[2011] FWA 2910 |
|
DECISION |
Fair Work Act 2009
s.394 - Application for unfair dismissal remedy
Ms Sharon Harris
v
Home Theatre Group Pty Ltd T/A Home Theatre Group
(U2010/14493)
COMMISSIONER ASBURY |
BRISBANE, 12 MAY 2011 |
Application for order for security for payment of costs - Principles relevant to exercise of discretion to make order for security for payment of costs - Application for order for security for payment of costs dismissed.
Background
[1] This is an application under Rule 16 of the Fair Work Australia Rules 2010 for an order directing Ms Sharon Harris to furnish security for the payment of costs in relation to her application for an unfair dismissal remedy (the substantive application). The application for security for the payment of costs is made by Home Theatre Group Ltd, the respondent to the substantive application.
[2] Ms Harris made the substantive application on 15 November 2010. Home Theatre Group Ltd filed an Employer’s Response to the substantive application on 14 December 2010. That response raised an objection to the substantive application proceeding on the grounds that Home Theatre Group Pty Ltd is a small business and that Ms Harris’ dismissal was in compliance with the Small Business Fair Dismissal Code.
[3] A conciliation conference was conducted on 16 December 2010 and the matter was not resolved by Agreement. A hearing of the substantive application is listed for 24 June 2011.
Legislation
[4] The power for Fair Work Australia (FWA) to make an order directing a party to furnish security for costs, is found in s.404 of the Fair Work Act 2009 (the FW Act) which provides:
The procedural rules may provide for the furnishing of security for the payment of costs in relation to matters arising under this Part.
[5] Rule 16 provides:
16 Security for the payment of costs
16.1 FWA may, on application, make an order directing a person to furnish security for the payment of costs in respect of a matter or part of a matter arising under Part 3-2 of the Act.
Note FWA will not ordinarily make such an order before the conclusion of conciliation.
16.2 The security must be of such amount, and furnished at such time and in such manner and form, as FWA directs.
16.3 FWA may, on further application:
(a) reduce or increase the amount of security directed to be given; and
(b) vary the time at which, or manner or form in which, the security is to be furnished.
16.4 Without limiting any other power which FWA may exercise, if FWA directs a person to furnish security for costs in respect of a matter or part of a matter arising under Part 3-2 of the Act, it may order that the matter be:
(a) adjourned until security is furnished; or
(b) adjourned indefinitely.
[6] The power of FWA to make an order for security for payment of costs is discretionary. Generally such an order is concerned with ensuring that a defendant/respondent is able to enforce an order for costs made in its favour at a trial, where the plaintiff/applicant fails in their proceedings.
Principles relevant to the discretion to make an order for security of costs
[7] Principles relevant to the making of orders for security of costs can be summarised as follows. There is no absolute rule to control the exercise of the discretion to order security for costs, and what should be done in each case depends on the circumstances of the case with the governing consideration being what is required by the justice of the matter. 1 The making of an order for security for costs should not be oppressive in that it would stifle a reasonably arguable claim.2
[8] The financial position of the party against whom the order is sought, will be relevant in a number of circumstances. There is no absolute rule that impecuniosity of a party will entitle its opponent to an order for security for costs. There is also a general rule that poverty should not be a bar to a person prosecuting a claim at first instance. 3 On appeal, the question of security is to be determined differently on the basis that the appellant has had his or her day in court, and should not be given a “free hit”, particularly in circumstances where the costs of a proceeding below had not been paid by the appellant4.
[9] In cases where the impecuniosity of the party against whom the order for security for costs is sought, it is relevant that the impecuniosity is itself a matter which the litigation may help to cure 5 or arises from the conduct the party is complaining of.6 In such circumstances the party against whom the order is sought should not be shut out of litigation.
[10] The prospects of success 7 and the strength of the case of the party resisting the order is relevant. In Merribee (Supra) Kirby J said (citations omitted):
“Another consideration that has sometimes been judged to be relevant is the strength of the case of the party resisting an order that it provide security for costs and evaluation (necessarily tentative) of its prospects of success. Thus, the fact that a party has secured special leave to argue its case on appeal has been thought a relevant consideration in some circumstances. Similarly, if a proceeding appeared hopeless and such as was bound to fail, the lack of apparent merit in a party’s case might be a reason for ordering it to provide security for the costs to which, it appears, it is needlessly putting its opponent. Such a consideration would need to be exercised with care, given that the real merits of a case might not emerge until the final hearing or might not sufficiently emerge in the necessarily brief proceedings typically involved in an application for security of costs. Furthermore, if a party asserts that its opponent’s proceedings are manifestly lacking in legal merit, other remedies are available to it to protect it from needless vexation.” 8
[11] In relation to costs, it is relevant that the nature of a proceeding is such that, even if successful, an order for costs might not be made or might be limited. 9 The inability of a party to meet the costs of an unsuccessful proceeding, or the risk that a cost order will not be satisfied is also relevant to the exercise of the discretion.10 Other related considerations are that a party is, or is likely to be absent from the jurisdiction when a decision is made and has no, or few assets within the jurisdiction.11
[12] There may also be aspects of public interest which are relevant to the exercise of the discretion to make an order for security for costs, such as an application raising matters of general public importance, quite apart from the interests of the parties. 12 Other matters that have been considered relevant are that a hearing of the proceedings is close at hand, or the party seeking the order has delayed its application for such an order.13 It may also be relevant that the parties, or some of them, are legally aided.
Unfair dismissal proceedings under the Fair Work Act 2009
[13] It is relevant in determining whether an order for security of costs should be made, to consider the circumstances in which the party who seeks the order may recover its costs in the substantive proceedings to which the security relates. 14 This approach was taken in Polaris Sales Australia v Pettigrew15 where Whelan C noted that before determining an application for an order for security of costs it was necessary to consider the nature of proceedings to which the order related, in the then Australian Industrial Relations Commission (AIRC) and its power to award costs. Whelan C observed that the AIRC had no inherent power to award costs, and that the circumstances in which costs could be awarded were limited. Further, it was noted that costs do not follow the cause, and a party who successfully prosecutes or defends a claim cannot assume that an application for costs will also be successful.
[14] It was also noted that the then Workplace Relations Act 1996 recognised that applications for an unfair dismissal remedy may be brought by persons with limited means and that proceedings may be conducted without the assistance of legal representation.
[15] These observations continue to be relevant under the terms of the Fair Work Act 2009 (the FW Act). The provisions of the FW Act relating to unfair dismissal are found in Chapter 3 Part 3 - 2. The Objects of that part, as set out in s.381, include establishing procedures for dealing with unfair dismissal that are quick, flexible and informal; addressing the needs of employers and employees; and ensuring a fair go all round. Pursuant to s.394 of the FW Act an application for an unfair dismissal remedy is made by the dismissed employee. There is an application fee, which may be waived under Regulations made pursuant to s.395 of the FW Act in cases where the person making the application will suffer serious financial hardship if the person is required to pay the fee.
[16] Parties to applications for unfair dismissal remedies before FWA often have limited financial means - applicants are frequently unemployed. Many respondents are small businesses struggling in the current economic environment. Many parties cannot afford representation and have no option but to be self-represented, often under great difficulty, given the complexities of the legislation. Parties should not be deterred from bringing proceedings, or responding to them, by the risk of a costs order, and are entitled to their “day in court”. 16
[17] Persons may be represented by lawyers or paid agents in unfair dismissal hearings, only with the permission of FWA. The circumstances in which permission is granted are limited by the provisions of s.596 of the Act. Factors that FWA is required to consider in deciding whether to give permission for a person to be represented by a lawyer or paid agent, include whether it would enable the matter to be dealt with more efficiently. Implicit in such a consideration is the fact that there are costs associated with such representation.
[18] In the present case, the party seeking the order for security of costs is the respondent to the substantive application. The grounds in s.611 of the FW Act on which costs may be awarded to the respondent in an application for an unfair dismissal remedy, are:
• The application was made vexatiously - s.611(2)(a);
• The application was made without reasonable cause - s.611(2)(a); or
• It should have been reasonably apparent to the applicant that the application had no reasonable prospects of success - s.611(2)(b).
[19] The grounds in s.611(2) relate to the point at which an application was made. The ground in s.611(2)(b) may include circumstances where an applicant persists with an application after being informed during conciliation that there are no reasonable prospects of success, or in circumstances where, on facts that are apparent, the applicant is excluded from making an application for an unfair dismissal remedy.
[20] The question of whether an application was instituted vexatiously is answered by reference to the motives of the applicant in instituting the proceedings. A proceeding will be instituted vexatiously where the predominant purpose in instituting the proceeding is to harass, annoy or embarrass the other party, or to gain a collateral advantage. 17 A proceeding will also be instituted vexatiously where irrespective of the motive of the litigant, it is: “so obviously untenable or manifestly groundless as to be utterly hopeless.”18
[21] Other grounds upon which an application could be said to have been instituted vexatiously have been identified as: the legitimacy or otherwise of the motives of the applicant; existence or lack of reasonable grounds for the claims sought to be made; repetition of compliance with or disregard of the Court’s practices, procedures and rulings; persistent attempts to use the Court’s processes to circumvent its decisions or other abuse of process; wastage of public resources and funds; and the harassment of those who are subject of the litigation which lacks reasonable basis. 19
[22] In relation to s.611(2)(b), the meaning to be given to the term “without reasonable cause” was considered by Wilcox J in Kanan v Australian Postal and Telecommunications Union 20. After reviewing a number of cases, his Honour formulated a test in the following terms:
“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.” 21
[23] His Honour went on to hold that there was no discretionary reason to withhold an order for costs observing that:
“It is not a matter of the applicant’s motives but, rather, that he has put the respondent to the expense of resisting a claim which was always doomed to failure. There is no question of punishing the applicant for his unreasonable course of action. The rationale for making a costs order is that a measure of indemnity should be conferred upon the respondent for the costs it has been obliged to incur in responding to the unreasonably instituted proceeding.” 22
The basis of the application for an order for security for costs
[24] The background facts in relation to the substantive application are not in dispute. Ms Harris was issued with a corporate credit card for business expenses. There was a practice allowed by Home Theatre Group that employees were permitted to use their corporate credit cards for personal expenses. Ms Harris used her corporate credit card for personal expenditure.
[25] In support of the application for the order for security of costs, Home Theatre Group Pty Ltd submits that the practice whereby employees used their corporate credit cards for personal expenditure was subject to a rule that expenditure being identified and paid for within the credit card billing cycle. It is also submitted that Ms Harris was responsible for ensuring compliance with that rule, and did not apply it to her own expenditure. It is contended that Ms Harris’ case is that her misuse of the corporate credit card is the fault of Home Theatre Systems, for allowing her to do so to an extent that she could not recover and was forced to keep the situation concealed.
[26] It is also contended that Home Theatre Group Pty Ltd is a small business employer, and that pursuant to s.385 of the Act, Ms Harris has not been unfairly dismissed, on the basis that her dismissal was consistent with the Small Business Fair Dismissal Code. In the application for the security of costs order, it is asserted by the Home Theatre Group that Ms Harris has in effect stolen money from the company that is yet to be repaid, by putting excessive personal expenditure on her company credit card.
[27] Ms Harris’ case is that she was encouraged to use the company credit card and to put all the expenditure that she could on the card. This was said by Ms Harris to be because use of the credit card led to points being accumulated for the benefit of a manager. Ms Harris contends that that she had every intention of repaying the personal expenditure on her corporate credit card, from the proceeds she expected to receive from her tax return. Ms Harris also contended that the General Manager of Home Theatre Group Pty Ltd knew that Ms Harris expected to repay the personal expenditure using the proceeds of a taxation refund, and that the General Manager where alternative sources of funds were not available to her. The General Manager is Ms Harris’ sister in-law.
Conclusions
[28] Other than evidence given by Ms Harris of the financial hardship brought about by her dismissal, there is no evidence of imepecuniosity on her part, such that there would be a risk that an order for costs in favour of the Home Theatre Group Pty Ltd would not be satisfied. It is also apparent from Ms Harris’ material, that she asserts that the impecuniosity was brought about by her dismissal.
[29] There is no basis upon which it could be said that Ms Harris’ case appears hopeless or bound to fail. It is not determinative that Ms Harris admits the personal expenditure on her corporate credit card. The relevant issue may be whether that expenditure was condoned and whether it was known, or reasonably known that Ms Harris intended to repay the amount using the proceeds from her taxation return. The determination of this case will require the resolution of disputed factual issues. On Ms Harris’ version of events, her conduct does not amount to “in effect stealing money” as contended for Home Theatre Group Pty Ltd in the application for an order for security for costs.
[30] Ms Harris’ case may be made more difficult by the fact that the Home Theatre Group Pty Ltd is a small business, and is contending, pursuant to s.385(c) of the FW Act, that the dismissal was consistent with the Small Business Fair Dismissal Code. However, the fact that a case is difficult, does not equate to it being doomed to failure. Whether this argument succeeds will depend on the evidence that is accepted at the hearing.
[31] The effect of s.385(c) of the FW Act is to deprive a dismissed employee of access to relief that is otherwise generally available to dismissed employees on the ground that their dismissal is harsh, unjust or unreasonable, in circumstances where the employer is a small business and has complied with the Code. If this argument succeeds, the proceedings in the substantive application will be significantly curtailed. This is a protection from vexation, of which Home Theatre Group Pty Ltd has availed itself. It is only if this argument does not succeed that Home Theatre Group Pty Ltd will be required to defend the substantive application with respect to whether the dismissal was unfair on the basis that it was harsh, unjust or unreasonable.
[32] It is also relevant that even if Home Theatre Group Pty Ltd successfully defends the substantive application, it is not automatic that an order for costs will be made. Rather, the Home Theatre Group will have to establish that the discretion to award costs under s. 611 is triggered, and that the discretion should be exercised. For the reasons set out above, it is not immediately apparent that the substantive application was made vexatiously or without reasonable cause, or that it should have been reasonably apparent to Ms Harris that the application had no reasonable prospects of success.
[33] In all of the circumstances, this is not a case where the discretion to make an order for security for payment of costs should be exercised. The application for an order for payment for security of costs made by Home Theatre Group Pty Ltd is dismissed. I Order accordingly.
COMMISSIONER
1 Meribee Pastoral v ANZ Banking Group 193 CLR 502 at 513.
2 Soh v Commonwealth [2008] FCA 1524 per Moore J at [10] cited in Clack v Collins (No 1) [2010] FCA 513 at 13.
3 Meribee Pastoral v ANZ Banking Group op. cit. at 513-514; Clack v Collins op. cit. at 8 per Jago J citing: Moore v Macks [2007] FCA 509 at [20] per Mansfield J; Singh v Secretary, Department of Employment and Workplace Relations [2007] FCA 90 per Sundberg J; Skyring v Sweeney [1999] FCA 61 at [6] and Cowell v Taylor (1885) 31 Ch D 34 at 38 per Bowen LJ.
4 Singh v Secretary, Department of Employment and Workplace Relations op.cit at [11], [13] and [14]; Tait v Bindal People [2002] FCA 322 at [3] and [4].
5 Merribee Pastoral Industries Pty Ltd v ANZ Banking Group Ltd (1998) op. cit. at 515.
6 Soh v Commonwealth [2008] FCA 1524 per Moore J at [10].
7 Clack v Collins op.cit. at [13]; Soh v Commonwealth [2008] FCA 1524 per Moore J at [10]; Merribee Pastoral Industries Pty Ltd v ANZ Banking Group Ltd (1998) op. cit. at 514.
8 Merribee Pastoral Industries Pty Ltd v ANZ Banking Group Ltd op. cit. at 514.
9 Merribee Pastoral Industries Pty Ltd v ANZ Banking Group Ltd op. cit. at 515 citing Devenish v Jewel Food Stores Pty Ltd [1990] HCA 35; 94 ALR 664 at 666.
10 ibid at 26; Clack v Collins (No 1) [2010] FCA 513 (21 May 2010) at [8] per Jago J citing Moore v Macks [2007] FCA 509 at [20] per Mansfield J; Singh v Secretary, Department of Employment and Workplace Relations [2007] FCA 90 per Sundberg J; Skyring v Sweeney [1999] FCA 61 at [6] and Cowell v Taylor (1885) 31 Ch D 34 at 38 per Bowen LJ.
11 Merribee Pastoral Industries Pty Ltd v ANZ Banking Group Ltd op. cit. At 514.
12 Devenish v Jewel Food Stores Pty Ltd [1990] HCA 35; 94 ALR 664 at 666.
13 Merribee Pastoral Industries Pty Ltd v ANZ Banking Group Ltd op. cit. at 515 citing Webster v Lampard [1993] HCA 20; 112 ALR 174 at 175-176 and Devenish v Jewel Food Stores Pty Ltd [1990] HCA 35; 94 ALR 664 at 665 - 666.
14 Merribee Pastoral Industries Pty Ltd v ANZ Banking Group Ltd op. cit. at 515.
15 (U2004/1942) at [17].
16 Zhang v The Royal Australian Chemical Institute Inc. (No. 2) [2004] FCA 1626 (10 December 2004) per Finkelstein J; Hatchett v Bowater Tutt Industries (1991) 39 IR 31.
17 Nilsen v Loyal Orange Trust IRCA Decision No: 267/97.
18 Attorney-General v Wentworth (1988) 14 NSWLR 481 at 491.
19 Re Cameron (1988) 14 NSWLR 481.
20 Kanan v Australian Postal and Telecommunications Union (1992) 43 IR 277.
21 ibid at 284.
22 ibid at 284.
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