| [2016] FWC 2659 |
| FAIR WORK COMMISSION |
DECISION |
Fair Work Act 2009
s.394—Unfair dismissal
Emma Sidney
v
Employsure Pty Ltd
(U2015/6453)
COMMISSIONER BISSETT |
MELBOURNE, 2 MAY 2016 |
Application for relief from unfair dismissal – s.400A application for costs - s.611 application for costs – application dismissed.
[1] On 11 December 2015 1 I issued a decision (the initial decision) in which I found that Ms Emma Sidney had been unfairly dismissed from her employment with Employsure Pty Ltd (Employsure). On 17 March 2016 I issued a further decision2 and Order3 with respect to compensation.
[2] On 30 March 2016 Ms Sidney made an application for costs against Employsure. As a result of a request for clarification on the application from my chambers Ms Sidney lodged an amended application with submissions in support of that application on 6 April 2016. Employsure lodged submissions in reply and Ms Sidney was given an opportunity to provide a reply to those matters raised by Employsure.
[3] Both Ms Sidney and Employsure indicated they were content for the Fair Work Commission (the Commission) to decide the application on the basis of written materials filed.
[4] Ms Sidney makes an application for costs pursuant to s.400A of the Fair Work Act 2009 (the Act). She also makes application pursuant to s.611(2)(a) and (b).
[5] The costs Ms Sidney seeks are those incurred by her in gaining legal advice in relation to her unfair dismissal matter before the Commission.
[6] Section 400A of the Act 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.
[7] Section 611 of the Act states:
(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).
[8] Ms Sidney says that she was forced to seek legal assistance because:
● The case was long running and detailed, starting with a lengthy dismissal letter;
● Employsure’s conduct was not in keeping with its policies or procedures;
● No breach of policy or procedure was identified in the dismissal letter so the nature of the case was obscured.
[9] Ms Sidney says that the complexity of the case was evident by Employsure’s initial request (later withdrawn) for permission to be represented by a lawyer or paid agent.
[10] She submits that there was ‘little if any question that the dismissal process would be deemed unfair’ and that Employsure knew this by its offer to settle the matter prior to hearing.
[11] Ms Sidney says that Employsure had access at all times to legal counsel and its representative in proceedings (Mr Fry, an employee of Employsure) had the advantage of regularly appearing before the Commission.
[12] Ms Sidney also says that Employsure’s approach to compensation required ‘several iterations of the compensation claim information’ which required the parties to return to the Commission.
[13] Ms Sidney also relies on the finding of the Commission in the initial decision that the manner in which her dismissal was carried out was unreasonable. 4
[14] For these reasons Ms Sidney says she incurred costs because of unreasonable acts or omissions of Employsure.
[15] Ms Sidney submits that Mr Michael Morris behaved vexatiously by an email he sent to her on 5 August 2015 (with regard to settlement discussions between Ms Sidney and Employsure) indicating Employsure would make no further offers when it fact it made two further offers to settle. She also says Mr Morris engaged in vexatious behaviour by threatening that Employsure would apply for costs.
[16] She submits that by entering into negotiations to settle her application Employsure tacitly admitted that it would fail before the Commission and it was for this reason it sought permission to be represented by a lawyer in the hearing of the application.
[17] Ms Sidney submits that delays in having the matter finalised were deliberate and an advantage to Employsure.
[18] She says that for these reasons the case was vexatious and had no reasonable prospect of success.
[19] Employsure submits that there is no basis to depart from the standard position that each party to proceedings bears its own costs. Particularly, it says that there is no evidence that it acted vexatiously, that it committed an unreasonable act or omission in the conduct of the case or that its response to the application had no reasonable prospect of success.
[20] Employsure submits that the case involved contested facts that required adjudication by the Commission.
[21] It says that fact that Ms Sidney chose to engage lawyers to assist her is not a relevant consideration of the Commission in making a decision to award costs. Further, that Mr Fry, an employee of Employsure who appeared for it in the proceedings, had previous experience in the Commission is not a relevant consideration in a determination of a costs application.
[22] Employsure submits that Ms Sidney has not advanced any evidence that Employsure (through Mr Fry or otherwise) acted unreasonably in the conduct of the matter.
[23] Employsure says that it did not engage in any unreasonable act or omission.
[24] Employsure submits that Ms Sidney confuses the finding by the Commission of the unreasonable way in which her dismissal was conducted with ‘unreasonable acts’ referred to in s.400A. It submits that this is an incorrect reading of the Act.
[25] Employsure submits that there is no evidence that it acted vexatiously and that the exchange of offers to settle the matter prior to hearing do not demonstrate that it acted vexatiously or without reasonable cause.
[26] A decision to award costs pursuant to section 400A of the Act requires a consideration of whether Employsure, by some unreasonable act or omission, caused Ms Sidney to incur costs.
[27] Section 400A was inserted into the Act by virtue of the Fair Work Amendment Act 2012. The Explanatory Memorandum to the Fair Work Bill 2012 states:
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.
[28] The authorities relevant to a consideration of the phrase ‘unreasonable act or omission’ were considered in the decision of the Full Bench in Roy Morgan Research v Baker. 5 I do not repeat those provisions here but note the following can be taken from those authorities:
● A failure to inform another party of an inability to attend proceedings would be, if intentional, unreasonable and if accidental, an unreasonable omission;
● a failure to advise the other party of the first party’s intentions, if deliberate or reckless, would be unreasonable and if an omission could be equally unreasonable;
● very strong prospects of success will not always justify a failure to participate in settlement negotiations;
● a reasonable person will determine if and how to respond to an offer of settlement after considering all of the circumstances of the case including the terms of settlement in relation to the relief sought; the relative strength of the parties cases; the likely length and cost of proceeding to hearing if the matter does not settle; and adverse consequences of acceptance of a settlement rather than prosecuting or defending the primary application.
[29] I have taken these principals into account in considering the application for costs before me.
[30] I am not satisfied that Ms Sidney has identified any unreasonable act or omission of Employsure such that she has satisfied me an award of costs should be made pursuant to s.400A of the Act.
[31] I do not accept Ms Sidney’s proposition that a failure by Employsure to make a reasonable settlement offer prior to hearing is an unreasonable act or omission. The information provided by both Employsure and Ms Sidney indicates that, prior to hearing Employsure made an offer of $10,000.00 to settle the matter. The final award of compensation was in the order of $20,000.00. The view of Ms Sidney that $10,000.00 was not reasonable is a subjective view. Given the circumstances of the case, the time taken, the volume of submissions and correspondence between the parties and the Commission and the final compensation amount (which was not, as suggested in Ms Sidney’s material close to $40,000.00), $10,000.00 at the point in time it was offered may be seen as a reasonable settlement offer. Employsure had the right to consider Ms Sidney’s offer of settlement and balance that against the considerations outlined above. In these circumstances I am not convinced its conduct constituted an unreasonable act or omission.
[32] I am satisfied that Employsure acted reasonably in its approach to the conduct of the matter before the Commission. It acted in a manner that, despite Ms Sidney’s submissions to the contrary, was directed to having the matter dealt with expeditiously but fairly. There is no identified act or omission by Employsure in the conduct of the matter that might be viewed as unreasonable. That the Commission found error in the way Employsure went about the dismissal of Ms Sidney should not be confused with its conduct in the matter before the Commission. In the hearing and determination of the matter there is nothing to suggest that Employsure engaged in an unreasonable act or omission.
[33] Employsure has been clear and open in all of their submissions and communication with the Commission and Ms Sidney such that I could not conclude that through some omission on its part it has caused costs to be incurred by Ms Sidney.
[34] Employsure has vigorously defended itself in proceedings but it is entitled to do so.
[35] I am not satisfied that Employsure caused costs to be incurred because of some unreasonable act or omission on its part in connection with the conduct of the matter before the Commission.
[36] The approach to be taken to an application for costs made pursuant to section 611 of the Act was recently considered by a Full Bench of the Commission in Keep v Performance Automobiles Pty Ltd 6 where the Full Bench said:
[16] The FWC’s power to order that a person bear some or all of the costs of another person in relation to an application is only enlivened if the FWC is satisfied as to the matters set out in either s.611(2)(a) or s.611(2)(b).
[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. 7
(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”.
[footnotes omitted]
[37] Whether proceedings or a response to proceedings may be vexatious was considered in Holland v Nude Pty Ltd (t/as Nude Delicafe) 7 where the Full Bench said:
[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 8 (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 by product 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.”
[38] It is apparent from the wording of both s.611(2)(a) and (b) that the conduct or behaviour of Employsure must be determined in relation to its response to the application. The application in this case is that made pursuant to s.394 of the Act. That application was made on 14 July 2015 so, at best, it is only the conduct of Employsure after this date that can be considered. This is so because the Act speaks of the conduct of the party in responding to the application. This means that the Commission cannot consider how Employsure behaved in relation to effecting the dismissal or the lead up to the dismissal in making a decision as to costs.
[39] That Employsure may have taken a hard line in its discussions with Ms Sidney in relation to settlement discussions cannot be taken as it being done with the predominant purpose to harass or embarrass Ms Sidney or for some collateral purpose.
[40] Ms Sidney says that Employsure acted vexatiously because it was a ‘long winded 10 month process in which Employsure held up proceedings’ and that this delay ‘facilitated a ‘collateral advantage’ of around $20,000.00 in reduction [in] earnings during the 6 months following dismissal’. I discern from this that Ms Sidney believes that Employsure deliberately dragged out proceedings in an attempt to reduce her earning capacity following dismissal.
[41] There is no basis on which it can be concluded that Employsure acted vexatiously by dragging out proceedings. Firstly, whilst Employsure sought an extension of time at one stage in proceedings, and this was granted, the proceedings ultimately took as long as they did because neither Ms Sidney nor Employsure came prepared to argue compensation at the time of the initial hearing. Separate directions and hearing were held for that purpose following the initial decision to ensure both Ms Sidney and Employsure could make submissions to assist the Commission in making an appropriate compensation order. Secondly, accommodations were made for both parties taking into account particular circumstances to ensure that both had a reasonable opportunity to put material they considered relevant before the Commission.
[42] I am not clear as to what ‘collateral advantage’ accrued to Employsure in effecting some reduction in Ms Sidney’s earnings post dismissal. If anything a reduction in her earnings would result in a greater payment of compensation to her. This cannot have been of benefit to Employsure.
[43] For the reasons given above Ms Sidney’s submissions that Employsure behaved vexatiously by its long winded termination letter is rejected. That letter was provided prior to the making of the unfair dismissal application and therefore does not fall within the rubric of ‘responding to the application’.
[44] Ms Sidney lodged a 12 page application for unfair dismissal plus a number of attachments. Ms Sidney did not raise in her application that her employment had been terminated for reasons associated with her capacity arising from an injury and a period of time away from the workplace.
[45] Employsure, in its response to the application, outlined this as the reason for her dismissal. Throughout proceedings it maintained that this was the reasons for dismissal and that it had reached this decision following consultation with Ms Sidney’s medical practitioners.
[46] To the extent that Employsure had a reason for Ms Sidney’s dismissal that, on its face, appeared defensible cannot allow a conclusions that it had no substantial prospect of success. That its defence was not successful does not mean that it responded to the application without reasonable cause.
[47] Ultimately there were a number of factual issues that were to be resolved in the matter, including Ms Sidney’s capacity to do her job and the validity of the conclusion reached by Employsure on this. That I found Employsure had invalidly reached its conclusions as to Ms Sidney’s capacity does not mean that Employsure responded to the application for unfair dismissal without reasonable cause. It had gone through what it considered a reasonable and robust process in reaching its decision and it was entitled to mount such a defence to the claim. That I found otherwise does not mean it did not have a reasonable basis on which to defend its actions.
[48] It was reasonably open to Employsure to argue that Ms Sidney could not fulfil the inherent requirements of her position. Ultimately I did not make a finding on this. Rather I determined that there was no basis on which Employsure could have reached its conclusion.
[49] For these reasons I find that Employsure did not respond to the application without reasonable cause.
[50] For the reasons given above I am not satisfied that it should have been reasonably apparent to Employsure that its response to Ms Sidney’s application had no reasonable prospect of success.
[51] Employsure had a structured basis on which it reached its conclusion that Ms Sidney’s employment should be terminated. This was documented in the lengthy termination letter it provided to Ms Sidney. No criticism can be made of Employsure’s willingness to provide detailed reasons as to why it terminated Ms Sidney’s employment. That the Commission did not support its conclusion does not mean its response to the application was ‘manifestly untenable or groundless’.
[52] I accept that Ms Sidney incurred some costs in the preparation of her application and running of the case. I also accept that, in finding in her favour, criticism was made of Employsure’s actions and decision making leading up to the dismissal. However, that does not mean that Employsure responded to Ms Sidney’s application vexatiously or without reasonable cause or that it should have been reasonably apparent to it that it had no reasonable prospect of success.
[53] Further, that there were negotiations over a settlement of Ms Sidney’s application that did not come to fruition does not create an unreasonable act or omission or vexatious intent on Employsure’s part.
[54] It should be noted that part of the costs that Ms Sidney seeks to recover are legal costs associated with advice she received prior to making her application for unfair dismissal. To this extent it is not clear how Employsure could be liable for costs incurred prior to Ms Sidney commencing her actions in the Commission. Whilst she may have a complaint about the length and detail of the dismissal letter that letter was provided prior to making her application and cannot be seen to be a matter in connection with the conduct of the matter or related to Employsure’s response to the application.
[55] The further costs Ms Sidney seeks were incurred in relation to the determination of compensation. In this respect it is difficult to comprehend how Employsure’s conduct in the lead up to the hearing of the initial application, including settlement negotiations, caused those costs to be incurred by Ms Sidney. In all of Ms Sidney’s submissions as to costs she does not identify any unreasonable act or omission by Employsure that caused costs to be incurred in relation to the separate determination of compensation or that the response of Employsure was vexatious or without reasonable cause.
[56] Ms Sidney’s criticism of Employsure in relation to compensation goes to its mention of the Sprigg formula and her need to obtain legal advice on this. There is nothing unreasonable or wrong in Employsure mentioning Sprigg. It is the standard approach of the Commission to the determination of compensation. By signposting it in its response to the claim for compensation Employsure was open with Ms Sidney as to the basis on which it made its submissions.
[57] Ms Sidney’s complaint about negotiations over a settlement and that Employsure put three different proposals to her does not provide grounds for her application for costs. That the compensation awarded by the Commission was more than offered by Employsure is not indicative of unreasonable act or a vexatious response to her application.
[58] For the reasons given Ms Sidney’s application for costs pursuant to s.400A and s.611(2) of the Act is dismissed.
COMMISSIONER
Final written submissions:
Applicant, 20 April 2016
Respondent, 11 April 2016
The decision is subject to a confidentiality order.
PR578097.
[2015] FWC 8432, [57] and [60].
[2014] FWCFB 1175, [10]-[14].
(2012) 224 IR 16 [7].
[1997] 76 IR 180 at page 181.
2 The decision is subject to a confidentiality order.
3 PR578097.
4 [2015] FWC 8432, [57] and [60].
5 [2014] FWCFB 1175, [10]-[14].
7 (2012) 224 IR 16 [7].
8 [1997] 76 IR 180 at page 181.
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