FCA rejects Westpac's responsible lending settlement
In the recent matter of Australian Securities & Investments Commission v Westpac Banking Corporation [2018] FCA 1733, Perram J of the Federal Court dismissed an application by ASIC and Westpac Bank for judicial approval of a penalty settlement. ASIC tends to favour reaching settlements rather than litigation for the purpose of applying penalties due its relative efficiency. A settlement can be preferential to litigation in terms of time expended and cost, especially in investment cases with large plaintiff classes or numerous issues.
This case is particularly unique as Perram J made amicus curiae appointments — the appointment of an independent third party to assist the Court in certain ways — to argue against the application in the place of Westpac.
The penalty was concerned with the methods employed by Westpac regarding home loan suitability assessments in a period between 12 December 2011 and March 2015. The specific method in question was a rule of Westpac’s Automated Decision System which gave a 'Final Net Monthly Surplus/Shortfall' calculation. The issue was that the calculation was not based on financial information provided by the customer, but rather a benchmark known as the HEM Benchmark based on data gathered by the ABS.
Westpac and ASIC had agreed that use of the HEM Benchmark was a contravention of s 128 of the National Consumer Credit Protection Act 2009 (Cth) (‘the Act’). Perram J strongly disagreed with this outlining that s 128 is focused on entering into a credit contract before making an assessment. In his Honours own words “… using the HEM Benchmark does not conceivably contravene s 128”. His Honour then went on to critique the substance of the agreement, noting that other than stating Westpac breached s 128, it did not outline what conduct or facts resulted in the breach.
Even after a thorough examination of the relevant facts and submissions by counsel for both parties, Perram J was not convinced that the draft orders presented to him were sufficient to fulfil the obligations of the Court under s 166 of the Act. Section 166 requires a court making a declaration for the purposes of a civil penalty provision to specify the conduct constituting the contravention. His Honour was quite blunt in expressing that he felt the conduct specified was conduct that could breach s 128 stating “I simply do not accept that the conduct specified in the declaration is conduct which could possibly be a contravention of s 128. I will not declare conduct which is not unlawful to be unlawful. The contraventions of s 128, that is the entry into credit contracts, must be specified. The declaration tells one next to nothing.”
On this basis, the joint application was refused with a case management hearing set for November 27. In making this refusal Perram J state “… I accept the need for the Court to encourage settlements in this area but the desirability of doing so does not permit the Court to become a rubber stamp”.
Foodora rider awarded $15k for unfair dismissal
The Fairwork Commission has handed down a highly important decision in the matter of Joshua Klooger v Foodora Australia Pty Ltd [2018] FWC 6836. Mr Klooger was a delivery rider for Foodora in Melbourne who had his employment terminated after he spoke out against pay rates and conditions in the Foodora structure and gig economy generally.
Mr Klooger commenced working as a 'Corporate Rider' (delivery rider) with Foodora in March 2016. Until his dismissal he held various titles/positions such as 'Rider Captain' and 'Driver Manager'. When Mr Klooger first began working as a rider in 2016, workers would select shift times in certain geographical locations through Foodora’s app or website. Access to shift selection was not restricted or preferenced except for users designated as 'Captains'. In October 2017, Foodora introduced a new system of shift selection. This system would use certain performance metrics, such as number of orders delivered per hour, to rank users into a series of ‘batches’ that would determine when a user was able to select upcoming shifts. Additionally, Foodora had been progressively reducing payments for new riders/drivers since about July 2016 to the point where an hourly rate was eliminated and replaced by a flat rate of $8.00 per delivery in February 2018.
Shortly after the payment rate had reached $8.00 per delivery, Mr Klooger made a complaint about pay rates and conditions at a public rally and on an interview with the television show 'The Project'. Following these appearances, Foodora management requested Mr Klooger hand sole control of a mobile messaging app chat group to Foodora. When Mr Klooger failed to comply with these requests, Foodora advised they had decided to no longer contract his services, effective immediately. In response Mr Klooger filed an application for an unfair dismissal remedy pursuant to s 394 of the Fair Work Act 2009.
Foodora raised two lines of argument, first that Mr Klooger was an independent contractor and not entitled to unfair dismissal protections, and second even if he were an employee he was dismissed for a valid reason. In establishing Mr Klooger’s status as an independent contractor counsel for Foodora pointed to the agreement between the parties which was a standard form contract titled “INDEPENDENT CONTRACTOR AGREEMENT” expressly stipulating Mr Klooger was engaged as an independent contractor and not an employee. Other indicators of contractor status included: the level of control Mr Klooger reserved over the amount of shifts he did or did not take in a week, that the service agreement was not exclusive, and the ability to have someone else discharge the obligations. (Foodora drivers/riders could have someone other than themselves perform deliveries with permission).
In terms of the validity of the reason for dismissal, Foodora pointed to its request for Mr Klooger to handover administrative control of the chat group and Mr Klooger's failure to do so as a valid reason for his dismissal under s 387(a).
Counsel for Mr Klooger disputed both assertions arguing that Mr Klooger worked directly for Foodora and not as part of a distinct, independent trade or company of his own. Secondly the reason for dismissal was not valid as it was unclear what the actual reason was, was not based in fact, and failed to give Mr Klooger any real opportunity to respond.
Commissioner Cambridge weighed a number of factors such as the nature of work and manner in which it was performed, the terms and terminology of the contract, ability to delegate work, level of control over working conditions, expenses/capital investment on the part of Mr Klooger and the extent of remuneration received. On these factors the Commissioner found that the proper characterisation of that relationship was that of employee-employer, in the Commissioners own words: “the applicant was not carrying on a trade or business of his own, or on his own behalf, instead the applicant was working in the respondent’s business as part of that business. The work of the applicant was integrated into the respondent’s business and not an independent operation.”
On the issue of the dismissal, the Commissioner rejected the arguments of Foodora that the dismissal was based on a valid reason. Referring to an email chain between Foodora managers on 28 February and 1 March 2018, the Commissioner determined that the substantive and operative reason for Mr Klooger’s dismissal was his conduct involving public agitation and complaint about the terms and conditions that Foodora imposed on its delivery riders/drivers.
As Foodora is currently in voluntary administration, Mr Klooger was unable to seek reinstatement, rather he sought damages. The Commissioner agreed with this remedy and determined, based on an average weekly remuneration, that Mr Klooger be awarded the sum of $15,559.00 as compensation.
QCA: Consideration must be given to the time taken to assess costs when determining security payments
In the recent matter of Monto Coal 2 Pty Ltd & Ors v Sanrus Pty Ltd & Ors [2018] QCA 309, the Queensland Court of Appeal provided a reminder that the time required to assess costs may be taken into account when determining whether a respondent is able to realise assets to pay security.
Background and the proceeding below
The proceeding related to a dispute over a joint venture to mine coal at Monto entered into in 2002. The proceeding had a long history, having been commenced in October 2007. The plaintiffs consented to provide security for the defendants’ costs of $250,000 in December 2007 and at the time of writing, the proceeding is listed for trial for 16 weeks in 2019.
In December 2017, the defendants applied to the Court to increase the security from $250,000 to $4,000,000.
At first instance, Crow J dismissed the application on the basis that the defendants failed to meet the essential threshold requirement in r671(a) of the Uniform Civil Procedure Rules 1999 that there is reason to believe that the plaintiff will not be able to pay the defendants’ costs if ordered to do so.
His Honour based his decision upon evidence provided on behalf of the plaintiffs that their interest in the joint venture (the evidence indicated that the total value of the joint venture was $100,000,000) significantly exceeded the estimate of the defendants’ likely costs of the proceeding ($4,000,000) and that the plaintiffs may sell that interest in order to satisfy any costs liability to the defendant should their action fail.
The defendants appealed his Honour’s decision on the basis that, relevantly, his Honour had failed to apply the correct threshold test under r671(a) and had erred in failing to find that there was “reason to believe” that the plaintiffs will not be able to pay the defendants’ costs if ordered to pay them.
The defendants needed to succeed on each of those points in order for the appeal to succeed.
The decision on appeal
Gotterson JA (with whom McMurdo JA and Boddice J agreed) held that the primary judge had applied too strict a threshold test under r671(a). The primary judge had approached the test on the basis that the defendants were required to satisfy the Court that the plaintiff “will not” be able to pay the defendants’ costs if ordered to do so, whereas the defendants were merely required to satisfy the Court that there was “reason to believe” that the plaintiffs would not be able to pay costs if ordered to do so.
In reaching his decision with respect to whether the primary judge should have in fact found that there was reason to believe that the plaintiffs will not be able to pay the defendants’ costs if ordered to pay them, Gotterson JA preferred the view was that it was for an applicant for security to adduce evidence from which the Court may form a reason to believe that a plaintiff will not be able to pay the defendants’ costs if ordered to pay them.
His Honour then turned to consider the time period within which a plaintiff must pay a defendant’s costs, observing that:
The expression itself does not stipulate when, or by what means, the plaintiff company is to be able to pay the costs order. It does not require, for example, that in order to be able to pay a costs order, a company must have available liquid funds sufficient to meet the costs order on the date that the order is made. To put it another way, it does not state or imply that a company will be unable to pay unless it has on hand such liquid funds at that date.
His Honour then cited an observation of von Doussa J in Beach Petroleum v Johnson and stated that:
These observations imply, correctly in my view, that the period of time likely to be required for determination, by assessment or otherwise, and allowing for resolution of any disputes that arise in the determination process, is to be taken into account. So also is the opportunity that the plaintiff corporation will have within that period to realise non-liquid assets in order to pay the quantum of the ordered costs as and when they are ultimately determined.
The appellants had contended that the Court should find that there was reason to believe that the plaintiffs would not be able to pay the defendants’ costs if ordered to pay them due to uncertainty surrounding when the plaintiff may be able to realise its interest in the joint-venture.
Gotterson JA ultimately found that on the evidence available, there was no reason to infer that the realisation of the plaintiffs’ interest in the joint venture in order to satisfy any costs order would take longer than the process of determining the costs payable. His Honour also noted that the process of costs assessment may take a considerable time given that the proceeding had commenced some 11 years earlier in 2007 and was listed for 16 weeks’ trial.
In light of that, his Honour held that the threshold requirement that there be reason to believe that the plaintiffs would not be able to pay the defendants’ costs if ordered to do so had not been met and accordingly, dismissed the appeal.
Conclusion
The decision is a timely reminder to practitioners that:
- the threshold contained in r671(a) necessary for security for costs to be awarded requires only a “reason to believe” that the relevant party cannot pay costs if ordered to do so, rather than a concluded opinion that the relevant party cannot pay costs if ordered to do so; and
- the relevant time at which the threshold is to be analysed is not at the time that the order for costs is made; but rather, at the time when the costs must be paid at the conclusion of the costs assessment process. This allows non-liquid assets to be taken into consideration as available to satisfy a costs order if a plaintiff can show that those assets could be sold prior to the conclusion of the costs assessment process. Practically, this may be of assistance in resisting an application for security for costs noting the significant length of time that the costs assessment process can take.
