1
Fair Work Act 2009
s.604—Appeal of decision
Livingstones Australia
v
ICF (Australia) Pty Ltd T/A IC Frith & Associates
(C2013/2690)
VICE PRESIDENT LAWLER
SENIOR DEPUTY PRESIDENT RICHARDS
COMMISSIONER BLAIR
SYDNEY, 3 MARCH 2014
Appeal – unfair dismissal – costs – s.401 costs application against representative – whether
representative acted unreasonably in failing to identify a particular case as determinative
against the application – whether representative acted unreasonably in pursuing application
on behalf of the employee – approach to costs applications against representatives where
reliance is placed on the representative’s duty to act on instructions.
[1] This is an appeal against a decision and order of Commissioner Bissett ([2012] FWA
10682) awarding costs against the appellant, a firm of industrial advocates (Representative).
The firm had acted as paid agent for an employee, Mr Setefano (Employee), on an application
for an unfair dismissal remedy under the Fair Work Act 2009 (FW Act) against the
Respondent (Employer). Mr Franken, a consultant to the firm, had the day to day carriage of
the matter on behalf of the firm.
[2] By agreement of the parties, the appeal was initially conducted on the papers and
written submissions. It became necessary to conduct a hearing in order to provide the parties
with an opportunity to deal with various matters arising from a consideration of the written
submissions.
Background
[3] It is necessary to outline the circumstances that gave rise to the underlying application
for an unfair dismissal remedy and the course of that application.
[4] The Employer conducts a business as an insurance broker. The loss of a major
customer necessitated a restructuring. The restructure lead to a number of redundancies,
including the Employee.
[5] On 30 March 2012 the Employer gave the Employee written notice of termination on
the ground of redundancy. The letter also stated:
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DECISION
E AUSTRALIA FairWork Commission
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“You will receive a redundancy payment, as outlined in our Termination & Redundancy
policy:
3 years but less than 4 years service = 8 week’s severance pay
In addition to the redundancy payment you will receive 3 week’s pay in lieu of notice,
all of your outstanding annual leave, salary entitlements up until 20th April 2012 and
payment in lieu of notice will be paid into your account within two working days. ...”
[6] It was never in dispute that the redundancy arose from the genuine operational
requirements of the Employer.
[7] Shortly thereafter, the Employer discovered emails sent from the Employee’s email
account to a fellow employee that, on their face, constituted evidence of serious misconduct.
By letter dated 4 April 2012 the Employer set out relevant portions of the emails and stated:
“Your behaviour is entirely unacceptable and constitutes a serious breach of your
employment obligations. For this reason, we have reviewed our decision to terminate
your employment on the grounds of redundancy.
In light of the information that has subsequently been brought to our attention, your
employment will be terminated on the ground of serious misconduct. For this reason,
you will not receive the redundancy pay set out in our earlier letter of 30 March 2012
nor will you receive payment in lieu of notice because termination on the grounds of
serious misconduct took effect immediately on 30 March 2012. Attached is your final
payslip with payment for accrued annual leave to 30 March 2012 which will be paid
into your bank account 5th April 2012.”
(emphasis added)
[8] At a practical level, the application for unfair dismissal was designed to secure the
Employee’s notice and redundancy entitlements by challenging the ‘dismissal for
misconduct’.
[9] The unfair dismissal application was listed for hearing on 24 August 2012.
[10] Prior to 17 August 2012, the employer had consistently maintained that it had changed
the reason for dismissal from genuine redundancy to serious misconduct such that the
dismissal was for misconduct rather than redundancy. That position, first put in the letter of 4
April 2012, was also adopted in the employer’s Form F3 Response to the originating
application and was put expressly in a letter dated 25 May 2012 (the Calderbank letter)
warning of a costs application:
“...
1. we agree the contract of employment between your client and our client was
terminated on 30 March 2012; and
2. the reason provided to your client on 30 March 2012 that his contract was
terminated was as a result of redundancy; and
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3. your client was notified by way of letter dated 4 April 2012 that as a result of his
conduct during the course of his employment with our client (such conduct of which
our client was unaware), that the reason for termination of his employment had
changed from redundancy to termination for misconduct.
We do not seek to challenge your assertion that the contract of employment was
terminated on 30 March 2012. What we do seek to challenge is our client’s right to
change the reasons provided to your client for his termination.
As you would be aware, your client has an ongoing obligation during his employment
to notify our client of any misconduct of any employee of IC Frith including himself.
Your client breached that obligation and deliberately withheld information regarding
his misconduct from our client. Your client now seeks to gain a financial advantage
from his deception prior to the termination of his contract.
...”
(emphasis in original)
[11] In written submissions dated 17 August 2012 the Employer added a gloss to its
position, arguing that the contract remained on foot as at 4 April 2012 such that it could
summarily dismiss the Employee for serious misconduct on 4 April 2012. Those written
submissions were otherwise directed at defending the dismissal on the basis of serious
misconduct.
[12] On 23 August 2013, the day before the hearing, the Employer’s solicitors wrote a
letter to the Representative seeking formal admissions that made it clear that, in defending the
unfair dismissal application, the respondent also proposed to rely upon genuine redundancy as
a “valid reason” for the dismissal. The employer’s representative gave evidence of a
conversation with Mr Franken reinforcing that position.
[13] At the hearing on 24 August 2012 the Commissioner, at her own initiative, took up the
issue of genuine redundancy pointing out that, by virtue of s.385(d), the Commission could
not uphold the Employee’s unfair dismissal application if it was “a case of genuine
redundancy”. Mr Franken expressly conceded that the redundancy notified on 30 March 2012
was a genuine redundancy (PN70) though he was acting on the presumption the Respondent
had substituted a different reason for the dismissal such that the dismissal for “genuine
redundancy” and been replaced with a “second termination” for misconduct (PN 67). The
matter was adjourned to enable Mr Franken to consider his client’s position and obtain
instructions.
[14] On 27 August 2012 the employer’s representative wrote a Calderbank letter to Mr
Franken warning of a costs application on the basis that the unfair dismissal application had
no prospects of success because there was a genuine redundancy. From this point, no
reasonable representative in Mr Franken’s position could have failed to appreciate that the
employer was relying on genuine redundancy as a reason for dismissal in the proceeding, in
addition to its reliance on misconduct.
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[15] Mr Franken continued with the case on behalf of the Employee. In written submissions
dated 17 September 2012 Mr Franken argued that the letter of 4 April 2012 involved the
employer in “reviewing” the dismissal for genuine redundancy on 30 March 2012 and
“replacing” it with a dismissal for serious misconduct (the “review and replace” argument).
[16] At the further hearing on 26 September 2012 Mr Franken argued that the “legal
character of the termination” was changed by the letter of 4 April 2012 such that the
termination was for misconduct and not redundancy with changed “statutory consequences”.
Mr Franken did not refer to any authority in support of that proposition or any provisions of
the FW Act that he contended had that effect.
[17] On 10 October 2012 the Commissioner issued a jurisdictional decision ([2012] FWA
8417) dismissing the Employee’s application for an unfair dismissal remedy. Relying on the
decision in Birrell v Australian National Airlines Commission (1984) 5 FCR 447 (Birrell) at
457, the Commissioner held that the employer had no right or power to unilaterally withdraw
the notice of termination of 30 March 2010 on the ground of redundancy with the
consequence that dismissal was a case of redundancy and, as such, the Tribunal had no
jurisdiction because the requirement in s.385(d) could not be satisfied.
The Costs Application
[18] The employer made a costs application against each of the Employee and his
Representatives.
[19] Section 401 provides:
“401 Costs orders against lawyers and paid agents
(1) This section applies if:
(a) an application for an unfair dismissal remedy has been made under section
394; and
(b) a person who is a party to the matter has engaged a lawyer or paid agent
(the representative) to represent the person in the matter; and
(c) under section 596, the person is required to seek the FWC’s permission to
be represented by the representative.
(1A) The FWC may make an order for costs against the representative for costs
incurred by the other party to the matter if the FWC is satisfied that the representative
caused those costs to be incurred because:
(a) the representative encouraged the person to start, continue or respond to the
matter and it should have been reasonably apparent that the person had no
reasonable prospect of success in the matter; or
(b) of an unreasonable act or omission of the representative in connection with
the conduct or continuation of the matter.
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(2) The FWC may make an order under this section 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.
(emphasis added)
[20] The core of the Commissioner’s reasoning was as follows:
“[51] Given these circumstances, from 30 March 2012 until the issuing of the decision
in October the question to be answered is whether Mr Franken caused costs to be
incurred because of some unreasonable act or omission on his part. As such the issue is
not as formulated by Mr Franken in the Applicant’s submissions made in response to
the costs application.
[52] ‘Unreasonable act’ and ‘omission’ as used in s.401 of the Act are not defined in
the Act. The Macquarie Dictionary definitions and a plain reading suggest that the
question is whether Livingstones caused costs to be incurred by the Respondent by
doing something (eg continuing with the claim) not based on sound judgement or by a
failure to make use (of information available) or through a failure to do (the necessary
research).
[53] The Respondent submits that the following demonstrates the unreasonable acts
and omissions by the paid agent:
Not reading the Act.
Not searching publically available sources.
If the above 2 points were done, pressing on in complete disregard of the
words of s.385.
Pressing on with a futile claim when the matter had been brought to his
attention on 24 August.
Pressing ahead when the matter had been raised in correspondence from Gillis
Delaney on 27 August.
Developing an argument without recourse to basic research which should have
uncovered Birrell’s Case.
[54] In assessing the behaviour of Livingstones it should first be noted that it (and Mr
Franken) is no stranger to FWA. Both Livingstones and Mr Franken have dealt with
the jurisdiction of FWA in the past. Livingstones and Mr Franken should quite
reasonably be expected to undertake the necessary research prior to embarking on an
application or continuing to pursue an application in FWA.
[55] The original claim never turned on s.387 of the Act (as asserted by Mr Franken)
but always on the ability of FWA to deal with the matter if the termination was,
indeed, a genuine redundancy.
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[56] Having agreed with me during the hearing on 24 August that the Applicant had
no issue with the redundancy and by virtue of the response to the correspondence of
Gillis Delaney on 23 August it is difficult to comprehend that Mr Franken was not
aware that it was highly likely that the redundancy was genuine before the matter
came on for hearing on 24 August. A basic reading of the Act (s.385 and s.389) at this
point would indicate that there was no jurisdiction for FWA to deal with the
application for unfair dismissal.
[57] Certainly at the time of the hearing on 24 August Mr Franken accepted that, even
if I heard all of the evidence, I would still not be able to get past s.385 of the Act yet
still he pursued the application beyond this point.
[58] Whilst I can appreciate some confusion prior to 24 August (the wording of
correspondence from Gillis Delaney in the letter of 24 May does not help) I find it
inconceivable that Livingstones was not aware of the critical matters associated with
its client’s application and the futility of the application to FWA.
[59] Even if he had not done so beforehand, research in well known and referenced
texts by any industrial relations practitioner (For example Creighton B., and Stewart
A., Labour Law (4th ed) or Macken J., O’Grady P., and Sappideen C., Macken,
McCaryy and Sappideen’s The Law of Employment (4th ed). Both contain quite
detailed discussions of notice and the inability to withdraw such notice unilaterally.)
would have informed Mr Franken of the folly of continuing with the application
beyond 24 August.
[60] By the time of the hearing on 26 September Mr Franken chose to argue that the
second termination ‘withdrew and replaced’ the first termination. Again some basic
research by Mr Franken - reasonably expected of someone in his position - would have
made it obvious that the first termination (the redundancy) could not be withdrawn by
the Respondent without some agreement from the Applicant which was clearly not
asked for by the Respondent.
[61] I should say that I do not hold [the employer’s solicitors] totally blameless for any
confusion on the part of the Applicant’s agent prior to 24 August. The Respondent
chose not to make any submissions to FWA in accordance with the directions
originally issued (save for a bundle of documents) that might have made the basis of
its objection clearer.
[62] In these circumstances I am satisfied that Livingstones did cause costs to be
incurred by the Respondent by his failure to take reasonable steps to research the
relevant law and his failure to withdraw the proceedings based on a lack of legal
research that could reasonably be expected of him.
[63] For these reasons I consider it reasonable to make an order for costs against
Livingstones.”
[21] The order for costs against the Representative was $8,700 representing the Employer’s
costs from 24 August 2012.
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Appeal Consideration
[22] In summary, the Commissioner’s decision against the Appellant as representative of
the Employee was predicated on her rationale for dismissing the Employee’s unfair dismissal
application – the applicability of the principle in Birrell - being so obvious and obviously
correct that any reasonable representative could not have failed to appreciate that Birrell
applied and that, accordingly, the application for an unfair dismissal remedy was bound to fail
for want of jurisdiction.
[23] The appeal against the Commissioner’s costs decision necessarily raises the
correctness of the Commissioner’s reasons for dismissing the Employee’s unfair dismissal
application in the primary proceeding (primary decision).
[24] Two key issues emerge from the evidence and from argument on the appeal:
(i) whether the Commissioner’s primary decision was affected by error because
the Commissioner failed to consider the extended meaning given to the
expression “a case of genuine redundancy” in s.389 of the FW Act and
whether there was any basis in the evidence or otherwise to conclude that the
Commissioner was entitled to conclude that there was a case of genuine
redundancy within the extended meaning in s.389, and therefore a case of
genuine redundancy within the meaning of s.385(d).
(ii) whether the Commissioner was incorrect in concluding in her primary decision
that the case was governed by Birrell such that Mr Franken could not
reasonably be found to have been negligent in failing to appreciate the
supposed correctness of that contention.
First Issues – s.389
[25] The resolution of the first of those issues must start with a consideration of the
statutory framework.
[26] The Commission’s jurisdiction to grant of an unfair dismissal is dependent upon a
finding that the employee was “unfairly dismissed”: s.390(1)(b). Pursuant to s. 385(1)(d) the
Commission cannot find that a person has been “unfairly dismissed” unless it is satisfied that
the dismissal was not “a case of genuine redundancy.”
[27] The fate of the unfair dismissal application before the Commissioner turned on the
jurisdictional issue of whether the Employee’s dismissal was “a case of genuine redundancy”
such that the essential jurisdictional prerequisite in s.385(d) was not met.
[28] The expression “a case of genuine redundancy” is defined in s. 389 of the FW Act:
“389 Meaning of genuine redundancy
(1) A person’s dismissal was a case of genuine redundancy if:
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(a) the person’s employer no longer required the person’s job to be
performed by anyone because of changes in the operational requirements of the
employer’s enterprise; and
(b) the employer has complied with any obligation in a modern award or
enterprise agreement that applied to the employment to consult about the
redundancy.
(2) A person’s dismissal was not a case of genuine redundancy if it would have
been reasonable in all the circumstances for the person to be redeployed within:
(a) the employer’s enterprise; or
(b) the enterprise of an associated entity of the employer.
[29] The obligation to consult employee organisations in the event of major or structural
change was introduced into federal awards as a test case standard in the Termination Change
and Redundancy Case (1984) 8 IR 34 at para [5]. As a result of that test case decision, the
right to consultation in such circumstances became an established feature in pre-reform award
system.
[30] Those principles now find statutory expression in s.531 which permits the
Commission to make remedial orders if “an employer has decided to dismiss 15 or more
employees for reasons of an economic, technological, structural or similar nature, or for
reasons including such reasons” and the employer has not complied with notification and
consultation obligations set out in s.531(2) and (3). Section 531(3) provides:
“Consulting relevant registered employee associations
(3) An employer complies with this subsection if:
(a) the employer gives each registered employee association of which any
of the employees was a member, and that was entitled to represent the
industrial interests of that member, an opportunity to consult the employer on:
(i) measures to avert or minimise the proposed dismissals; and
(ii) measures (such as finding alternative employment) to mitigate
the adverse effects of the proposed dismissals; and
(b) the opportunity is given:
(i) as soon as practicable after making the decision; and
(ii) before dismissing an employee in accordance with the
decision.”
[31] Section 139(1) specifies ten categories of term that may be included in a modern
award, one of which is “procedures for consultation, representation and dispute settlement”
(s.139(1)(j)).
[32] The FW Act requires an employer to whom a modern award applies to comply with
the modern award (ss 45-47). All of the modern awards contain a consultation clause.
[33] Enterprise agreements are required by the FW Act to have a consultation clause.
Section 205 relevantly provides:
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“205 Enterprise agreements to include a consultation term etc.
Consultation term must be included in an enterprise agreement
(1) An enterprise agreement must include a term (a consultation term) that:
(a) requires the employer or employers to which the agreement applies to
consult the employees to whom the agreement applies about major workplace
changes that are likely to have a significant effect on the employees; and
(b) allows for the representation of those employees for the purposes of
that consultation.
Model consultation term
(2) If an enterprise agreement does not include a consultation term, the model
consultation term is taken to be a term of the agreement.”
[34] A mandatory workplace determination made as a result of a termination of industrial
action on grounds of threatened endangerment of public health and safety etc (s.426) must
include the model consultation term unless FWC is satisfied that an agreed term for the
determination would, if the determination were an enterprise agreement, satisfy subsection
205(1): see s. 273(5).
[35] Consultation does not mean joint decision making, it does involve a genuine
opportunity to persuade (CPSU, the Community and Public Sector Union v Vodafone Network
Pty Ltd [PR911257] per Smith C (as he then was); Modern Award Consultation Clause case
[2013] FWCFB 10165 at [31] - [32]). The terms of the FW Act demonstrate that the
legislature has intended to attach significance to the right to consultation in redundancy
situations.
[36] In that statutory context, s.389(1)(b) evinces a legislative intent to ensure that statutory
consultation rights are upheld in cases where an employer decides that there are genuine
operational reasons to make an employee or employees redundant. The existence of genuine
operational reasons justifying the redundancy is not enough. The employer must also comply
with consultation obligations imposed by an award of enterprise agreement before a
termination based on those operational requirements can be “a case of genuine redundancy”
for the purposes of the Act, and s.385(d) in particular.
[37] A finding that in accordance with s.389(1)(b) is a jurisdictional pre-requisite to a
finding that a dismissal was “a case of genuine redundancy” (compare Edwards v Giudice
(1999) 169 ALR 89). The Commission has no jurisdiction to dismiss an unfair dismissal
application on the basis that the case is a case of genuine redundancy unless there is a finding
that the requirement in s.389(1)(b) has been satisfied. An admission that the requirements of
s.389 had been met is a sufficient basis to make a finding that that the matter was “not a case
of genuine redundancy”.
[38] There was no suggestion that the Employee was covered by an enterprise agreement.
The Banking, Finance and Insurance Award 2010 (modern award) undoubtedly applied to the
Employer. Clause 8 of that modern award imposed a consultation obligation on the Employer.
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[39] If the Commissioner could not be satisfied that the requirement in s.389(1)(b) was
satisfied, she could not be satisfied that the case was “a case of genuine redundancy” such that
the jurisdictional requirement in s.395(d) was not met.
[40] In the primary proceeding, the Commissioner did not refer to s.389. She made no
findings in relation to the Employer’s compliance or otherwise with the consultation
obligation imposed by s.389(1)(b). There was nothing in the evidence that allowed the
Commissioner to be satisfied that the jurisdictional requirement in s.389(1)(b) had been
satisfied.
[41] The issues is whether, in the circumstances of this case, this constituted an error or
whether Mr Franken made an admission that the requirements of s.389 were satisfied that
dispensed with the need for findings on each component of s.389(1) as was submitted by Mr
Shariff for the Respondent.
[42] Mr Franken did not make any express admission that the requirements of s.389 had
been met or that the consultation requirement in s.389(1)(b) had been met. On the other hand,
counsel for the respondent took us to a number of passages in the transcript where Mr
Franken had made it plain that he was not taking issue with the redundancy notified in the
letter of 31 March 2012.
[43] A submission in the form of a statement was filed on behalf of the Employee in June
2012. Paragraph 7 of those submissions states:
“My employment was terminated for reasons of a genuine redundancy on 30 March. I
was entitled to severance pay.”
[44] At the first hearing on 25 August 2012 the Commissioner immediately raised the
obvious jurisdictional issue:
PN7 THE COMMISSIONER: Section 365 of the Act says that a person has been
unfairly dismissed if they’ve been dismissed and the dismissal is harsh, unjust or
unreasonable and it was not consistent with the Small Business Dismissal Code and it
was not a case of genuine redundancy. I didn’t see anything in the material that
suggested that you were arguing that this was not a genuine redundancy.
PN8 MR FRANKEN: No, that’s not what it’s about.
PN9 THE COMMISSIONER: So I’m just not quite sure why I’m here.
PN10 MR FRANKEN: Well, he was
PN11 THE COMMISSIONER: There was an offer made to Mr Setefano. He accepted
it. The redundancy offer, he accepted it. I’m not sure why we’re here, because that
contract was made between the parties.
PN12 MR FRANKEN: Your Honour, we have no problem with the redundancy. The
issue is that the respondent four days after the termination of his first – well, I call it
the first termination.
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[45] Note that Mr Franken does not reject the Commissioner’s assertion that the Applicant
is not contending that it was not a case of genuine redundancy. From a practical perspective,
Mr Franken appears to accept the proposition that the dismissal on 30 March 2012 was a case
of genuine redundancy – “that’s not what it’s about” and “we have no problem with the
redundancy”. The exchange continues:
PN13 THE COMMISSIONER: There can only be one termination if it’s accepted.
PN14 MR FRANKEN: Well, they purported to effect a second termination on the
basis of alleged misconduct.
PN15 THE COMMISSIONER: Yes, well, that
PN16 MR FRANKEN: That’s the only application we could bring.
PN17 THE COMMISSIONER: Why aren’t you in court trying to get the money that
the applicant is owed?
PN18 MR FRANKEN: Your Honour, there’s an application that he was terminated
and the records show that he was terminated and we’re entitled to bring that
application here.
PN19 THE COMMISSIONER: No, the jurisdiction only exists if section 385 of the
Act is satisfied and you’re going to have to convince me that the termination was not a
case of genuine redundancy, because the termination was as a result of redundancy,
which I understand was offered and was accepted by Mr Setefano.
PN20 MR FRANKEN: It was, your Honour, but the fact is that if you look at the letter
from the respondent, they revisited that decision.
[46] And a little later there was the following exchange:
PN40 THE COMMISSIONER: But that’s the point, Mr Franken. The dismissal is a
redundancy which you’ve agreed is a genuine redundancy.
PN41 MR FRANKEN: Your Honour, we couldn’t have attacked the first dismissal
because there was a purported second dismissal in
PN42 THE COMMISSIONER: No, but, Mr Franken, there can’t be a second dismissal
if the first dismissal is on foot. If the first dismissal exists the second dismissal can’t.
PN43 MR FRANKEN: Your Honour, I tried to convey that to the other side and it was
met with a stone wall all the way.
[47] Once again, Mr Franken had the opportunity to contend that the dismissal “was not a
case of genuine redundancy”, and instead affirmed his attempts to convey to the Company
that the dismissal was a case of genuine redundancy such that the Employee was entitled to
redundancy payments. The following exchange occurred on 24 August (at PN70):
PN 70 THE COMMISSIONER: It’s up to your client to pursue performance of the
contract, of the redundancy contract, in court. I can’t pursue it here. I can’t get you in
the door here because there is nothing that suggests Mr Setefano has been unfairly
dismissed because everyone agrees this is a case of genuine redundancy. So I can’t - - -
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PN71 MR FRANKEN: Your Honour, I appreciate that you’re also in a very difficult
position, because your interpretation of the legal position is exactly right.
PN72 THE COMMISSIONER: But that’s what I have to deal with. I can’t – even
though it might be unfair and unreasonable and, you know, a bit underhanded or any
other description you might care to give it, the behaviour of the respondent, that doesn’t
help me get past section 385 of the Act.
PN73 MR FRANKEN: My view is that – and at the end of the day, even if you were to
hear evidence on this that would inevitably be your finding in any case. There’s no
dispute about the facts.
[48] Section 577(b) obliges the Commission to perform its functions and exercise its
powers “in a manner that is quick, informal and avoids unnecessary technicalities”. Mr Shariff
advanced a strong argument in support of the proposition that the Commissioner should have
been able to rely on the things said by Mr Franken in transcript as amounting to an admission
that this was a case of genuine redundancy within the meaning of the Act. There was
disagreement among the members of this Full Bench as to whether that was so. This reflects
the fact that this is a borderline case. In the event, it is unnecessarily to finally decide that
issue.
[49] Given the fact that the definition in s.389 is markedly different from the ordinary
usage of the expression “genuine redundancy” (which is concerned only with the existence of
the genuine operational requirements in s. 389(1)(a)) and the fact that the requirement in
s.389(1)(b) is jurisdictional, it would be advisable for members of the Commission to
expressly address the requirement in s.389(1)(b) in every case where genuine redundancy
arises as an issue.
Second Issue – Was Birrell determinative?
[50] The Commissioner’s costs decision turns on the applicability of a common law
principle in relation to the termination of the Employee’s contract. As such, it is necessary to
consider the contractual and common law position.
[51] In the absence of an express term conditioning the right to terminate in particular
circumstances, an employer’s right to terminate on notice is pursuant to an implied term
permitting either party to an employment contract to terminate it on the giving of reasonable
notice (or, for the employer, proffering payment in lieu of such notice, see Siagian v Sanel Pty
Ltd (1994) 54 IR 185; Portal Software International Pty Ltd v Bodsworth [2005] NSWSC
1179 at [94]-[98]). The reason for the giving of notice – the employer’s motivation – is
immaterial to the exercise of the right to give notice of termination conferred by that implied
term.
[52] In this case there was a written contract of employment that contained an express
provision empowering the Employer to terminate the contract for “material breach or serious
misconduct”. While the contract also made express provision for calculating the payment due
on termination for redundancy and for the quantum of notice “on termination”, it does not
expressly empower the employer to terminate for redundancy or on the giving of reasonable
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notice. A term giving the parties the right to terminate the contract on the giving of reasonable
notice is implied.
[53] The Employer’s letter of 30 March 2013 was an exercise of the Employer’s unilateral
right to terminate the contract of employment pursuant to that implied term. Whether the
contract terminated at that point, as the letter purported to specify, or whether it continued to
operate during a period of notice until the promised payment in lieu of notice was made, is an
issue that appears not to have been the subject of an authoritative decision. That issue was not
the subject of considered argument before us and is best left undecided. We note the
authorities referred to in paragraph [51] above and conclude that, from Mr Franken’s
perspective, it was at least arguable that the contract remained on foot as at 4 April 2013 such
that the letter of that date effected a termination on that, that is, before the termination
effected by the notice of 30 March 2012 became operative.
[54] However, in Shepherd v Felt & Textiles of Australia Ltd (1931) 45 CLR 359 the High
Court unanimously upheld the right of an employer to defend a contractual claim brought by
an employee who had engaged in conduct found to be in breach of an implied term “of
faithful and loyal discharge of duty towards the employer”. Rich J stated (at p 370-1):
“The suggestion faintly made that, because the defendant was unaware of the plaintiff’s
misdeeds in this matter until after the termination of the contractual relationship, they
could not constitute a defence, is an ancient heresy to which I am surprised to find any
surviving adherent. In 1838 Tindal C.J. expressed the view that when a party is
discharged and a reason is assigned at the time, another reason may afterwards be
proved (Baillie v. Kell); and repeated statements to the like effect have been made, the
latest of which is that of Greer J. (as he then was) in Taylor v. Oakes Roncoroni & Co.
The question is whether the defendant was entitled to do what it did, not whether the
reason why it exercised the rights it in fact had was a good or bad one (cf. Hansson v.
Hamel & Horley Ltd).”
(footnotes omitted)
[55] Starke J said (at p 373):
“The fact that the appellant’s misconduct was unknown to the respondent at the time of
the termination of the agreement is quite immaterial. If there were, in fact, any
circumstances in existence at the time of the termination of the agreement which could
have justified the respondent in so terminating it, then it may justify the termination by
subsequent proof of those circumstances...”
[56] The other members of the Court agreed that the employment was validly terminated.
[57] The applicability of the principle in Shepherd v Felt and Textile in a case of the sort
the Commissioner was dealing with is demonstrated by the decision of the NSW Court of
Appeal in Downer EDI Ltd v Gillies [2012] NSWCA 333. In that case an executive was
terminated pursuant to a contractual right to terminate on the giving of three months notice or
payment in lieu. The contract provided for quantified redundancy benefits in the event of a
termination on that basis. The contract also provided a right of termination for misconduct, in
which case the employee had no entitlement to a payment in lieu of notice or redundancy
benefits. The employer subsequently discovered serious misconduct by the executive. The
[2014] FWCFB 1276
14
issue before the Court was whether the employee was entitled to the contractual payments in
lieu of notice and for redundancy.
[58] Alsop P, as his Honour then was, (with whom Macfarlan and Meagher JJA agreed),
provides a penetrating analysis of principle at paragraphs [127] – [144] of [2012] NSWCA
333 that we respectfully adopt and commend it to the reader, rather than set it out here.
[59] The question is determined by the terms of the contract of employment (or any award
or enterprise agreement) relied upon by the employer in effecting the termination. However,
the terms of contract of employment
“...should be construed both in the context of the common law, including the principle
in Shepherd v Felt and Textiles, and in accordance with honest commercial common
sense. One aspect of common sense would be the obvious fact that serious misconduct
of an employee is sometimes not discovered for some time. A business contract,
otherwise tolerably straightforwardly drafted, to be understood as permitting an
employee to obtain contractual benefits on termination on one basis of no misconduct
when, unknown to the employer, serious misconduct has occurred, which if
appreciated, would have denied the contractual benefits, might give pause for thought.
If the words are reasonably capable of conforming to a regime consistent with the
parties’ rights being resolved by reference to the true position, they should be given
that sensible meaning.” (at [143])
[60] In Downer EDI Ltd v Gillies the Court of Appeal held that the employer was entitled
to rely upon the after-discovered serious misconduct to deny the entitlement of the executive
to notice and severance benefits that were payable under the contract when termination was
on the basis advised by the employer when notice of termination was first given.
[61] Where the termination of the contract of employment is effected pursuant to an
implied term conferring a right to terminate on the giving of reasonable or specified notice (or
payment in lieu), only the clearest words in some express term of the contract would prevent
an employer from subsequently altering the reason for termination by reference to serious
misconduct discovered after termination in accordance with the principle in Shepherd v Felt
and Textiles. After all, the contractual right to effect a termination pursuant to such an implied
term is not conditional upon the existence of a particular reason or reasons – no reason is
required.
[62] In Kanes Hire v Mitchell [2010] FCA 756 Moore J dismissed an appeal against a
decision of the Chief Industrial Magistrate awarding redundancy entitlements to an employee
who had been dismissed pursuant to an express right to terminate for redundancy in an award,
in circumstances where the employer objected to payment on the basis of misconduct
discovered after termination. Moore J held that, on the proper construction of the award, the
entitlement to redundancy was conditional only upon the termination having been effected
pursuant to the clause in question (at [29]-[35]). His Honour distinguished Shepherd v Felt
and Textiles and other cases on the basis that they were concerned with the position at
common law when terminating pursuant to a contractual right, rather than termination
effected pursuant to a power conferred by a provision in an award that also specified a
redundancy entitlement when termination is effected pursuant to that provision. That decision
has no bearing on the outcome of this appeal because here the termination was effected
pursuant to a contractual term and not pursuant to a right conferred by an award. As such, the
[2014] FWCFB 1276
15
principle in Shepherd v Felt and Textiles was applicable and allowed the Employer to act as it
did.
[63] The principle stated by Gray J in Birrell, on which the Commissioner relied, is as
follows: (at p 457)
“The giving of notice of termination of a contract, in accordance with the terms of that
contract, is a unilateral right. Its exercise does not depend in any way on the
acceptance or rejection of the notice by the other party to the contract. The giving of
such a notice operates to determine the contract by effluxion of the period of notice. It
is clear that such a notice could be withdrawn by the consent of both parties to the
contract;”
[64] The principle in Birrell meant that the contract terminated by virtue of the notice of
termination given by the Employer in its letter of 30 March 2012 and its proffering of
payment in lieu of notice and that that notice of termination could not be unilaterally
withdrawn. The Commissioner’s reasoning is premised on an apparent assumption that this
somehow irrevocably fixed the reason for the dismissal as the reason specified in the notice of
termination for the purposes of determining the unfair dismissal in accordance with the FW
Act. That assumption is incorrect.
[65] The principle in Shepherd v Felt and Textiles allowed the Employer in this case to rely
upon the misconduct discovered after termination for the purposes of the common law. There
is nothing in Birrell that suggests otherwise (not that could it displace a decision of the High
Court in any event).
[66] However, the problem in the Commissioner’s approach is more fundamental. The
Commissioner was not hearing a common law claim. She was hearing an application made
and to be determined in accordance with the provisions of a statute, the FW Act. It is a well
established principle in the authorities that guide the proper application of the unfair dismissal
provisions of the FW Act that an employer is entitled to rely upon misconduct discovered
after termination as a “valid reason” for dismissal within the meaning of s.387(a). The leading
authority is Australia Meat Holdings Pty Ltd v McLauchlan (1998) 84 IR 1 at 9 but the
principle has been applied in numerous cases. The reasons that the Commission must consider
in determining whether there was a “valid reason” for the dismissal are those that the
employer chooses to rely upon.
[67] Thus, irrespective of the contractual position, in defending the unfair dismissal
application under the FW Act, the Employer in this case was entitled to rely upon misconduct
discovered after the dismissal as a “valid reason” for the purposes of s.387(a), just as it was
entitled to rely upon genuine redundancy as a reason for dismissal that excluded the
jurisdiction of the Commission. It follows that the Commissioner’s reasoning in the costs
decision is affected by error.
[68] In Construction, Forestry, Mining and Energy Union v Clarke (2008) 170 FCR 574
the Full Court of the Federal Court considered the costs power in s.824 of the Workplace
Relations Act 1996, a costs power using terms and expressions similar to those used in s.401.
The Full Court held (at [29]):
[2014] FWCFB 1276
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“As the authorities indicate, there is a distinction between a party who pursues
arguments which are ultimately abandoned or rejected by the Court and a party who
commences a proceeding which is misconceived in the sense of being incompetent or
unsupportable: Australian and International Pilots Association 162 FCR at 402;
Standish v University of Tasmania (1989) 28 IR 129 at 138-139. Simply because a
party does not conduct its litigation in the most efficient way does not mean that the
Court should exercise its discretion in s 824(2) of the WR Act to make a costs order. In
our view, neither the late abandonment of some of its defence, nor the use of a notice
of contention to advance a previously minor and ultimately unsuccessful argument,
crosses the threshold of being “an unreasonable act or omission” for the purposes of s
824(2). True it is that the concession ultimately given by the respondent that it
regarded the decision of Nicholson J as erroneous could have been given earlier.
However, it was a concession which was, in light of the decision of this Court on the
substantive appeal, properly made and beneficial to the appellants. Although it is
arguable that the lateness of the concession may have put the appellants to some extra
costs, we are of the view that it cannot be characterised as “unreasonable” in the
circumstances of this case. Indeed, while courts should use the discretion in s 824(2) to
ensure that parties to litigation arising from the WR Act do not engage in unreasonable
acts and omissions which put the other party to undue expense, they should also be
careful not to exercise the discretion with too much haste, given that such haste may
discourage parties, for fear of an adverse costs order, from pursuing litigation under the
WR Act in the manner which they deem best.”
[69] There are vital public policy considerations that inform the cautious approach
reflected in this passage. We proceed that these observations apply equally to a consideration
of an application for costs against a representative under s.401 of the FW Act.
[70] While it may be clear with the benefit of a hindsight analysis that Mr Franken’s
position was wrong, adopting the approach commended by the Full Court in Clarke, we do
not consider that Mr Franken should be held to have acted so unreasonably in pursuing the
matter notwithstanding the Commissioner’s explicit questioning in relation to s.385(d). The
Commissioner’s costs decision focuses on Mr Franken’s allegedly unreasonable failure to
appreciate to appreciate that Birrell’s case determined the matter when that was not, in fact,
the case. In those circumstances it should be unsurprising that we are not persuaded that there
should be a costs order against Mr Franken’s firm because he persisted in advancing the
Employee’s case beyond 24 August 2012, particularly in circumstances where Mr Franken
had obtained informal legal advice from a barrister that supported his contention that the
Tribunal had jurisdiction to deal with the matter.
[71] However, that is not the end of the matter. For reasons which will become apparent
there is still a live issue as to whether the Representative and or the Employee should be
ordered to pay the Employer’s costs of the primary application.
[72] We turn to comment on the specific grounds of appeal:
First Ground of Appeal - The decision involved a significant error of fact or, in the
alternative, an error of law in that there was no evidence to support the finding that the
Appellant had agreed that even if FWA heard the evidence, it would inevitably be the
finding of FWA that it could not get past section 385 of the Act (“the first ground of
appeal”).
[2014] FWCFB 1276
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[73] We have addressed the ground above.
Second Ground of Appeal - FWA erred in finding that the Appellant engaged in an
unreasonable act or omission in connection with the continuation of the matter by
continuing the claim that the Applicant was dismissed by the Respondent for
misconduct (“the claim”):
(i) because the Appellant could not, of its own volition, continue the claim;
and/or, in the alternative
(ii) because the claim was not incompetent.
[74] When parties are represented, there is an inherent difficulty in finding that the party
has behaved unreasonably in commencing or continuing an application. It is reasonable for a
lay party to rely upon expert advice and assistance. The natural inference is that the party has
relied upon the advice of the representative in commencing and continuing the proceeding. Of
course, the advice given by the representative in relation to prospects is privileged.
[75] On the other hand, if an unmeritorious case sounds in a costs application against the
representative, the representative will likely respond as the appellant has in this case. The
appellant contends that the withdrawal of the proceedings was not something that it had no
power to do because a representative must act on the instructions of the client and cannot
withdraw a proceeding on their own initiative.
[76] That contention is strictly correct but it glosses over the responsibility and ethical duty
of lawyers and paid agents not to conduct cases that have no reasonable prospects of success.
In some jurisdictions there are specific statutory duties cast on legal practitioners not
commence or continue proceedings that have no reasonable prospects of success (for
example, ss.344-349 of Legal Profession Act 2004 (NSW)).
[77] A legal representative or paid agent can only ever act on instructions. If a case is to be
discontinued because it is doomed to failure that will always require the instructions of the
client. Legal advice given to the client on prospects will be privileged and cannot be disclosed
by the representative without a waiver of the privilege. If a client refuses to accept advice that
his or her application has poor prospects of success and should be discontinued, and instead
gives instructions for the matter to proceed, the representative may decline to act further for
the client.
[78] The line between cases with poor prospects of success and cases that have “no
reasonable prospects of success” within the meaning of the FW Act is not always bright.
Reasonable minds may differ on whether a particular case should be assessed as having no
reasonable prospects of success.
[79] If a representative decides that the circumstances of the case permit them to continue
acting notwithstanding the rejection of advice that the prospects of success are poor, it will
not be open to a representative to volunteer that fact to the Commission on a costs application.
[80] While there is obvious force in the argument advanced by the appellant based on the
obligation to act on instructions, its unqualified acceptance will result in a situation where it
will rarely, if ever, be possible to establish that a representative has acted unreasonably in
continuing an application that did not have reasonable prospects of success. That result is at
[2014] FWCFB 1276
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odds with the clear legislative purposes of s.401, namely to enable representatives to be held
accountable for the unreasonable conduct or pursuit of matters. From our own experience we
can say that there is a certain incidence of unfair dismissal and similar applications filed in the
Commission that are unmeritorious and appear to have been commenced in the expectation
that a modest settlement can be achieved because it is cheaper for the employer to pay what is
known as “go away” money than to defend and defeat the claim. Section 401 ought be
available when the case being pursued by the representative has no reasonable prospects of
success.
[81] It is open to a member of the Tribunal, in an appropriate case, to draw an inference
from the particular circumstances, that the representative, if acting reasonably, must have
appreciated that the case did not have reasonable prospects of success such that the
representative was obliged to advise the client to withdraw his application and cease acting if
that advice was not accepted.
[82] However, there will typically be a problem dealing with costs applications in
misconduct cases where, as here, there has not been a full hearing and the basis for
contending that there were “no reasonable prospects of success” depends upon the apparent
strength of an employer’s case on misconduct.
[83] We note the decision of McHugh J in Re Minister for Immigration, Ex part Qin (1997)
186 CLR 622 where his honour summarised the principles applicable in the courts:
“In most jurisdictions today, the power to order costs is a discretionary power.
Ordinarily, the power is exercised after a hearing on the merits and as a general rule
the successful party is entitled to his or her costs. Success in the action or on particular
issues is the fact that usually controls the exercise of the discretion. A successful party
is prima facie entitled to a costs order. When there has been no hearing on the merits,
however, a court is necessarily deprived of the factor that usually determines whether
or how it will make a costs order.
In an appropriate case, a court will make an order for costs even when there has been
no hearing on the merits and the moving party no longer wishes to proceed with the
action. The court cannot try a hypothetical action between the parties. To do so would
burden the parties with the costs of a litigated action which by settlement or extra-
curial action they had avoided. In some cases, however, the court may be able to
conclude that one of the parties has acted so unreasonably that the other party should
obtain the costs of the action. In administrative law matters, for example, it may
appear that the defendant has acted unreasonably in exercising or refusing to exercise
a power and that the plaintiff had no reasonable alternative but to commence a
litigation.”
[84] McHugh J made it clear that the absence of a completed final hearing does not
invariably mean that a court or tribunal will be unable to form a view that a party has acted
unreasonably in commencing or continuing a proceeding.
[85] In a misconduct case that concludes before there has been a full hearing and where, as
here, it appears on the material before the tribunal that the employer had a strong case based
on misconduct, such that it was unlikely that the applicant could succeed, it is open to a
member to permit or require such submission as is necessary to:
[2014] FWCFB 1276
19
(i) establish the basis, if any, the applicant advances for contending that the
misconduct did not occur, and
(ii) identify the matters that the applicant and or representative were proposing to
rely upon in support of a contention that the dismissal was harsh, unjust or
unreasonable.
[86] Any reception of evidence will be limited and will not involve conducting a full
hearing of the contested facts. The test in s.401 is then applied in the manner explained by the
Full Court in CFMEU v Clarke (2008) 170 FCR 574 at [29].
[87] It is open to a member to deal with the problems presented by the representative’s
obligation to act on instructions and the privilege attaching to those instructions in the
following way:
(i) To require the employee to specify whether they relied on advice from the
representative in deciding to commence or continue the application and invite
the employee consider whether he or she wishes to waive privilege in respect
of such advice. If the employee is not prepared to waive privilege the
Commission may proceed on the basis that the applicant ought bear
responsibility if it ought have been apparent to a reasonable person that there
were no reasonable prospects of success in the relevant sense.
(ii) If privilege is waived, the Commission would receive submissions (and if
necessary evidence) about the advice and instructions that were given so as to
better determine whether costs should be awarded against the applicant and or
their representative and the extent of such costs order.
[88] If, after considering those matters, and assuming in favour of the applicant contested
facts that cannot be resolved without a full or substantial hearing, the Commission is satisfied
that it was not reasonably arguable that:
(i) the misconduct did not occur; or
(ii) the dismissal was harsh, unjust or unreasonable even if the misconduct did
occur,
a costs order will likely be appropriate. Of course, attention must remain on the actual
language of 401 and s.400A.
Third Ground of Appeal - FWA erred in finding that the Appellant engaged in an
unreasonable omission in connection with the continuation of the matter by failing to
take reasonable steps to research the relevant law because:
(i) there was no evidence that the Appellant or its employee failed to take
reasonable steps to research the relevant law; and/or, in the alternative
(ii) there was no evidence from which the inference could be drawn that the
Appellant or its employee failed to take reasonable steps to research the
relevant law.
[2014] FWCFB 1276
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Fourth Ground of Appeal - FWA erred in finding that the Appellant engaged in an
unreasonable omission in connection with the continuation of the matter by failing to
withdraw the proceedings based on a lack of legal research that could reasonably be
expected of the Appellant’s employee because:
(i) the Appellant could not, of its own volition, withdraw the proceedings;
and/or, in the alternative
(ii) there was no evidence that the Appellant failed to withdraw the
proceedings based upon a lack of legal research that could reasonably be
expected of the Appellant or the Appellant’s employee; and/or, in the
alternative
(iii) there was no evidence from which the inference could be drawn that the
Appellant failed to withdraw the proceedings based upon a lack of legal
research that could reasonably be expected of the Appellant or the
Appellant’s employee.
[89] In relation to the Third and Fourth Grounds of appeal we consider that it is open to a
member of the Tribunal, in an appropriate to case, to infer unreasonable neglect on the part of
a representative by virtue of the fact that they have pursued a case that any reasonable
practitioner would have recognised was doomed to failure or without reasonable prospects of
success.
Fifth Ground of Appeal - FWA erred in deciding that its discretion should be exercised
in favour of the Respondent because it acted upon a wrong principle in that it did not
give any separate consideration as to why its discretion should be exercised in favour of
the Respondent once it was satisfied that the Appellant had engaged in an unreasonable
act or omission in connection with the continuation of the matter.
[90] The appellant submits that, broken down into its relevant parts, section 401(1)(b) of
the Act:
“(a) confers discretion as to whether the discretion to make a costs order is triggered
(“...if FWA is satisfied... that the lawyer or paid agent caused costs to be incurred by
the other party to the matter because of an unreasonable act or omission of the lawyer
or paid agent in connection with the conduct or continuation of the matter”); and
(b) confers discretion upon FWA to make an order for costs once the discretion is
triggered (“...FWA may make an order for costs against the lawyer or paid agent...”).”
[91] The appellant argues that these are two separate discretions and the Commissioner
erred because she “did not give any separate consideration as to why the second discretionary
decision under section 401(1)(b) of the Act should have been exercised in favour of the
Respondent.”
[92] It is true that the discretion conferred by s.401(b) is conditioned upon satisfaction as to
the existence of a prescribed state of affairs involving the application of a broad discretionary
standard. Statutory discretions of this type are commonplace.
[93] We are not persuaded that the Commissioner failed to appreciate that this is the form
of discretion that she was exercising.
[2014] FWCFB 1276
21
[94] It does not assist to describe the provision as involving two distinct discretions.
Ordinarily, one would expect that a finding of satisfaction as to the existence of the prescribed
state of affairs would result in the discretion conferred by s.401(b) - what the appellant
describes as the ‘second’ discretion – being exercised against the lawyer or paid agent. After
all, the manifest purpose of the provision is to act as a disincentive to lawyers or paid agents
granted permission to appear from causing costs to be incurred by other parties through
unreasonable acts or omissions. However, such a finding does not inevitably result in the
discretion being exercised against the lawyer or paid agent. There may be circumstances in a
particular case that would render it unjust to make any award of costs notwithstanding such a
finding. The issue is really one of adequacy of reasons. Argument before the Commissioner
focussed on the requirement in s.401(b) that “the lawyer or paid agent caused costs to be
incurred by the other party to the matter because of an unreasonable act or omission of the
lawyer or paid agent in connection with the conduct or continuation of the matter” rather than
the discretion that arose once that condition was satisfied. It was understandable that the
Commissioner’s reasons had the same focus. We are not persuaded that the Commissioner
was obliged to give reasons beyond those that she did and address, as a separate part of her
decision, why, having been satisfied that the required state of affairs existed, she had decided
it was appropriate to make an order.
[95] Upon a fair reading of the Commissioner’s reasons, she did consider what the
appellant has called the ‘second’ discretion. If the Commissioner’s analysis had been correct
it would have been open for her to hold that the commencement of the proceeding involved
unreasonable neglect on the part of the appellant. It would have been open to the
Commissioner to infer that the Employee had sought and acted on the advice of the appellant
in commencing his application for an unfair dismissal remedy. Nevertheless, the
Commissioner only ordered costs incurred after 24 August 2012. She did this because,
amongst other things, because of the matters identified in paragraphs [58] to [71]. The
Commissioner clearly confined the costs order in the manner that she did because she was
satisfied that there were mitigating circumstances that has existed prior to 24 August 2012 but
that there was nothing that mitigated the conduct of the lawyer after that date.
Sixth Ground of Appeal - FWA erred in deciding that its discretion should be exercised
in favour of the Respondent once it was satisfied that the Appellant had engaged in an
unreasonable act or omission in connection with the continuation of the matter because,
on the facts, the exercise of that discretion was unreasonable or plainly unjust.
[96] It is unnecessary to consider this ground of appeal but we do not consider that the
Commissioner acted in a way that was “unreasonable or plainly unjust”.
Permission to appeal
[97] This appeal raises questions of practical importance to practitioners in the Commission
and s.401 has had little appellate consideration. We are satisfied that there is a public interest
in granting permission to appeal. The requirement in s.401(a) is met. The requirement in
s.401(b) is not applicable.
[98] Given the error we have identified, we are satisfied that permission to appeal pursuant
to s.604(1) should be granted. Permission to appeal having being granted, the appeal proceeds
as a rehearing.
[2014] FWCFB 1276
22
Rehearing – Decision to remit
[99] The Employer made costs applications against both the Applicant and his
Representative. The Commissioner, having decided to make an order for costs against the
Representative, refrained from deciding the application for costs against the Applicant.
[100] If the Commissioner’s decision and order are quashed, as we propose to do, the
employer’s costs applications in their totality fall to be re-determined.
[101] For the reasons we have given, we are not persuaded that the Representative should be
subject to an order for costs on the basis granted by the Commissioner or on any other basis
associated with the matter being a case of genuine redundancy.
[102] However, the material before the Commissioner raises a real issue as to whether costs
ought be ordered against the Employee and or the Representative because the challenge to the
dismissal for misconduct itself had no reasonable prospects of success and was pursued
unreasonably.
[103] The Employer’s letter of 4 April 2013, substituting misconduct as a reason for
dismissal, set out a number of emails, the sending of which was said to constitute serious
misconduct. If the Employee sent those emails there is a real case to be tried that the
Employee had no reasonable prospects of success, even if consideration were confined to
misconduct as a reason for dismissal.
[104] The Commissioner focussed on the case being doomed because it was a “case of
genuine redundancy” and did not consider the costs applications to the extent that they were
based on the poor prospects of success or unreasonableness associated with the misconduct as
a reason for dismissal. That focus was understandable because the Employer’s submissions at
the costs hearing focussed on genuine redundancy rather than misconduct. In turn, that focus
was understandable because of the proactive manner in which the Commissioner had pursued
the significance of the absence of any challenge to the genuineness of the redundancy notified
on 30 March 2012.
[105] The net result is that there was no consideration of whether there could and should
have been an order for costs against the Applicant and or his representative on the basis that
the application had no reasonable prospects of success, and that it was unreasonable to pursue
it, even if consideration had been confined to misconduct as the reason for dismissal.
[106] We do not know what passed between Mr Franken and the Employee and those
communications are presently privileged, nor has either Mr Franken or the Employee had an
opportunity to be heard in relation to a costs order on that basis.
[107] As a result and unfortunately, it will be necessary to remit the costs applications for
rehearing by another member with the following guidance as to the proper determination of
that application.
[108] To the extent that problems of privilege and the requirement to act on instructions
intrude upon the apportioning of responsibility, if any, as between the Employee and his
Representative, the observations at paragraph [81] and following may provide assistance.
[2014] FWCFB 1276
23
[109] The member to whom the costs application is remitted, having heard from the parties,
will have to apply s.401, s.400A and s.611 to determine whether or not costs should be
ordered against one or both of the Employee and Representative. If the discretion to award
costs is enlivened, the proper exercise of discretion will depend upon all the relevant
circumstances of the case. However, if a representative has encouraged an employee to pursue
an unfair dismissal application that manifestly had no reasonable prospects of success then it
may be appropriate for the representative to bear the costs. On the other hand, if a
representative has discouraged the proceeding because of poor prospects of success (even if
nevertheless considering the case to be properly arguable), and the matter has proceeded at the
insistence of the employee, it may be appropriate for the employee to bear the costs.
Orders
[110] The appeal is allowed. The decision and order of the Commissioner are quashed. The
costs applications as against the appellant and as against the applicant at first instance are
remitted to Commissioner Blair for determination in accordance with these reasons.
[111] We consider such orders are what a proper application of the law requires in the
circumstances of this appeal. That said, we are conscious that legal costs in this matter have
long since eclipsed the amount of costs in dispute on the appeal and that this matter has
consumed inordinate resources and it is still not concluded. We recommend that the parties
participate in a telephone settlement conference to be conducted by another member of the
Commission with a view to arriving a sensible compromise that provides some recognition of
the risk that, given the terms of the emails set out in the 4 April 2012 letter, the Employer may
succeed on the remitter and lest legal costs increase once more by more than the amount in
dispute.
VICE PRESIDENT
Hearing
2013
Brisbane
Nov 13
Appearances:
The appeal was initially conducted on the papers, thereafter:
Mr J. Merrell of counsel for the Appellant
OF FAIR WORK COME AUSTRALIA THE SEAL
[2014] FWCFB 1276
24
Mr Y. Shariff of counsel for the Respondent
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