Kelsey v Logan City Council[2021] ICQ 11

INDUSTRIAL COURT OF QUEENSLAND

1. [1]
   Sharon Rae Marie Kelsey, the appellant, commenced an appeal against several parties, including Timothy Luke Smith, who was the second respondent, challenging orders made in the Queensland Industrial Relations Commission (QIRC) by Vice President O'Connor.^[1]  She then abandoned the appeal against Mr Smith who seeks his costs of the appeal on an indemnity basis.
2. [2]
   Two issues arise:

1. whether Mr Smith should have the benefit of an order that Ms Kelsey pay his costs of the appeal; if so
2. whether the costs should be assessed on an indemnity basis.

Background

3. [3]
   Ms Kelsey was employed on 2 June 2017 as the Chief Executive Officer of the Logan City Council (the Council) which is the first respondent to the appeal.  Her employment was subject to a six month probationary period.
4. [4]
   Mr Smith was, at relevant times, the Mayor of Logan City.  The third to ninth respondents to the appeal were, at relevant times, councillors of the Council. 
5. [5]
   On 10 October 2017, a performance review meeting was held with Ms Kelsey.  Present were Councillors Dalley and Schwarz (respectively the third and eighth respondents to the appeal) and Mayor Smith.  Concerns were expressed to Ms Kelsey about her performance.
6. [6]
   Two days later, Ms Kelsey made a public interest disclosure to the Council, the Minister for Local Government and the Crime and Corruption Commission.  That disclosure alleged possible misconduct by Mayor Smith.
7. [7]
   On 1 December 2017, Ms Kelsey commenced proceedings in the QIRC alleging contraventions of s 285 of the Industrial Relations Act 2016 (the IR Act) and s 48 of the Public Interest Disclosure Act 2010 (the PID Act).  Section 285 of the IR Act protects a person against adverse action taken by the employer^[2] to prevent a person from exercising a workplace right.  Section 48 of the PID Act, relevantly here, gives a right to a person who has made a public interest disclosure to seek remedies against any person who attempts to damage the first person because the public interest disclosure was made.
8. [8]
   On 7 February 2018, the Council terminated Ms Kelsey’s employment.
9. [9]
   Ms Kelsey’s application to the QIRC was heard by Vice President O'Connor over a total of 23 days between 17 December 2018 and 10 June 2020.  On 1 April 2021, his Honour dismissed the claim and invited submissions on other orders, including costs.
10. [10]
    It is unnecessary to analyse the judgment of the Vice President.  It is sufficient to observe that the allegations levelled by Ms Kelsey against Mr Smith were serious.
11. [11]
    By s 557 of the IR Act, Ms Kelsey had a right to appeal to the Court from the decision of the QIRC on the ground of “error of law”^[3] or “excess or want of jurisdiction”,^[4] or she could appeal by leave of the Court on any other ground.^[5]  By s 564 of the IR Act, any appeal was required to be commenced within 21 days of the order appealed. 
12. [12]
    Notwithstanding some comments in the application to appeal filed by Ms Kelsey,^[6] it is common ground that the appeal period ran from the time Vice President O'Connor dismissed the application, even though questions of costs and perhaps other final orders, remained to be determined.^[7]
13. [13]
    On 21 April 2021, Ms Kelsey filed an application to appeal.  In the paragraph headed “4.  Details of decision sought”, this appears:

“Final orders have not yet been made in relation to the matter. However there has been a Decision which appears to commence the relevant appeal period. This appeal is filed to preserve my ability to appeal the Decision when final orders are made and when I have had an opportunity to take advice (if my means allow) in relation to appropriate grounds of appeal. I have not had the opportunity to consider or take advice on appeal prospects or on available grounds of appeal. If an appeal is pursued, I will file an amended notice of appeal which sets out the grounds of appeal in accordance with the usual requirements. In the meantime I respectfully ask that the Court does not progress this Appeal until after final orders are made and I am in a position to advise the Court as to whether I wish to proceed with the appeal and have filed an amended application to appeal in compliance with the normal requirements.”

And in the paragraph headed “5.  Grounds of the appeal”, there is this:

“Final orders have not yet been made in relation to the matter. However there has been a Decision which appears to commence the relevant appeal period.

This appeal is filed to preserve my ability to appeal the Decision when final orders are made and when I have had an opportunity to take advice (if my means allow) in relation to appropriate grounds of appeal. I have not had the opportunity to consider or take advice on appeal prospects or on available grounds of appeal.

If an appeal is pursued, I will file an amended notice of appeal which sets out the grounds of appeal in accordance with the usual requirements.

In the meantime I respectfully ask that the Court does not progress this Appeal until after final orders are made and I am in a position to advise the Court as to whether I wish to proceed with the appeal and have filed an amended application to appeal in compliance with the normal requirements.”

14. [14]
    It is unnecessary to analyse the Industrial Relations (Tribunal) Rules 2011.  It is conceded by Ms Kelsey that the appeal as filed was non-compliant and must be amended.^[8]  When this was pointed out to Ms Kelsey by email, she responded:

“Thank you for your email. I do not have solicitors on the record yet in the appeal, however please do copy Dan Williams and Sarah Walters^[9] in to any further correspondence.

As my notice made clear, it is intended to be a holding appeal including to ensure that all respondents were aware of my intention to appeal. I do intend to seek permission to amend the notice so that it is fully compliant once I have had an opportunity to gain support in doing so. I hope you will understand that it is difficult for me to secure that support at present. Also, while the current suppression orders are in place in the QIRC proceedings I am not sure it would be allowable or appropriate for me to file a document in the Court which referred in any detail to the content of the decision.

I don’t require any respondent to file a response or to take any step at present. I have also presumed that all respondents are content that the service by the registry on the QIRC representatives is sufficient service, however if anyone has a different position please let me know.

Finally, my understanding is that the hearing on Thursday^[10] is limited to the final disposition of the QIRC matter and that the Court has not yet listed the appeal for any directions. Therefore I don’t believe any issue related to the appeal can be dealt with tomorrow. (emphasis added)”

15. [15]
    In the usual course, the Registrar would issue directions as to the conduct of the appeal.  As the appeal was obviously non-compliant, the matter was brought to my attention and I listed the matter for mention before me on 14 May 2021. 
16. [16]
    On 13 May, Mr Smith filed an application seeking to strike out the appeal as it was non-compliant with the Rules.
17. [17]
    On 14 May 2021, I made the following orders:

“1. By 4pm on 11 June 2021, the Applicant file and serve any application to regularise the appeal together with any material in support including a draft compliant notice of appeal

2. By 4pm on 25 June 2021, the First to Ninth Respondents file and serve any material in reply to any application filed by the Applicant

3. By 4pm on 9 July 2021, the Applicant file and serve an outline of submissions on the question of leave being granted to the Applicant to file an amended notice of appeal

4. By 4pm on 23 July 2021, the First to Ninth Respondents file and serve outlines of submissions on the question of leave being granted to the Applicant to file an amended notice of appeal

5. The application to regularise the appeal be listed for hearing on 25 August 2021

6. The application brought by the Second Respondent to strike out the notice of appeal is adjourned for hearing on 25 August 2021

7. The costs of the appearance today are reserved”

18. [18]
    On 11 June 2021, Ms Kelsey through Minter Ellison Solicitors, contacted my Associate seeking an extension of time to 18 June to file the material that had been ordered to be filed by 11 June by order of 14 May.  That extension was opposed by the respondents so the matter was listed for mention before me on 22 June 2021.
19. [19]
    On 18 June 2021, the following documents were filed and served by Ms Kelsey:

    1. (a)
       Form 4 – application in existing proceeding, seeking the substitution of the previously filed notice of appeal, and the discontinuance of the appeal as against the second respondent;
    2. (b)
       Form 5 – Notice of appeal, attaching grounds of appeal and orders sought as part of the appeal, together with a parties list;
    3. (c)
       Affidavit of Sharon Rae Marie Kelsey dated 18 June 2021; and
    4. (d)
       Affidavit of Dan Williams dated 18 June 2021.
20. [20]
    One effect of the documents that were filed was to abandon the appeal against Mr Smith who then filed an application for costs.  That is the application now under consideration.
21. [21]
    On 22 June 2021, I made orders in relation to the appeal concerning the first and third to ninth appellants and in relation to the appeal against Mr Smith I ordered:

“1. By consent the appeal against the second respondent is dismissed; and

2. By 4pm on 29 June 2021, the appellant file and serve submissions on the question of costs

3. By 4pm on 6 July 2021, the second respondent file and serve submissions in reply on the question of costs

4. Unless either party files an application by 4pm on 13 July 2021 for leave to make oral submissions or further written submissions, the matter of costs will be dealt with on the papers”

22. [22]
    In due course, written submissions were received on behalf of both Ms Kelsey and Mr Smith.  No party has filed an application for leave to make oral submissions or further written submissions.  Consistently with the orders made on 22 June 2021, I will deal with the question of costs on the basis of the written submissions which have been filed.

Should Mr Smith have a costs order?

23. [23]
    There are good reasons why, in civil proceedings, costs usually follow the event.^[11]  By force of s 545 of the IR Act, that general rule is abrogated.  The policy behind such an approach was explained in Augusta Ventures Ltd v Mount Arthur Coal Pty Ltd.^[12]  I shall return to that case shortly.
24. [24]
    Section 545 of the IR Act provides, relevantly here:

“545 General power to award costs

3. (1)
   A person must bear the person’s own costs in relation to a proceeding before the court or commission.

3. (2)
   However, the court or commission may, on application by a party to the proceeding, order—

1. (a)
   a party to the proceeding to pay costs incurred by another party if the court or commission is satisfied—

1. (i)
   the party made the application or responded to the application vexatiously or without reasonable cause; or

2. (ii)
   it would have been reasonably apparent to the party that the application or response to the application had no reasonable prospect of success; or …”

25. [25]
    Section 545 and provisions like it have been the subject of analysis in various decisions.  The following principles can be identified:

    1. (a)
       The starting point is that each party bears their own costs.^[13]
    2. (b)
       A discretion to depart from that point only arises, relevantly here, if one of the jurisdictional facts identified in s 545(2)(a)(i) or s 545(2)(a)(ii) are established.^[14]
    3. (c)
       The assessment of “reasonable cause” in s 545(2)(a)(i) is:

       1. an objective assessment;^[15] and
       2. made considering the facts existing as at the time of the institution of the proceedings, here the appeal.^[16]
    4. (d)
       Section 545(2)(a)(ii) prescribes a separate and distinct jurisdictional fact giving rise to a discretion to award costs.  In consideration of whether s 545(2)(a)(ii) is engaged, facts which arise after the commencement of the proceedings may be relevant.^[17]
26. [26]
    Here, it is obvious that the discretion to depart from the general rule^[18] arises by force of s 545(2)(a)(i).  On any view, the application to appeal was filed without identification of any error of law or act in excess or want of jurisdiction.  After investigation, the appeal was abandoned by Ms Kelsey against Mr Smith, an admission that there were no identifiable grounds which Ms Kelsey chose to mount against him. 
27. [27]
    In those circumstances, the appeal was instituted against Mr Smith “without reasonable cause”.  The real issue is whether the discretion to award costs against Ms Kelsey should be exercised.
28. [28]
    Two affidavits filed on Ms Kelsey’s behalf on 18 June 2021 explain the circumstances in which the application to appeal was filed.  They are the affidavits of Ms Kelsey and her solicitor, Mr Williams. 
29. [29]
    Ms Kelsey, in her affidavit, explains:

1. After her employment with the Council was terminated in February 2018, she did not obtain employment until March 2020.
2. Ms Kelsey’s employment past July 2021 is uncertain.
3. The costs of the proceedings in the QIRC and other events, some of which are related to her dispute with the council, have drained her assets and savings.
4. Ms Kelsey’s poor financial position did not enable her to engage lawyers for the appeal.
5. Ms Kelsey filed the appeal in the hope that Minter Ellison may assist her to regularise the appeal.

30. [30]
    Mr Williams, in his affidavit, explained that he is the partner of Minter Ellison who had conduct of the proceedings on Ms Kelsey’s behalf in the QIRC.  Some fees and outlays owing to the firm in relation to the proceedings in the QIRC remain unpaid.  In those circumstances, the internal procedures of Minter Ellison required the approval of the firm’s Executive Leadership Team before further legal services could be provided to Ms Kelsey.  A decision to assist Ms Kelsey in regularising the appeal was made by the Executive Leadership Team on or about 31 May 2021 and work has proceeded diligently since that date.
31. [31]
    Obviously Minter Ellison must have internal rules in place which regulate how and when, and on what terms the firm accepts instructions and thereby commits itself to involvement in litigation.  There was, quite properly in my view, no challenge to Mr Williams’ affidavit by Mr Smith and no suggestion that Minter Ellison had acted other than reasonably. 
32. [32]
    However, the responsibility for filing a compliant application to appeal within time falls not upon Minter Ellison but upon Ms Kelsey.
33. [33]
    Mr Smith points to Northern Territory v Sangare^[19] and P v H^[20] as authority for the proposition that the impecuniosity of a party, the unavailability of legal assistance or the fact that a party is indemnified by an insurer (as is the case here with Mr Smith apparently) ought not relieve the defaulting party of the obligation to pay costs.
34. [34]
    That is obviously the case in jurisdictions where the usual rule applies, namely costs follow the event.  However, in Augusta Ventures Ltd v Mount Arthur Coal Pty Ltd,^[21] this was said in relation to the legislative policy underpinning s 570 of the Fair Work Act 2009 which, like s 545, abrogates the usual rule that costs follow the event:

“[103] The evident legislative policy is that persons who seek by legal proceedings to vindicate rights or to obtain relief under the FW Act should be able to do so without exposing themselves to the risk of having to pay the costs of another party in the event that they are unsuccessful. So much was made express by the Minister in the Second Reading Speech for the introduction of s 197A into the Conciliation and Arbitration Act in 1973:

This is part of our policy of bringing the courts to the people, of overcoming the deterrent which often prevents a person from seeking to right a wrong because of the burden of costs he might incur where his argument has failed to carry the day … The possibility of having costs awarded against an applicant discourages the use of the courts as a means of settling disputes.

…

[107] It is important not to lose sight of legislative policy which underpins s 570. This can easily occur if one characterises it as being no more than a statutory fetter on the making of the usual order for costs. It is that, but it also reflects an attempt to address the underlying inequality of position commonly experienced by applicants in litigation for the enforcement of industrial entitlements.”

35. [35]
    Consequently, in my view, the impecuniosity of Ms Kelsey, the fact that she did not have access to legal assistance and the fact that Mr Smith had the benefit of insurance are all factors that are relevant in the exercise of the discretion to award costs.
36. [36]
    However, even having regard to the policy behind s 545, the impecuniosity of Ms Kelsey, the unavailability of legal assistance to her at the time the application to appeal was filed, and the fact that Mr Smith has the benefit of insurance, there are persuasive factors against her.  In particular:

    1. (a)
       the allegations made against Mr Smith in the QIRC are serious;
    2. (b)
       those allegations were not substantiated in the proceedings in the QIRC;
    3. (c)
       the grounds of appeal available, at least as of right under s 557 of the IR Act, are limited;
    4. (d)
       Ms Kelsey filed the application to appeal against Mr Smith and thereby continued to level serious allegations against him without identifying any arguable ground of appeal;
    5. (e)
       Ms Kelsey, by paragraphs 4 and 5 of the application to appeal, effectively purported to unilaterally grant herself an extension of the time set by the IR Act to settle her grounds;
    6. (f)
       when pressed to file amended grounds of appeal, Ms Kelsey abandoned the allegations against Mr Smith.
37. [37]
    In all the circumstances, it is appropriate that Ms Kelsey pay Mr Smith’s costs of the appeal, including the costs of the preparation of the written submissions on costs.

Should the costs be assessed on the indemnity basis

38. [38]
    In a statutory regime where costs prima facie follow the event, the starting point is that the costs be assessed on the standard basis unless there are circumstances justifying a departure from that general rule so as to make an award of indemnity costs appropriate.
39. [39]
    In Rosniak v Government Insurance Office,^[22] the New South Wales Court of Appeal said this:

“… the court requires some evidence of unreasonable conduct, albeit that it need not rise as high as vexation. This is because party and party costs remain the norm, although it is common knowledge that they provide an inadequate indemnity. Any shift to a general or common rule that indemnity costs should be the order of the day is a matter for the legislature or the rule maker.”^[23]

40. [40]
    Many cases have considered the circumstances in which an award of indemnity costs may be justified.^[24]
41. [41]
    Here, Mr Smith submits that indemnity costs ought to be awarded because the “putative appeal was foredoomed to fail”.  Given that Ms Kelsey never managed to even articulate a ground of appeal against Mr Smith, it should be accepted that the appeal against Mr Smith, when it was instituted, was indeed “foredoomed to fail”.
42. [42]
    The filing of proceedings which are “foredoomed to fail” would often, in a regime where costs generally follow the event, result in an order that the costs be assessed on an indemnity basis.
43. [43]
    However, that is not the regime established by s 545 of the IR Act.  The discretion to award costs only arises at all where the appeal is filed “vexatiously or without reasonable cause” or it was “reasonably apparent [to] the appellant that [the appeal] had no reasonable prospect of success”.  Even when one of those preconditions are fulfilled, costs on any basis do not inevitably follow.  A discretion arises to depart from the usual rule established by s 545(1), namely that each party bear their own costs.
44. [44]
    In a regime where even vexation only gives rise to a discretion to award costs, it cannot be that there is a general rule that commencing a proceeding which is “foredoomed to fail” (a term synonymous with “no reasonable prospect of success”) will lead to an award of indemnity costs.
45. [45]
    Ms Kelsey ought not have filed an appeal against Mr Smith without having firstly identified grounds.  However, she expressly accepted in the application to appeal that grounds would have to be identified and articulated.  Presumably she expected that grounds to challenge the judgment of the QIRC as it relates to Mr Smith would be found.
46. [46]
    After receiving advice, Ms Kelsey abandoned the appeal against Mr Smith.  There is nothing to suggest that the appeal was commenced against him maliciously.^[25]
47. [47]
    For the reasons given earlier, Mr Smith has demonstrated a good case for departure from the general rule established by s 545(1) of the IR Act and he should have an award of costs.  However, the proper balancing of the respective interests of the parties here is best served by ordering that the costs be paid on the standard basis.
48. [48]
    Rule 70 provides:

“7 Costs

3. (1)
   This rule applies if the court or commission makes an order for costs under section 545 of the Act.

3. (2)
   The court or commission, in making the order, may have regard to—

1. (a)
   for a proceeding before the commission—the costs payable on the scale of costs for Magistrates Courts under the Uniform Civil Procedure Rules 1999, schedule 3; or

2. (b)
   for a proceeding before the full bench—the costs payable on the scale of costs for the District Court under the Uniform Civil Procedure Rules 1999, schedule 2; or

3. (c)
   for a proceeding before the court—the costs payable on the scale of costs for the Supreme Court under the Uniform Civil Procedure Rules 1999, schedule 1; or

4. (d)
   any other relevant factor.

3. (3)
   The court may order that costs be assessed by the registrar and, in assessing costs, the registrar may have regard to the Uniform Civil Procedure Rules 1999, chapter 17A.”

49. [49]
    Consistently with r 70(2)(b), the costs should be assessed on the scale of costs for the Supreme and District Courts.

Orders

50. [50]
    I order that:

1. The appellant pay the second respondent’s costs of the appeal, including reserved costs and the costs of the written submissions on costs, all on the standard basis calculated on the scale of costs of the Supreme Court and District Court under the Uniform Civil Procedure Rules 1999, Schedule 1.