What happened
Brendan Ryan had been employed by Primesafe, a Victorian statutory agency, as its Operations Manager. In early 2014 the agency underwent a restructure. Ryan was told his position would become redundant. He was dismissed on 18 March 2014 with five weeks’ pay in lieu of notice. He believed the process had been flawed: insufficient consultation, no genuine attempt at redeployment, and that the decisions were taken for prohibited reasons including his exercise of workplace rights (personal leave and Fair Work Commission proceedings) and his age.
Ryan first lodged a general protections application in the Fair Work Commission against Primesafe and its CEO, Brendan Tatham. A second application named Derek Humphery-Smith, a partner of Lander & Rogers who had for many years acted as Primesafe’s external lawyer, as third respondent. Humphery-Smith had attended meetings, given advice on the redundancy process and the termination, and filed a notice of representative commencing to act. Ryan’s solicitor, Alan McDonald of McDonald Murholme, formed the view on instructions that Humphery-Smith’s involvement made him liable as an accessory under s 550 of the Fair Work Act 2009 (Cth).
Proceedings were issued in the Federal Court on 28 May 2014. The statement of claim (signed and certified by McDonald under r 16.01 of the Federal Court Rules 2011 (Cth)) alleged that Humphery-Smith had provided both legal and “management” advice, had actual knowledge of the essential facts, was knowingly concerned, and was an intentional participant in the alleged contraventions of ss 340, 351 and 352. No material facts were pleaded that distinguished Humphery-Smith’s conduct from the ordinary role of an external employment lawyer.
Hall & Wilcox (instructed by Humphery-Smith after he ceased acting for Primesafe) immediately sought further and better particulars. None were provided. Settlement negotiations with Primesafe and Tatham succeeded in early July 2014 on the basis of a substantial payment to Ryan. Ryan initially refused to discontinue against Humphery-Smith, insisting his claim be settled separately. A directions hearing before Bromberg J on 16 July 2014 resulted in an order that particulars be filed by 30 July 2014. Instead of complying, Ryan filed notices of discontinuance against all three respondents on that date. The discontinuance against Humphery-Smith was unilateral.
Humphery-Smith then applied for costs against Ryan, or alternatively against McDonald personally. The application was heard on 6 October 2014. Mortimer J delivered judgment on 21 January 2015 ordering that McDonald personally bear Humphery-Smith’s costs up to 30 July 2014 (excluding Fair Work Commission costs) on a party-and-party basis, together with the disbursements of the costs application including counsel’s fees. The judgment runs to 117 paragraphs and contains a detailed examination of the correspondence, the pleadings, the affidavits filed on the costs application, and the interaction between the Fair Work Act costs regime and the Federal Court’s case-management provisions.
Why the court decided this way
Mortimer J first held that s 570 of the Fair Work Act conditioned the general costs discretion in s 43 of the Federal Court of Australia Act. She accepted that the constraints applied to the whole proceeding even though Australian Consumer Law claims were also pleaded, following the broader wording analysis of White J in Stanley v Service to Youth Council Inc (No 3) [2014] FCA 716 rather than the narrower approach in El-Debel.
Her Honour was satisfied both limbs of s 570(2) were met. The proceeding against Humphery-Smith had been instituted “without reasonable cause” because the statement of claim contained no material facts capable of taking his conduct outside the ordinary role of a legal adviser. At [81] Mortimer J stated it was “difficult to see how a lawyer, acting in accordance with her or his professional obligations, could be said to be ‘involved’ in a contravention” unless the lawyer stepped outside that role or breached ethical duties. No such conduct was alleged. The certification under r 16.01 that the pleading had a proper basis was therefore unjustified.
The claim was also maintained by unreasonable acts and omissions. Despite early, clear warnings in correspondence from Lander & Rogers dated 11 April 2014, no particulars were ever supplied. After settlement with the principal respondents on 10 July 2014, Ryan (on McDonald’s advice) insisted on keeping Humphery-Smith in the proceeding. A contested directions hearing was required, an order for particulars was made and not obeyed, and a unilateral discontinuance was filed. These steps caused Humphery-Smith to incur separate legal representation costs that would otherwise have been unnecessary. Mortimer J found at [85] that “all this conduct was unreasonable and caused Mr Humphery-Smith to absent himself from his position as legal representative for Primesafe and retain independent lawyers”.
On the question of personal liability, Mortimer J held that the power in s 43(3)(f) was available once a party costs order was warranted. She drew on White Industries (Qld) Pty Ltd v Flower & Hart, Modra v Victoria and Mitry Lawyers v Barnden to emphasise that something more than an ultimately unsuccessful case is required, but that “something more” was present. McDonald had failed to offer any evidentiary foundation for the allegations despite the opportunity on the costs application. His correspondence was at times inflammatory and contained legally incorrect assertions (for example that Humphery-Smith retained exposure to penalties after the principal settlement). Mortimer J concluded at [105] that the forensic choices were McDonald’s, not those of an obstinate client acting against advice. The applicant’s own affidavit showed he had relied on his solicitor’s professional judgment that Humphery-Smith should be joined “to identify the decision maker”.
The overarching purpose provisions in ss 37M and 37N were decisive. The litigation against Humphery-Smith had not been conducted “as quickly, inexpensively and efficiently as possible”. Instead it generated disproportionate costs for a maximum individual penalty exposure of approximately $10,000. McDonald’s conduct was therefore unreasonable in the sense required by Mijac Investments Pty Ltd v Graham and justified a personal costs order. Indemnity costs were refused because, while the claim lacked foundation, the evidence did not rise to the level of wilful disregard or ulterior purpose required by Colgate-Palmolive and Ugly Tribe.
Before and after state of the law
Before Ryan v Primesafe the law was clear that s 570 (and its predecessor s 824 of the Workplace Relations Act) set a high threshold, to be applied cautiously so as not to chill genuine claims: Saxena v PPF Asset Management Ltd [2011] FCA 395; Australasian Meat Industry Employees’ Union v Fair Work Australia (No 2). It was equally settled that solicitors could be ordered to pay costs personally for serious derelictions, but courts were wary of doing so merely because a case was weak: Ridehalgh v Horsefield principles adopted in White Industries and Ashby v Slipper.
What Ryan added was an explicit reconciliation of the access-to-justice policy in s 570 with the case-management obligations in ss 37M and 37N. Mortimer J held at [66] that s 570 “is not a licence to parties to ignore the requirements of s 37M … nor the Court’s power to order costs against parties who fail to comply with their obligations under s 37N”. The decision therefore tightened the practical operation of s 570 in circumstances where a solicitor has certified a pleading that lacks any apparent factual foundation, particularly where the allegation is grave (naming another practitioner as an accessory).
The judgment also clarified the limits of s 550 accessorial liability in the employment context. While Yorke v Lucas and Construction, Forestry, Mining and Energy Union v McCorkell (No 2) were cited, Mortimer J emphasised at [84] that authorities dealing with corporate accessories “cannot simply be transposed” to lawyers acting in their professional capacities. After Ryan it is clear that merely advising on a termination process, attending meetings or drafting correspondence will not, without more, expose a lawyer to accessory liability.
Subsequent legislative and rule changes have not altered the core statutory provisions, but the decision has reinforced the Court’s willingness to use personal costs orders as a case-management tool even in the Fair Work jurisdiction.
Key passages with plain-English translation
Paragraph [81]: “It is difficult to see how a lawyer, acting in accordance with her or his professional obligations, could be said to be ‘involved’ in a contravention of the general protections provisions of the Fair Work Act.”
Translation: You cannot sue a company’s lawyer for helping the company break the law just because the lawyer gave the advice the company relied on. Something extra—stepping outside the lawyer’s proper role or knowingly helping an illegal plan—is required.
Paragraph [67]: “The power in s 43(3)(f) depends … on the Court having formed the view that there should be an order that one party … pay the costs of another … The power in s 43(3)(f) then enables the Court … to order that the party’s lawyer bear those costs personally.”
Translation: The judge must first decide that someone (the client) should pay costs. Only then can the judge shift that bill onto the solicitor if the solicitor is the one who behaved unreasonably.
Paragraph [95]: “The problem lies in the original allegation, which appears to have been made without any factual foundation … To make such allegations against another legal practitioner without any existing basis is the antithesis of the appropriate approach.”
Translation: The mistake happened at the very beginning when the claim was drafted. You cannot throw serious accusations at another lawyer and then hope discovery or cross-examination will turn up something later. You must have a proper basis before you start.
Paragraph [104]: “Acting on behalf of a client … in a way which is so clearly inconsistent with those obligations [under s 37N(2)] is unreasonable, and capable of justifying an order under s 43(3)(f).”
Translation: Specialist Fair Work solicitors know they must help the Court resolve disputes efficiently. If they instead run a case that wastes everyone’s time and money, the Court can make them pay personally.
What fact patterns trigger this precedent
Ryan v Primesafe is likely to be invoked in any Fair Work proceeding where:
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A lawyer, HR consultant or external adviser is joined as an accessory under s 550 on the basis of advice or attendance at meetings without pleading specific facts showing the adviser stepped outside their ordinary professional role or had the requisite knowledge of an unlawful motive.
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A solicitor certifies a statement of claim under r 16.01 yet the pleading is expressed in generalised, conclusory terms and no particulars are supplied despite requests.
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A claim is maintained after settlement with the principal respondent in circumstances where the settlement deed contains a release that logically prevents proof of the principal contravention.
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A party refuses to provide ordered particulars and instead discontinues unilaterally, having put the other side to the expense of separate representation and a contested directions hearing.
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Correspondence or submissions contain extravagant claims of confidence in the case coupled with inflammatory allegations against the opposing legal representatives.
The case is particularly relevant where the maximum penalty exposure is modest relative to the legal costs incurred, highlighting lack of proportionality.
How later courts have treated it
Ryan v Primesafe has been cited with approval in subsequent Federal Court and Federal Circuit Court decisions concerning personal costs orders and the interaction of s 570 with ss 37M and 37N. In Fair Work Ombudsman v Devine Marine Group Pty Ltd [2015] FCA 370, the Court referred to Mortimer J’s analysis of the limits of accessorial liability for professional advisers. Several costs decisions have applied the reconciliation of s 570 with the overarching purpose: see for example Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (No 2) [2017] FCA 87 at [22] (citing [66] of Ryan for the proposition that s 570 is not a licence for unreasonable conduct).
The decision has been distinguished where a proper factual foundation for accessory liability existed or where the solicitor could point to specific client instructions given against advice. In Maritime Union of Australia v Minister for Immigration (costs judgment), a personal costs application was refused because, unlike McDonald, the solicitor had placed detailed evidence before the Court explaining the basis on which instructions were accepted.
Overall, later courts treat Ryan as setting a high but not impossible bar for personal costs orders against solicitors in the Fair Work jurisdiction. It is routinely cited in written submissions on costs applications following discontinuance or summary dismissal.
Still-open questions
Several questions remain unresolved after Ryan v Primesafe. First, the precise boundaries of “management advice” versus “legal advice” for s 550 purposes were left unexplored because the pleadings did not clearly differentiate them. Mortimer J noted at [103] that the distinction “may, in theory, be a material one” but that no factual foundation had been laid. Future cases may test whether a lawyer wearing two hats (adviser and de facto decision-maker) can cross the line.
Second, the weight to be given to a solicitor’s offer to indemnify the client remains unsettled. Mortimer J rejected the proposition that such an indemnity could influence the identity of the costs respondent, but the point may be revisited where the indemnity is given at the outset rather than shortly before a costs hearing.
Third, the interaction between s 570 and the consumer law claims pleaded in the same proceeding was left open. Although Mortimer J preferred White J’s broader reading in Stanley, she ultimately decided the point was moot on the facts. A fully contested case in which discrete costs can be attributed to non-Fair Work causes of action may yet require appellate resolution.
Finally, the extent to which Ryan applies to in-house counsel or to lawyers acting for applicants rather than respondents is untested. The policy reasons for protecting external advisers giving orthodox termination advice may not apply with equal force in every context. These open questions ensure that Ryan v Primesafe will continue to generate satellite litigation on costs.