Somchai Chimlum v Phoenix Combat Sports Pty Ltd T/A Phoenix Gym

[2016] FWC 6851

[2016] FWC 6851

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.394—Unfair dismissal

Somchai Chimlum
v
Phoenix Combat Sports Pty Ltd T/A Phoenix Gym
(U2015/17061)

DEPUTY PRESIDENT KOVACIC MELBOURNE, 23 SEPTEMBER 2016

Application for costs against the Costs Respondent.

[1] On 23 December 2015 Mr Somchai Chimlum (the Costs Respondent) made an application under s.394 of the Fair Work Act 2009 (the Act) alleging that the termination of his employment by Phoenix Combat Sports Club Pty Ltd T/A Phoenix Gym (the Costs Applicant) on 14 December 2015 was unfair. In its Form F3 – Employer Response to Unfair Dismissal Application the Costs Applicant raised a jurisdictional objection, objecting to the application on the basis that it was a small business and that Mr Chimlum’s dismissal was consistent with the Small Business Fair Dismissal Code (the Code). The application and jurisdictional objection were heard by the Fair Work Commission (the Commission) on 7 and 8 June 2016.

[2] In its decision 1 (the Decision) issued on 3 August 2016, the Commission determined that Mr Chimlum’s dismissal was consistent with the Code and that, as such, his dismissal was fair. Mr Chimlum’s application was therefore dismissed. An Order to that effect2 was issued in conjunction with the Decision.

[3] On 15 August 2016 the Costs Applicant made an application for costs under s.400A of the Act which deals with costs orders against parties. The Commission emailed the parties on 16 August 2016 seeking an indication as to whether they were open to the costs application being dealt with on the papers, with both parties advising that they were amenable to that approach. Against that background, the Commission issued Directions on 22 August 2016 regarding the filing of submissions concerning the costs application.

[4] For the reasons outlined below, I am not satisfied the grounds in s.400A(1) of the Act have been made out. Accordingly, the costs application will be dismissed.

The Statutory framework

[5] Section 400A of the Act provides as follows:

“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.”

[6] As can be seen from above, s.400A(2) refers to s.402 of the Act which is set out below.

“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.”

The Costs Applicant’s case

[7] The grounds on which costs are sought were set out in the costs application and can be summarised as follows:

• the Costs Respondent acted unreasonably by rejecting the settlement offers put to him by the Costs Applicant on 16 March and 1 April 2016, highlighting that both letters of offer advised the Costs Respondent that the amount being offered ($1,000) was more than he was likely to be awarded by the Commission should it find that he had been unfairly dismissed particularly as he had found alternative employment a week and a half after his dismissal;



• in circumstances where the Costs Respondent was not seeking reinstatement, he acted unreasonably by proposing a settlement amount which was beyond the maximum which the Commission could determine as compensation in lieu of reinstatement;



• the Costs Respondent acted unreasonably by continuing the proceedings in circumstances where he had been advised of the Costs Applicant’s jurisdictional objection as it should have been apparent to him that his application did not have reasonable prospects of success;



• the Costs Respondent acted unreasonably by raising many matters and issues in his submissions and evidence that were irrelevant or beyond the jurisdiction of the Commission, e.g. the Costs Respondent’s claim for back pay, thereby unreasonably preventing settlement and making the proceedings more protracted; and



• the Costs Respondent acted unreasonably by deliberately obfuscating and avoiding answering questions while giving his oral evidence thereby causing the hearing to proceed into a second day.

[8] In its submissions in reply to the Costs Respondent’s written submissions, the Costs Applicant reiterated the reasons cited in its costs application and its view that the Costs Respondent acted unreasonably. Beyond that, the Costs Applicant contended inter alia that:

• it is unreasonable to continue unfair dismissal proceedings in order to pressure the other party to resolve other matters in other jurisdictions;



• while it acknowledged that s.400A is not intended to preclude an applicant from robustly pursuing their unfair application such robustness must be tempered by reasonableness;



• ignorance of the law is not an excuse;



• the reasonable of the Costs Applicant’s second settlement offer should have been apparent to the Costs Respondent as the letter setting out the offer highlighted the difficulties which his unfair dismissal claim faced, making his rejection of the offer all the more unreasonable;



• in assessing a costs application made under s.400A the Commission must determine whether the party against who costs are sought engaged in unreasonable behaviour as opposed to when the party engaged legal representation; and



• while the Costs Respondent’s financial position was a factor which the Commission may take into consideration it should only do so in determining the amount of any costs order as opposed to it being a factor preventing the making of a costs order.

[9] Finally, the Costs Applicant submitted that in determining its costs application the Commission should follow the decision of Commissioner Williams in Ferry v GHS Regional WA Pty Ltd T/A GHS Solutions (Ferry) 3.

The Costs Respondent’s case

[10] The Costs Respondent submitted that:

• the Costs Applicant’s settlement offer of $1,000 was not generous when compared to what he considered he was owed by the Costs Applicant;



• he did not find work a week and a half after he had been dismissed;



• s.400A was not intended to prevent him from robustly defending his unfair dismissal application, adding that he was within his rights to hold out for an offer that was more closely aligned to what he had calculated he was owed;



• he was not legally trained and did not properly understand the legal framework in which he was operating, including the Costs Applicant’s jurisdictional objection;



• his proposed settlement offer was not an attempt to engage in unreasonable conduct, adding that he genuinely believed that the Commission could deal with his demotions and associated loss of pay as part of his unfair dismissal claims and the settlement amount he was seeking was reduced when he became aware that the Commission could not make a determination in respect of those issues;



• the Costs Applicant should have known that its proposed settlement offer would be rejected when it put the offer to him again on 1 April 2016 given that he had previously rejected the offer;



• the Costs Applicant prevented a settlement being reached by not engaging in the settlement process in good faith and acted unreasonably by making an offer which had been rejected twice previously;



• it was not his intention when giving his evidence to deliberately delay proceedings, adding that he was placed in a highly stressful situation in which he broke down and provided evidence that became inconsistent and convoluted;



• the Commission is generally a no cost jurisdiction;



• costs incurred by the Costs Applicant prior to permission being granted by the Commission for the Costs Applicant to be legally represented should not be considered by the Commission as part of the costs application;



• he was not in a strong financial position to pay costs; and



• the Commission should refrain from exercising its discretion to award costs in this case, adding that were the Commission minded to award costs it should have regard to his limited ability to pay such costs.

Consideration of the issues

[11] Section 400A(2) provides that the Commission may only make a costs order under s.400A(1) if the other party to the matter has applied for such an order in accordance with s.402. In this case it was not disputed that the costs application had been made within 14 days after the Commission had determined the matter. Accordingly, the requirement in s.400A(2) is satisfied.

[12] Section 400A(1) of the Act provides that the Commission may make an order for costs against a party (the first party) to a matter arising under Part 3-2 – Unfair Dismissal of the Act if it 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.” In this case the Costs Applicant contended that the Costs Respondent had acted unreasonably in a number of respects.

[13] By way of background, I would firstly note that s.611(1) of the Act provides that “A person must bear the person’s own costs in relation to a matter before the FWC.” Secondly, I would note that s.400A was enacted as part of the Fair Work Amendment Act 2012. The Explanatory Memorandum to the Fair Work Amendment Bill 2012 explains s.400A in the following terms:

“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.” (Underlining added)

[14] A key contention of the Costs Applicant is that the Costs Respondent acted unreasonably by rejecting its settlement proposals of 16 March and 1 April 2016, particularly as he had found alternative employment a week and a half after his dismissal. On the other hand, the Costs Respondent disputed that he had found alternative work so quickly after his dismissal and submitted, inter alia, that s.400A was not intended to prevent him from robustly defending his unfair dismissal application, adding that he was within his rights to hold out for an offer that was more closely aligned to what he had calculated he was owed. At the unfair dismissal hearing, the Costs Respondent attested in his oral evidence that he had found various work and set up his own business from January 2016 4. Further, the Costs Respondent in his written submissions to the unfair dismissal hearing estimated his loss over the period from his dismissal to 14 May 2016 as $4,718.185. That estimated loss was not the subject of any submissions by the Costs Applicant at the hearing, though the Costs Applicant did submit in the proceedings that were the Commission to find that the Costs Respondent had been unfairly dismissed that the amount of any compensation awarded “should be minimal if at all.”6 I note also that in his unfair dismissal application the Costs Respondent stated that the remedy being sought was six months’ pay or any other order that the Commission was minded to make7. The above analysis does not point to the Costs Respondent’s decision to reject the settlement offers made by the Costs Applicant being unreasonable.

[15] The Costs Applicant further submitted that the Costs Respondent acted unreasonably by continuing the proceedings in circumstances where he had been advised of its jurisdictional objection as it should have been apparent to him that his application did not have reasonable prospects of success. A Full Bench of the then Australian Industrial Relations Commission in Wright v Australian Customs Service (Wright) 8explored the circumstances in which a finding that an application had no reasonable prospect of success may be warranted, observing that:

“We reiterate that, in our view, in considering whether the requisite conclusion should be drawn, the Commission should proceed with exceptional caution and only draw that conclusion where, on all the materials before the member, the substantive application is manifestly untenable or groundless. Where, on those materials, there is a real issue of fact to be determined and that issue is relevant to the resolution of the substantive application, it would be unlikely that a conclusion could be formed that the application has “no reasonable prospect of success at arbitration”.” 9 (Underlining added)

[16] With regard to the Costs Applicant’s jurisdictional objection, as noted in the Decision, the Commission had “… to determine first whether the employer genuinely held a belief that the employee’s conduct was sufficiently serious to justify immediate dismissal, and second whether the employer’s belief was, objectively speaking, based on reasonable grounds. Whether the employer has carried out a reasonable investigation into the matter will be relevant to the second element.” 10 In other words, drawing on the language used in Wright, there were matters of fact to be determined by the Commission. As such, I am not satisfied that the Costs Applicant’s contention is sustained.

[17] As previously noted, the Costs Applicant also contended that the Costs Respondent acted unreasonably by deliberately obfuscating and avoiding answering questions while giving his oral evidence thereby causing the hearing to proceed into a second day. As observed in the Decision, there were a number of significant inconsistencies in key aspects of the Costs Respondent’s evidence which caused the Commission to have significant reservations about the reliability of his evidence 11. Further, during the unfair dismissal hearing, the Commission on a number of occasions stressed the importance of the Costs Respondent answering the questions asked of him. The following extract from the transcript is an example:

“I will just make a point here and I am sorry to interrupt your flow, Mr Ward. Ms Sunettra [the translator], you must convey to Mr Chimlum, this will be a lot quicker if he is a lot more direct in his responses to the questions that are asked. I use the word very carefully – evasiveness doesn’t help.” 12

[18] Also relevant in this regard is that when the Commission issued Directions on 4 May 2016 in respect of the unfair dismissal application, the matter was listed for hearing for 7 and 8 June 2016, i.e. two days. In other words, it should have been clear to the Costs Applicant that the hearing could extend beyond one day. I note also that:

• English is not the Costs Respondent’s first language;



• the need for a translator also had the effect of extending the Costs Respondent’s cross examination; and



• the hearing on 8 June 2016 continued for just under two hours, raising significant doubt as to whether the hearing could have concluded in one day.

[19] Taking into account all of the above considerations, I am not satisfied that the Costs Respondent’s oral evidence, as confused as it was at times, of itself caused the hearing to proceed into a second day or that the Costs Respondent’s conduct at the hearing was deliberate.

[20] Beyond the above, I would further note that:

• it is not uncommon as part of settlement negotiations in respect of an unfair dismissal application for a party to pursue a settlement which encompasses issues going beyond what the Commission can determine, e.g. for the termination of employment to be treated as a resignation and the rectification of alleged underpayments;



• doing so does not of itself constitute an unreasonable act; and



• the Costs Applicant did not point to any other specific conduct by the Costs Respondent which prolonged the hearing of the matter.

[21] Finally, as mentioned above, the Costs Applicant submitted that the Commission should follow the decision in Ferry. One of the factors relied upon by Commissioner Williams in deciding to award costs in Ferry was that in that case:

“[70] In addition to knowing the above facts as he did, Mr Ferry would also have been assisted when considering the respondent’s settlement offer, by the fact that he already had received the respondent’s witness statements, supporting documents and outline of submissions that had been filed in preparation for the hearing.” 13

[22] In this case the Costs Applicant’s settlement offers of 16 March and 1 April 2016 were both made before the Commission issued its Directions on 4 May 2016. In other words, the Costs Respondent would not have had the benefit of the Costs Applicant’s submissions and evidentiary materials at the time of those offers. That, in my view, clearly distinguishes this matter from the circumstances existing in Ferry.

[23] In summary, based on the above analysis, the Commission is not satisfied that the grounds in s.400A(1) have been made out. Accordingly, the costs application will be dismissed.

Conclusion

[24] For all the above reasons, I am not satisfied the grounds in s.400A(1) have been made out. Accordingly, the costs application will be dismissed. An order to that effect will be issued in conjunction with this decision.

 1   [2016] FWC 5282

 2   PR583635

 3   [2016] FWC 3120

 4   Transcript of 8 June 2016 at PN815-818

 5   Exhibit 9 at paragraph 60.b.

 6   Transcript of 8 June 2016 at PN940

 7   Form F2 – Unfair Dismissal Application at Item 2.1

 8 (2002) 120 IR 346

 9   Ibid at [32]

 10   [2016] FWC 5282 at [32]

 11   [2016] FWC 5282 at [29]

 12   Transcript of 8 June 2016 at PN750

 13   [2016] FWC 3120 at [70]

Printed by authority of the Commonwealth Government Printer

<Price code C, PR585719>