Fair Work considers whether a litigation funder is protected under the “no costs” tradition
In a recent decision of the Federal Court of Australia, Justice Bromwich considered whether the traditional “no costs” regime of the Fair Work Act 2009 (Cth) applied to the litigation funder of an industrial class action.
The court noted the decision’s potential to have a “chilling effect” on employment law. The issue arose after the dismissal of an employment class action. The respondent applied for a costs order against the unsuccessful lead applicant’s litigation funder.
The Fair Work Act 2009 is traditionally a “no costs” jurisdiction – that is, the decision does not ordinarily result in a costs order being awarded against the unsuccessful party.
Further, the Fair Work Act 2009 section 570 provides that a costs order should only be made in certain circumstances, such as where a party instituted proceedings “vexatiously or without reason” or “where their unreasonable act or omission caused the other party to incur costs”.
Read more: Which jurisdiction governs an NZ employee transferred to the USA?
However, the respondent argued that, as a non-party to the proceedings, the litigation funder was not protected from a costs order, given it took on the litigation for “purely commercial gain”. His Honour noted that, while a litigation funder usually acts for commercial purposes, it also plays a role in access to justice by removing financial barriers to litigation.
The litigation funder also highlighted the fact that, under S570, it could not recover costs from a respondent who, as a party to the proceedings, was protected under the provision.
His Honour found that a costs order against the litigation funder would have “practical consequences for the efficacy of S570 in large volume, small claim, class action cases involving difficult issues where success is far from assured”. Although noting the “cooperative and sensible” nature of the proceedings, His Honour cautioned that a broad proposition should not be readily or universally accepted.
Read more: COVID layoffs: How to terminate workers in crisis
Despite this, after considering S570 and the broader role of litigation funders in facilitating access to justice, His Honour declined to make a costs order against the litigation funder, concluding that this “would not be in the interest of justice”.
Key Takeaways:
- The Fair Work Act 2009 S570 provides for a ‘no cost’ regime, in which costs orders are not generally made
- The court may exercise discretion to make a costs order against a non-party, such as a litigation funder. However, in the above case, it declined to do so.
