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Beware of “doomed” unfair dismissal applications and costs risks

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Beware of “doomed” unfair dismissal applications and costs risks

The Fair Work Commission (“FWC”) is generally a no costs jurisdiction, meaning that people must pay their own costs when making and defending an application. This is considered an access to justice provision, allowing employees with genuine grievances and an arguable evidentiary and legal basis an opportunity to bring their claim in the FWC without being deterred by potential costs implications.

That said, the FWC is able to order that a party to an unfair dismissal matter, pay the other party’s legal or representational costs, if the FWC is satisfied that the matter was commenced or responded to:

  • vexatiously or without reasonable cause; or
  • with no reasonable prospects of success.

In the recent case of CPRE (Charles Parletta Real Estate Pty Ltd v Ms Maria D’Ortenzio and Mr Nicola Minicozzi [2018] FWC 3286), the FWC awarded indemnity costs (a higher standard of costs) against a former HR Manager, Maria D’Ortenzio, for having brought an unfair dismissal claim against her former employer which was said to be “doomed” from the start.

The FWC found that Ms D’Ortenzio’s working relationship at CPRE at the time of her dismissal was “poisoned to the point of being totally dysfunctional” and it was clear that Ms D’Ortenzio’s conduct had contributed to that.

The fatal blows to the employment relationship included Ms D’Ortenzio’s communication with CPRE’s bank to advise them of the impending litigation against CPRE, and communicating with a potential purchaser of CPRE as to Mr Parletta’s improper conduct, irreparably harming CPRE’s goodwill and reputation.

With that background the FWC found that it had valid grounds to dismiss Ms D’Ortenzio’s application.

CPRE then made an application for indemnity costs to be awarded against Ms D’Ortenzio for having brought the unfair dismissal application in the first place.

The FWC found:

  • Ms D’Ortenzio’s motivation to bring the unfair dismissal application was to “inflict as much damage on Mr Parletta as possible” and therefore she had no reasonable basis to have commenced her claim;
  • Ms D’Ortenzio knew of her actions which ultimately resulted in her dismissal and therefore should have known she had no prospect of success when she lodged her claim; and
  • Alternatively, she should have known after having received CPRE’s response material to her unfair dismissal claim, that she had no prospect of success in continuing with her claim.

The FWC acknowledged that “it is extremely rare for the Commission to order indemnity costs and therefore a high level of caution must be exercised”. The Commission confirmed that there must be “some relevant delinquency on the part of the unsuccessful party” before indemnity costs could be awarded.

The FWC considered that, in respect of Ms D’Ortenzio’s relevant delinquency:

  • It was not present when her claim was initially lodged;
  • It was arguably present when she received and reviewed CPRE’s response material; and
  • It was certainly present at the conclusion of her evidence in the unfair dismissal hearing and her case “in tatters”, when the FWC invited Ms D’Ortenzio to reconsider her position in light of all the evidence but continued to proceed.

The FWC ultimately ordered party-party costs against Ms D’Ortenzio from the day after she lodged her unfair dismissal claim and on an indemnity basis from the conclusion of her evidence at the hearing.

This case is a timely reminder to both employees and employers to bring and defend claims relating to an unfair dismissal on a justifiable basis.

If you have any questions about the decision or what it might mean for you, please contact Colin Broadbent.

 

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