Proceedings commenced under the Fair Work Act 2009 (Cth) are generally "no cost", meaning that other than in limited circumstances parties must bear their own cost of proceedings, even if successful.
However, a line of recent cases suggests Fair Work Australia, and other courts exercising jurisdiction under this Act, are prepared to exercise discretion to order costs in circumstances where the court is satisfied the proceedings have been instituted vexatiously or without reasonable cause, where there has been an unreasonable act or omission by one party which has caused the other party to incur costs, or where a party has unreasonably refused to participate in a matter before the court.
Following are a number of cases where this has occurred.
Rejection of settlement offer by employer: Mifsud v Veolia Transport Sydney1
On 29 March this year, the Federal Magistrates Court handed down an indemnity cost order under the Fair Work Act against an employer for a fixed amount of $15,000, without imposing a penalty. The Mifsud v Veolia Transport Sydney case concerned the liability of the respondent (Veolia) to make a redundancy payment to Mr Mifsud due under a collective agreement.
Mr Mifsud sought the imposition of a penalty against Veolia in view of a breach of the collective agreement and costs on the basis of an asserted unreasonable act or omission of Veolia in not accepting a written offer of settlement made by Mr Mifsud during the proceedings.
Driver FM concluded it was not appropriate to impose a penalty in the circumstances where he found that Veolia's conduct was not a deliberate breach of the collective agreement, but a genuine but mistaken belief as to the proper interpretation of the agreement. Veolia had no record of prior contraventions and it was held that the imposition of a penalty in this case would not be effective in terms of general nor specific deterrence. It was concluded that Mr Mifsud should receive his costs on an indemnity basis from the expiration of the offer of settlement made to Veolia on 31 August 2011 until the 22 December 2011 judgment.
Under section 570(2)(b) of the Fair Work Act, the court may make an order for costs if it is satisfied that a party's unreasonable act or omission caused the other party to incur costs. Veolia's refusal to accept the Calderbank offer made by letter dated 31 August 2011 was held to be an unreasonable omission that caused Mr Mifsud to incur legal costs up to the date of judgment of 22 December 2011. Veolia's contention that the offer contained in the letter did not satisfy the requirements of a Calderbank offer was rejected, as the intention of the offer was clearly to resolve the entire proceedings.
Driver FM went on to deem it appropriate in the circumstances to award costs on an indemnity basis, as section 570(2) does not restrict the ability of the court to award costs on an indemnity or other basis once the preconditions for an award of costs under the section are met. Not wanting to put the parties to the further expense and trouble of having costs assessed and taxed, Driver FM fixed costs at $15,000, as estimated by counsel for Mr Mifsud.
Rejection of settlement offer by employee: Muzzicato v New Cleaning Services2
Late last year a former employee had costs awarded against him after it was found it was unreasonable for him to reject a $15,000 settlement offer in response to his adverse action claim.
The employee's adverse action claim was summarily dismissed by the Court following a finding that the employee's claim had no reasonable prospects of success. Federal Magistrate Daniel O'Dwyer held there were some "very serious deficiencies" in the presentation of the adverse action claim.
The employee was ordered to pay the employer's costs pursuant to section 570(2)(b) of the Fair Work Act, on the basis of a finding that it was an unreasonable act for him to not accept the settlement offer, which was generous in all the circumstances. The Court also acknowledged there was merit in the argument that costs could be awarded pursuant to section 570(2)(a) – that the proceedings were issued without reasonable cause. The period over which costs were payable was assessed as being the period from the date of rejection of the settlement offer to the date of judgment.
Appeal of unfair dismissal claim "without reasonable cause": Ben Timmins v Compass Security t/a Compass Integrated Security Solutions3
Earlier this year, a Fair Work Australia Full Bench ordered an employee must bear some of the costs of his former employer on the basis that the worker's appeal of the rejection of his unfair dismissal claim was "without reasonable cause."
In the absence of any challenge to the factual or legal basis upon which the earlier decision was made, the bench was satisfied that the requirements in section 611(2) of the Fair Work Act for the making of a costs order were met. It was held the employee made the application to appeal without reasonable cause [section 611(2)(a)] and that the employee pursued the appeal in circumstances where it should have been reasonably apparent to him that it had no reasonable prospect of success [section 611(2)(b)].
The order to be made and amount of costs awarded will be determined by Justice Boulton after providing an opportunity for the parties to make further submissions on this issue.
Unreasonable action in defence of proceedings: Kavassilas v Migration Training Australia4
The Federal Magistrates Court of Australia fined Migration Training Australia $20,000, ordered they pay over $37,000 in compensation and in excess of $57,000 in costs to a dismissed worker for terminating her employment due to her sick leave. Ms Kavassilas was summarily dismissed on her second day of absence by her employer, Migration Training Australia (MTA). She was notified of her termination by a letter delivered to her home outlining various allegations of serious misconduct.
Federal Magistrate Smith found that the letter of termination was "a cloak for [the] unexpressed true reason"' of the dismissal, and that the reasons given in the letter were lacking in substance in circumstances where MTA provided no reliable or clear evidence to support them. The Court ruled the real reason the employee's employment was terminated was because of her temporary absence due to illness, in breach of section 352 of the Fair Work Act.
In addition to imposing a civil penalty of $20,000, MTA was ordered to pay compensation to Ms Kavassilas in the amount of $37,000, representing lost wages and superannuation entitlements from the date of dismissal to the date the employee commenced new employment (less a 20% discount for "uncertain but real contingencies that her employment may not have lasted that long").
MTA were also ordered to pay one half of the employee's legal costs. The Court was satisfied that MTA made a number of "baseless assertions", which Ms Kavassilas was required to answer, causing her to incur unnecessary legal costs. As a result, the assertion and maintenance of most of these false issues until the end of trial constituted unreasonable actions in the defence of proceedings, justifying an award of costs under the Fair Work Act.
Unreasonable act by applicant in rejecting offer of settlement and relying on witnesses with no bearing to case: Cugura v Frankston City Council (No. 2)5
The Federal Magistrates Court has ordered costs against an employee on the basis that the employee rejected a settlement offer for the parties to walk away from the matter and each bear their own costs in circumstances where the applicant had put on little evidence in support of his case and the respondent had filed substantial evidence in support of its defence. The Court ultimately dismissed the employee's adverse action claim.
In awarding costs to the employer, the Court held that the employer's offer should have been considered by the applicant, especially where the applicant had an opportunity to review the employer's evidence at the time the offer was made, and that the applicant had required all of the employer's witnesses for cross examination at trial at significant expense to the employer when these witnesses ultimately had no bearing on the applicant's case.
These cases demonstrate that Fair Work Australia, and courts exercising jurisdiction under the Fair Work Act, are prepared to order costs in appropriate circumstances. Commencing a vexatious claim or maintaining an unreasonable defence, as well as rejecting reasonable settlement offers, are circumstances in which cost orders have been made.
The risk of an adverse costs order being made is likely to affect the way in which applications under the Fair Work Act are litigated.
1Mifsud v Veolia Transport Sydney Pty
Ltd  FMCA 167 (29 March 2012)
2Muzzicato v New Cleaning Services Pty Ltd  FMCA 1044 (1 December 2011)
3Ben Timmins v Compass Security t/a Compass Integrated Security Solutions  FWAFB 1093 (21 February 2012)
4Kavassilas v Migration Training Australia Pty Ltd  FMCA 22
5Cugura v Frankston City Council (No. 2)  FMCA 530
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.