Industrial Law - costs - whether proceedings instituted "vexatiously or without reasonable cause"

Industrial Relations Act 1988, s.347

NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

On 16 April 1991 I delivered judgment dismissing the application for the imposition of a penalty under s.178 of the Industrial Relations Act 1988 ("the Act"). The respondent now seeks an order for the costs of the proceeding.

2. The proceeding is one to which s.347 of the Act applies. That section reads:

"347(1) A party to a proceeding (including an appeal) in a matter

arising under this Act shall not be ordered to pay costs incurred

by any other party to the proceeding unless the first-mentioned

party instituted the proceeding vexatiously or without reasonable

cause.

(2) In subsection (1) :

"costs" includes all legal and professional costs and

disbursements and expenses of witnesses."

This section replaced the now repealed provision in s.197A of the Conciliation and Arbitration Act 1904. In R. v. Moore; Ex Parte Federated Miscellaneous Workers' Union of Australia [1978] HCA 51; (1978) 140 CLR 470, at p 473, Gibbs J. said:

"In my opinion a party cannot be said to have commenced a

proceeding 'without reasonable cause', within the meaning of that

section, simply because his argument proves unsuccessful. In the

present case the argument presented on behalf of the prosecutor

was not unworthy of consideration and it found some support in the

two decisions of this Court to which I have referred. The fact

that those decisions have been distinguished, and that the

argument has failed, is no justification for ordering costs in the

face of the prohibition contained in s.197A."

In Heidt v. Chrysler Australia Ltd (1976) 26 FLR 257 at p 272, Northrop J. said:

"The policy of s.197A of the Act is clear. It is designed to free

parties from the risk of having to pay the costs of an opposing

party. At the same time the section provides a protection to

parties defending proceedings which have been instituted

vexatiously or without reasonable cause. This protection is in

the form of conferring a power in the court to order costs against

a party who, in substance, institutes proceedings which in other

jurisdictions may constitute an abuse of the process of a court."

After referring to these authorities a Full Court of this Court in Thompson and Ors v. Hodder and Ors (unreported decision 1 December 1989) observed at p 7:

"It is apparent from these authorities that an applicant who has

the benefit of the protection of s.347 will only rarely be ordered

to pay the costs of a proceeding in exceptional circumstances."

Counsel for the respondent contends that the findings of the Court which led to the dismissal of the application demonstrate that the proceeding was without foundation in fact, and that a proceeding brought without foundation in fact is brought vexatiously or without reasonable cause within the meaning of s.347. Reliance is placed on a single sentence, read in isolation from its context, from the judgment of Gray J. in Geneff v. Peterson (1986) 19 IR 40 at 89:

"The claim relying upon r.27(a) of the rules of the federal union

was baseless in fact, and must be regarded as having been

instituted vexatiously or without reasonable cause."

In my opinion this sentence does not support the proposition that every proceeding which is determined to have no foundation in fact is necessarily issued vexatiously or without reasonable cause.

3. The conclusion reached by Gray J. about the claim relating to r.27(a) in Geneff v. Peterson was one which depended on all the complex circumstances of the proceedings before the court. It will be noted, at p 85, that the claim was abandoned during the trial. The conclusion that the claim was baseless in fact did not depend on the resolution by the court of conflicting evidence. In such a case, although the decision of the court on the disputed question of fact may show that the proceeding was without foundation, it is not difficult to think of circumstances where it would be entirely reasonable, and a proper use of the process of the court, for the proceeding to be brought. A proceeding could properly be brought to resolve a dispute over an essential fact, or facts, on which the claim was based. This point is recognised by Northrop J. in Heidt v. Chrysler Australia Ltd at pp 274-275 in the following passage:

"In considering this matter the court must have regard to all the

material properly before it. The test is not subjective to the

party instituting the proceedings as at the time of the

institution of the proceedings. The conduct of the opposing party

prior to the institution of the proceedings may be relevant in

deciding whether the proceedings were instituted vexatiously or

without reasonable cause. The conduct of the opposing party both

prior and subsequent to the institution of proceedings may be

relevant to the discretion remaining in the court. It may be

difficult to satisfy the test where disputed questions of fact

arise and the proceedings eventually are dismissed because the

court finds facts adverse to the party instituting the

proceedings. Where the test is satisfied, having regard to the

general policy of the section, the court may, nevertheless, in the

exercise of its discretion, make no order as to costs."

4. Implicit in the respondent's contentions is a further proposition which is also contrary to the observations of Northrop J. The contentions assume that where it is held that a proceeding has been instituted vexatiously or without reasonable cause, an order for costs in the respondent's favour necessarily follows. This is not so. Section 347 imposes a threshold condition which must be met before the court is empowered to award costs, but once the condition is met, the further question remains for consideration, namely, whether in all the circumstances the party so instituting the proceeding ought to be ordered to pay costs. The court may in the exercise of its discretion, and having regard to the general policy of the Act, expressed in s.347, that parties will usually be freed from the traditional risk of an order for costs following the event, make no order as to costs.

5. In the present case the applicant alleged in her statement of claim unfair dismissals from her employment with the respondent on 12 July 1989 and on 3 November 1989. During the trial the allegation of a dismissal on 12 July 1989 was abandoned. In support of the claim that the dismissal on 3 November 1989 was unfair the applicant alleged:

* that the reasons given for her termination namely that her work

performance was unsatisfactory and that she was unable to get on

with other workers were false

* that two previous warnings regarding unsatisfactory work

* that the real reasons for her termination were that the other

workers would send her to Coventry if she were not dismissed, and

further because she was the only woman employed in the workshop,

and the only member of a union.

At trial the applicant led no evidence to support the allegations that her dismissal occurred because she was a woman and a union member. These allegations, and the allegation of a dismissal on 12 July 1989, may fairly be described as not only baseless in fact, but as made without any arguable justification in law or in fact.

6. However the other allegations concerned a chain of events which occurred in the workplace over a period of time, and about which it is clear that the applicant held the belief that she had been unfairly treated because her work was not unsatisfactory to the degree which warranted action against her. Upon the evidence led, the court concluded that the applicant's work was substandard, and the respondent's actions were justified. However that result depended on the court's acceptance of the respondent's witnesses and the rejection of parts of the applicant's evidence. It is to be noted that in rejecting the applicant's assessment of the quality of her work the court did not find that she did not genuinely hold the beliefs on matters of fact and opinion which she expressed in the witness box. The court did not find that the applicant was deliberately seeking to mislead. The court did not doubt the genuineness of her beliefs. It held, notwithstanding those beliefs, that the facts were otherwise than she understood them to be.

7. The respondent conceded in argument, correctly in my view, that ordinarily an applicant who genuinely holds a belief as to a state of fact, which, if correct, would support the claim which is made in the proceeding, is entitled to "a day in court" to test that belief without becoming liable to pay costs under s.347. However the respondent contends that in the unusual circumstances of this case the institution of the proceeding was vexatious or without reasonable cause. This is said to follow from the fact that immediately following the applicant's dismissal, the merits of her beliefs, and the opposing evidence of the respondent's main witness, were fully aired in a hearing in the Australian Industrial Relations Commission before a Commissioner who published reasons for concluding that the termination of the applicant's employment had not been harsh, unjust or unreasonable. In substance the respondent's argument is that the applicant should have accepted this decision, even though this Court later held that the decision was made without jurisdiction: Hatchett v. Bowater Tutt Industries (No. 1): Judgment delivered 26 October 1990. I have reached the conclusion that I should reject this argument, and hold that the proceeding was not instituted vexatiously or without reasonable cause. I have already noted the genuineness of the beliefs of the applicant. In Heidt v. Chrysler Australia Ltd Northrop J. at p 272 described s.347 as affording to a party defending proceedings to which the section relates as "a power in the court to order costs against a party who, in substance, institutes proceedings which in other jurisdictions may constitute an abuse of the process of a court". I do not think it can fairly be said that for the applicant to pursue her claim in a court of competent jurisdiction amounted to an abuse of the process of the court.

8. The test imposed by the expression "vexatiously or without reasonable cause" is similar to the one applied by a court on an application for the exercise of summary power to stay or strike out proceedings. See Heidt v. Chrysler Australia Ltd at 272-273 and Geneff v. Peterson at 87-88. Expressions used in that context to illustrate the test such as "frivolous", "so obviously untenable that it cannot possibly succeed", "manifestly groundless" and "bad beyond argument" are not apt to describe the proceeding instituted by the applicant.

9. I add, that if I had come to the opposite conclusion and held that the proceeding had been instituted vexatiously or without reasonable cause, I would have exercised my discretion so as to award to the respondent only one half party and party costs of the proceeding excluding the hearing of the notice of motion determined on 26 October 1990. I would have made this order as the applicant was refused costs on the notice of motion on the footing that the court was not empowered to make such an order. However if the occasion were now to arise to make an order for costs in relation to the proceeding I think it would be proper to bring into account the fact that the applicant had been required to argue a preliminary point unsuccessfully raised by the respondent on the notice of motion.