FWC 6700
FAIR WORK COMMISSION
Fair Work Act 2009
s 365 - Application to deal with contraventions involving dismissal
Mr Lee Price
John Holland Group Pty Limited
DEPUTY PRESIDENT SAMS
SYDNEY, 6 SEPTEMBER 2013
Applications for costs under the Act’s general protection provisions - no reasonable prospects of success - whether reasonably apparent to the lawyers that there were no prospects of success - new and novel arguments as to the construction of the general protections provisions - competing authorities - both costs application dismissed.
 This decision concerns cross applications for costs arising from a jurisdictional decision of the Fair Work Commission (FWC or the ‘Commission’), Lee Price v John Holland Group Pty Limited and Others  FWC 3329 (the ‘primary decision’), in respect to an application filed by Mr Lee Price (the ‘applicant’) against John Holland Group Pty Ltd and others (the respondents), pursuant to the general protections provisions of the Fair Work Act 2009 (the ‘Act’).
 In the primary decision, the Commission dismissed the jurisdictional objections of the respondents, which had sought to have Mr Price’s s 365 application summarily dismissed. These objections were summarised at paras - of the Commission’s decision as follows:
‘ Mr Ludeke further submitted that the primary failures of the purported application are twofold. Firstly, there can be no application before the Commission because there could be no allegation that the applicant was dismissed in contravention of Part 3-1 of the Act. This is so because no workplace right/s were identified. Secondly, in the absence of any identified workplace right/s, there can be no dispute between the parties. The respondents do not know what workplace right the applicant had and what their contravention was. There cannot be a dispute if the respondent parties are unaware of how they are alleged to have contravened Part 3-1 of the Act; See: CEPU v Active Tree Services Pty Ltd  FMCA 535 (‘CEPU v Active Tree Services).
 While Mr Ludeke noted that the Act does not define ‘dispute’ for the purposes of Part 3-1, Divison 8 requires a tangible dispute to exist between parties. In the absence of something real which is disputed between the parties, the jurisdiction of the Commission, and ultimately the Courts, is meaningless. It followed that relief cannot be provided in proceedings for a nonexistent dispute.’
 Unsurprisingly, the applicant has applied for costs pursuant to s 376 of the Act. It should be noted that the ‘fruits of his victory’ in the primary decision has resulted in little more than the gateway being opened to further proceedings before the Federal Circuit Court or the Federal Court as to the substantive merits of the applicant’s general protections case. Notwithstanding the reality that the respondent’s objections were dismissed and its arguments comprehensively rejected (from which I observe there has been no appeal), the respondents have also sought costs against the applicant’s lawyers, on the basis of s 376 of the Act. At this juncture, it must be noted that it is highly unusual for the Commission to deal with a costs application from a losing party, particularly given the overwhelming rejection of its case at first instance.
 The applicant seeks a costs order against Herbert Geer Lawyers and Mr P Ludeke acting as agent for the respondents. The costs orders sought by the respondents are against the applicant’s solicitor, Ms L Maclou and the firm of which she is a principal, M&K Lawyers.
For the applicant
 Mr J Darams of Counsel submitted that firstly, the respondent’s application to summarily dismiss Mr Price’s s 365 application had no reasonable prospects of success and secondly, this outcome should have been reasonably apparent to the respondents; See: Baker v Slava Resources Pty Ltd  FWAFB 4014 (‘Baker v Slava’) and ACI Operations v Cook  FWAFB 3292.
 Mr Darams said that from his research, there have been no decisions of the Commission which have considered s 376(1)(b) of the Act. However, it is clear from the Explanatory Memorandum to the Fair Work Bill 2008 that the section was designed to deter lawyers and paid agents from encouraging others to make applications which they know have no reasonable prospects of success. Nevertheless, s 376(1)(b) is in relevantly similar terms to s 401(1A)(b) of the Act and the same terms of the former s 401(1)(b) of the Act.
 Mr Darams observed that the new ss 401(1) and 401(1A) were particularly directed to the raising of jurisdictional arguments having no reasonable prospects of success; See: Bidinost v Orica Australia Pty Ltd  FWC 2089 (‘Bidinost’)
 Mr Darams submitted that the Commission should order costs against the respondents because it should have been reasonably apparent to either the respondents, Herbert Geer and/or Mr Ludeke, that their summary dismissal application had no reasonable prospects of success. This is so for the following reasons:
The respondents’ case under s 587(1) of the Act had to be more than ‘arguable’ to succeed. Applications for summary termination of a claim or proceeding are to be approached carefully, and with caution, and would only succeed in the clearest of cases; See: General Steel Industries v Commissioner for Railways (NSW) (1964) 112 CLR 125.
The applicant need only to have demonstrated that his s 365 application had been ‘made in accordance with the Act’ (s 587(1)). It was not contested that the applicant had been dismissed, he had completed and filed the F8 alleging his dismissal was in contravention of Part 3-1. It was obvious from these facts that the respondent’s case was doomed to fail because they could not satisfy s 587(1) of the Act.
The decision in Shea v TruEnergy Services (No 1)  FCA 628 (‘Shea’) stood for the opposite proposition advanced by the respondent. The Commission was obliged to follow Shea. Any lawyer/s acting reasonably and competently should have recognised the relevance of Shea as standing in the way of their application succeeding.
The decision in Shea had been expressly raised with the respondents’ solicitors at an early stage. Ultimately, the Commission was in complete agreement with the principles expressed therein.
Herbert Geer and Mr Ludeke attempted to distinguish Shea as inapplicable and simply dismissed the applicant’s arguments in respect to Shea, knowing their own arguments were erroneous.
To the extent there was insufficient particularisation of the applicant’s workplace right/s, this was notified before the Commission’s conference by letter dated 22 March 2013.
 Mr Darams said that once the Commission’s jurisdiction was enlivened, there was no proper basis for the Commission not to exercise its discretion to order costs. In doing so, the Commission would have regard to:
• the summary dismissal application was within the control of the respondents;
• there is no doubt the summary dismissal application increased the applicant’s costs;
• there is no evidence the respondents cannot meet a costs order;
• there is no evidence that a costs order might stultify proceedings;
• a costs order is not to punish an unsuccessful party, but to compensate the successful party; See: Latoudis v Casey (1990) 170 CLR 534; Oshlack v Richmond River Council (1998) 193 CLR 72; and Goffett v Recruitment National Pty Ltd  AIRCFB 626; and
• an order is only sought for costs incurred after 22 March 2013 - the date the applicant’s lawyer particularised the workplace right.
 In addition, Mr Darams made the following submissions:
The specific objection to the Commission’ jurisdiction was technical in nature, drawing a reasonable inference that it arose from Herbert Geer and/or Mr Ludeke, rather than the respondents themselves.
There can be little doubt that the views espoused in correspondence to the applicant’s lawyers as to the applicability of Shea and generally as to whether the applicant’s application was properly made, were those of Herbert Geer and/or Mr Ludeke.
Lawyers have a fiduciary duty to act in the best interests of their clients and on the instructions provided by their clients. It may be reasonably inferred that advice as to the prospects of success was given by Herbert Geer and/or Mr Ludeke.
 Mr Darams added that it may be reasonably inferred that the summary dismissal application was conceived by Herbert Geer and/or Mr Ludeke. Had the advice been to withdraw the application, that advice would have been accepted. The reasonable course for Herbert Geer and/or Mr Ludeke would have been to constructively participate in the Commission’s disputes conference under s 368 of the Act.
 Finally, Mr Darams put that the basis for s 376 was to deter or prevent the very thing which has occurred in this case. It is difficult to see what work the section has to do, if the applicant’s costs application does not succeed in these circumstances.
For the respondents
 Mr Ludeke submitted that despite having legal representation at all relevant times, the applicant had identified no workplace right/s allegedly contravened by the respondents. He added that the s 365 application had been deliberately drafted to avoid identification of the workplace rights allegedly contravened, so as to suit the applicant’s conduct of the proceedings. These were unreasonable act/s and/or omissions by which the applicant’s solicitors had caused the respondents to incur unnecessary costs.
 Mr Ludeke said that the respondents had challenged the validity of the application from the outset. The respondents were facing significant penalties when they did not even know what was alleged against them and were therefore unable to respond. Mr Ludeke opined that had the applicant’s legal advisors stated what protections were allegedly transgressed by the respondents, the entirety of the contest would have been avoided.
 Mr Ludeke submitted that the deliberate intent of the applicant’s lawyers is evident in correspondence to the respondents from Ms Maclou as extracted below:
‘... Mr Price did not provide such particulars of the workplace right and intended to raise these during the conference.’
‘... Mr Price, as required by the rules, set out the basis for his claim in his application. He has not provided detailed particulars, and is not, in this respect, in any breach of the rules as he is not required to provide evidence at this stage.’
 Mr Ludeke said that because no workplace rights were identified, there was no dispute for the Commission to deal with. He said that Ms Maclou had chosen, for tactical reasons, not to disclose the workplace right until the conference before the Commission. In addition, the applicant’s counsel had even said that the applicant had provided ‘particulars’ to Ms Maclou, but she deliberately chose not to put them in the application. Having omitted a fundamental element in the case, the respondents were perfectly entitled to test the jurisdictional basis for the application, particularly as these circumstances had not been previously considered by the Commission. The deliberate conduct of the applicant’s representatives was an unreasonable act which could have avoided the testing of the application.
 In response to the applicant’s costs application, Mr Ludeke submitted that as the jurisdictional issue was a question of law and these questions had not been previously considered by the Commission, the question of ‘no reasonable prospects of success’ did not arise. The position might be different in a jurisdiction where costs follow the event.
 Mr Ludeke noted the Commission’s comments as to the importance and complexity of the jurisdictional issue to be determined and the principles to be applied when doing so. Mr Ludeke said that the applicant’s costs application contains a series of assertions, rather than grounds. As such, no response was required. Mr Ludeke said it was plainly untrue that the applicant wished to have a further conference, if the jurisdictional issue was determined in his favour.
 Mr Ludeke referred to the general principles as to the awarding of costs under s 611 of the Act. The parties bear their own costs, unless one or other of the elements in s 611(2) is satisfied:
a) the application was instituted or conducted vexatiously; See: Nilsen v Loyal Orange Trust IRCA Decision No: 267/97. Mr Ludeke said that the respondents’ conduct could not be characterised as intended to harass or embarrass the applicant. There was no collateral advantage for the respondents in openly seeking to have the application dismissed as jurisdictionally incompetent.
b) the test of ‘without reasonable cause’; See: R v Moore; ex parte Federated Miscellaneous Workers’ Union of Australia (1978) 140 CLR 470. Mr Ludeke put that the fact the respondents were ultimately unsuccessful does not render them liable for a costs order. The Commission recognised the respondents’ arguments were worthy of consideration, particularly where they had not been previously considered.
c) the test of ‘being reasonably apparent’; See: Baker v Slava. Mr Ludeke said it was readily apparent that the jurisdictional issue involved complex arguments as to the construction of the Act and the correct application to go before the Federal Circuit Court or the Federal Court. Furthermore, the issue was far from manifestly untenable, groundless, lacking in merit or substance so as not to be reasonably arguable. The applicant’s legal advisors acknowledged there was a point because an alternative argument was put that the applicant should be permitted to amend its application, or file a fresh application, if his primary arguments were not accepted.
 In his reply submission, Mr Darams put that that nub of the respondents’ case was that the applicant’s lawyers deliberately failed to identify the workplace right for purposes which suited the applicant’s conduct of proceedings and such conduct was an unreasonable act or omission. Mr Darams relied on the chronology of events to demonstrate that even on the respondents’ own case, their complaint fell away after 22 March 2013, when the workplace right/s were identified.
 In any event, Mr Darams said that the Commission has an express power under s 586(a) of the Act to allow any amendment of any application, on any terms it considers appropriate. Such a course would have been simpler, cheaper, and a more efficient use of the Commission’s and the parties’ time. Mr Darams noted that before completing the respondents’ F8A on 6 March 2013, no one contacted the applicant’s lawyer to raise any concern over, or seek clarification of, the application of the workplace right in particular. Almost immediately, the applicant’s lawyers were aware of the respondents’ concerns, an offer to deal with the issue was made and not taken up by the respondents.
 Mr Darams said that there was no apparent or logical reason why the respondents would not have been satisfied with the applicant’s detailed explanations of 22 March 2013. It was the actions and conduct of the respondents and/or Herbert Geer and/or Mr Ludeke which led to the costs being incurred over a fictional jurisdictional issue.
 In his reply submission, Mr Ludeke said it was the applicant’s choice not to participate in any further conference concerning his s 365 application. The respondents had not refused to discuss any other issues. It had been made plain that the application wholly lacked merit and the applicant was responsible for his manifest failings which led to the termination of his employment. The respondent had considered the applicant’s offer to settle the claim and rejected it. Mr Ludeke added that a conference was always going to fail where the claim was entirely unmeritorious.
 Mr Ludeke submitted that the correspondence between the parties underlies the arguability (sic) of the jurisdictional issue raised. It was perfectly reasonable for the parties to have tested their differing views as to Shea.
 Mr Ludeke further submitted that a defective application cannot be rectified by correspondence. Leave to amend is required as the applicant’s lawyers themselves contended for in the alternative. In any event, the defects were a deliberate tactical decision of the applicant’s legal advisers.
Relevant statutory provisions
 The Commission’s role under Ch 3, Part 3.1 of the Act is to conduct a conference to deal with a dispute. In this case, it was a dispute involving the dismissal of Mr Price. Section 376 makes provision for costs orders against lawyers or paid agents in respect to such conference/s on specified grounds. The section is as follows:
(1) If the FWC has granted permission in accordance with section 596 for a person to be represented by a lawyer or paid agent in relation to an application under section 365 or 372, the FWC may make an order for costs against the lawyer or paid agent if the FWC is satisfied:
(i) the lawyer or paid agent caused costs to be incurred by another party to the dispute because the lawyer or paid agent encouraged the person to make the application; and
(ii) it should have been reasonably apparent that the application would have no reasonable prospect of success; or
(b) that the lawyer or paid agent caused costs to be incurred by another party to the dispute because of an unreasonable act or omission of the lawyer or paid agent in connection with the conduct or continuation of the dispute.
(2) The FWC may make an order under this section only if the other party has applied for it under section 377.
(3) This section does not limit the FWC’s power to order costs under section 611.’
 It will be readily apparent that subsection 376(1)(a)(ii) above is materially identical to the Commission’s wider power to award costs under s 611(b), where it is said:
(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.
(3) A person to whom an order for costs applies must not contravene a term of the order.’
 In short, the power derives from a finding by the Commission, that it should have been reasonably apparent that the s 365 application would have no reasonable prospects of success. The distinction, of course, in s 376 to s 611(b) is that the person to whom it should have been ‘reasonably apparent’ is the party’s lawyer or paid agent and not the applicant. The power to award costs in these circumstances is predicated on the Commission having granted permission for the person to be represented by a lawyer (s 596). As permission was granted to both parties being legally represented, there is no issue as to this prerequisite not having been satisfied.
 It is also relevant to note that s 376(1)(b) is in identical terms to s 401 of the Act dealing with costs applications in the Commission’s unfair dismissal jurisdiction. I respectfully agree with SDP Richards in Bidinost that s 401 and its re-emphasis in the amendments of 2012 (s 401(1A)) are particularly designed to provide a stronger deterrent against lawyers or paid agents from encouraging parties to bring speculative claims, which they know have no reasonable prospects of success. His Honour said at para :
‘ The amending legislation has removed the prior caveat that the person must have been granted permission for a representative to appear under s.596 of the Act before such time as an application for costs can be made. Section 401 now requires only that the person is required to seek the FWC’s permission to be represented by the representative. The Explanatory Memorandum to the amending legislation explains the policy context for the amendment as follows:
180. New subsections 401(1) and 401(1A) will provide a stronger deterrent for lawyers and paid agents from encouraging parties to bring or continue speculative unfair dismissal claims, particularly claims they know have no reasonable prospect of success. The provision will also deter lawyers or paid agents from unreasonably encouraging a party to defend a claim or make a jurisdictional argument where there is no prospect of the argument succeeding. It will act as a stronger deterrent than the current provision as it will make lawyers and paid agents subject to the possibility of adverse costs orders even if they are not granted, or do not seek, permission to represent the party in the matter before the FWC. [My emphasis]’
 It seems to me that the unassailable approach to be adopted under s 367 of the Act is to apply the well known principles which have considered the two expressions ‘should have been reasonably apparent’ and ‘had no reasonable prospects of success’. In Baker v Slava, a Full Bench of Fair Work Australia (FWA), summarised the approach in the following way:
‘ The concepts within s.611(2)(b) “should have been reasonably apparent” and “had no reasonable prospect of success” have been well traversed:
 In Hamilton James and Bruce Pty Limited v Michelle Gray  FWAFB 9235, a Full Bench of FWA said:
‘ The phrase “no reasonable prospect of success” in the context of costs applications was considered by a Full Bench of the Australian Industrial Relations Commission (AIRC) in Deane v Paper Australia Pty Ltd. In that decision the Full Bench said:
“ It was not disputed that for the purposes of s.170CJ(1)(a)(ii) the appeal instituted by the applicant was a proceeding begun by him. The question is whether he did so in circumstances where it should have been reasonably apparent to him that there was no reasonable prospect of success. If that question is answered in the affirmative the Commission is able to make an order for costs against him. Whether it should do so is a separate although closely related question which requires a separate exercise of discretion.
 We were taken to a number of authorities which were said to bear upon the construction of s.170CJ. None of those authorities deals with the operative expression which now appears in s.170CJ(1)(b), namely: ‘no reasonable prospect of success’.
 The expression ‘no reasonable prospect of success' also appears in ss.170CF(2)(d), 170CF(3)(b) and 170CF(4). Section 170CF(4) provides for the summary dismissal of an application for relief pursuant to s.170CE, by the issue of an appropriate certificate, if the Commission concludes that the application has no reasonable prospect of success. The construction of the expression in that context was considered by a Full Bench of the Commission in Wright v Australian Customs Service. In that case the Full Bench, drawing upon relevant authority relating to summary dismissal of proceedings in various jurisdictions, held that a conclusion that an application had no reasonable prospect of success should only be reached with extreme caution and where the application is manifestly untenable or groundless.
 Making due allowance for the caution which must attend the exercise of a discretion to summarily dismiss an application, it appears to us that the approach in Wright is one we should follow. In other words, unless, upon the facts apparent to the applicant at the time of instituting the appeal, the proceeding in question was manifestly untenable or groundless, the relevant requirement in s.170CJ(1) is not fulfilled and the discretion to make an order for costs is not available.” (Endnote omitted)
 In Smith v Barwon Region Water Authority, a Full Bench of the AIRC in considering the phrase “no reasonable prospect of success” in the context of s.650 of the Workplace Relations Act 1996 (Cth) (WR Act) concerning AIRC advice to the parties about an application for relief in respect of termination of employment said:
“ Having regard to the authorities ... it seems to us that an application will have no reasonable prospects of success if it is so lacking in merit or substance as to be not reasonably arguable.”’
 It is to be observed, in passing, that unlike s 611, there is no reference to costs being awarded where the application has been made or responded to ‘vexatiously, or without reasonable course.’ Obviously, these considerations do not arise in this case.
 At the outset, I must observe that despite Mr Ludeke’s submission that he did not intend to traverse the arguments put to the Commission in the primary decision (which were rejected), that is precisely what his costs submission sought to do. It was not only a traversing of the earlier arguments, but he reagitated the precise arguments that the Commission had expressly rejected, namely; that it was not jurisdictionally necessary under Chapter 3, Part 3.1 of the Act, to identify in a F8 application what workplace right had been allegedly contravened by an employer and the dispute may only need to be identified in general terms. In addition, the Commission is only empowered to conduct a conference to deal with a dispute (s 368) and reliance on strict technicalities should be eschewed (Note: These propositions have been recently endorsed by the Full Bench of the Commission in Hewitt v Topero Nominees  FWCFB 6321 (‘Hewitt v Topero’)).
 In my view, Mr Ludeke’s submissions directly confronted and implicitly challenged the Commission’s findings. Such an approach is impermissible and might have even have led me to conclude (had I been asked and assuming I had jurisdiction to do so) that the respondents’ costs application was an abuse of process itself. In my opinion, there are no new, or indeed any grounds, to justify the awarding of costs against the applicant, particularly in circumstances where he was wholly successful in the primary proceeding.
 That said, I agree with Mr Ludeke that the respondent’s summary dismissal application cannot be characterised as being reasonably apparent to the respondents as having no reasonable prospects of success. This is so because:
Costs do not follow the event in matters before the Commission and the fact the respondents’ case was unsuccessful does not, per se, mean that costs should be awarded against them;
The jurisdictional issue raised new and novel arguments as to the construction of the Act’s general protections jurisdiction;
At para  of the primary decision, I said:
‘ The contrary view is that the question of whether an employee has been dismissed is a jurisdictional prerequisite to a valid application under s 365 of the Act. The single member decisions in this respect have invariably dealt with the question of whether the person had been dismissed and not to other jurisdictional issues. As I apprehend it, there is no Full Bench authority on the extent of the Commission’s powers under Part 3-1 of the Act, and more particularly there is no authority at all on what the Commission is being asked by Mr Ludeke to decide in this case. Given these circumstances, and the serious ramifications of what I am being asked to determine here, I intend to proceed with utmost caution and circumspection.’
There were competing Federal Circuit Court and Federal Court decisions relied on by both parties. It was appropriate for the Commission to consider which of the competing views should be adopted in this case.
There were differing views of the members of the Commission as to the extent of the Commission’s powers under Chapter 3, Part 3-1 of the Act. Consequently, there was no guidance to the parties as to whether the powers of the Commission extended as far as Mr Ludeke contended (Those powers were recently clarified in Hewitt v Topero).
 Given these circumstances and notwithstanding my findings in the primary decision, it could not be fairly said that the respondents’ case had no reasonable prospects of success or that such a view was reasonably apparent to the respondents’ lawyers and/or Mr Ludeke.
 It follows that I would conclude that both the applicant’s and the respondents’ applications for costs do not satisfy the relevant tests under the Act and must be dismissed. Accordingly, each party shall bear their own costs. I so order.
Final written submissions:
Applicant - 18 July 2013, 25 July 2013
Respondent - 18 July 2013, 25 July 2013
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<Price code C, PR541448>