The Federal Circuit Court has ordered an unrepresented litigant pay $12,500 of his former employer’s legal costs, finding that although he did not run the case vexatiously, allegations unsupported by evidence rendered it “baseless and groundless”.
Mr Somerville claimed AFS Security 24/7 Pty Ltd (trading as Armidale Fire & Safety) (AFS) took adverse action against him in breach of section 340 of the Fair Work Act (the Act) by “unilaterally” dismissing him 36 hours after he alleged he was underpaid $4,360 between February and August 2016. AFS responded that the reason for the dismissal was a restructure.
Mr Somerville sought compensation of $19,863, including the $4,363 in alleged underpayments and $15,500 in lost income as a result of the dismissal. Judge Nicholls found in favour of AFS that Mr Somerville’s employment was terminated due to AFS’ restructure and rejected Mr Somerville’s inference that AFS were reluctant to address the matter of underpayment, noting AFS had acknowledged their underpayments when Mr Somerville approached them, and agreed to pay him for the additional hours.
Mr Somerville’s application was dismissed. AFS sought costs of $15,070, including $12,490 in professional fees and $2,580 in other disbursements including wages, travel expenses, meal expenses and accommodation costs of AFS’ solicitor, director and business manager.
The Courts discretion to award costs is qualified by section 570 of the Act: costs will only be awarded when proceedings are instituted vexatiously or without reasonable cause. AFS argued Mr Somerville commenced the proceedings vexatiously and without reasonable cause.
The Court made it clear the concepts “vexatious” and “without reasonable cause” are not synonymous and that its discretion should be exercised cautiously.
The onus was on AFS to satisfy the Court that the proceedings were initiated vexatiously. The term vexatious is narrowly construed, and the Court will consider whether the predominant purpose in instituting the proceeding was to harass or embarrass the other party or to gain a collateral advantage.
Mr Somerville claimed that at the time he instituted proceedings, he was of the genuine belief that his employment was terminated in retaliation for his having made a complaint about underpayment.
Mr Somerville stated the following informed his belief:
- The matter had been the subject of a conference before the FWC and the certificate that was issued “lent credence” to his claim;
- AFS did not follow any restructuring process as described under the applicable award or the Act, and did not provide evidence of any consultation;
- The Court made a finding that his employment was terminated “shortly after” he made his complaint, which suggested there was reasonable cause for institution of the proceedings.
The Court was satisfied Mr Somerville instituted the proceedings because he believed that it was the appropriate course to ask the Court to adjudicate on the issues arising from the events.
No reasonable cause for the proceedings
In considering if there was a reasonable cause to bring the application, it was not relevant that Mr Somerville’s application was unsuccessful. The relevant question was whether his application had a reasonable prospect of success at the time the proceedings were instituted.
Judge Nicholls stated that Mr Somerville, even if not legally represented, should as a layperson have known he would need to adduce evidence upon which to base his allegations. “A temporal coincidence, without more, is simply a coincidence. A distinction must be drawn between an applicant’s genuine belief, and supposition or speculation. A belief even if genuine, in the righteousness of the cause, is not sufficient, of itself, to argue that the institution of the proceedings was reasonable.”
Judge Nicholls concluded that due to the lack of an arguable evidentiary basis, Mr Somerville had no reasonable cause for instituting the proceedings.
Costs with caution
Judge Nicholls decided costs with some caution due to the potential to discourage parties from pursuing “in a complete and robust way” claims of contravention of the Act. Judge Nicholls noted Justice Mortimore in Ryan v Primesafe  FCA 8; (2015) 323 ALR 107 who said the possibility of costs should not “loom so large in the mind of the potential applicants that those with genuine grievance and an arguable evidentiary basis, are “put off” from commencing and continuing proceedings”.
Judge Nicholls ordered Mr Somerville to pay the costs of the professional fees only, as AFS had not made any attempt to explain how the claimed disbursements constituted party/party costs.
Employers, and their lawyers, should carefully consider claims being brought under the Act to determine whether they may be able to mount an argument that the claim is vexatious or brought without reasonable cause.
The Court will order costs against an applicant in certain circumstances, even if they are unrepresented.
Employers should also consider cautioning applicants regarding the risks of adverse cost orders; in light of this decision, such a caution is likely to hold even greater weight.