Lisa Holland

[2011] FWA 8012

[2011] FWA 8012

FAIR WORK AUSTRALIA

DECISION

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

Lisa Holland
(U2010/6622)

Tony Holland

(U2010/6623)

v

Nude Pty Ltd t/a Nude Delicafe

COMMISSIONER ASBURY BRISBANE, 25 NOVEMBER 2011

Application for costs.

Background

[1] This is an application under s.611 of the Fair Work Act 2009 (the Act), by Nude Pty Ltd t/a Nude Delicafe for an award of costs against Mr Tony Holland and Ms Lisa Holland (the Applicants) in relation to their respective applications for an unfair dismissal remedy. The application for costs is made on the grounds that:

● The unfair dismissal applications were made vexatiously (s.611(2)(a)); or

● It should have been reasonably apparent to each Applicant that their applications had no reasonable prospect of success (s.611(2)(b)).

[2] In Directions made on 2 July 2010, the unfair dismissal applications were listed for hearing in Maroochydore on 26 August 2010. At approximately 4.45 pm on 25 August 2010, Mr Fuhrman-Luck, the Applicants’ representative, telephoned my Chambers to advise that the applications were to be discontinued. Given the time and the manner in which this information was received, my Associate contacted the representative for Nude Pty Ltd, Ms Aitken, to inform her about the proposed discontinuance, and was advised that instructions from Nude Pty Ltd would be sought in relation to an application for costs.

[3] In circumstances where a formal notice of discontinuance had not been received; the Maroochydore Court House was booked; the parties were located at the Sunshine Coast; and an application for costs had been foreshadowed; the listing for 10.00 am on 26 August 2010 was maintained. An application by Nude Pty Ltd for costs was made orally by Counsel for Nude Pty Ltd at the commencement of the hearing on 26 August 2010. When it became apparent that the Applicants’ representative was not in a position to defend an oral costs application, it was withdrawn and it was indicated that an application for costs would be made in the usual manner and served upon the Applicants. Directions were made for material in relation to the costs application to be filed and served, and the matter was adjourned at 11.43 am on 26 August 2010. Notices of discontinuance in relation to each of the unfair dismissal applications were not filed until 8.35 pm on 26 August 2010. An application for costs was made by Nude Pty Ltd on 8 September 2010.

[4] All parties sought to call evidence in relation to the costs application and each party indicated that witnesses for the other party would be required for cross-examination. Due to issues associated with the availability of parties the costs application was heard on 2 February 2011,and final material was received from the parties subsequent to that hearing.

Legislation

[5] Section 611 of the Act provides:

“611 Costs

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

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

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

(b) FWA 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: FWA can also order costs under sections 376, 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).”

[6] In exercising the discretion to award costs under s.611 of the Act, it is necessary to determine whether the situation is one in which there is a power to award costs, and if so, is an award of costs appropriate in all of the circumstances. 1 The general statement in s.611(1) that a person must bear the person’s own costs in relation to a matter before FWA, reflects the longstanding principle that costs will not be awarded against parties in industrial proceedings, other than in exceptional circumstances.

[7] The Objects of the unfair dismissal provisions include establishing quick, flexible and informal procedures, addressing the needs of employers and employees and ensuring that a “fair go all round” is afforded to the employer and the employee concerned. Those Objects also include the provision of remedies if the dismissal is found to be unfair, with an emphasis on reinstatement. That emphasis is also reflected in s.390(3) which provides that FWA must not order payment of compensation to a person found to have been unfairly dismissed, unless FWA is satisfied that reinstatement of a person is inappropriate and FWA considers an order for payment is appropriate in the circumstances of the case.

[8] Parties to applications for unfair dismissal remedies before FWA often have limited financial means - applicants are frequently unemployed. Many respondents are small businesses struggling in the current economic environment. There are many parties who cannot afford representation and have no option but to be self-represented, often under great difficulty, given the complexities of the legislation. Parties should not be deterred from bringing proceedings, or responding to them, by the risk of a costs order, and are entitled to their “day in court”. 2

[9] However, these considerations have to be balanced against the often reprehensible conduct of parties in unfair dismissal applications. Regrettably there are applicants who institute proceedings designed to extract settlement from former employers, often small businesses, who do not wish to expend cost and time associated with defending an application however unmeritorious. Equally regrettably, there are respondents who resist settlement in cases where the application has merit, by raising jurisdictional objections that have no valid basis, or refusing reasonable offers of settlement knowing that it is probable that an unrepresented former employee with limited financial means will not be able to proceed to a hearing. In both case, parties engage in brinkmanship, with the result that applications are often discontinued shortly before hearing, after considerable cost and time has been expended in advancing or defending them.

[10] The point at which it is determined whether an application is vexatious or without reasonable cause, is when the application is made. Unreasonable or vexatious conduct on the part of an applicant which occurs after the application is made, may be relevant to determining what the position was at the point the application was made, but it cannot of itself, constitute grounds for an award of costs against an applicant. For example, conduct such as the late withdrawal of an application or the refusal of a reasonable offer of settlement, will not of itself justify an award of costs against the applicant, but may be indicative of an application made vexatiously or without reasonable cause. Such conduct may also be relevant in circumstances where there is a power to award costs and consideration is being given to whether or not the discretion to make an order should be exercised.

The unfair dismissal applications

[11] The unfair dismissal applications have some history and it is necessary to set it out. The Applicants were dismissed on 23 February 2010 and the applications were made on 26 February 2010. On 10 March 2010, Nude Pty Ltd filed a Response objecting to the applications on the grounds that:

● The Small Business Fair Dismissal Code applied;

● The Applicants were casual employees with less than 12 months continuous service; and

● The dismissals were cases of genuine redundancy.

[12] The applications were listed for a conciliation conference on 29 March 2010 but were not resolved because Nude Pty Ltd wanted the jurisdictional objections dealt with before arbitration. On 12 April 2010 a Form F53 was filed on behalf of the Applicants stating that Mr Alexander or Mr Fuhrman-Luck of Carroll Alexander and Associates were commencing to act on their behalf. Following a number of adjournments on the basis of the availability of the parties, the applications were listed for Directions/Conciliation on 4 May 2010.

[13] Directions were issued requiring submissions and witness statements in relation to the jurisdictional objections to be exchanged between the parties and filed in Fair Work Australia. The dates stipulated in those Directions were altered on several occasions at the request of the parties. On 11 June 2010 submissions and witness statements in relation to the jurisdictional objections were filed by Nude Pty Ltd. On 30 June submissions and witness statements in reply were filed on behalf of the Applicants.

[14] On 1 July, a Form 5 was filed stating that Ms Aitken of Aitken Legal was commencing to act on behalf of Nude Pty Ltd. Following a further Directions/Conference on 2 July 2010, the applications were listed for jurisdiction hearing on 26 August 2010at Maroochydore. By email of 20 July 2010, Aitken Legal advised Fair Work Australia and the representative of the Applicants that the jurisdictional arguments advanced by Nude Pty Ltd had now been reviewed and advice from Counsel obtained, and that it had been decided to abandon the objections on the grounds that Nude Pty Ltd was a small business and in relation to the minimum period of employment.

[15] In order to save time and costs for all parties, Nude Pty Ltd sought a hearing on the question of whether the dismissal was a case of genuine redundancy, and in the alternative, whether the dismissal was otherwise unfair on the grounds that it was harsh, unjust or unreasonable. These issues were said to be intertwined. Further Directions Conferences were held on 21 July 2010 and 6 August 2010 and the matter was scheduled to proceed on 26 August 2010 as previously listed. Directions were issued for the filing of further submissions and witness statements in relation to the alternative question of whether the dismissal of the Applicants was unfair.

Evidence in relation to the costs application

[16] Evidence in support of the costs application was given by Ms Margo Grant, Director of Nude Pty Ltd and Ms Lisa Aitken, Solicitor and Managing Partner of Aitken Legal Pty Ltd. Ms Grant said that on 1 July 2010, she instructed Aitken Legal to represent Nude Pty Ltd. The legal costs incurred in defending the applications have been financed from drawings on a line of credit secured against the home of Ms Grant and her husband. Ms Grant said that she had instructed Aitken Legal to attempt to settle the applications, and several offers had been made to the Applicants and rejected by them.

[17] Under cross-examination, Ms Grant said that she did not seek legal advice at the point of lodging the jurisdictional objections, and did not have an understanding about the definition of “small business” for the purposes of such an objection until her meeting with Ms Aitken on or about 1 July 2010. Ms Grant said that in all business matters such as taxation, she had always been treated as a small business. In relation to an offer of settlement made by the Applicants on 25 August 2010, Ms Grant said that she was not prepared to settle the applications “at the last hour” because she had “spent a lot of money”.

[18] Ms Aitken confirmed that her firm received instructions from Nude Pty Ltd on 1 July 2010. Ms Aitken gave evidence of a number of discussions and email exchanges with Mr Fuhrman-Luck where possible settlement of the applications was discussed. Ms Aitken’s evidence included copies of emails and contemporaneous file notes of telephone calls, and was not contradicted. The offers and counter offers were conveyed between Mr Fuhrman-Luck on behalf of the Applicants and Ms Aitken on behalf of Nude Pty Ltd and can be summarised as follows:

● The Applicants initially offered to settle the application for five weeks wages each;

● On 12 June Nude Pty Ltd rejected an offer to settle both applications for $9000 and offered each of the Applicants two weeks wages on the basis that such offer was “without prejudice except for costs”.

● On 14 July there was an email exchange during which the Applicants indicated that the earlier offer of five weeks compensation each was some time ago and that any settlement would need to take this into account. Nude Pty Ltd offered 2.5 weeks wages to each of the applicants as a genuine redundancy payment. The email conveying the offer of Nude Pty Ltd also states that there will be no further offers in the event that the offer is rejected.

● The response on behalf of the Applicants on 15 July was that if Nude Pty Ltd wanted to settle the applications it would “have to come up with a better offer than 5 weeks”.
● On 3 August there was a telephone discussion during which a further offer of settlement was sought on behalf of the Applicants and the representative of Nude Pty Ltd indicated that two reasonable offers had already been made and no further offers would be made.

● On 4 August an additional issue relating to a potential claim for underpaid wages was raised on behalf of the Applicants and an offer to settle all claims was made comprising an amount of $4,025 for Mr Holland and $3,524 for Ms Holland, paid as genuine redundancy payments.

● On 4 August Nude Pty Ltd rejected the offer made by the Applicants and indicated that there was no basis for a claim for unpaid wages. The statement that two reasonable offers had already been made and that no further offers would be forthcoming, was reiterated.

● Between 9 and 11 August there were exchanges by email and telephone wherein the Applicants’ representative sought a counter offer from the Respondent, and was again informed that two reasonable offers of settlement had been made, and that given the subsequent costs of preparing witness statements and submissions, no further offers would be made.

[19] On 25 August Ms Aitken received a telephone call from Mr Fuhrman-Luck and had a conversation in the following terms:

Mr Fuhrman-Luck: “Is there any way that we can avoid this matter going to hearing tomorrow?”

Me: “Your clients can withdraw their Applications.”

Mr Fuhrman-Luck: “They’re not going to do that. Will your clients settle?”

Me: “They tried to settle prior incurring substantial legal fees. It’s my understanding that they’ll now proceed to hearing given they have incurred most of the legal fees already.”

Mr Fuhrman-Luck: “The Applicants have incurred substantial costs as well and both parties will incur more if the matter goes to hearing.”

Me: “I’m obligated to put offers to our client so if your clients would like to make an offer I’ll put the offer to our client - they’re here at the moment.”

Mr Fuhrman-Luck: “They’re there?”

Me: “Yes, we’re in conference with Counsel.”

Mr Fuhrman-Luck: “I’ll get instructions and get back to you.” 3

[20] Ms Aitken’s file note of this discussion indicates that it occurred at approximately 2.35pm. 4

[21] At 2.57 pm on 25 August Ms Aitken received an email from Mr Fuhrman-Luck indicating that the Applicants were prepared to settle the matters on the basis of a payment of $2,300 to Mr Holland and $2,024 to Ms Holland, and pointing out that the Applicants had also been put to the considerable expense as a result of responding to the jurisdictional objections, which had been waived by the Respondent.

[22] At 4.35 pm Mr Fuhrman-Luck telephoned Ms Aitken in relation to the email and was informed that Nude Pty Ltd did not accept the settlement offer put by the Applicants. Ms Aitken said in her evidence that the offer made in the email was for the same amount the Respondent had offered on 14 July, before incurring the legal costs of preparing its submissions and witness statements.

[23] At 4.46 pm Mr Fuhrman-Luck sent a further email to Ms Aitken in the following terms:

“Hi Lisa. We refer to our below email and to our telephone call to you a few minutes ago. We note your telephone advices that your client ‘will not be settling’. We are instructed that for commercial reasons, our clients will not be proceeding to a hearing tomorrow and will be discontinuing their applications. Cheers, John.” 5

[24] Under cross-examination Ms Aitken said that she was not consulted by the Directors of Nude Pty Ltd in relation to the unfair dismissal applications until 1 July 2010 and thereafter had a number of consultations during which information was gathered and consideration was given to correspondence that had passed between the Directors and the Applicants and their representatives. Ms Aitken said that she did not provide advice at this point, but did provide an estimate of the costs to Nude Pty Ltd to assess the merits of their jurisdictional objections. On hearing that assessment, Ms Aitken was instructed by the Directors to make an offer of settlement to Mr and Ms Holland, on a commercial basis prior to carrying out the assessment. Ms Aitken said that advice about the prospects of the jurisdictional objections succeeding was received from Counsel on 20 July 2010, and two of the objections were then withdrawn.

[25] In relation to the discussion with Mr Fuhrman-Luck on 25 August 2010, Ms Aitken maintained under cross-examination that she simply stated in response to Mr Fuhrman-Luck’s question, that the Applicants could withdraw their unfair dismissal applications and did not say that the Respondent would not do anything if the applications were withdrawn. Ms Aitken also said that she had not undertaken the calculation to compare the settlement offer made by the Respondent on 14 July and the offer made by the Applicants on 25 August, but relied on advice from Nude Pty Ltd in relation to the quantum of the two claims. Ms Aitken did not disagree with the proposition put to her in cross-examination that these offers were not substantially different but were not the same.

[26] The witness statement filed by the Applicants indicated that they consulted Mr Fuhrman-Luck of Carroll Alexander and Associates before filing their own unfair dismissal applications, and were informed that they had reasonable prospects of success. As they could not afford to pay the costs quoted by Mr Fuhrman-Luck, the Applicants decided to file their own applications. Nude Pty Ltd did not wish to conciliate and indicated that it wished to press its jurisdictional objections. The Applicants believed that they were out of their depth, and appointed Mr Fuhrman-Luck and other members of the firm Carroll Alexander and Associates as their representatives. The Applicants also said that on or around the time of the Directions hearing, they offered to settle their applications for five weeks wages each and this was rejected by Nude Pty Ltd on the basis that it wished to pursue its jurisdictional objections.

[27] Mr Holland provided a witness statement in relation to the costs application that also dealt with the circumstances in relation to Ms Holland. Mr Holland said in his statement that the Applicants had held some discussions with the Directors of Nude Pty Ltd about buying Nude Delicafe, and had established a trust and a company for this purpose. According to Mr Holland, the name of the trustee company included the term “Elegant Eggplant” because a platter of eggplants was displayed in the servery hatch of Nude Delicafe. Subsequently, the discussions about the sale of the business faltered because the Directors of Nude Pty Ltd wanted to sell a franchise to the Applicants rather than the business itself, and the Applicants were not interested in buying a franchise. Mr Holland states that:

“(8) We subsequently purchased ‘Desirees’ Cafe’ at Noosaville and that settled on 31 March 2010;

(9) We changed its name to ‘Elegant Eggplant’ as that was the name of the trustee company that we had formed.

(10) We closed the business to rebrand and renovate, and re-opened it as Elegant Eggplant on 12 April 2010.

(11) It was our intention to continue working for the Respondent until 31 March 2010.

(12) We were summarily dismissed on 23 February 2010.

(13) We both looked for work but because we were only available for 5 weeks, we could not obtain work.

(14) This resulted in our being without income for those 5 weeks.

(15) We needed this money and that caused us financial pressure.” 6

[28] In relation to the offer of settlement made by Nude Pty Ltd on 12 July 2010, Mr Holland said that two weeks wages was not considered to be fair and reasonable, given that no offer of settlement was made by Nude Pty Ltd until the Applicants had expended considerable cost and time, filing their material in reply to its jurisdictional objections. Mr Holland also said that there was further cost incurred by the Applicants when Nude Pty Ltd abandoned two of its three jurisdictional objections, associated with attendance at a Directions hearing to deal with how the matter would proceed, and preparing and filing submissions in relation to the substantive matter of whether the Applicants were unfairly dismissed.

[29] Mr Holland said that what started as a relatively simple and straightforward process that the Applicants had intended to handle themselves, became totally out of hand. At the same time, the Applicants were attempting to establish their new cafe and to deal with after- hours calls at the resort where they both resided. The Applicants were concerned about the commercial consequences of a hearing and in particular the loss of profits associated with closing down their new cafe to attend the hearing. The Applicants decided that it would not be commercially viable for them to do this, and that they had no choice but to try to settle the matter. The commercial reasons for being unable to proceed to a hearing cited by Mr Holland were:

● The increasing costs associated with the process of pursuing the applications;

● Attempts to establish the new cafe;

● The winter months and wet weather adversely affecting trade at the new cafe;

● The need for the Applicants to travel from their residence at Mooloolaba to Noosaville each day to operate their new cafe;

● The Applicants live rent free at a resort and are required to handle out of hours calls 7 days a week;

● Commercial consequences associated with having to close the cafe down for the hearing and the associated loss of daily profits and good will.

[30] Mr Holland said that not only had the Applicants lost income from their dismissal, but had been put to the cost of dealing with jurisdictional objections advanced by the Respondent, which were abandoned after the Applicants filed their material. According to Mr Holland, settlement was made more difficult by the fact that after establishing the cafe and employing staff, he had cause to study the relevant award, and formed the view that he and Ms Holland had been underpaid during the period of their employment with Nude Pty Ltd. Mr Holland was made aware by Mr Fuhrman-Luck that Nude Pty Ltd was seeking a full release in relation to any settlement and accordingly instructed Mr Fuhrman-Luck to make a settlement offer of 3.5 weeks each, to be paid on the basis that it was a genuine redundancy payment.

[31] On 11 August, that offer was rejected. Mr Holland then instructed Mr Fuhrman-Luck to put a reduced settlement offer of 2 weeks wages each on a genuine redundancy basis. That offer was put to the Respondent on 25 August 2010 and was again rejected. Mr Holland said that he then instructed Mr Fuhrman-Luck to inform FWA that the applications were being discontinued “for commercial reasons” and that they would not be proceeding with the hearing on 26 August 2010. In respect of the applications Mr Holland also asserted on behalf of himself and Ms Holland that they:

● Could not proceed to a hearing for commercial reasons;

● Were not aware when they made the applications that the case could become so involved;

● Had no ulterior motive when the applications were made;

● Did not file the applications to harass or embarrass Nude Pty Ltd or to gain some kind of collateral advantage; and

● Wanted fair compensation for what they believed and were advised was unfair dismissal.

[32] Under cross-examination, Mr Holland agreed that the unfair dismissal applications were made after advice was sought from Mr Fuhrman-Luck. The initial advice was that the applications were required to be filed within fourteen days of the date of the dismissal, and that they would be conciliated. Mr Fuhrman-Luck did not advise that if conciliation was unsuccessful that the applications would go to a hearing. When asked about what he believed would happen if the applications were not resolved at conciliation, Mr Holland said that he did not see past the conciliation, and thought that things would be sorted out. Mr Holland said that after the conciliation conference and the further meeting with Mr Fuhrman-Luck he was informed that there would be a further hearing of the matter, but said that: “I honestly believed that Nude would see the error of their ways and back down.” Mr Holland agreed that from 30 March 2010, he knew that if the matter did not settle or was not discontinued, there would be a hearing or trial of the proceedings.

[33] In relation to the sale of Desiree’s Cafe at Noosaville and the plan to reopen as Elegant Eggplant, Mr Holland agreed that it was to be a cafe or restaurant business operated by him and his wife. Mr Holland also agreed that the business is owned by a trustee company, of which he is the sole director, and that company was registered on 2 February 2010. Mr Holland could not recall whether the company was also registered for GST and an ABN on 2 February 2010, but agreed on the basis of company extracts he was shown, that this was the case. 7

[34] Mr Holland said that the sale of Desiree’s Cafe settled on 31 March 2010 but did not know when the contract for sale was entered into. Mr Holland said that he thought it was 20 days before the settlement date but could not say whether it was four to six weeks or four weeks. Mr Holland also said that there were no negotiations with the former owners and he paid the asking price. Mr Holland said that he had been looking to buy Desiree’s Cafe two days before the purchase was made, and was shocked at how quickly the sale was finalised. Elegant Eggplant opened as planned, on 12 April 2010. Mr Holland agreed that once the contract for the purchase of Desiree’s Cafe was signed, it was his intention and that of Ms Holland, to only continue working for Nude Pty Ltd up until 31 March 2010, and that the Directors of Nude Pty Ltd had not been told of this plan.

[35] Mr Holland rejected the proposition put to him in cross-examination, that the decisions to buy, establish and open Elegant Eggplant were devised before 23 February 2010. In this regard, Mr Holland maintained that the registration of the Company and the registration for an ABN and GST on 2 February 2010, was as a tool to buy Nude Delicafe which had been offered for sale to himself and Ms Holland on around 9 June 2009. Mr Holland agreed that Mr and Ms Grant had not been informed about the formation of a company called Elegant Eggplant, or the registration of that company for an ABN and GST. Mr Holland rejected the proposition that he was trying to hide this information. Mr Holland maintained that he and Mrs Holland needed the amount of 5 weeks wages because they did not have any income rather than because they needed money to open their own business. Mr Holland also said that he took out a loan to purchase the business.

[36] In response to the proposition that the whole intention behind making the unfair dismissal applications was not to have them actually heard, but to get Mr and Ms Grant to pay five weeks that they would be out of pocket until they took possession of Desiree’s Cafe. Mr Holland said that he and Mrs Holland wanted what they believed to be the right thing and had taken every step with respect to their applications, on the advice of Mr Fuhrman-Luck.

[37] Mr Holland agreed that all of the commercial issues set out in his statement as the basis for withdrawing the unfair dismissal applications, were known to him at the point in March when he realised there would be a trial in relation to the applications unless they were settled or withdrawn. Mr Holland also said that circumstances had changed when the applications were to be heard, because the business had been impacted by bad weather and poor trade and was not going as well has had been expected.

Conclusions

[38] The question of whether an application was made vexatiously is answered with reference to the motive of the applicant, and requires consideration of whether the predominant purpose is to harass or embarrass the other party, or to gain a collateral advantage 8, rather than seeking adjudication on issues to which the application gives rise.9 An application may also be vexatious where regardless of the motive of the applicant it is so “obviously untenable or manifestly groundless as to be utterly hopeless.”10

[39] In my view, the evidence in this case in relation to the conduct of the Applicants and their representative in pursuing the applications, establishes that they were made in circumstances where there was no real intention to prosecute them. I am also of the view that the evidence considered overall, establishes that the applications were made for the collateral purpose of obtaining a payment from Nude Pty Ltd to cover the period between the date the Applicants’ dismissals took effect and the date upon which they intended to resign their employment for the purposes of establishing their own business. I have reached these conclusions for the following reasons.

[40] At or around 4.45 pm on the day before the hearing, the Applicants’ representative informed FWA and the representative of the Respondent that the applications were to be withdrawn. The late withdrawal of an application is not of itself, a ground upon which it could be found that the application was made vexatiously. However, in the context of this case, I am of the view that the late withdrawal is indicative of the collateral purpose for which the applications were made. The applications had been on foot since 26 February 2010 and the hearing had been programmed since 2 July 2010. The Applicants’ representative knew that the Respondent had obtained representation. The Applicants withdrew after their representative engaged in a series of offers and counter offers, which in my view were designed to “up the ante” by referring to matters which had not been previously raised, such as a claim for unpaid wages, in anticipation that the Respondent would back down and make a settlement offer that approximated the amount the Applicants were seeking to cover the period before they opened their new business.

[41] That the Applicants were engaging in brinkmanship is apparent from the tone of the emails in relation to settlement attempts, and the fact that late on the afternoon before the applications were to be heard, the Applicants were prepared to settle for substantially the same amount as the final offer made by the Respondent, and rejected by the Applicants over a month earlier, on 15 July 2010. The Applicants provided no evidence about the difference between the offers, and I accept that the proposition put to Ms Aitken by Mr Fuhrman-Luck during cross-examination is accurate and that the offers were not substantially different.

[42] It is also the case that the “commercial reasons” cited by Mr Holland in his evidence as the basis for the withdrawal of the applications, existed from the point the applications were conciliated, and probably at the point they were made. At the point the applications were made, the applicants were establishing a new business or had definite plans to do so. The Applicants’ living arrangements were in place before they were dismissed and any difficulties associated with travel to and from their new business caused by those living arrangements were matters that they must have contemplated when they took steps to purchase the new business. It is also the case that the need for the Applicants to shut down their business for a hearing in relation to their unfair dismissal applications, was a matter that would have been known, or should reasonably have been known, when the applications were made, or at very least, after the conciliation conference. The submission that the Applicants’ new business was floundering at the point they decided to withdraw their applications, was unsupported by evidence in these proceedings, other than an assertion by Mr Holland during cross-examination.

[43] I am satisfied, on the balance of probabilities, that before the Applicants were dismissed, they had made a definite decision to leave their employment by 31 March 2010, for the purposes of establishing a cafe or restaurant business of their own and had purchased premises for that purpose. On Mr Holland’s evidence, the contract for the purchase of a business, by the Company known as Elegant Eggplant Pty Ltd, of which he was the sole Director, was finalised on 31 March 2010 and it was intended that there would be refurbishment before the business was rebranded and reopened on 12 April 2010.

[44] Elegant Eggplant Pty Ltd was formed on 2 February 2010, well before the dismissal of the Applicants on 23 February 2010. It is improbable that a Company registered on 2 February 2010, was formed for the purpose of purchasing Nude Delicafe or a franchise to operate it, when on Mr Holland’s evidence those discussions commenced in July 2009 and this proposal did not come to fruition. It is also the case that the name of the Company is aligned to the name of the new Elegant Eggplant Cafe rather than Nude Delicafe. I do not accept Mr Holland’s evidence on this point.

[45] I also do not accept Mr Holland’s evidence that the contract for the purchase of Desiree’s Cafe was entered into after the Applicants were dismissed on 23 February 2010, or that the contract was finalised within two days. Mr Holland did not tender the contract for the purchase of Desiree’s Cafe and offered no reasonable explanation for failing to do so. Mr Holland said in his evidence that he required a loan in connection with the purchase. It is highly improbable that the Applicants could have decided to start their own business and finalised the purchase of an existing business with the intention of rebranding it and re-opening under a new name, between their dismissal on 23 February 2010 and the date they settled on a contract to purchase Desiree’s Cafe.

[46] When these factors are considered, it is more probable than not that when the Applicants were dismissed on 23 February 2010, they had already taken definite steps to purchase Desiree’s Cafe and intended to continue work for the Respondent until 31 March 2010, at the latest, when the contract settled, at which time they planned to cease employment with the Respondent and refurbish the premises they had purchased so that they could reopen on 12 April 2010. The period between 23 February 2010 and 31 March 2010 is approximately five weeks. That is the amount the Applicants sought in conciliation to settle their applications and which informed their position in negotiations thereafter.

[47] Mr Holland’s evidence that he did not consider that there would need to be a hearing, because he believed that Nude Pty Ltd would “back down”, is a further indication that the purpose of the applications was to pressure Nude Pty Ltd to make a payment to the Applicants to tide them over while they implemented a plan formulated before their dismissal, to open a new business. It is also apparent that the Applicants were not seeking the remedy of reinstatement emphasised in the Objects of the unfair dismissal provisions, when they made their applications, and this is a relevant factor in the overall consideration of whether the applications were made vexatiously.

[48] With respect to the ground in s.611(2)(b), the terms “reasonably apparent” and “no reasonable prospects of success” have appeared in earlier versions of the legislation. The question of whether something is reasonably apparent must be objectively determined, rather than determined on the basis of what the person making the application or responding to it thought. The test is that FWA be satisfied that it should have been reasonably apparent that an application or a response had no reasonable prospects of success. 11 The conclusion that an application had no real prospects of success: “should only be reached with extreme caution and where the application is manifestly untenable or groundless”.12 Further, as Whelan C observed in Darcy v Megan Fitzgerald & Associates Pty Ltd13:

“We are dealing in this case with new legislation, the parameters of which have not been tested by the Courts. ... In my view, great care should be exercised in coming to a conclusion that a party either instituted proceedings ‘without reasonable cause’ or in circumstances where it should have been reasonably apparent that the application had ‘no reasonable prospects of success’ where the facts and the law have not been tested in a hearing.” 14

[49] In the circumstances of this case, I am satisfied that it should have been reasonably apparent to the Applicants that their unfair dismissal applications had no reasonable prospects of success. This follows from the finding that the applications were made for the collateral reason that the Applicants were seeking a payment from the Respondent to tide them over until they could open their own business, rather than to have FWA determine whether they had been unfairly dismissed. The material filed by the Applicants in connection with their unfair dismissal applications did not paint the full picture. In particular, the Applicants said nothing about the purchase of Desiree’s Cafe or their plan to voluntarily leave their employment for the purpose of opening their own business, five weeks after they were dismissed. Further, the Applicants had advice from an industrial relations consultant before filing their applications and it would have been reasonable to assume that they would have been informed that their case was marginal, given that they were not seeking reinstatement, and that any compensation they obtained would be minimal because they had planned to leave their employment in any event. The Applicants also had assistance from that consultant in the preparation of their witness statements in the unfair dismissal proceedings and the proceeding in relation to the costs application.

[50] It is true that the material filed by the parties indicates that there are disputed facts, and thathad the Applicants’ version of events as set out in their witness statements been accepted, they may have succeeded with their applications, albeit to a limited extent. However, that version of events was incomplete, and the Applicants did not intend that their version of the facts would be considered by FWA, as indicated by the withdrawal late on the afternoon before the hearing, and the other factual circumstances surrounding their applications.

[51] When all of the evidence is considered the discretion to award costs is triggered, on the basis that the unfair dismissal applications were made vexatiously, and in circumstances where it should have been reasonably apparent that the applications had no reasonable prospects of success. It is therefore necessary to consider whether the discretion should be exercised and an order for costs made. In all of the circumstances of this case, I consider that an award of costs should be made in favour of Nude Pty Ltd. In reaching this conclusion, I have considered the following matters.

[52] This is not a case involving unrepresented persons with no access to advice, withdrawing their applications after realising the implications of proceeding. The Applicants received advice from an industrial relations consultant before filing their applications. The Applicants received further advice from the consultant after the conciliation conference into their applications on 30 March 2010 and at every step thereafter. The Applicants knew that the Respondent was represented by Solicitor and later by Counsel. The consultant, Mr Fuhrman-Luck, should have known the possible consequences of withdrawing the applications at 4.45 pm on the day before the hearing, without reaching agreement in relation to each party bearing its own costs. I do not accept Mr Fuhrman-Luck’s submission that the discussion with Ms Aitken on 25 August 2010 constituted agreement on the part of Ms Aitken to the applications being withdrawn on the basis that Nude Pty Ltd would not pursue costs against the Applicants.

[53] In all of the circumstances of this case, I do not consider that the Respondent has conducted itself unreasonably in refusing to settle the applications. For the reasons set out above, the Applicants, through the conduct of their representative in making a range of settlement offers, engaged in brinkmanship. On 14 July 2010, Nude Pty Ltd offered 2.5 weeks wages as a genuine redundancy payment and indicated in no uncertain terms that if this offer was rejected, no further offers would be made. Nude Pty Ltd maintained this position.

[54] If the matter had gone to hearing, the Applicants would have been required to put on evidence about steps they had taken to mitigate their losses, and a payment of five weeks wages was in all probability, the maximum the Applicants could have obtained, when the evidence about them starting their own business was considered. Even if the Applicants’ new business was floundering, that would not have been relevant in the unfair dismissal proceedings. As casual employees the Applicants had not lost sick leave credits or other entitlements which could have been taken into account in an award of compensation, and FWA could not have ordered any compensation to be paid as a redundancy payment. Any compensation would also have been adjusted for contingencies, such as the Applicants leaving their employment before 31 March 2010. In my view, properly advised, the Applicants could not have reasonably believed that they would have obtained compensation equivalent to five weeks wages each and would have been warned that the amount of compensation could be less.

[55] Viewed against the factual matrix that emerged from the evidence in relation to the costs application, the conduct of the Applicants with respect to settlement attempts and their rejection of the final offer put by Nude Pty Ltd was not reasonable.

[56] Although there is no counter application for costs against Nude Pty Ltd, I am of the view that the conduct of a respondent in resisting an application for reinstatement can be taken into account in deciding whether the discretion to award costs should be exercised. Given that an order for costs may be to the effect that the person against whom they are awarded is to bear some or all of the costs of another person, the conduct of the person to whom costs are awarded may also be relevant to the amount or proportion of the costs awarded.

[57] Nude Pty Ltd was not represented at the point it filed its jurisdictional objection. After taking advice, Nude Pty Ltd dropped two grounds of objection which were not sustainable. This course of action on the part of Nude Pty Ltd and its representative ensured that the issues in dispute were narrowed, and the costs of determining the applications to finality would have been reduced, on the basis that it brought about a situation where a single jurisdictional issue, and the substantive issue of whether the dismissals were unfair, would be heard and determined together. This course of action was agreed to by the Applicants’ representative.

[58] It is the case that two of the grounds of objection were dropped after the Applicants had filed their submissions in response to the jurisdictional objections. However, after considering the material filed on behalf of the Applicants I am of the view that the bulk of that material would have been required in the hearing and determination of the applications, regardless of the jurisdictional objections. The material filed by the Applicants addressed the jurisdictional objection which was still on foot after 20 July 2010, and the general assertion that the dismissals were unfair. This is apparent from the fact that after the further directions issued on 21 July 2010, the Applicants did not file any additional witness statements, but rather, relied on those they had already filed in accordance with earlier directions.

[59] Other than raising two jurisdictional objections which were not sustainable, there was nothing unreasonable about the conduct of Nude Pty Ltd. It made a reasonable offer of settlement in the circumstances of this case, and put the Applicants and their representative on notice that the offer was final. Thereafter, Nude Pty Ltd stuck to its position and did so in circumstances where it faced mounting costs of defending the applications. For the reasons set out above, those applications were made vexatiously, and in circumstances where it should have been reasonably apparent that their applications had no reasonable prospects of success. In all of the circumstances of this case, the Applicants should pay the costs reasonably incurred by Nude Pty Ltd from 20 July 2010 in defending their unfair dismissal applications and the costs of the costs application, on a party and party basis.

[60] Given the legal costs that have already been incurred by the parties, I intend to issue an Order to the effect that the itemised invoices provided by the Respondent, and the file, will be referred to Senior Deputy President Drake for taxation of costs in accordance with Schedule 3.1 of the Fair Work Regulations 2009.

COMMISSIONER

 1   McKenzie v Meran Rise Pty Ltd t/as Nu Force Security Services Dec 375/00 M Print S4962 Per Giudice J, Watson SDP and Whelan C at [7].

 2   Zhang v The Royal Australian Chemical Institute Inc. (No.2) [2004] FCA 1626 (10 December 2004) per Finkelstein J; Hatchett v Bowater Tutt Industries (1991) 39 IR 31.

 3   Exhibit 1 - Statement of Lisa Aitken.

 4   Exhibit 1 - Statement of Lisa Aitken - Annexure N.

 5   Exhibit 1 - Statement of Lisa Aitken - Annexure Q.

 6   Statutory Declaration of Tony Holland Exhibit 3.

 7   Exhibit 4 and Exhibit 5.

 8   Nilsen v Loyal Orange Trust IRCA Decision No: 267/97.

 9   Attorney-General v Wentworth (1988) 14 NSWLR 481.

 10   Ibid at 491 and see also Re Cameron (1996) 2 Qd R 218 per Fitzgerald P.

 11   Wodonga Rural City Council v Lewis PR956243 4 March 2005 at [6] per Watson SDP, Lloyd SDP and Gay C.

 12   Wright v Australian Customs Service PR926115, 23 December 2002 at [23]-[27] and [32]; Deane v Paper Australia Pty Ltd [PR 932454, 6 June 2003] at [7]-[8] and Papunya Community Council Inc. V Hanley

 13   [2009] FWA 1547.

 14   Ibid at [27] - [28].

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