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[59]
[2021] FWCFB 4970
General information, not legal advice.
Fair Work Commission (Full Bench)
2021-08-12
Original judgment source is linked above.
s.604 - Appeal of decisions
[1] On 28 February 2020, we issued a decision[1] (first appeal decision) in which we determined an appeal filed by Mr Scott Tracey against a decision[2] of Deputy President Binet issued on 2 September 2019 in which she dismissed Mr Tracey's application for an unfair dismissal remedy against BP Refinery (Kwinana) Pty Ltd (BP). In the first appeal decision, we granted permission to appeal, upheld the appeal and quashed the decision of the Deputy President. On a rehearing of Mr Tracey's unfair dismissal application, we found that this dismissal was unfair, ordered that BP reinstate Mr Tracey and maintain the continuity of his employment and the period of his continuous service upon reinstatement taking effect, and directed that the parties file any evidence and submissions concerning the making of an order to compensate Mr Tracey for income lost as a result of his dismissal. An application for judicial review of the first decision was dismissed by the Federal Court on 22 May 2020.[3] On 10 August 2020, we issued a further decision[4] concerning the amount of compensation to be awarded to Mr Tracey (second appeal decision) and ordered, pursuant to s 391(3) of the Fair Work Act 2009 (FW Act) that BP pay Mr Tracey the amount of $177,324.93 on account of lost salary and bonus (less applicable taxation) as well as an additional amount of $24,069.99 on account of lost superannuation.[5]
[2] On 20 August 2020, Mr Tracey filed a Form F6 - Application for costs pursuant to ss 400A, 401 and 611 of the FW Act in respect of the Deputy President's decision, the first appeal decision and the second appeal decision. Mr Tracey seeks costs against both BP and their legal representative in the proceedings, Corrs Chambers Westgarth (Corrs).
[3] On 21 August 2020, Mr Tracey was directed to file any evidence and submissions in support of his costs application, including an itemised schedule of legal costs, by 4 September 2020. On 25 August 2020, Mr Tracey filed an application for an order for the production of documents in respect of the costs application seeking that BP and Corrs produce various and extensive materials, records and email correspondence relevant to BP's internal investigations and management prior to Mr Tracey's dismissal, his employment classification and the proceedings before the Commission and the Federal Court. He requested that he not be required to file his evidence and submissions until this application had been dealt with. On 12 February 2021, we declined to make the orders for production sought, determining that the documents had no apparent relevance to the costs application, and directed Mr Tracey to proceed to file his submissions and evidence in support of the costs application by 19 February 2021. Mr Tracey was, at his request, subsequently given an extension until 26 February 2021 to file his material, but he did not do so until 3 March 2021.
[4] In this decision, we determine Mr Tracey's costs application on the basis of the evidence and written submissions filed by him.
[5] The facts upon which Mr Tracey's unfair dismissal application proceeded are set out in paragraphs [2]-[10] of the first appeal decision. In short summary, Mr Tracey was involved in the making and distribution of a video clip (using a well-known excerpt from the German-language film Downfall concerning the final days of the Nazi regime and adding subtitles in English) which satirised the conduct of BP during fraught negotiations for a new enterprise agreement. The two grounds upon which Mr Tracey was dismissed were as follows:
(1) "You created, made available, shared and/or distributed an offensive and inappropriate video which purportedly depicted BP representatives involved in the current Operations and Laboratory Agreement negotiations as Nazis."
(2) "You inappropriately used BP computers, logins and/or networks to create, access, share and/or distribute the video."
[6] At first instance, Deputy President Binet accepted that there was a valid reason for the dismissal, that the video was offensive and did depict BP's enterprise bargaining representatives as Nazis, and that the dismissal was not unfair. In the first appeal decision, we determined that the video could not, objectively speaking, be characterised as "offensive and inappropriate" on the basis that it "depicted BP representatives involved in the ... negotiations as Nazis" because, first, the video compared the position of the BP negotiators to the position of Hitler in his bunker realising his defeat was imminent rather than comparing the negotiators directly to Hitler and Nazis and, second, the popular use of the Downfall clip as a meme had culturally disassociated it from the historical events being portrayed.
[7] Mr Tracey's costs application is made pursuant to ss 400A, 401 and 611 of the FW Act. Section 400A provides:
(1) The FWC may make an order for costs against a party to a matter arising under this Part (the first party) for costs incurred by the other party to the matter if the FWC is satisfied that the first party caused those costs to be incurred because of an unreasonable act or omission of the first party in connection with the conduct or continuation of the matter.
(2) The FWC may make an order under subsection (1) only if the other party to the matter has applied for it in accordance with section 402.
(3) This section does not limit the FWC's power to order costs under section 611.
[8] The "Part" referred to in s 400A(1) is Pt 3-2, Unfair Dismissal. Section 401 provides:
401 Costs orders against lawyers and paid agents
(a) an application for an unfair dismissal remedy has been made under section 394; and
(b) a person who is a party to the matter has engaged a lawyer or paid agent (the representative) to represent the person in the matter; and
(c) under section 596, the person is required to seek the FWC's permission to be represented by the representative.
(1A) The FWC may make an order for costs against the representative for costs incurred by the other party to the matter if the FWC is satisfied that the representative caused those costs to be incurred because:
(a) the representative encouraged the person to start, continue or respond to the matter and it should have been reasonably apparent that the person had no reasonable prospect of success in the matter; or
(b) of an unreasonable act or omission of the representative in connection with the conduct or continuation of the matter.
(2) The FWC may make an order under this section only if the other party to the matter has applied for it in accordance with section 402.
(3) This section does not limit the FWC's power to order costs under section 611.
(1) A person must bear the person's own costs in relation to a matter before the FWC.
(2) However, the FWC may order a person (the first person) to bear some or all of the costs of another person in relation to an application to the FWC if:
(a) the FWC is satisfied that the first person made the application, or the first person responded to the application, vexatiously or without reasonable cause; or
(b) the FWC is satisfied that it should have been reasonably apparent to the first person that the first person's application, or the first person's response to the application, had no reasonable prospect of success.
Note: The FWC can also order costs under sections 376, 400A, 401 and 780.
(3) A person to whom an order for costs applies must not contravene a term of the order.
Note: This subsection is a civil remedy provision (see Part 4-1).
[10] The basis upon which costs are sought by Mr Tracey against BP are summarised as follows:
Mr Tracey seeks indemnity costs from 1 February 2019 (the date his unfair dismissal application was filed) on the grounds that BP's response to the application was vexatious, made without reasonable cause or that it should have been reasonably apparent that the application had no reasonable prospect of success pursuant to s 611(2) of the FW Act;
alternatively, Mr Tracey seeks an order for indemnity costs against BP from 15 May 2019 (the date BP rejected his settlement offer) as it should have been reasonably apparent to BP that their response to Mr Tracey's application had no reasonable prospect of success; and
in addition or in the alternative to indemnity costs, Mr Tracey seeks an order for party-party costs pursuant to s 400A of the FW Act in that BP caused Mr Tracey to incur needless costs and "monopolised his representative's time" on three occasions between 1 February 2019 and 15 May 2019.
[11] The basis upon which costs are sought against Corrs are:
Mr Tracey seeks indemnity costs against Corrs from 1 February 2019 (the date his unfair dismissal application was filed) on the same grounds upon which indemnity costs are sought against BP. Additionally, Mr Tracey submitted that Corrs has a fiduciary duty to inform BP to cease responding to the application or acting for them if that advice was not accepted by BP;
alternatively, Mr Tracey seeks an order for indemnity costs against Corrs from 15 May 2019 (the date BP rejected his settlement offer); and
in addition or in the alternative to indemnity costs, Mr Tracey seeks an order for party to party costs against Corrs in respect of incurring unreasonable costs and monopolising his representative's time on four occasions between 1 February 2019 and 22 May 2019.
[12] The indemnity costs sought by Mr Tracey in itemised form are:
(1) Total indemnity costs from 1 February 2019 until filing his submissions as to costs - $52,118.23; or
(2) Partial indemnity costs from when BP rejected his settlement offer until filing his submissions as to costs - $11,102.93.
[13] Furthermore, or alternatively, the party-party costs sought by Mr Tracey in itemised form are as follows:
(d) Facebook Supplementary Facts in Agreement - $502.70
(e) Written Assurance for Applicant's Witnesses - $227.70
(g) Requirement to Make Closing Submissions - AWU Delegates - $255.20
(h) Requirement to Make Closing Submissions - Confidentiality - $255.20
[14] Mr Tracey filed extensive submissions in support of his costs application. In relation to the claimed order for indemnity costs against BP from 1 February 2019, Mr Tracey submitted in summary that:
BP's handling of the unfair dismissal application should be considered vexatious under s 611(2) of the FW Act in that BP's response was motivated by "personal reasons" including feelings of personal offence and embarrassment at the prospect of reinstating Mr Tracey, BP sought to obtain a collateral advantage over the remaining workforce "in a time of tense industrial negotiations", BP had attempted to continually block Mr Tracey's reinstatement, BP had selectively dealt with workplace disciplinary matters, and BP and its legal representatives understood that if the video was found not to be offensive then its case would fail.
BP was, or at least should have been aware, that their response to Mr Tracey's application was without reasonable cause and had no reasonable prospect of success under s 611(2) because it was "completely misconceived" having regard to the findings in the first appeal decision. BP had failed to understand the difference between subjective and objective offensiveness, its managers had failed to discuss the merits of whether the video was offensive or investigated whether it was objectively offensive prior to the dismissal, BP had advanced misconceived submissions during the appeal, BP and its managers held a negative view of Mr Tracey because he held a contrary (and correct) view about the proper characterisation of the video, and BP had inconsistently applied its own Code of Conduct.
BP's case should be considered completely misconceived in that the reasonable person or viewer would understand the video to be satirising BP's conduct in the enterprise agreement bargaining process and that BP's position that the video was objectively offensive was a mischaracterisation borne out of the subjective testimony of various managers at BP.
BP was guilty of delinquent action in producing false and fabricated evidence on multiple occasions.
BP's case should be considered manifestly untenable or groundless, or so lacking in merit or substance as to not be reasonably arguable, in that BP was aware of the "memetic context" of the video and that it was not objectively offensive under common law, that the impartiality of internal investigations at BP was "infected" by the opinions of various staff at BP, at the hearing BP was unable to provide any evidence or expert witnesses to support the proposition that the video was offensive, BP relied entirely on the subjective testimony of their senior staff who felt they were being targeted by the video, BP relied on three irrelevant case authorities, did not properly investigate if the video could be considered objectively offensive but rather took that as the starting point, and BP refused to discuss or consider any alternative point of view. Further, prior to the dismissal, Mr Tracey had advised BP that he had obtained legal advice indicating that BP was unlikely to win an unfair dismissal case if it went to the Commission.
[15] Mr Tracey submitted in the alternative that an order for partial indemnity costs against BP should be made from 15 May 2019 (the date BP rejected Mr Tracey's settlement offer). It was submitted that BP's failure to agree to the terms of the offer or make a counteroffer should be considered an unreasonable act and/or delinquent action as it should have been reasonably apparent to BP that any response to Mr Tracey's unfair dismissal application had no reasonable prospect of success. By the completion of the unfair dismissal hearing, when the offer was made, it should have been reasonably apparent to BP that its response to Mr Tracey's application had no reasonable prospects of success given that it had failed to present any evidence that the video was objectively offensive and had instead relied on three incorrect authorities and the subjective testimony of senior management who had a vested interest in the investigation and hearing outcome, had failed to provide any evidence from staff who felt they were targeted by the video, serious doubt had been cast on the credibility of one of BP's witnesses, and BP's counsel had advanced a submission concerning the "Downfall" meme which was misconceived. Further, BP's failure to make a counter-offer was delinquent and unreasonable, went beyond "hard bargaining" and involved a wilful disregard of known facts and imprudence.
[16] It was further submitted that in addition or in the alternative to indemnity costs, an order for party-party costs should be made against BP in relation to items (a), (b), (c), (e) and (f) as specified above in paragraph [13]. Mr Tracey submitted that between 1 February 2019 and 15 May 2019, BP caused Mr Tracey to incur needless legal costs and monopolised his representative's time in forcing him to file an application for an order to produce a copy of the investigation report, filing applications for orders to produce information already in their possession and refusing to provide Mr Tracey's witnesses with assurances that they would not face disciplinary action for acting as witnesses in the proceedings until this was requested by Mr Tracey's representative.
[17] In relation to indemnity costs sought against Corrs from 1 February 2019, Mr Tracey submitted that, as legal practitioners for BP, Corrs owed a fiduciary duty to both the Commission and BP and that in these circumstances it should have advised BP to cease responding to Mr Tracey's unfair dismissal application. As highly trained professionals, it was submitted, Corrs must have or ought to have known that BP's case was made vexatiously, without reasonable cause and that it was reasonably apparent that their response had no reasonable prospect of success. Alternatively, or in addition to any such order, Mr Tracey seeks an order for indemnity costs from 15 May 2019, the date BP rejected his settlement offer and, further or alternatively, an order for party-party costs against Corrs in relation to items (a), (b), (c), (d), (g) and (h) specified in paragraph [13] above.
[18] Mr Tracey also filed a lengthy witness statement made by himself in conjunction with his submissions. This witness statement describes in some detail the entire history of Mr Tracey's matter, including the investigation process and termination of employment meeting which preceded Mr Tracey's dismissal by BP, the conciliation conference which followed Mr Tracey filing his unfair dismissal application, various matters which occurred during the litigation which Mr Tracey says caused him to incur costs, a post-hearing settlement offer made by him, and various events which followed Mr Tracey's reinstatement. Much of this material appears to us to lacking in relevance to Mr Tracey's costs application. The two matters of most immediate pertinence in the statement are:
(1) The legal professional costs incurred by Mr Tracey all related to the first instance proceedings before Deputy President Binet. In the proceedings before us and in the Federal Court, legal representation was arranged by Mr Tracey's union, the AWU.
(2) The settlement offer referred to in Mr Tracey's costs application was made after the completion of the hearing before Deputy President Binet on 14 May 2019. The offer was, in summary, that BP reinstate Mr Tracey with maintenance of continuity of employment, pay him four months' pay as compensation for lost income, and enter into a deed of settlement in standard terms. The offer was rejected by BP the following day and no counter-offer was made.
[19] The principles applicable to the construction and application of s 611 are well-established. In Hansen v Calvary Health Care Adelaide Limited[6] the Full Bench said in relation to s 611 generally:
"[15] It is trite to observe that the statutory and policy imperative underpinning a costs application under the Act, is that a person in a matter before the Commission must bear their own costs. So much is plainly obvious by the precise and unambiguous language of s 611(1).
[16] However, the statutory scheme sets out the relatively circumscribed circumstances in which an order for costs might be found by the Commission to be appropriate in a particular case. It includes the exercise of discretionary power where the Commission is satisfied that one, or more of the circumstances set out in s 611(2), has been established. If such circumstances are established, the Commission, in the broad exercise of its discretion, may make an order that a person/s bear some, or all of the costs of another person, in relation to the application, including on an indemnity basis, or decline to make any order at all."
[20] In Church v Eastern Health t/as Eastern Health Great Health and Wellbeing,[7] the Full Bench stated the following propositions, in summary, concerning s 611(2)(a):
An application is made vexatiously when the predominant motive or purpose of the applicant is to harass or embarrass the other party or to gain a collateral advantage.
An application is not made without reasonable cause simply because the application did not succeed.
Whether an application is made without reasonable cause may be tested by asking, on the facts apparent to the applicant at the time the application was made, whether 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 characterise the application as having been made without reasonable cause.
In relation to an appeal, the question becomes whether the appeal has no substantial prospect of success. The prospect of success must be evaluated in the light of the facts of the case, the judgment appealed from and the points taken in the notice of appeal. If there is a not insubstantial prospect of the appeal achieving some success, it cannot fairly be described as having been made without reasonable cause.
An application will have been made without reasonable cause if it can be characterised as so obviously untenable that it cannot possibly succeed, is manifestly groundless or discloses a case where the tribunal is satisfied it cannot succeed.
[21] In relation to s 611(2)(b), the relevant principles were summarised by the Full Bench in Baker v Salva Resources Pty Ltd[8] as follows (footnotes omitted):
"[10] The concepts within s.611(2)(b) 'should have been reasonably apparent' and 'had no reasonable prospect of success' have been well traversed:
[22] In Baxter Healthcare Pty Ltd v Mr Andrew Portelli,[9] the Full Bench said in relation to s 400A:
"[50] Item 4 of the Fair Work Amendment Bill 2012 inserted a new section 400A into the FW Act to enable the Fair Work Commission to order costs against a party to an unfair dismissal matter (the first party) if it is satisfied that the first party caused the other party to the matter to incur costs by an unreasonable act or omission in connection with the conduct or continuation of the matter. The explanatory memorandum provides as follows:
[23] In Roy Morgan Research v Baker,[10] the Full Bench treated as relevant and applicable to s 400A decisions of Full Benches of the Australian Industrial Relations Commission (AIRC) in relation to s 170CJ(2) and (3) of the Workplace Relations Act 1996. Section 170CJ(2) conferred a discretion on the AIRC to award costs in unfair dismissal matters where a party acted unreasonably in failing to discontinue a proceeding or to agree to terms of settlement that could lead to the discontinuance of an application. Section 170CJ(3) authorised the award of costs in circumstances essentially the same as in the current s 400A(1). The Full Bench referred to three AIRC decisions in this respect.[11] In Goffet v Recruitment National Pty Ltd[12] the AIRC Full Bench said an intentional act may be an unreasonable act, but if unintentional it may nonetheless constitute an unreasonable omission.[13] In Brazilian Butterfly Pty Ltd v Charalambous,[14] the AIRC Full Bench said discussed what constitutes a reasonable response to a settlement offer as follows:
"[43] A reasonable person, who is a party to proceedings pursuant to s.170CE, when confronted with an offer of settlement from the other party, will determine whether, and if so, how to respond to such an offer after considering all the circumstances of the case, including:
[44] This list is not intended to be exhaustive. All of the circumstances are relevant and, as is made clear in the joint judgment in Blagojevch, there is no basis in the Act for giving primacy to any particular factor in every case."
[24] In Stagno v Frews Wholesale Meats[15] the AIRC Full Bench endorsed the proposition that a party to an unfair dismissal proceeding in which arbitration has commenced has acted unreasonably in failing to discontinue the matter if when, at the relevant time, upon the facts apparent to the applicant there was not substantial prospect of success.
[25] We will deal with Mr Tracey's costs application against BP insofar as it relies on s 611 first. We are not satisfied that BP responded to Mr Tracey's application vexatiously or without reasonable cause, or that its response to the application had no reasonable prospect of success.
[26] BP was successful at first instance in establishing the factual basis for the above grounds of dismissal, in that Deputy President found that Mr Tracey had been responsible, at least in significant part, for the production of the video and had distributed it to other employees including while he was at work using BP's computer system. Mr Tracey's appeal did not challenge any findings of fact made by the Deputy President. In this respect therefore, BP had a case which was well-founded and had strong prospects of success. The issue upon which BP ultimately failed was its characterisation of the video as being offensive on the basis that it compared BP's enterprise bargaining negotiators to Nazis. However, it cannot be said that the position taken by BP to effect the dismissal and to defend the unfair dismissal proceedings brought by Mr Tracey was therefore "manifestly untenable or groundless" or "so lacking in merit or substance as to not be reasonably arguable". The video did depict Hitler and Nazis, and was concerned with BP's conduct of negotiations for a new enterprise agreement. Its proper characterisation depended upon it being analysed objectively and in its full context, and was not a matter which turned on any disputed facts or the evidence of witnesses. Although BP's position in response to Mr Tracey's application was ultimately not sustained, it was not so unworthy of consideration to permit it to be characterised as being advanced without reasonable cause or having no reasonable prospects of success. Mr Tracey's extensive submissions on this point are simply multiple variations on the theme that BP was ultimately unsuccessful, which is not sufficient to meet the criteria for the award of costs under s 611(2).
[27] Mr Tracey's submission that BP acted vexatiously in defending his application in that it sought to obtain a collateral advantage over the remaining workforce "in a time of tense industrial negotiations" is based on no evidence and is demonstrably incorrect. As the chronology in paragraph [3] of the first appeal decision makes clear, by the time Mr Tracey filed his unfair dismissal application on 4 February 2019, enterprise bargaining had already ceased a month before and the matter had moved into the arbitration phase before the Commission. The other matters raised by Mr Tracey do not, even taken at their highest, amount to vexatious conduct. Mr Tracey's contention that BP was "guilty of delinquent action in producing false and fabricated evidence on multiple occasions" is, we consider, without proper foundation. No finding of that nature was made against BP either at first instance or in either appeal decision. We conclude that the jurisdictional prerequisites for the making of a costs order against BP under s 611 are not satisfied and, accordingly, there is no power for costs to be awarded under that provision.
[28] As to BP's rejection of Mr Tracey's offer of settlement, we are not satisfied that this constitutes "an unreasonable act or omission" within the meaning of s 400A. Mr Tracey was dismissed by BP effective from 18 January 2019. At the hearing of his unfair dismissal application before Deputy President Binet, which took place on 8 May 2019, Mr Tracey sought the remedies of reinstatement and compensation for income lost since his dismissal. BP contended that his dismissal was not unfair and strongly resisted his reinstatement. Mr Tracey's settlement offer was, as earlier stated, made on 15 May 2019 - slightly less than four months after his dismissal. The offer required a response by 17 May 2019. In these circumstances, the offer effectively represented Mr Tracey's best case outcome at that point in time, and did not constitute any real compromise on his primary position. We also note that it did not represent Mr Tracey's "best offer", since he said in his witness statement that "I was willing to forgo any compensation if it enabled me to be reinstated, but it was decided to save that as a bargaining position for any counter offers". From BP's perspective, considered objectively, it had a reasonably arguable case, it had already completed the hearing of the matter, and it would be required to have Mr Tracey return to his employment if it accepted the offer. Further, we do not consider that anything occurred at the hearing which should have caused BP to understand that it was likely to be unsuccessful in the matter. It had made out its evidentiary case as to the facts of what occurred, and the issue was whether the video could be considered to be offensive on the basis alleged by BP. As we know, it subsequently succeeded at first instance. In those circumstances, its rejection of the offer was not unreasonable. We also do not consider that BP acted unreasonably in not making a counter-offer having to the same matters to which we have just adverted.
[29] We also not satisfied that BP's resistance to the voluntary production of certain documents, or to providing Mr Tracey's witnesses with assurances that they would not face disciplinary action if they were called by him as witnesses in the proceedings, was unreasonable. BP complied with orders for the production of documents that were issued by the Commission and, as Mr Tracey concedes, gave the assurances sought once they were requested by his legal representative.
[30] The jurisdictional prerequisite for the making of any costs order under s 400A is therefore also not satisfied.
[31] In relation to the applications for costs against Corrs pursuant to s 401, there is no evidence or other material to suggest that Corrs "encouraged" BP to respond to Mr Tracey's unfair dismissal application. There is nothing before us to merit the drawing of any inference about what advice Corrs may have given to BP at any stage of the proceedings. In any event, for the reasons already explained, we do not consider that BP had no reasonable prospects of success in its defence of Mr Tracey's unfair dismissal application. Nor do we consider that any particular act or omission during the course of the proceedings can be characterised as Corrs' particular responsibility, let alone that any act or omission was unreasonable. Accordingly there is no basis to order costs under s 401.
[32] For the above reasons, Mr Tracey's costs application is dismissed.
[1] [2020] FWCFB 820, 293 IR 170
[3] [2020] FCAFC 89, 276 FCR 9, 298 IR 183
[7] [2014] FWCFB 810, 240 IR 377 at [23]- [33]
[8] [2011] FWAFB 4014, 211 IR 374
[14] [2006] AIRC 521, 155 IR 36
[15] [1998] AIRC 949, 84 IR 270
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Scott Tracey
BP Refinery