Costs

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Introduction

See Fair Work Act 2009 s.400A, s.401, s.402, s.611

People who incur legal costs in a matter before the Fair Work Commission generally pay their own costs.^[1]

The Commission has the discretion to order one party to an unfair dismissal matter to pay the other party's legal or representational costs, but only where the Commission is satisfied the matter was commenced or responded:

vexatiously or without reasonable cause, or
with no reasonable prospect of success.^[2]

Costs may be awarded to one party if the Commission is satisfied that the costs were incurred as a result of an unreasonable act or omission of the other party (but only for dismissals taking effect from 1 January 2013, when the section commenced).^[3]

Costs may also be ordered against legal representatives.

This is called a 'costs order' and it will only be granted in certain situations.

What are costs?

Costs are the amounts a party to a matter before a court or tribunal has paid to a lawyer or paid agent for advice and representation.

If a party is ordered to pay another party's legal costs it will not usually be for the whole amount of legal costs incurred.

The Commission may order that a proportion of the costs be paid. This is often called 'ordering costs' which may be either on a party-party basis or on an indemnity basis.

Party–party costs

Party–party costs are the legal costs that are deemed necessary and reasonable.^[4]

The Commission will look at whether the legal work done was necessary and will decide what a fair and reasonable amount is for that work.^[5]

Indemnity costs

Indemnity costs are also known as solicitor – client costs.

Indemnity costs are all costs including fees, charges, disbursements, expenses and remuneration as long as they have not been unreasonably incurred.^[6]

Indemnity costs involve a larger proportion of the legal costs.

They may be ordered when there has been an element of misconduct or delinquency on the part of the party being ordered to pay costs.^[7]

Party–party costs are the costs that one side pays to the other side in legal proceedings. They are the result of the Commission ordering that one party pay costs to the other party.

Indemnity costs are the costs that you pay to your solicitor for the work that they perform for your matter. The basis of these costs is a costs agreement between you and your solicitor.

Applying for costs

Parties may apply for costs in accordance with s.402 of the Fair Work Act if they can show the other party acted vexatiously or without reasonable cause, or that the application or a response to it had no reasonable prospect of success.^[8] Applications for costs must be made within 14 days after:

the Commission determines the matter, or
the matter is discontinued.^[9]

What costs may be recovered?

The Fair Work Regulations include a 'schedule of costs' which sets out appropriate rates for common legal services. The schedule provides the Commission with guidance when exercising its jurisdiction to make an order for costs.^[10]

The Commission is not limited to the items in the schedule of costs, but cannot exceed the rates or amounts if an item is relevant to the matter.^[11]

When are costs ordered?

See Fair Work Act s.611

Section 611 of the Fair Work Act sets out the general provision for when the 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.

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.^[12]

Vexatiously

Vexatious means that:

the main purpose of an application (or response) is to harass, annoy or embarrass the other party^[13]
there is another purpose for the action other than the settlement of the issues arising in the application (or response).^[14]

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.^[15]

Without reasonable cause

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

is 'so obviously untenable that is 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', or
'under no possibility can there be a good cause of action'.^[16]

The Commission may also consider whether, at the time the application (or response) was made, there was a 'substantial prospect of success.'^[17] 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.^[18]

An application (or response) is not without reasonable cause just because the court rejects a person's arguments.^[19]

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.^[20]

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.^[21]

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'.^[22]

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, this can influence how the person will look at the issues.

Additional circumstances for costs orders against parties

See Fair Work Act ss.400A, 402

Section 400A of the Fair Work Act sets out additional circumstances in which the Commission can make costs orders against parties in unfair dismissal matters. Orders under this section can only be made if a party has lodged an application in accordance with s.402 of the Fair Work Act. The Commission may order costs against a party to an unfair dismissal if the first party caused the second party to incur costs:

because of an unreasonable act or omission, or
in connection with the conduct or continuation of the matter.

An unreasonable act or omission can include a failure to discontinue an unfair dismissal application or a failure to agree to terms of settlement.^[23] What is unreasonable will depend on the circumstances.^[24] It is intended that costs only be ordered where there is clear evidence of unreasonable conduct.^[25]

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) 213 IR 151.

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 (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.

Application was dismissed because the 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 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 (2014) 240 IR 377.

An appeal application filed by the employee was held to be made for the improper collateral purpose of delaying the first instance hearing. The employer then sought an order for the payment of its costs incurred in relation to the appeal.

The Full Bench decided to exercise its discretion and ordered that the employee pay the employer's costs on a party-party basis, in respect of the appeal application. The terms of s.611 of the Fair Work Act only permit the making of costs orders against a party, not their representative. However, the Full Bench stated that in this case, the fault clearly lay with the employee's representative and accordingly it expected the representative to meet its obligations to the employee and to pay the costs on her behalf.

Costs against parties 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 employee's 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 and costs 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 prospects 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 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 of the employer. 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 application did not mean necessarily 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 prospects of success.

Employee failed to attend a Commission 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 prospects of success. This was rejected.

Employee appealed a decision refusing an extension of time

Baker v Salva Resources Pty Ltd (2011) 211 IR 374.

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

Employer sought costs – employee dismissed before Fair Work Act came into force

Expanse Pty Ltd t/as Expanse Search and Selection v Mocsari (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 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.

Applicant entitled to ascertain exact reasons for termination [s.400A]

Mowlam v R I Brown Pty Ltd [2013] FWC 5770 (Blair C, 21 August 2013).

The Commission found that there was a valid reason for the applicant's termination. But it only did so after dealing with several issues set out in the Form F3 that were never put to the applicant and were not identified in his letter of termination. The respondent refused to attend conciliation and therefore the applicant did not have clarification on the reasons for his termination. The applicant was entitled to continue with his application to ascertain the exact reason for his termination and he was entitled to conduct it in the manner that he did.

Related information

References

^[1] Fair Work Act s.611(1).

^[2] Fair Work Act s.611(2).

^[3] Fair Work Act s.400A(1).

^[4] Butterworths Australian Legal Dictionary, 1997, 852.

^[5] ibid.

^[6] Butterworths Australian Legal Dictionary, 1997, 586.

^[7] Oshlack v Richmond River Council (1998) 193 CLR 72 [44]; cited in Goffett v Recruitment National Pty Ltd (2009) 187 IR 262 [50]; and Stanley v QBE Management Services Pty Limited T/A QBE [2012] FWA 10164 (Jones C, 18 December 2012) at para. 24.

^[8] Fair Work Act s.611(2).

^[9] Fair Work Act s.402.

^[10] Fair Work Regulations reg 3.08; sch 3.1.

^[11] Fair Work Regulations reg 3.08; sch 3.1.

^[12] McKenzie v Meran Rise Pty Ltd t/as Nu Force Security Services, Print S4692 (AIRCFB, Giudice J, Watson SDP, Whelan C, 7 April 2000) at para. 7.

^[13] Nilsen v Loyal Orange Trust (1997) 76 IR 180, 181; citing Attorney-General v Wentworth (1988) 14 NSWLR 481, 491; cited in Holland v Nude Pty Ltd (t/as Nude Delicafe) (2012) 224 IR 16 [7].

^[14] ibid.

^[15] Church v Eastern Health (2014) 240 IR 377 [29].

^[16] General Steel Industries Inc v Commissioner for Railways (1964) 112 CLR 125, 129; cited in Walker v Walker v Mittagong Sands Pty Limited T/A Cowra Quartz [2011] FWA 2225 (Thatcher C, 14 April 2011) at para.17, [(2011) 210 IR 370].

^[17] Kanan v Australian Postal and Telecommunications Union (1992) 43 IR 257; cited in Dryden v Bethanie Group Inc [2013] FWC 224 (Williams C, 11 January 2013) at para. 20.

^[18] ibid.

^[19] R v Moore; Ex Parte Federated Miscellaneous Workers' Union of Australia (1978) 140 CLR 470, 473; cited in Walker v Mittagong Sands Pty Limited T/A Cowra Quartz [2011] FWA 2225 (Thatcher C, 14 April 2011) at para. 20, [(2011) 210 IR 370].

^[20] Zornada v St John Ambulance Australia (Western Australia) Inc. (2013) 237 IR 48 [35].

^[21] Baker v Salver Resources Pty Ltd [2012] FWAFB 4014 (Watson SDP, Drake SDP, Harrison C, 27 June 2011) at para. 10; citing Wodonga Rural City Council v Lewis (2005) 142 IR 188, 191 [6].

^[22] Baker v Salver Resources Pty Ltd [2012] FWAFB 4014 (Watson SDP, Drake SDP, Harrison C, 27 June 2011) at para. 10; citing Deane v Paper Australia Pty Ltd, PR932454 (AIRCFB, Giudice J, Williams SDP, Simmonds C, 6 June 2003) at para. 7.

^[23] Explanatory Memorandum to Fair Work Amendment Bill 2012 at para. 170.

^[24] Explanatory Memorandum to Fair Work Amendment Bill 2012 at para. 171.

^[25] Explanatory Memorandum to Fair Work Amendment Bill 2012 at para. 171.

Updated time

Last updated

15 January 2020

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