Getting costs in Fair Work Act proceedings requires careful planning

Each party to a proceeding under the jurisdiction of the Fair Work Act 2009 (Cth) (FW Act) is generally expected to shoulder their own legal fees. This detracts from the norm in other jurisdictions, where a successful party is often able to recover at least some of its legal fees upon the conclusion of the trial.

This is because the FW Act grants very limited power to the Courts to make costs orders, with one example being section 570 of the FW Act. Often cited in legal correspondence and settlement letters, section 570 of the FW Act essentially states that a party may be ordered to pay costs if the court is satisfied that the party instituted proceedings vexatiously or without reasonable cause, or if a party acted unreasonably which caused the other party to incur costs.

A pre-trial offer is a common litigation tool, but under the FW Act, there are no guarantees that making such an offer secures costs for the party.

But what if the party making a reasonable offer pre-trial obtains a favourable outcome? While there is plenty of caselaw considering this question, the recent decision of the Federal Court of Australia in Fair Work Ombudsman v Construction, Forestry and Maritime Employees Union (Kwinana Bulk Jetty Case) (Costs) provides some valuable lessons on what employers should consider when making settlement offers and applying to the court for costs.

In that case, the Construction, Forestry and Maritime Employees Union (CFMEU) was taken to Court by the Fair Work Ombudsman (FWO) over alleged breaches of the FW Act. Ultimately, the Court concluded that CFMEU had not breached the FW Act. After judgment, the CFMEU applied to the Court for an order that the FWO pay the CFMEU’s legal costs pursuant to section 570(2)(b) of the FW Act, on the basis that the FWO had refused a pre-trial offer by the CFMEU and that refusal was unreasonable. The offer in question was simple; the parties should walk away with each bearing their own costs.

The CFMEU made multiple submissions as to why the FWO should be liable to pay its costs. The matter was heard on the papers (i.e. without a hearing). Reinforcing the claim above that the threshold for such orders is high, Dowling J dismissed the application.

First, Dowling J observed that the CFMEU had given FWO only three days to consider the offer. This, `, was a consideration that weighed in favour of the FWO’s decision to refuse the offer as not unreasonable.

Second, Dowling J noted that the “basis on which the offer was made was not put to the [FWO].” In other words, it did not identify whether the CFMEU’s offer was an ‘offer of compromise’ made pursuant to the Court’s rules, or whether it was a Calderbank offer. Dowling J also observed that the CFMEU’s offer did not expand on the perceived weaknesses of the FWO’s case, though he made some allowance to supplement that ‘gap’ with the CFMEU’s previously filed submissions.

Third, Dowling J disagreed with the CFMEU’s submission that the FWO’s case was doomed. While the FWO was ultimately unsuccessful, Dowling J noted that he had given “detailed consideration to each of the [FWO’s] arguments as to the Union’s liability” and that he “did not come to those conclusions lightly”, suggesting that the FWO’s case was not so obviously ‘doomed’ from the start. 

Finally, Dowling J disagreed with the CFMEU’s submission that the FWO’s obligations as a ‘model litigant’ meant that it should have approached the CFMEU’s offer differently, or that such an obligation altered the Court’s approach to assessing costs under section 570 of the FW Act.

Key implications for employers

What lessons learned from this judgment? We extrapolate the following key lessons from the judgment:

• employers should not treat reasonable settlement offers as a ‘guaranteed’ avenue for seeking costs, no matter how weak the employee’s case might be
• employers should get into the habit of explaining why their offer is reasonable. This requires a deeper analysis in offer letters about the weaknesses of the other side’s case. Dowling J’s observations reinforce the notion that it is not enough to only claim that the other party’s case is weak and that more is required to bring that weakness to the forefront of the offeree’s mind when considering the reasonableness of the offer
• employers should analyse the decision of the court in more detail before expending further legal fees in making costs applications. Employers should ask whether the judgment reinforces the submission that the case was ‘doomed to fail’ from the start 
• employers should consider how much time to give before the offer expires. The time given to consider an offer should be proportional to the complexity of the case. Sometimes, giving a shorter timeframe may put more pressure on the offeree, but a subsequent refusal might not render it ‘unreasonable’.

Costs orders are difficult to obtain in the FW Act jurisdiction. Employers that find themselves embroiled in litigation should always seek legal advice when considering costs orders in this jurisdiction.

If you have any questions regarding pre-trial offers, please contact us here.

Disclaimer
The information in this article is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this article is accurate at the date it is received or that it will continue to be accurate in the future.

Published by:

Charles Power

Dogu Yesildag

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