This matter titillated my interest due to the explanatory nature of the decision in relation to costs orders, and the claim (for costs) following on from an unfair dismissal application where an offer was made by the applicant (ie ex-employee) and rejected by his former employer (the respondent). It was the rejection of this offer that led to costs being awarded (amongst other things) against the ex-employer.
And what does a 1975 English Court of Appeal divorce case have to do with this matter in 2019?[Please note that there was an issue whether the “ex-employee” was or was not a contractor, I used the terminology “ex-employer and “ex-employee” for convenience].
The nuts and bolts of this matter is the submission that the ex-employee incurred costs because the ex-employer did not “settle” the matter before going to arbitration, therefore causing the employee to endure additional costs in fighting (and ultimately) winning a higher sum than the offer an arbitration of the matter. That is, the offer was 16 weeks, the arbitrated outcome was 18.45 weeks’ pay, finding that the employee (was an employee) and was unfairly dismissed.
The Canadian CEO “pointed” response to the offer was:
Andrew O’Farrell was never an employee of [ex-employer].
I find your position parasitic and disgusting.
Should you proceed any further we will contact the Australian revenue authorities since [the ex-employee] has never paid taxes.
As well we will contact the Australian bar association to report your unprofessional representation.
Govern yourself accordingly.
The commissioner ed that the matter be determined “on the papers”:
“That is, he will make a decision on the application based on the written submissions and evidence both parties have already filed, without requiring the parties to attend the Commission”.
The ex-employee claim was:
“The Applicant claims that because the arbitrated outcome is superior to that proposed by the Applicant in the final settlement offer correspondence, in accordance with the obiter in Calderbank v Calderbank [see “Legal bits”], the unreasonable action by the Respondent in not settling the matter for the amount proposed by the Applicant, the Respondent prolonged the settlement of this matter unnecessarily, which caused the Applicant to incur additional costs”.
Also stating that the ex-employer made no attempt to seek or obtain legal advice on Australian law.
In consideration, the Commissioner noted:
- The Respondent had every right to reject the offer from the Applicant based on their understanding of the contractual relationship with the Applicant. They were of the view, albeit misguided, that the contract that they entered into with the Applicant was binding and enforceable.
- The Applicant put the Respondent on notice of a further application in relation to costs if they were successful in an arbitrated outcome.
- The Respondent did not enter into any negotiations with the Applicant.
- The Respondent did not attend the Hearing.
- Regarding Australian representation:
“I do not accept the Respondent’s excuse that they could not find representation to prosecute their case. Sydney has a large number of competitively priced advisors, solicitors and barristers who specialise in the field of industrial relations. Any one of a number of these specialists could have provided advice or representation in this matter”.[Ed: A Google search of “unfair dismissal lawyers Sydney” had 257,000 results!]
- The Applicant sent the Respondent a letter “putting them on notice” as to costs.
The Commissioner concluded:
- The Respondent’s involvement in the conduct of the proceedings was relatively unique. The Respondent was difficult to contact and appeared somewhat blasé about the whole process before the FWC. I have sympathy with the Applicant in relation to the frustration that the Applicant experienced in the conduct of the matter.
- The Applicant’s letter should have at least generated an enquiry to an Australian IR practitioner. This letter clearly put the Respondent on notice in relation to the possibility of a future claim by the Applicant in relation to his legal costs.
- The Respondent’s attitude and inactivity in the process before the FWC was unreasonable conduct.
- That this unreasonable conduct resulted in the Applicant being required to incur additional costs.
The Commissioner, in allowing the costs to be awarded, referred the parties to the FW Regulations, and encouraged the parties to agree to a sum of money being the costs incurred by the Ex-employee after 18 October 2018 and until 28 February 2019.
The legal bits
Section 400A of the FWA.
“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.”
Section 400A was inserted into the Act in 2012. The Explanatory Memorandum of the Fair Work Amendment Bill 2012 stated:
“Parts 3 and 4 of Schedule 6 to the Bill enhance the FWC’s ability to order costs against a party and/or their representative in unfair dismissal matters. The new ‘party costs’ provision applies where a party to an unfair dismissal matter (either an employee or employer) has caused the other party to incur costs by an unreasonable act or omission. Under section 401 of the FW Act, lawyers and paid agents may currently be exposed to costs orders if FWA has granted permission for a person to be represented in an unfair dismissal matter. The Bill will provide for the FWC to order costs against a lawyer or paid agent whether or not the FWC has given permission for a person to be represented.
The amendments strike a balance between the need to protect workers from unfair dismissal, and to provide a deterrent against unreasonable conduct during proceedings. The amendments will enable costs orders to be more easily made in the case of unreasonable conduct but will not prevent genuine claims from being pursued. They will discourage frivolous and speculative claims and assist in the efficient resolution of claims by encouraging all parties to approach proceedings in a reasonable manner. These measures are reasonable and proportionate to address the time and expense that an unreasonable conduct by a participant and/or their representative may cause another party to incur”
“Item 4 inserts a new section 400A to enable the FWC to order costs against a party to an unfair dismissal matter (the first party) if it is satisfied that the first party caused the other party to the matter to incur costs by an unreasonable act or omission in connection with the conduct or continuation of the matter.
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.
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.
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.” (Commissioner’s emphasis).
In Sidney v Employsure Pty Ltd (Sidney), Commissioner Bissett conveniently summarised a number of relevant authorities on this issue in the following manner:
“The authorities relevant to a consideration of the phrase ‘unreasonable act or omission’ were considered in the decision of the Full Bench in Roy Morgan Research v Baker. I do not repeat those provisions here but note the following can be taken from those authorities:
A failure to inform another party of an inability to attend proceedings would be, if intentional, unreasonable and if accidental, an unreasonable omission;
a failure to advise the other party of the first party’s intentions, if deliberate or reckless, would be unreasonable and if an omission could be equally unreasonable;
very strong prospects of success will not always justify a failure to participate in settlement negotiations;
a reasonable person will determine if and how to respond to an offer of settlement after considering all of the circumstances of the case including the terms of settlement in relation to the relief sought; the relative strength of the parties cases; the likely length and cost of proceeding to hearing if the matter does not settle; and adverse consequences of acceptance of a settlement rather than prosecuting or defending the primary application.”
In Matthew Gugiatti v SolarisCare Foundation Ltd, the Full Bench of the Commission held that s.400A “is concerned with unreasonable acts or omissions in connection with the “conduct or continuation” of a matter already instituted, not with whether it was reasonable to have instituted a matter in the first place.”
The Full Bench in Roy Morgan also stated:
“Section 400A(1) establishes two pre-conditions for the making of an order for costs under the subsection (in addition to the requirement in s.400A(2)). The first is that the Commission must be satisfied that a party engaged in an unreasonable act or omission in relation to the conduct or continuation of a matter. The second is that such act or omission caused the other party to the matter to incur costs. Once these preconditions are satisfied, a discretionary power to order the payment of such costs is enlivened.”
Section 400A appears in Part 3-2 Unfair Dismissal of the Act. Relevantly, section 381 of the Act states:
“381 Object of this Part
(1) The object of this Part is:
(a) to establish a framework for dealing with unfair dismissal that balances:
(i) the needs of business (including small business); and
(ii) the needs of employees; and
(b) to establish procedures for dealing with unfair dismissal that:
(i) are quick, flexible and informal; and
(ii) address the needs of employers and employees; and
(c) to provide remedies if a dismissal is found to be unfair, with an emphasis on reinstatement.
(2) The procedures and remedies referred to in paragraphs (1)(b) and (c), and the manner of deciding on and working out such remedies, are intended to ensure that a “fair go all round” is accorded to both the employer and employee concerned.
Note: The expression “fair go all round” was used by Sheldon J in in re Loty and Holloway v Australian Workers’ Union  AR (NSW) 95.
In Baxter Healthcare Pty Ltd t/a Baxter Healthcare v Andrew Portelli, a Full Bench of the Commission held:
“We note at the outset that the relevant sections provide that if the requisite jurisdictional facts are established (relevantly, ss. 400A(1) and (2), and s.611(2)) then the Commission may make an order for costs. A costs order does not automatically follow upon a finding of the requisite jurisdictional fact. It is clear from the use of the word ‘may’ that the Commission retains a discretion as to whether or not to make an order for costs. In that regard these provisions may be contrasted with ss. 418(1) and 424(1), which provide that the Commission must make certain orders if certain jurisdictional facts are present.”
Calderbank v Calderbank (Source: Wikipedia)
After a marriage of 17 years, Mr and Mrs Calderbank separated and filed for divorce which was duly granted.
However substantial difficulties arose regarding the division of the matrimonial assets of £78,000, consisting of the £80,000 Mrs Calderbank had previously inherited during the relationship from the estates from the death of both her parents. Complicating matters further, the matrimonial home was registered under only Mr Calderbank’s name (for fiscal reasons), and he continued to live in this property after the divorce.
The matter was referred to the Family Court, and the judge awarded Mr Calderbank the modest amount of £10,000 (out of the total assets of £78,000), as well as court costs.
However, prior to the matter going to trial, Mrs Calderbank had made the following offer via no less than the form of an affidavit, “I am willing, and have always been willing, to make over to the [husband] the house at Alderley Edge”, which Mr Calderbank declined.
While this house was not the matrimonial home (it was rented by Mr Calderbank’s father, and Mr Calderbank’s mother lived there), the trial judge was of the opinion that this house was worth about £12,000, which was £2,000 more than Mr Calderbank later obtained at trial.
Mrs Calderbank, not happy with the outcome, appealed on two grounds, that the courts had no legal jurisdiction to make such a property division and, of most legal significance, that as Mr Calderbank had obviously declined a reasonable pretrial settlement offer, he should not be entitled to legal costs for unnecessarily prolonging the legal proceedings.
The Court decided that if a winning party in litigation refuses an earlier settlement offer made by the losing party, the losing party may produce the settlement offer as evidence towards the appropriate level of costs payable. In practice, if the winning party’s award of damages is less than the earlier settlement offer, the losing party may have to pay less costs to the winning party than normal.
On the facts, the Court upheld the lower court’s quantum of the £10,000. However, the Court reversed the burden of paying legal costs from Mrs Calderbank onto Mr Calderbank. The Court held that the legal proceedings had been unnecessarily prolonged by Mr Calderbank’s earlier refusal to accept Mrs Calderbank’s settlement offer of around £12,000.