[2014] FWC 3777

FAIR WORK COMMISSION

DECISION


Fair Work Act 2009
s.402 - Application for costs orders against lawyers and paid agents under s.401

Rainshield Roofing Pty Ltd T/A Rainshield Roofing
v
Peter Paerau

and

Garry Dircks T/A Just Relations - Consultants
(U2014/5903)

COMMISSIONER WILSON

MELBOURNE, 6 JUNE 2014

Application for costs orders against Applicant and Paid Agent.

INTRODUCTION

[1] A decision dismissing Peter Paerau’s application for an unfair dismissal remedy was published on 11 March 2014. 1 Subsequent to the decision, the respondent in that matter, Rainshield Roofing Pty Ltd (Rainshield Roofing) made application to the Fair Work Commission for an order for costs pursuant to the Fair Work Act 2009 (the Act) against both Mr Paerau and his paid agent, Mr Gary Dirks of Just Relations - Consultants (Just Relations).

[2] The application for costs (referred to as the Costs Application) refers specifically to ss.400A and 401, which provide that in certain circumstances, costs may be awarded against a party to an unfair dismissal matter or their representatives. Later submissions made by Rainshield Roofing in support of the Costs Application also refer to s.611 which provides the Fair Work Commission with a general power of costs.

[3] Peter Paerau was dismissed from employment by Rainshield Roofing Pty Ltd on 11 September 2013 and commenced his application for an unfair dismissal remedy pursuant to s.394 on 17 September 2013. His application was heard by me on 7 February 2014, with the decision in that matter published on 11 March 2014.

[4] For the reasons set out below, I have decided that a costs order is appropriate to be made against both Mr Paerau and Just Relations.

BACKGROUND TO THE COSTS APPLICATION

[5] Rainshield Roofing made application for costs specifically under s.400A and 401 of the Act and made such application in the proper form on 25 March 2014.

[6] It is noted that while the application is made under ss.400A and 401 of the Act, the Act also provides for costs to be awarded in certain matters pursuant to s.611. While the application form itself does not refer to it being an application pursuant to s.611, the Rainshield Roofing submissions make apparent that the company relies upon that section as well. The company submits that the application was made vexatiously or without reasonable cause and that it had no reasonable prospect of success, which are the relevant considerations within s.611(2)(a) and (b). Accordingly I treat this application as one made pursuant to each of ss.400A, 401 and 611 of the Act.

[7] The application made by Rainshield Roofing puts forward that at the time of the commencement of Mr Paerau’s application for unfair dismissal remedy, his application had no reasonable prospects of success and, by way of alternative argument, it should have become reasonably apparent to the applicant that his application had no reasonable prospect of success once Rainshield Roofing had filed its submissions and witness statements in relation to the merits hearing. Rainshield Roofing also set forth as a ground in its Costs Application that a number of open offers were put to Mr Paerau which, if he had accepted, would have reduced Rainshield Roofing’s costs.

[8] Rainshield Roofing seeks orders for costs both against the applicant in the original matter, Mr Paerau and his paid agent, Mr Gary Dircks of Just Relations. Mr Dircks’ submissions include that he personally trades as Just Relations.

[9] Having received the Costs Application, the Commission issued Directions to the parties for the provision of various materials and advice as to whether any party sought a hearing. The Directions were issued by the Commission on 31 March 2014 to each of the representatives on the file. Mr Dircks’ initial response to the Directions indicated he had no current instructions from Mr Paerau and suggested that the Commission provide the directions to Mr Paerau directly, which was subsequently done. A copy of the Directions was provided by the Commission to Mr Paerau by mail on 2 April 2014.

[10] Rainshield Roofing and Just Relations responded to the Directions, however there has not been a response received from Mr Paerau or anyone acting on his behalf, although it should be noted there have been several telephone and email exchanges about the need to respond, both with Mr Paerau as well as a person the Commission understands to be Mr Paerau’s partner and to the email address the Commission understands Mr Paerau to use. On 29 April 2014, Mr Dircks advised to the Commission that he was not instructed to represent Mr Paerau’s interests in these proceedings. Accordingly I proceed to consider Just Relations’ submissions and other material as being in relation to Mr Dircks’ personal interests only and not to those of Mr Paerau.

THE MERITS DECISION

[11] The reasons for Mr Paerau’s termination by Rainshield Roofing are fully set out in the Commission’s earlier decision. In that decision I found that Mr Paerau’s dismissal by Rainshield Roofing was consistent with the Small Business Fair Dismissal Code (the Code) and that Rainshield Roofing was entitled to believe on reasonable grounds that Mr Paerau’s conduct was sufficiently serious to justify immediate dismissal. The findings I made in that regard were that there were two independent circumstances either of which amounted to conduct sufficiently serious to justify immediate dismissal (being the test set out within the Code).

[12] For the purposes of context, Mr Paerau was summarily dismissed on 11 September 2013, after having been involved in an incident earlier on that day as he was driving a four-wheel-drive and trailer owned by Rainshield Roofing. The trailer had four wheels and in the course of driving the vehicle, another driver pointed out to Mr Paerau that one of the wheels had come off the trailer. While there may well have been a legitimate safety complaint to be made to Rainshield Roofing about the trailer as a result, there was no evidence that Mr Paerau was injured, or at risk of immediate injury. Mr Paerau was understandably shocked and distressed and he rang the company about the matter and shortly after returned to Rainshield Roofing’s premises.

[13] The first set of circumstances which justified immediate dismissal involved three factors;

[14] The second set of circumstances which justified immediate dismissal is that having left the premises, Mr Paerau went to the carpark and ignored a direction from Mr Salan not to leave in a company vehicle; he then left in the company’s vehicle, knowing it was not his property. He subsequently refused to return the vehicle, saying that he would only do so once Mr Salan had agreed to provide an employment separation certificate and payslip. Notwithstanding this initial refusal to return the vehicle, he subsequently returned it later on the same day as he was dismissed.

LEGISLATION

[15] The Act provides in s.400A that costs may be awarded against a party to an application for unfair dismissal remedy, and s.401 provides for costs to be awarded against a lawyer or paid agent. The respective provisions are as follows;

[16] In addition to ss.400A and 401, s.611 provides a cost remedy (which is preserved for applications such as this through ss.400A(3) and 401(3)). The section provides the following;

[17] The language and tests of s.611 are different to the provisions of ss.400A and 401, and especially so in relation to the consideration that an action may have been taken “vexatiously or without reasonable cause”.

[18] Application of these provisions requires a consideration of the circumstances by which the application proceeded to a merits hearing on 7 February 2014.

CONSIDERATION

[19] Rainshield Roofing contend that in all the circumstances it was not reasonable for Mr Paerau to commence his application for an unfair dismissal remedy and that the substantive application was made vexatiously or without reasonable cause. It also contends that it was unreasonable for Mr Paerau to continue his application in the face both of the case made against him by Rainshield Roofing and the offers of settlement put forward by the company at various times before the merits hearing.

[20] The material before the Commission indicates that Mr Paerau sought advice about the circumstances immediately upon termination by Rainshield Roofing and that he retained Just Relations soon thereafter. Mr Paerau’s own evidence is that he spoke with Mr Dircks near to the time he told Mr Salan he would not return Rainshield Roofing’s vehicle without receiving an employment separation certificate and payslip. 2 Having been dismissed on 11 September 2013, Mr Paerau saw Mr Dircks on 17 September 2013 and issued instructions to him to commence an application for unfair dismissal remedy, which was filed in the Fair Work Commission later on the same day.

[21] The matter was listed for a telephone conciliation conference on 7 November 2013 and after the conference failed to settle the matter, the hearing of the merits was scheduled for 7 February 2014. In accordance with usual practice, Directions were given to all parties for the filing of submissions and witness statements, which were complied with.

[22] Mr Paerau’s material was filed by Just Relations on 9 December 2013 and included an outline of submissions and the witness statement of Mr Paerau.

[23] Rainshield Roofing’s material was filed on 24 January 2014 by Goodman Group Lawyers. The materials included submissions, together with three witness statements including that of Mr Salan, Mr Butler and a further director, Mr Steven Bastalich.

[24] Mr Paerau filed supplementary submissions and a supplementary witness statement on 6 February 2014.

[25] In his original submissions, Mr Paerau stated that he did not seek reinstatement and instead sought compensation in the order of $26,923. At the time of termination, Mr Paerau’s submissions indicated that his weekly remuneration including superannuation was $1035.50 per week.

[26] Mr Paerau’s application was made and proceeded on the basis that there was no misconduct on his part and that he raised legitimate safety concerns before being dismissed. 3 His written submissions identified that the dismissal was over a heated argument in which Mr Paerau vented his anger and frustration but which involved no violence or threatening behaviour and no intimidation.4 His final written submissions acknowledge the Small Business Fair Dismissal Code may apply, but contests whether it applies. Mr Paerau’s witness statement recorded, in verbatim form, an obviously strongly worded argument with Mr Salan on the day of dismissal, which culminates by recording that Mr Salan instructing Mr Butler to “call the cops”. The witness statement also records that after the argument, Mr Paerau “hopped in the truck and drove home”; that he sought advice, rang the company and “asked for the employment separation certificate and payslips” and that he “drove the truck back within an hour of dismissal”.

[27] Mr Paerau’s supplementary submissions commence with the opening “[t]he respondent argues now that the dismissal was for alleged misconduct”. (emphasis added) Such contention stands in stark contrast with Rainshield Roofing’s “Employer Response” which was filed on 5 November 2013 and records that Mr Paerau was dismissed for “[v]iolent and threatening behaviour” and “[i]ntimidation towards other team members”.

[28] The Rainshield Roofing written submissions and witness statements filed on 24 January 2014 reinforce the company’s argument of misconduct. The contents of each witness statement filed record aspects of behaviour that, if true and correct, could allow an employer to believe on reasonable grounds that Mr Paerau’s conduct was sufficiently serious to justify immediate dismissal.

[29] A fair reading of the file is that, at all times from 5 November 2013, Mr Paerau was on notice that his former employer would contend he was dismissed for reasons of misconduct. Further, I am satisfied that by at least 24 January 2014, Mr Paerau and Just Relations were aware of the full weight of the case against him.

[30] I am also satisfied that a reasonable reading of the case at that date would have shown that, for Mr Paerau’s case to succeed, he would have to show that both Mr Salan and Mr Butler were not credible witnesses on the key aspects of what occurred in Rainshield Roofing’s premises when Mr Paerau returned after the incident with the trailer. In this regard, Mr Paerau would need to show the incidents upon return to the premises were not hostile and argumentative and provoked by him. Since Rainshield Roofing raised an alternative defence to the action, relating to his overall capacity and conduct during employment, he would also have had to show that not only were there insufficiently serious grounds to allow Rainshield Roofing to hold a reasonable belief that his conduct justified immediate dismissal, but that his prior conduct and the company’s responses over several months did not amount to an otherwise valid reason for dismissal based on his conduct or capacity to do the job.

[31] The Rainshield Roofing’s submissions are that it made open offers to Mr Paerau for the settlement of his application on several occasions between 11 December 2013 and 24 January 2014. Rainshield Roofing’s submissions summarise these offers as follows 5;

[32] Resolution of Rainshield Roofing’s Costs Application requires an examination of the conduct of Mr Paerau and Just Relations against three separate criteria;

[33] The question of whether something is an unreasonable act or omission, or whether it had a reasonable prospect of success, requires application of an objective test.

[34] Intentional actions by a party may be unreasonable acts, and unintentional actions may be unreasonable omissions.  6 For example, the Full Bench has found that institution and maintenance of an appeal in the face of poor prospects of success was an unreasonable act on the part of an appellant.7 A matter is not without reasonable cause simply because it fails8; and the test is not whether the application might have been successful, but whether the application should not have been made.9

[35] Assessment of whether it should have been reasonably apparent the matter had no reasonable prospect of success requires an objective consideration as well;

[36] The Full Bench has observed that the context of the expression “vexatiously or without reasonable cause” requires consideration 11;

[37] Having considered all the circumstances of the matter I find it was an unreasonable act on the part of Mr Paerau to commence his application.

[38] Despite this, I do not find that that it should have been reasonably apparent to Mr Paerau that his application had no reasonable prospect of success at the time it was made, or after. The Full Bench in Deane v Paper Australia 12 followed the earlier reasoning of Wright v Australian Customs Service13 in holding that such a finding is to be made only with extreme caution with a finding that an action is manifestly untenable or groundless to be assessed through examination of the facts apparent to the applicant.14 In Wright, the Full Bench held about this examination that;

[39] In this matter, as laid out in the various submissions and witness statements, there were real issues of fact to be determined and those issues were relevant to the resolution of the substantive application.

[40] I find also that the continuation of Mr Paerau’s application in the face of several offers for settlement and the filing of the employer’s materials was unreasonable and without reasonable cause.

[41] The circumstances I take into account in relation to my finding regarding the commencement of Mr Paerau’s application are not only the interaction between he, Mr Salan and Mr Butler on 11 September 2013, all of which circumstances were personally and intimately known to Mr Paerau, but also that Mr Paerau consulted with Mr Dircks in between being requested to return a company vehicle and refusing to do so, and actually returning it. That is, Mr Paerau had the benefit of advice at an early stage, and before he commenced the action.

[42] I also take into account that Mr Paerau had the benefit of receiving advice from Mr Dircks at least by 17 September 2013, which was in the form of a personal consultation. Mr Dircks has not provided details of advice provided by him to Mr Paerau, if any, beyond his notes of the initial consultation meeting and subsequent meetings and exchanges, which appear to be brief and procedural rather than of an advisory nature.

[43] I consider that it would have been reasonably apparent that an application for an unfair dismissal remedy was a questionable proposition for a person dismissed in the circumstances of Mr Paerau and with his poor history of employment with Rainshield Roofing, and such prospects as it had relied upon adverse findings of credibility being made about the witnesses Salan and Butler. Although these issues were weighed against Mr Paerau’s case from the start, they were arguable and so I do not find that it should have been reasonably apparent to him from the beginning that the matter had no reasonable prospect of success.

[44] The circumstances I take into account in relation to my finding regarding the continuation of Mr Paerau’s application include the form and content of the settlement offers together with the case made against him in the employer’s written submission and witness statements.

[45] By the time of the hearing, he had received the offers referred to above and had chosen not to accept them, which was an unreasonable act or omission in respect of the merits of consideration of the offers themselves as well as how they might be taken into account in relation to the range of possible compensation in the event the Commission found in Mr Paerau’s favour.

[46] In forming this view, I take into account that the offers were initially for reinstatement, which was offered in December 2013 and within two months of the date of termination, and in late December 2013 and January 2014, prior to the filing of the Rainshield Roofing response material, for compensation. The amounts of compensation were initially for two weeks’ pay followed by a later offer of one month’s pay.

[47] I take into account that, within the context of Mr Paerau’s period of employment within Rainshield Roofing, together with the circumstances of his dismissal, these were generous offers. A person acting reasonably would have viewed these offers as proper and generous endeavours on the part of a respondent to avoid the need of a potentially costly, time-consuming or embarrassing hearing.

[48] I take into account as a demonstration of Mr Paerau acting vexatiously what he said to Mr Bastalich about his motives for continuing the matter, which are reported in Mr Bastalich’s witness statement. 16 Those statements refer to a desire, in late 2013, on the part of Mr Paerau to continue the action in order to cause Rainshield Roofing to incur legal fees. I take this into account as evidence of Mr Paerau’s motivation to commence or continue his action for a collateral advantage. The failure to settle the matter at an early opportunity or to take account of the range of possible compensation orders from the Commission reinforces this view.

[49] I also take into account that between the time of his dismissal on 11 September 2013 and the hearing on 7 February 2014, Mr Paerau earned $10,149.75 from another employer. 17 The documents filed on his behalf indicate that he did not seek reinstatement, which means compensation was the only remedy he sought in the event the Commission found in his favour. As such, the factors in s.392(2), (5) and (6) may have application. Those subsections require post-termination earnings to be taken into account in assessing compensation for an unfair dismissal, as well as capping compensation in some circumstances.

[50] Mr Paerau claimed as compensation $26,923, which was calculated by Mr Dircks as a payment of 26 weeks’ remuneration calculated on the basis of Mr Paerau’s weekly remuneration, including superannuation, of $1035.50 per week.

[51] An order for compensation would be calculated taking into account the criteria within s.392, which is usually applied by having regard to the factors and methodology laid out in Sprigg v Paul’s Licensed Festival Supermarket 18, and Ellawala v Australian Postal Corporation19. In assessing compensation s.392(2) requires the Commission to take account of the remuneration the applicant received between dismissal and the date of the order; and s.392(3) requires the Commission to reduce the amount of compensation if satisfied that an applicant’s misconduct contributed to the employer’s decision to dismiss them.

[52] I consider that a reasonable applicant or representative would have formed the view by at least the date of the hearing that, in all the circumstances of this matter as set out in the pre-hearing materials as well as the information known to them privately, the Commission would have been unlikely to order compensation above the amount earned by Mr Paerau after the date of his dismissal and would likely have deducted from any order for compensation the amounts Mr Paerau had earned since dismissal. This possibility was put to Mr Dircks at the start of the hearing. 20

[53] I take into account that the submissions made by Rainshield Roofing and filed in the Commission on 24 January 2014 in response to the Commission’s directions were clear and cogent and that the case Mr Paerau faced against him was fully articulated by those documents, save for two issues on which Rainshield Roofing attempted to adduce evidence in the hearing and which I ruled should not be admitted as evidence. The outline of submissions and witness statements indicated that Mr Salan would testify that Mr Paerau was argumentative; threatening and aggressive. Mr Salan would give evidence that he feared for his safety and that Mr Paerau’s period of employment with the company been subject to warnings about abuse of workers and suppliers and the misuse of property. Mr Butler’s evidence would show that Mr Paerau had been screaming and that it looked like he was going to assault Mr Salan, which caused Mr Butler to fear for his own safety and that of Mr Salan.

[54] Determination of the application in respect of Just Relations requires the Commission to be satisfied either that it encouraged Mr Paerau to start or continue his application when it “should have been reasonably apparent that the person had no reasonable prospect of success” or that it made an unreasonable act or omission “in connection with the conduct or continuation of the matter”.

[55] The nature of this matter is not dissimilar to many unfair dismissal applications in which the applicant is represented, in that it was commenced quickly on relatively basic information, was the subject of quick and firm denials in the form of the employer’s written response, and passed through a telephone conciliation conference at which not much more information appears to have been provided against the applicant. What occurred next is also not out of the ordinary, with the parties being directed to provide written materials in preparation for an arbitration and the parties privately exchanging offers for settlement.

[56] By the time the employer’s response was filed on 5 November 2013 and, at latest by the time the offers commenced being exchanged and Just Relations commenced detailed work on preparation of Mr Paerau’s case for arbitration, I consider a reasonable representative would have formed the view that his case did not have strong prospects of success. By the time the Rainshield Roofing submission and witness statements were filed, a reasonable representative would have formed the view that its continuation was unreasonable.

[57] For the above reasons I am satisfied that the threshold requirements of ss.400A and 401 have been met. In particular, I am satisfied;

[58] I am also satisfied that it is appropriate to exercise my discretion to make an order for costs pursuant to ss.400A and 401 against both Mr Paerau and Just Relations. Although I am persuaded the application was commenced and continued vexatiously or without reasonable cause, I do not consider it necessary to exercise my discretion and make a separate order pertaining to s.611, for the reason that I am making orders pursuant to ss.400A and 401.

[59] I consider it appropriate to apportion the costs to be paid on the basis of 67% to be paid by Mr Paerau and 33% by Just Relations. Mr Paerau’s own conduct resulted in his dismissal and he had greater insight into the case against him than his representative.

[60] I consider the date from which Mr Paerau and Just Relations should bear liability for costs is 19 November 2013, being two weeks after the filing of the employer response form on 5 November. Within two weeks of that filing, the applicant would reasonably have been fully aware of the case against him and his representative would reasonably have been able to both seek instructions and provide advice about the disposition of the matter.

[61] The costs order will apply to all party-party costs incurred by Rainshield Roofing from 19 November 2013, and will include the costs associated with its Costs Application, as had this matter settled prior to or during the hearing, these latter costs would have been avoided.

[62] I direct the parties to confer and endeavour to agree on the quantum of such costs. Rainshield Roofing is to file and serve an itemised schedule of costs reflecting this decision and the apportionment of costs between Mr Paerau and Just Relations within 14 days of this decision. In the event that there is no agreement about these matters, liberty is given to Rainshield Roofing to apply within 14 days of the date of this decision for a determination by me of the quantum of costs to be ordered and their apportionment.

COMMISSIONER

Final written submissions:

Applicant - 29 April 2014

Respondent - 29 April 2014

 1   [2014] FWC 1524

 2   Transcript, PN 295 - 296

 3   Application for Unfair Dismissal Remedy, item 2 and 3

 4   Applicant’s Outline of Submissions, 9 December 2013, para 6 - 9

 5   Rainshield Roofing Outline of Submissions for Costs Application, 29 April 2014, para 22

 6   Goffett v Recruitment National Pty Ltd [2009] AIRCFB 626, at [35] and [47]

 7   Roy Morgan Research Ltd v Baker [2014] FWCFB 1175, see [25] - [28]

 8   Kanan v Australian Postal and Telecommunications Union (1992) 43 IR 257; p 264

 9   Ibid, p 263

 10   Baker v Salva Resources Pty Ltd [2011] FWAFB 4014, with reference to Wodonga Rural City Council v Lewis (2005) 142 IR 188 at [6]; Deane v Paper Australia Pty Ltd (unreported, AIRCFB, PR932454, 6 June 2003) at [7] and Smith v Barwon Region Water Authority (2009) 187 IR 276 at [48].

 11   Church v Eastern Health t/as Eastern Health Great Health and Wellbeing [2014] FWCFB 810

 12   (2003) 121 IR 362

 13   (2002) 120 IR 346

 14   (2003) 121 IR 362, at [7] - [8]

 15   (2002) 120 IR 346, at [32]

 16   Exhibit R4, para D.11 (k) - (s)

 17   Exhibit A2, para 3

 18   (1998) 88 IR 21

 19   (2000) AIRCFB Print S5109

 20   Transcript, PN 41

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