASSOCIATES First Appellant JAMES MCCONVILL Second Appellant AND: JOSEPH CARBONE Respondent order made by: SNADEN J DATE OF ORDER: 23 MARCH 2022 THE COURT ORDERS THAT: 1. The respondent's interlocutory application dated 24 February 2022 be dismissed. 2. The appellants' interlocutory application dated 15 March 2022 be dismissed. 3. The costs of each application be reserved. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT SNADEN J: 1 The respondent is a former employee of the law practice operated by the first appellant. The second appellant is the first appellant's sole director. By orders made by the court below on 9 April 2021 and 24 May 2021, the respondent was granted relief in the form of compensation, interest and penalties pertaining to conduct engaged in by the appellants in contravention of various provisions of the Fair Work Act 2009 (Cth) (the "FW Act"). The present appeal challenges those orders (or the bulk of them). 2 Before the court presently are two interlocutory applications: one filed by the respondent on 24 February 2022, seeking relief in the nature of security for costs; and one filed by the appellants on 15 March 2022, seeking that the orders of the primary judge be stayed pending the determination of the appeal. For the reasons that follow, both interlocutory applications will be dismissed with costs to be reserved. 3 Both interlocutory applications came before the court for hearing on Friday, 18 March 2022. The evidence led in relation to them was common to both. The respondent relied upon three affidavits: one that he affirmed on 22 February 2022, one that he affirmed on 17 March 2022 and one that was affirmed by his solicitor, Ms Maria Johns, on 21 February 2022. The appellants read two affidavits of the second appellant, Dr McConvill: one affirmed on 10 March 2022 and the other affirmed on 17 March 2022. 4 Before turning to the substantive issues that the applications present, I should deal first with some ancillary issues that arose in respect of some subpoenas that were issued at the request of the respondent. At the risk of oversimplification, they sought to compel the production by third parties of documents that, it was hoped, would help paint a picture concerning the appellants' financial health (or ill-health, as the case may be). Specifically, they went to the appellants' level or levels of indebtedness. 5 The relevant subpoenas were to be returned before a registrar of the court on Wednesday, 16 March 2022. They were, however, at that time adjourned for my consideration after the appellants indicated that they would apply to have them set aside. At the hearing on Friday, 18 March 2022, that application was pressed and, at its conclusion, I granted that relief. I undertook to provide some brief written reasons for doing so. 6 In short, I did not consider that the information that the court might glean from documents produced pursuant to the subpoenas would greatly assist its consideration of the application for security. For the reasons outlined below, I am not minded to grant that relief. Even assuming that the information to be derived from the documents produced pursuant to the subpoenas was such as to show that the appellants were heavily indebted, the same result would ensue. There was, then, no utility to be realised from leaving the subpoenas in place. Furthermore, doing so would necessarily have resulted in delay and additional cost, all in the service of an application that, in my view, ought not to warrant it. Had I been minded to leave the subpoenas in place, it would have been necessary to adjourn them for return before a registrar at a later date; and also to adjourn the respondent's security for costs application to accommodate that course. I did not consider that to be in the interests of justice. 7 This court's power to require that an appellant provide security for costs in an appeal is to be found in s 56 of the Federal Court of Australia Act 1976 (Cth). It is wholly discretionary and that discretion is fettered only by the interests of justice: Bell Wholesale Co Ltd v Gates Export Corporation (No 2) (1984) 2 FCR 1, 3 (Sheppard, Morling and Neaves JJ). Impecuniosity on the part of an appellant may be (or partly be) a basis to require security in the context of an appeal; but the central question remains whether there is a substantial risk that, if the appeal fails, the appellant will be unable to meet any adverse costs order: Tait v Bindal People [2002] FCA 322, [3] (Spender J). 8 There are several factors to which courts typically have regard when considering whether the interests of justice might best be served by granting or rejecting an application for security: as to which, see generally Clack v Collins (No 1) [2010] FCA 513, [13] (Jagot J). They include—but are not limited to—whether or not the appellant has a prospect of successfully prosecuting the appeal, the risk that a costs order, if made, might not be satisfied and the point in time at which the application for security is made. 9 The respondent's case for security revolves principally around what he perceives is the appellants' inability, or potential inability, to pay any costs order made against them in the appeal. There are several planks to that submission. First, the respondent notes that the appellants are yet to pay him the judgment sum in respect of which the appeal is brought. Second, he points to various debts owed by the appellants (principally, the second appellant), of which he is aware or otherwise has evidence (and which he considers is suggestive of a constrained ability to meet by property or other assets any order that is made as to costs). Third, he refers to threatened or existing proceedings that he is aware are to be or have been brought against the appellants by third parties, including by clients or former clients of the first appellant's practice. Fourth, he notes that the appellants have declined to provide him, despite request, with details concerning their capacity to pay any costs orders that might be made against them in the appeal. 10 By his affidavit, the second appellant addresses, or seeks to address, the respondent's concerns. He deposes as to the professional health of the first appellant's practice (it maintains approximately 40 clients, employs four staff and, in the year ending 30 June 2021, generated nearly $1.3 million in revenue). He also deposes to an interest that the appellants have in property and in a supermarket business, which is said to generate "modest income". He maintains that the appellants do not want for means to a degree that any costs order made against them in the appeal might go unmet. 11 It is convenient at this juncture to note the trajectory of the matter to this point. It began as an application in this court, by which the respondent charged the appellants with having contravened various provisions of the FW Act. That application was the subject of default judgment, following which the matter was remitted to what was then the Federal Circuit Court of Australia for an assessment of compensation and other relief. It is from that process of assessment (or the orders in which it culminated) that the present appeal is brought. 12 There are four appeal grounds: 1. The learned primary judge erred in fact and in law in concluding, at paragraph 55 of the primary judgment, that the respondent: "would have remained employed (by the first appellant) for a further 26 week period, rather than the shorter six week period put by the respondents", because: (a) that conclusion was directly contradicted by the sworn evidence of the second appellant, in respect of which the second appellant was not cross-examined or otherwise challenged; and (b) the learned primary judge did not refute that sworn evidence of the second appellant. 2. The learned primary judge erred in fact and law in concluding that the respondent was owed $5,061.54 in accrued annual leave, because that conclusion was contrary to the uncontroverted evidence of the first appellant's bookkeeper, Jane Quirk, who swore an affidavit, filed 18 May 2020, which disclosed that the respondent had a leave balance, at the time of the termination of his employment, of 4.6 hours, which put the value of his accrued annual leave at $78.12, based on a $35,000 per annum salary. 3. The learned primary judge erred in fact and law in concluding that: (a) the respondent's decision to abandon his claims made under "contract 1 and contract 2" at the hearing was not an "unreasonable act or omission", for the purpose of section 570(2)(b) of the FWA; and (b) the respondent's decision to abandon those claims was referable to, or as a consequence of, any alleged failure by the appellants to provide full disclosure of financial documents to the respondent, because the appellants had made full disclosure of the financial documents the subject of the respondent's claim. 4. The learned primary judge erred in fact and in law in ruling that the penalties imposed upon the appellants, totalling $21,690, be paid to the respondent, and not to the Commonwealth of Australia, because the respondent's receipt of those penalties represents a "windfall" which the respondent ought not receive. 13 The respondent maintains that all four grounds are devoid of any merit. The first two he describes as "unsupportable challenge[s]" to the primary judge's findings of fact. The third is said to be unimpeachable, again based on the primary judge's findings of fact. The fourth is said to proceed in the face of well-established principle. 14 I am not persuaded that the grounds sink to the standard that the respondent suggests. I accept that there exists a prospect that the appeal might succeed. That assessment, of course, is impressionistic only, as it must be. Nonetheless, it could not be said that the appeal grounds (or any one or more of them) is obviously ambitious or novel. On the contrary, each appears to be orthodox. On their face, they present as unremarkable challenges to factual and legal conclusions by which the appellants are aggrieved. 15 The court was not taken to any material in support of the conclusion urged upon it now that the grounds are "unsupportable" in any factual sense. Although they might well fail, I am unable to see how it can be said that they are sufficiently hopeless that that should be obvious at this juncture. It is not. Likewise—and even assuming that there is a degree of ambition to the questions of law inherent in the third and fourth grounds of appeal—it could not be said on the basis of what is presently known (as opposed to what may emerge or is likely to be made clearer at the hearing of the appeal) that those grounds are entirely devoid of merit. 16 The appeal is a proceeding in a matter arising under the FW Act. Section 570 of the FW Act prohibits the court from awarding costs against a party to such a proceeding unless satisfied that, relevantly, it instituted the proceeding vexatiously or without reasonable cause, or otherwise committed an unreasonable act or omission. Assuming, only for present purposes, that the appeal ultimately fails, it is conceivable that the court might at that point be persuaded that the appellants should be thought to fall within one of the exceptions to the prohibition for which s 570 of the FW Act provides. On what is presently before the court, however, there is no reason to think that that is likely. There is no basis presently upon which to presume or think that the appeal, if it fails, will fail because it had to; nor that its prosecution will involve some relevantly unreasonable act. Far more likely, it will fail (if it does) because the submissions upon which it rests are not accepted. 17 In those circumstances, there seems little prospect, presently, that the appellants might find themselves on the wrong end of an order for costs. That, I think, should inform the court's discretion to grant the security for which the respondent moves. If the prospect of a costs order against the appellants is as limited as it appears to be, it could not sensibly be said that the respondent labours under a "substantial risk" of being deprived of anything. To make the point rhetorically: why should the appellants be required now to provide security to cover orders that, even if they lose, appear unlikely to be made? 18 There are other bases upon which to reject the respondent's application. On the evidence presently before me, I do not accept that there is a substantial risk that the appellants will not be able to meet any order made against them for costs in the appeal. The second appellant has at least some property and asset holdings and the first respondent's practice appears to be viable and ongoing. Even assuming that the appellants are in debt as the respondent suspects; and even assuming that they face the prospect of further debts (including judgment debts) in the near future, I am not persuaded that that accumulates to a point suggestive of a substantial default risk. 19 It follows that I do not consider that the interests of justice require that the appellants give security for costs in the appeal and the respondent's interlocutory application for relief in that nature must be dismissed. 20 I turn, next, to the appellant's application for orders to stay the execution of the orders made by Judge McNab on 9 April 2021 and 24 May 2021 until the determination of the appeal to this court. There was no point of principle in dispute as between the parties on this issue. When considering whether or not to grant a stay under r 36.08 of the Federal Court Rules 2011 (Cth), two questions arise for the court's attention: first, does the appeal enjoy reasonable prospects of success; and, second, does the balance of convenience favour the grant of a stay: Nolten v Groeneveld Australia Pty Ltd [2011] FCA 1494, 24 (Kenny J). 21 The appellants' prospects on appeal have already been addressed. I accept that there is an arguable point to be prosecuted. 22 As to the balance of convenience, the appellants cite four considerations that are said, individually or cumulatively, to warrant the relief for which they move. First, they note that the date for compliance with a bankruptcy notice that the respondent has filed (apparently in response to their non-payment of the sums owed) has been extended until a point seven days from the determination of the present appeal. Second, they note that the appeal is likely to be heard in September. Third, they maintain that they possess assets that can be realised if the appeal is unsuccessful. Fourth, they say that a stay is appropriate because, if the appeal succeeds, the respondent may become liable to them to the tune of some $80,000.00. 23 None of those circumstances suffices (alone or in combination) to warrant a stay of the orders from which the appeal is brought. The fact that related bankruptcy proceedings have been stayed is irrelevant (or, at least, not materially relevant). So, too, is the likely timeframe for the determination of the appeal and the fact (as they describe it) that the appellants are able to pay what they owe. The fact that, if the appeal succeeds, the respondent might have to repay a sum of money is potentially significant; but there is no reason presently for the court to presume (and the appellants did not suggest) that he might have any difficulty doing so. There is no evidence to suggest that the respondent's financial situation would jeopardise the repayment of any sum that he was ordered to pay. 24 I do not consider that the balance of convenience is such as to warrant the relief that the appellants seek. The respondent is entitled to the fruits of his victory in the court below. It follows that the appellants' interlocutory application of 15 March 2022 should (and will) be dismissed. 25 Section 570(1) of the FW Act likely prohibits the making of any order as to costs in relation to either application. For now, the safest course is to reserve them. I certify that the preceding twenty-five (25) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Snaden. Associate: Dated: 23 March 2022