Security for costs

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Introduction

See Fair Work Act 2009 s.404 and Fair Work Commission Rules rule 55

Security for costs is when the Fair Work Commission orders that one party pay an amount to be held in trust before a matter proceeds to a hearing. Until the amount ordered is paid, the matter will be adjourned.

Section 404 of the Fair Work Act allows the Commission, through its Rules, to provide for security of costs. Rule 55 sets out the relevant rules.

Discretion

There is no absolute rule as to when the Commission will exercise the discretion to order security for costs.^[1] Whether an order should be made depends on the circumstances of the case and 'what is required by the justice of the matter'.^[2]

In Zornada v St John Ambulance Australia (Western Australia) Inc. the Full Bench stated that:

...costs orders in this jurisdiction are extraordinary, and security for costs orders even more so. This is because the Act reflects the longstanding principle that costs will not be awarded against parties in industrial proceedings, other than in exceptional circumstances.

...

Accordingly the Commission should award security for costs only in the rarest of circumstances, once the Commission has balanced the merits of the application, the financial position of the parties, and what is just in the circumstances.^[3]

Financial position

The financial position of the party against whom the order is sought may be relevant in the circumstances.^[4] There is no absolute rule that security for costs should be ordered against a party who is suffering financial hardship.^[5] There is a general rule, however, that poverty should not prevent a party from having their matter determined by the Commission.^[6]

Simply because an applicant is able to satisfy a security for costs order does not mean that an order is justified.^[7]

Merits

The strength of the case of the party against whom the order is sought may also be relevant.^[8] This may require a tentative evaluation of the party's prospects of success.^[9] A case which is hopeless and bound to fail may be a reason to order security for costs.^[10]

Whether the case raises issues of general public importance may also be relevant to whether security for costs are ordered.^[11]

Repeated non-compliance of, or disregard to, practices, procedures and rulings may be indicative of vexatiousness.^[12] This could result in the Commission dismissing the application for security of costs.

Case examples

Security for costs ordered

Employer sought security for costs – employee failed to comply with directions

O'Reilly v SA Waste Management Pty Ltd [2011] FWA 4229 (Steel C, 4 July 2011).

The employee failed to attend a directions conference, repeatedly failed to comply with directions, and then failed to attend the hearing on security of costs.

It was found that the employee had put the employer to considerable expense preparing for hearings, and ordered security for costs.

Employer sought security for costs – employee failed to demonstrate he had met the minimum period of employment

Russell v Due Easy Pty Ltd T/A Hard Rock Excavations [2011] FWA 7052 (Macdonald C, 22 December 2011).

The employer raised jurisdictional objections to the application, including that the employee had not met the minimum 12 month period of employment required for small business employees. The employee's own application identified that he had less than 12 months' service, but he later contradicted this.

Security for costs was ordered on the basis that the applicant's application asserted service less than the required minimum period of employment.

Employer sought security for costs – employee had pleaded guilty in the Magistrates' Court for the same matter she was dismissed for

Keel v State of Victoria (Department of Education and Early Childhood Development) [2010] FWA 8499 (Smith C, 4 November 2010).

The employer sought security for costs on grounds including the fact the employee had plead guilty to the conduct she was dismissed for in other proceedings, had reneged on settlement, had failed to comply with directions of the Commission, and had failed to attend the hearing on security of costs.

It was ordered that the employee pay security for costs and the matter adjourned until such time as the security was paid.

Security for costs NOT ordered

Employer sought security for costs – employee dismissed for alleged work credit card use

Harris v Home Theatre Group [2011] FWA 2910 (Asbury C, 12 May 2011).

The applicant employee was dismissed for the alleged private use of the work credit card. The employee case was that there was an accepted practice of using the work credit card for private use, subject to repayment. The employer sought security for costs. This was rejected, because there was no evidence that the applicant was impecunious, and there was no basis upon which it could be said her case was hopeless or bound to fail. The applicant's case was more difficult because the Small Business Fair Dismissal Code applied, but that did not mean it was doomed to failure. Even if the employer succeeded, it would not automatically obtain an order for costs

Employer sought security for costs – employer did not supply material in support to the Commission

Hosking v Millennium Hi-Tech Group Pty Ltd [2012] FWA 4058 (Asbury C, 11 May 2012).

The employer objected to the employee's application on the grounds that the employee had not met the minimum period of employment. It also sought security for costs. The employer did not supply the Commission with any material in support of either the jurisdictional objection or the security for costs order.

It was found that there was nothing indicating that the application was made vexatiously or without reasonable cause, and it did not appear to be hopeless or bound to fail; nor was there any evidence that the employee could not meet an order for costs if granted. Security for costs was refused.

Employer sought security for costs – employee dismissed for poor performance – evidence of misconduct found post-dismissal

Smith v OSD Pty Ltd [2012] FWA 4591 (Gooley C, 28 May 2012).

The employer's argument for costs was that the employee had no reasonable prospect of success. However, it was found that although the applicant's case seemed weak, it was not one where there was no reasonable prospect of success or one that was lodged vexatiously or without reasonable cause. It was also relevant that an order for security of costs would be likely to frustrate the applicant's right to litigate her claim, and that if the employer was successful in defending the claim that an order for costs might not be made. The application for security for costs was dismissed.