Thaer Barkho v Dairy Country Pty Ltd

[2016] FWC 3111

[2016] FWC 3111

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
ss.400A, 611 – costs

Thaer Barkho
v
Dairy Country Pty Ltd
(U2015/2982)

COMMISSIONER RYAN MELBOURNE, 18 MAY 2016

Application for relief from unfair dismissal – application by respondent for costs pursuant to ss.400A and 611 – application dismissed.

[1] Dairy Country has made an application for costs against Mr Barkho in relation to the failed unfair dismissal application made by Mr Barkho.

[2] Dairy Country seeks costs orders under both s.611 and s.400A and seeks that the costs orders be made on an indemnity costs basis and not on a party to party basis.

[3] The presumption underpinning the Fair Work Act and proceedings before the Fair Work Commission is that parties to proceedings bear their own costs.

“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).”
“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.”

Consideration of the Applications for Costs

[4] The applications for costs under each of s.400A and s.611 must be considered separately given the requirements of both sections.

[5] The first point that must be made is that the legislative purpose of the two sections is fundamentally different.

[6] Section 611 commences by stating the key principle underlying participation in proceedings before the Commission, namely that applicants and respondents must bear their own costs in relation to the matter before the Commission.

[7] The circumstances in which the Commission can make a costs order under s.611 are the very limited exceptions set out in s.611(2) to the general rule in s.611(1) that each party bear its own costs.

[8] The authorities on s.611 and predecessor legislative provisions make it very clear that the hurdle created by s.611(2) is meant to be a high bar that requires significant effort to get over and that s.611(2) is not a low bar that can be stepped over easily. 1

[9] Section 400A was introduced into the Act in 2012 following a review of the Act’s first two years of operation. The Explanatory Memorandum to s.400A makes very clear its purpose:

“Part 3 – Costs orders against parties

Fair Work Act 2009

168. Item 4 inserts a new section 400A to enable the FWC to order costs against a party to an unfair dismissal matter (the first party) if it is satisfied that the first party caused the other party to the matter to incur costs by an unreasonable act or omission in connection with the conduct or continuation of the matter.

169. As with the new power to dismiss applications under section 399A, the power to award costs under section 400A is not intended to prevent a party from robustly pursuing or defending an unfair dismissal claim. Rather, the power is intended to address the small proportion of litigants who pursue or defend unfair dismissal claims in an unreasonable manner. The power is only intended to apply where there is clear evidence of unreasonable conduct by the first party.

170. The FWC’s power to award costs under this provision is discretionary and is only exercisable where the first party (whether the applicant or respondent) causes the other party to incur costs because of an unreasonable act or omission. This is intended to capture a broad range of conduct, including a failure to discontinue an unfair dismissal application made under section 394 and a failure to agree to terms of settlement that could have led to the application being discontinued.

171. However, the power to award costs is only available if the FWC is satisfied that the act or omission by the first party was unreasonable. What is an unreasonable act or omission will depend on the particular circumstances but it is intended that the power only be exercised where there is clear evidence of unreasonable conduct by the first party.

172. This amendment responds to Panel recommendation 45.

173. Subsection 400A(2) provides that the power to award costs against one party in these circumstances is only exercisable if the other party to the matter makes an application in accordance with section 402. Subsection 400A(3) makes clear that the new power to award costs under subsection 400A(1) operates in addition to subsection 611(2), which enables the FWC to make costs orders against a person in certain circumstances, such as where an application is made vexatiously or without reasonable cause.”

[10] Whilst s.400A does not have the same general principle as does s.611(1), it is clear from the Explanatory Memorandum to s.400a that there is still a high bar to be got over before costs can be ordered under s.400A.

[11] Section 400A gives rise to 4 specific questions that must be addressed:

● Is the FWC satisfied that the Applicant caused those costs to be incurred because of an unreasonable act of the Applicant in connection with the conduct of the matter?
● Is the FWC satisfied that the Applicant caused those costs to be incurred because of an unreasonable omission of the Applicant in connection with the conduct of the matter?
● Is the FWC satisfied that Applicant caused those costs to be incurred because of an unreasonable act of the Applicant in connection with the continuation of the matter?
● Is the FWC is satisfied that the Applicant caused those costs to be incurred because of an unreasonable omission of the Applicant in connection with the continuation of the matter?

[12] Section 611 gives rise to 3 specific questions that must be addressed:

● Is the FWC satisfied that the Applicant made the application, vexatiously?

● Is the FWC satisfied that the Applicant made the application, without reasonable cause?

● Is the FWC satisfied that it should have been reasonably apparent to the Applicant that the Respondent’s application, had no reasonable prospect of success?

Section 400A Costs Application

[13] In relation to s.400A Dairy Country contends that there were three specific unreasonable acts or omissions of the Applicant which caused costs to be incurred by the Respondent and which therefore justify the making of an order for costs.

[14] Firstly, the Respondent contends that:

“15. For the sake of clarity, Dairy Country submits that Mr Barkho’s failure to
withdraw his application on or around 6 March 2015 was an unreasonable act
or omission, given his indication that he did not dispute his dismissal and that
the relief he was seeking related to back pay. It follows that failing to
withdraw that application caused Dairy Country to incur the costs of defending
the proceeding.” 2 [citation removed]

[15] Secondly, the Respondent contends that the Applicant’s rejection of offers of settlement was an unreasonable act or omission on his part. The Respondent identifies that six separate offers of settlement were made on 6 March 2015, 10 July 2015, 11 September 2015, 13 October 2015, 19 October 2015 and 30 October 2015.

[16] Thirdly, the Respondent contends that it incurred costs as a result of a series of failures of the Applicant to comply with the orders and/or directions of the Commission in the lead up to and during the hearing of the unfair dismissal application.

Failure of the Applicant to Discontinue his application

[17] Of the three grounds for an order under s.400A the first ground is easy to deal with.

[18] In the context of an application for an unfair dismissal remedy it is not uncommon for an applicant to raise other outstanding issues with their former employer especially issues relating to underpayments. In the present matter the Applicant did just that. In his Form F2 the Applicant identified the remedy he was seeking as follows:

“2. Remedy

2.1 What outcome are you seeking by lodging this application?

My overtime work to be payed
My super to be payed
Not good reason for dismissal

[19] Further the Applicant in his Form F2 gave a description of the events which led to his dismissal.

[20] In the context of the Form F2 it would not be surprising for the Applicant to seek to resolve both his unfair dismissal application and his underpayment claims at the conciliation which occurred on 6 March 2015.

[21] It appears from the Respondent’s material that no offer of settlement was made by the Respondent at that conciliation and that the Applicant sought the sum of $40,000.00 to settle all claims against the Respondent.

[22] Whilst it is clear from the email from the Conciliator to the parties that the Applicant advised that he would discontinue his application this did not occur and the Applicant continued to press his application. I note that the Applicant in his affidavit in this costs matter asserts that he never intended to discontinue his application and that there was a misunderstanding in the proceedings before the Conciliator.

[23] The failure of the conciliation before the FWC Conciliator did not require the Applicant to discontinue his unfair dismissal application and the Applicant was free to continue that application separately to any action to recover an underpayment of wages or superannuation.

[24] It cannot be considered to be an unreasonable act on the part of the Applicant to not go through with the filing of a notice of discontinuance. Whilst it appears that the discussions at the conciliation concerned the Applicant’s underpayment of wages claim and the inability of the Commission to deal with an underpayment of wages claim as part of an unfair dismissal claim there is nothing which suggests that at the time of the conciliation that the Applicant’s unfair dismissal case was without merit.

[25] It is obvious that the Respondent incurred costs once the application was not discontinued. But, for the purposes of s.400A, it cannot be said that the Respondent incurred costs because of an unreasonable act or omission of the Applicant in connection with the conduct or continuation of the matter in that the Applicant chose not to discontinue his application after the conciliation on 6 March 2015.

Rejection of Settlement Offers

[26] On 6 March 2015 a conciliation occurred before a FWC Conciliator. During that conciliation the Applicant sought $40,000 to settle the matter. The Respondent rejected this offer. The Respondent makes no suggestion that it made any monetary offer to settle. It appears that the Applicant told the Conciliator that he intended to discontinue his application. But he did not do so.

[27] On 4 June 2015 the Respondent made a payment to the Applicant of $9,058.12 in respect of any possible underpayment which may have arisen during the period of employment with the Respondent.

[28] On 10 July 2015 during a telephone conference convened by the Commission the Respondent made a verbal offer to the Applicant of reinstatement or a payment of $3,952.00. The Applicant rejected both offers.

[29] On 11 September 2015 the Respondent put a written offer of settlement to the Applicant. The offer identified the Respondent had already paid $9,058.12 and that a further $5,015.72 less tax was being paid to the Applicant in respect of any possible underpayment which may have arisen during the period of employment of the Applicant with Hudson Pacific Corporation. The letter then offered a settlement payment of $3,952.00 less tax if the Applicant would sign a Deed of Release. The Deed of Release attached to the letter was a complex legal document of over 7 pages.

[30] The written offer of settlement stated that it was only available to the Applicant until 5pm on Tuesday 15 September 2015. The letter also contained the following:

“Given that our client’s materials in response to your application are due to be filed and served on 28 September 2015, this is our client’s final offer to you in respect of settlement of these proceedings. This offer will not be renewed after 15 September 2015 and no further offer will be made after that date, and so you must accept it by that date if you intend on doing so.”

[31] The letter continued with a statement that the Respondent would seek costs under s.400A if the offer was rejected.

[32] The Respondent had sent the written offer of settlement and the Deed of Release to the Applicant’s email address. The written offer of settlement and the Deed of Release were in English even though the Applicant does not read English.

[33] On 13 October 2015 a further offer of settlement was made to Sabelberg Morcos Lawyers who had advised the Commission that they were acting for the Applicant. The letter contained the following:

“As your client has refused our client’s offers of re-employment, in order to dispose of these proceedings, our client will, on a without prejudice basis, and in settlement of all potential claims against it and its related bodies corporate, make payment to your client in the amount of $3,952.00 less tax, contingent upon your client entering into a Deed of Release in the form enclosed with this letter. This offer is open to be accepted by your client until 12 noon on Wednesday, 14 October 2015.”

[34] The letter continued with a statement that the Respondent would seek costs under s.400A if the offer was rejected.

[35] On 19 October 2015 a hearing was held by DP Hamilton but was adjourned because of the difficulty of proceeding without an Arabic interpreter for the Applicant. DP Hamilton convened a conference of the parties after the adjournment of the hearing to see if the matter could be settled by conciliation. During that conciliation the Respondent again offered to settle the matter for a payment of $3,952.00. This offer was rejected. The Respondent then offered to pay the amount of $5,928.00 to settle the matter. This offer was also rejected by the Applicant. The Applicant had indicated at that conciliation that he would accept 12 weeks’ pay to settle the matter. At the weekly rate of about $990 this offer from the Applicant amounted to about $11,880.00

[36] On 30 October 2015 the Respondent again wrote to the Applicant repeating the offer of settlement of $5,928.00. The letter set out a detailed history of the matter to that date. The letter contained a very blunt warning that the Respondent would seek costs orders against the Applicant even if the Applicant was successful. The letter then ended with:

“Given this, and in light of the fact that our client reasonably believes that you have no prospect of success at hearing given the admissions and concessions made by you on 19 October 2015, in order to ensure that it has taken every reasonable step to resolve this matter, on a without prejudice basis, and in settlement of all potential claims against it and its related bodies corporate, and also in settlement of our client’s impending costs application against you, our client hereby makes the following offer:

● our client will make payment to you in the amount of $5,928.00 less tax; and
● in order to receive this payment, you must enter into a Deed of Release in the form enclosed with this letter.

If you wish to accept this offer, you must write to us and confirm your acceptance by no later than 5pm on Friday, 13 November 2015.

Our client has been more than generous in the offers that it has made to you to settle these proceedings. If you continue to act unreasonable and refuse this offer and continuing with these proceedings, our client will be left with no option but to defend the proceedings and pursue you for legal costs to the fullest extent possible.

Our client intends to rely upon all of its offers when making application for an order for recovery of its costs, including this correspondence.” [original emphasis]

[37] The Applicant gave evidence, both in chief and under cross examination, that before the arbitration hearing scheduled for 12 February 2016 Mr Ktenidis of the Respondent contacted him by telephone and offered him $10,000.00 to settle the matter. The Applicant contended that this was one of the reasons he did not attend the hearing on 12 February 2016. Mr Ktenidis did not attend the costs hearing but the Respondent relied on a sworn affidavit of Mr Ktenidis in which he asserted that he made no such offer to the Applicant. As Mr Ktenidis put it: “Mr Barkho’s evidence is a complete fabrication.”

[38] Within the overall context of this matter it is possible that the Respondent made an offer to settle all matters for $10,000.

[39] I note that the Respondent chose not to have Mr Ktenidis attend the Commission to give evidence.

[40] I also note that the evidence of the Applicant was that he received a telephone call from Mr Ktenidis in which the offer of $10,000.00 was made. If the evidence of the Application was a complete fabrication, as asserted by Mr Ktenidis then it would appear that proof of the truth or proof of the lie may be found in the telephone records of the Applicant. Neither the Applicant nor the Respondent sought to explore the existence of such proof.

[41] In the absence of proof to the contrary and in all the circumstances of this case there is a reasonable probability that the evidence of the Applicant is true.

[42] The second ground relied on by the Respondent must also fail.

[43] A summary of the discussion above shows the following.

● On 6 March 2015 at the conciliation the Applicant sought $40,000.00 and it appears that the Respondent offered nothing.

● On 4 June 2015 the Respondent made a payment to the Applicant of $9,058.12. This was not part of any settlement and did not require the Applicant to enter into any deed of release.

● On 10 July 2015 during a telephone conference convened by the Commission the Respondent made a verbal offer to the Applicant of reinstatement or a payment of $3,952.00.

● On 11 September 2015 the Respondent advised the Applicant that it was paying him a further $5,015.72 less tax. This was not part of any settlement and did not require the Applicant to enter into any deed of release.

● On 11 September 2015 the Respondent offered a settlement payment of $3,952.00 less tax if the Applicant would sign a Deed of Release. The offer was final and would not be repeated.

● On 13 October 2015 a further offer of $3,952.00 less tax, if the Applicant would sign a Deed of Release. The offer was only open until 14 October 2015.

● On 19 October 2015 after an aborted hearing and during a conciliation the Respondent made two offers to the Applicant, firstly $3,952.00 and secondly $5,928.00 to settle the matter. The Applicant had indicated at that conciliation that he would accept 12 weeks’ pay to settle the matter (about $11,880.00).

● On 30 October 2015 the Respondent repeated the offer of settlement of $5,928.00 if the Applicant would sign a Deed of Release. The offer was only open until 13 November 2015.

● It is possible that in February 2016 the Respondent made an offer to settle all matters for $10,000.

[44] What is very obvious is that the Applicant did nothing to pursue his underpayment of wages claims yet received two payments totalling $14,073.84 less tax. The Respondent made an offer of $3,952.00 which was final and not be repeated only to make the same offer on two further occasions. The Respondent then increased its offer to $5,928.00 and repeated this increased offer. And it is possible that the Respondent made a further offer of $10,000.00.

[45] The Applicant had initially sought $40,000.00 but had reduced his total claim to about $26,000.00. The Respondent who had started with nothing on offer had increased its offer to a total of $20,001.84. If the possible offer of $10,000.00 was included then the Respondent had moved from zero to $24,073.84.

[46] The approach adopted by the Respondent invited the Applicant not to accept the offers put. He was paid $14,073.84 without doing anything other than raise the issue of underpayment in his Form F2 and at the conciliation. His rejection of an offer that was final and not to be repeated led the Respondent to not only repeat the offer but to increase the offer.

[47] In the circumstances of this matter the Commission cannot be satisfied that the Applicant’s rejection of the several offers made by the Respondent was an unreasonable act or omission of the Applicant. In the circumstances of this matter it was perfectly reasonable for the Applicant to reject an offer as in doing so it led to a better offer. Where the Respondent had threatened to make a costs application in several of the letters of offer but then went on to repeat the offer or make a new offer, it is difficult to see how the Applicant could have been expected to understand that the last written offer of 30 October 2015 was final (if in fact it was given the possible offer in February 2016).

Failure to Comply with Orders and/or Directions

[48] The Respondent contended that:

“54. Further, or in the alternative, Dairy Country also relies upon various acts of noncompliance with the Commission’s orders on the part of the Applicant, which caused it to incur costs in this matter. Specifically:

a. The Applicant’s repeated non-compliance with the Commission’s orders to file material (orders dated 28 May 20, and the lack of reasonable explanation for this non-compliance, caused Dairy Country to seek to have the matter determined summarily to avoid unnecessary further expenditure on the matter;

b. The Applicant’s failure to prosecute his claim between 14 December 2015 and 21 December 2015, in circumstances where:

i. there was no medical evidence that the Applicant was unfit to attend a hearing on 14 December 2015;

ii. the Applicant had, contrary to his claim, had Dairy Country’s material for many weeks by this time, and ought to have been able to proceed on 21 December 2015 meant that the proceeding continued on foot unnecessarily until 12 February 2016;

c. The Applicant’s failure to attend at the Commission on 12 February 2016, and the lack of any explanation for this non-compliance, caused Dairy Country to unnecessarily incur the costs of an additional appearance by Counsel and instructing solicitors, where the matter could otherwise have been dealt with on the papers.” 3

[49] I will deal with the three elements of this ground in support of a costs order under s.400A separately.

The first element

[50] The Respondent complains that it incurred costs in seeking “to have the matter determined summarily to avoid unnecessary further expenditure on the matter” when the Applicant failed to comply with the directions issued by the Commission that the Applicant file his material in support of his application.

[51] Whilst the Respondent was entitled to file an application under s.399A of the Act, which it did, there was no requirement for the Respondent to have done so.

[52] Where any applicant in an unfair dismissal matter fails to comply with directions issued by the Commission the Commission will deal with the non-compliance. The Commission as a matter of course will hold non-compliance hearings in relation to unfair dismissal applications and will on many occasions dismiss applications because of non-compliance by an applicant with directions issued by the Commission. The non-compliance with directions establishing a failure of an applicant to prosecute their application.

[53] In circumstances where the Respondent had its legal representatives, Thomson Geer, file the s.399A application it would have been apparent to the Respondent’s legal representatives that the Respondent did not need to incur the costs of making and pursuing a s.399A application. The making of the s.399A application was at the initiative of the Respondent and thus the costs of the Respondent were caused by the Respondent taking that initiative.

[54] Under this first element the costs incurred by the Respondent were not incurred because of the failure of the Applicant to comply with directions before the Respondent made its s.399A application.

The second element

[55] The Applicant contends that it incurred costs which were caused by the unreasonable act or omission of the Applicant in failing to prosecute his claim between 14 December 2015 and 21 December 2015 in circumstances where:

i. there was no medical evidence that the Applicant was unfit to attend a hearing on 14 December 2015;

ii. the Applicant had, contrary to his claim, had Dairy Country’s material for many weeks by this time, and ought to have been able to proceed on 21 December 2015 meant that the proceeding continued on foot unnecessarily until 12 February 2016.

[56] The hearing of the unfair dismissal application had been listed for 2 days being Wednesday 9 and Thursday 10 December 2015. On Tuesday 8 December 2015 the Commission adjourned the hearing until Monday 14 December 2015 on the basis that the Applicant had provided a medical certificate covering the period from Tuesday 8 to Friday 11 December 2015.

[57] It was the Commission who cancelled the hearing for 14 December 2015 after receiving advice from the Applicant’s friend as to the Applicant’s state of health. The Commission was satisfied with the explanation given by the Applicant’s friend even though there was no medical certificate covering Monday 14 December 2015. It was not as if the only reason for cancelling the hearing on 14 December 2015 was the ability of the Applicant to attend.

[58] The Respondent in its Form F6 and in other submissions made in support of the costs application fails to identify that the Respondent’s legal representatives wrote to the Commission on Thursday 10 December 2015 requesting that the hearing on 14 December 2015 be adjourned.

[59] The Commission conducted a telephone conference of the parties on Thursday 17 December 2015 in order to further progress the matter. The outcome of those telephone discussions was that the Commission determined that the matter would be dealt with in early 2016.

[60] I accept that the Applicant had received a copy of the Respondent’s material in October 2015, even though at the telephone mention the Applicant stated that he had not. I also accept that the Applicant was working at a dry cleaners on 14 December 2015.

[61] The issue is whether the Applicant engaged in an unreasonable act or omission and whether any such unreasonable act or omission caused the Respondent to incur costs.

[62] In all of the circumstances of this matter, including the evidence of the Applicant at the costs hearing concerning his mental health over a period of time, the Commission is satisfied that the Applicant’s inability to attend the hearing scheduled for 14 December 2015 was not an unreasonable act or omission. The Commission also notes that no act or omission of the Applicant led the Respondent to request that the Commission not conduct a single day hearing on 14 December 2015.

[63] Even though the Applicant’s claim that he had not received the Respondent’s material was not correct, no costs were incurred by the Respondent in providing the Applicant with a copy of the Respondent’s material on 17 December 2015 as that was done by the Commission.

[64] The mention on 17 December 2015 was necessitated by the need for the Commission to manage the ongoing conduct of the matter. It was necessary to ascertain when the Applicant would be available as well as dealing with the issues raised by the Respondent’s legal representatives in the letter of 10 December 2015.

[65] The contentions of the Respondent that it incurred costs which were caused by the unreasonable act or omission of the Applicant in failing to prosecute his claim between 14 December 2015 and 21 December 2015 is simply not made out. The Respondent played a significant role in proceedings not going ahead on 14 December 2015 and the issue raised by the Respondent’s letter of 10 December 2015 necessitated a mention hearing.

[66] I must say that it seems to be extraordinarily unprofessional for the Respondent’s legal representatives to have failed to mention the letter they wrote to the Commission on the Respondent’s behalf on 10 December 2015.

[67] That letter was never mentioned in the Form F6. It was never mentioned in the Respondent’s reply submissions and it was never mentioned at the costs hearing. Clearly the Respondent was so bent on blaming the Applicant for everything that it failed completely to be honest about its own conduct in relation to the matter not proceeding on 14 December 2015.

The third element

[68] The non-attendance of the Applicant at the hearing on 12 February 2016 did not cause the Respondent “to unnecessarily incur the costs of an additional appearance by Counsel and instructing solicitors, where the matter could otherwise have been dealt with on the papers.” The non-attendance of the Applicant at that hearing allowed the Commission to conclude all proceedings in the matter including the taking of final oral submissions from the Respondent. There is nothing to suggest that the matter would have been dealt with on the papers. The very fact that the Respondent chose to conduct its case through having both counsel and an instructing solicitor was the Respondents choice. The matter was never complex enough to warrant both counsel and an instructing solicitor. The level of complexity of the matter was such that it could have been handled by the Respondent without need for legal representation.

[69] As the Respondent has identified the Commission revoked its decision not to allow the Respondent to be represented and granted permission for representation under s.596(2)(a) which primarily relates to efficiency.

[70] Once the Applicant had given evidence before the Commission at the hearing on 2 February 2016 and the matter had not concluded on that day there was a necessity for further proceedings which were listed for 12 February 2016. Those proceedings were not abandoned simply because the Applicant did not attend. The hearing proceeded so that the Commission could finalize the matter. Once the matter was not concluded on 2 February 2016 the Respondent was necessarily going to incur costs in order to finalize its submissions to the Commission.

[71] Under this third element the costs incurred by the Respondent were not incurred because of the failure of the Applicant to attend the hearing on 12 February 2016.

Section 611

[72] I note at the outset that the Respondent does not contend that the application was made vexatiously.

[73] The proper interpretation of s.611 has been considered on several occasions. In Keep v Performance Automobiles Pty Ltd 4 (Keep) Ross.J , Wells DP and Lee.C said:

“[17] The proper construction of s.611(2)(a) was recently considered by a Full Bench in Church v Eastern Health t/as Easter Health Great Health and Wellbeing (Church). Church is authority for the following propositions:

(i) The power to order costs pursuant to s.611(2) should be exercised with caution and only in a clear case.

(ii) A party cannot be said to have made an application ‘without reasonable cause’ within the meaning of s.611(2)(a), simply because his or her argument proves unsuccessful.

(iii) One way of testing whether a proceeding is instituted ‘without reasonable cause’ is to ask whether upon the facts known to the applicant at the time of instituting the proceeding, there was no substantial prospect of success.

(iv) The test imposed by the expression ‘without reasonable cause’ is similar to that adopted for summary judgment, that is, ‘so obviously untenable that it cannot possibly succeed’, ‘manifestly groundless’ or ‘discloses a case which the Court is satisfied cannot succeed’.

[18] As to s.611(2)(b), the FWC may make a costs order against a person if satisfied that ‘it should have been reasonably apparent’ to that person that their application had ‘no reasonable prospect of success’. The expression ‘should have been reasonably apparent’ in s.611(2)(b) imports an objective test, directed to a belief formed on an objective basis as opposed to the applicant’s subjective belief.

[19] There is Full Bench authority for the proposition that the Commission should exercise caution before arriving at the conclusion that an application had ‘no reasonable prospects of success’. In Deane v Paper Australia Pty Ltd a Full Bench made the following observation about this expression in the context of enlivening a power to award costs under s.170CJ(1) of the Workplace Relations Act 1996;

‘unless upon the facts apparent to the applicant at the time of instituting the [application], the proceeding in question was manifestly untenable or groundless, the relevant requirement in s.170CJ(1) is not fulfilled and the discretion to make an order for costs is not available’.”
[citations removed]

[74] In the present matter the Respondent contends that the Applicant made his unfair dismissal application without reasonable cause (s.611(2)(a)) and that it should have been reasonably apparent to the Applicant that his application had no reasonable prospect of success (s.611(2)(b)). The Respondent relied on the same grounds in support of both propositions. 5

[75] The Respondent contended that an alternative basis for a costs order under s.611(2)(b) was that it should have been reasonably apparent to the Applicant that his application had no reasonable prospects of success on and from 28 September 2015, when the Respondent filed its comprehensive material in defence. 6

[76] Given that the Respondent’s contentions were prepared by its legal representatives, Thomson Geer, it is extremely surprising that this alternative ground was contended for. The alternative ground is manifestly untenable and is wrong and shows a complete lack of understanding of s.611(2)(b). As the plain language of s.611(2)(b) makes clear (and this is reinforced by the authorities) the provision directs attention to the time at which the Applicant made his application. The provision does not permit the Commission to consider the state of things at the time the Respondent filed its comprehensive material in defence of the application. Section 611(2)(b) is very different from s.400A which does permit consideration of matters of conduct after the Applicant made his application.

[77] In its Reply Submissions the Respondent contended that:

“2. This is not an example of a meritorious case that was hidden beneath the misguided conduct of a self-represented litigant whose first language was not English.

3. Mr Barkho’s case was, at all times, fundamentally unmeritorious. Indeed, the Commission found that there was “nothing in any of the material and under any of the criteria or elements of section 387, which would suggest that the dismissal was harsh. .. unjust or .. . unreasonable”.

4. The Commission went on to find that the dismissal:

“was fair because it simply was not a harsh outcome on the employee in the context of his conduct. It was not an unjust outcome in relation to dealing with the applicant when he was refusing to work, and nor was it an unreasonable outcome, having regard to the processes adopted in giving the applicant an opportunity of understanding his obligations and giving him an opportunity to recant from refusing to do the work he was asked of, and giving him an opportunity to agree to do the work he was asked of”

5. Thus, the Commission found that, even on the Applicant’s own material, there was nothing to ground a finding that the dismissal was other than fair. Thus, the Applicant not only failed at trial, but had no reasonable cause to initiate the proceeding in the first place, and no reasonable prospects of succeeding at hearing.”
[citations removed] [original emphasis]

[78] The Respondent treats the decision of the Commission, which comes at the end of the hearing of the unfair dismissal application, as establishing that the Applicant “had no reasonable cause to initiate the proceeding in the first place, and no reasonable prospects of succeeding at hearing”.

[79] The fact that the Applicant lost his case does not of itself mean that the Applicant made the application without reasonable cause or that it should have reasonably apparent to the Applicant that his application had no reasonable prospects of success.

[80] The tests to be satisfied under s.611(2)(a) and (b) are not easy tests to meet. So much is clear from the summary of Church as explained in Keep and so much is made very clear when the whole of Church is read and understood, including reading and understanding each of the authorities referred to and relied in Church.

[81] The practical difficulty that arises from the tests to be applied under s.611(2)(a) or (b) is that s.387 does not lead only to one answer or one outcome in relation to a given fact situation.

[82] The very nature of decisions made under s.387 is that each of the criteria under s.387 which is relevant must be taken into account. But when a member of the Commission takes the relevant criteria under s.387 into account the member must necessarily weigh those matters which favour a finding of harshness or unjustness or unreasonableness against those matters which weigh in favour of a finding against harshness, unjustness or unreasonableness.

[83] A very clear and consistent hallmark of decisions made under s.387 is that reasonable minds may differ as to what should be the decision of the Commission.

[84] This point is made time and time again by Full Benches of the Commission (and its predecessors) who are asked on appeal to overturn the decision at first instance and give the appellant the decision it wants. 7 This point was made quite well by a Full Bench considering an appeal in relation to a costs decision in Livingstones Australia which said:

“[78] The line between cases with poor prospects of success and cases that have “no reasonable prospects of success” within the meaning of the FW Act is not always bright. Reasonable minds may differ on whether a particular case should be assessed as having no reasonable prospects of success.” 8

[85] In the present matter it would be accurate to describe the Applicant’s case at the time he filed his application as one with poor prospects. However, even on the facts as emerged during the case it was not unreasonable for the Applicant to argue that his dismissal was harsh in its consequences for the personal and economic situation of the Applicant or because it was disproportionate to the gravity of the misconduct in respect of which the Respondent acted. 9

[86] The Applicant’s case was never “so obviously untenable that it cannot possibly succeed”. It was simply a case that did not succeed.

[87] The decision in Church refers to and relies on Kanan v Australian Postal and Telecommunications Union. 10, in which Wilcox J said:

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

[88] Whilst Wilcox J focused on “arguable points of law” the same logic applies where the success of the Applicant’s case depends upon the resolution in the applicant’s favour of a finding based upon a weighing of the several relevant factors under s.387 that the dismissal was harsh, unjust or unreasonable. In circumstances where reasonable minds may differ as to whether the dismissal of the Applicant was harsh, unjust or unreasonable, then, as Wilcox J put it “it is inappropriate to stigmatise the proceeding as being ‘without reasonable cause’”.

[89] The application for a costs order under either or both s.611(2)(a) and/or (b) must fail.

[90] The applications for costs orders under s.400A and 611 are dismissed.

COMMISSIONER

Appearances:

T. Barkho on his own behalf.

R. Sweet, of Counsel, for Dairy Country Pty Ltd.

Hearing details:

2016.

Melbourne:

April 27.

 1   Church v Eastern Health[2014] FWCFB 810.

 2   Respondent’s reply submissions, 7 April 2016.

 3   Form F6 at para 54.

 4   [2015] FWCFB 1956.

 5   Form F6 paras 44-48.

 6   Ibid para 48.

 7   See Rail Corporation New South Wales v Peter Vrettos [2008] AIRCFB 747 at [64]; GlaxoSmithKline Australia Pty Ltd v Gauci [2008] AIRCFB 439 at [24]; Selak v Woolworths Limited  [2008] AIRCFB 81 at [35]; Big W Monarto Warehouse/590 Regional Distribution Centre v Peach [2007] AIRCFB 1049 at [19]; Budd v Dampier Salt Limited [2007] AIRCFB 797 at [13]; Asciano Services Pty Ltd v Hadfield[2015] FWCFB 2618 at [19]; Oratis v Melbourne Business School Ltd[2014] FWCFB 3869 at [11]; CFMEU v LCR Group Pty Ltd [2016] FWCFB 916 at [29].

 8   [2014] FWCFB 1276 [78].

 9   Byrne and Frew v Australian Airlines Ltd, [1995] HCA 24 per McHugh and Gummow JJ at 128).

 10 (1992) 43 IR 257.

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