Costs in unfair dismissal applications – part 2

An earlier article by Dundas Lawyers discussed the difficulties confronted in obtaining a costs order against an unsuccessful party in an unfair dismissal claim.  To recap, subsection 611(1) of the Fair Work Act 2009 (Cth) (FWA) holds that a party to an unfair dismissal application, be it the complainant employee or the respondent employer, must bear its own costs in relation to a matter before the Fair Work Commission (FWC).

Costs

Costs can however be ordered under section 611 of the FWA against a party if the FWC is satisfied that:

• the applicant or the respondent was acting vexatiously or without reasonable cause; or
• it should have been reasonably apparent to the relevant party that they had no reasonable prospect of success.^[1]

Costs can also be ordered against a party if the FWC is satisfied the party caused those costs to be incurred because of an unreasonable act or omission in connection with the conduct or continuation of the matter.^[2]

The case law

While the bar to jump in order to get a costs order is high, recent cases however illustrate it is not impossible to clear.  In the Clair Petersen v Kizuri Capital Pty Ltd, Maycorp Pty Ltd and Cricklewood Capital Pty Ltd. T/A Allpet Products [2021] FWC 526 (Petersen) matter, the successful employee sought a costs order against her former employer.

Prior to the hearing of the matter, the employee’s solicitors made three settlement offers and put the employer on notice that should it fail to negotiate in good faith towards resolution of the claim, then if the employee was successful in establishing her claim, she would seek a costs order.  The successive offers of settlement were for less than the previous offers made.  The employer ignored the offers and failed to respond to them or otherwise engage in good faith negotiations.  The merits hearing occupied five (5) days and the evidence was lengthy, the documentary material voluminous and the proceedings factually complex.  The employee was successful and the compensation awarded exceeded the last two offers made.

Costs were not awarded under section 611 of the FWA as the FWC determined the employer’s defence to the unfair dismissal claim, while having considerable weaknesses, was not manifestly untenable or groundless or so lacking in merit or substance as to not be reasonably arguable.   In respect of costs under section 400A of the FWA, the rejection of the settlement offers was not considered to be unreasonable in circumstances where the defence was arguable and the employer was within its rights to have its evidence supporting its claim that the dismissal was not unfair to be independently assessed.

However, it was found that the failure to communicate or otherwise respond at all to the settlement offers was discourteous and reflective of a defensive and defiant attitude, having the inevitable effect of forcing the matter to a formal hearing.  This conduct inhibited the chances of resolving the matter quickly and informally without the need for a five-day hearing and thus was capable of being objectively viewed as unreasonable for the purposes of section 400A.  A reasonable response, even in the form of rejection of the offers, required some kind of active communication, not a presumption of rejection based on stony silence.  In failing to communicate a response on at least three occasions to settlement offers made, the employer caused costs to be incurred because of an unreasonable act or omission in connection with the conduct or continuation of the matter and thus the discretion to order costs under section 400A of the FWA was enlivened.

The employer had been put on notice on multiple occasions during the course of the matter that the employee considered the non-responsiveness as unreasonable and that its refusal to engage in dialogue on settlement would expose it to an application for costs.  The employer elected to be non-responsive notwithstanding being put on notice about a costs claim, its non-responsiveness caused reasonable settlement offers made in good faith to fall into a costly litigation blackhole.  Accordingly, it was ordered that the employer pay some of the employee’s incurred costs.

Takeaways

The case highlights the importance of parties to an unfair dismissal claim engaging with each other meaningfully and reasonably throughout the process.  Such engagement does not mean a party has to surrender, but there is an onus to at least engage in dialogue on settlement if the situation arises.

Links and further references

Legislation

Fair Work Act 2009 (Cth)

Cases

Clair Petersen v Kizuri Capital Pty Ltd, Maycorp Pty Ltd and Cricklewood Capital Pty Ltd. T/A Allpet Products [2021] FWC 526

Further information on unfair dismissal applications

If you are facing an unfair dismissal application or require advice regarding costs in such matters, contact Dundas Lawyers Gold Coast for a confidential and obligation-free discussion:

Disclaimer

This article contains general commentary only.  You should not rely on the commentary as legal advice.  Specific legal advice should be obtained to ascertain how the law applies to your particular circumstances.

[1] Fair Work Act 2009 (Cth) s 611(2).

[2] Fair Work Act 2009 (Cth) s 400A.

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