Max Brenner Australia Pty Ltd v John Hammon

[2018] FWC 1922

[2018] FWC 1922

FAIR WORK COMMISSION

DECISION ON COSTS

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

Max Brenner Australia Pty Ltd
v
John Hammon
(U2017/11409)

COMMISSIONER CAMBRIDGE SYDNEY, 6 APRIL 2018

Unfair dismissal claim - application for costs - application made only against party - conduct of paid agent questionable - application refused.

[1] This Decision is made in respect to an application for costs that was made pursuant to s. 400A of the Fair Work Act 2009 (the Act). The costs application was made on 20 December 2017, by Restaurant & Catering Industrial (RCI), acting for the respondent employer who is Max Brenner Australia Pty Ltd(the employer). In accordance with the requirements of s. 402 of the Act, the costs application was made within 14 days after the originating unfair dismissal application was discontinued.

Chronology of Proceedings

[2] On 25 October 2017, Mr Amnon Kelemen from Employee Assist filed an unfair dismissal application (Form F2) taken under s. 394 of the Act. The unfair dismissal application was made on behalf of Mr John Hammon (the applicant). In the application Mr Kelemen identified himself as the applicant’s representative.

[3] The Form F2 indicated that the remedy sought was “Financial Compensation” and that the reason for dismissal was “Poor performance.” Further, the Form F2 contained the following sentence in answer to the question; Why was the dismissal unfair? “The Applicant submits that there was no valid reason for the dismissal and that it was procedurally unfair.”

[4] The Form F2 was made without payment of the relevant application fee. However, on 26 October 2017, the application fee was paid via contact made through Mr Kelemen. On 27 October 2017, the application was listed for conciliation proceedings scheduled for 2:15 pm on 15 November 2017.

[5] On 9 November 2017, RCI sent a written communication to the Fair Work Commission (the Commission) advising that it was acting on behalf of the employer, and it provided relevant contact details for the anticipated conciliation proceedings. On 14 November 2017, RCI filed an employer response (Form F3), on behalf of the employer.

[6] At 1:55 pm on 15 November 2017, being approximately 20 minutes prior to the scheduled commencement of the conciliation proceedings, Mr Kelemen sent an email to the Commission which stated:

“The applicant declined to participate in the conciliation conference.

Please forward the file to the arbitration roster.”

[7] On 17 November 2017, the Parties and their respective representatives were provided with a Notice of Listing for a Pre-Hearing Conference to be held before the Commission as currently constituted, and which was scheduled for 2 pm on 23 November 2017. On 22 November 2017, Mr Kelemen sent an email communication to the Commission which relevantly stated: “Please note that the Applicant will be attending the conference unrepresented.”

[8] On 23 November 2017, the Pre-Hearing Conference proceeded as scheduled and the applicant appeared unrepresented, while Ms A Cameron from RCI appeared with Ms Y Kaminski for the employer. During the Pre-Hearing Conference held on 23 November, the applicant confirmed that Mr Kelemen would be representing him at any Hearing of the application. Ms Cameron indicated that the employer did not oppose permission being granted for the applicant to be represented by lawyers or paid agents. In the circumstances the Commission was satisfied that the requirements of s. 596 of the Act had been met, and permission for either Party to be represented by lawyers or paid agents was granted.

[9] During the Pre-Hearing Conference held on 23 November the Commission programmed the matter for a Hearing to be held on 22 January 2018. The Commission also issued Directions which required that the applicant was to file and serve evidence and an outline of submissions by no later than 4 pm on Friday, 8 December 2017, and the employer was to do likewise by 22 December 2017. Finally, the applicant was directed to file any evidence or other material in reply by no later than 12 January 2018.

[10] On 7 December 2017, the day before the applicant was due to file and serve evidence and an outline of submissions, Mr Kelemen, acting on behalf of the applicant, filed a Notice of discontinuance (Form F50). On 8 December 2017, the Commission advised the Parties that as a result of the filing of the Form F50, the Hearing listed for 22 January had been vacated and the file would be closed accordingly.

[11] On 20 December 2017, RCI filed an Application for costs (Form F6) on behalf of the employer. The Form F6 identified the applicant as the respondent for costs, it did not identify any representative for either Party, and it indicated at point 2.1 that the costs application was taken only under s. 400A of the Act. However, the grounds advanced in support of the application in the Form F6 did mention s. 611 (2) (a) of the Act. Further, the Form F6 indicated at point 3.1 that no costs application was made against a lawyer or paid agent.

[12] The Form F6 did not appear to have been served on either the applicant or his representative, Mr Kelemen, so, on 2 January 2018, the Commission sent a copy of the Form F6 to the applicant and Mr Kelemen. The application for costs was listed for Mention and Directions proceedings on 12 January 2018.

[13] On 8 January 2018, Mr Kelemen sent an email to the Commission in response to the Notice of Listing which stated; “Please note the applicant will appear unrepresented.”

[14] At the Mention and Directions re Costs held on 12 January, Ms Cameron appeared for the employer and the applicant appeared unrepresented. The Commission issued Directions which timetabled the provision of evidence and submissions on the question of costs. The timetable also involved the subsequent confirmation from the Parties that the costs application could be determined upon the documentary material that had been filed and served.

The Case for Costs

[15] The application for costs was said to have been made under s. 611 (2) (a) of the Act. Specifically it was asserted that the original unfair dismissal application had been made without reasonable cause. However, the employer submitted that, alternatively, it relied upon s. 400A of the Act, that is, the applicant caused the employer to incur costs because of an unreasonable act or omission in connection with the conduct or continuation of the matter.

[16] According to the submissions made on behalf of the employer, the circumstances in this instance established that the applicant had engaged in conduct that was captured by the terminology “unreasonable act or omission” found in s. 400A of the Act. The submissions made by the employer referred to various Authorities which were said to establish that subsection 400A (1) could apply in circumstances where a Party incurred costs because of the unreasonable behaviour of the other Party involving the refusal to participate in the conciliation shortly before that process was scheduled to commence.

[17] The submissions made on behalf of the employer set out various aspects of the matter which it said amounted to an unreasonable act or omission by the applicant and which caused costs to be incurred by the employer. These aspects or factors included, inter alia; an absence of sufficient detail of the claim; late notification of a refusal to participate in the conciliation on 15 November 2017; failure to take account of a warning provided by the Commission during the Pre-Hearing Conference about the potential of costs arising from a refusal to participate in conciliation; failure to file and serve documents by 8 December 2017, but “instead pre-emptively withdrawing the Original Application at 10pm on 7 December 2017.”

[18] The employer’s costs application also sought to impugn the conduct of the applicant in response to the costs application and his alleged failure to settle the costs matter. The employer submitted that the applicant’s refusal to accept offers of settlement for the costs matter amounted to an unreasonable act or omission which caused the employer to incur further costs. The employer’s costs application sought to recover the costs of answering the initial unfair dismissal claim and the costs of taking the costs application.

[19] The submissions of the employer included an itemised schedule of costs incurred and disbursements paid up to and including attendance at the Pre-Hearing Conference on 23 November 2017, and totalling $1,716.00. Further costs associated with the costs application were not itemised.

[20] In summary, the employer submitted that the various aspects of the matter including the brevity of detail in the claim, the late refusal to participate in the conciliation, failure to take account of a warning provided by the Commission about the potential for costs, the late pre-emptive withdrawal of the claim, and the refusal to settle the costs application, amounted to an unreasonable act or omission in satisfaction of subsection 400A (1) of the Act.

[21] Consequently, the employer submitted that as the relevant provisions of ss. 611 and 400A of the Act had been satisfied, it was appropriate that the Commission should exercise the discretion to Order that the applicant pay the employer’s costs for both the initial unfair dismissal proceedings and the costs application.

The Case against Costs

[22] The applicant provided extensive documentary submissions in opposition to the employer’s application for costs. The applicant’s submissions opposed the application for costs on the basis that the requirements of ss. 611 and 400A of the Act had not been satisfied in this instance.

[23] The submissions made by the applicant firstly addressed the assertion that costs should be Ordered under s. 611 of the Act. In particular, the submissions made by the applicant rejected that the s. 394 application had been made without reasonable cause, or that it should have been reasonably apparent to the applicant that his application had no reasonable prospect of success. The applicant provided a summary of issues relating to his unfair dismissal claim which he said established that it had reasonable prospects for success, and was not taken vexatiously, frivolously or unnecessarily. The applicant submitted that when all of the relevant facts and circumstances surrounding the termination of his employment were considered, there was a reasonable basis for commencing the unfair dismissal claim.

[24] The second part of the submissions made by the applicant involved a summary of the activity taken in respect of the proceedings for his unfair dismissal claim, and in particular, reference was made to communications that occurred between himself and his representative, Mr Kelemen. According to the submissions made by the applicant, an analysis of the material that verified the detail of the communications between himself and his representative, established that all of the actions taken in respect of the unfair dismissal claim were undertaken as a result of direction given by Mr Kelemen.

[25] The submissions made by the applicant included copies of numerous email communications between Mr Kelemen and himself and which related to the motivations that were said to have underpinned the particular activity of the applicant in respect to the approach to proceedings in the unfair dismissal claim. The applicant asserted that the conduct of his representative was unsatisfactory, and it was the advice and actions of Mr Kelemen rather than the applicant himself that caused any conduct that may satisfy s. 400A of the Act.

[26] The applicant stated that he had been a victim of his former employer as well as a victim of Mr Kelemen. Further, the applicant said that he had made several offers to settle the costs application which he believed were reasonable propositions and that none of the actions that he had taken were undertaken with the intention of causing the employer to unnecessarily incur costs.

[27] In summary, the submissions made by the applicant asserted that his unfair dismissal application was made with the belief that the claim had reasonable prospects of success. The applicant stated that he genuinely felt that he had been unfairly dismissed. Further, the applicant stated that his actions during the unfair dismissal proceedings occurred as a result of the advice provided by his representative whose engagement in relation to the unfair dismissal application was “nothing short of disastrous.” Consequently, the applicant submitted that he had not taken any unreasonable act or omission in relation to any of the proceedings. Therefore, the applicant requested that the Commission dismiss the employer’s application for costs.

Consideration

[28] Although there are a number of different sections of the Act which deal with costs, the application for costs in this instance was pursued under s. 400A. Section 611 was specifically not included in answer to question 2.1 of the Form F6. However, s. 611 (2) (a) was mentioned in the grounds set out in the Form F6.

[29] It is clear from subsection (3) of s. 400A that the Commission may make a costs Order in respect to an unfair dismissal claim if any of the terms of either ss. 400A or 611 have been satisfied. Relevantly, these two sections of the Act are in the following terms:

“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

and

611 Costs

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

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

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

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

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

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

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

[30] Importantly, the costs application made in this instance has not been taken under s. 401 of the Act, as no identification to that effect was made in part 3.1 of the Form F6. Section 401 of the Act is in the following terms:

“401 Costs orders against lawyers and paid agents

(1) This section applies if:

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

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

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

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

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

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

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

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

[31] Consequently, in the absence of any application taken under s. 401 of the Act, the employer’s application for costs has been considered in terms of any satisfaction of s. 400A and/or s. 611 of the Act.

General Approach to Costs

[32] The approach to consideration of any application for costs made under the Act should, at the outset, recognise the significance of subsection 611 (1) and the implications that have been established to flow from those particular provisions. In this regard, it is relevant to refer to a Full Bench Decision in the matter of E. Church v Eastern Health t/as Eastern Health Great Health and Wellbeing 1 and the following extract from that Decision is relevant:

“[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 5 and that the power should be exercised with caution and only in a clear case 6. 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.” [emphasis added]

[33] Consequently, it has been well established that there should be a cautious approach taken in respect to any application for costs made under the Act. This caution operates to establish an underlying reluctance to grant any application for costs and to only do so in instances where a clear case has been made out to satisfy the exceptions to the general rule that each side bear its own costs. Those exceptions are specified in subsections 611 (2) (a) and (b) of the Act, and in the case of a claim for unfair dismissal, also extend to circumstances identified in subsection 400A (1).

[34] In this instance the employer has asserted that there were particular aspects of the application and the conduct of the applicant in respect to the proceedings, upon which the exceptions to the general rule that each side bear its own costs had been established. The employer asserted that the unfair dismissal claim made by the applicant was; (a) taken without reasonable cause and/or, (b) that it had no reasonable prospect of success. Further, and more particularly, the employer asserted that the applicant caused costs to be incurred because of the unreasonable act(s) or omission(s) of the applicant.

Vexatiously or Without Reasonable Cause - s. 611 (2) (a)

[35] Although the costs application included mention of subsection 611 (2) (a) of the Act it appeared that the employer primarily sought to rely upon s. 400A as the basis for any costs Order. On the question of whether the application could be considered to have been taken without reasonable cause, it is important to have regard for the established stringency of the test that must be met to satisfy that a case was taken without reasonable cause. In numerous Judgements and Decisions there have been various descriptions used to characterise the test required for a finding that a case was commenced without reasonable cause. Terminology such as “manifestly groundless” “obviously untenable” and “incapable of argument” has provided guidance.

[36] The relevant tests for finding that a matter was taken without reasonable cause, when translated into the context of an application for unfair dismissal remedy, require identification of some aspect of the application which would unquestionably defeat the claim. An unfair dismissal claim that was taken without reasonable cause would contain some aspect which was identifiable from the application document and which aspect of itself, would operate to strike the claim out. For example, an application which stated and provided verification that the period of employment was less than six months would be a claim that would be likely to have been taken without reasonable cause.

[37] In the present circumstances, there was no suggestion that the claim for unfair dismissal contained some defect(s) which meant that it should have been struck out or otherwise subject to interlocutory disposal. Indeed, the employer complained that the conduct of the applicant deprived it of an opportunity to attempt to settle the claim. I cannot identify any aspect of the application which could be capable of defeating the claim without any recourse to argument. Consequently, I am not satisfied that the application was made without reasonable cause.

No Reasonable Prospect of Success - s. 611 (2) (b)

[38] The second aspect upon which the application for costs may have been established involved the prospect that it should have been reasonably apparent to the applicant that his application had no reasonable prospect of success. It seems to be well settled that the test to establish that a case had no reasonable prospects for success is not as stringent as that required to find that a matter had been taken without reasonable cause.

[39] Consideration of this aspect of the application for costs involves a broad assessment of the merits of the case as should have been properly evaluated at the time of the making of the application. However, caution must be exercised to carefully evaluate whether any alleged absence of merit would have been reasonably apparent to an applicant at the time of making the claim.

[40] The submissions of the employer on this question focused upon the brevity of the information and grounds advanced in support of the claim as contained in the Form F2. The employer did provide an extensive response as part of the Form F3. However, the employer did not at the time of making its response, indicate that the lack of information provided in the Form F2 was reflective of there being no reasonable prospect of success.

[41] Consequently, despite the regrettable paucity of information contained in the Form F2, the brevity of the information provided in the claim when considered against the position that was articulated in the employer’s response, does not provide for any clear absence of potential for success of the claim. Essentially, the case as was presented by the Form F2 and Form F3 appeared to be open to argument and with some potential for success.

Unreasonable Act or Omission - s. 400A (1)

[42] The primary basis upon which the costs application was pursued involved conduct that was asserted to satisfy subsection 400A (1) of the Act.

[43] Subsection 400A (1) of the Act introduces a further exception to the general rule established by subsection 611 (1) that each side bear its own costs in relation to a matter before the Commission. This particular exception is confined to unfair dismissal proceedings and requires that the Commission be satisfied that a Party caused costs to be incurred by another Party because of an unreasonable act or omission. An unreasonable act or omission could occur in respect to a particular aspect or part of the proceedings, or such act or omission might involve a more general finding in respect to a combination of factors surrounding the application and any part or parts of the proceedings.

[44] The employer’s s. 400A application focused complaint about two particular events involving the conduct of the applicant which, in combination with other factors, were said to establish an unreasonable act or omission which caused the employer to incur costs. The first event involved the applicant refusing to participate in the scheduled conciliation on 15 November 2017, and instead requesting that the matter proceed to arbitration. The second event occurred when, after the programming of the matter for arbitration in accordance with Directions made at the Pre-Hearing Conference held on 23 November 2017, the applicant discontinued the matter the day before he was due to submit evidence and other material in support of the claim.

[45] In my view, there is a fundamental obligation on an applicant in an unfair dismissal claim to participate in any process which might seek to resolve that claim without the need for a determination of the Commission. There are obvious, important public interest considerations in ensuring that unfair dismissal claims are dealt with efficiently and without unnecessary costs to either the Parties or the tax paying public.

[46] Ordinarily, it would seem to be unreasonable for an applicant in any unfair dismissal claim to refuse to participate in conciliation. However, there may be circumstances where for legitimate reason, an applicant could insist that their unfair dismissal claim be the subject of arbitration and determination by the Commission. In such circumstances, whereby the claimant has acted so as to compel the matter to proceed to Hearing and determination without any preparedness to entertain settlement, any failure of the claim might logically represent an unreasonable act or omission as contemplated by subsection 400A (1) of the Act.

[47] In general terms, to make an unfair dismissal claim and then refuse to participate in conciliation, is conduct that should involve potential consequences in the event that the claim failed. Those consequences manifest in the form of costs Orders. In this instance, there would seem to be sound, almost compelling basis for a costs Order to be made against the applicant.

[48] However, the applicant has sought to resist any costs Order on the basis that particular conduct that the employer complained about was action taken as a direct result of the advice and conduct of his representative, Mr Kelemen. The applicant provided considerable material including various documentary exchanges between himself and Mr Kelemen, upon which he sought to demonstrate that the refusal to participate in conciliation, and the subsequent discontinuance of the claim, were actions taken by Mr Kelemen acting as the applicant’s representative.

[49] An examination of the material provided by the applicant including in particular, documentary exchanges that he had with Mr Kelemen on 23 and 28 November 2017, and also on 6 December 2017, has introduced the potential that the unreasonable actions of the applicant could be largely attributed to the questionable conduct and unusual advice provided by Mr Kelemen. I stress that there can be no concluded view about the role of the applicant’s representative, as Mr Kelemen has not been provided with an opportunity to be heard in respect to his conduct and advice as was alleged by the applicant. However, particular aspects of the documentary exchanges between the applicant and Mr Kelemen have provided potential that it would be unreasonable and unjust to confine culpability for the unreasonable conduct of the applicant to the applicant himself.

[50] The relevant exchanges between the applicant and Mr Kelemen reveal the level of concern that the applicant had about the prospect that the conduct that had been adopted on his behalf might result in costs Orders being made against him. Despite the applicant’s level of concern, the responses provided by Mr Kelemen were somewhat regrettable, as can be seen from the following extracts taken from the material provided by the applicant:

“

[51] As previously mentioned, the documentary material that the applicant provided and which included various exchanges with Mr Kelemen, has not been capable of proper testing or further scrutiny because the employer did not advance its application for costs under s. 401 of the Act. In addition, the Commission has no record that there has been a Notice of representative ceasing to act filed by Mr Kelemen or Employee Assist.

[52] Further, it is relevant to note that the applicant has engaged in negotiations aimed at settling the employer’s costs application. The applicant has offered to pay amounts to settle the costs application. This approach by the applicant when apparently acting without the assistance of his representative can be contrasted with the approach to conciliation of the unfair dismissal claim which appeared to be largely directed by Mr Kelemen.

[53] Consequently, as a result of the evidence of the communications between the applicant and his representative, I have formed the view that it would be unreasonable and unjust to find the applicant solely culpable for the unreasonable conduct of the applicant which may ordinarily represent an act or omission capable of satisfying the terms of subsection 400A (1) of the Act.

Conclusion

[54] This application for costs was made primarily under s. 400A of the Act. However, the Commission has also been required to consider whether the requirements of subsections 611 (2) (a) and (b) of the Act were met and therefore costs should be Ordered in favour of the employer.

[55] In respect to subsection 611 (2) (a) of the Act, an analysis of the circumstances at the time that the application was made, has confirmed that the application was not made without reasonable cause.

[56] Further, for the purposes of subsection 611 (2) (b) of the Act, having regard for the plethora of factors which may establish that a dismissal was unfair, I am not satisfied that at the time that the application was made, it should have been reasonably apparent to the applicant that the application had no reasonable prospect of success.

[57] In respect to subsection 400A (1) of the Act, I have not been satisfied that the conduct of the applicant in connection with the refusal to participate in conciliation and the subsequent discontinuance of the matter, represented an act or omission that could be solely attributed to the applicant. Although such conduct would ordinarily be sufficient to satisfy the requirements of subsection 400A (1) of the Act, in the absence of the costs application being advanced under s. 401 of the Act, there can be no concluded view made as to the appropriate apportionment of culpability that might be properly made as between the applicant and his representative.

[58] Consequently, the requirements of subsections 611 (2) (a) and (b) and 400A (1) of the Act have not been properly satisfied. Therefore, the general rule established by subsection 611 (1) of the Act, that each Party bear its own costs, is not disturbed by any one or more of the exceptions provided in subsections 611 (2) and 400A (1).

[59] The employer’s application for costs must be refused and an appropriate Order shall be issued.

COMMISSIONER

<PR601690>

 1   E. Church v Eastern Health t/as Eastern Health Great Health and Wellbeing [2014] FWCFB 810.

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