Costs in the cause v costs follow the event – what is the difference?

In this blog post I explain the related but different concepts of costs follow the event and costs in the cause. I personally find costs to be an uninteresting topic of law, but if you work in litigation, knowledge of basic costs principles and orders is essential. The simplest way to remember the difference is to understand that costs follow the event is a principle and costs in the cause is an order. While I have used examples from South Australia, the jurisdiction I work in, the content is applicable to other Australian jurisdictions.

The principle – costs follow the event

The principle that costs follow the event is a common law principle that the unsuccessful party pays the legal costs of the successful party in litigation. In simple terms, the loser pays their own costs and the costs of the winner. Where there are multiple events in an action, the costs will be allocated separately for each event, though there will often be a dispute as to whether events are separate or part of the main action. A court may decide to depart from the principle in certain situations after considering the nature of the action, the complexity of the factual and legal issues, the profile of the parties and publicity associated with the matter and the amount recovered.

The common law rule that costs follow the event had been included in statute or rules in most jurisdictions. For example, in South Australia r 263(1) of the Supreme Court Civil Rules 2006 provides that “as a general rule, costs follow the event”. This general rule is subject to more specific rules such as that “the costs of an amendment are to be awarded against the party making the amendment” (r 263(1)(a)). However, costs are awarded at the court’s discretion (see s 40 of South Australia’s Supreme Court Act 1935) and the general rule and more specific rules are subject to orders to the contrary.

The order – costs in the cause

Costs in the cause is an order that costs from an interlocutory hearing (for example) will form part of the general costs and be awarded to the successful party in the action. Costs in the cause orders have existed for over a century in Australia, with the NSW case of Dubbo Refrigerating & Co v Rutherford (1898) 14 WN (NSW) 180 often cited as authority for the interaction between costs in the cause orders and general costs principles.

In Dubbo Refrigerating the plaintiff was suing the defendant for unpaid work boiling down 17,023 of the defendant’s sheep for tallow (sheep fat, commonly used in the 1800s to produce shortening for processed foods and deep frying). Two commissions had occurred in which costs in the cause had been ordered. The plaintiffs were awarded general costs after the hearing. As the case is not readily electronically available I have extracted the key paragraph:

“The costs in both commissions were ordered to be costs in the cause, but it is now said that although the evidence was accepted by the jury as in favour of the defendant, the plaintiffs are entitled to the costs because they are entitled to the general costs of the action.  “Costs in the cause” merely means costs not now disposed of; after the trial they have to be disposed of with the costs of the trial, which are themselves costs in the cause, according to certain settled principles of law which the Prothonotary has followed. Issues are divisible, and if some issues are found for the defendant, although the plaintiff may be the successful party in the action, still the defendant gets the costs of those issues upon which he has succeeded, although they may at first have been costs in the cause. Here the Prothonotary is entitled to assess the costs of these commissions in favour of the party who was successful upon the issues to which the evidence in question was directed, and he has done so. If a plaintiff takes out a commission, and examines a witness whose evidence turns out at the trial to be absolutely immaterial, is the defendant to pay the costs merely because the plaintiff is entitled to the general costs of the action? So here, why should the defendant have to bear the cost of witnesses whom he called to establish his case, and who were in fact instrumental in establishing it? The evidence of these witnesses was within the same category exactly as if the witnesses had been present at the trial, and I am of the opinion that the Prothonotary has acted upon the proper principle in allowing them to the defendant.”

There are several advantages of obtaining an order for costs in the cause versus relying on the principle of costs follow the event, including that the order is not subject to the exceptions that apply to the principle, and the order will ordinarily be respected by the trial judge or an appellate court. It would be very unusual for a court to amend or substitute a costs order made earlier in proceedings. In the case of Koosen v Rose (1897) 45 WR 337 (often incorrectly cited as Coosen v Rose (1897) 45 WR 337) an order for costs in the cause was made in chambers for the costs of the chambers application. At trial the judge interfered with this order, making the plaintiff pay his own costs for the application in chambers. On appeal, the Court of Appeal decided that the trial judge had no jurisdiction to interfere with the costs order of the proceedings in chambers.  

Note the difference between the orders costs in the cause and “plaintiff’s costs in the cause” (more commonly made) or “defendant’s costs in the cause” (rarely made). A “plaintiff’s costs in the cause” order means that if the plaintiff is ultimately awarded costs of the action, the costs the subject of the interlocutory application become part of that. If the plaintiff is not ultimately awarded costs of the action, there is no order as to the costs the subject of the interlocutory application. Often a costs order is requested through an interlocutory application, though orders as to costs prior to the event are often made by consent or otherwise in directions hearings.

 

Probation periods and minimum employment periods – a guide for employees

It is common for an employer to place a new employee on a probation period ranging from a few weeks to a few months. The intention of a probation period is for the employer to assess the employee’s performance and ensure their suitability of the role. In this blog post I detail the legal position of employees on probation and explain how the probation period and unfair dismissal regime interact. Information in this blog post is only relevant to national system employees (see sections 13 and 14 of the Fair Work Act 2009).

Characteristics of probation periods

The length of a probation period can be found in the employment contract and/or letter of engagement. Employees on probation are entitled to accrue and access entitlements provided under the Fair Work Act 2009 (FW Act) including annual leave and sick leave. Probation is not a separate period of employment and any entitlements accrued will carry over after probation has ended.

At the end of a probation period you should receive a letter confirming that your probation period has ended and that your employment will continue. Ideally you will also have a meeting with your employer at this time to receive feedback.

How long can a probation period be?

The length of a probation period is at the discretion of the employer. However, note the information below about the minimum employment period and protection from unfair dismissal. A probation period is a separate concept to a minimum employment period. A probation period is selected by the employer and reflected in the employment contract or letter of engagement, whereas the minimum employment period is a statutory period set under s.383 of the FW Act. While it is logical for an employer to select a probation period the same as a minimum employment period (generally 6 months), this will not be the case in every situation.

An employer can only extend a probation period if the employment contract allows for an extension or if the employee agrees to the extension. In contrast an employer cannot extend the statutory minimum employment period (discussed below).

What if I do not pass a probation period?

An employer does not have to wait until the completion of a probation period to terminate an employee. Employees who do not pass a probation period are still entitled to receive the appropriate notice for the cessation of their employment and be paid out unused annual leave and other accrued entitlements. The minimum notice requirement where an employee has 1 year or less continuous service is 1 week of notice.

While an employee who fails to pass a probation period may not be protected from unfair dismissal, the employee may be able to take action against their employer under general protections laws, anti-discrimination laws, or breach of employment contract. Employees should also familiarise themselves with any additional rights provided in an applicable award or enterprise agreement.

Can I make an unfair dismissal claim?

The unfair dismissal regime in the FW Act is available to employees who earn less than the high income threshold (currently $138,900) and who have completed the minimum employment period (s.382). The minimum employment period is 6 months or 1 year for small business employers (s.383). The probation period and the minimum employment period may overlap, as employers often choose a six month probation period, enabling the employer to terminate the employee’s employment prior to the end of the probation period, meaning the employee is not protected from unfair dismissal. However, it is possible for a probation period to be longer than the minimum employment period. For example where a probation period for an employee working for a large company is 12 months and an employee’s employment is terminated at 11 months, the employee will be protected by the unfair dismissal regime as the six month minimum employment period will be satisfied.  

Remember that an unfair dismissal application must be made within 21 days of the date of dismissal so if you believe you have a claim you should seek legal advice as soon as possible after the date of dismissal (s 366 Fair Work Act 2009).  

Why the confusion?

The difference between a probation period and a minimum employment period appears straight forward. Confusion among practitioners and those working in human resources appears to have arisen from hanging on to old concepts that applied under the old Workplace Relations Act 1996 (WR Act).

Section 643 of the WR Act provided that an employee wishing to make an application relating to their termination of employment must among other criteria have served the qualifying period of employment. The definition of qualifying period of employment differs from the definition of the minimum employment period under the FW Act. Section 643(7) of the WR Act provided:

(7)  For the purposes of subsection (6), the qualifying period of employment is:

(a)  6 months; or

(b)  a shorter period, or no period, determined by written agreement between the employee and employer before the commencement of the employment; or

(c)  a longer period determined by written agreement between the employee and employer before the commencement of the employment, being a reasonable period having regard to the nature and circumstances of the employment.

As you can see from the wording of the section, the WR Act allowed the employee and employer to agree to a shorter or longer qualifying period of employment. It was therefore practical for employers under the old WR Act to make the qualifying period of employment the same as the probation period and the qualifying period of employment was often referred to as the probation period. This flexibility to agree on a shorter or longer qualifying period no longer exists. The FW Act provides a statutory minimum employment period of 6 months (1 year for small business employees) and this is a separate concept to a probation period the employer may include in a contract of employment.

Secondments – Can an employee choose not to go on secondment? Can sending an employee on secondment constitute adverse action?

Introduction

Secondments are arrangements where an employee is temporarily transferred to work in another office (internal secondment) or for a different legal entity (external secondment). While working for the host, the secondee will remain employed by their employer.

Secondments in the legal industry are very common. Lawyers working at large commercial law firms are often sent on short term secondments to work in-house for a client. There are a number of benefits that flow from this arrangement. The client gets specialty legal advice and the seconded lawyer can help upskill the client’s staff on basic legal matters. In return the seconded lawyer builds connections with the client and hopes to obtain further work with the client when they return from secondment. The seconded lawyer continues to be employed and paid by the law firm. The law firm will have a separate agreement with the client as to how much the client pays for the secondment. Ordinarily this rate will be the lawyer’s wages plus a fee the law firm takes for providing the services.

Ordinarily a secondment is a great short term professional development opportunity for the employee concerned. However, there are some situations where an employee may not welcome a secondment, such as where the employee is concerned about relocating to another location, that the placement will involve deskilling, would make performance management difficult or would involve a significant amount of new training. In these situations, is an employee able to refuse to go on secondment?

Can an employee refuse to go on a secondment?

Lawful employer directions

Generally speaking if an employee is directed to go on secondment by their employer and this direction is a "lawful direction" then the employee must go on the secondment. A lawful direction is one which relates to the subject matter of the employee’s employment, involves no illegality and is reasonable (see Dixon J in R v Darling Island Stevedoring & Lighterage Co Ltd; Ex parte Halliday (1938) 60 CLR 601 – this case concerned a provision of an award but the provision adopted the common law test for a lawful direction).

Generally speaking it will not matter that the work completed on secondment is not interesting or that there is not enough work for a secondee. There is no common law right for an employee to be provided with work or meaningful work (note this common law position may be altered by an applicable enterprise agreement, contract of employment, or other workplace instrument).

It is important to note that an employee does not have to comply with a direction that is unlawful. Therefore if a direction to go on secondment breaches an employer’s obligation under the Fair Work Act 2009 (Fair Work Act), the employee does not have to comply with the direction. Employees should be particularly alert if the secondment occurs at the same time as a significant change within their employer’s organisations such as a new outsourcing arrangement or a merger.

Can sending an employee on a secondment be adverse action?

In the recent case of McJannet v Special Broadcasting Services Corporation t/as SBS Corporation [2016] FCCA 2937 the Federal Circuit Court considered whether sending an employee on secondment can constitute adverse action.

Ms McJannet was employed by SBS as a Presentation Coordinator Supervisor within the Technology and Distribution Division. She had worked for SBS since 1982. In late 2014 SBS entered into an agreement to outsource its playout operations to Deluxe Australia Pty Ltd. As a consequence of the outsourcing:

A number of SBS employees of the T&D division (excluding Ms McJannet and some others) were offered and accepted employment with Deluxe; and


SBS decided to retain Ms McJannet and a number of other members of the T&D division as employees. Ms McJannet was then directed to go on secondment with Deluxe in order to perform the requirements of her position.

Ms McJannet took a period of leave, resigned on 14 March 2016, and did not go on the secondment. Despite her resignation SBS encouraged her to reconsider her resignation and recommence employment but she did not take up this offer and her employment with SBS ceased.

Ms McJannet alleged a number of contraventions of the Fair Work Act and her contract of employment. Relevantly for this blog post, Ms McJannet claimed adverse action had occurred under s.340 of the Fair Work Act when SBS decided to require her to undertake a secondment (or otherwise resign) and not pay her redundancy. Section 340 of the FW Act provides that a person must not take adverse action against another employee because the other person has a workplace right (etc) to prevent the exercise of a workplace right by the other person. Ms McJannet claimed she had a right to redundancy payout. Adverse action is defined in s.342 of the Fair Work Act. Adverse action is taken by an employer against an employee if the employer injures the employee in his or her employment (s.342(1) Item 1(b)) or alters the position of the employee to the employee’s prejudice (s.342(1) Item 1(c)). SBS submitted that adverse action had not occurred as there was no "injury" or prejudicial alteration to her position, and she was not entitled to a redundancy payment.

Judge Altobelli found there was no adverse action. Ms McJannet was never in scope to be offered employment with Deluxe and was never offered a financial settlement as a consequence of the outsourcing. Judge Altobelli found the proposed secondment did not require the functions of Ms McJannet’s position to be transferred to another location and therefore she was not eligible for a redundancy under the relevant clause of the enterprise agreement. Ms McJannet was directed to go on secondment to Deluxe and was not offered resignation as an alternative.

Ms McJannet was particularly concerned about being sent on secondment because she believed it would involve deskilling, make performance management difficult, involve a new work location, involve new training, and raise problems with her supervising team located physically apart from her. Judge Altobelli found that no aspect of the secondment would have altered the position of the applicant to her prejudice and that there was no adverse action. 

 

Summary

Ordinarily, if an employee is directed to go on secondment by their employer and the direction is a lawful direction, the employee will have to go on the secondment regardless of whether the employee has to change physical work location or whether the employee will be getting challenging or interesting work. Employees should look out for any additional factors that may affect their employer’s power to send them on a secondment, such as a Secondment Policy or relevant provisions of an enterprise agreement.

It is possible that requiring an employee to go on secondment may constitute adverse action in certain factual circumstances. However, the case of McJannet v Special Broadcasting Services Corporation t/as SBS Corporation [2016] FCCA 2937 indicates that it will be difficult to establish that being sent on secondment "alters the position of the employee to the employee’s prejudice" or "injures the employee in his or her employment" under s.342 of the Fair Work Act. 

 

For further reading I recommend the case of Westpac Banking Corporation v Wittenberg [2016] FCAFC 33 which involves complicated legal issues arising from five secondments that occurred during the merger of St George Bank with Westpac Banking Corporation. You may also wish to read Swiegers v Commonwealth Scientific and Industrial Research Organisation [2015] NSWDC, a decision concerning the employer’s failure to provide a role for the secondee when the secondee returned to the employer from secondment.