DECISION

Fair Work Act 2009
s.394—Unfair dismissal

Husam Shamoon
v
Cabin Services Australia
(U2018/12538)

Application for costs.

[1] On 14 June 2019 I dismissed Mr Husam Shamoon’s application for unfair dismissal remedy against his former employer, Cabin Services Australia (CSA), finding that he was not unfairly dismissed (the Merits Decision). 1

[2] This decision concerns CSA’s Costs Application against Mr Shamoon, made on 28 June 2019. The Costs Application seeks costs pursuant to s.400A and s.611 of the Fair Work Act 2009 (the Act). The Costs Application is motivated by several matters. First, it is argued that Mr Shamoon’s failure to respond to a settlement offer was an unreasonable act or omission in connection with the conduct or continuation of the matter. Further, it was submitted in the Costs Application that:

“a. it should have been reasonably apparent to the Costs Respondent prior to filing the initiating application that his claim had no reasonable prospects of success, as contemplated by section 611(2) of the Fair Work Act 2009 (Cth) (FW Act), and on this basis caused the Costs Applicant to incur costs unreasonably and without cause;

b. it should have been reasonably apparent to the Respondent early in the proceedings that the claim had no reasonable prospects of success as contemplated by section 611(2) of the FW Act and on this basis caused the Costs Applicant to incur costs unreasonably and without cause; and,

c. the Costs Respondent pursued the claim vexatiously and/or without reasonable cause, as the predominant purpose was to gain a collateral advantage (in form of unjustified financial gain) and cause reputational damage to the Costs Applicant, particularly where it was clear that the proceedings would fail.” 2

[3] The Costs Application seeks costs on an indemnity basis both in relation to the Merits Decision and the Costs Application. It identifies CSA’s costs to the conclusion of the Merits Hearing as being $30,852.37, including GST.

[4] A hearing in relation to the Costs Application was held by me on 27 August 2019, at which Mr Rogan McMahon, from Ai Group, a registered organisation of employers, appeared for CSA. Mr Shamoon was represented by Fabian Brimfield of Counsel, instructed by Costanzo Lawyers, solicitors, with permission for representation in the hearing being granted to Mr Shamoon because I was satisfied of each of the criteria within s.596(2) of the Act.

[5] In addition to the originating Costs Application by CSA, made on the Commission’s Form F6, written submissions were provided by each party, as well as a witness statement filed on behalf of CSA by Mr Paul Borobokas, an Ai Group Principal Adviser. In making my decision on the Costs Application, I have taken into account all of the documents that have been filed in this matter to date, including those filed by each party in the merits hearing and all evidence given in those hearings.

LEGISLATION

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

“400A Costs orders against parties

(1) The FWC may make an order for costs against a party to a matter arising under this Part (the first party) for costs incurred by the other party to the matter if the FWC is satisfied that the first party caused those costs to be incurred because of an unreasonable act or omission of the first party in connection with the conduct or continuation of the matter.

(2) The FWC may make an order under subsection (1) only if the other party to the matter has applied for it in accordance with section 402.

(3) This section does not limit the FWC’s power to order costs under section 611.” 3

[7] Relevantly, 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 provides:

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

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

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

171. However, the power to award costs is only available if the FWC is satisfied that the act or omission by the first party was unreasonable. What is an unreasonable act or omission will depend on the particular circumstances but it is intended that the power only be exercised where there is clear evidence of unreasonable conduct by the first party.” 4

[8] Section 611 of the Act provides as follows:

“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).” 5

[9] The Explanatory Memorandum does not assist in understanding s.611’s legislative purpose. 6

CONSIDERATION

[10] Other than is allowed for under s.400A and s.611 of the Act, the general rule is that each party must bear their own costs in proceedings before the Commission. 7 In cases where the statutory criteria may be enlivened, the Commission’s power to award costs under this provision of the Act is discretionary. The exercise of discretion must be in a manner which is ‘fair and just’ and takes into account ‘equity, good conscience and the merits of the matter’ and there is a broad nature to the factors which may be relevant to the exercise of the discretion.8 There is also a requisite causal link between the act or omission and the costs incurred.

[11] Section 400A of the Act allows for cost orders to be made if the Commission is satisfied that costs were incurred because of an unreasonable act or omission of a party in connection to the conduct of the case. An unreasonable act or omission includes one which was either deliberate or reckless. 9 A failure to consider the possible settlement of a matter may be unreasonable, but is not necessarily so,10 as may be unreasonably failing to discontinue an unfair dismissal application.11 A “warning” provided to a party about the prospects of their case may be relevant to the assessment of whether the continuation of a matter was reasonable.12

[12] Section 611 of the Act allows for an order to be made for the payment of costs if the Commission is satisfied that a party’s application or response to an application was vexatious, without reasonable cause or if the Commission is satisfied that the application or a party’s response to an application had no reasonable prospect of success. 13

[13] It has been held in respect of s.611(2)(a) of the Act that the legislative intention under the section was for the power to order costs to be exercised where there is clear evidence of unreasonable conduct and that the power to order costs under the section should be exercised with caution and only in clear cases. 14 In these regards, the Full Bench has held the following about the context within which s.611 costs applications are determined in the Commission:

“[79] … Section 611(1) expressly states that ‘A person must bear the person’s own costs in relation to a matter before the FWC’. Section 611(2) provides an exception to that general proposition – so much is clear from the use of the word ‘however’ at the commencement of the subsection. This construction is confirmed by the explanatory memorandum which states:

‘Subclause 611(1) provides that generally a person must bear their own costs in relation to a matter before FWA. However, subclause 611(2) provides an exception to this general rule in certain limited circumstances.’

[80] Further, as observed the Full Bench in Church v Eastern Health:

‘In court proceedings the usual practice is that an order for costs follows the outcome of the substantive proceedings. … the Commission context is different. The Commission’s power to order costs only arises in the context of ss 376, 400A, 401, 611 and 780 of the FW Act. There is no general practice of cost following the event…

Section 611 sets out a general rule — that a person must bear their own costs in relation to a matter before the Commission (s 611(1)) — and then provides an exception to that general rule in certain limited circumstances.’” (references omitted)

[14] 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. The Full Bench has indicated that 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”. 15 An application will have been made vexatiously “where the predominant purpose ... is to harass or embarrass the other party, or to gain a collateral advantage”.16

[15] The following findings were made in the Merits Decision:

1. The evidence of Ms Cukur and Ms Teputepu was to be preferred over that of Mr Shamoon and likewise the evidence of Ms Armone and Mr Watson was also to be preferred over Mr Shamoon’s. 17

2. Mr Watson omitted from his two witness statements that he had a conversation with Tung Le and Danica Nguyen prior to the investigation meeting. His lack of early reference to the conversation with Tung Le is an improbable omission. 18

3. Mr Shamoon’s version of events moved in the course of CSA’s investigation and the Commission proceedings:

•  Mr Shamoon likely initially agreed the airplane items concerned were his, given to him by someone from Dnata Catering. He then tried to bargain his way out of a bad situation and threatened to lie about the circumstance. 19

•  He provided a different version of events initially in the investigation meeting on 26 November 2018 and again in a submission to the company on 3 December 2018. 20

•  His version of events repeatedly changed and kept changing; the shifts he made discredited his overall evidence. 21

4. Mr Shamoon’s post-employment conduct was influential in the Merits Decision, with that conduct affecting the credibility of his evidence: 22

•  He attended the workplace after his dismissal and tried to give the impression that his manager wanted him back in employment; 23

•  In January he claimed to have been sent a text message from Ms Cukur immediately prior to the telephone conciliation in his unfair dismissal remedy application, likely having fabricated the message; 24

•  He then sent text messages to Mr Watson and Mr Sigsworth threatening an expose by “A Current Affair”; he agreed in evidence that he had made contact with the program, but that they took too long to respond and by the time they did respond he had wanted to terminate his request; 25

•  In the course of the hearing before me he made unsubstantiated allegations about an inappropriate relationship having not been disclosed and argued the relationship led to his dismissal. 26

5. At the time CSA put its allegations to Mr Shamoon, CSA’s investigation was basic and in particular the company did not know the identity of the “friend in catering” and had not even tested the possibility that there may be such a person. 27 Mr Watson’s knowledge on the subject of the conversation he had with Tung Lee was belated and basic.28

6. I had reservations accepting CSA’s version of the investigation. 29 While the evidence of Ms Armone on the matter of bio-security was accepted, on its own an allegation that Mr Shamoon had breached bio-security obligations would have been unlikely to amount to a valid reason for his termination.30

7. Mr Shamoon was untruthful to his employer and to the Commission. 31

8. In combination Mr Shamoon’s conduct amounted to serious misconduct; he had taken the two items in question; he had been untruthful to his employer; and he had acted contrary to CSA’s quarantine obligations. 32

[16] Beyond these findings, CSA rely for its Costs Application on the fact that it offered to settle Mr Shamoon’s unfair dismissal action at a relatively early stage of the proceedings. Mr Shamoon’s unfair dismissal application was lodged in the Commission on 3 December 2018 and responded to by CSA on 9 January 2019. An FWC staff-member conciliation took place on 10 January 2019, and on 18 January 2019, CSA offered to settle the dispute, through an email message containing the below information, with the offer also communicated to Mr Shamoon in a text message:

“Without Prejudice Save as to costs

Dear Mr Shamoon,

Cabin Services Australia (CSA) makes the following offer for full and final settlement of your unfair dismissal claim in the Fair Work Commission:

•  3 week’s pay

•  Statement of service

•  Recording the termination as a resignation

•  Parties sign a release agreement (Fair Work Commission version provided by the conciliator).

The Respondent is of the firm view their prospects of success in defending the claim are in their favour. This offer is made on a without prejudice basis as the Respondent prefers to avoid the inconvenience and cost of preparing for and participating in arbitration.

This offer is available until 5.00pm Friday 25 January.

Sincerely Paul” 33

[17] Mr Shamoon did not respond to the offer which lapsed on 25 January 2019.

[18] In accordance with the Commission’s Filing Directions for the hearing of merits of Mr Shamoon’s unfair dismissal application, Mr Shamoon filed his material on 18 February 2019 and CSA on 14 March 2019. The hearing was convened on 27 and 28 March and 5 and 29 April 2019.

[19] In its submissions, CSA pose three questions to be determined in these proceedings; did Mr Shamoon cause CSA to incur costs due to an unreasonable act or omission in connection with the conduct or continuation of the matter?; did he make the application vexatiously or without reasonable cause?; and was it reasonably apparent to Mr Shamoon that his application had no reasonable prospect of success? CSA advance in their submissions that the answer to each of these questions is “yes”.

[20] In relation to the first of the questions, whether it was unreasonable to commence or continue the application, CSA submit there are five unreasonable acts which must be taken into account; 34

•  the proceedings were instigated by Mr Shamoon without reasonable cause and on this basis should be characterised as an unreasonable act;

•  his failure to discontinue the application subsequent to receiving CSA’s response on 8 January 2019 was unreasonable;

•  Mr Shamoon’s failure to accept an offer of settlement made on 18 January 2019 was unreasonable;

•  He acted unreasonably when he failed to discontinue his application after receiving the CSA Outline of Submissions and associated witness statements on 14 March 2019;

•  Mr Shamoon’s failure to discontinue his application before or during the proceedings was unreasonable.

[21] In connection with the second claim, that the application was made vexatiously or without reasonable cause, CSA argue both that it was pursued vexatiously, and/or with no reasonable prospect of success, as well as it being the case that Mr Shamoon was “clearly on notice” of his former employer’s views on these matters, prior to commencing proceedings, in the lead up to proceedings and during the proceedings. 35 In relation to the third matter advanced by CSA, that it was reasonably apparent to Mr Shamoon that his application had no reasonable prospect of success, CSA argue that he either ignored his prospects, or chose to be ignorant of the lack of merit in his claim.36

[22] While I take account of CSA’s arguments, and the elements advanced in support of each of its submissions, since the Costs Application is advanced under both ss.400A and s.611, it is appropriate that my decision deal with the elements of proof of each section. Broadly speaking, both ss.400A and 611 of the Act require consideration of the commencement of an action or a response to it, as well as matters associated with its continuation. As is relevant to Mr Shamoon’s underlying case as well as the matters argued in the Costs Application, there are three broad questions requiring resolution;

•  Was the commencement of the application an unreasonable act or omission (s.400A(1)) or made without reasonable prospects of success (s.611(2)(b))? Was the application made vexatiously or without reasonable cause (s611(2)(a))?

•  Was continuation of the application an unreasonable act or omission (s.400A(1)) or should it have been apparent that continuation had no reasonable prospects of success (s.611(2)(b))?

•  If the basis for a costs application is established, consideration needs to then be given to whether the discretion to award costs should be exercised.

[23] I consider each of these matters in turn.

Was the commencement of the application an unreasonable act or omission (s.400A(1)) or made without reasonable prospects of success (s.611(2)(b))? Was the application made vexatiously or without reasonable cause (s611(2)(a))?

[24] In relation to the apparent prospects of success, the Full Bench has held that:

“The concepts within s.611(2)(b) of the Act “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.” 37 (references omitted)

[25] Assessment of whether an application has been made vexatiously was considered by the Full Bench in the matter of Church v Eastern Health, in which is it was held:

“[41] As we have mentioned, the question of whether an application was made vexatiously turns on the motive of the applicant in making the application. Motive can be inferred from, among other things, the surrounding circumstances, the applicants conduct and the merits of the application itself.” 38

[26] A proceeding “is not classed as being instituted without reasonable cause simply because it fails, but rather in circumstances where the applicant’s own version of the facts, it is clear that the proceeding must fail”. 39 Another “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”.40

[27] When he was dismissed, Mr Shamoon knew that he was accused of having stolen two items from an aircraft, a small bag of chips and a piece of cake and lied about the provenance of the items. He also knew that reasons relied upon by CSA for his dismissal were that he had admitted the aircraft food was his and that he had requested the incident not be reported to management. He was also aware that he had already varied his version of events on at least two occasions.

[28] Necessarily, consideration of the criteria for unfairness within s.387 of the Act requires consideration of whether there was a valid reason for a person’s dismissal relating to their capacity or conduct as well as consideration of matters of procedural fairness. In matters of misconduct, consideration of the question of a valid reason for dismissal requires findings that the misconduct as alleged actually occurred. On the material presently before the Commission, and irrespective of the Applicant’s shifting evidence, it would appear highly likely under any scenario that the misconduct alleged by CSA would be found to have occurred. Mr Shamoon would have either agreed that his initial concession to Ms Cukur was correct, or it would be established through the evidence that he had taken the goods. In this regard I take into account that it was not just CSA which failed to address the evidence of the contention that Mr Shamoon had been given the items by a “friend in catering” – Mr Shamoon could have, but did not, bring forward evidence from that person, if in fact there is such a person.

[29] While determination that Mr Shamoon had taken the items is likely, leaving aside his later inventions and other post-employment conduct, it is at least debatable whether the misconduct would have been found to have been a valid reason for termination of employment. Depending on his explanation for why he took the goods, or who gave them to him or why, or what matters may be put forward in mitigation, there is not an automatic leap forward to the finding that such misconduct was axiomatically either serious misconduct or a valid reason for termination. A person who accepted what they had done at an early stage may well have an ultimate finding from the Commission that dismissal was a disproportionate penalty. This may be especially so in the situation presently before the Commission in which the company investigation was shambolic or replete with assumptions and errors.

[30] At the time Mr Shamoon commenced his application, he had some semblance of prospects of success. Not only did he know the reasons for his dismissal, but he also knew the CSA investigation was as perfunctory as it was or could have guessed as such from the state of affairs. While perhaps not holding the strongest prospects of success for the making of his application for unfair dismissal remedy, neither could it be concluded that it would be unreasonable for him to commence an unfair dismissal action. While the greatest problems with Mr Shamoon’s case are the things he said and did after being dismissed, those things are well after the time his application was commenced.

[31] For the same reasons, I am also unable to make a finding that Mr Shamoon’s application was commenced with a vexatious purpose.

[32] Specifically in relation to the matter of whether the claim was made vexatiously, CSA argue Mr Shamoon was “clearly on notice” of his former employer’s views on these matters, prior to commencing proceedings and in the lead up to proceedings Mr Shamoon was “clearly on notice” that CSA considered “his claim was being pursued without reasonable cause”. 41

[33] I am unaware of the evidence to which CSA points about this claim, or what the relevant distinction is between “prior to” and “in the lead up” to proceedings; perhaps they mean “lead up” to mean the time after the application was made and before the hearing was commenced. If that is the distinction CSA intends, then such is not relevant to the commencement or making of the application. CSA has not particularised the things it relies upon for the contention that Mr Shamoon was “clearly on notice” that CSA viewed the commencement or making of the application to be without reasonable prospects of success, or vexatious or made without reasonable cause. I assume they mean to point to their views on the merits of the claim and not to any correspondence to Mr Shamoon putting him on notice before he commenced his application that his claim lacked substance.

[34] As a result, in relation to the commencement of Mr Shamoon’s application, I do not find that the making of the application was an unreasonable act (s.400A(1)) or that it was made vexatiously or without reasonable cause (s.611(2)(a)) or that it had no reasonable prospect of success (s.611(2)(b)).

Was continuation of the application an unreasonable act or omission (s.400A(1)) or should it have been apparent that continuation had no reasonable prospects of success (s.611(2)(b))?

[35] As indicated above, a proposal for the settlement of this matter was made by CSA’s legal representatives on 18 January 2019. The substance of the offer was for the payment of three weeks wages, equating to $3000. 42 By that date, Mr Shamoon had invented the text message said to have come from Ms Cukur and clumsily endeavoured to threaten the company with an expose by “A Current Affair”.

[36] While it is not clear whether the fabricated text message had been disclosed to CSA prior to the filing of Mr Shamoon’s written submissions for the merits application, it is clear from the documents he filed in the Commission on 18 February 2019 that he intended to rely upon the message.

[37] The Applicant’s case was described in the Merits Decision as disingenuous and outlandish and it most certainly was at that state by the time his merits submissions were filed. Several versions of the same events had been disclosed by that date, as had most of the conspiratorial “blame others” strategy.

[38] The problem which these matters cause for Mr Shamoon is that with a competent and dispassionate enquiry into the events that actually occurred it would be more than likely that the Applicant’s evidence would be shown for what it was – flimsy and replete with invention. That is, by mid-February, having filed material with the Commission in the way that he did, the die was cast with the inevitable consequence of adverse findings against Mr Shamoon. Such balancing of evidence or discretion as may be otherwise exercised in relation to the requisite findings under s.387 would almost be inevitably tainted by the untruths to such a degree that what may have started out as a case with not unreasonable prospects of success would likely gel into an unfavourable morass for the Applicant, Mr Shamoon.

[39] There is no direct evidence before me about how Mr Shamoon viewed the offer for settlement, on the basis of three weeks’ wages. The question though of whether it was unreasonable for him to either not respond favourably to it or not attempt to negotiate around that which had been put necessarily requires being viewed through the prism of what may have eventuated had his case proceeded, untainted with the problems of postemployment conduct referred to.

[40] At the point Mr Shamoon commenced his application there were some prospects of success. Those prospects relied upon the Commission accepting not only his evidence about what had occurred but also, more likely, that there were significant errors on the part of CSA in investigating what actually occurred. At least based upon the evidence seen by me, there is little likelihood that it would be found Mr Shamoon did not take the goods in question; the best he could hope for would either be acceptance that he had taken the items with procedural defects in the employer’s response; or in the alternative he may have reasonably hoped for a finding that despite having denied taking the goods, he in fact did, and that such did not amount to serious misconduct and was not a valid reason for termination.

[41] In such eventualities, it may be predicted that some modest amount of compensation may be awarded. Necessarily the determination of compensation, calculated in accordance with the Sprigg principles, 43 focuses upon the anticipated period of employment. In the situation referred to above, in which there was a finding both of misconduct as well as inadequacies of and employer’s response and investigation, such compensation as may be ordered would be somewhat low after the anticipated period of employment was calculated and relevant deductions made.44 All in all, the settlement proposal put forward by CSA was probably in the mid-range of what reasonably could be expected from the Commission in the event there was a finding in favour of Mr Shamoon.

[42] While the foregoing leads to the conclusion that the settlement offer should have been seriously considered by Mr Shamoon, there is no evidence that it was.

[43] CSA criticised Mr Shamoon for having failed to heed the caution at the top of the letter to the effect that the proposal was “Without Prejudice Save as to costs” with it then being said in the body of the correspondence that “The Respondent is of the firm view their prospects of success in defending the claim are in their favour. This offer is made on a without prejudice basis as the Respondent prefers to avoid the inconvenience and cost of preparing for and participating in arbitration.” Respectfully, this jargon is not quite the same as bluntly saying to an unrepresented applicant with no legal or industrial relations background and plainly with English language difficulties that “we think your case is hopeless and if you fail after an arbitration we will seek to recover from you our legal costs which we expect to be in excess of $30,000 and we think we have a good chance of obtaining them”.

[44] It is a regular and somewhat frustrating experience for every Member of the Commission that they have to explain to unfair dismissal applicants that maximum compensation is rarely given and is usually significantly less. 45 Even sophisticated parties with well-trained legal representatives misunderstand this basic fact of the unfair dismissal system, so what hope is there for a person who plainly does not have English as their first language and is not represented to understand the jargon “Without Prejudice Save as to costs”?

[45] Nonetheless, there was a caution given to Mr Shamoon by CSA about the consequences of proceeding to hearing, but that caution was not heeded. I accept that such caution satisfies CSA’s submission that Mr Shamoon was “clearly on notice” prior to and during the hearing that CSA considered “his claim was being pursued without reasonable cause”

[46] All in all, Mr Shamoon’s case had moved by the time he had filed his material in the Commission from at least arguable to problematic, if not worse. It was an unreasonable act on his part not to have engaged with the settlement proposal put to him by CSA. Further, by that time, his threats to engage “A Current Affair” against the company were plainly vexatious, in the sense that “the predominant purpose ... is to harass or embarrass the other party, or to gain a collateral advantage”. 46 Mr Shamoon had actually engaged with the program and had moved beyond a mere threat.

[47] As a result, in relation to the continuation of Mr Shamoon’s application beyond the time of having not responded to the settlement offer, the finding must be made that the continuation of his application for unfair dismissal remedy was an unreasonable act (s.400A(1)) with there likely being no reasonable prospect of success for its continuation (s.611(2)(b)).

Considerations for and against exercising the discretion to awarding costs:

[48] A determination of an award of costs is a discretionary one. Costs orders in unfair dismissal matters have been described as “extraordinary” with it being the case that “the Act reflects the longstanding principle that costs will not be awarded against parties in industrial proceedings, other than in exceptional circumstances”. 47 In relation to the costs provision in s.570, the Full Bench has observed that a “cautious approach” is necessary;

“[27] In the context of s.570 and its legislative antecedents courts have observed that an applicant who has the benefit of the protection of a provision such as s.570(1), (ie the general rule that parties bear their own costs), will only rarely be ordered to pay costs and that the power should be exercised with caution and only in a clear case. In our view a similarly cautious approach is to be taken to the exercise of the Commissions powers in s.611 of the FW Act.” 48

[49] Baxter Healthcare v Portelli extensively reviewed the question of the Commission’s exercise of the discretion to award costs. In that matter, the Full Bench made the following findings about the discretion:

“[95] We note at the outset that the relevant sections provide that if the requisite jurisdictional facts are established (relevantly, ss. 400A(1) and (2), and s.611(2)) then the Commission may make an order for costs. A costs order does not automatically follow upon a finding of the requisite jurisdictional fact. It is clear from the use of the word ‘may’ that the Commission retains a discretion as to whether or not to make an order for costs. In that regard these provisions may be contrasted with ss. 418(1) and 424(1), which provide that the Commission must make certain orders if certain jurisdictional facts are present.

[96] Sections 400A and 611 contain no positive indication of the considerations which the Commission must take into account in deciding how to exercise its discretion. The discretion conferred is expressed in general, unqualified, terms. As the High Court observed in O’Sullivan v Farrer 49 (O’Sullivan):

‘Where a power to decide is conferred by statute, a general discretion, confined only by the scope and purposes of the legislation, will ordinarily be implied if the context (including the subject matter to be decided) provides no positive indication of the considerations by reference to which a decision is to be made.’ 50 

[97] But, of course, the discretion conferred by ss. 400A(1) and 611(2) must be exercised judicially, that is to say not arbitrarily, capriciously or so as to frustrate the legislative purpose. Further, consistent with O’Sullivan, the discretion is also confined by the subject matter, legislative context and purpose. 51 

[98] The terms of ss. 400A and 611 operate to limit the scope of any order which may be made. Two limitations are inherent in s.400A(1):

(i) an order for costs may only be made ‘against a party to a matter arising under [Part 3-2 Unfair Dismissal]; and

(ii) an order is confined to costs which were incurred by the other party ‘because of an unreasonable act or omission’ of the party to whom the order is directed.

[99] Section 611 operates more broadly, in that it confers a power to order a person to ‘bear some or all of the costs of another person in relation to an application to the FWC’. Unlike s.400A, s.611 is not confined to matters arising under Part 3-2 of the FW Act. Nor is the power in s.611 expressly limited to a ‘party’ to an application, though a costs order under s.611(2) may only be made against a person who has either made an application or responded to an application.

[100] The legislative purpose of the provisions is also relevant. The relevant extrinsic material is set out at [49] and [52] above. In respect of s.400A, the explanatory memorandum makes plain that:

‘… 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.’ 52 

[101] The extrinsic material in respect of s.611 is of no assistance in discerning the legislative purpose. Given the limited argument on the point we do not propose to say anything further about the legislative purpose of these provisions.” 53

[50] After considering argument within the appeal that consideration of the subjective circumstances of a person against whom a costs order are irrelevant, the Full Bench found that the proposition that the only consideration in the exercise of the discretion is compensation of the successful party and made these findings about exercise of the discretion to award costs:

“[112] It is clear that in Oshlack 54 the High Court rejected the proposition that the only consideration in the exercise of a statutory costs discretion is the compensation of the successful party for the cost to which it has been put by the litigation.

[113] In summary, the following general observations may be made about the discretion to order costs in ss. 400A and 611:

1. The discretion is expressed in general, unqualified, terms confined only by the subject matter, legislative context and purpose.

2. The terms of ss. 400A and 611 operate to limit the scope of any order which may be made (see [98] and [99] above).

3. The discretion must be exercised judicially, that is to say not arbitrarily, capriciously or so as to frustrate the legislative intent.

4. The discretion must be exercised in a manner which is ‘fair and just’, and takes into account ‘equity, good conscience and the merits of the matter’.” 55 (citation added)

[51] The same decision explicitly eschewed the potential for the amount of the costs sought to be taken into account in the exercise of the discretion:

“[90] We accept that the quantum of costs sought is irrelevant to the question of whether or not a costs order should be made. Of course, once the Commission has decided to exercise the discretion to make a costs order the question of the costs sought becomes relevant in determining the order to be made.” 56

[52] Even so, Mr Shamoon contends that the costs claimed by CSA ($30,852) as being “completely out of proportion” to the matter in dispute when the maximum Mr Shamoon could have obtained was just of $40,000. 57 More technically, his Counsel argues that CSA’s Bill of Costs does not include the itemised information that would be necessary to assess the costs if ordered. Since consideration of the quantum sought by CSA would be contrary to the determination in Baxter Healthcare, I place no weight on Mr Shamoon’s submissions about quantum.

[53] Mr Shamoon came into these proceedings obviously aggrieved. He saw an injustice having been committed against him. Having been accused of stealing a small piece of cake and a bag of chips, he was assured not to worry by one of the company’s managers, 58 but not the right one it seems.

[54] His level of aggravation was maintained when the company would not entertain his return to work when he approached them with that purpose in mind in December. He most definitely should not have invented claims that Ms Cukur tried to enlist “A Current Affair” in his support. Those efforts are to be wholly deprecated and an order for costs may assist in that regard. An order for costs against Mr Shamoon would reinforce that unmeritorious applications are not to be pursued and that vexatious claims may have dire consequences.

[55] An order for costs against Mr Shamoon will likely have significant personal consequences for him. He has suffered financially since being dismissed having been without employment. He has a family; but of what size and overall circumstance I do not know. There is some, but not much evidence about a mental health illness being suffered after he was dismissed. A psychologist’s report tabled by Mr Shamoon in the merits proceedings as part of the document bundle he relied upon records him as suffering depression, shock stress and psychological trauma. 59 Such evidence as is available on these matters is basic and does not disclose a set of circumstances far from the ordinary.

[56] If a costs order is made against Mr Shamoon it may well have a crushing effect on him. A costs order would likely worsen his financial affairs which are probably already not strong in view of his unemployment. This decision, in and of itself, whether or not costs are actually ordered will foreseeably cause further problems, with the decision being public and available to potential new employers and especially given that Mr Shamoon has been dismissed, and comes from a non-English speaking and unskilled background. An adverse decision may well worsen those future employment prospects. It is also foreseeable that, if he is suffering from health problems, that an adverse costs decision may exacerbate such symptoms as he experiences. If he is suffering from the recorded symptoms, this decision, in and of itself, and whether or not costs are actually ordered will foreseeably cause him further anxiety and possible further problems in obtaining employment, with the decision being public and available to potential new employers

[57] On the other hand, CSA has succeeded where it probably did not necessarily deserve to. Its success in the Merits Decision was largely to do with Mr Shamoon’s own poor decision-making, with the CSA investigation being inadequate in many parts and risible in others because of what it did not coherently address or how it was implausibly presented. When Mr Shamoon was called to account, the company had evidence principally from Ms Cukur 60 and Ms Teputepu61 that Mr Shamoon had agreed the goods were his, but it had little else. In particular, it took no steps in the investigation meeting to rebut Mr Shamoon’s contention that he had been given the goods. Mr Watson says that he had clarified that subject with Tung Le in a phone call before the meeting,62 however that was not reported to Mr Shamoon or anyone until the giving of his evidence in the merits hearing.

[58] An order for costs would recompense CSA, at least for its outgoings with the Ai Group.

[59] An order could potentially assist in CSA’s workplace relations messaging – do not steal at work; do not lie to us if we enquire about such matters and expect to be dismissed if you do. However, that messaging is reasonably already available to CSA simply because of the Merits Decision. CSA has severed its relationship with Mr Shamoon and is not at risk of him returning; it is able to use his example in its efforts to establish a compliant workplace.

[60] On balance, I decline to exercise my discretion to order costs against Mr Shamoon, notwithstanding that the basis for doing so is there. While an order in favour of CSA would compensate CSA monetarily, its effect on Mr Shamoon may well be severe. Irrespective of whether an order is made, Mr Shamoon will likely feel the effects of his dismissal from CSA in November 2018 for some time to come. If he remains unemployed, he will suffer further financial and social hardship. When he seeks future employment, he will have the potential of further difficulties if employers learn of how he left CSA; being called an inventive liar is hardly the quality of a good reference. When he obtains further employment, his positioning in the labour market is such that the new employment is unlikely to make up the loss he has incurred since being dismissed.

[61] Having considered all relevant factors and having formed a broad value judgement about the disposition of CSA’s application, I do not exercise my discretion to award costs against Mr Shamoon. As a result, the CSA costs application is dismissed.

COMMISSIONER

Appearances:

Mr R McMahon of Ai Group for the Costs Applicant.

Mr F. Brimfield of Counsel for the Costs Respondent.

Hearing details:

2019.

Melbourne;

27 August.

Printed by authority of the Commonwealth Government Printer

<PR713528>

 1   [2019] FWC 2260.

 2   Costs Application, 28 June 2019, item 2.2, [7].

 3   Fair Work Act 2009 (Cth) s.400A.

 4   Explanatory Memorandum to the Fair Work Bill 2012.

 5   Fair Work Act 2009 (Cth) s. 611.

 6   See Explanatory Memorandum to the Fair Work Bill 2012, [2353] – [2356]; see also Baxter Healthcare Pty Ltd v Portelli [2017] FWCFB 3891, [101].

 7   Fair Work Act 2009 (Cth) s. 611(1); see also Church v Eastern Health [2014] FWCFB 810, [26].

 8   Baxter Healthcare Pty Ltd v Portelli [2017] FWCFB 3891, [104].

 9   Goffett v Recruitment National Pty Ltd [2009] AIRCFB 626, [47].

 10   Roy Morgan Research Ltd v K Baker [2014] FWCFB 1175, [12]; with reference to Brazilian Butterfly Pty Ltd v Charalambous (2006) 155 IR 36, [39] – [45].

 11   Kube v Dominelli Group Pty Ltd T/A Rockdale Nissan [2016] FWC 8933, [15].

 12   Roy Morgan Research Ltd v K Baker [2014] FWCFB 1175, [21] – [23].

 13   Fair Work Act 2009 (Cth) s. 611.

 14   Keep v Performance Automobiles Pty Ltd [2015] FWCFB 1956, [13], [17].

 15   Ibid [17], with reference to Heidt v Chrysler Australia Limited (1976) 26 FLR 257, [272]–[273].

 16   Church v Eastern Health [2014] FWCFB 810, [29], with reference to Nilsen v Loyal Orange Trust [1997] 76 IR 180 at 181.

 17   [2019] FWC 2260, [35] – [37].

 18   Ibid, [38].

 19   Ibid, [48].

 20   Ibid, [39].

 21   Ibid, [43].

 22   Ibid, [64].

 23   Ibid, [50].

 24   Ibid, [52], [54].

 25   Ibid, [55], [56].

 26   Ibid, [57].

 27   Ibid, [59] – [60].

 28   Ibid, [62].

 29   Ibid, [63].

 30   Ibid, [65].

 31   Ibid, [64] – [66]

 32   Ibid, [68].

 33   Exhibit R9, Witness Statement of Paul Borobokas, Attachment PB – 6.

 34   Exhibit R10, CSA Outline of Submissions – Application for Costs, [14].

 35   Ibid, [35].

 36   Ibid, [44].

 37   Baker v Salva Resources Pty Ltd [2011] FWAFB 4014, [10].

 38   [2014] FWCFB 810.

 39   Zornada v St John Ambulance Australia (Western Australia) Inc [2013] FWCFB 8255, [35]; with reference to Kanan v Australia Postal Telecommunications (1992) 43 IR 257, p.264; 287.

 40   Kanan v Australia Postal Telecommunications (1992) 43 IR 257, p.264.

 41   Exhibit R10, CSA Outline of Submissions – Application for Costs, [35].

 42   Witness Statement Paul Borobokas, 17 July 2019, [11].

 43   See Sprigg v Paul’s Licensed Festival Supermarket (1998) 88 IR 21, 32, and Ellawala v Australian Postal Corporation (unreported, AIRCFB, Ross VP, Williams SDP, Gay C, 17 April 2000) Print S5109 [33]; cited with approval in Haigh v Bradken Resources [2014] FWCFB 236, (2014) 240 IR 366 [11].

 44   See, for example, the reasoning of McKinnon C. in Ali v Chobani Pty Ltd [2019] FWC 4406, in which the further employment was estimated at three months [60], but reduced by 50% for contributory misconduct [68].

 45   See Fair Work Commission Annual Report 2018–19, tables D2 and D7 (pp.144 – 148).

 46   Church v Eastern Health [2014] FWCFB 810, [29].

 47   Zornada v St John Ambulance Australia (Western Australia) Inc. [2013] FWCFB 8255, [35].

 48   Church v Eastern Health [2014] FWCFB 810.

 49   (1989) 168 CLR 210.

 50   Ibid at 216 per Mason CJ, Brennan, Dawson and Gaudron JJ.

 51   Ibid.

 52   Fair Work Amendment Bill 2012, Explanatory Memorandum, [169].

 53   Baxter Healthcare Pty Ltd v Portelli [2017] FWCFB 3891

 54   Oshlack v Richmond River Council, (1988) 193 CLR 72 at [40] and [132].

 55   Ibid.

 56   Ibid.

 57   Shamoon Outline of Submissions on Costs, [36].

 58   [2019] FWC 2260, [21].

 59   Exhibit A4, Applicant’s bundle of Documents, Attachment A18.

 60   Exhibit R3, [8].

 61   Exhibit R5, [9].

 62   Merits hearing Transcript PN2012 – 2033.