Costs in the Fair Work Commission

This is a decision of a very senior member of the Fair Work Commission dealing with an application by an employer for orders for costs against an applicant whose unfair dismissal case did not succeed. The decision sets out the legal principles which apply to this issue.

“Application for costs orders

[1] Gerard Monaghan, the costs-respondent, was dismissed by the costs-applicant, Applied Medical Australia Pty Ltd, on 7 December 2021 in connection with his status as an unvaccinated person. He applied under s 394 of the Fair Work Act 2009 (Act) for an unfair dismissal remedy, alleging that he had been unfairly dismissed, but was unsuccessful.1 The costs-applicant now applies under ss 400A and 611 of the Act for an order that the costs-respondent pay some of its costs. The costs said to have been incurred in defending the unfair dismissal remedy application are $111,425.10 but the costs-applicant claims, pursuant to this application, costs in the amount of $39,500.00.

[2] Section 400A of the Act is a departure from the usual rule that parties must bear their own costs in relation to a matter before the Commission,2 and provides the Commission with a discretionary power to award costs against a party to a matter arising under Part 3-2 of the Act if the Commission is satisfied that the party against whom costs orders are sought, caused the costs to be incurred by the other party because of an unreasonable act or omission of the first mentioned party, in connection with the conduct or continuation of the matter. In addition to the requirement in s 400A(2), s 400A(1) establishes two preconditions for the making of an order for costs. The first is that the Commission must be satisfied that a party engaged in an unreasonable act or omission in relation to the conduct or continuation of a matter. The second is that such act or omission caused the other party to the matter to incur costs. Once these preconditions are satisfied, a discretionary power to order the payment of such costs is enlivened.3

[3] Section 611 of the Act sets out some of the circumstances in which an order for costs might be made in relation to a matter before the Commission.4 The Commission may exercise a discretion to make an order that a person bear some or all of the costs of another person in relation to an application to the Commission if satisfied that a person made an application, or responded to an application, vexatiously or without reasonable cause;5 or it should have been reasonably apparent to a person that that person’s application, or response to an application, had no reasonable prospects of success.6

[4] The principles applicable to the application of s 611(2)(a) are summarised below:

  • An application is made vexatiously when the predominant motive or purpose of the applicant is to harass or embarrass the other party or to gain a collateral advantage;
  • An application is not made without reasonable cause simply because the application did not succeed;
  • Whether an application is made without reasonable cause may be tested by asking, on the facts apparent to the applicant at the time the application was made, whether there was no substantial prospect of success;
  • If success depends upon the resolution in the applicant’s favour of one or more arguable points of law, it is inappropriate to characterise the application as having been made without reasonable cause;
  • In relation to an appeal, the question becomes whether the appeal has no substantial prospect of success. The prospect of success must be evaluated in the light of the facts of the case, the judgment or decision from which the appeal is brought and the points taken in the notice of appeal. If there is a not insubstantial prospect of the appeal achieving some success, it cannot fairly be described as having been made without reasonable cause;
  • An application will have been made without reasonable cause if it can be characterised as so obviously untenable that it cannot possibly succeed, is manifestly groundless or discloses a case where the tribunal is satisfied it cannot succeed.7

[5] As to the application of s 611(2)(b), the relevant principles were discussed in Baker v Salva Resources Pty Ltd8 as follows:

“[10] The concepts within s.611(2)(b) ‘should have been reasonably apparent’ and ‘had no reasonable prospect of success’ have been well traversed:

  • ‘should have been reasonably apparent’ must be objectively determined. It imports an objective test, directed to a belief formed on an objective basis, rather than a subjective test; and
  • A conclusion that an application ‘had no reasonable prospect of success’ should only be reached with extreme caution in circumstances where the application is manifestly untenable or groundless or so lacking in merit or substance as to be not reasonably arguable.”9[Footnotes omitted]

[6] Thus, the statutory scheme sets out the relatively circumscribed circumstances in which an order for costs might be found by the Commission to be appropriate in a particular case. It includes the exercise of discretionary power where the Commission is satisfied that one, or more of the circumstances set out in s 611(2), or that the preconditions in s 400A(1), have been established. If so satisfied, the Commission, in the broad exercise of its discretion, may make an order that a person, or persons, bear some, or all, of the costs of another person in relation to an application, including on an indemnity basis, or decline to make any order at all.10

[7] It is convenient to deal with the costs-applicant’s application under s 611(2) of the Act first. The costs-applicant relies on both heads of s 611(2).

[8] As to s 611(2)(a), it says the costs-respondent made his application vexatiously and without reasonable cause because:

  • He was determined to pursue the application regardless of the merits and, by refusing to file the required evidence and submissions, he was determined to ensure that the substance of his case was opaque until quite late in the proceedings;
  • He failed to adduce evidence of his claim for compensation until questions on this issue were asked in examination by me, thus providing a basis to infer that Mr Monaghan was not primarily or dominantly concerned with obtaining a remedy;
  • He was evasive and combative when giving evidence and displayed a preparedness to exaggerate and embellish his evidence where he considered it would suit his interests, and he failed to answer questions during cross examination truthfully and fulsomely. Thus, he was focused on having an opportunity to attack his former employer through this proceeding, to obtain some retribution through the fact of the proceedings, rather than through a form of remedy.

[9] A person will make an application vexatiously if the person’s predominant purpose or motive is to harass or embarrass another person, or to gain a collateral advantage. The issue which must be examined in determining whether a person acted vexatiously in making an application, is the person’s purpose or motive. It is not sufficient to point to a weakness in a person’s application and to conclude from this weakness that the application was made vexatiously. Nor will it be sufficient to point to deficiencies in the conduct of a person’s case, the manner in which they might have given evidence, or to matters which go to the credit of the person giving evidence and infer a vexatious purpose or motive. Some evidence must be led or elicited which is directed to the person’s purpose and from which it can be concluded that a person was motivated to make an application by an intention or desire to harass or embarrass another person, or to gain some collateral advantage.

[10] No evidence of that kind was led or elicited, and the costs-applicant did not seek to require the costs-respondent to give evidence during the hearing of its costs application. Indeed, but for the costs-respondent’s request for an oral hearing, the costs-applicant was content for its application to be dealt with on the papers. The conduct of the costs-respondent to which the costs-applicant points, may be explicable by the fact that the costs-respondent was self-represented and inexperienced in the jurisdiction, or uncertain as to the nature of the materials he was required to file. Questions of credit of the costs-respondent in giving evidence does not. without more, disclose that the application was made vexatiously.

[11] There is not, in my view, any proper basis for concluding that the costs-respondent made the application vexatiously.

[12] An application will not have been made without reasonable cause simply because it fails or is not accepted. Considering whether an application was made without reasonable cause requires an examination of the nature and strength of the application. Simply put, the proposition may be tested by asking whether on the facts apparent to the applicant at the time the application was made, there was no substantial prospect of success.

[13] This is not a case where, on the costs-respondent’s version of the facts, it is clear that the application must fail and thus the making of the application would fairly be described as “without reasonable cause.” True it is that the costs-respondent’s failure or refusal to become vaccinated, in circumstances where the duties he was required to carry out in his employment and in the context of the operative COVID-19 Mandatory Vaccination (Specified Facilities) Directions made by the Chief Health Officer for Victoria, made highly likely, if not inevitable, a conclusion that at the time of his dismissal the costs-respondent was unable to perform the inherent requirements of his role because he did not have the requisite capacity to do so. A conclusion that the refusal amounted to misconduct because the direction to become vaccinated contained in the costs-applicant’s policy was a lawful and reasonable direction with which the applicant was required to comply and did not comply, was not certain. An examination of the whole of the circumstances of the promulgation of the policy and the circumstances of the costs-respondent and his employment was required. Whether the direction was lawful required a determination of a mixture of facts and a question of law. The question whether the direction was reasonable is one on which reasonable minds may differ. If success depends upon the resolution in the costs-respondent’s favour of one or more arguable points of law, it is inappropriate to stigmatise the application as being made “without reasonable cause.”11

[14] In any event, findings of misconduct and an inability on the costs-respondent’s part to perform the inherent requirements of his role, go to the question whether there was a valid reason for the dismissal related to the costs-respondent’s capacity or conduct. This is but one of several considerations that must be taken into account in determining whether a dismissal was harsh, unjust or unreasonable as s 387 of the Act makes clear.

[15] The procedural fairness considerations in s 387(b) and (c) are not insignificant in the consideration.

[16] It is to be remembered that although I concluded that the costs-respondent was notified of a valid reason for dismissal, and I accepted that he was given an opportunity to respond before the decision to dismiss was taken (albeit a truncated opportunity), I also observed:

“[58] . . . As I had earlier set out in the background facts, the reasons for the proposed termination of the applicant’s employment were set out in the respondent’s correspondence to him of 3 and 6 December 2021. Therein the reason for the proposed dismissal is communicated to the applicant and relevantly concerns his failure to comply with the respondent’s policy by not receiving the first dose of COVID-19 vaccine by 1 December 2021 or applying for an exemption under the policy. The correspondence describes this conduct as a failure to follow a lawful and reasonable direction in breach of the applicant’s contract of employment and the respondent’s policy. That correspondence also sets out the conditions imposed by various of the respondent’s healthcare customers – that any person attending their facilities be vaccinated – and the requirements of the applicant’s position as a Territory Manager to visit such facilities. The latter of the two pieces of correspondence invites a response in writing by 5:00pm on 7 December 2021 and advises the applicant that the respondent will take into account any response provided before taking any decision.

[59] The applicant did not access his emails and so did not see the correspondence until 6 December 2021. He provided a response to the proposed reason for his dismissal on that day, the text of which is earlier set out. The substance of the applicant’s response focused on his concerns about mandatory vaccinations and about the legal basis on which vaccine mandates are made. The respondent’s letter of termination of 7 December 2021 acknowledges the applicant’s concerns about vaccination but points to its obligations to other employees and relevantly the applicant’s capacity to attend to his duties at premises operated by its healthcare customers whilst not being vaccinated as overriding factors.

[60] The applicant did not attend the scheduled meeting at 3:00pm on 7 December 2021 because he did not check his emails during the day. The respondent ought to have made some enquiries about whether the applicant had received its invitation to the meeting before proceeding to terminate his employment, apparently on the assumption that the applicant was being evasive. The meeting was proposed on rather short notice . . .

. . .

[62] . . . the applicant’s evidence was that had he had the opportunity to attend the meeting with his employer on 7 December 2021, his response would have been largely to go through the matters that are set out in his email of 6 December 2021.

[63] Although the events in the first week of December 2021 leading to the applicant’s dismissal on 7 December 2021 were less than optimal, ultimately the reason for the applicant’s dismissal was communicated to the applicant before his dismissal took effect and he was given an opportunity, and he took up that opportunity, to respond to the reason.”12 [Footnotes omitted, underlining added]

[17] Part of the costs-respondent’s case was that the decision to dismiss him was undertaken hastily and that he was denied procedural fairness.

[18] On the basis of the facts as found, those contentions were not beyond argument and the weight that might be ascribed to the significance of the less than optimal procedure adopted by the costs-applicant in effecting the dismissal in the overall assessment, required by s 387, is a matter on which reasonable minds may differ.

[19] For these reasons I do not consider the costs-respondent made the application without reasonable cause.

[20] As to s 611(2)(b), the costs-applicant contends that it should have been reasonably apparent to the costs-respondent that his application had no reasonable prospect of success because:

  • During the course of the hearing, further decisions of this Commission were handed down which found that employees who were dismissed for their refusals to be vaccinated against COVID19 and in breach of the Victorian Public Health Orders were unable to perform the inherent requirements of their roles, and accordingly were not unfairly dismissed;
  • The costs-respondent gained the knowledge that his application had no reasonable prospect of success when the costs-applicant sent him the letter dated 24 February 2022, and upon receipt of its evidentiary materials on 23 March 2022 which indicated it had a strong defence to the application; and
  • On those occasions, and in the broader context where the Commission continued to find in favour of the employer, it should have been reasonably apparent to the costs-respondent that his application had no reasonable prospects of success.

[21] For the same reasons given above, I do not consider that at any stage could it properly be said that the costs-respondent’s application had no reasonable prospects of success.

[22] The application for costs under s 611(2) of the Act is refused.

[23] Turning then to the application for a costs order under s 400A(1). The costs-applicant relies on the following conduct to underpin its contention that these were unreasonable acts or omissions of the costs-respondent, in connection with the conduct or continuation of the matter, which caused the costs to be incurred by the costs-applicant:

  • He failed or refused to discontinue his application, despite being afforded ample opportunity to do so in the early stages of the matter. The costs-applicant relies on comments I made to the costs-respondent during a hearing on 9 February 2022 to deal with the question whether the application had been made within the time prescribed, which encouraged the applicant to seek some legal advice; to review the material filed by the costs-applicant; and the possibility of a costs application in the event that he was unsuccessful. It also relies on its correspondence to the costs-respondent dated 24 February 2022 encouraging the costs-respondent to discontinue and foreshadowing an application for costs under s 611 (but not s 400A(1)) in the event that he did not do so;
  • He sought last-minute adjournments during the course of this matter, admittedly on the basis that he was COVID positive on two occasions. The evidence provided by Mr Monaghan did not adequately demonstrate any exceptional hardship or difficulty in complying with requirements to attend the hearing on any of these occasions. Specifically:
  • The first such occasion was the substantive hearing which was originally scheduled for 5 April 2022, which was adjourned by the Commission following the costs-respondent’s indication on 4 April 2022 that he was COVID positive. That hearing was rescheduled for 26 April 2022.
  • The second occasion was the hearing scheduled for 6 May 2022, which was adjourned at the request of the costs-respondent on 4 May 2022. Again, the costs-respondent indicated he was COVID positive. The hearing was rescheduled to 23 May 2022.
  • The third occasion was the resumed hearing on 23 May 2022. The costs-respondent – on very short notice – unreasonably failed to attend that resumed hearing.
  • He unreasonably failed to comply with the directions of the Commission about the filing of evidentiary materials – including by not filing submissions in a proper form and not filing any witness evidence – and did not avail himself (or indicate any intention that he would avail himself) of the further opportunities afforded by the Commission to comply with such directions. In doing so, the costs-respondent demonstrably failed to prosecute his application, which caused significant additional costs to be incurred by the costs-applicant in preparing a response to the application, which could have been avoided.
  • He did not, until the hearing on 26 April 2022, give any evidence or present his case, which necessitated the filing of further evidence and submissions by the costs-applicant as well as attendance at the resumed hearing on a later date. This caused additional costs to be incurred.
  • He was an evasive and combative witness who was prepared to exaggerate and embellish his evidence (noted at [33] of the decision) where he considered it would suit his interests, including by his failure to answer questions during cross examination truthfully and in a fulsome manner.

[24] The costs-applicant contends that, but for the costs-respondent’s unreasonable acts in connection with the conduct of his unfair dismissal remedy application, it would not have incurred a substantial portion of the costs incurred in defending the application. It also contends that but for the costs-respondent’s unreasonable omission in failing to file a notice of discontinuance in connection with the continuation of his application, the costs-applicant would not have incurred the additional costs, or the costs would have been significantly lessened.

[25] It is appropriate that I set out below a chronology relating to the conduct of the costs-respondent’s application, before returning to the costs-applicant’s contentions.

CHRONOLOGY

11 January 2022 EOT directions issued requiring costs-respondent to file and serve an outline of submissions, any statement(s) of evidence and any documentary material(s) on which he intends to rely in support of his application for an extension of time by 5pm on Thursday, 20 January 2022.
20 January 2022 Costs-respondent did not file material in compliance with directions.
28 January 2022 Costs-respondent filed various documents following multiple phone calls from Associate.
9 February 2022 EOT hearing held where it was determined that although the application on 27 December 2021 was not lodged in accordance with rule 14(3)(a) it is appropriate to dispense with compliance with the rules and to accept that the F2 attached to costs-respondent’s email on 27 December 2021 was an application under s.394 and in those circumstances the application was made within time.
9 February 2022 Directions issued requiring, inter alia, that the costs-respondent file and serve an outline of submissions, any statement(s) of evidence and any documentary material(s) on which he intends to rely in support of his application by 5pm on Wednesday, 2 March 2022.

The hearing was scheduled for Monday, 4 April 2022.

22 February 2022 Hearing rescheduled for 5 April 2022 following request from costs-applicant.
2 March 2022 Costs-respondent filed only a short word document of submissions.
16 March 2022 Email sent to costs-respondent requesting additional material in support of his application as soon as possible and providing FWC template documents.
4 April 2022 Email from costs-respondent sent at 4.30pm stating “I am unwell and will need to postpone tomorrows (sic) hearing. Please accept my apologies.”

Associate called costs-respondent to advise that in order to postpone the hearing he will need to provide medical evidence.

Subsequent email from costs-respondent providing a screenshot of an email he received from DHHS on 4 April 2022 at 4.14pm thanking costs-respondent for notifying them of his positive test result.

5 April 2022 Adjournment granted and hearing rescheduled for Tuesday, 12 April 2022.
7 April 2022 Hearing rescheduled for 26 April as costs-applicant’s witness not available on 12 April 2022.
26 April 2022 Hearing commenced at 10am and was adjourned at 2:58pm. The matter listed for a further hearing for the conclusion of evidentiary material and closing submissions at 10am on 6 May 2022 at costs-applicant’s request to allow the costs-applicant time to properly respond to evidence that was provided by the costs-respondent for the first time during the course of the hearing.
26 April 2022 Directions issued requiring costs-respondent to file and serve any other document(s) on which he intends to rely in support of his application by no later than 5:00pm AEST on Thursday, 28 April 2022.
28 April 2022 Costs-respondent did not file any material.
4 May 2022 Email from costs-respondent with text of a positive PCR test result he advised conducted on Monday 2 May requesting adjournment of hearing. The costs-respondent later provided a screenshot of the PCR result text message.
5 May 2022 Hearing on 6 May 2022 cancelled and rescheduled for 23 May 2022 at 10am.
20 May 2022 Costs-respondent sent through various emails linking to TGA reported adverse events, further submissions, and various screenshots.
23 May 2022 Email from costs-respondent stating, “I am ill and will not be able to attend today’s hearing.”

Email sent to parties advising the hearing will proceed at 10am.

Costs-respondent did not attend the hearing, which adjourned at approximately 10.23am. Costs-applicant advised it could make short supplementary written submissions.

24 May 2022 Email from costs-respondent attaching medical certificate stating he was unfit for work study from 23 May to 24 May 2022 inclusive.
24 May 2022 Email to parties noting that the costs-respondent does not wish to cross examine Mr Stuart Johnson and so there will be no further hearing and the decision will be issued in due course.

[26] As I do not consider the costs-respondent’s application to have been made without reasonable cause and was not one that could properly be described as having no reasonable prospects of success, for the reasons earlier stated, the contention that the costs-respondent’s failure to discontinue his application in the circumstances on which the costs-applicant relies must be rejected.

[27] The conduct complained of relates to short notice adjournments requests which, though inconvenient, were supported by medical evidence. No unreasonable act is thereby disclosed and, as is apparent from the chronology above, the costs-applicant was granted adjournments and rescheduled hearing dates on two occasions at its request.

[28] I have earlier dealt with matters raised by the costs-applicant as to the manner in which the costs-respondent gave evidence and noted that these matters go to credit. Relevantly here, although I was invited to do so in the costs-applicant’s submissions in the substantive application and, save for the matter at [33] of my decision, I made no adverse finding as to credit. I certainly did not make a general finding as to credit. Allowance needs to be made for the fact that the costs-respondent was self-represented and there can be a blurring of lines in giving evidence and advancing submissions. He felt wronged by the conduct of the costs-applicant in dismissing him and the manner in which it dismissed him. It is understandable that he was a combative witness. Overall, I do not consider that the costs-respondent’s conduct relating to the manner in which he gave evidence to be an unreasonable act or omission for the purposes of s 400A.

[29] However, that the applicant did not, prepare a witness statement and an outline of submissions setting out all of the material facts and the arguments on which he sought to rely, is in the circumstances an unreasonable omission. As the chronology above shows, the applicant was directed to file material. Apart from a short half page submission, he filed nothing. He was subsequently asked by my associate to file material and was provided with the Commission template submission outlines, document list and witness statements which are available to assist parties in conducting or defending unfair dismissal remedy applications. No further material was filed. During the hearing, the applicant was permitted, despite his failure to comply to give oral evidence.13 In so doing he raised various matters about which the costs-applicant had no notice and could not properly cross-examine or respond. The hearing did not conclude, and at 2:58 pm the hearing was adjourned as a consequence and a further hearing was necessary.

[30] At the conclusion of such cross-examination as could be undertaken of the costs-respondent at the 26 April 2020 hearing, I made the following directions recorded in the transcript:

THE DEPUTY PRESIDENT: In that case, what I’m going to do is make the following directions. I’m going to require you, Mr Monaghan, if there are any other documents on which you intend to rely in support of your application, you are to file those documents and serve them on the respondent by 5 pm Melbourne time, on Thursday, 28 May, and I will require, Mr Lundberg, any further statements of evidence and any other documents you wish to rely on in support of the respondent’s case, responsive to the medical certificate issue and the leave issue, to file those by 5 pm Melbourne time on 4 May, file and serve. And I’ll otherwise adjourn this matter, for the conclusion of the – sorry, if I say May, in relation to you, Mr Monaghan, I meant 28 April, in relation to the respondent I mean 4 May.

. . .

THE DEPUTY PRESIDENT: And the matter is listed for conclusion of the evidentiary case and for final submissions to be delivered orally, at 10 am on 6 May 2022 and we’ll have the hearing conducted in the same way as we did today, that is, by Microsoft Teams.14

[31] As the chronology discloses, the hearing date was changed on application of the costs-respondent to 23 May 2022.

[32] On 20 May 2022 the costs-respondent filed various emails with links to TGA reported adverse events, further submissions, and various screenshots. The costs-respondent did not attend the hearing, which adjourned at approximately 10:23am and the costs-applicant was permitted to make short supplementary written submissions. As set out in the chronology, no further hearing took place.

[33] The costs-respondent’s failure to comply with my direction to file materials in the circumstances of the follow-up and assistance given to the costs-respondent by my associate was objectively unreasonable. It was an unreasonable omission in connection with the conduct of the matter. Moreover, I am satisfied that unnecessary costs were incurred by the costs-applicant because of the unreasonable omission of the costs-respondent. In my view, the unreasonable omission resulted in:

  • A shortening of the hearing on 26 April 2022, which would otherwise have been sufficient to complete at least the evidentiary cases for the parties. Costs were incurred for the further conduct of the matter; and
  • The incurring of additional costs by the costs-applicant to consider further materials filed by the costs-respondent, taking instructions, to prepare a witness statement responding to matters raised for the first time during the 26 April 2022 hearing, to prepare for and attend the 23 May 2022 scheduled hearing and to prepare further written submissions.

[34] Given the unreasonable omissions of the costs-applicant and the circumstances of the omissions, I see no reason why an appropriate costs order should not be made. Although the costs-respondent contended that he has suffered greatly during this year personally, financially and with his mental health, that this has impacted him and his family greatly and he had exhausted his funds, he led no evidence about these matters and so I am not persuaded that these bare assertions weigh against the exercise of my discretion in favour of the costs-applicant.

[35] The costs-applicant sets out the costs it has incurred and which it claims as follows:

[36] For the reasons earlier stated, I do not consider the costs incurred and sought by items 1 through 6 to have been incurred because of the unreasonable omissions identified. However, much of the costs incurred and claimed as set out in items 7 through 10 were so incurred. I will allow 80% of the costs claimed in item 7 ($4800.00); all of the costs claimed in items 8 and 9 ($2500.00); and 80% of the costs claimed in item 10 ($800.00). As to item 11, I will allow 30% of the general care and conduct costs claimed ($750.00).

[37] The total costs that the costs-respondent will be ordered to pay the costs-applicant is $8,850.00. Given the amount I will make provision for the payment of costs by three instalments of equal amounts and allow a reasonable period for the payment of each.

Order

[38] I order:

  • Pursuant to s 400A of the Fair Work Act 2009 that Gerard Monaghan pay costs in the amount of $8,850.00 to Applied Medical Australia Pty Ltd.
  1. Gerard Monaghan must pay the amount specified in order 1 by instalments, paying the amounts specified by, and no later than, the dates specified as follows:
  2. The amount of $2950.00 by 30 January 2023;
  3. The amount of $2950.00 by 15 March 2023;
  4. The amount of $2950.00 by 30 April 2023.”

Application for costs orders against lawyers and paid agents – Applied Medical Australia Pty Ltd T/A Applied Medical v Monaghan (2022) FWC 3263 delivered (2022) FWC 3263 delivered 15 December 2022 per Gostencnik DP