Legal costs of fair work cases

As a general rule it is almost impossible to obtain an order from the Fair Work Commission requiring the loser of an unfair dismissal case to pay the legal fees costs or some of the costs of the winner; thus

“Consideration

[24] Section 400A was inserted into the Act by the Fair Work Amendment Act 2012. The Explanatory Memorandum to the Fair Work Amendment Bill 2012 states:

  1. Item 4 inserts a new section 400A to enable the FWC to order costs against a party to an unfair dismissal matter (the first party) if it is satisfied that the first party caused the other party to the matter to incur costs by an unreasonable act or omission in connection with the conduct or continuation of the matter.
  2. As with the new power to dismiss applications under section 399A, the power to award costs under section 400A is not intended to prevent a party from robustly pursuing or defending an unfair dismissal claim. Rather, the power is intended to address the small proportion of litigants who pursue or defend unfair dismissal claims in an unreasonable manner. The power is only intended to apply where there is clear evidence of unreasonable conduct by the first party.
  3. The FWC’s power to award costs under this provision is discretionary and is only exercisable where the first party (whether the applicant or respondent) causes the other party to incur costs because of an unreasonable act or omission. This is intended to capture a broad range of conduct, including a failure to discontinue an unfair dismissal application made under section 394 and a failure to agree to terms of settlement that could have led to the application being discontinued.
  4. However, the power to award costs is only available if the FWC is satisfied that the act or omission by the first party was unreasonable. What is an unreasonable act or omission will depend on the particular circumstances but it is intended that the power only be exercised where there is clear evidence of unreasonable conduct by the first party.

[25] Where a party chooses to incur legal expenses, they bear their own costs in a matter before the Commission. Section 400A sets out additional circumstances where a party may make an application for costs orders where the other party caused the party to incur costs because of an unreasonable act or omission in relation to the conduct or continuation of the matter.

[26] The Explanatory Memorandum makes clear that s.400A of the Act is not intended to prevent an applicant from “robustly” pursuing their matter, rather it is intended to address the conduct of those that unreasonably pursue a matter and there is clear evidence of unreasonable conduct.

[27] The general provision when the Commission can award costs is in s.611 of the Act.

[28] Legal representation is not necessary and where a party seeks representation they can do so with leave from the Commission. In this matter ICV sought to be legally represented at the hearing on the grounds that the Respondent raised complex jurisdictional objections, that it had no experience or capability to represent itself and with legal representation it would enable the matter to be dealt with more efficiently. Ms Yuan did not object to the arguments for leave to appear. The Respondent raised the jurisdictional objections that it was a small business and Ms Yuan had not served the minimum employment period, that Ms Yuan was not dismissed but resigned from employment and if I found that Ms Yuan was dismissed that it relies on the Small Business Fair Dismissal Code. Having considered the submissions in respect to s.596(2)(a) and (b) of the Act and the views of Ms Yuan, I granted the Respondent leave to be legally represented.

[29] Awarding costs is discretionary in an unfair dismissal case where the Commission is satisfied that the costs were incurred as a result of the other party making the application or responding vexatiously or without reasonable cause. In this matter, the Respondent must satisfy the Commission that Ms Yuan commenced or responded in a way that is vexatious or without reasonable cause or that the matter had no reasonable prospect of success. Further, costs may be awarded should the evidence be clear that the Respondent incurred costs because Ms Yuan acted unreasonably or omitted to act.

[30] Ms Yuan in her submissions in her unfair dismissal matter raised the point that she offered to settle the matter at conciliation for $3,000.00 which incidentally would have resolved entirely the quantum of her underpayment claim; the Respondent chose not to settle, but directed her to withdraw and subsequently incurred legal expenses totalling $5,000.00 in defending the application. For this, ICV cannot hold Ms Yuan responsible, and certainly it does not support the argument that she acted vexatiously.

[31] The invoice from Pera Lawyers dated 23 April 2021, tendered in evidence by ICV shows that it engaged the firm from an early stage. It is marked as invoice three, yet in the form F6, ICV list three invoices each marked invoice one, two and three. The descriptor of the 23 April 2021 invoice relates to taking instructions, preparing documents, representation at two conciliation conferences, representation at a contested hearing as well as other professional disbursements. ICV is seeking the payment for the whole invoice and does not in its submissions address which legal expenses were incurred as a result of Ms Yuan’s alleged unreasonable action or omission. It appears that ICV submits that Ms Yuan’s unreasonable action is the making of an unfair dismissal application. It is alleged that she should have known her application would fail, and her application was for the purpose of causing embarrassment and reputational damage for ICV.

[32] It is not ordinarily the case that costs will be awarded in respect of all costs incurred. Should the Commission be satisfied to award costs, a portion relating to the unreasonable conduct of the party is considered.

[33] I do observe that in ICV’s form F6 application for costs, it refers to three invoices from Pera Lawyers, two of $2,000.00 (2 February 2021 and 2 March 2021) and one of $1,000.00 (14 April 2021). These invoices were not tendered in evidence and it is unclear if they are in addition to the $5,000.00 invoice or are the individual invoices that make up the $5,000.00 invoice tendered in evidence. As ICV did not tender the three invoices in evidence, it is probable that the costs incurred by ICV are $5,000.00 in total for the unfair dismissal matter. This lack of transparency raises concerns.

[34] If ICV incurred $5,000.00 in total in legal costs for the case, then the first two invoices relate to general advice, the employer’s responses, and attendance at the staff conciliation conference. My directions required the Respondent to file and serve their submissions and materials for the hearing by 10 March, reply by 7 April and attend a member assisted conciliation on 8 April 2021. The last invoice of $1,000.00 covers the costs from 2 March 2021 to 14 April 2021. In the context of the invoices, the Respondent failed to provide any evidence of which costs were incurred because of Ms Yuan’s alleged unreasonable actions. Consequently, I am of the view that the costs incurred by ICV were because of their decision to challenge the matter on jurisdictional grounds rather than taking action to resolve the dispute, or Ms Yuan’s unreasonable actions to resolve the dispute.

[35] ICV raised three jurisdictional objections. ICV’s objection on the grounds that it was a small employer was rejected. It failed to provide evidence to satisfy the Commission of its status as a small business employer, it also failed to satisfy the Commission that Ms Yuan had resigned. The date of termination was heavily contested during proceedings. Having considered the evidence and submissions of the parties, I determined that ICV terminated Ms Yuan’s employment on 16 December 2020, and she concluded her employment on 8 January 2021.

[36] Having found the date of termination being 16 December 2020, ICV relied on s.383 of the Act to argue that Ms Yuan failed to meet the 6-month minimum employment period due to the date that notice of dismissal was given.

[37] Mr Sheikh, the CEO, gave evidence on behalf of ICV and argued that the meeting of 16 December 2020 was not a termination of employment but rather a performance meeting. I did not accept his evidence. On balance I found that Mr Sheikh dismissed Ms Yuan on 16 December 2020. Further I did not accept his evidence that ICV is a small business employer with fewer than 15 employees.

[38] As the dismissal date and whether Ms Yuan was dismissed or resigned was highly contested, I cannot be satisfied that Ms Yuan made her application knowing that it would fail. In fact, the complexity in the matter was largely because the Respondent relied on 3 jurisdictional objections, of which 2 failed. Among ICV’s arguments were that Ms Yuan resigned of her own free will.

[39] Ms Yuan believed that she was unfairly dismissed or forced to resign, and the merits of her claim were not addressed due to the matter being dismissed on jurisdictional grounds. Ms Yuan did not have the opportunity to argue the merits of her claim, as having determined the date of termination, her minimum employment period fell just shy of the required 6 months to enliven the unfair dismissal protections. Ms Yuan gave evidence that Mr Sheikh orally dismissed her employment on 16 December 2020 and informed her that the notice period would finish at the end of January 2021. From the evidence the actual notice period given by Mr Sheikh on 16 December 2020 appeared unclear, but the notice of dismissal to Ms Yuan was clear to her and I accepted on the evidence that notice of dismissal occurred on that date. Ms Yuan continued in employment until 8 January 2021 when due to a medical condition she finished earlier than the end of January that she understood was the notice period. On this basis Ms Yuan genuinely believed that she completed the minimum employment period. However, as her employment was dismissed on 16 December 2020, and despite her working into January s.383 of the Act provides that the minimum employment period is the time when notice of the dismissal occurs.

[40] Consequently, ICV’s submission that Ms Yuan’s application was without reasonable cause cannot be sustained. The merits were not tested, only the jurisdictional arguments were advanced and for ICV, its 3 arguments consisted of each way bets, with the hope that one will prevail. It cannot be reasonably argued that the application was baseless or unreasonable when ICV argued Ms Yuan resigned but accepted that if it terminated her employment, that she did not meet the minimum employment period of 12 months or 6 months. While Ms Yuan argued her dismissal was unfair, the Respondent’s jurisdictional arguments certainly go to the matter of procedural fairness, however, procedural fairness was not considered in any event, because the matter was dismissed for want of jurisdiction.

[41] I accepted Ms Yuan’s evidence that her employment was terminated on 16 December 2020 and not that she was forced to resign after having been dismissed; I did not accept the witness evidence of Mr Sheikh that she was performance managed on 16 December 2020 and resigned in January 2021. The jurisdictional arguments were complex and not obvious to Ms Yuan, nor even to ICV that the finding of a dismissal on 16 December 2021 would be found and therefore Ms Yuan would not meet the 6-month minimum employment period.

[42] ICV further submit that Ms Yuan made the application solely for the purpose of damaging the organisation’s reputation. ICV failed to satisfy the Commission with any evidence that this was the case. ICV contested Ms Yuan’s application by advancing a number of jurisdictional objections. In doing so, it failed to satisfy the Commission that it was a small business or that Ms Yuan resigned. These allegations were ICV’s allegations. There is no evidence of any reputational damage as alleged by ICV, if ICV suggest that it suffered reputational damage due to the hearing, it is important to put in context that it was the Respondent that insisted on the jurisdictional objections to be determined. In scheduling directions, I also scheduled a member assisted conciliation. While ICV submit it tried to resolve the matter “amicably by sending her an email to withdraw her application,” on any objective basis it is apparent that it made no attempt to resolve Ms Yuan’s dispute. The hearing to determine jurisdiction was ICV’s own making.

[43] Ms Yuan was aggrieved by ICV in relation to her unpaid wages and her sudden dismissal without any warning, and she challenged her employer which she is entitled to do. Further, the alleged threats against it that ICV raise, relate to Ms Yuan obtaining advice from the Fair Work Ombudsman (FWO) and her demand for rectification of her outstanding wages. Again, if she is owed wages, and particularly if she is acting on advice from the FWO, she is entitled to and should write to ICV demanding that her outstanding wages be addressed. This I do not consider a threat nor grounds for Ms Yuan to pay ICV’s legal costs. I further do not accept the submissions that Ms Yuan claimed that ICV is a racist organisation, there was no evidence during the hearing to support this allegation, nor does it add weight to its argument that the application was vexatious.

[44] None of the submissions of ICV weigh in their favour to substantiate its evidentiary onus that Ms Yuan filed a claim without reasonable cause or vexatiously. On my assessment both Ms Yuan and ICV vigorously argued their respective positions in relation to each of the jurisdictional arguments. Therefore, the fact that ICV chose to engage legal representation remains their own responsibility and they should bear their own costs.

[45] Having regard to the submissions of the parties and the evidence, ICV has not satisfied the Commission to use its discretion in respect to the provisions of s.400A or s.611 of the Act to make an order for costs against Ms Yuan. The application for costs is dismissed.”

Yuan v Victorian Education and Training Group Pty Ltd (2021) FWC 5398 delivered 13 September 2021 per Yilmaz C