Legal costs in the Fair Work Commission

Notwithstanding the frequency with which inexperienced and sometimes ignorant lawyers threaten costs applications in the Fair Work Commission which are almost always without merit and serve only to demonstrate that they are dills, costs orders are very rare in that jurisdiction and are reserved for the infinitessemally tiny number of cases which are without any merit at all.

Here are the principles at play.

‘The principles governing the operation of section 400A (and its predecessors) have been considered by full benches of the Commission in Roy Morgan Research v Baker [2014] FWCFB 1175, Hansen v Calvary Health Care Adelaide Ltd [2016] FWCFB 8162, Gugiatti v SolarisCare Foundation Ltd [2016] FWCFB 2478 and Baxter Healthcare Pty Ltd v Portelli [2017] FWCFB 3891.

[14] Without being exhaustive, the principles emerging from these authorities are summarised as follows:

  1. Before an order can be made, causation must be found to have existed between the unreasonable conduct or continuation of the matter and the incurring of the costs 10;
  2. The power to order costs is the exercise of a general discretion. Section 400A of the FW Act provides that the Commission “may” make an order. Where the Commission finds that a party acted unreasonably in the conduct or continuation of a matter and that unreasonable conduct caused the costs to be incurred, then an order may be made. However, the statute does not provide that the Commission shall make an order even in those circumstances 11;
  3. Being a general discretion, all relevant factors need to be taken into account. The discretion must be exercised judicially that is to say not arbitrarily, capriciously or so as to frustrate the legislative intent. Ultimately the provision sits within a framework where the objects include that the parties be provided ‘a fair go all round’ 12;
  4. An “unreasonable” act in the context of proceedings is to be objectively assessed but is not limited to a defined circumstance Roy Morgan Research v Baker [2014] FWCFB 1175at [12]. Relevant considerations concerning reasonableness were discussed in Roy Morgan Research v Baker14and summarised in Sidney v Employsure Pty Ltd:

“A failure to inform another party of an inability to attend proceedings would be, if intentional, unreasonable and if accidental, an unreasonable omission;

A failure to advise the other party of the first party’s intentions, if deliberate or reckless, would be unreasonable and if an omission could be equally unreasonable;

Very strong prospects of success will not always justify a failure to participate in settlement negotiations;

A reasonable person will determine if and how to respond to an offer of settlement after considering all of the circumstances of the case including the terms of settlement in relation to the relief sought; the relative strength of the parties cases; the likely length and cost of proceeding to hearing if the matter does not settle; and adverse consequences of acceptance of a settlement rather than prosecuting or defending the primary application.” [2016] FWC 2659 at [28] per Commissioner Bissett

[15] While the language of the section should be given its full effect, section 400A sits within a statutory scheme in which costs in matters before the Commission do not generally follow the event. It was a provision included into the statutory scheme following a review of the FW Act. 16 It was intended to dissuade certain conduct in unfair dismissal cases but to not frustrate or deter access to the jurisdiction or the robust pursuit of genuine claims17. As said by the Full Bench in Hansen v Calvary Health Care Adelaide Ltd:

“Section 400A is a relatively recent amendment to the Act (1 January 2013) and is designed to provide the Commission with a discretionary power to award costs against a small proportion of litigants who pursue or defend unfair dismissal claims in an unreasonable manner. As stated in the Explanatory Memorandum accompanying the s 400A amendment, ‘the power is only intended to apply where there is clear evidence of unreasonable conduct by the first party’ and ‘is intended to capture a broad range of conduct, including a failure to discontinue an unfair dismissal application made under s 394.’”   [2016] FWCFB 8162 at [18] “

Wederay v Airline Cleaning Services Pty Ltd (2017) FWC 6232 delivered 24 November 2017 per Anderson DP