When are costs ordered by the Commission?

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When are costs ordered by the Commission?

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Overview

See Fair Work Act ss. 375B, 377 and 611

Section 611 of the Fair Work Act 2009 sets out the general provision for when the Fair Work Commission may order costs. The Commission may order a person to pay the other party’s costs if it is satisfied:

that the person’s application or response to an application was made vexatiously or without reasonable cause, or
it should have been reasonably apparent that the person’s application or response to an application had no reasonable prospect of success.

Section 375B of the Fair Work Act sets out the circumstances in which the Commission can make costs orders against parties in general protections matters. Orders under this section can only be made if a party has lodged an application in accordance with s.365 of the Fair Work Act.

The Commission may order costs against a party to a general protections dispute if the first party caused the second party to incur costs because of an unreasonable act or omission in connection with the conduct or continuation of the matter.^[1]

The power to award costs is discretionary. It is a two stage process:

decide whether there is power to award costs, and
if there is power, consider whether the discretion to award costs is appropriate.^[2]

Vexatiously

Vexatious means that:

The main purpose of an application (or response) is to harass, annoy or embarrass the other party.^[3]
There is another purpose for the action other than the settlement of the issues arising in the application (or response).^[4]

The question of whether an application was made ‘vexatiously’ looks to the motive of the applicant in making the application. It is an alternative ground to the ground that the application was made ‘without reasonable cause’ and may apply where there is a reasonable basis for making the application.^[5]

Without reasonable cause

The test for ‘without reasonable cause’ is that the application (or response):

is ‘so obviously untenable that it cannot possibly succeed’
is ‘manifestly groundless’
is ‘so manifestly faulty that it does not admit of argument’
‘discloses a case which the Court is satisfied cannot succeed’
‘under no possibility can there be a good cause of action’.^[6]

The Commission may also consider whether, at the time the application (or response) was made, there was a ‘substantial prospect of success.’^[7] It is inappropriate to find that an application (or response) was without reasonable cause if success depends on the resolution of an arguable point of law.^[8]

An application (or response) is not without reasonable cause just because the court rejects a person’s arguments.^[9]

A proceeding is not to be classed as being instituted without reasonable cause simply because it fails, but rather in circumstances where on the applicant’s own version of the facts, it is clear that the proceeding must fail.^[10]

In simple terms, without reasonable cause means that an application (or response) is made without there being any real reason, basis or purpose.

No reasonable prospect of success

Whether it should have been reasonably apparent that an application (or response) had no reasonable prospect of success is an objective test.^[11]

A finding that an application (or response) has no reasonable prospects of success should be reached with extreme caution and should only be reached when an application (or response) is ‘manifestly untenable or groundless’.^[12]

An objective test considers the view of a reasonable person. In this case it looks at whether it would have been apparent to a reasonable person that an application or response had no reasonable prospect of success. This is the appropriate test.

A subjective test would look at the view of the person themselves. A subjective test would look at whether it would be reasonably apparent to the person that their application or response had no reasonable prospect of success. This is not the appropriate test as the person has a vested interest in the matter being decided in their favour, which can influence how the person will look at the issues.

Unreasonable act or omission

An unreasonable act or omission can include a failure to discontinue a general protections dispute application or a failure to agree to terms of settlement.^[13] What is unreasonable will depend on the circumstances.^[14] It is intended that costs only be ordered where there is clear evidence of unreasonable conduct.^[15]

Case examples

Costs ordered against employer

Employer relied on false evidence

Walker v Mittagong Sands Pty Limited T/A Cowra Quartz [2011] FWA 2225 (Thatcher C, 14 April 2011), [(2011) 210 IR 370].

It was found that the employer dismissed the employee based on a false allegation of theft of oil. The employer had based the decision to dismiss the employee on evidence obtained by a manager of the employer.

The manager was found to be an unreliable witness, having knowingly sent a false sample of oil for testing. It was held that it should have been reasonably apparent to the employer, after the employee’s tests results were known, that the case had no reasonable prospect of success. Indemnity costs were ordered against the employer.

Employer did not attend hearing and then appealed

Cremona (formerly trading as Frooty Fresh) v Lane [2011] FWAFB 6984 (O’Callaghan SDP, Kaufman SDP, Lewin C, 13 October 2011).

The employer objected to the unfair dismissal application on the basis that it was frivolous and vexatious, but did not attend the hearing and did not provide an acceptable reason for his absence. The matter was decided in the employer’s absence in the employee’s favour. The employer appealed the decision.

The appeal was dismissed. Costs were granted in relation to the appeal which was found to be without merit and manifestly untenable.

Costs ordered against employee

Employee appealed a decision with no proper basis

Timmins v Compass Security t/a Compass Integrated Security Solutions [2012] FWAFB 1093 (Boulton J, Richards SDP, Bissett C, 21 February 2012) [(2012) 219 IR 5].

The employee’s unfair dismissal application was dismissed as he had not met the minimum period of employment. On appeal the employee appeared to try and change the application to an unlawful termination application and did not contest that he had not met the minimum period of employment.

The Full Bench found that the application to appeal was made without reasonable cause and had no reasonable prospects of success, and that some order for costs was justified.

Applicant had not been dismissed

Mijaljica v Venture DMG Pty Ltd [2012] FWA 2800 (Watson SDP, 3 April 2012).

Due to a misunderstanding about arrangements concerning light duties, an employee believed her employment had been terminated and lodged an application for unfair dismissal.

After the application was lodged the employer sent evidentiary materials and correspondence confirming the employee was still employed, yet the employee did not discontinue the matter once she was made aware of this.

Costs were ordered for the period from when the employer’s correspondence was lodged up to and including the hearing for costs.

Appeal application made vexatiously

Church v Eastern Health t/as Eastern Health Great Health and Wellbeing [2014] FWCFB 810 (Ross J, Hatcher VP, Wilson C, 4 February 2014), [(2014) 240 IR 377].

The employer sought an order for the payment of its costs incurred in relation to an appeal filed by the employee. The appeal was made against a decision granting permission for the employer to be represented by a lawyer at the hearing the employee’s unfair dismissal application. At all relevant times the employee was represented by the Health Services Union. The appeal was withdrawn about an hour before its hearing was scheduled to commence. The employer contended that the appeal was made vexatiously and without reasonable cause.

The Full Bench concluded that the appeal application was made vexatiously. It was made for the improper collateral purpose of delaying the first instance hearing. Having concluded that the appeal application was made vexatiously the Commission’s discretion to order costs against the employee was enlivened.

The Full Bench decided to exercise the discretion and made an order for costs. The Full Bench ordered that the employee pay the employer’s costs on a party-party basis, in respect of the appeal application.

Costs NOT ordered

Seeking compensation for lost wages is not a collateral purpose

Holland v Nude Pty Ltd T/A Nude Delicafe [2012] FWAFB 6508 (Harrison SDP, Richards SDP, Blair C, 3 August 2012), [(2012) 224 IR 16].

The employees were dismissed and subsequently lodged applications for unfair dismissal. Discussions between the representatives were ongoing up until the afternoon prior to the matter being heard, when the applicants discontinued their applications.

The employer sought costs which were granted on the grounds that the employees were seeking a collateral advantage, being payment of wages for lost wages while they were out of work, and that the application had no reasonable prospect of success.

On appeal the Full Bench overturned the costs order. It held that the application was arguable, and that seeking compensation for lost wages is not a collateral purpose as it is a remedy for unfair dismissal.

Employee withdrew application after conciliation conference and before arbitration

Ross-Davis and Anor v JD Pty Ltd T/A Daniel Lightfoot Studios [2011] FWA 3767 (Asbury C, 15 June 2011).

Applications for unfair dismissal were made by an employee and her daughter. The employer claimed that the daughter had never been an employee. After unsuccessful conciliation, the applications were discontinued 18 days before the employer was due to file its materials.

The employer sought costs, but this was rejected. The withdrawal of the applications did not necessarily mean that they were vexatious, and there was no basis to conclude that it should have been apparent to the applicants that their applications had no reasonable prospect of success.

Employee failed to attend hearing and discontinued her application after the scheduled hearing dates

Dryden v The Bethanie Group Inc [2013] FWC 224 (Williams C, 11 January 2013).

The applicant refused offers of settlement, failed to attend the hearing because of alleged illness, failed to supply medical certificates in respect of this illness, and then discontinued her application. The employer sought costs on the basis that the application was filed vexatiously and had no reasonable prospect of success.

While the Commission noted the negative effect the applicant’s actions had on the employer, the actions were characteristic of an ex-employee who lacked appreciation for what is involved in pursuing an application. The application for costs was rejected.

Employee appealed a decision refusing an extension of time

Baker v Salva Resources Pty Ltd [2011] FWAFB 4014 (Watson SDP, Drake SDP, Harrison C, 27 June 2011).

The employee filed an appeal against an original decision to refuse to extend time to make an application. The appeal was unsuccessful and the employer sought costs.

The appeal was properly characterised as contending that no or insufficient regard was had to medical reasons for the delay. The Full Bench was not satisfied that it should have been reasonably apparent to the employee that her appeal had no reasonable prospect of success. Costs were not awarded.

Employee dismissed before Fair Work Act came into force

Expanse Pty Ltd t/as Expanse Search and Selection v Mocsari [2010] FWAFB 7124 (Acton SDP, Cartwright SDP, Thatcher C, 17 September 2010), [(2010) 197 IR 303].

The employee was found to have been dismissed before the Fair Work Act came into operation, and because of the size of the employer was therefore not protected from unfair dismissal. The employer applied for a costs order against the employee.

The Commission dismissed the application on the basis that the employee’s case that the dismissal occurred after the Fair Work Act took effect was arguable and not manifestly untenable. The employer appealed that decision and the appeal was refused.

Employee applied for costs more than 14 days after the matter had been determined

Lindsay v Department of Finance and Deregulation [2011] FWA 6115 (Williams C, 9 September 2011).

The employee made an application for costs on 29 July 2011 against her employer following a decision issued on 14 July 2011 in which the employee was successful. The application for costs needed to have been lodged by 28 July 2011.

The Commission found that it had no discretion to extend the time for lodging an application for costs. The application was dismissed.

Union sought costs against employer

Keogh v P & R Mitchell Contractors (Vic) Pty Ltd [2011] FWA 5070 (Gooley C, 17 August 2011).

The employee was represented by his union, which sought a costs order against the employer.

It was found that the employer’s conduct warranted a costs order. However, there was insufficient evidence that the union had actually charged any costs to the employee. Unless evidence was provided as to an enforceable costs agreement between the employee and the union, the costs application would be dismissed.

Employer sought costs against employee [s.375B]

Keep v Performance Automobiles Pty Ltd [2015] FWCFB 1956 (Ross J, Wells DP, Lee C, 24 March 2015).

The employee was dismissed and subsequently made a general protections dismissal dispute application alleging that the employer had taken ‘adverse action’ against him because he exercised a ‘workplace right’. A conference did not resolve the dispute and the parties agreed to the Commission determining the dispute by consent arbitration. The Commission decided that the employer had established that the reasons for the ‘adverse action’ were not for a prohibited reason, and the employee’s application was dismissed.

The employer sought orders that the employee pay the employer’s costs for the consent arbitration proceedings on the basis that the application was made without reasonable cause and had no reasonable prospect of success. In the alternative, the employer contended that the employee unreasonably continued the application, which caused the respondent to incur costs.

The Full Bench was not persuaded that the application was made without reasonable cause or that it had no reasonable prospect of success. Regarding the employer’s alternative submission that the employee acted unreasonably in failing to discontinue the application, the Full Bench was not persuaded that the continuation of the dispute was unreasonable.

As the employer was unable to satisfy the Full Bench regarding the requirements in s.611(2)(a) or (b), or s.375B(1)(b) of the Fair Work Act, the discretion to make an order for costs was not enlivened. The costs application was dismissed.