QUEENSLAND INDUSTRIAL RELATIONS COMMISSION

CITATION:
	JBS Australia Pty Ltd v The Regulator under the Work Health and Safety Act 2011 [2021] QIRC 367

PARTIES:	
	JBS Australia Pty Ltd
(Applicant)

v

The Regulator under the Work Health and Safety Act 2011
(Respondent)
	
CASE NO:
	WHS/2021/81
	
PROCEEDING:
	Application for costs
	
DELIVERED ON:
	28 October 2021
	
HEARING DATE: 
	27 September 2021
	
MEMBER:

HEARD AT:	O'Connor VP 

Brisbane

ORDER:
	1.	The Respondent pay the Applicant's costs of the proceedings, including the costs of this application for costs, on the standard basis calculated on the scale of costs of the Magistrates Courts under the Uniform Civil Procedure Rules 1999, Schedule 2.
	
CATCHWORDS:	INDUSTRIAL LAW – WORK HEALTH AND SAFETY – where application filed for external review of a decision to uphold an improvement notice issued by respondent – where respondent conceded prior to hearing – where applicant seeking an order pursuant to s 542(2) of the Industrial Relations Act 2016 (Qld) that respondent pay applicant's costs of proceedings – whether respondent responded to application vexatiously or without reasonable cause – whether it was reasonably apparent to respondent that the response to the application had no reasonable prospect of success – whether costs should be awarded on an indemnity basis – where costs awarded on a standard basis. 

LEGISLATION:

CASES:
	Work Health and Safety Act 2011 (Qld) s 229D, s 229E
Industrial Relations Act 2016 (Qld) s 545
Fair Work Act 2009 s 570
Industrial Relations (Tribunals) Rules 2011 (Qld) r 70 

Anderson v AON Risk Services Australia Ltd [2004] QSC 180
Augusta Ventures Ltd v Mount Arthur Coal Pty Ltd (2020) 384 ALR 340
Australian Securities Commission v Marlborough Gold Mines Ltd (1993) 177 CLR 485
Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225
Di Carlo v Dubois [2002] QCA 225
Ellis v Workers' Compensation Regulator [2020] QIRC 201
Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89
Fick v Groves (No 2) [2010] QSC 182
Kelsey v Logan City Council & Ors [2021] ICQ 11
LPD Holdings (Aust) Pty Ltd v Phillips, Hickey and Toigo [2013] QCA 305
Park Avenue Motor-Hotel Pty Ltd and Ors v Beck [2006] ICQ 63; 183 QGIG 971
Rosniak v Government Insurance Office (1997) 41 NSWLR 608  
Thiess Pty Ltd v FLSMIDTH Minerals Pty Ltd (No. 2) [2010] QSC 120
Wicks v Workers' Compensation Regulator (No 2) [2021] QIRC 112
	
APPEARANCES:	Mr J. Ford of counsel instructed by Mills Oakley Solicitors for the Applicant. 

Mr S.A. McLeod QC instructed directly by the Regulator under the Work Health and Safety Act.

Reasons for Decision

[1]	On 9 April 2021, JBS Australia Pty Ltd ('the Applicant') sought an external review of the decision of the Regulator under the ('the WHS Regulator/Respondent') to uphold the issue of improvement notice I2008379. 

[2]	Following a conciliation conference where the matter remained unresolved, the Commission issued a Directions Order to file material to proceed to a hearing. 

[3]	In accordance with the Directions Order, the parties completed the following:

1.	exchanged documents relevant to the matters in issue; 
2.	filed an agreed statement of facts;
3.	exchanged outlines of evidence and filed a list of witnesses; and,
4.	the Applicant filed and served an outline of argument.  

[4]	The matter was listed for a two-day hearing scheduled to commence on 27 September 2021. 

[5]	On 22 September 2021, the parties filed a signed discontinuance in the Industrial Registry. 

[6]	The Applicant has filed an application in existing proceedings in the matter WHS/2021/81 seeking an order pursuant to s 545(2) of the Industrial Relations Act 2016 (Qld) ('IR Act') that the Respondent pay the Applicant's costs of the proceedings. 

Legislation 

[7]	Section 229D of the Work Health and Safety Act 2011 (Qld) ('WHS Act') provides that the procedure for external reviews is governed by the rules provided by the IR Act.  

[8]	Section 229D of the WHS Act provides:

229D	Hearing procedures

(1)	The procedure for an application for a review is to be under the rules applying to applications for review by the commission under the Industrial Relations Act 2016 or, if the rules make no provision or insufficient provision, in accordance with directions of the commission.

[9]	Section 229E of the WHS Act sets out the powers of the Commission when dealing with external review applications:

229E	Powers of commission on application

(1)	In deciding an application for a review, the commission may – 

(a)	confirm the decision; or
(b)	vary the decision; or
(c)	set aside the decision and make a decision in substitution for it; or
(d)	set aside the decision and return the issue to the decision-maker with directions the commission considers appropriate.

[10]	Section 545 of the IR Act 2016 deals with the general powers to award costs and provides:

545	General power to award costs

(1)	A person must bear the person's own costs in relation to a proceeding before the court or commission.
(2)	However, the court or commission may, on application by a party to the proceeding, order –

(a)	a party to the proceeding to pay costs incurred by another party if the court or commission is satisfied – 
(i)	the party made the application or responded to the application vexatiously or without reasonable cause; or
(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
. . .

[11]	Rule 70 of the Industrial Relations (Tribunals) Rules 2011 (Qld) ('IR Rules') applies to the Commission when making an order for costs under s 545 of the IR Act. 

[12]	Relevantly, rule 70(2) of the IR Rules provides:

70 	Costs
…
(2)	The court or commission, in making the order, may have regard to – 
(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 2; or
(b)	for a proceeding before the court or the full bench - the costs payable on the scale of costs for the Supreme Court and District Court under the Uniform Civil Procedure Rules 1999, schedule 1; or
(c)	any other relevant factor.
…

Applicant's position 

[13]	The Applicant submits that following the conciliation conference, correspondence was issued to draw to the Respondent's attention the lack of prima facie evidence of any contravention; the inspector's mistaken belief that fit testing (per the Australian Standard) was a requirement of the WHS Regulation; that the Respondent had no real prospects of success; and the avoidable costs being incurred by the Applicant.

[14]	In a letter from Mills Oakley, Solicitors for the Applicant dated 25 May 2021 it was said:

Accordingly, our client is concerned that advancing this matter any further will result in it incurring costs which are immediately avoidable.
There is no evidence to support that Inspector Wiersma had the requisite information on which to form a reasonable belief that our client had contravened regulation 44(3) of the Work Health and Safety Regulation 2011 (Qld) (WHS Regulation).
The only basis upon which Inspector Wiersma issued the Notice was that she believed 'fit testing' was a requirement under regulation 44(3) and therefore, our client was in contravention because they do not require 'fit testing' of P2 masks.
We do not propose to restate all the full content of our client's external review application, however we specifically draw your attention to the following points:
1. 	regulation 44(3) does not prescribe or mandate that a P2 mask (or any respirator for that matter) be 'fit tested', rather the obligation is to ensure that the respirator is 'a suitable size and fit and reasonably comfortable for the worker who is to use or wear it;
2. 	there is no suggestion in either the Notice or Inspector Wiersma's material described in the Internal Review Decision that the respirators being used by the truck drivers were not of a suitable size or fit; and
3. 	the only enquiry made by Inspector Wiersma was whether our client conducted fit testing, which she did over the phone. When advised that it did not, she concluded that our client was in contravention of regulation 44(3). Inspector Wiersma's assessment could only have been based on the information she sought, namely whether fit testing was undertaken. She did not enquire whether the respirators being used were of a suitable size or fit such as by enquiring how our client could practically and immediately demonstrate compliance with section 44(3) through the procedures and processes our client had in place at the time.

[15]	By email dated 21 September 2021, the WHS Regulator advised:

I refer to the above matter. It is the respondent's position that we are no longer able to defend WHS/2021/81. Regional Director, Robert Wicks has advised that he has withdrawn improvement notice 12008379.

[16]	The Applicant submits that there is no significant difference between its case as first filed in the application for external review and in the submissions filed immediately prior to the hearing.  The case advanced by the Applicant was as follows:

(a)	The inspector who issued the improvement notice had no prima facie evidence before her to form a reasonable suspicion that the applicant was not complying with the Work Health and Safety Regulation 2011 (WHS Regulation) as alleged in the notice she issued; 
(b)	The inspector was operating under a misapprehension that complying with the WHS Regulation required compliance with an Australian Standard. 

[17]	The Applicant asserts that the Respondent's withdrawal of the improvement notice without a hearing speaks to its acceptance that it had no real prospects of defending the application.  However, despite the constancy of the Applicant's position throughout the proceedings, and its efforts to assist the Respondent's identification of a lack of prospects, the Respondent waited until the Applicant had taken almost all steps before seeking to discontinue. 
 
Respondent's Position  

[18]	The Respondent submits that once the Applicant provided its outline of argument to the Respondent on 27 August 2021, the Respondent determined to withdraw the improvement notice.   

[19]	It is asserted by the Respondent that as it has not filed or served submissions responding to the Applicant's grounds of appeal, there is no evidence to suggest the Respondent has acted without reasonable cause. 
 
[20]	The Respondent further argues that a contention that there was no basis for the inspector to issue the improvement notice can only be made good upon a finding of fact by the Commission after considering the evidence at a hearing.  Similarly, the contention that the inspector operated under a misapprehension that the Applicant was required to comply with the relevant Australian Standard could only be resolved by reference to the evidence at a hearing and a subsequent finding of whether the direction was lawful.  

Consideration

[21]	The starting point for a consideration of this application is the statutory presumption contained in s 545(1) of the IR Act that a party must bear their own costs of a proceeding before the Commission.

[22]	The legislative policy underpinning s 570 of the Fair Work Act 2009 which, like s 545 of the IR Act, abrogates the usual rule that costs follow the event was expressed in the following terms in Augusta Ventures Ltd v Mount Arthur Coal Pty Ltd: 
 
[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.

[23]	Relevantly for current purposes, s 545(2)(a)(i) and s 545(2)(a)(ii) of the IR Act authorises the Commission to order an unsuccessful party to the proceeding to pay costs in circumstances where an application is made vexatiously or without reasonable cause, or where it would be reasonably apparent to a party that the application or response to the application had no reasonable prospect of success.

[24]	In Kelsey v Logan City Council & Ors ('Kesley') Davis P, conducted an analysis of various decisions considering the operation of s 545 of the IR Act and identified the following relevant principles: 

Section 545 and provisions like it have been the subject of analysis in various decisions. The following principles can be identified: 
(a)	The starting point is that each party bears their own costs. 
(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. 
(c)	The assessment of “reasonable cause” in s 545(2)(a)(i) is:
(i)	an objective assessment; and 
(ii)	made considering the facts existing as at the time of the institution of the proceedings, here the appeal. 
(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. [footnotes omitted]

[25]	The Respondent relies on Ellis v Workers' Compensation Regulator ('Ellis').  In that case, Ellis lodged an appeal against a decision of the Workers' Compensation Regulator. The matter was compromised prior to the Regulator filing its Statement of Facts and Contentions.  The only outstanding issue was the question of costs.  The Commissioner concluded: 

[33]	The power to award costs under s 545(1)(a)(i) (sic) is contingent upon a determination a party responded without reasonable cause. There has been no response. The Regulator conceded prior to filing a Response to the Statement of Facts and Contentions. It is trite to say that I cannot then find that the response was without reasonable cause.

[34]	There is a similar problem inherent to the Applicant’s reliance upon s 545(1)(a)(ii) (sic). Not only has there been no response, but as soon as the Respondent realised they had no reasonable prospects by virtue of their witness conferencing they determined to concede and not file a response. That section of the IR Act is designed to dissuade persons from defending proceedings they should sensibly concede, so as to avoid putting the applicant or appellant party to unnecessary cost. That is precisely what the Respondent has done.

[26]	I am mindful of the desirability of maintaining internal consistency in decision making within the Commission unless the decision is 'plainly wrong'.  Nevertheless, I am, for the reasons which follow, on this occasion disinclined to follow Ellis.  

[27]	First, whilst the parties agreed before the Commissioner that s 545 of the IR Act had application, in my respectful view, it did not. Merrell DP in Wicks v Workers' Compensation Regulator (No 2) comprehensively dealt with the application of the IR Act to an appeal under ch 13, pt 3, div 1 of the WCR Act. His Honour observed:

For all these reasons, my opinion is that the more general provisions in s 545 of the IR Act must give way to the contrary specific powers in s 558(3) of the WCR Act and in s 132 of the WC Regulation. Section 545 of the IR Act does not apply to the conduct and determination of an appeal under ch 13, pt 3, div 1 of the WCR Act.
[28]	Secondly, irrespective of whether s 545 had application, I do not accept that on a proper reading of s 545(2)(a)(i) or s 545(2)(a)(ii) that absent a response from the Regulator (or indeed anyone) the Commission is denied the ability to undertake an assessment as to whether or not reasonable cause or reasonable prospects of success can be ascertained. 

[29]	The Regulator raises an analogous argument with respect to s 545(2)(a)(ii), namely the contention that 'the inspector had no prima facie evidence before her to form the reasonable belief that the Applicant was not complying with the Regulation, and by extension, there was no basis to issue the Notice' can only be made good by the Commission making findings of fact after a hearing.

[30]	Put simply, the statutory regime under the WHS Act permits an eligible person to apply to the Commission for an external review of a reviewable decision made by the Regulator or an internal review decision.  The application for a review must state fully the grounds of the application and the facts relied on.  On the filing of the application for external review, the Regulator is afforded the opportunity to respond.  In the present case the Regulator advanced no grounds upon which it could rely to respond to the application. Indeed, the email of 21 September 2021 made it abundantly clear that Respondent's position was that it was not able to defend the matter.

[31]	In Kelsey, Davis J wrote:

Here, it is obvious that the discretion to depart from the general rule 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. 

[32]	The affidavit of Mr Sam Dekker sets out the basis upon which the Applicant argues that a costs order ought to be made.  The grounds relied upon by the Applicant for issuing the Improvement Notice were set out in the application for external review filed on 9 April 2021; the letter of 25 May 2021 drew the Regulator's attention to apparent deficiencies that had been identified by the Applicant making the proceedings "completely untenable"; and the outline of argument filed on 27 August 2021 restated the arguments already advanced by the Applicant on 9 April and 25 May 2021. 

[33]	It is accepted by the Regulator that once the Applicant provided its outline of argument to the Respondent on 27 August 2021, a decision was made to withdraw the improvement notice and discontinue proceedings.  It was at this point that it became apparent that the Regulator had no reasonable prospects of success in defending the application. 

[34]	In the hearing of the costs application the following exchange took place:

HIS HONOUR: 	But would I be entitled to accept that the matters that are outlined in the correspondence in May and elsewhere, were such that impacted upon you in the withdrawal of this matter before me for hearing? 

MR McLEOD: 	I think it’s - - -  

HIS HONOUR: 	To compromise it?  

MR McLEOD: 	I think it’s fair to conclude what’s impacted upon the decision to withdraw the notice was the receipt of the applicant’s written outline of submissions. 

HIS HONOUR: 	So – okay. But on that basis, then, you’d accept that costs would be payable, but not on an indemnity basis - - - 

MR McLEOD: 	I would - - - 

HIS HONOUR:	- - - after the 25th of May? 
 
MR McLEOD: 	Depends. There’s two points to that opposition. 

HIS HONOUR: 	Yes. Just jumping ahead. 

MR McLEOD: 	Firstly, whether you form the view that the discretion should be exercised, having regard to the tests under subsection (2). 

HIS HONOUR: 	Yes. 

MR McLEOD: 	In event if you were to find that, ie, that was a warrant to exercise the discretion, as I’ve said in the outline, the - - - 

HIS HONOUR: 	Fearless approach and - - - 

MR McLEOD: 	That’s correct.

HIS HONOUR: 	Yes.

MR McLEOD: 	But as I’ve said in the outline, if you were to accede to the application, it should only be costs on a standard basis, not - - - 

HIS HONOUR: 	Yes. No, I understand that. Yes. Yes. 

MR McLEOD: 	- - - not on the indemnity basis.

[35]	In these proceedings, I am satisfied that the award of costs is appropriate. I have formed the view the discretion contained in s 545, in particular s 545(2)(a)(ii), has been enlivened.  Moreover, I am of the view that the discretion to award costs against the Regulator should be exercised. 
[36]	In the circumstances, it is appropriate that the Regulator pay the costs of the application for external review, including the costs of the application for costs.

Should the costs be assessed on an indemnity basis?

[37]	Once enlivened, the Commission's discretion to award costs, including the awarding of indemnity costs, is unfettered. 

[38]	Applegarth J in Fick v Groves (No 2) identified the following factors to be considered in determining whether to award indemnity costs:

•	the fact that proceedings were commenced or continued in wilful disregard of known facts;
•	the making of allegations which ought never to have been made;
•	the undue prolongation of a case by groundless contentions;
•	evidence of particular misconduct that causes loss of time to the Court and to other parties; and
•	any imprudent refusal of an offer to compromise.

[39]	In LPD Holdings (Aust) Pty Ltd v Phillips, Hickey and Toigo the Court of Appeal referred to the principles applying to the award of indemnity costs, in these terms:

[21]	The applicable principles for the awarding of indemnity costs were usefully summarised by Sheppard J in Colgate-Palmolive Company v Cussons Pty Ltd. However, those principles operate as a guide to the exercise of the relevant discretion. They do not define all of the circumstances in which the discretion is to be exercised and do not limit the width of that discretion. Further, the categories in which the discretion to award indemnity costs may be exercised are not closed.

[22]	Whilst the awarding of costs on an indemnity basis will always ultimately depend upon the exercise of a discretion in the particular circumstances of each individual case, the justification for an award of indemnity costs continues to require some special or unusual feature of the particular case. As was observed by Basten JA in Chaina v Alvaro Homes Pty Ltd, the general rule remains that costs should be assessed on a party and party basis, and the standard to be applied in awarding indemnity costs ought not “be allowed to diminish to the extent that an unsuccessful party will be at risk of an order for costs assessed on an indemnity basis, absent some blameworthy conduct on its part”.

[40]	The principles identified in Colgate-Palmolive Company v Cussons Pty Ltd were expressed in the following passage from that decision:

I instance the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud (both referred to by Woodward J in Fountain and also by Gummow J in Thors v Weekes (1989) 92 ALR 131 at 152; evidence of particular misconduct that causes loss of time to the Court and to other parties (French J in Tetijo); the fact that the proceedings were commenced or continued for some ulterior motive (Davies J in Ragata) or in wilful disregard of known facts or clearly established law (Woodward J in Fountain and French J in J-Corp (supra)); the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions (Davies J in Ragata); an imprudent refusal of an offer to compromise (eg Messiter v Hutchinson (1987) 10 NSWLR 525; Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 at 724 (Court of Appeal); Crisp v Keng (unreported, Court of Appeal, NSW, Kirby P, Priestley JA, Cripps JA, No 40744/1992, 27 September 1993) … . Other categories of cases are to be found in the reports. The question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on a party and party basis.

[41]	The Applicant submits that the Regulator as a model litigant ought not to have defended the application; ought to have withdrawn much earlier; and the delay in withdrawing caused the Applicant to incur avoidable costs. At the highest, the Applicant contends that it was imprudent for the Regulator to proceed.  In making that submission, the Applicant relies, in particular on the letter of 25 May 2021 in which the Regulator's poor prospects of success was highlighted together with a warning that should the matter proceed then an application for costs would be pursued on an indemnity basis. 

[42]	In Anderson v AON Risk Services Australia Ltd, and repeated in Thiess Pty Ltd v FLSMIDTH Minerals Pty Ltd (No. 2), McMurdo J said that there must be something about the facts and circumstances beyond the demerit of a party's case, as reflected in the outcome, before an order for costs on an indemnity basis is warranted.

[43]	As was identified in the New South Wales Court of Appeal decision in Rosniak v Government Insurance Office and adopted by the Court of Appeal in Di Carlo v Dubois:

… 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 shifts 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.

[44]	What the evidence before the Commission does not disclose, in my view, is unreasonable conduct on behalf of the Regulator or evidence of particular misconduct that causes loss of time to the Commission or the Applicant.  There is no special or unusual feature of this particular case which would justify an order for indemnity costs.
[45]	Whilst I have identified a number of cases which have considered the circumstances in which it is appropriate to make an award of indemnity costs, this case is not one of them. In my view, the discretion to award costs has been enlivened under s 545(2)(a)(ii) of the IR Act and it is appropriate that they be ordered on a standard basis. Consistently with r 70(2)(a) of the IR Rules, the costs should be assessed on the scale of costs for the Magistrates Courts. 

Order

1.	The Respondent pay the Applicant's costs of the proceedings, including the costs of this application for costs, on the standard basis calculated on the scale of costs of the Magistrates Courts under the Uniform Civil Procedure Rules 1999, Schedule 2.