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:
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.
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 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 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.
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 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]
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:
The power to award costs is discretionary. It is a two stage process:
Vexatious means that:
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]
The test for 'without reasonable cause' is that the application (or response):
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.
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.
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:
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]
[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.