Emma Valenzuela v Spectrum Community Focus Limited T/A Spectrum Community Focus
[2018] FWC 46
•3 JANUARY 2018
| [2018] FWC 46 |
| FAIR WORK COMMISSION |
| DECISION |
Fair Work Act 2009
s.394—Unfair dismissal
Emma Valenzuela
v
Spectrum Community Focus Limited T/A Spectrum Community Focus
(U2017/1378)
| Senior Deputy President Hamberger | SYDNEY, 3 JANUARY 2018 |
Application for costs pursuant to application for an unfair dismissal remedy – costs not awarded – costs application dismissed.
On 4 October 2017, I issued a decision[1] (the merits decision) dismissing an application by Emma Valenzuela (Ms Valenzuela or the costs respondent) for an unfair dismissal remedy in relation to the termination of her employment as Finance Manager by Spectrum Community Focus Limited (Spectrum or the costs applicant).
In the merits decision, I found that Spectrum had a valid reason to dismiss Ms Valenzuela.[2] However, I found that the dismissal was unfair, but only because Ms Valenzuela was dismissed summarily, i.e. she was neither given notice of her termination nor paid in lieu of notice. She was guilty of poor performance rather than serious misconduct. This would normally justify notice of termination.[3]
However, I declined to order payment of compensation to Ms Valenzuela. This was because I had found that she had deliberately deceived the costs applicant about her qualifications when she had originally applied to work for them.[4] I found that it would be reasonable to infer that at least part of the costs respondent’s poor performance was due to the fact that she was ‘out of her depth’ in performing the Finance Manager role. If she had been honest with the costs applicant about her qualifications, she might never have been appointed to the position. I concluded that payment of compensation in these circumstances would have been inappropriate.[5]
On 18 October 2017, Spectrum made an application for costs under ss. 400A and 611 of the Fair Work Act 2009 (Cth) (the FW Act).
Spectrum says that on 7 February 2017 (the day before Ms Valenzuela filed her unfair dismissal application), they had advised her that should proceedings be commenced, they would test her qualifications in light of the representations she had made at the time of her employment, as they appeared to be misleading or false.
Spectrum also says that at a jurisdictional objection hearing on 23 June 2017 it made a ‘walk away’ offer to Ms Valenzuela on the basis that she had lied to them to gain employment. It made her a further ‘walk away’ offer on 4 September 2017. Both offers were rejected and I proceeded to hear Ms Valenzuela’s application and issue the merits decision.
The costs applicant submits that the proceedings should never have been commenced, and had no reasonable prospects of success as:
· Ms Valenzuela was on notice of the type of evidence that would be relied on at the hearing;
· Ms Valenzuela was aware that the evidence would show that she did not possess a CPA-ASA or Master of Business Administration qualification;
· Ms Valenzuela knew that she had represented to Spectrum that she held those qualifications in circumstances where she knew that she did not in fact hold those qualifications; and
· Ms Valenzuela would not receive any award of compensation, or reinstatement, as a result of the deceit.
Spectrum submits that it should be reasonably apparent to any applicant in unfair dismissal proceedings that an applicant who lies to their employer prior to the commencement of employment would be wholly unsuccessful in obtaining any relief. Ms Valenzuela had not only acted unreasonably in commencing the proceedings, but she also acted unreasonably in rejecting offers to settle the proceedings with no party making any application for costs.
The costs respondent submits that at the time of making the application, she had an arguable case that she had been unfairly dismissed. She had been dismissed without notice, and where allegations were made as to her performance and capacity, she disputed them. On her version of events, she had been blamed for events and errors that she did not believe she was responsible for, and it would not have been clear to her that the proceedings would fail. The fact that certain matters were ultimately found against her does not indicate her application was without merit or lacked substance.
Ms Valenzuela also points out that while she was not granted a remedy, it is arguable that she obtained a better result than if she had accepted Spectrum’s ‘walk away’ offer, because the failure to provide notice was found to be unfair. She also notes that the decision not provide a remedy was based on the finding that she had misled Spectrum in relation to her qualifications when applying for a position with them. However, this was based on the Commission preferring the evidence of the costs applicant’s witness to that of the costs respondent, and the Commission should be cautious about awarding costs where a case fails because of adverse findings based upon the assessment of the credit of a witness.[6]
The legislation
Section 611 of the FW Act states:
‘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 of the 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).’
Section 400A of the FW Act, which is in the Part dealing with unfair dismissal, states:
‘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.’
The power to award costs is discretionary. It is a two-stage process:
· the Commission must first decide whether there is power to award costs, and
· secondly, if there is power, the Commission should then consider whether it is appropriate to exercise its discretion to award costs.
The test for ‘without reasonable cause’ is that the application:
· is ‘so obviously untenable that is cannot possibly succeed’
· is ‘manifestly groundless’
· is ‘so manifestly faulty that it does not admit of argument’
· ‘discloses a case which the Court is satisfied cannot succeed’, or
· ‘under no possibility can there be a good cause of action’.[7]
The Commission may also consider whether, at the time the application (or response) was made, there was a ‘substantial prospect of success’. It is inappropriate to find that an application (or response) was without reasonable cause if success depends on the resolution of an arguable point of law.[8]
An application is not without reasonable cause just because the court rejects a person’s arguments.[9]
A proceeding is not to be classed as being instituted without reasonable cause simply because it fails, but rather in circumstances where on the applicant’s own version of the facts, it is clear that the proceeding must fail.[10]
Under s.400A of the FW Act, the Commission may order costs against a party to an unfair dismissal proceeding if the first party caused the second party to incur costs because of an unreasonable act or omission in connection with the conduct or continuation of the matter.
An unreasonable act or omission can include a failure to discontinue an unfair dismissal application or a failure to agree to terms of settlement. The Explanatory Memorandum to the Fair Work Amendment Bill 2012 says that:
‘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.’[11]
Consideration
I am not satisfied that Ms Valenzuela’s unfair dismissal application was made without reasonable cause in the sense that it was so obviously untenable that it could not possibly have succeeded. I found that the costs applicant had a valid reason for the dismissal; however, this was because I preferred the evidence of Spectrum’s witness rather than that of Ms Valenzuela. This was not a situation where on the applicant’s own version of the facts it was clear that her application must fail. Moreover, it needs to be emphasised that the dismissal was found to be unfair.
Despite finding that the dismissal was unfair, I declined to order a remedy because of my findings about the costs respondent’s dishonesty with regard to her qualifications. However, this involved an exercise of judgment. It was at least arguable that the issue of Ms Valenzuela’s qualifications was marginal to the case. Her advocate submitted during the hearing that there was no evidence that the employer ever asked Ms Valenzuela for a copy of her qualifications, nor was it the reason she was dismissed.[12]
In these circumstances, it was not unreasonable for the costs respondent to reject the costs applicant’s offers to settle on a ‘walk away’ basis. At the point those offers were made, it was at least plausible that Ms Valenzuela’s application could have been successful and she would have been awarded compensation.
Conclusion
The application for costs is dismissed.
SENIOR DEPUTY PRESIDENT
Written submissions:
Spectrum Community Focus Limited: 9 November 2017.
Emma Valenzuela: 22 November 2017.
[1] [2017] FWC 5007.
[2] Ibid [22].
[3] Ibid [30].
[4] Ibid [13].
[5] Ibid [32].
[6] Hyde v RS Thomas and Company [2014] FWC 7391.
[7] General Steel Industries Inc v Commissioner for Railways (1964) 112 CLR 125, 129.
[8] Kanan v Australian Postal and Telecommunications Union (1992) 43 IR 257.
[9] R v Moore; Ex Parte Federated Miscellaneous Workers’ Union of Australia (1978) 140 CLR 470, 473.
[10] Zornada v St John Ambulance Australia (Western Australia) Inc. (2013) 237 IR 48 [35].
[11] At [171].
[12] PN2247-8.
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