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Left with the bill

Feature Articles

Cite as: (2007) 81(7) LIJ, p. 40

Complainants in discrimination cases need to consider the costs consequences when deciding between the federal and state jurisdictions.

By Sarah Rey and Caitlin Moor

Complainants in discrimination cases need to consider the costs consequences when deciding between the federal and state jurisdictions.
By Sarah Rey and Caitlin Moor

Separate anti-discrimination legislation exists at the state and federal level. One factor to consider when choosing the jurisdiction for a discrimination complaint is the different costs regimes in the state and federal jurisdictions.

Federal v state position

The prima facie position in the Federal Court and Federal Magistrates Court is that costs follow the event.[1]

However, in Colgate Palmolive v Cussons,[2] Sheppard J noted false and irrelevant allegations of fraud, misconduct causing loss of time to the court and other parties, and proceedings commenced or continued for some ulterior motive or in wilful disregard of known facts or established law, as some of the recognised circumstances which would justify departure from this principle and lead to reduction of costs awarded or refusal to award costs to the successful party.

An exception also exists in circumstances where an unsuccessful party’s case raises broader issues of public interest, such as constitutionally important questions or human rights concerns. In that situation the unsuccessful party may not be forced to pay costs.

In some federal discrimination cases the public interest element has been strong enough to warrant the unsuccessful party avoiding a costs order altogether. Discrimination cases do not, however, automatically fall into a special category departing from the general rule that costs follow the event, even though they often deal with human rights issues. Frequently, a complainant in a discrimination case will be pursuing a personal action for damages and there will be an insufficient public interest component to warrant a departure from the general rule.

In contradistinction, the position in the Victorian Civil and Administrative Tribunal (VCAT) is, prima facie, that parties bear their own costs.[3] There are recognised exceptions to this principle and where it is “fair” to order costs in the circumstances, such as where the complaint was vexatious, the complainant unnecessarily prolonged their case, or where a failure to award costs might mean the successful party is deprived of the benefit of victory in the case.[4]

The recent decisions in Prolisko v Knight[5] and Gonsalves v MAS National Apprenticeship Services & Anor[6] indicate that VCAT can, and will, depart from the “no costs” position. It does not necessarily evidence a shift in the general principle; however, it was in the interests of fairness for partial costs to be granted against the complainants in both cases, largely on the basis of their claims of discrimination or harassment being “flimsy”.

Costs-related decisions

This article considers some of the 2006 and 2007 Federal Court decisions relating to costs, and then recent VCAT cases.

In Sheikholeslami v Brungs & Or,[7] the respondents sought an order to dismiss allegations of discriminatory acts during the period 2000 to 2004 and the accompanying claims for mental anguish, defamation, loss of opportunity for advancement, distress and costs. The way that the applicant conducted proceedings was found to amount to an “exceptionally strong and clear case” of abuse of process under O.20 r2 of the Federal Court Rules. [18] Tamberlin J granted the respondents’ application to dismiss proceedings and ordered that the applicant pay costs of the respondents for the main proceedings on a solicitor-client basis.

Tamberlin J highlighted the 11 directions and interlocutory hearings and repeated failures by the applicant to cooperate in bringing the matter to a hearing as evidence of abuse of process. In particular, he focused on Ms Sheikholeslami’s refusal to provide particulars and her obstructive approach in relation to discovery. These led to the respondents having to issue a subpoena, after which time the applicant continued to frustrate the process by providing a “read only” CD-ROM with 10,000 pages of documentation, not all responsive to the subpoena.

Eventually Tamberlin J ordered that the applicant not be permitted to take further interlocutory steps without leave of the Court and ordered her to file and serve evidence by 28 April 2006. The affidavit eventually filed (after the time set by the Court) referred to annexures which were not attached, and when the annexures were later sent they were simply bundles of documents for each year. There were no specific allegations or incidents referred to, and many relevant records such as medical reports, pay slips and tax returns were absent.

Solicitor-client costs were awarded against the applicant on the basis of facts revealing an exceptional case of vexatious conduct. The award of solicitor-client costs could be distinguished from the usual rule of party-party costs because of the vexatious conduct. Tamberlin J stressed that it was rare to find an applicant unwilling to cooperate, or for some reason unable to do so: “Of course ... [the] power [under O.20 r2] ought to be sparingly exercised”. [18] However, in this case he agreed with the respondents that it was impossible to answer any case against them given the “persistent failure to identify any specific incident which has any connection to discrimination”. [15] It was found that a significant proportion of the large costs incurred by the respondents were “directly attributable to the way in which the applicant has run this matter”. [15] The applicant subsequently unsuccessfully sought leave to appeal in relation to the dismissal of the proceeding and the costs order.

In Hollingdale v North Coast Area Health Service (No 2),[8] the applicant was unsuccessful in her claims of discrimination on the basis of a disability (bipolar disorder). Costs were awarded to the respondent on a party-party basis, according to the Federal Magistrates Court scale of costs. Driver FM referred to the general position that costs follow the event, and the discretion of the Court to depart from that position in certain circumstances. However, it was found that the “unexceptionable” conduct of the respondent did not disentitle it to an order for costs.

Further, it was highlighted that most human rights proceedings, such as disability discrimination claims, do not fall into a special category in relation to costs. Human rights proceedings may “ ... necessarily contain a public interest element ... in particular cases ... strong enough for an unsuccessful party to avoid an adverse costs order. However ... generally in human rights proceedings an applicant is pursuing a personal action for damages and ... frequently there will be an insufficient public interest component in the proceedings to merit a departure from the general principle that costs will follow the event”. [11]

The Court characterised Ms Hollingdale’s action as a personal action rather than a public interest one. Driver FM emphasised that litigants take action in the Federal Court jurisdiction with notice that they are exposed to a costs order, and observed that: “A departure from the general principle that costs follow the event should be based upon recognised exceptions, rather than general considerations of sympathy for a disabled party”. [11]

Driver FM found the relative financial position of the parties irrelevant to an order for costs, but relevant to the consideration of the basis for a costs order, putting forth the costs scale in human rights proceedings as the means to provide “clarity and certainty and a level playing field in such proceedings”. [12]

He approved Heerey J’s judgment in Fetherson v Peninsula Health (No 2).[9] In that case Heerey J compared the absence of special provisions as to costs in the Disability Discrimination Act with the presence of such special provisions in other legislation, such as the Workplace Relations Act 1996. The comparison demonstrated that Parliament can legislate to confer special jurisdiction as to costs, and will do so if it considers policy considerations warrant special provisions. Thus in the case of disability discrimination, “the absence of any such provision applicable to the present case confirms that the usual principles as to costs are to apply”. [9]

Section 109 of the VCAT Act presents a similar example of “special provisions” as discussed by Heerey J. This suggests that in creating the state jurisdiction and legislating to the effect that parties will bear their own costs in most circumstances, there was an intention to consider the policy behind costs orders in discrimination proceedings.

In Prolisko v Knight,[10] Megay SM highlighted that under s109 of the VCAT Act the prima facie position is that generally each party will bear its own costs: “the Tribunal’s discretion in relation to costs is broad”. [17]

In this case it was found that the claims relating to discrimination “w[ere] flimsy, bordering on fanciful”. [13] The claim of sexual harassment, while not proven, was not seen to be in the same “flimsy” category as the discrimination claims. [13] Being unsuccessful on this claim alone would have been unlikely to result in a costs order. However, although the discrimination claims “did not occupy a great deal of actual hearing time”, in the context of a complex and forcefully conducted case Megay SM found it significant that “the allegations were made, they formed a significant part of the points of claim and the respondent had to prepare to respond to those points irrespective of any views they held about credibility”. [13] At no point did the complainant concede the flimsiness of her claims during the proceedings, leading Megay SM to form the view that “there are circumstances present which justify an award against the complainant and a departure from the prima facie position set out in section 109(1) of the Act”. [18]

Megay SM found that the assertions made about either party’s financial position were “pure supposition”. However, she took into account that “it is unlikely [Ms Prolisko] has substantial funds at her disposal” and that, according to the usual costs scale, the respondents would be unlikely to be entitled to the amount claimed ($52,673.09). [18] Megay SM ordered that $10,000 be paid by Ms Prolisko ”as a contribution towards the costs expended by [the respondents] in defending this action”. [19]

In the VCAT case of Beddoes v Fraraccio,[11] McKenzie DP maintained the position that the parties bear their own costs, dismissing an application to order costs against the complainant’s representative. The complainant was represented by the Disability Employment Action Centre (DEAC), but was ill throughout the proceedings and unable to give directions. McKenzie DP found that it was not unreasonable for DEAC to continue to act, and it was correct to be cautious in circumstances where the complainant had given clear instructions to refer the complaint to VCAT and continue to act, particularly when it was unclear how long the complainant would be unable to give further instructions. “[DEAC] was not obliged to withdraw from acting for Ms Beddoes but was obliged to act in her best interests”. [28]

More recently in the VCAT case of Gonsalves v MAS National Apprenticeship Services & Anor,[12] a sexual harassment and victimisation case, the unsuccessful complainant was ordered to pay 50 per cent of the costs of each of the two respondents. Megay SM was not convinced the complainant “unnecessarily prolonged her case”, nor that her case was “vexatious”. [14] Nonetheless the respondents were put to considerable expense and inconvenience and subjected to “rigorous and sometimes embarrassing cross-examination”. [15] The second respondent in particular was required to respond to sexual harassment claims which were based on a “flimsy premise” with which the complainant persisted. [15] The complainant did not succeed with any aspect of her claim and thus as a matter of fairness she was ordered to contribute to the respondents’ costs. Further, on the grounds of fairness, Megay SM did not accede to the respondents’ request for indemnity costs since to do so would be “punitive in the extreme”.[17] She indicated that the provisions regarding costs seek to achieve balance between the “competing merits of accessibility and fairness to all parties”. [17]

Conclusion

In summary, the general proposition that costs follow the event in the federal jurisdiction has not been displaced by a more generous view of what might constitute the public interest. Discrimination cases, which often raise human rights issues, are not automatically categorised as raising sufficient public interest to warrant departure from the principle that costs follow the event. The prima facie position in the VCAT jurisdiction remains that parties will bear their own costs.

In cases involving vexatious or unreasonable litigants, the federal courts and VCAT are prepared to depart from general principles and order costs against a complainant. Additionally, in VCAT an order will be made where, among other factors, it is in the interests of fairness to the parties to do so. As vexatious litigants are often self-represented, and there appears to be an increase in self-represented litigants,[13] the orders as to costs will continue to be made. However, these orders will be felt more by complainants in the VCAT jurisdiction, which has traditionally been viewed as a cost-free jurisdiction.


SARAH REY is a partner and CAITLIN MOOR a legal research assistant with Justitia Lawyers & Consultants. The authors thank the LIJ article reviewer for the detailed and helpful comments on this article before publication.
The numbers in square brackets in the text refer to the paragraph numbers in the judgment.


[1] The Court has power to award costs pursuant to s79 of the Federal Magistrates Act 1999:

“79(2) The Federal Magistrates Court or a Federal Magistrate has jurisdiction to award costs in all proceedings before the Federal Magistrates Court ...

(3) Except as provided by the Rules of Court or any other Act, the award of costs is in the discretion of the Federal Magistrates Court or Federal Magistrate”.

Rule 21.02(2) of the Federal Magistrates Court Rules 2001 states:

“In making an order for costs in a proceeding, the Court may:

(a) set the amount of the costs; or

(b) set the method by which the costs are to be calculated; or

(c) refer the costs for taxation ...

(d) set a time for payment of the costs ... ”.

The Court has a discretion to determine by whom and to what extent costs are to be paid. It is open to the Court to order payment on any basis, including on a party/party or indemnity basis. Its discretion “must be exercised judicially and not against the successful party except for some reason connected with the case”: Ruddock v Vadarlis (No 2) (2001) 115 FCR 229. The usual order as to costs is that costs follow the event: Ruddock v Vadarlis (No 2); Australian Competition & Consumer Commission v Australian Safeway Stores Pty Ltd [2002] FCA 1293.

[2] (1993) 118 ALR 248 at 257; see also Howe v Qantas Airways Ltd (No 2) [2004] FMCA 934 (17 December 2004).

[3] Pursuant to s109, Victorian Civil and Administrative Tribunal Act 1998 (VCAT Act):

“109(1) Subject to this Division, each party is to bear their own costs in the proceeding.

(2) At any time, the Tribunal may order that a party pay all or a specified part of the costs of another party in a proceeding.

(3) The Tribunal may make an order under subsection (2) only if satisfied that it is fair to do so ... ”.

[4] Section 109(3) of the VCAT Act sets out several factors the Court may have regard to in departing from the “no costs” position: whether a party has conducted the proceeding in a way that unnecessarily disadvantaged another party to the proceeding; whether a party has been responsible for prolonging unreasonably the time taken to complete the proceeding; the relative strengths of the claims made by each of the parties, including whether a party has made a claim that has no tenable basis in fact or law; the nature and complexity of the proceeding; and any other matter VCAT considers relevant.

[5] (Anti Discrimination) [2006] VCAT 2046 (3 January 2006).

[6] (Anti Discrimination) [2007] VCAT 64 (5 January 2007).

[7] [2006] FCA 933 (28 July 2006).

[8] [2006] FMCA 585.

[9] [2004] FCA 594.

[10] Note 5 above.

[11] [2006] VCAT 2304 (17 November 2006).

[12] Note 6 above.

[13] There are no comprehensive empirical studies on self-represented or unrepresented litigants in the VCAT jurisdiction. However, in the federal jurisdiction there has been a request for more resources due to a perception that the number is increasing in the court system. A recent report calls for more comprehensive recording of costs implications for self-represented litigants in all jurisdictions: Australian Institute of Judicial Administration and the Federal Court of Australia, Forum on Self-represented Litigants, Sydney, 17 September 2004.

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