Harness Energy Services Pty Ltd t/as Harness Energy v Chris Trutwein

[2015] FWC 4686

[2015] FWC 4686

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s 394 - Application for unfair dismissal remedy

Harness Energy Services Pty Ltd t/as Harness Energy
v
Chris Trutwein
(U2014/12627)

DEPUTY PRESIDENT SAMS SYDNEY, 13 JULY 2015

Application for costs in unfair dismissal matter – whether application pursued without reasonable cause and/or where there were no prospects of success – unreasonable act or omission – ss 611 and 400A of the Act – indemnity costs order refused - orders made for part costs on party to party basis as agreed or assessed.

[1] On 7 April 2015, the Fair Work Commission (the ‘Commission’) as presently constituted, published a decision in Chris Trutwein v Harness Energy Services Pty Ltd t/as Harness Energy[2015] FWC 1816, upholding a jurisdictional objection by Harness Energy Services Pty Ltd t/as Harness Energy that Mr Chris Trutwein was not covered by the Hydrocarbons Industry (Upstream) Award 2010 [MA000062] (s 382(b)(i)) and, as his annual rate of earnings was above the high income threshold (s 382(b)(iii)), he was not a person protected from unfair dismissal. In the result, an order was made dismissing Mr Trutwein’s unfair dismissal application.

[2] On 21 April 2015, Harness Energy Services Pty Ltd t/as Harness Energy (hereinafter referred to as the ‘applicant’) made an application to the Commission, pursuant to s 611 of the Act, for an order of costs against Mr Trutwein (hereinafter referred to as the ‘respondent’) on the basis that he pursued his unfair dismissal claim:

(a) without reasonable cause; and
(b) in circumstances where there were no reasonable prospects of success.

[3] In the alternative, the applicant sought an order for costs, pursuant to s 400A of the Act, on the basis that the respondent had caused the applicant to incur costs because of an unreasonable act or omission in connection with the conduct or continuation of the matter. Costs were sought on an indemnity basis or, alternatively, in accordance with the Schedule of Costs in the Fair Work Regulations 2009, as agreed or assessed.

[4] This application was listed for mention and directions on 27 April 2015, at which time the parties agreed that the costs application should be determined ‘on the papers’. Directions for the filing and service of submissions were issued accordingly. The applicant continued to be represented by Holding Redlich Solicitors (Mr Hardman) and the respondent continued to be represented by A Whole New Approach Pty Ltd (AWNA) (Mr G Pinchen)

Legislative provisions and principles

[5] It is useful, at the outset of this decision, to set out the legislative framework underpinning this application and the guiding principles to be applied by the Commission in applications of this kind.

[6] Section 611 of the Act is expressed as follows:

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.

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

[7] Section 400A was inserted into the Act in 2012 and was operative from 1 January 2013. It is set out below:

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.

[8] Section 402 of the Act sets out the manner in which applications, pursuant to s 611 and 400A must be made. It is expressed as follows:

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 400A or 401, must be made within 14 days after:

(a) the FWC determines the matter; or

(b) the matter is discontinued.

[9] In Qantas Airways Limited v Carter [2013] FWCFB 1811 (‘Qantas v Carter’), the Full Bench of the Commission dealt with s 611(2)(b) as follows:

‘[18] The approach we have taken to whether Qantas instituted its appeal without reasonable cause, is to consider whether at the time of instituting the appeal there was no substantial prospect of success.

[19] We now turn to s.611(2)(b). The approach to be taken to considering whether such a finding should be made is summarised in the decision of the Full Bench in Baker v Salva Resources Pty Ltd (Baker). The relevant extract is as follows:

“The concepts within s.611(2)(b) “should have been reasonably apparent” and “had no reasonable prospect of success” have been well traversed:

● “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; and

● 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 or so lacking in merit or substance to be not reasonably arguable.” [endnotes omitted]’

[10] In Hamilton James and Bruce Pty Limited v Gray[2011] FWAFB 9235, a Full Bench of Fair Work Australia (as the Commission then was) said at paras [18]-[21]:

‘[18] The phrase “without reasonable cause” was considered in Kanan v Australian Postal and Telecommunications Union. Section 347(1) of the then Industrial Relations Act 1988 (Cth) provided that:

“A party to a proceeding (including an appeal) in a matter arising under this Act shall not be ordered to pay costs incurred by any other party to the proceeding unless the first-mentioned party instituted the proceeding vexatiously or without reasonable cause.” (Underlining added)

[19] In Kanan’s case, Justice Wilcox said in respect of the phrase that:

“A proceeding is not to be classed as being launched ‘without reasonable cause’ simply because it fails. As Gibbs J said in R v Moore; Ex parte Federated Miscellaneous Workers' Union of Australia (1978) 140 CLR 470 at 473, speaking of the Conciliation and Arbitration Act equivalent of s 357 (s 197A):

‘... a party cannot be said to have commenced a proceeding “without reasonable cause”, within the meaning of that section, simply because his argument proves unsuccessful. In the present case the argument presented on behalf of the prosecutor was not unworthy of consideration and it found some support in the two decisions of this court to which I have referred. The fact that those decisions have been distinguished, and that the argument has failed, is no justification for ordering costs in the face of the prohibition contained in s.197A.’

In Standish v University of Tasmania (1989) 28 IR 129 at 139 Lockhart J applied the qualification in ordering costs against an applicant whose case he thought ‘misconceived’, rather than simply unsuccessful. But, as the Full Court pointed out in Thompson v Hodder (1989) 29 IR 339 at 342, ‘there may be cases which could not be described properly as “misconceived” but which would nevertheless be held to have been instituted without reasonable cause’.

It seems to me that one way of testing whether a proceeding is instituted ‘without reasonable cause’ is to ask whether, upon the facts apparent to the applicant at the time of instituting the proceeding, there was no substantial prospect of success. If success depends upon the resolution in the applicant's favour of one or more arguable points of law, it is inappropriate to stigmatise the proceeding as being ‘without reasonable cause’. But where it appears that, on the applicant's own version of the facts, it is clear that the proceeding must fail, it may properly be said that the proceeding lacks a reasonable cause.”

[20] The phrase “no reasonable prospect of success” in the context of costs applications was considered by a Full Bench of the Australian Industrial Relations Commission (AIRC) in Deane v Paper Australia Pty Ltd. In that decision the Full Bench said:

“[5] It was not disputed that for the purposes of s.170CJ(1)(a)(ii) the appeal instituted by the applicant was a proceeding begun by him. The question is whether he did so in circumstances where it should have been reasonably apparent to him that there was no reasonable prospect of success. If that question is answered in the affirmative the Commission is able to make an order for costs against him. Whether it should do so is a separate although closely related question which requires a separate exercise of discretion.

[6] We were taken to a number of authorities which were said to bear upon the construction of s.170CJ. None of those authorities deals with the operative expression which now appears in s.170CJ(1)(b), namely: ‘no reasonable prospect of success’.

[7] The expression ‘no reasonable prospect of success' also appears in ss.170CF(2)(d), 170CF(3)(b) and 170CF(4). Section 170CF(4) provides for the summary dismissal of an application for relief pursuant to s.170CE, by the issue of an appropriate certificate, if the Commission concludes that the application has no reasonable prospect of success. The construction of the expression in that context was considered by a Full Bench of the Commission in Wright v Australian Customs Service. In that case the Full Bench, drawing upon relevant authority relating to summary dismissal of proceedings in various jurisdictions, held that a conclusion that an application had no reasonable prospect of success should only be reached with extreme caution and where the application is manifestly untenable or groundless.

[8] Making due allowance for the caution which must attend the exercise of a discretion to summarily dismiss an application, it appears to us that the approach in Wright is one we should follow. In other words, unless, upon the facts apparent to the applicant at the time of instituting the appeal, the proceeding in question was manifestly untenable or groundless, the relevant requirement in s.170CJ(1) is not fulfilled and the discretion to make an order for costs is not available.” (Endnote omitted)’

[21] In Smith v Barwon Region Water Authority, a Full Bench of the AIRC in considering the phrase “no reasonable prospect of success” in the context of s.650 of the Workplace RelationsAct 1996 (Cth) (WR Act) concerning AIRC advice to the parties about an application for relief in respect of termination of employment said:

“[48] Having regard to the authorities ... it seems to us that an application will have no reasonable prospects of success if it is so lacking in merit or substance as to be not reasonably arguable.” [endnotes omitted].’

[11] More recently, a Full Bench of the Commission considered the similarities between costs application made, pursuant to s 611, and costs application made in a Court, pursuant to s 570 of the Act. In Church v Eastern Health [2014] FWCFB 810, the Full Bench said at paras [23]-[27], then at [30]-[33]:

‘[23] Given the similarities between ss 611 and 570, in particular the common use of the expression ‘vexatiously or without reasonable cause’, judgements which have construed s.570 and its legislative antecedents are relevant to our consideration of s.611.

[24] In Heidt v Chrysler Australia Ltd Northrop J said of s.197A of the Conciliation and Arbitration Act 1904 (Cth), a predecessor provision to s.570 of the FW Act;

“The policy of s.197A of the Act is clear. It is designed to free parties from the risk of having to pay the costs of an opposing party. At the same time the section provides a protection to parties, defending proceedings which have been instituted vexatiously or without reasonable cause. This protection is in the form of conferring a power in the court to order costs against a party who, in substance, institutes proceedings which in other jurisdictions may constitute an abuse of the process of a court.”

[25] The application of these observations to the construction of s.611 requires some qualification. Section 570 deals with the ordering of costs in court proceedings in relation to matters arising under the FW Act. In court proceedings the usual practice is that an order for costs follows the outcome of the substantive proceedings. As we have mentioned the Commission context is different. The Commission’s power to order costs only arises in the context of ss.376, 400A, 401, 611 and 780 of the FW Act. There is no general practice of cost following the event. Despite these differences the observations of Northrop J in Heidt are apposite to s.611.

[26] Section 611 sets out a general rule - that a person must bear their own costs in relation to a matter before the Commission (s.611(1)) - and then provides an exception to that general rule in certain limited circumstances. The Explanatory Memorandum confirms this interpretation of the section, it is in the following terms:

2353. Subclause 611(1) provides that generally a person must bear their own costs in relation to a matter before FWA.

2354. However, subclause 611(2) provides an exception to this general rule in certain limited circumstances. FWA may order a person to bear some or all of the costs of another person where FWA is satisfied that the person made an application vexatiously or without reasonable cause or the application or response to an application had no reasonable prospects of success.

2355. A note following subclause (2) alerts the reader that FWA also has the power to order costs against lawyers and paid agents under clauses 376, 401 and 780 which deal with termination and unfair dismissal matters.

2356. Subclause 611(3) provides that a person to whom a costs order applies must not contravene a term of the order.

[27] In the context of s.570 and its legislative antecedents courts have observed that an applicant who has the benefit of the protection of a provision such as s.570(1), (ie the general rule that parties bear their own costs), will only rarely be ordered to pay costs and that the power should be exercised with caution and only in a clear case. In our view a similarly cautious approach is to be taken to the exercise of the Commissions powers in s.611 of the FW Act.

…

[30] We now turn to the expression ‘without reasonable cause’. A party cannot be said to have made an application ‘without reasonable cause’, within the meaning of s.611(2)(a), simply because his or her argument proves unsuccessful. The test is not whether the application might have been successful, but whether the application should not have been made. In Kanan v Australian Postal and Telecommunications Union, Wilcox J put it this way:

“It seems to me that one way of testing whether a proceeding is instituted ‘without reasonable cause’ is to ask whether, upon the facts apparent to the applicant at the time of instituting the proceeding, there was no substantial prospect of success. If success depends upon the resolution in the applicant’s favour of one or more arguable points of law, it is inappropriate to stigmatise the proceeding as being ‘without reasonable cause’. But where, on the applicant’s own version of the facts, it is clear that the proceeding must fail, it may properly be said that the proceeding lacks a reasonable cause.”

[31] In the context of an appeal the question becomes whether, having regard to the arguments available to the appellant at the time of instituting the appeal, there was no substantial prospect of success. As Wilcox CJ (with whom Madgwick J agreed) observed in Imogen Pty Ltd v Sangwin:

“The prospect must be evaluated in the light of the facts of the case, the judgment appealed from and the points taken in the notice of appeal. If having regard to those matters, there was not insubstantial prospect of the appeal achieving some success, albeit not necessarily complete success, then it would seem to me it cannot be fairly described as having been instituted ‘without reasonable cause’. This is so even if, in the result, the appeal proved unsuccessful.”

[32] In the same matter Ryan J said:

“The existence of ‘‘reasonable cause’’ within the meaning of s 347 falls to be determined at the time when the relevant proceedings were instituted. The fact that the party instituting the proceedings later discontinues them is therefore not a matter to be taken directly into account in the application of the section. However, an appeal stands in somewhat different case from proceedings at first instance in that discontinuance may bear indirectly on the discretion conferred by s 347 by tending to confirm an impression derived from the grounds of appeal and the reasons for judgment below that the prospects of success on the appeal were slight.

Not without significance to an assessment of the reasonableness of the institution of an appeal are the amount at issue and the nature of the points raised by the notice of appeal. Where, as here, the appeal is essentially against findings of fact made by the trial judge after a two day hearing resulting in a judgment for $16,900 and raises no important or distinctive point of law or principle, the Court may more readily conclude that it was not reasonable in the circumstances to have instituted it. On a fairly fine balance of the relevant considerations and not without hesitation, I have been led to reach that conclusion in this case and agree with the Chief Justice and the orders which he has proposed.”

[33] In construing s.570 and its legislative antecedents courts have observed that the test imposed by the expression ‘without reasonable cause’ is similar to that adopted for summary judgement, that is ‘so obviously untenable that it cannot possibly succeed’, ‘manifestly groundless’ or ‘discloses a case which the Court is satisfied cannot succeed’ [endnotes omitted].’

[12] Given the more recent origin of s 400A of the Act, I have not been able to identify (nor did the parties) any Full Bench authority directly on the principles to be applied under that section. Nevertheless, reliance can be had on the Explanatory Memorandum to the Fair Work Bill 2012, where it was said at paras 168-172:

‘168. 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.

169. 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.

170.     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.

171.     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.

172.     This amendment responds to Panel recommendation 45.’

[13] Deegan C, however, in Pedley v IPMS Pty Ltd [2013] FWC 8453 said at paras [16]-[18]:

‘[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.’

Indemnity costs

[14] It is trite to observe that the principles to be applied to costs applications on an indemnity basis require the Commission to exercise a requisite level of caution. Such costs orders are rare and there must be special or unusual features of the case to justify a departure from the usual ‘party to party’ approach.

[15] In Dye v Commonwealth Securities Limited (No 2) [2012] FCA 407, Buchanan J identified one of the foundations for an order of indemnity costs may be on the basis of the findings made in the earlier judgment that the applicant’s case was, in all relevant aspects, based on a falsehood.His Honour said at para [5]:

‘Each of these foundations appears to me to provide a sufficient basis for the award of indemnity costs from the dates specified. As to the first basis upon which indemnity costs have been sought, it is well-established that indemnity costs are not awarded as a punishment against an unsuccessful litigant. However, they will be awarded in appropriate cases to protect a respondent from the financial burden of proceedings which were unjustified and should not have been commenced. Each of the proceedings commenced by the applicant falls, in my view, into this category. In the present case, the lack of merit in each of the proceedings is so marked, and the claim for protection by the respondents against unwarranted financial burden is so well-founded, that there is a sufficient justification for the award of indemnity costs with respect to the whole of each of the proceedings, subject to an issue to which I will return concerning the basis on which the Supreme Court proceedings were transferred to this Court. It is not necessary for me to repeat here the findings which were made in the earlier judgment. The proceedings were, in each case, based on falsehood and were without any legal substance. The respondents are entitled to claim that they should be relieved, so far as an order for costs would achieve this, from the financial burden of defending them.’

[16] In a different context, in Colgate Palmolive Co v Cussons Pty Ltd (1993)46 FCR 225 (‘Colgate v Palmolive’), Sheppard J, after identifying relevant authorities, distilled the following general principles in respect to the award of indemnity costs. At 232-234, His Honour said:

‘It seems to me that the following principles or guidelines can be distilled out of the authorities to which I have referred:

1. The problem arises in adversary litigation, ie litigation as between parties at arm's length. Different considerations apply where parties may be found to be entitled to the payment of their costs out of a fund or assets being administered by or under the control of a trustee, liquidator, receiver or person in a like position, eg a government agency or statutory authority.

2. The ordinary rule is that, where the Court orders the costs of one party to litigation to be paid by another party, the order is for payment of those costs on the party and party basis. In this Court the provisions of O 62, rr 12 and 19, and the Second Schedule to the Rules will apply to the taxation. In many cases the result will be that the amount recovered by the successful party under the Order will fall short of (in many cases well short of) a complete indemnity.

3. This has been the settled practice for centuries in England. It is a practice which is entrenched in Australia. Either legislation (perhaps in the form of an amendment to rules of Court) or a decision of an intermediate court of appeal or of the High Court would be required to alter it. No doubt any consideration of whether there should be any change in the practice would require the resolution of the competing considerations mentioned by Devlin LJ in Berry v British Transport Commission (supra) and Handley JA in Cachia v Hanes (supra) on the one hand and by Rogers J in Qantas on the other. The relevant passages from the respective judgments have been earlier referred to.

4. In consequence of the settled practice which exists, the Court ought not usually make an order for the payment of costs on some basis other than the party and party basis. The circumstances of the case must be such as to warrant the Court in departing from the usual course. That has been the view of all judges dealing with applications for payment of costs on the indemnity or some other basis whether here or in England. The tests have been variously put. The Court of Appeal in Andrews v Barnes (supra) at 141 said the Court had a general and discretionary power to award costs as between solicitor and client “as and when the justice of the case might so require”. Woodward J in Fountain Selected Meats appears to have adopted what was said by Brandon LJ (as he was) in Preston v Preston (supra) at 637; namely, there should be some special or unusual feature in the case to justify the Court in departing from the ordinary practice. Most judges dealing with the problem have resolved the particular case before them by dealing with the circumstances of that case and finding in it the presence or absence of factors which would be capable, if they existed, of warranting a departure from the usual rule. But as French J said (at p 8) in Tetijo, “The categories in which the discretion may be exercised are not closed”. Davies J expressed (at p 6) similar views in Ragata (supra).

5. Notwithstanding the fact that that is so, it is useful to note some of the circumstances which have been thought to warrant the exercise of the discretion. I instance the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud (both referred to by Woodward J in Fountain and also by Gummow J in Thors v Weekes (1989) 92 ALR 131 at 152; evidence of particular misconduct that causes loss of time to the Court and to other parties (French J in Tetijo); the fact that the proceedings were commenced or continued for some ulterior motive (Davies J in Ragata) or in wilful disregard of known facts or clearly established law (Woodward J in Fountain and French J in J-Corp (supra)); the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions (Davies J in Ragata); an imprudent refusal of an offer to compromise (eg Messiter v Hutchinson (1987) 10 NSWLR 525; ; Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 at 724(Court of Appeal); Crisp v Keng (unreported, Court of Appeal, NSW, Kirby P, Priestley JA, Cripps JA, No 40744/1992, 27 September 1993) and an award of costs on an indemnity basis against a contemnor (eg Megarry V-C in EMI Records (supra)). Other categories of cases are to be found in the reports. Yet others to arise in the future will have different features about them which may justify an order for costs on the indemnity basis. The question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on a party and party basis.

6. It remains to say that the existence of particular facts and circumstances capable of warranting the making of an order for payment of costs, for instance, on the indemnity basis, does not mean that judges are necessarily obliged to exercise their discretion to make such an order. The costs are always in the discretion of the trial judge. Provided that discretion is exercised having regard to the applicable principles and the particular circumstances of the instant case its exercise will not be found to have miscarried unless it appears that the order which has been made involves a manifest error or injustice.’

SUBMISSIONS

For the applicant

[17] Mr Hardman submitted that it should have been apparent to the respondent, at the time of making the application, that he was not protected from unfair dismissal because:

(a) he earned more than the high income threshold;
(b) he was not covered by an enterprise agreement;
(c) he was engaged in the workplace health, safety and environment industry, not the hydrocarbon industry and, consequently, was not covered by the Hydrocarbon Industry (Upstream) Award 2010; and
(d) health and safety professionals have never been historically covered by awards.

[18] It was said that prior to the conciliation conference, an offer had been made, and rejected by the respondent, to settle his claim and discontinue the proceeding for an amount of $5,000.00. Rejecting such an offer was an unreasonable act or omission by the respondent.

[19] The applicant had raised four jurisdictional objections in the employer’s response to the application. The respondent should have realised and/or made inquiries that he was not covered by the Award and his earnings exceeded the high income threshold. This was explained to him at the conciliation and would have been apparent from the submissions filed by the employer in the substantive proceedings.

[20] Mr Hardman also relied on my comments at para [70] of the earlier decision:

‘[70] Finally, on any objective assessment of the tasks under the Hydrocarbons Industry Services Employees classification the notion that a person of the applicant’s skills and experience or the generic role of HSE Advisors, fits neatly in within that group, is at best wishful thinking, or to my mind, quite fanciful.’

[21] Mr Hardman put that the respondent should have critically assessed the weight of evidence against him, prior to the hearing, and formed the view that he had no reasonable prospects of success. On 14 January 2015, the applicant put the respondent on notice that it would apply for costs, if it was successful with its objection to jurisdiction. It invited him to withdraw his claim and discontinue the proceeding. Failing to do so, was an unreasonable act or omission in connection with the continuation of the matter (s 400A).

[22] Mr Hardman referred to my earlier decision and observed that the Commission was critical of the respondent’s evidence. It noted the following:

‘(a) The [respondent] seriously downplayed his duties and responsibility to little more than a clerical role which involved a simple ‘tick and flick’ exercise of documents;

(b) The [respondent] was aware of his duties and responsibilities;

(c) The [respondent’s] evidence was difficult to reconcile with the [respondent’s] resume and evidence concerning the lack of experience and personal skills of his fellow rotation HSE Advisor;

(d) The objective evidence did not support a finding that the [respondent] was an unskilled worker with little independent discretion or responsibility in his job.

26. The [respondent] described himself as a ‘technically sophisticated and business-savvy professional with 12+ years of experience in occupational health and safety, and environmental management’ (paragraph 64, Decision). The [respondent] ought to have been aware that his application for an Unfair Dismissal Remedy had no reasonable prospects of success and had been made without reasonable cause.’

For the respondent

[23] Mr Pinchen set out his Company’s involvement in this matter since preparing the respondent’s Form F2 application, in accordance with the respondent’s instructions. He noted that at the hearing, the applicant did not seek to argue all of its jurisdictional objections (and abandoned its claim of being a small business) and only sought the Commission’s determination of Award coverage.

[24] In rejecting the grounds for the costs application, it was submitted that the circumstances of the respondent’s employment were ‘extremely complex’, involving a ‘sham’ contracting arrangement and misleading representations regarding Award coverage in the various work contracts prepared by the respondent. The respondent was not an industrial relations expert and he lodged a ‘good and legitimate’ claim for unfair dismissal in good faith and with a genuine desire to resolve the dispute in a reasonable and expeditious matter.

[25] Mr Pinchen said that the burden of proof in this case is on the applicant to establish its case at law and in fact, on the balance of probabilities. In considering whether a claim is ‘so obviously untenable that it cannot possible succeed’ or is ‘manifestly groundless’ (See: General Steel Industries Inc v Commissioner for Railways (1964) 112 CLR 125), the test is not that the Commission has found against the respondent. Nor is it determined by reference to the subjective views of a person, but by the question being determined objectively. In addition, the timing is relevant. Sub-para (a) of s 611 is directed to the time the application was made and sub-para (b) may be ascertained at various points during the conduct of the matter before the Commission; See: Qantas v Carter. For an order under s 400A, the applicant will have to provide clear evidence of unreasonable conduct by the respondent.

[26] Mr Pinchen submitted that at the time of lodging his Form F2 and Form F52, the respondent was responding to a complex set of circumstances and numerous jurisdictional objections of the applicant. He had held a genuine and reasonable belief that he had been unfairly dismissed. Until issuing an order for production, the respondent did not have the relevant paperwork or information to properly understand his case.

[27] Mr Pinchen said it was ‘nonsensical’ for the applicant to argue that it should have been reasonably apparent to the respondent that he was engaged in the workplace, health, safety and environment industry, when the applicant acknowledged it was engaged in the hydrocarbons industry. Moreover, it was not correct that health and safety professionals have not historically been covered by Awards. He identified the following:

(a) Black Coal Mining Industry Award 2010, Staff Employees, Group G, Assistant Safety Officer;
(b) Black Coal Mining Industry Award 2010, Staff Employees, Group G, Safety Officer;
(c) Supported Employment Services Award 2010, Grade 5, Cleaning
(d) Rail Industry Award 2010, Operations (Op), Rail worker (Op), Level 6
(e) Racing Industry Ground Maintenance Award 2010, Trackwork and pool supervisor
(f) Security Services Industry Award 2010, Security officer level 3

[28] Mr Pinchen argued that it was not reasonably apparent to the respondent that his application had no reasonable prospects of success, particularly given the representations in his three (possibly four) contracts that he was Award covered. It was also relevant that his employment arrangements changed to a contracting arrangement, his pay was reduced unilaterally by the applicant and the applicant later admitted it was not a small business employer. The applicant had repeatedly obfuscated the facts and information provided under an Order for Production.

[29] Mr Pinchen emphasised that a determination of the facts in favour of the applicant does not lead to an automatic conclusion that costs should be awarded; See: Walker v Mittagong Sands Pty Limited T/A Cowra Quartz[2011] FWA 2225 and AC Butchery Pty Ltd v Cosworth[2011] FWA 2275. A finding by the Commission that the respondent’s submission that he was Award covered was ‘at best, wishful thinking... quite fanciful’, does not satisfy the much higher test of ‘manifestly groundless’.

[30] Mr Pinchen said that it was not the respondent’s submission that he was unskilled. Rather, it was that he was semi-skilled; consistent with him holding a Diploma, and not a Bachelor’s degree. The respondent was led to believe he was Award covered by the applicant’s own misleading conduct and by reference to the Award in his three contracts of employment.

[31] Mr Pinchen noted that Ms Kavanagh (the applicant’s General Manager, People) believed the respondent was Award covered when she reduced his daily rate, citing compliance with Award rates. The applicant used a template document and did not bother to amend it to reflect the respondent’s work circumstances. Mr Pinchen described the applicant’s ‘reckless’ conduct as highly as misrepresentation in contravention of s 345 of the Act, affecting not only the respondent, but other of its employees.

[32] In the alternative, Mr Pinchen submitted that this was not a case where the award of indemnity costs could be justified. There was no evidence of delinquent conduct of the respondent. Finally, Mr Pinchen said that this was an unmeritorious costs application which, on the balance of probabilities, should not be granted.

[33] In reply, Mr Hardman denied that this was a case involving an ‘extremely complex set of circumstances’. Given the respondent had the benefit of competent representation and with his own knowledge of his role, qualifications, seniority and $950 per day salary, he ought to have known that his role was not clerical or administrative. He was not required to be an expert in industrial matters to know that he was not covered by the Award; rather, he elected to proceed with a ‘hopeless’ claim.

[34] The applicant accepted that the respondent’s contract referred to his employment being governed by the Award. However, such reliance was found by the Commission to be ‘misplaced and without foundation’. This was so because:

(a) the contract cannot change the substantive position at law, being that the Award only imposes legal rights and corresponding obligations, if the Award covers the employee;
(b) the respondent cannot ‘opt into’ an Award where the Award is not expressed to cover the employee;
(c) the 24 February 2014 Contract cannot expressly state that the respondent’s employment was governed by the Award;

(d) the respondent is a highly skilled and highly paid professional; and
(e) the respondent was engaged in the workplace health, safety and environment industry, not the hydrocarbon industry.

[35] It was noted that the Commission did not accept evidence, given by the respondent, which sought to downplay his role and duties. In any event, the respondent was, at all times, represented by a competent industrial solicitor.

[36] The applicant rejected the submissions that Ms Kavanagh had amended the applicant’s daily rate of pay in accordance with the Award. Ms Kavanagh had revised the rate due to advice from its client, Origin Energy.

[37] In respect to the submission concerning the respondent being engaged in the workplace health, safety and environment industry, the applicant submitted:

(a) the respondent was not employed in a clerical role;
(b) the respondent seriously downplayed his duties and responsibilities;
(c) the respondent’s duties did not primarily amount to semi-skilled clerical and administrative duties;
(d) although the respondent was required to complete paperwork, this was incidental to the ‘primary purpose’ of his role;
(e) the respondent is a highly skilled and highly paid professional in the workplace, health, safety and environment industry; and
(f) although the respondent reported to a Team Leader, this had no bearing on the determination that the respondent was a highly skilled and highly paid professional.

[38] Moreover, the Commission had found that occupational health and safety professionals have not historically been covered by awards. The classifications referred to by the respondent, such as ‘Safety Officer’ in other Awards, are unrelated and not comparable to a workplace health and safety advisor.

[39] The applicant denied it had engaged in ‘confusing conduct’ or an ‘unreasonable act’ in withdrawing its earlier objection that it was a small business. The makeup of the applicant’s workforce fluctuates from time to time and is further complicated by reason that a substantial component of the workforce are ‘regular and systematic’ casual employees. Rather, the fact the applicant made concessions, at the earliest opportunity, demonstrates a prudent approach to the case.

[40] The applicant rejected any assertions of a ‘sham’ contracting arrangement for the following reasons:

(a) the respondent had not led any evidence to corroborate this allegation;
(b) the alleged ‘sham contract’ was entered into at the request of the respondent after the respondent rejected an offer of employment;
(c) the Commission, at para [54] of the Decision, accepted that the respondent requested to enter into a further contract to use his ABN as a means to alter the contractual terms with the applicant;
(d) the Commission made no determination regarding the existence of a ‘sham contract’; and
(e) this extraneous allegation had no relevance to the determination by the Commission that the respondent was not covered by the Award.

[41] The applicant noted that the Commission made no findings as to:

(a) the existence of a ‘fourth contract’ or that
(b) whether the applicant had not complied with any Order for Production of Documents.

There was no foundation to any criticism of the applicant’s solicitors’ handling of the matter and is irrelevant to any determination as to whether the respondent should be ordered to pay the applicant’s costs.

CONCLUSION

[42] Having regard for the relevant principles applying to costs applications in unfair dismissal matters, I approach this matter with the requisite degree of caution. Having considered the well-argued submissions of both parties, I would conclude as follows. To my mind, the fundamental issue is the one arising from the finding that the respondent was not covered by the Award. Put another way, was it reasonably apparent to the respondent that he had no reasonable prospects of success as to Award coverage?

[43] Before turning to this question, I deal with the serious criticism of the applicant’s conduct and, impliedly, that of its solicitors. For example, it was said that the withdrawal of the small business objection was ‘confusing conduct’. I do not accept such a characterisation. The small business objection was withdrawn early in the proceedings (at conciliation). I accept the applicant’s submission as to the fluctuation of its workforce and high levels of casualisation as making an assessment of workforce numbers, at the relevant time, subject to some investigation and clarification.

[44] Secondly, there was no foundation for the respondent’s claim of ‘sham’ contracting and the Commission made no express findings on the nature of the employment relationship. Given these circumstances, it is not proper to raise such a matter in the context of this costs application.

[45] Thirdly, similarly there were no findings of the Commission as to a ‘fourth contract’. In any event, the existence of a ‘fourth contract’ was irrelevant to the issue to be determined as to award coverage. It draws a long bow indeed to elevate a passing reference to a possible ‘fourth contract’ (of which the respondent was not even aware) to the accusation of failing to comply with an Order for Production.

[46] I also reject two other submissions of the respondent in respect to the evidence and criticism of the applicant. There was no evidence that Ms Kavanagh had revised the applicant’s daily rate of pay in accordance with the Award. It is difficult to comprehend how that could be so, given the rates of pay under the Award and the significant daily rates the respondent was paid ($915)

[47] Secondly, the classifications referred to in other Awards relied on to support a finding that the respondent’s role was covered by other Awards, do not equate to the seniority or the duties and responsibilities of the respondent. In my view, Award covered safety officers are not equivalent to Health, Safety and Environment Advisors at the applicant’s level. In my view, an advisor is not the same as a safety officer.

[48] In summary, the extensive unsupported criticism of the applicant’s conduct is irrelevant to the proper focus on a costs application against the respondent, namely, his conduct and acts in initiating and continuing his application. To the extent the Commission had any criticism of the applicant, it was no higher than the following:

‘In my opinion, the use of a template document might be convenient, but it does have the potential for creating the difficulties evidenced in this case. The respondent might reconsider the utility of using standard templates for its senior employees.’

[49] That said, I am prepared to accept that at the time of filing the application and that of the employer’s reply, the respondent held a genuine belief that he was unfairly dismissed. It is obvious at the time of filing of the employer’s response, that he was faced with at least four jurisdictional objections, at least one of which involved what is usually a difficult legal question about ‘sham’ contracting vis a vis direct employment. He was also aware of the three contracts of employment which mentioned the Award in various places. In my view, it was understandable, at that time, for the respondent to hold a reasonable belief that his case was at least arguable.

[50] However, in my opinion, when the issue/s narrowed to that of Award coverage, the dynamic shifted significantly. To my mind, that date was around 14 January 2015. By that time, the applicant had:

(a) received and had a reasonable opportunity to consider the submissions and evidence of the applicant and the weight of evidence against him.
(b) the benefit of independent advice for some time;
(c) been put on notice by the applicant of the prospect of a costs application, which invited him to discontinue the proceedings listed for 20 January 2015.

[51] Against this background was the respondent’s knowledge of his own duties and responsibilities in the context of his then knowledge of the Award, its classifications and wage rates. It was at this point that I consider it should have been reasonably apparent that his application had no reasonable prospects of success (s 611(b)). It is from that date - 14 January 2015 - that I am prepared to order costs on a party to party basis against the respondent. Given this finding, I do not intend to rely on s 400A of the Act in respect to any ‘unreasonable act or omission’. In any event, I am not satisfied that there was unreasonable conduct by the respondent to the requisite level.

[52] Further, in my opinion, this is not a case in which the circumstances justify the award of indemnity costs. The substantive case simply does not meet that high hurdle of delinquent or reprehensible behaviour, such as fraud or an abuse of process; See: Colgate v Palmolive. Nor are there any special or unusual features of the case, which would warrant a departure from the usual practice of costs orders on a party to party basis. Orders reflecting my findings in this matter will be published contemporaneously with this decision.

DEPUTY PRESIDENT

Final written submissions:

Applicant for costs: 21 April, 26 May 2015.

Respondent for costs: 18 May 2015.

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