Bradford Pedley v Ipms Pty Ltd T/A peckvonhartel

[2013] FWC 8453

[2013] FWC 8453

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.394—Unfair dismissal

Bradford Pedley
v
IPMS Pty Ltd T/A peckvonhartel
(U2013/104)

COMMISSIONER DEEGAN CANBERRA, 28 OCTOBER 2013

Application for costs - application dismissed.

[1] This decision arises from an application made under the Fair Work Act 2009 (the Act) for costs incurred by IPMS Pty Ltd trading as peckvonhartel (the Employer) in defending an unfair dismissal application lodged by Bradford Pedley (the applicant).

[2] The Employer seeks orders for costs against both the applicant and his representative, jointly and severally, on an indemnity basis or, in the alternative, on a party to party basis.

Background

[3] On 16 January 2013 the applicant lodged an application in the Commission alleging he had been unfairly dismissed by the Employer.  The matter was unsuccessfully conciliated and was referred for formal proceedings. The hearing of the matter took place on 6 May 2013 and by a decision issued on 2 July 2013, [2013] FWC 4282, I dismissed the application, having found that the termination of the applicant’s employment was not unfair.

The Application for Costs

[4] On 16 July 2013, the Employer lodged an application, relying on s.400A of the Act, seeking an order for costs against the applicant. In the alternative, the Employer was seeking a costs order against the applicant under ss.611(2) of the Act and/or, a costs order against the applicant’s solicitor under ss.401(1A) of the Act.

[5] An affidavit was filed by the Employer’s representative in support of the application. The affidavit set out the history of the substantive matter, including offers of settlement made by the Employer. The affidavit referred to the decision issued by the Commission and the circumstances surrounding an offer, to resolve the matter of costs, made to the applicant by the Employer following that decision.

[6] In essence, it was the Employer’s submission that a costs order be made against the applicant pursuant to s.400A of the Act as:

• The applicant had caused the Employer to incur costs by his unreasonable failure to accept offers of settlement made by the Employer on 5 March and 17 April;



• In sending the email that resulted in his termination, the applicant had breached his implied contractual duty of fidelity and good faith, something that was inconsistent with the continuation of the applicant’s employment. This would have been reasonably apparent to the applicant, and continuation of the matter in these circumstances was unreasonable.

[7] In the alternative, it was submitted that the Commission should exercise its discretion to award costs pursuant to ss.611(2) of the Act as it should have been reasonably apparent to the applicant that the application had been made without reasonable cause (s.611(2)(a)) or had no reasonable prospect of success (s.611(2)(b)). Relying on the principles enunciated by Justice Wilcox in Kanan v Australian Postal and Telecommunications Union 1, it was argued that the application was made without ‘reasonable cause’ as the reason for the applicant’s dismissal was a serious breach of the applicant’s conditions of employment, and no credible evidence could be led to refute this. It was therefore contended that the applicant, on his own version of events, should reasonably have known at the time he instituted the proceeding that he had no substantial prospect of success. It was argued in the alternative that it should have been apparent to the applicant at the time the Employer’s submissions and statements were filed (19 April 2013) that the application had no ‘reasonable prospect of success’, as there were no arguable issues of law or fact in dispute that required resolution at a hearing, and no credible evidence could have been led at the hearing to refute the contention that the applicant had fundamentally breached his duty to the Employer in sending the email.

[8] So far as the application was made under ss.401(1A) of the Act is concerned, it was submitted that the applicant’s legal representative had, by an unreasonable act or omission caused costs to be incurred by the Employer. In this respect it was argued that it was not reasonable for the applicant’s legal representative, once he had had the opportunity to acquaint himself with all the materials filed with the Commission, to either advise the applicant to proceed with the application, or to fail to advise the applicant to discontinue the application. It was further argued that if the applicant instructed that he wished to pursue the application then the applicant’s legal representative should have terminated the retainer.

The Applicant’s Response

[9] The applicant’s objection to the application was supported by a statement made by the applicant. The statement outlined the history of the matter and the counteroffers made by the applicant in response to the Employer’s offers of settlement. The applicant stated that it had been his genuine belief that he had not breached his employment contract by sending the email that resulted in the termination of his employment.

[10] Further, it was submitted that it was not apparent to the applicant that the application had no reasonable prospect of success, and that the applicant’s solicitor had not acted unreasonably in connection with the conduct or continuation of the matter, as it was reasonable for the solicitor to form the view that the applicant had a reasonable prospect of success.

[11] Essentially, it was put for the applicant that:

• On the basis of the evidence available at the time the proceedings were instituted, including the conduct of the Employer in effecting the termination, it was reasonable for the applicant to believe that his application would succeed;



• The terms of the applicant’s contract of employment were such that it was arguable that the applicant’s conduct had not been in breach of that contract;



• In the absence of any damage caused by the email, and the fact that the applicant had not undertaken any action to put into effect the aspirations outlined in his email, it was reasonable for the applicant, and his representative, to conclude that the application had a reasonable prospect of success.

[12] The applicant’s representative reiterated that, as it was not clear that the proceeding must fail at the time it was instituted, the Commission could not be satisfied that the application had no reasonable prospect of success. It was put that the Employer’s heavy reliance on findings made by the Commission was not the appropriate approach to an application for costs. It was necessary to assess objectively the conduct of the applicant at the time the application was filed.

[13] Finally, it was submitted that a number of arguable points were made on the applicant’s behalf at the hearing. While it was accepted that the Commission made findings that were not in the applicant’s favour, it was contended that this did not alter the fact that a reasonably arguable case had been put. Findings not made in the applicant’s favour were not a sufficient basis for the Commission to exercise the discretion to award costs.

The Legislation

[14] The relevant provisions of the Act provide:

400A Costs orders against parties

(1) The FWC may make an order for costs against a party to a matter arising under this Part (the first party) for costs incurred by the other party to the matter if the FWC is satisfied that the first party caused those costs to be incurred because of an unreasonable act or omission of the first party in connection with the conduct or continuation of the matter.

(2) The FWC may make an order under subsection (1) only if the other party to the matter has applied for it in accordance with section 402.

(3) This section does not limit the FWC’s power to order costs under section 611.

401 Costs orders against lawyers and paid agents

(1) This section applies if:

(a) an application for an unfair dismissal remedy has been made under section 394; and

(b) a person who is a party to the matter has engaged a lawyer or paid agent (the representative) to represent the person in the matter; and

(c) under section 596, the person is required to seek the FWC’s permission to be represented by the representative.

(1A) The FWC may make an order for costs against the representative for costs incurred by the other party to the matter if the FWC is satisfied that the representative caused those costs to be incurred because:

(a) the representative encouraged the person to start, continue or respond to the matter and it should have been reasonably apparent that the person had no reasonable prospect of success in the matter; or

(b) of an unreasonable act or omission of the representative in connection with the conduct or continuation of the matter.

(2) The FWC may make an order under this section only if the other party to the matter has applied for it in accordance with section 402.

(3) This section does not limit the FWC’s power to order costs under section 611.

402 Applications for costs orders

An application for an order for costs under section 611 in relation to a matter arising under this Part, or for costs under section 401, must be made within 14 days after:

(a) FWA determines the matter; or

(b) the matter is discontinued.

611 Costs

(1) A person must bear the person’s own costs in relation to a matter before the FWC.

(2) However, the FWC may order a person (the first person) to bear some or all ofthe costs of another person in relation to an application to the FWC if:

(a) the FWC is satisfied that the first person made the application, or the first person responded to the application, vexatiously or without reasonable cause; or

(b) the FWC is satisfied that it should have been reasonably apparent to the first person that the first person’s application, or the first person’s response to the application, had no reasonable prospect of success.

Note: The FWC can also order costs under sections 376, 400A, 401 and 780.

(3) A person to whom an order for costs applies must not contravene a term of the order.

Note: This subsection is a civil remedy provision (see Part 4-1).

Consideration

[15] I am satisfied that the application for costs was made within the timeframe provided by s.402 of the Act.

[16] So far as the application is made under s.400A of the Act, I may only make an award of costs if I am satisfied that costs were incurred as a result of an unreasonable act or omission on the part of the applicant. The unreasonable act or omission relied upon is the applicant’s failure to discontinue the application or to accept an offer of settlement made by the Employer. In order to find the act of the applicant unreasonable in this regard I would need to be satisfied that it was apparent to the applicant that his case could not succeed. Similar considerations apply to the application so far as the provisions of ss.401(1A) of the Act are relied upon and the application is directed towards the applicant’s representative.

[17] I am not satisfied that the applicant acted unreasonably, in either failing to discontinue his application or in failing to accept the offers of settlement made by the Employer. It is apparent from the case put for the applicant at the hearing of the substantive matter that the applicant did not believe his conduct was such that the Employer had grounds for the dismissal. A number of the points raised in support of the applicant’s contention that his dismissal was unfair were clearly arguable. The terms of the applicant’s contract of employment were such that it was arguable that he had a right of private practice and that the right may have extended to legitimise his conduct in sending the email. It was also arguable that the procedures adopted in effecting the dismissal lacked procedural fairness such that the dismissal itself was rendered unfair. Additionally, the summary nature of the applicant’s dismissal may have been found to be unfair in the circumstances. The applicant did not succeed on these arguments but this lack of success, of itself, is not a basis for an award of costs.

[18] Given that the applicant put an arguable case, I am unable to find that he acted unreasonably, in either failing to discontinue his application before the hearing, or in accepting any offer of settlement made by the Employer.

[19] For the same reasons, I do not accept the Employer’s contention that the applicant’s representative acted unreasonably if, as was asserted, the representative omitted to advise the applicant to withdraw or settle, or actively encouraged him to continue with the application.

[20] So far as the Employer relies on s.611(2)(a) of the Act, I am unable to find that the applicant instituted the proceedings without reasonable cause. Given the matters set out in paragraph [17] above, I do not accept that it was a foregone conclusion that the applicant would be found to have breached his employment contract to the extent that summary dismissal was justified. It was only after taking evidence about the right of private practice contemplated by the contract that a finding could be made about the seriousness of the breach. In those circumstances, it cannot be said that the applicant must have been aware at the time he made the application that the Employer’s argument about the contractual term was bound to succeed.

[21] So far as the application relies on s.611(2)(b) of the Act, the concepts “should have been reasonably apparent” and “had no reasonable prospect of success” have been considered in a number of decisions of the Commission. From these decisions, it is apparent that “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 2. Similarly, 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’3 or ‘so lacking in merit or substance as to be not reasonably arguable’4.

[22] As I have already noted, a number of the matters put for the applicant during the substantive hearing were arguable. Findings were made, on both the facts and the law, which ultimately resulted in the application being dismissed. I cannot find, however, that the application was so ‘manifestly untenable or groundless’, or ‘so lacking in merit or substance as to not be reasonably arguable’.

Conclusion

[23] I refuse to grant the application for costs made pursuant to s.400A of the Act. I also refuse the application so far as it is based on either ss.401(1A) or ss.611(2) of the Act.

[24] The application is dismissed. An order to that effect [PR543843] is issued separately.

Appearances:

Mr D. Prail, for the applicant.

Mr J. Wilson with Mr J. Karcher, for the respondent.

Hearing details:

2013.

Canberra:

September 5.

 1 (1992) 43 IR 257.

 2   Wodonga Rural City Council v Lewis, PR956243, [6].

 3   Deane v Paper Australia Pty Ltd, PR932454, [7]-[8].

 4   A Smith v Barwon Region Water Authority, [2009] AIRCFB 769, [48].

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<Price code C, PR543842>