Costs, caution and consequences: ‘Rare’ ruling against a paid agent

In the recent decision of Flexy Services Pty Ltd v Mr Brian Newman [2024] FWC 2840, the Fair Work Commission (FWC) made a costs order against a paid agent who represented an employee in making a general protections claim against her employer.

Background

Ms. Georgina McBride was engaged as a casual employee by Flexy Services Pty Ltd (Flexy), a labour hire company, and was on-hired to Rio Tinto.

After being advised of the termination of her engagement by Rio Tinto, Ms. McBride engaged Mr. Brian Newman of 1800Advocates. Mr. Newman provided Ms. McBride with advice on her options and ultimately assisted her to lodge a general protections claim against Flexy under section 365 of the Fair Work Act 2009 (Cth) (FW Act), alleging that Ms. McBride was unlawfully dismissed by Flexy on the basis of her pregnancy.

Flexy argued that Rio Tinto ended the assignment without Flexy’s knowledge. As Rio Tinto was not Ms. McBride’s employer, and Flexy was not aware that Rio Tinto had taken that action until Ms. McBride made her claim, Flexy did not ‘dismiss’ Ms. McBride.

FWC Deputy President, Peter O’Keeffe ultimately determined the jurisdictional objection in favour of Flexy, finding that Flexy had not in fact dismissed Ms. McBride.

Costs order against paid agent

After being successful in the jurisdictional objection argument, Flexy applied for a costs order against Mr. Newman under section 376 of the FW Act. Flexy argued that Mr. Newman acted unreasonably by encouraging Ms. McBride to pursue a claim that had no reasonable prospect of success.

Deputy President O’Keeffe ultimately agreed that costs should be awarded against Mr. Newman, stating “[p]ut simply, this case should never have been run”.

The Deputy President ultimately found that costs could be awarded under section 376(2)(b) of the FW Act because Mr. Newman’s behaviour constituted an unreasonable act in connection with the continuation of the dispute. Being mindful that such a finding should be made with ‘great care and discretion’, the Deputy President’s reasoning included consideration of the following:

• There was no evidence to suggest that Ms. McBride had been dismissed. In fact, there was ‘significant evidence from Flexy that rebutted’ that position and ‘no grounds for Mr. Newman to have thought that he could persuade the FWC with his argument’. For example, at the time of lodging the claim, Mr. Newman was only aware of correspondence from Flexy which clearly confirmed that the applicant was still considered a current employee.
• Mr. Newman did not properly consider the prospects of success of the case that he ran for Ms. McBride. The Deputy President did not accept that Mr. Newman was merely following his client’s instructions in making a general protections application because he should have known that as a casual, Ms. McBride would not have been entitled to be ‘paid out’ her contract – a remedy that Mr. Newman asserted led Ms. McBride to instruct him to make the application in the first place. Consequently, Mr. Newman’s offer to Flexy to settle the matter for $43,363 was ‘ill-conceived and doomed to summary rejection’.

In the above circumstances, Mr. Newman’s unreasonable act was being involved in continuing the claim when it became increasingly clear that there was no prospect of success, and not advising Ms. McBride to withdraw her claim by continuing to represent her.

What does this mean?

The Fair Work jurisdiction is considered a ‘no costs’ jurisdiction because costs can only be awarded in very limited circumstances, and the FWC seldom makes such orders.

Deputy President O’Keeffe considered this a ‘clear case where costs should be awarded’, and so the decision provides useful guidance in future cost applications.

Interestingly, the Deputy President has invited the parties to make further submissions on the appropriate amount of costs, noting that Flexy’s legal fees, which were in excess of $80,000, were considered excessive and he was not minded to award costs on an indemnity basis.

The decision also serves as a useful example of the reasons for paid agent reforms which are currently underway. On 9 September 2024, the FWC released ‘Paid Agents and the Fair Work Commission: Report and Recommendations’ which arose from the Paid Agents Working Group Consultation.

The recommendations made are:

1. FWC members and conciliators (where applicable under delegation) will determine applications for representation by a paid agent prior to any conciliation, conference or hearing – this will involve the FWC considering if there is a ‘suitable way to log and respond to internal reports of challenging paid agent conduct’.
2. Disclosure of costs arrangements at the commencement of conciliation processes – this will apply to lawyers and paid agents alike and will likely require a confidential disclosure of costs arrangements to clients and the FWC before any conciliation in an unfair dismissal or general protections matter.
3. Enhancement of information about representation on the FWC’s website.
4. The FWC’s standard terms of settlement providing only for the payment of the settlement amount into a bank account belonging to the applicant.
5. The enhancement of referral arrangements with Community Legal Centres and other pro bono legal services.

The overarching recommendations are anticipated to be implemented shortly and revisited in 12 months’ time.

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Authored by:
George Haros, Partner
Ellie Pitcher-Willmott, Lawyer