Costs orders and the Fair Work Commission

As a general rule, the Fair Work Commission does not order costs to be awarded in proceedings before it. Here are the principles from an extract from a case where an application was made.

“In Church v Eastern Health t/as Eastern Health Great Health and Wellbeing (Church), 5 the Full Bench considered the approach to be taken in determining whether proceedings have been instituted vexatiously or without reasonable cause. With Rocla ultimately not submitting that Mr Stock made his unfair dismissal application vexatiously, it is only necessary to consider what the Full Bench outlined in relation to the expression ‘without reasonable cause’:

“A party cannot be said to have made an application ‘without reasonable cause’, within the meaning of s.611(2)(a), simply because his or her argument proves unsuccessful. The test is not whether the application might have been successful, but whether the application should not have been made. In Kanan v Australian Postal and Telecommunications Union, Wilcox J put it this way:

“It seems to me that one way of testing whether a proceeding is instituted ‘without reasonable cause’ is to ask whether, upon the facts apparent to the applicant at the time of instituting the proceeding, 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 stigmatise the proceeding as being ‘without reasonable cause’. But where, on the applicant’s own version of the facts, it is clear that the proceeding must fail, it may properly be said that the proceeding lacks a reasonable cause.”” 6 (References omitted)

[18] In Church, the Full Bench outlined principles to be applied in deciding whether an application has been made without reasonable cause. These were summarised in Keep v Performance Automobiles Pty Ltd (Keep), 7 as follows:

“The proper construction of s.611(2)(a) was recently considered by a Full Bench in Church v Eastern Health t/as Easter[sic] Health Great Health and Wellbeing (Church). Church is authority for the following propositions:

(i) The power to order costs pursuant to s.611(2) should be exercised with caution and only in a clear case.

(ii) A party cannot be said to have made an application ‘without reasonable cause’ within the meaning of s.611(2)(a), simply because his or her argument proves unsuccessful.

(iii) One way of testing whether a proceeding is instituted ‘without reasonable cause’ is to ask whether upon the facts known to the applicant at the time of instituting the proceeding, there was no substantial prospect of success.

(iv) The test imposed by the expression ‘without reasonable cause’ is similar to that adopted for summary judgment, that is, ‘so obviously untenable that it cannot possibly succeed’, ‘manifestly groundless’ or ‘discloses a case which the Court is satisfied cannot succeed’.” 8

[19] As to s.611(2)(b), the issue I have to determine is whether I am satisfied that in all the circumstances it should have been reasonably apparent to Mr Stock that his claim that he had been unfairly dismissed had no reasonable prospect of success. In Keep, the Full Bench also summarised the principles relevant to s.611(2)(b) of the Act, outlining:

“ As to s.611(2)(b), the FWC may make a costs order against a person if satisfied that “it should have been reasonably apparent” to that person that their application had ‘no reasonable prospect of success’. The expression “should have been reasonably apparent” in s.611(2)(b) imports an objective test, directed to a belief formed on an objective basis as opposed to the applicant’s subjective belief.”

There is Full Bench authority for the proposition that the Commission should exercise caution before arriving at the conclusion that an application had “no reasonable prospects of success”. In Deane v Paper Australia Pty Ltd a Full Bench made the following observation about this expression in the context of enlivening a power to award costs under s.170CJ(1) of the Workplace Relations Act 1996;

“unless upon the facts apparent to the applicant at the time of instituting the [application], the proceeding in question was manifestly untenable or groundless, the relevant requirement in s.170CJ(1) is not fulfilled and the discretion to make an order for costs is not available”.” 9 (references omitted)

[20] The Full Bench in Baker v Salva Resources Pty Ltd 10 summarised the principles to apply in deciding whether an application has been made without reasonable prospects of success as follows:

“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.” 11

[21] More recently, when considering the meaning of s.611(2)(b), despite referencing it as s.611(1)(b), the Full Bench in Health Services Union – Victoria No.1 Branch v Sanli 12 stated:

“The observations of the High Court in Spencer v The Commonwealth as to the meaning of the expression ‘no reasonable prospect’ in s.31A of the Federal Court of Australia Act 1976 (Cth) (the Federal Court Act), are apposite to the matter before us:

‘In many cases where a plaintiff has no reasonable prospect of prosecuting a proceeding, the proceeding could be described (with or without the addition of intensifying epithets like “clearly”, “manifestly” or “obviously”) as “frivolous”, “untenable”, “groundless” or “faulty”. But none of those expressions (alone or in combination) should be understood as providing a sufficient chart of the metes and bounds of the power given by s 31A. Nor can the content of the word “reasonable”, in the phrase “no reasonable prospect”, be sufficiently, let alone completely, illuminated by drawing some contrast with what would be a “frivolous”, “untenable”, “groundless” or “faulty” claim.

Rather, full weight must be given to the expression as a whole. The Federal Court may exercise power under s 31A if, and only if, satisfied that there is “no reasonable prospect” of success. Of course, it may readily be accepted that the power to dismiss an action summarily is not to be exercised lightly. But the elucidation of what amounts to “no reasonable prospect” can best proceed in the same way as content has been given, through a succession of decided cases, to other generally expressed statutory phrases, such as the phrase “just and equitable” when it is used to identify a ground for winding up a company. At this point in the development of the understanding of the expression and its application, it is sufficient, but important, to emphasise that the evident legislative purpose revealed by the text of the provision will be defeated if its application is read as confined to cases of a kind which fell within earlier, different, procedural regimes.’

Section 31A of the Federal Court Act is a power to enter summary judgment and accordingly is not directly relevant to the matter before us. However, the High Court’s observation (in Spencer) that full weight must be given to the expression as a whole and that descriptors such as ‘frivolous’, ‘untenable’, ‘groundless’ or ‘faulty’ do not provide a sufficient chart of the metes and bounds of the power, are also applicable to s.611(1)(b).” 13 (references omitted)

[22] Having regard to the above authorities, I am required to exercise caution in determining whether to exercise the power to order costs pursuant to s.611(2)(b) of the Act and consider whether it would have been apparent to a reasonable person that Mr Stock’s application “had no reasonable prospect of success”, giving full weight to this expression as a whole.

[23] It was observed in Gugiatti that s.400A “is concerned with unreasonable acts or omissions in connection with the “conduct or continuation” of a matter already instituted, not with whether it was reasonable to have instituted a matter in the first place.” 14 In Macdougall v Health Axix Pty Ltd T/A Raymond Hader Clinic,15 the Full Bench proffered that s.611 is concerned with the making of the application, although it also suggested that post filing conduct can, in some circumstances, assist in determining whether the application or response, at the time it is made, falls within the scope of s.611.”

 

Stock v Rocla Ltd (2022) FWC 2597 delivered 27 September 2022 per Clancy DP