Adverse costs should not stand in the way of access to justice

Court considers appropriateness of costs orders in proceedings under the Fair Work Act 2009 (Cth)

This is a class action on behalf of more than 3,000 telecommunications workers against ISG Management Pty Ltd (ISG). ISG is a workforce management company that holds contracts with Telstra, Foxtel, NBN Co and others. The applicant alleges that he and the class members, who were purportedly engaged by ISG as ‘independent contractors’, were in fact ‘employees’ and that, contrary to the Fair Work Act 2009 (Cth) (FWA) and the relevant industrial award, ISG had failed to pay or provide him and the class members with various employee entitlements.

In an earlier judgment (Mutch v ISG Management Pty Ltd [2020] FCA 362), Bromberg J relevantly:

  • dismissed an application by ISG for a declaration that the proceeding was not properly commenced as a representative proceeding pursuant to s 33C(1) of the Federal Court of Australia Act 1976 (Cth) (FCAA), and/or an order that the proceeding be declassed pursuant to s 33N of the FCAA, and/or orders for class-closure pursuant to an opt-in process; and
  • dismissed an application by the applicant for a common fund order (CFO), which became futile following the High Court’s decision in BMW Australia Ltd v Brewster (2019) 374 ALR 627; [2019] HCA 45 (Brewster). In this judgment, Bromberg J dealt with questions as to the appropriate orders for costs arising out of that earlier judgment.

Because the proceeding is a proceeding under the FWA, the starting point was s 570 of the FWA, which relevantly provides that costs may not be awarded in relation to a matter arising under the FWA unless the court is satisfied that:

  1. the proceeding was instituted vexatiously or without reasonable cause; or
  2. a party’s unreasonable act or omission caused the other party to incur the costs.

In this matter, both parties relied on sub-para (b) in contending that costs should be awarded against the party whose application was dismissed.

His Honour noted (at [7]-[8]) that the purpose of s 570 is “to provide access to justice by ensuring that the fear of an adverse costs order does not discourage litigants from pursuing good claims”, and thus the occasions upon which costs will be awarded under s 570 are likely to be “exceptional”. ISG placed particular reliance on the fact that the applicant was funded by a litigation funder, relying on what Lee J had earlier said on that topic in Bywater v Appco Group Australia Pty Ltd [2019] FCA 799 and Turner v Tesa Mining (NSW) Pty Ltd (2019) 290 IR 388; [2019] FCA 1644. In relation to that issue, however, his Honour said (at [13]-[14]):

Whilst litigation funders fund litigation to derive profit, that they do so serves to facilitate access to justice for individuals who may otherwise not have been able to afford the cost of litigating good claims. The activities of litigation funders in funding Fair Work litigation is, in that respect, aligned with the policy objective which underlies s 570 of the [FWA].

It would be antithetical to that policy objective if cost orders against litigants who are funded by litigation funders became the rule rather than the exception in Fair Work litigation. If that were so, the willingness of litigation funders to participate in funding Fair Work litigation may diminish and the capacity of prospective litigants to use litigation funders may also diminish because of the higher fees or commissions which litigation funders will likely charge. Further, that adverse cost orders should be more readily available against applicants than respondents conflicts with the scheme of s 570 which is primarily directed to assisting applicants, but in doing so, recognises the importance of an even-handed approach to the question of legal costs. An even-handed approach must have been seen as integral to the broad acceptance of Fair Work litigation as primarily a “no costs” jurisdiction. Carving out exceptions to the even-handed approach taken by s 570 may serve to undermine the regime that s 570 seeks to promote.

In relation to each of the applications that were dismissed in his earlier judgment, his Honour found that there was nothing which could be described as ‘unreasonable’ so as to warrant a costs order being made under s 570. Although each of the applications was ultimately dismissed (and, in that sense, could be said to have lacked merit), that alone was not enough to warrant a costs order – his Honour concluded that the lack of merit in relation to each application, and the conduct of the parties in relation to those applications, was not such as to amount to an ‘unreasonable’ act or omission so as to justify a costs order. In relation to the application for a CFO in particular, that application was made before the decision in Brewster (when CFOs were routinely made), and following the decision in Brewster, it was sensibly not pressed.

Accordingly, his Honour dismissed both parties’ applications for costs, and instead ordered that there be no orders as to costs in relation to the dismissed applications.

Mutch v ISG Management Pty Ltd (No 2) [2020] FCA 954

Federal Court of Australia, Bromberg J,

8 July 2020

Applicant’s Solicitors: Shine Lawyers;          

Respondent’s Solicitors: Lander & Rogers;

Applicant’s Funder: Litigation Lending Services Ltd

Austlii link: http://www.austlii.edu.au/cgi-bin/viewdoc/au/cases/cth/FCA/2020/954.html?context=1;query=mutch;mask_path

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