• An all too common feature of individual employee claims is to include salacious allegations designed to shame or embarrass management representatives.
  • In many cases, such allegations are unrelated to the issues to be determined in the case and are made without proper foundation.  Rather, their purpose is to extract a “shame or silence” premium in settlement negotiations.
  • Recent cases debunk popular “cost-free” perceptions about the Fair Work jurisdiction and reinforce that smear campaigns expose employees and their representatives to liability for legal costs of those required to defend them.
  • Careful positioning by employers can turn the tables on such campaigns by exposing baseless or irrelevant allegations for what they are – an attempt at leverage –  with costly consequences for those responsible.

If you would like more information, read on…

Recent developments

A recent Federal Court decision has again confirmed that the limited costs nature of the Fair Work jurisdiction is not an invitation to parties to sling mud without a proper basis.

In fact, employers can recover legal costs against an opposing litigant (or their representative) in a range of situations.  This will call for close analysis of the way that litigation is being run, and careful positioning that brings to light the unreasonable nature of an opposing litigant’s approach.  Both courts and the Fair Work Commission will step in to protect a party that has been subject to baseless litigation or behaviour which is unreasonable.

Shea v EnergyAustralia Services Pty Ltd (No 7) [2014] FCA 1091 (upheld on appeal this week) tells a story that (to experienced practitioners) is all too common.  Ms Shea made a number of serious allegations against the CEO of her former employer.  None were found to be substantiated, and several were not supported by any admissible evidence whatsoever.  The Court made findings to the effect that it was unreasonable for Ms Shea to have made a number of those allegations – for example, because they were based on rumours that she had heard without having any direct involvement or knowledge of the substance of the events in question.  The case follows hot on the heels of Dye v Commonwealth Securities Limited (No 2) [2012] FCA 407 in which Ms Dye was ordered to pay costs of $5.85m following her unsuccessful litigation.

Taking a broader view – trial by media

The litigation strategy often described as “trial by media” is not uncommon.  Often, the purpose behind the strategy is not to genuinely pursue a legal remedy to finality but rather to publicly embarrass a person or entity (or threaten to do so) through the court process so as to force them to settle the claim, often by extracting an early settlement premium.  Typically, senior executives of the corporation will be named as individual respondents to the litigation, or otherwise implicated in some way.  This can sometimes be an effective strategy, particularly given the corporate and individual desire to avoid distracting litigation and damage to brand and reputation.

The Fair Work jurisdiction is not cost free

In the Fair Work jurisdiction, a court or tribunal will not make costs orders merely because an applicant is unsuccessful.  There is no presumption that costs “follow the event” as is typically the case in the commercial litigation context.  However, a court can make a costs order against an unsuccessful party, including where a party starts legal proceedings vexatiously or without reasonable cause, or where an unreasonable act or omission has caused another party to incur legal costs.

The Fair Work Commission can also order costs where certain conditions are satisfied, for example, where an application, or response to an application was made, vexatiously or without reasonable cause.  For example, in Conrad v Thiess Pty Ltd t/as Thiess Degrémont [2011] FWA 6689, Fair Work Australia held that Mr Conrad was liable to pay Thiess’ costs when he brought an application for an unfair dismissal remedy 284 days out of time, and failed to produce any evidence that he was at any time an employee of Thiess.

Positioning for success

There are many public and private examples of employers recovering meaningful costs orders, in some cases from the representative of a litigant.  The achievement of this outcome often depends on careful positioning that exposes the low quality nature of the allegations.  A diligent employer preparing to ask for a costs order might consider:

  • an application to strike out all or part of a claim that is made without a reasonable basis;
  • pointing out the defects in the opposing party’s claim early and allowing an opportunity for withdrawal of the claims before too much damage is done or costs wasted;
  • offering to settle litigation for an amount referable to its true value, rather than any inflated value put forward in the opposing litigant’s legal documents;
  • scrutinising the basis of allegations made during the court process (including through the process of discovery or cross-examination during trial) so as to expose their poor quality.

Other more nuanced strategies may also be available in an individual case.

Of course, parallel with the employer’s legal defence will be the public response to the trial by media strategy.  There are now many good examples of what works well and what doesn’t.  It is clear that, where an employer is prepared to combat the strategy, excellent results can be achieved.