[2014] FWC 2280

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.394 - Application for unfair dismissal remedy

Sun Health Foods Pty Ltd
v
Ms Suman Verma

and

COMMISSIONER WILSON

MELBOURNE, 7 APRIL 2014

Application for costs orders against party involved in an application for an Unfair Dismissal Remedy.

[1] This decision concerns an application made by Sun Health Foods Pty Ltd (Sun Health Foods) for a costs order to be made in relation to Ms Suman Verma’s application for an unfair dismissal remedy against the company.

[2] I have previously found that Ms Verma was not unfairly dismissed, because she was not dismissed 1. The decision in the matter was published on 4 December 2014.

[3] The Fair Work Act 2009 (the Act) provides in s.400A that costs may be awarded against a party to an application for unfair dismissal remedy; s.401 provides for costs to be awarded against a lawyer or paid agent; and s.402 provides when an application is to be made. The respective provisions are 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.

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.

(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.

402 Applications for costs orders

An application for an order for costs under section 611 in relation to a matter arising under this Part, or for costs under section 400A or 401, must be made within 14 days after:

(a) the FWC determines the matter; or

(b) the matter is discontinued.

[4] The application for costs was originally made by Sun Health Foods when it filed an application for costs on 26 September 2013, which is prior to the hearing of the substantive matter on 14 November 2013.

[5] The 26 September 2013 application for costs was prepared on a version of the Form F6 (Application for Costs) made under the Fair Work Australia Rules 2010, which in its preamble refers to it being an “Application for Costs Fair Work Act 2009 – ss.376, 401, 611, 780”. While the form does not refer to it being an application made under s.400A, because of all the circumstances of this matter, I take the application to be one made for costs not only in respect of Ms Verma’s paid agent representative, Just Relations, but also in respect of Ms Verma herself.

[6] Having received the Commission’s decision dismissing Ms Verma’s application for an unfair dismissal remedy, Sun Health Foods wrote to the Commission on 18 December 2013 referencing its earlier submission of a Form F6 Application for Costs, and enquired “how we can claim costs incurred by our company for the resolution this matter”. This correspondence was within a period of 14 days after the determination of the substantive matter.

[7] The Applicant’s representative, Just Relations, argues that there is no competent application for costs before the Commission, for the reason that the Sun Health Foods costs application was made on 26 September 2013 and not after the FWC determined the matter. 2 It was argued there is no capacity for the Commission to entertain applications made in advance for matters. This submission overlooks the correspondence received by the Commission on 18 December 2013 from Sun Health Foods, which plainly reagitates the desire of Sun Health Foods to apply for and obtain costs pursuant to the Act.

[8] In forming my view in relation to this aspect of the matter, I have had regard to s.577 which requires the Commission to perform its functions and exercise its powers in a manner that is fair and just, and s.578 which requires the Commission to take into account equity, good conscience and the merits of matter. Very plainly, Sun Health Foods saw Ms Verma’s application as unmeritorious at an early stage and wished to pursue costs against her if she proceeded. While the original application was certainly filed early, there is nothing about the correspondence to the Commission on 18 December 2013 that could give rise to a reading other than it being an endeavour by Sun Health Foods to enliven the jurisdiction of the Fair Work Commission for consideration of the recovery of costs.

[9] Because of the way the matter has progressed, with the first application having been made before the hearing, and not after determination of the substantive matter, and the second application being in the form of an email, I accept the second application as being a valid application pursuant to s.400A, s.401 and s.611. To the extent that the second application is not in accordance with the Commission’s procedural rules or forms, I waive compliance with the Fair Work Commission Rules in accordance with s.586 of the Act.

[10] Having received this application, the Commission issued directions for the provision of written submissions from both parties and proposed to them that the matter would be determined by me on the papers, unless either party requested a hearing. Both parties provided submissions in accordance with the Directions and neither party requested a hearing. A perusal of the submissions does not indicate that the question now before me involves disputed fact and so I am of the opinion I am not required, because of s.397, to conduct a conference or hearing in relation to the matter.

[11] The first issues to be considered are the threshold tests set out within s.400A (cost orders against parties) and s.401 (cost orders against lawyers and paid agents), which are respectively;

● s.400A – satisfaction on the part of the FWC that the applicant (being 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”;

● s.401(1A) – satisfaction on the part of the FWC that the representative, being just Relations, caused 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.”

[12] In addition to ss.400A and 401, s.611 provides a cost remedy as well (which is preserved for applications such as this through ss.400A(3) and 401(3)). The section provides the following;

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).

[13] The language and tests of the section are different to the provisions of ss.400A and 401, and especially so in relation to the consideration that an action may have been taken “vexatiously or without reasonable cause”.

[14] Sun Health Foods submissions in relation to its costs application are brief. They consist of the following paragraphs taken from the original Form F6 lodged on 26 September 2013;

“Having resigned per (sic) position Suman Verma did not complete the notice period. Consequently no proper handover took place which resulted in training staff and extended disruptions in production. These disruptions have caused additional cost and loss to the business.

Since Suman Verma resigned on her own and has filed an application with no justification, I the undersigned along with other staff in the business had been compelled to spend time attending and responding to her application for unfair dismissal. The time spent on this issue has deprived us from attending to our business which at present is faced with loss of business and difficulties.” 3

[15] No additional submissions were received from Sun Health Foods in response to the Commission’s directions given on 14 January 2014 that the company was to file a copy of its written submissions by 29 January 2014. The only additional material to that referred to above received from the company close to that time was the following quantification of its claim for costs;

“In respect of o (sic) the application filed by Suman Verma, Sun health Foods Pty Ltd had to incur costs as detailed below.

● Discussion with all relevant staff, preparation of response - Time spent 2 days – Cost $ 2,500

● Attendance at FWC for hearing of application by the Director - Time spent 1 day + travelling expenses - $ 500

Total amount of claim for costs : $3,000” 4

[16] As a result of the foregoing, and in the absence of well-formed submissions on the subject by Sun Health Foods, I discern the company to argue the following as the basis of its application for costs;

● Ms Verma resigned from her employment;

● She must have known that this was the case at the time she made her application for unfair dismissal remedy;

● There were no facts or evidence available to Ms Verma that would allow a different view to be formed;

● The cumulative effect of this situation is to not give rise to sufficient jurisdiction for an application for an unfair dismissal remedy to be made; this is because of s.386, which defines the meaning of “dismissed”;

● These things should have been reasonably apparent to Ms Verma and her representative at the time the application was made

[17] Ms Verma and Just Relations’ submissions in relation to costs include that there was a course of conduct relied upon by Ms Verma as being the basis of her application. In this regard Ms Verma refers to 10 elements which reinforce an overall deteriorating relationship between Ms Verma and her employer by the time she came to resign. In this regard, Ms Verma and Just Relations submit the following;

“18. The question of whether those events occurred and whether they would constitute conduct or a course of conduct that could reasonably be seen to force a resignation per s386 is a mix of findings of fact and law.

19. The fact that the Commission did not find that there was a resignation caused by the employer’s conduct does not mean that the application was made vexatiously, without reasonable cause or in circumstances where it should have been apparent that the application could not succeed.

20. There is no doubt that cases where a resignation follows sexual harassment of an employee or other objectively intolerable conduct may be regarded as a termination at the initiative of the employer (before there was the current ‘forced resignation’ clause in the relevant Act). See for example Groves v Benlor Real Estate.

21. In this case there were objectionable comments about the applicant’s private life, unwarranted disciplinary action, actual removal of parts of her supervisor role and actual evidence that the second most senior manager threatened a reduction on pay and dismissal.

22. Our view remains that the Commission ought to have viewed that as a course of conduct that would force the resignation of any normal person.

23. The fact that it did not in no way makes this a vexatious case or a case where it ought to have been apparent that the case could not succeed.” 5

[18] As was noted at paragraph [12] of the substantive decision, the admitted and relevant evidence on these matters is limited, comprising the evidence of Ms Verma, Mr Andriopoulos and several short documents. The substantive decision also noted that the circumstances of Ms Verma’s employment were that her working relationship had been deteriorating for some time which had resulted in the issuance of a warning to Ms Verma with accusations made to her about her timekeeping. There was also uncorroborated evidence to the effect that a manager had spoken to her which led her to believe she was being asked to take a pay cut. 6

[19] Sections 400A and 401 were introduced to the Act by the Fair Work Amendment Act 2012 (No. 174 of 2012) and the Explanatory Memorandum introduced with the Bill containing the amendments included the following;

“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.

...

173. Subsection 400A(2) provides that the power to award costs against one party in these circumstances is only exercisable if the other party to the matter makes an application in accordance with section 402. Subsection 400A(3) makes clear that the new power to award costs under subsection 400A(1) operates in addition to subsection 611(2), which enables the FWC to make costs orders against a person in certain circumstances, such as where an application is made vexatiously or without reasonable cause.” 7

[20] For the reason that Sun Health Foods was unrepresented in the substantive proceedings, its claim for costs is properly described as a claim for indemnity costs. Such costs have been defined as including fees, charges, disbursements, expenses and remuneration, incurred by a party as long as they have not been unreasonably incurred or are not of an unreasonable amount. 8 Indemnity costs stand in distinction to party-party costs, being the legal costs that are deemed necessary and reasonable.9 It has been held that indemnity costs are capable of being awarded as part of the Commission’s broad discretion to award costs, provided it is satisfied as to certain circumstances, and that such broad discretion includes the discretion to award costs either on a party–party basis or indemnity basis.10

[21] The Federal Court of Australia has approached the meaning of the phrase “without reasonable cause” on the basis that a “proceeding is not to be classed as being launched "without reasonable cause" simply because it fails” 11 and, further, that;

“It seems to me that one 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. If success depends upon the resolution in the applicant's favour of one or more arguable points of law, it is inappropriate to stigmatise the proceeding as being "without reasonable cause". But where, on the applicant's own version of the facts, it is clear that the proceeding must fail, it may properly be said that the proceeding lacks a reasonable cause.” 12

[22] The Full Bench has further indicated on this subject;

“[31] In the context of an appeal the question becomes whether, having regard to the arguments available to the appellant at the time of instituting the appeal, there was no substantial prospect of success. As Wilcox CJ (with whom Madgwick J agreed) observed in Imogen Pty Ltd v Sangwin:

‘The prospect must be evaluated in the light of the facts of the case, the judgment appealed from and the points taken in the notice of appeal. If having regard to those matters, there was not insubstantial prospect of the appeal achieving some success, albeit not necessarily complete success, then it would seem to me it cannot be fairly described as having been instituted “without reasonable cause”. This is so even if, in the result, the appeal proved unsuccessful.’

[32] In the same matter Ryan J said:

‘The existence of ‘‘reasonable cause’’ within the meaning of s 347 falls to be determined at the time when the relevant proceedings were instituted. The fact that the party instituting the proceedings later discontinues them is therefore not a matter to be taken directly into account in the application of the section. However, an appeal stands in somewhat different case from proceedings at first instance in that discontinuance may bear indirectly on the discretion conferred by s 347 by tending to confirm an impression derived from the grounds of appeal and the reasons for judgment below that the prospects of success on the appeal were slight.

Not without significance to an assessment of the reasonableness of the institution of an appeal are the amount at issue and the nature of the points raised by the notice of appeal. Where, as here, the appeal is essentially against findings of fact made by the trial judge after a two day hearing resulting in a judgment for $16,900 and raises no important or distinctive point of law or principle, the Court may more readily conclude that it was not reasonable in the circumstances to have instituted it. On a fairly fine balance of the relevant considerations and not without hesitation, I have been led to reach that conclusion in this case and agree with the Chief Justice and the orders which he has proposed.’

[33] In construing s.570 and its legislative antecedents courts have observed that the test imposed by the expression ‘without reasonable cause’ is similar to that adopted for summary judgement, that is ‘so obviously untenable that it cannot possibly succeed’, ‘manifestly groundless’ or ‘discloses a case which the Court is satisfied cannot succeed.’” 13 [references omitted]

[23] It is necessary for me to have regard to whether there was an unreasonable act or omission of Ms Verma in connection with the conduct or continuation of the matter (which is the test relevant to s.400A). Regard must also be had to whether Ms Verma’s representative, Just Relations, encouraged her to start, continue or respond to the matter when it should have been reasonably apparent to them there was no reasonable prospect of success, or whether there may have been an unreasonable act or omission of Just Relations in connection with the conduct or continuation of the matter (which are the tests relevant to s.401). Finally, regard must be had to whether any part of the proceedings may have been taken “vexatiously or without reasonable cause” (which are the tests laid out in s.611).

[24] My consideration of these matters has taken into account the following;

● The original Application for Unfair Dismissal Remedy, dated 11 June 2013, which acknowledges a resignation on the part of Ms Verma, but claims that it was a “forced resignation following course of conduct including unwarranted change work arrangements, unwarranted warning, threat to dismiss unless the applicant accept a pay cut”. 14

● Ms Verma’s Outline of Submissions in the substantive matter, filed 19 August 2013. The Outline of Submissions goes into some detail of the factual circumstances of Ms Verma’s resignation, including an analysis of the actions of others, and argues that there was a termination at the initiative of the employer, citing Full Bench authorities to the effect that “an objective analysis of the employer’s conduct is required to determine whether it was such a nature that resignation was the probable result or that the appellant had no effective or real choice but to resign.” 15

● Ms Verma’s witness statement which elaborates on factual aspects associated with her resignation and the matters contended in her outline of submissions.

● Sun Health Foods’ Outline of Submissions and associated documents, filed in the Commission on 19 August 2013. These Outline of Submissions do not go further than outlining a very basic chronology; indicating a sudden departure on the part of Ms Verma and her apparent resignation. The Outline of Submissions do not meaningfully respond to the contentions put forward by Ms Verma to the effect that her resignation was, within the meaning of the Act, a termination at the initiative of the employer.

[25] In addition to the above material, I have had regard to written statements filed by Sun Health Foods and which the company sought to rely upon in the substantive proceedings. These statements are from employees who worked with Ms Verma and knew something about the circumstances of her employment. These statements were referred to in the substantive decision as follows;

“[13] Sun Health Foods sought to table written statements from five of its other employees. The tendering of these statements was objected to by Ms Verma’s representative. None of the authors of the statements were called to give evidence and, in any event, the content of statements do not sufficiently go to the events leading to Ms Verma leaving her employment to have probative value. I therefore do not rely on the material which they contain.”

[26] Although these witness statements were not tendered as evidence in the substantive proceedings, it is appropriate I give regard to their content in relation to this application for costs for the reason that the documents are part of the material that was known to Ms Verma and Just Relations prior to the formal hearing.

[27] None of these statements meaningfully rebut the fundamental proposition advanced in Ms Verma’s submissions or witness statement that she was forced into resignation. After consideration of all of this material, I am not satisfied that, at the time it was made, Ms Verma’s application for unfair dismissal remedy had no reasonable prospect of success or that its commencement or continuation amounted to an unreasonable act or omission either on the part of Ms Verma or her representative, Just Relations. Ms Verma plainly felt that the employment relationship at the time she resigned was untenable. That she submitted a resignation as a result was admitted by her both in her originating application and also in her evidence. She sought advice as to her rights upon resignation.

[28] It is not inconceivable based upon the assertions and facts as set out in her application, outline of submission and witness statement that her case could have been within the criteria set out in O’Meara v Stanley Works Pty Ltd and found to be a termination at the initiative of the employer. In the end, there was insufficient evidence that would assist her case, and no corroborating evidence before the Commission that would allow a finding to be made, on the balance of probabilities, that she had no effective or real choice but to resign. However that is not to say that her case, at the time it was commenced, had no reasonable prospect of success because it was manifestly groundless or that it could not possibly succeed.

[29] The material and evidence provided to the Commission by Sun Health Foods both in respect of the substantive proceedings and also in relation to the costs proceedings has been insufficient to compellingly illustrate that Ms Verma’s application had no reasonable prospect of success. Aside from the relevance of this observation to the finding made so far, I note that the absence of cogent submissions from the employer on this matter means that I am unable to be satisfied that, at any stage after the commencement of Ms Verma’s application for an unfair dismissal remedy and prior to the determination by me of the matter in the substantive proceedings, it should have been reasonably apparent to Ms Verma or her representative, because of submissions or material brought forward by Sun Health Foods, that her application lacked a reasonable prospect of success and that it would be an unreasonable act of either to continue the application. My view on this may well have been different if the material filed by the employer, and available to Ms Verma and Just Relations prior to the hearing, cogently articulated evidence that would lead to the view there was no termination at the initiative of the employer.

[30] In all the circumstances, I am not satisfied that either Ms Verma or Just Relations caused costs to be incurred by Sun Health Foods because of an unreasonable act or omission in connection with the conduct or continuation of the matter; or because it should have been reasonably apparent that Ms Verma had no reasonable prospect of success in her application; or that the application was made or maintained vexatiously or without reasonable cause.

[31] For the foregoing reasons I dismiss the application by Sun Health Foods for a costs order in relation to Ms Verma’s application for unfair dismissal remedy.

COMMISSIONER