Background
David Woods brought proceedings against T&F.S. Woods Pty Ltd, a trucking business operated in Moree, claiming employment-related entitlements, compensation, long-service leave, personal property or conversion damages, and damages for breach of a deed. The proceeding was initially summarily dismissed on the basis that the deed barred the claims, but that decision was overturned on appeal because the claims were at least arguable.
After the matter returned to the Federal Circuit and Family Court of Australia, Woods discontinued it several months before a scheduled six-day trial. The company sought its costs under s 570(2) of the Fair Work Act 2009 (Cth). Although the primary judge rejected the contention that Woods had instituted the proceeding vexatiously or without reasonable cause, the judge held that Woods had unreasonably caused the company to incur costs and ordered him to pay costs of the entire proceeding and the costs application.
The Court’s Holding
Justice Meagher allowed Woods’s appeal and set aside the costs orders. Section 570(2)(b) required the company to identify an objectively unreasonable act or omission by Woods that caused it to incur the claimed costs. The ordinary costs consequences sometimes associated with discontinuance could not be imported into the Fair Work Act’s restricted costs regime, and discontinuance was not itself equivalent to surrender.
Commencing and maintaining the proceeding was not unreasonable because Woods’s claims were arguable, had survived the earlier appeal, and were not shown to be vexatious or brought without reasonable cause. Discontinuing after considering substantial legal expenses, the lack of a beneficial commercial outcome, and the breakdown of a relationship with a key witness was also not unreasonable. The Court dismissed both parties’ costs applications and made no costs order for the appeal because the company’s unsuccessful arguments were not themselves unreasonable.
Key Takeaways
- A party seeking costs under s 570(2)(b) must prove a specific unreasonable act or omission and a causal connection to the costs incurred.
- Discontinuing an arguable Fair Work claim, even relatively late in the litigation, does not by itself constitute surrender or unreasonable conduct.
- Courts should assess reasonableness prospectively and must not use hindsight to treat later commercial concerns as making the entire proceeding unreasonable.
Why It Matters
The decision reinforces the Fair Work Act’s departure from the ordinary rule that costs follow the event. General principles governing costs after discontinuance cannot bypass the statutory requirement to establish unreasonable conduct that caused particular costs.
For employment litigants, the ruling confirms that pursuing an arguable claim and later discontinuing it for commercial reasons will not automatically expose the claimant to the opposing party’s costs. It also confirms that an unsuccessful costs application or appellate argument is not unreasonable merely because it rests on an incorrect interpretation of the statute.