Federal Court of Australia

Colton v Dhelkaya Health (Costs) [2025] FCA 1153

ORDERS

THE COURT ORDERS THAT:

1.    The Appellant pay the Respondent’s costs on an indemnity basis for the period after 6pm on 18 April 2025, such amount to be assessed in default of agreement.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

ORDERS

THE COURT ORDERS THAT:

1.    The Appellant pay the Respondent’s costs on an indemnity basis for the period after 6pm on 18 April 2025, such amount to be assessed in default of agreement.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

ANDERSON J:

introduction

1    On 13 August 2024, both appeals were dismissed in their entirety: Colton v Dhelkaya Health [2025] FCA 942 (Appeal Decision). At paragraph [2] of that decision, I outlined the background to the two appeals. In summary, on 15 July 2022 and 11 August 2022 respectively, the appellants commenced proceedings before the Federal Circuit and Family Court of Australia (FCFCOA) against the respondent, their former employer, contending that their dismissals were in contravention of the Fair Work Act 2009 (Cth) (FW Act) and that they suffered other adverse action and unlawful coercion. On 28 November 2022, the appellants consented to their matters being heard together. On 23 September 2024, the primary judge dismissed the proceedings in the FCFCOA and ordered costs be reserved, delivering separate reasons for each of the proceedings: Mayne v Dhelkaya Health [2024] FedCFamC2G 938 and Colton v Dhelkaya Health [2024] FedCFamC2G 939. The appellants filed separate appeals but, given the grounds of appeal were broadly similar, the Appeal Decision addressed both appeals together.

2    The parties to the appeals sought to make submissions on costs and were content for the question of costs to be determined on the papers. On 3 September 2025, the appellants filed written costs submissions together with an affidavit of Leonard Colton, made 3 September 2025, and an affidavit of Bernadette Mayne, made 3 September 2025.

3    The appellants, by their written submissions, submit that there should be no order requiring them to pay the respondent’s costs of the appeals.

4    The respondent filed written costs submissions on 25 August 2025. The respondent submits that the Court should make an order for the respondent’s costs incurred in defending the appeals to be paid by the appellants, and that those costs be:

(a)    on a party-party basis for the period prior to the close of business on 18 April 2025; and

(b)    on an indemnity basis for the period after that date.

5    For the reasons given below, the Court will make an order that each of the appellants pays the respondent’s costs on an indemnity basis for the period after 6pm on 18 April 2025. The Court will not make any costs order for the period prior to 6pm on 18 April 2025.

PRINCIPLES

6    Pursuant to s 43 of the Federal Court of Australia Act 1976 (Cth) the Court has a broad discretion to make an order for costs. However, these appeals arise under the FW Act. Section 570 of the FW Act places a limitation on the Court’s power to award costs in matters arising under the FW Act. Relevantly, subsection 570(2) provides that, in these circumstances, a party may be ordered to pay costs only if the Court is satisfied that:

(a)    the party instituted the proceeding vexatiously or without reasonable cause (First Ground); or

(b)    the party’s unreasonable act or omission caused the other party to incur costs (Second Ground).

7    The policy behind s 570 of the FW Act was explained by Mortimer J (as her Honour then was) in Ryan v Primesafe (2015) 323 ALR 107; [2015] FCA 8 at [64], and affirmed in Trustee for The MTGI Trust v Johnston (No 2) [2016] FCAFC 190 (Siopis, Collier and Katzmann JJ) at [8]. Her Honour outlined the following in Primesafe:

The reason for caution is the potential for discouraging parties’ pursuit in a complete and robust way of the claims for contravention which they seek to make under the Fair Work Act, or the defence of such claims. The policy behind s 570 is to ensure that the spectre of costs being awarded if a claim is unsuccessful does not loom so large in the mind of potential applicants (in particular, in my opinion) that those with genuine grievances and an arguable evidentiary and legal basis for them are put off commencing or continuing proceedings. It is an access to justice provision. Insofar as it operates to the benefit of respondents, it is designed to ensure respondents feel free to pursue arguable legal and factual responses to the claims made against them.

8    Nonetheless, to enliven the Court’s discretion to award costs in matters arising under the FW Act, it is not necessary to prove that there are exceptional circumstances warranting the making of an order in a proceeding: Australian Workers Union v Leighton Contractors Pty Ltd (No. 2) (2013) 232 FCR 428 at [7] (Dowsett, McKerracher and Katzmann JJ).

9    In respect of the First Ground, it is “well accepted” that one way of testing whether a proceeding is instituted “without reasonable cause” is to ask whether, upon the facts apparent to the applicant at the time of instituting the proceeding, there were no substantial prospects of success: Australian Workers Union at [7]. If success depends upon resolution in the applicant’s favour of one or more arguable points of law, it is inappropriate to say that the proceeding was instituted “without reasonable cause”. However, where on the applicant’s own version of the facts it is clear the proceeding must fail, it may be said that the proceeding lacks a reasonable cause: Reeve v Ramsay Health Care Australia Pty Ltd (No 2) [2012] FCA 1322 at [10] (Barker J). The question here is whether it was clear, on the facts known to the appellants when the appeals were instituted by the appellants, that their respective appeals had no substantial prospects of success.

10    In respect of the Second Ground, the following principles apply, as summarised by Lee J in Patrick Stevedores Holdings Pty Ltd v Construction, Forestry, Maritime, Mining and Energy Union (CFMMEU) (No 5) [2021] FCA 1645 at [6]. First, a failure to accept a reasonable offer of compromise, including an offer expressed in accordance with the principles in Calderbank v Calderbank [1975] 3 All ER 333, is capable of constituting an unreasonable act or omission for the purposes of s 570(2): see also Trustee for The MTGI Trust v Johnston (No 2) [2016] FCAFC 190 at [21]-[24]. Second, “unreasonable” does not equate to “exceptional”. Third, whether an act is “unreasonable” is informed by its context and requires an evaluative assessment of all of the circumstances. The following matters should ordinarily be considered:

(a)    the stage of the proceeding when the offer was made;

(b)    the time afforded to the offeree to accept the offer;

(c)    the extent of the compromise involved;

(d)    the offeree's prospects of success, assessed as at the date of the offer;

(e)    the clarity with which the terms of the offer were expressed; and

(f)    whether the offer foreshadowed an application for indemnity costs in the event of refusal.

CONSIDERATION

The appeals were instituted without reasonable cause

11    In the Appeal Decision, I found that none of the grounds of appeal, for each appellant, were made out. However, this does not mean that, at the time the appeals were instituted, the appellants ought to have known that the appeals had no reasonable prospects of success. In the context of the FW Act, the “Court ought be very careful indeed to exercise the discretion provided by s 570(2) and should not do so other than in a clear case”: Saxena v PPF Asset Management Ltd [2011] FCA 395 at [6] (Bromberg J). The mere fact that the appellants failed on each ground of their appeals, does not mean the applications were instituted without reasonable cause.

12    I am not satisfied that the appeals were instituted without reasonable cause. The First Ground of s 570(2) of the FW Act is not made out.

The appellants’ unreasonable act or omission caused the respondent to incur costs

13    I am satisfied that the appellants’ unreasonable acts or omissions in refusing reasonable offers of settlement caused the respondent to incur costs in defending the appeals.

14    In this respect, on 3 April 2025, the respondent made Calderbank offers to each of the appellants by which the respondent offered, in exchange for the appellants immediately taking all necessary steps to discontinue the appeals, to:

(a)    pay each appellant the sum of $1,000; and

(b)    not seek any order for its costs incurred in relation to the appeals as at the date of the making of its offers, or any future costs incurred in respect of the finalisation of the matters: Affidavit of Rory Emmet Jolley, affirmed on 25 August 2025 (Jolley Affidavit) at [6] and [7]; exhibit REJ-1.

15    The respondent’s offers to each of the appellants:

(a)    remained open until close of business on 18 April 2025 (i.e. a period of over 14 days);

(b)    explained in detail why the appeals were bound to fail (which they did);

(c)    stated that they were made in accordance with Calderbank principles; and

(d)    foreshadowed that, if its offers were not accepted and the appeals failed, the respondent would rely on its correspondence on the question of costs and seek an order pursuant to s 570 of the FW Act that the appellants pay the respondent's future costs of the proceeding including on an indemnity basis: Jolley Affidavit; exhibit REJ-1.

16    The respondent did not receive any response from the appellants to the correspondence referred to above and, accordingly, the respondent's offers lapsed as at 4.00pm on 18 April 2025 according to their terms: Jolley Affidavit at [8].

17    I am satisfied, in the circumstances, that the appellants acted unreasonably in refusing the respondent’s reasonable offers of settlement and, as a consequence, caused the respondent to incur costs in defending the appeals.

18    Therefore, I am satisfied that the Second Ground of s 570(2) of the FW Act is enlivened. That is, the Court may make a costs order pursuant to the discretionary power in s 43 of the Federal Court of Australia Act 1976 (Cth).

Indemnity Costs

19    It is well-established that, in the context of s 570 of the FW Act, once the Court’s discretion to award costs is enlivened, it includes a discretion to award indemnity costs: Sabapathy v Jetstar Airways [2021] FCAFC 68 at [65] (and the cases referred to there) (Logan, Flick and Katzmann JJ); United Firefighters’ Union of Australia v Fire Rescue Victoria [2025] FCAFC 7 at [51] (Katzmann, Snaden and Shariff JJ); Burt v University of Sydney (No 2) [2025] FCA 596 [37].

20    However, the power to order costs, on any basis including on an indemnity basis, remains discretionary. As Logan J said in Construction, Forestry, Mining & Energy Union v North Goonyella Coal Mines Pty Ltd [2013] FCA 1444 at [78], approved in United Firefighters’ Union of Australia at [51]:

It does not…axiomatically follow that because one is satisfied for the purposes of s 570(2)(b) [of the FW Act] that one must exercise the discretion given under s 570(1) always to order indemnity costs. Each case must be considered on its individual merits.

21    Once a criterion is engaged in s 570(2), here the Second Ground, the discretion “should be exercised, not so as to impose a penalty or punishment on the losing party but to provide an appropriate means of compensating the successful party having regard to all of the circumstances”: Shea v Energy Australia Services Pty Ltd (No 2) [2015] FCAFC 14 at [11] (Rares, Flick and Jagot JJ) (and the cases referred to there).

22    In considering the exercise of the discretion to award costs the statutory context of the FW Act, and the legislative purpose of s 570, as I discuss in [7], remains relevant: Burt v University of Sydney (No 2) [2025] FCA 596 [38]. This is especially so in considering the Court’s discretion to award indemnity costs, which is “in substance, a second departure from the underlying policy evidenced by s 570”: Primesafe at [114]; cf Tamu v World Vision Australia (No 2) [2021] FCA 565 at [26] (Rangiah J).

23    For an award of costs on an indemnity basis in the context of the FW Act, it is not necessary that “the party against whom the order is to be made should be thought guilty of misconduct or having acted maliciously…a proceeding can commence (and may be progressed) without any impropriety of purpose on the part of an applicant and yet still attract an order for indemnity costs”: United Firefighters’ Union of Australia at [50].

24    I am satisfied, in the circumstances, that it is appropriate to make costs on an indemnity basis for the period following the provision of the Calderbank offers. I am so satisfied given the generosity of the offers, in the circumstances of these appeals, as discussed at [15], including the clearly explained poor prospects of the appeals. Further, the appellants failure to engage whatsoever with the offers, demonstrates a level of disregard justifying an award of indemnity costs.

Disposition

25    I am satisfied, in all the circumstances, that it is appropriate that an order for indemnity costs be made in the respondent’s favour, for the period following the provision of the Calderbank offer, being from 6pm on 18 April 2025.

Associate:

Dated:     19 September 2025