Hany Attia v Dr Nader Khodragha Pty Ltd T/A Back and Foot Clinics (Australia)

[2019] FWC 2217

[2019] FWC 2217

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.394—Unfair dismissal
ss.400A, 611—Costs

Hany Attia
v
Dr Nader Khodragha Pty Ltd T/A Back and Foot Clinics (Australia)
(U2018/9421)

SENIOR DEPUTY PRESIDENT HAMBERGER SYDNEY, 24 APRIL 2019

Application for costs pursuant to application for an unfair dismissal remedy – costs not awarded – costs application dismissed.

Background

[1] On 22 January 2019 I issued a decision 1 (the jurisdictional decision) dismissing an application by Hany Attia (Mr Attia or the costs respondent) for an unfair dismissal remedy in relation to the termination of his employment by Dr Nader Khodragha Pty Ltd T/A Back and Foot Clinics (Australia) (Back and Foot Clinics or the costs applicant).

[2] Back and Foot Clinics raised two jurisdictional objections to the unfair dismissal application in the Form F3 Employer’s Response to Unfair Dismissal Application it filed with the Fair Work Commission (the Commission) on 25 September 2018: that the Applicant was not an employee, and that the Applicant’s employment does not meet the minimum employment period. In the same form it stated that it was a small business with fewer than 15 employees.

[3] Deputy President Dean wrote to Mr Attia on 9 November 2018, advising:

‘[b]ased on the information provided, you do not appear to have satisfied the minimum employment period. Unfortunately, if this is the case, the Commission has no jurisdiction to deal with your application.’ 2

[4] In his response to Deputy President Dean’s letter, Mr Attia set out the basis upon which he believed that his former employer was not a small business, and included a list of 17 employees that he said were employed by Back and Foot Clinics at the relevant time. 3

[5] Back and Foot Clinics made a settlement offer of $5,000 to Mr Attia on 6 December 2018, on the basis that each side pay their own costs. Mr Attia was put on notice as to the risk of a costs application being made against him should he reject the settlement offer and his unfair dismissal claim subsequently be dismissed. 4

[6] Back and Foot Clinics filed its material on 14 December 2018, which included witness statements responding to the list of 17 people named as employees in Mr Attia’s email to Deputy President Dean, and stating that only five of those named were employees.

[7] By email dated 8 January 2019 Mr Attia rejected the settlement offer, stating inter alia:

‘I intend to leave no stone unturned to hold the employer accountable. I have really nothing to lose and since losing my only employment through unfair termination, plenty of time to have this matter resolved through arbitration.’ 5

[8] In the same email Mr Attia offered to settle all matters, including the unfair dismissal application and ‘all legal entitlements’, for an after tax payment of $25,000. He also stated:

‘I will be objecting to the employer being legally represented and therefore any legal costs he incurs will be payable by him personally.’ 6

[9] Mr Attia filed a response to the jurisdictional objection on 8 January 2019, maintaining that he was an employee and that Back and Foot Clinics had employed 17 people at the time of his termination. He also objected to Back and Foot Clinics being legally represented.

[10] In the jurisdictional decision I found that Mr Attia had worked for Back and Foot Clinics for a period of less than 12 months and that Back and Foot Clinics was a small business at the time the applicant ceased to work for it. Accordingly I dismissed the application on the basis that Mr Attia had not completed the minimum employment period necessary to be protected from unfair dismissal and therefore the Commission had no jurisdiction to grant Mr Attia an unfair dismissal remedy.

[11] In light of these findings I did not need to determine the second jurisdictional objection that had been raised: whether Mr Attia was an employee (as opposed to a contractor), although I found it was strongly arguable that he was an employee. 7

[12] On 5 February 2019 Back and Foot Clinics made an application for costs under ss.400A and 611 of the Fair Work Act 2009 (Cth) (the FW Act).

[13] The costs applicant submits that the costs respondent acted unreasonably in rejecting the settlement offer of $5,000 that was made to him on 6 December 2018.

[14] The costs applicant also submits that the costs respondent had no evidence to support the assertion that 17 people were employees of Back and Foot Clinics and that it should have been reasonably apparent to him that, without such evidence, he had no reasonable prospects of success in arguing that Back and Foot Clinics was not a small business.

[15] The costs respondent submits that he has made every effort to informally resolve the matter with Back and Foot Clinics and that the settlement offer of $4,000 was not genuine and would not even cover the 30 days notice that should have been provided to him per his contract of employment.

[16] The costs respondent also submits that he provided to the Commission a list of 17 employees of Back and Foot Clinics which had been sourced from the employee list on the computer system of the business. He said that he had met and worked on a regular basis with 16 of these employees.

The legislation

[17] 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.

[18] 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.’

[19] 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.

[20] 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’.⁸

[21] 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.⁹

[22] An application is not without reasonable cause just because the court rejects a person’s arguments.¹⁰

[23] 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.¹¹

[24] 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.’12

Consideration

[25] I am not satisfied that Mr Attia’s unfair dismissal application was made without reasonable cause in the sense that it could not possibly have succeeded. He had some basis for believing that Back and Foot Clinics had more than 15 employees at the relevant time. Although ultimately unsuccessful, his case was arguable.

[26] In these circumstances, I do not accept that it should have been reasonably apparent to Mr Attia that his application had no reasonable prospect of success. The facts concerning the size of the business were in dispute. Back and Foot Clinics filed and served its material, including statements from several witnesses, on 14 December 2018. On the basis of the evidence before me at the hearing I was ultimately persuaded that the Commission had no jurisdiction.

[27] I do not accept that Mr Attia acted unreasonably in rejecting the settlement offer of $5,000 which was made on 6 December and remained open until 5:00 pm on Thursday, 13 December 2018. At the time the offer was made, it was plausible that Mr Attia could have been successful in his unfair dismissal claim and awarded compensation in excess of $5,000. He was entitled to have the matters in dispute put to evidence.

Conclusion

[28] The application for costs is dismissed.

SENIOR DEPUTY PRESIDENT

Written submissions:

Dr Nader Khodragha Pty Ltd T/A Back and Foot clinics Australia: 19 February 2019.

Mr Hany Attia: 7 March 2019.

Printed by authority of the Commonwealth Government Printer

<PR706519>

 1   [2019] FWC 385.

 2   Annexure A to the costs application.

 3   Annexure B to the costs application.

 4   Annexure D to the costs application.

 5   Annexure E to the costs application; Annexure G to the costs respondent’s submissions.

 6   Ibid.

 7   [2019] FWC 385 at [5].

8 General Steel Industries Inc v Commissioner for Railways (1964) 112 CLR 125, 129.

9 Kanan v Australian Postal and Telecommunications Union (1992) 43 IR 257.

10 R v Moore; Ex Parte Federated Miscellaneous Workers’ Union of Australia (1978) 140 CLR 470, 473.

11 Zornada v St John Ambulance Australia (Western Australia) Inc. (2013) 237 IR 48 [35].

12 At [171].