[2013] FWC 8795

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.402 - Application for costs orders against lawyers and paid agents under s.401

Alexander M Pty Ltd
v
Gregory Lloyd; McDonald Murholme Solicitors
(U2013/14070)

DEPUTY PRESIDENT HAMILTON

MELBOURNE, 19 DECEMBER 2013

Application for costs against lawyers and paid agents.

[1] On 24 April 2013 Mr. Gregory Lloyd made an application under s.394 of the Fair Work Act 2009 for an unfair dismissal remedy. The employer, Alexander M. Pty Ltd, submitted that Mr.Lloyd was not dismissed within ss.385, 386 and 394(1).

[2] The matter was conciliated and then heard on 2 September 2013.

[3] On 18 September 2013 I dismissed the application on the basis that Mr.Lloyd abandoned his employment, and had not been dismissed 1.

[4] On 1 October 2013 Alexander made an application for costs against Mr.Lloyd under s.611, or in the alternative, against his legal representative, McDonald Murholme, under s.401.

[5] The requirement in s.402 that the application must be made within 14 days of the decision is met.

Procedure

[6] McDonald Murholme raised a number of procedural issues. On 10 October 2013 the applicant was directed to provide a written submission and any other evidentiary material by 31 October, and McDonald Murholme the same by 21 November. The Commission indicated that the matter would be determined on the basis of written submissions, ‘on the papers’, unless the parties objected no later than 17 October. No objection to the matter being determined on the papers was received.

[7] On 24 October 2013 McDonald Murholme wrote to Mr.Lloyd advising him that they can no longer act for him unless he contacted them by 30 October.

[8] On 13 November McDonald Murholme sought an extension of time in which to lodge submissions on the basis of alleged difficulties in contacting Mr.Lloyd and because Mr.McDonald would be on leave overseas from 14 November until 25 November.

[9] In order to assist McDonald Murholme I extended time in which it could lodge submissions to 29 November.

[10] On 28 November McDonald Murholme sought a further extension of time in which to lodge its application on the basis that its ‘interest is reasonably expected to be possibly in conflict with our client in responding to the application, we should be grateful if we could seek advice from the Ethics Committee of the Law Institute of Victoria as to what we are entitled to do in response to the application when we have not been able to contact our client notwithstanding our numerous attempts to do so.’

[11] On 29 November the applicant opposed the extension of time sought on the basis that it should have been plain to McDonald Murholme that they have had difficulties in contacting their client, and that prejudice to the employer would occur. I refused the application for an extension of time.

[12] On 29 November McDonald Murholme provided a written submission and affidavit of Mr.Alan McDonald. In the affidavit but not the submission McDonald Murholme said: ‘I ... crave leave of the Tribunal to make a lengthier affidavit in opposition to the Application by the Costs Applicant’. No submission in support was made.

[13] On 4 December the Costs Applicant submitted that the directions were issued on 10 October, and that the Commission is entitled to take the view that both Cost Respondents have had more than adequate time and opportunity to clarify their position and that any information not currently before the Commission, ought to be disregarded.

[14] McDonald Murholme was aware from early on that it would have difficulty contacting its client, Mr.Lloyd. Mr.McDonald chose to go on leave, notifying this Commission only the day before he left, which is very short notice. Mr.McDonald could have made an approach to the Law Institute before he left. I have already extended time in which McDonald Murholme was to put submissions. Other staff at McDonald Murholme could and apparently did work on submissions. Mr.McDonald could have directed work to be done in his absence. There is the danger of prejudice to the Costs Applicant. The submission of McDonald Murholme on a further opportunity to put submissions is very brief and does not raise issues which could not have been addressed by it at an earlier date.

[15] I am satisfied that both Mr.Lloyd and McDonald Murholme have had adequate time in which to prepare submissions. Leave to put further material is refused.

[16] No submissions were received from Mr.Lloyd notwithstanding directions and service effected in accordance with the Fair Work Rules.

Application against Mr.Lloyd

[17] In these matters costs do not follow the result, but may only be ordered in a limited range of circumstances set out in s.611 of the Act and elsewhere.

[18] Section 611 provides:

“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).”

[19] The concept of vexatious in the context of similar costs provisions was discussed in Holland v Nude Pty Ltd T/A Nude Delicafe 2:

[7] We turn to the first issue raised by the appellants’ grounds of appeal. The approach generally taken by members of the Tribunal as to the meaning to be ascribed to the word “vexatiously” in s.611(2)(a) is to adopt the comments of Justice North in Nilsen v Loyal Orange Trust 1 (Nilsen). The Commissioner referenced this case in her reasons for decision. Nilsen was decided in 1997 when the then Workplace Relations Act 1996 applied however the relevant provision considered by His Honour was in terms similar to s.611(2)(a) being whether an applicant “instituted the proceeding vexatiously or without reasonable cause”. About this provision His Honour said:

“The next question is whether the proceeding was instituted vexatiously. This looks to the motive of the applicant in instituting the proceeding. It is an alternative ground to the ground based on a lack of reasonable cause. It therefore may apply where there is a reasonable basis for instituting the proceeding. This context requires the concept to be narrowly construed. A proceeding will be instituted vexatiously where the predominant purpose in instituting the proceeding is to harass or embarrass the other party, or to gain a collateral advantage : see Attorney General v Wentworth (1988) 14 NSWLR 481 at 491. The approach of the High Court in an application for a permanent stay of criminal proceedings on the ground of abuse of process constituted by improper purpose is instructive. In Williams v Spautz [1992] HCA 34, (1992) 174 CLR 509, at 522, Mason CJ, Dawson, Toohey and McHugh JJ said:

“Bridge LJ identified one difficulty when he said ([1977] 1 WLR, at p 503; [1977] 2 All ER, at p 586):

‘What if a litigant with a genuine cause of action, which he would wish to pursue in any event, can be shown also to have an ulterior purpose in view as a desired byproduct of the litigation? Can he on that ground be debarred from proceeding? I very much doubt it.’ (Emphasis added.)

So would we. But his Lordship, by implication, evidently sees no difficulty with the case in which the plaintiff does not wish to pursue his or her cause of action to a conclusion because he or she intends to use the proceedings for a collateral and improper purpose.””

[20] In Read v Gordon Square Child Care Centre Inc T/A Gordon Square Early Learning Centre 3 a Full Bench of the FWC considered the phrase "without reasonable cause" as it appears in s.611. That Full Bench stated:

“[5] The phrase “without reasonable cause” was considered by Wilcox J in Kanan v Australian Postal and Telecommunications Union. 5 Section 347(1) of the then Industrial Relations Act 1988 (Cth) provided that:

“A party to a proceeding (including an appeal) in a matter arising under this Act shall not be ordered to pay costs incurred by any other party to the proceeding unless the first-mentioned party instituted the proceeding vexatiously or without reasonable cause.” [Underlining added]

[6] In Kanan, Wilcox J said in respect of the phrase:

“A proceeding is not to be classed as being launched ‘without reasonable cause’ simply because it fails. As Gibbs J said in R v Moore; Ex parte Federated Miscellaneous Workers' Union of Australia (1978) 140 CLR 470 at 473, speaking of the Conciliation and Arbitration Act equivalent of s 357 (s 197A):

‘... a party cannot be said to have commenced a proceeding “without reasonable cause”, within the meaning of that section, simply because his argument proves unsuccessful. In the present case the argument presented on behalf of the prosecutor was not unworthy of consideration and it found some support in the two decisions of this court to which I have referred. The fact that those decisions have been distinguished, and that the argument has failed, is no justification for ordering costs in the face of the prohibition contained in s.197A.’

In Standish v University of Tasmania (1989) 28 IR 129 at 139 Lockhart J applied the qualification in ordering costs against an applicant whose case he thought ‘misconceived’, rather than simply unsuccessful. But, as the Full Court pointed out in Thompson v Hodder (1989) 29 IR 339 at 342, ‘there may be cases which could not be described properly as “misconceived” but which would nevertheless be held to have been instituted without reasonable cause’.

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 it appears that, 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.”

[21] In Deane v. Paper Australia 4 a Full Bench of the Commission said:

‘[7] 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.¹ 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.

[8] 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.’

[22] In Hart v. Kangan Batman TAFE 5 a Full Bench of the Commission said that:

‘It is common ground that in relation to a costs application pursuant to s.170CJ(1) the relevant test is set out in G.H.Deane v. Paper Australia (Deane) as follows:

‘... 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.’

[23] In Baker v. Salva Resources 6 a Full Bench of the Commission followed Deane in relation to the new s.611 of the Act and said:

‘[10] The concepts within s.611(2)(b) “should have been reasonably apparent” and “had no reasonable prospect of success” have been well traversed:

● “should have been reasonably apparent” must be objectively determined. It imports an objective test, directed to a belief formed on an objective basis, rather than a subjective test; and

● a conclusion that an application “had no reasonable prospect of success” should only be reached with extreme caution in circumstances where the application is manifestly untenable or groundless or so lacking in merit or substance as to be not reasonably arguable.’ [footnotes omitted]

Decision on Costs Application Against Mr.Lloyd

[24] I have had regard to the submissions and material put by Alexander M. No submissions were put by or on behalf of Mr.Lloyd. McDonald Murholme has not expressly withdrawn its appearance on behalf of Mr.Lloyd. From the context it may be inferred that it has done so, although this is not entirely clear.

[25] In this matter all the facts which formed the basis of my decision were known to the applicant before he instituted his application for an unfair dismissal remedy. I summarised those facts in my decision and reached a conclusion with respect to them:

‘[11] In my view Mr.Lloyd asked for time to respond to questions on 8 April. The employer agreed to this. Despite Mr.Lloyd’s request, he never responded. Mr.Lloyd never provided his employer with any answers to a legitimate set of questions about the running of the business, which went to issues which were central to the profitability of the business, to the conduct of Mr.Lloyd, and to issues of overpayment of wages. The employer had the right to ask these questions and to have them responded to. Mr.Lloyd never contacted the employer except to collect his possessions from the premises. Not only did he not contact his employer as he had implicitly agreed to do, but when the employer tried to contact him, he did not answer his mobile phone, and did not return messages. He did not answer other messages. He did not return to work or attempt to do so. His actions indicate that he had decided not to continue the employment relationship in any form. There was no action by the employer to terminate his employment. There was an abandonment of employment.’

[26] In my view on the facts known to the applicant it was obvious that his application would not succeed because there were no grounds for a claim that there was a dismissal. His application was not reasonably arguable, specifically his claim that he had been dismissed.

[27] An order for costs will be made against him pursuant to s.611.

Application against McDonald Murholme

[28] Section 400A states:

“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.”

[29] Section 400A relates only to costs which may be awarded against parties.

[30] Section 401 provides:

“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] This section incorporates the same concept of an unreasonable act or omission referred to in s.400A but with application to the actions taken or not taken by the legal representative of a party.

[32] Section 400A took effect in January 2013. The Explanatory Memorandum refers to this section and to s.401 in the following terms:

“Parts 3 and 4 of Schedule 6 to the Bill enhance the FWC's ability to order costs against a party and/or their representative in unfair dismissal matters. The new `party costs' provision applies where a party to an unfair dismissal matter (either an employee or employer) has caused the other party to incur costs by an unreasonable act or omission.”

.... Under section 401 of the FW Act, lawyers and paid agents may currently be exposed to costs orders if FWA has granted permission for a person to be represented in an unfair dismissal matter. The Bill will provide for the FWC to order costs against a lawyer or paid agent whether or not the FWC has given permission for a person to be represented.

The amendments strike a balance between the need to protect workers from unfair dismissal, and to provide a deterrent against unreasonable conduct during proceedings. The amendments will enable costs orders to be more easily made in the case of unreasonable conduct but will not prevent genuine claims from being pursued. They will discourage frivolous and speculative claims and assist in the efficient resolution of claims by encouraging all parties to approach proceedings in a reasonable manner. These measures are reasonable and proportionate to address the time and expense that an unreasonable conduct by a participant and/or their representative may cause another party to incur.”

[33] The phrase "unreasonable act or omission" used in s.170CJ(3) of the Workplace Relations Act 1996 (the WR Act). Sections 170CJ(1), (2) and (3) as they applied in March 2006 provided:

“Section 170CJ. Commission may order payment of costs

(1) If the Commission is satisfied:

(a) that a person (first party):

(i) made an application under section 170CE; or

(ii) began proceedings relating to an application; and

(b) the first party did so in circumstances where it should have been reasonably apparent to the first party that he or she had no reasonable prospect of success in relation to the application or proceeding;

the Commission may, on application under this section by the other party to the application or proceeding, make an order for costs against the first party.

(2) If the Commission is satisfied that a party (first party) to a proceeding relating to an application under section 170CE has acted unreasonably in failing:

(a) to discontinue the proceeding; or

(b) to agree to terms of settlement that could lead to the discontinuance of the application;

the Commission may, on an application under this section by the other party to the proceeding, make an order for costs against the first party.

(3) If the Commission is satisfied:

(a) that a party (first party) to a proceeding relating to an application made under section 170CE caused costs to be incurred by the other party to the proceeding; and

(b) that the first party caused the costs to be incurred because of the first party’s unreasonable act or omission in connection with the conduct of the proceeding;

the Commission may, on an application by the other party under this section, make an order for costs against the first party.”

[34] The unreasonable act or omission phrase in s.170CJ(3) was considered in Goffet v Recruitment National Pty Ltd 7, which concerned a failure to attend conciliation proceedings. In that matter the Full Bench stated:

“[35] In the absence of medical evidence of Ms Goncalves and an opportunity for the Appellant to be heard on the point no weight should attach to the affidavit of Ms Goncalves claim that she was ill on the day of the conciliation on 5 November 2008. The notice of listing for the 5 November 2008 conciliation was sent to the Respondent by fax on 20 October 2008. The matter was listed for 11.30am. The Respondent only notified the Commission that it would not be attending the conciliation when the Commissioner’s associate telephoned the Respondent to inquire of its whereabouts at the time of the conciliation. Assuming Ms Goncalves was ill, as it is submitted that she was, no explanation appears to be given for the failure of the Respondent to inform the Appellant or the Commission of the fact prior to the scheduled commencement time of the conciliation or at all at the initiative of the Respondent. That represents conduct in our view, which caused the Appellant and her representative an unnecessary attendance at the Commission for which we think she should have her costs. The failure to initiate contact with the Commission and/or the Appellant prior to the scheduled start time for the conciliation to inform it or them of the non-attendance of the Respondent was unreasonable. If the act was intentional it would be an unreasonable act. If unintentional it would be an unreasonable omission. There is no evidence that the Respondent’s conduct in this regard was an intentional act. We are satisfied that the Respondent’s conduct in respect of the conciliation on 5 November 2009 was an unreasonable omission which caused the Appellant to incur costs.”

[35] The Bench continued:

“[47] The Respondent’s failure to take steps to inform the Appellant of its intentions immediately after the issue of the notice of listing was either a deliberate or reckless act that could not be regarded as anything other than unreasonable. Alternatively, to the extent that the failure might be regarded as an omission, it was equally unreasonable. That those unreasonable acts or omissions caused the Appellant to incur the costs in connection with the conduct of the proceeding is unquestionable. We are satisfied that the Respondent must be ordered to pay the Appellant’s costs of and incidental to the submissions and preparation for arbitration. We allow also the costs on an indemnity basis in respect of the costs application.”

[36] A Full Bench considered the former s.170CJ(2) and (3) in Brazilian Butterfly Pty Ltd and Charalambous. 8 It addressed the authorities relevant to these provisions before stating:

“[39] Very strong prospects of success will not always justify a failure to participate in settlement negotiations initiated by a serious settlement offer from the other party. For example, where reinstatement is not sought and the amount offered by a respondent is equivalent to the statutory cap on compensation that can be ordered pursuant to s.170CH, it will likely be unreasonable for an applicant to fail to agree to a settlement on those terms, irrespective of how strong the applicant’s case is. Of course, even then, it is possible to conceive of circumstances where a failure to agree terms of settlement on the basis of such an offer would not be unreasonable. For example, depending upon the circumstances, it may be entirely reasonable for an applicant to insist upon a withdrawal of the dismissal and acceptance of a resignation in its stead if this were necessary to repair substantial damage done to an applicant’s professional reputation and future professional job prospects as a result of the dismissal.

[40] On the other hand, modest or even poor prospects of success on liability or remedy will not necessarily always make it unreasonable for a party to fail to agree terms of settlement that may lead to the discontinuance of the application. For example, an applicant who was a long term employee close to retirement may have very substantial contingent superannuation entitlements that will be lost unless he or she obtains reinstatement. The difference between the value of those contingent entitlements and the amount offered by the respondent as a monetary settlement may be so great as to make it reasonable for the applicant to refuse the respondent’s offer, notwithstanding that the applicants’ prospects of success are only modest or even poor. Again, each case will turn on its own facts.”

(references removed)

[37] The Full Bench continued:

“[43] A reasonable person, who is a party to proceedings pursuant to s.170CE, when confronted with an offer of settlement from the other party, will determine whether, and if so, how to respond to such an offer after considering all the circumstances of the case, including:

• the terms of the settlement offered in relation to the relief sought;



• the relative strengths of the parties’ cases (and thus their relative prospects of success) in relation to both ‘liability’ and the relief sought;



• any assessment of the merits in the certificate issued by the Commission pursuant to s.170CF(2);



• the likely length and cost of proceeding to a hearing if the matter does not settle; and



• any adverse consequences that will accrue to a party if they accept a settlement on particular terms rather than successfully prosecute or defend the primary application, as the case may be.




[44] This list is not intended to be exhaustive. All of the circumstances are relevant and, as is made clear in the joint judgment in Blagojevch, there is no basis in the Act for giving primacy to any particular factor in every case.

[45] In many, if not most, cases there will be contested facts or contested interpretations of particular facts. What knowledge in this regard is to be attributed to the reasonable person considering whether, and if so, how to respond to an offer of settlement? The passage in Abbey, upon which the Commissioner relied was, clearly enough, an attempt to grapple with that problem. However, there is a tension between the way in which that passage is expressed and the apparent acceptance by the majority in Blagojevch that a party can act reasonably in responding to an offer of settlement by reference to that party’s “genuine perception or recollection of events”. The Full Court’s formulation is to be preferred although, even then, it is not to be seen as a substitute for the words of the Act. Of course, there is an issue as to what constitutes a “genuine” perception. The Full Bench in Kangan Batman TAFE observed, we think correctly, that:

“A party cannot simply disregard matters that should have been reasonably apparent and then claim that such matters were not apparent to them.””

(references removed)

[38] A Full Bench said in Stagno v Frews Wholesale Meats 9:

“This last extract introduces a point of distinction between s.170CJ(1) and s.170CJ(2). The former refers to `without reasonable cause', the latter to `acted unreasonably'. This anomaly, as it was described, is noted by a full bench in K.M. Lloyd v. International Health and Beauty Aids Pty Ltd t/as Elly Lukas Beauty College [Print Q5446] and, by inference, the bench is of the view that the tests are different in s.170CJ(1) and (2). That there is a different formula is clear but we are of the view that the formulations are based on the stage of proceedings at which they occur. Section 170CJ(1) relates to the initiation of proceedings. Section 170CJ(2) relates to the failure to discontinue or the discontinuance of the matter. In each case what attracts the discretion to award costs is unreasonable action or the absence of sufficient reason for the action taken. What is considered to be without reason is determined by reference to the stage that the proceeding has reached. We note that this leaves open the possibility that proceedings may commence which are with reasonable cause but may, in particular circumstances at a later stage, be further prosecuted unreasonably.

“We are of the view that a party to a proceeding commenced under s.170CE of the Act in which the Commission has begun arbitrating has acted unreasonably in failing to discontinue the matter if when, at the relevant time, upon the facts apparent to the applicant there was not substantial prospect of success.””

[39] In Blagojevch v Australian Industrial Relations Commission 10 the Court said:

“38 Before turning to the question whether prerogative relief is justified, there is one other matter with which we should deal. The employer's written submission raised the question whether, in the circumstances, the Commission had begun arbitrating the matter, so as to have power to make an order for costs: s 170CJ(2). That topic was not developed substantially in oral argument. The Commission proceeded on the basis that the time at which the condition in s 170CJ(2) must be met is the time when the Commission is called upon to consider whether to exercise its power to make an order for payment of costs. In our view that is correct: it is what the provision literally means and we can see no reason to depart from the literal meaning. Though it does not matter, we think, also, that the applicant was plainly right, on the basis of the chronology which we have recorded, in submitting that the Commission had already "begun arbitrating" at the time when the settlement offer was made and rejected.

Jurisdictional error?

39 In Craig the High Court stressed (at 179) the "critical distinction which exists between administrative tribunals and courts of law". Their Honours continued:

"At least in the absence of a contrary intent in the statute or other instrument which established it, an administrative tribunal lacks authority either to authoritatively determine questions of law or to make an order or decision otherwise than in accordance with the law. That point was made by Lord Diplock in Re Racal Communications Ltd [1981] AC 374 at 383:

Parliament can, of course, if it so desires, confer upon administrative tribunals or authorities power to decide questions of law as well as questions of fact or of administrative policy; but this requires clear words, for the presumption is that where a decision-making power is conferred on a tribunal or authority that is not a court of law, Parliament did not intend to do so.

The position is, of course, a fortiori in this country where constitutional limitations arising from the doctrine of the separation of judicial and executive powers may preclude legislative competence to confer judicial power upon an administrative tribunal. If such an administrative tribunal falls into an error of law which causes it to identify a wrong issue, to ask itself a wrong question, to ignore relevant material, to rely on irrelevant material or, at least in some circumstances, to make an erroneous finding or to reach a mistaken conclusion, and the tribunal's exercise or purported exercise of power is thereby affected, it exceeds its authority or powers. Such an error of law is jurisdictional error which will invalidate any order or decision of the tribunal which reflects it."”

[40] In Veal v. Sundance 11 a Full Bench of the Commission said:

“[15] Section 401 refers to the concept of whether it should have been reasonably apparent that a person had no reasonable prospect of success. We address that concept relative to s.611(2)(b) but note that, because the section applies to the actions taken or not taken by a legal representative of a party it seems to us to follow that these actions or omissions by legally qualified and trained people should be measured against a higher standard than that which would apply to an unrepresented party, by virtue of the representative’s training and expertise.”

Submissions

[41] Alexander M applies for costs against McDonald Murholme.

[42] McDonald Murholme submits that:

. nothing said in evidence at the hearing or in the relevant material would entitle Alexander M to costs;

. Alexander M seeks to rely on confidential communications at a Fair Work conference which cannot be relied on. In any event McDonald Murholme denies that it said that the case requires a four day hearing;

. the Commission’s decision was on jurisdiction not merits;

. the Commission’s decision was based on the credibility of Mr.Lloyd;

. there was no reason for McDonald Murholme not to believe its client;

. McDonald Murholme relied on the written instructions of Mr.Lloyd;

. Alexander M was delinquent in making statutory payments;

. it was not possible for McDonald Murholme to advise Mr.Lloyd that he should not proceed with the application because it does not have reasonable prospect of success or that he should accept any particular offer of settlement;

. Alexander M’s case was confusingly put and the costs claim is excessive.

[43] Mr.Alan McDonald claims in his affidavit that:

. he found Mr.Lloyd to be a credible person;

. he was instructed to make reasonable offers of settlement and did so, while Alexander M did not;

. Alexander M did not provide comply with his obligations to provide payslips and other records and employment obligations;

. the failure of the application on jurisdictional grounds could not be foreshadowed because it was a matter of Mr.Lloyd’s instructions as to what happened on that day, and the rejection of his evidence could not be predicted.

[44] Alexander M in reply submits that:

. the request by the Conciliator for McDonald Murholme to estimate the length of hearing and likely number of witnesses, and their answer, is not privileged but can be had regard to in costs applications;

. McDonald Murholme clearly indicated that it considered that the case would go for four days and did so as late as 31 July 2013, (Exhibit JSF7 to the Affidavit of Jonathan Flannery dated 1 October 2013), and Mr.McDonald has never sworn on oath to the contrary;

. the cost impact on Alexander M of preparing for a four day case was considerable. It was an interstate employer because it closed its Melbourne office because it was unprofitable under Mr.Lloyd’s management;

. Alexander M always clearly disputed that it had dismissed Mr.Lloyd;

. Alexander M disputes the claim that McDonald Murholme was entitled not to investigate overpayments made to Mr.Lloyd;

. Mr.McDonald’s reference in paragraph 8 of this affidavit to a belated Alexander M claim for overpayment of wages made in the proceedings ignores the plain raising of the issue on 10 May 2013 in the Alexander M response to the application. Mr.McDonald’s statement is ‘of course utter and arrant nonsense’;

. Mr.McDonald’s claim that Alexander M made belated settlement offers is also nonsense as the evidence reveals;

. there is no documentation of any alleged reasonable offers of settlement made by Mr.Lloyd, and indeed there were no such offers as indicated by the chronological history of the matter tendered by Alexander M. The only offer made by Mr.Lloyd was on 29 August, one clear business day before trial, at which time all the costs of Alexander M had been incurred including solicitor’s professional fees, barrister’s fees, witness expenses, airfares and accommodation costs. The offer made was totally unacceptable to Alexander M;

. by comparison, Alexander M attempted to negotiate and minimise costs. It acted reasonably;

. Alexander M rejects the claims made with respect to payslips and similar records, which are in any event irrelevant;

. McDonald Murholme is not simply entitled to reply on the written instructions of its client Mr.Lloyd regardless;

. the costs incurred by Alexander M are not excessive, and Mr.Bailey’s witness statement should be relied on;

. Alexander M seeks nothing more than a ‘fair go all round’, and McDonald Murholme and Mr.Lloyd’s actions were ‘deliberate, cynical and denied the Cost Applicant that ‘fair go’’.

Consideration of the Issues

[45] In relation to offers of settlement, according to Mr.Flannery’s sworn statement of 1 October 2013, Alexander M made an offer of settlement to McDonald Murholme on 27 May 2013 12 (payment of entitlements and one weeks’ additional pay), 8 August 201313 (4 weeks’ pay), and on 9 August 2013 further and in addition offered not to pursue the alleged overpayment14. There were apparently unsatisfactory telephone conversation(s) which led Mr.Flannery to request McDonald Murholme to respond in writing, as conversations by telephone ‘are of little value to the potential resolution of this matter’15.

[46] While Alexander M made an offer of settlement on 27 May, no offer to settle was made by McDonald Murholme until 29 August, some three months later. Mr.Flannery provided a sworn statement on 31 October 2013 that:

‘In order to correct that inaccuracy, I advise the Commission, that my office received on Thursday, 29 August 2013 a letter from Mr.Lloyd’s solicitors which was labelled ‘Without Prejudice Save as to Costs’. It contained an offer of compromise.

I did not respond to that correspondence on behalf of the Cost Applicant. By the time this offer was received, all of the relevant costs and outlays incurred up to that point in time by the Cost Applicant had already been incurred and could not be recovered or otherwise ameliorated. These included my professional fees, the barrister’s fees, witness expenses, air fares and accommodation. In any event, the terms of that offer were totally inacceptable to my client.’

[47] Alexander M further offered and sought in letters to McDonald Murholme to make arrangements for the payment of entitlements to Mr.Lloyd on 27 May 16, and 8 July17.

[48] McDonald Murholme’s claim that the overpayment issue was raised belatedly is curious. It was raised by Alexander M in its first response to the application, on 10 May (‘Apparent significant overpayments of wages/salary made to the applicant’). Mr.Flannery for Alexander M again raised the issue of alleged overpayments by Alexander M to Mr.Lloyd on 8 July 2013 18, and at greater length on 31 July 201319. McDonald Murholme did not at any stage provide any substantive response to the 31 July explanation, although it discussed the alleged overpayments on 15 July 201320. In any event the issue had already been raised by Alexander M with Mr.Lloyd on 8 April.

[49] In particular, On 15 July 2013 McDonald Murholme requested Mr.Flannery for Alexander M to provide details of the ‘progress and steps undertaken by your client with respect of the alleged overpayments given that our client’s [sic] was dismissed on 8 April 2013 and investigations of this nature are commonly expeditious when paperwork and accounts are in order’. It sought other details so that it could take instructions. Mr.Flannery responded on 31 July by providing such specific details. He claimed that ANZ had verified that certain payments were made to Mr.Lloyd, the amounts, the dates of the alleged payments, the alleged sum of net overpayments, and requested repayment.

[50] Despite seeking such details, McDonald Murholme never responded to this material, either by letter or email or in the proceedings. In my decision I drew attention to the failure of Mr.Lloyd to clarify the facts about the alleged overpayments 21.

[51] McDonald Murholme and Mr.Lloyd were put on notice as early as possible about the issue. The issue was important because it was arguably relevant to the amount of compensation that might be ordered by the Commission if Mr.Lloyd was successful in his application.

[52] Mr.Flannery has provided a sworn statement that during a conciliation conference McDonald Murholme provided an estimate to the Commission and himself that the matter would take four days 22. However, the estimate was provided during a conciliation conference, and McDonald Murholme has objected to the material being taken into account on that basis. In McKenzie v. McDonald Murholme23 a Full Bench of the Australian Industrial Relations Commission considered an appeal against a decision ordering costs against McDonald Murholme. The Bench considered that an offer made during conciliation should not be taken into account in determining a costs application under s.170CJ. I adopt the reasoning of the Full Bench. The four day estimate made during a conciliation proceeding cannot be taken into account for the purposes of these proceedings.

[53] A contemporaneous letter of 31 July 2013 from Mr.Flannery supports his version of events, namely that McDonald Murholme continued to estimate that a four day hearing was required:

‘Against this your client apparently wishes to run a 4 day before the Commission in Melbourne drawing out significant resources not only from the Commission itself, but further from the respondent in particular. All witnesses who attend on behalf of the respondent will need to fly to Melbourne for the purpose of giving evidence at any time over a four-day period. This will come at enormous cost. The Commission will be entitled to draw its own conclusions as to these matters and will make costs orders appropriately.’  24

[54] He expressed his concern about the ‘enormous cost’ therefore involved. McDonald Murholme did not contradict this claim by letter at the time. If it was inaccurate it was allowed to remain inaccurate without correction. Mr.McDonald has provided only an unsworn statement to the contrary for the purposes of the costs proceedings.

[55] On 8 August 2013 Mr.Flannery again complained about the cost implications of a four day hearing that McDonald Murholme apparently continued to recommend, support or require:

‘However, you have listed this matter for 4 days in Melbourne and any hearing of this matter will cost my client a considerable sum of money, not only in terms of time away from work, but also in having several witnesses attend from interstate, accommodation costs, airfares, transportation and so forth. In addition to that, significant legal fees will plainly be incurred. Accordingly, in order to obviate the cost of such wasted expense, my client herewith makes an offer to the applicant in order to resolve this matter once and for all. That offer is a payment, as the applicant’s former rate of pay, equal to 4 week’s pay.’ 25

[56] Mr.Flannery referred to a number of other issues including costs applications under s.401. McDonald Murholme responded in writing on 14 August 2013 but did not deal with the contents of the offer or respond to the offer, or contradict or change the estimate of a four day hearing which Alexander M said had adverse cost implications.

[57] The matter was initially listed for a four day hearing on 5 July, and this continued until it was reduced to a more accurate one day on 21 August. McDonald Murholme was advised by Mr.Flannery on 31 July and 8 August about his concerns about the cost impact, and McDonald Murholme on the material before me did not reply by reviewing its estimate or taking other action to change the four day hearing which was on the material supported by it. McDonald Murholme in so doing it appears caused Alexander M to incur additional costs. The four day hearing was not necessary and the hearing was one day or less.

[58] The costs incurred by Alexander M are stated in a sworn statement of Mr.Gordon Bailey, Accountant, made on 30 October 2013, to be $27,284.71. He provides a breakdown of those costs. McDonald Murholme described these costs as ‘excessive’ in a submission without specifying which and why payments were allegedly excessive.

[59] In relation to the merits of the matter, I have stated above that on the facts known to Mr.Lloyd his application had no substantial prospects of success. McDonald Murholme submits that on the facts stated to the firm this was not apparent, and that it was entitled to rely on what was put to it by its client. Mr.McDonald said that he was not impressed with the employer because it had failed to meet payroll and other requirements regarding documentation, and because Mr.Lloyd ‘provided me with plausible explanations of matters which were in his knowledge. He was not able to answer questions about monies paid into his account which were not accompanied by any documentation and which were not from his employer’s account’ 26. A number of other matters were raised in the McDonald Murholme submissions27.

[60] However, in this matter there was clearly a difference of opinion about the facts of the matter which McDonald Murholme, a highly experienced firm, was aware about from the earliest possible time. Alexander M had provided specific details of the alleged overpayments to McDonald Murholme on 31 July, in response to a request for those details made by McDonald Murholme on 15 July. Alexander M claimed that ANZ had verified that certain payments were made to Mr.Lloyd, the amounts, the dates, the alleged sum of net overpayments, and requested repayment.

[61] McDonald Murholme must have known that there was a possibility that another version of events would be preferred if these details were true and correct. It could not simply rely on what Mr.McDonald calls in his statement ‘matters which were in [Mr.Lloyd’s] knowledge’. Any reasonable person would have investigated to ascertain if the claims made by Alexander M with such specificity were true. Even if I assume that the instructions given by Mr.Lloyd to McDonald Murholme on the issue of alleged overpayments were consistent with the evidence given by Mr.Lloyd to the Commission, namely that he did not know and did not investigate to ascertain the truth, then McDonald Murholme must have known that there was a real danger that the Commission might not find this to be an appropriate response after so many occasions when the issue was raised with him.

Decision on Costs Order Against McDonald Murholme

[62] The requirements of s.401(1) are met. Mr.Lloyd made an application for an unfair dismissal remedy, engaged a lawyer to represent him in the matter, and the lawyer was required and did seek the Commission’s permission to be represented by the representative. The permission was granted.

[63] Turning to deal with the requirements of s.401(1A), I find the submissions and evidence provided by Alexander M generally persuasive. I have not been able to place much weight on the material provided by McDonald Murholme.

[64] Beginning on at least 27 May Alexander M made at least three attempts to settle the matter by making offers of money, to pay entitlements, and to forego substantial alleged overpayments. McDonald Murholme refers to these offers as being made ‘belatedly’ 28. However it is difficult to see how such a claim can reasonably be made. Alexander M made its first offer on 27 May, and sought shortly after to address settlement issues such as the alleged overpayments and entitlements.

[65] McDonald Murholme did not make an offer of settlement until the last minute, on 29 August shortly before a 2 September hearing, at which point considerable costs had already been incurred by Alexander M, which was an interstate company. Mr.Flannery has given uncontradicted sworn evidence that all of the relevant costs and outlays incurred up to that point in time had already been incurred and could not be ameliorated 29. Unlike Alexander M, McDonald Murholme never substantively addressed before that late stage the various settlement issues between the parties namely the alleged overpayments and the additional payments offered. The course of conduct engaged in by McDonald Murholme maximised costs to Alexander M and minimised the possibility of any negotiated settlement on a basis other than complete accession to their claims, regardless of the merits of those claims. Complete accession to their claims was not likely given the merits of the case and the overall circumstances in which the employer had legitimate concerns about the conduct of an employee, which the employee never sought to address.

[66] As noted in my decision, McDonald Murholme did not satisfactorily address in submissions or evidence the issue of alleged overpayments, even though this might affect any resulting compensation. It now says that this overpayments claim was made ‘belatedly’ 30. Again, it is difficult to see how such a claim can reasonably be made. The employer first raised the issue on 8 April, and then 10 May, and then consistently raised it. Such a failure is relevant to an assessment of whether or not the conduct of McDonald Murholme was reasonable, having regard to the observations on merits issues in for example Brazilian Butterfly.

[67] On the information before me, I am satisfied that Mr.Lloyd followed advice from McDonald Murholme over the duration of this matter. No submission to the contrary was put. Directions were issued on 10 October, and McDonald Murholme had ample opportunity to raise the issue with the Law Institute or other body if it wished and has not done so. It quickly became apparent that there would be difficulties in contacting Mr.Lloyd.

[68] Section 381 provides the object of the unfair dismissal part of the Act:

“Section 381 Object of this Part

(1) The object of this Part is:

(a) to establish a framework for dealing with unfair dismissal that balances:

(i) the needs of business (including small business); and

(ii) the needs of employees; and

(b) to establish procedures for dealing with unfair dismissal that:

(i) are quick, flexible and informal; and

(ii) address the needs of employers and employees; and

(c) to provide remedies if a dismissal is found to be unfair, with an emphasis on reinstatement.

(2) The procedures and remedies referred to in paragraphs (1)(b) and (c), and the manner of deciding on and working out such remedies, are intended to ensure that a “fair go all round” is accorded to both the employer and employee concerned.

Note: The expression “fair go all round” was used by Sheldon J in In re Loty and Holloway v Australian Workers’ Union [1971] AR (NSW) 95.”

[69] As noted in Veal 31, McDonald Murholme is entitled to recommend hard bargaining. However, the conduct before me goes beyond hard bargaining and into the realm of disadvantaging both the employer and employee concerned. The result of the conduct of the case is that Mr.Lloyd has achieved no compensation, has expended moneys on litigation, and is now liable for an action for the repayment of alleged overpayments, and for the payment of Alexander M’s costs. Alexander M has expended $27,284.71 in legal costs to date, and will need to engage in further litigation if it wishes to recover alleged overpayments. Both employer and former employee have been left in an unsatisfactory position. It may not be too strong a description to describe the outcome of the case as a calamity for both sides.

[70] It should have been reasonably apparent to any participant in the negotiations that a settlement on something similar to the terms offered by Alexander M on 8-9 August would have comparatively benefited both Mr.Lloyd and Alexander M. Mr.Lloyd would have received at least four weeks’ additional pay and possibly more, and been released from any claim for recovery of alleged overpayments, and presumably costs. Alexander M would have avoided the expenditure of considerable funds in litigation, and would have achieved finality in these proceedings.

[71] The conduct of negotiations by McDonald Murholme made a settlement beneficial to both sides extremely difficult, led to costs being incurred which could have been avoided, and led to possibly unnecessary proceedings. The only possible net beneficiary of the conduct of the case to date is McDonald Murholme, through legal costs.

[72] There were cumulative unreasonable acts by McDonald Murholme within s.401(1A)(b) in the circumstances of this case.

[73] The four day hearing estimate made by McDonald Murholme during a conciliation conference cannot be taken account of. However, McDonald Murholme outside the conciliation conference continued to support a four day hearing which caused Alexander M to incur additional costs, and which on the material before me was not a well founded estimate. On one view this is also the result of the conciliation conference and cannot be taken account of. In the alternative, although this is not necessary to my decision, it was an estimate that McDonald Murholme supported or advocated outside the conference and is relevant as another in a series of cumulative unreasonable acts. It would be curious result if the mention of an estimate of hearing time in a conciliation conference is enough to absolve a party which continues to support outside the conference an unfounded estimate which causes costs to the other side.

[74] An order for costs will be made against McDonald Murholme pursuant to s.401(1A).

Shared Costs

[75] In my view the costs should be paid equally by both Mr.Lloyd and McDonald Murholme. The costs are those incurred by Alexander M arising from the initial proceedings arising out of Mr.Lloyd’s application for an unfair dismissal remedy, and the costs proceedings.

Order

[76] An order [PR545796] has been issued giving effect to my decision.

DEPUTY PRESIDENT

Hearing details: on the papers

Final written submissions:

2013

31 October

21 November

28 November