Purpose of the Bill

The purpose of the Australian Human Rights Commission Amendment (Costs Protection) Bill 2023 is to amend the Australian Human Rights Commission Act 1986 (AHRC Act) to insert a modified ‘equal access’ cost protection provision to apply to all unlawful discrimination proceedings commenced in the federal courts.

Background

Respect@Work Report

In June 2018, the Coalition Government announced it would provide funding to the Australian Human Rights Commission (AHRC) to undertake a national inquiry into sexual harassment in Australian workplaces.

The Respect@Work Report was released in 2020 and made 55 recommendations which comprise ‘a new approach for government, employers and the community to better prevent and respond to sexual harassment in the workplace and provide leadership and innovation in addressing this complex and difficult issue’ (p. 15).[1]

Of these recommendations, 13 required Commonwealth legislative reform.[2] As stated by the Attorney-General’s Department, all but one of these 13 recommendations have now been implemented with the commencement of the following legislation:

• Sex Discrimination and Fair Work (Respect at Work) Amendment Act 2021[3]
• Anti-Discrimination and Human Rights Legislation Amendment (Respect at Work) Act 2022 (Respect at Work Act 2022) [4] and
• Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022.[5]

The provisions in this Bill are aimed at implementing the outstanding recommendation which requires legislative reform (recommendation 25), which stated:

Recommendation 25: Amend the Australian Human Rights Commission Act to insert a cost protection provision consistent with section 570 of the Fair Work Act 2009 (Cth).[6]

History of the cost protection provisions

A costs order is a court order that sets out which party must pay the legal costs associated with proceedings, which is generally regulated by legislation and by court rules. While anti-discrimination complaints made to the AHRC do not involve costs orders, both the Federal Court of Australia and the Federal Circuit and Family Court of Australia (Division 2) (collectively the federal courts) may award costs.[7]

Currently, while federal courts have broad discretion in deciding how to award costs in unlawful discrimination proceedings, they generally follow the practice of making a no-costs order (where each party pays their own costs) or awarding costs following the event (where the unsuccessful party pays the costs of the other party).[8]

As part of its inquiry, the AHRC received a number of submissions which argued that the current process for awarding costs ‘operates as a disincentive to pursuing sexual harassment matters under the Sex Discrimination Act’ (p. 507). In recognising these concerns, the AHRC recommended that the Government amend the AHRC Act to insert a cost protection provision consistent with section 570 of the Fair Work Act 2009 (Recommendation 25, p. 45). This provision provides that costs may only be ordered against a party if the court is satisfied that the party instituted the proceedings vexatiously or without reasonable cause, that a party’s unreasonable act or omission caused the other party to incur costs, or that the party unreasonably refused to participate in a matter before the Fair Work Commission which arose from the same facts as the proceedings (referred to as a ‘hard cost neutrality model’).[9]

This recommendation was originally agreed to in-principle by the Coalition Government as part of its 2021 response to the Respect@Work report, which stated that it would ‘review cost procedures in sexual harassment matters to ensure they are fit for purpose, taking into account the issues raised by the Report’ (p. 15). This recommendation was not addressed in the Coalition Government’s initial legislative response to the Respect@Work report (the Sex Discrimination and Fair Work (Respect at Work) Amendment Bill 2021).

On 14 February 2022, the former Attorney-General Michaelia Cash released a consultation paper and survey seeking feedback on the outstanding recommendations from the Respect@Work report which required legislative change (including recommendation 25).[10] The consultation process concluded on 18 March 2022, however the 2022 Federal Election was called on 10 April 2022.

Respect at Work Bill 2022

The Anti-Discrimination and Human Rights Legislation Amendment (Respect at Work) Bill 2022 (Respect at Work Bill 2022) was introduced to the Parliament by the Albanese Government on
27 September 2022. The purpose of the Bill was to respond to the outstanding recommendations from the Respect@Work report which required legislative amendments.

Schedule 5 of the Respect at Work Bill 2022 originally included provisions which would amend the AHRC Act to provide that the default position in unlawful discrimination proceedings is each party will bear their own costs. However, the federal courts would have had the discretion to depart from this position and make orders as to costs where it is considered just to do so, with a list of factors the court must consider. This has been described as a ‘soft costs neutrality model’.[11]

While this approach differed from the approach outlined in recommendation 25 of the Respect@Work report, the Government explained that it was in line with the model recommended by the AHRC in its later 2021 Free and Equal Position Paper which outlined a reform agenda for federal anti-discrimination laws (p. 201). At the time, the Government stated that this approach ‘balances the need for certainty and the clear impact costs can have on applicants taking action in the courts against the unintended consequences of costs reform, such as impacting access to legal representation’.

Legal and Constitutional Affairs Legislation Committee Report

As part of its inquiry into the Respect at Work Bill 2022, the Legal and Constitutional Affairs Legislation Committee (the Committee) considered the cost provisions in Schedule 5 of that Bill.

In its report, the Committee noted that there were differing views from stakeholders on the cost provisions:

…several stakeholders supported the provision on the basis that cost neutrality would be an improvement to the current approach. However, other stakeholders argued that the proposal does not go far enough and would fail to achieve its intended objective. (p. 32)

Some stakeholders advocated (pp. 33–35) that the Government adopt an ‘equal access model’ where:

• claimants will generally not be liable for adverse costs, except where vexatious claims are made or a claimant’s unreasonable conduct in the course of proceedings has caused the other party to incur costs
• if an applicant is successful and the court has found that a respondent has engaged in discriminatory conduct, the respondent will be liable to pay the claimant’s costs and
• if a claimant is unsuccessful, each party will bear its own costs.

However, the Committee was of the view that the approach proposed in the Respect at Work Bill 2022 ‘would provide a degree of costs certainty for both parties and allow the courts the flexibility to deal with costs on a case-by-case basis’ (p. 39). The Committee recommended that the proposed cost provisions be the subject of an Australian Law Reform Commission review six to 12 months following commencement to ensure they are operating as intended (recommendation 1).

In its response to the Committee’s recommendation, the Government stated that while it noted this recommendation, it had listened to stakeholder concerns regarding these provisions and moved amendments to the Bill to remove these provisions. Accordingly, the Bill as passed by the Parliament did not include the originally proposed cost provisions.

Review into an appropriate cost model for Commonwealth anti-discrimination laws

Following the removal of the cost provisions from the Respect at Work Bill 2022, the Government referred the issue of costs in discrimination proceedings to the Attorney-General’s Department for review by May 2023 (AGD review).

A consultation process was undertaken from 23 February to 14 April 2023 and the Government published a consultation paper setting out possible options for reform, including:

• the option originally recommended by the Respect@Work Report, which is a model based on section 570 of the Fair Work Act (‘hard cost neutrality’)
• the option put forward in the Respect at Work Bill 2022 (‘soft cost neutrality’)
• an asymmetrical cost model (the equal access model proposed by stakeholders in their submissions to the Legal and Constitutional Affairs Committee report as discussed above)
• a hybrid or applicant opt-in model.[12]

The Government published 31 submissions, some of which are discussed in the ‘position of major interest groups’ section of this digest. Following this consultation process, the Government has adopted what it has referred to in the Explanatory Memorandum as a “modified ‘equal access’ approach”:

…adopting the requirements of the equal access model but adding the ability to award costs against an applicant in circumstances where the respondent has been successful on all grounds, the respondent does not have a significant power advantage over the applicant and the respondent does not have significant financial or other resources, relative to the applicant. (p. 3)

Committee consideration

At the time of writing, the Bill has not been referred to any committees.

Senate Standing Committee for the Scrutiny of Bills

At the time of writing, the Senate Standing Committee for the Scrutiny of Bills had yet to consider the Bill.

Policy position of non-government parties/independents

Proposals to amend the costs provisions in the Respect at Work 2022 Bill

The Member for Kooyong, Monique Ryan, moved amendments to the Respect at Work 2022 Bill which would have provided for an equal-access approach to costs:

Under this proposal, each party will bear its own costs, except when the applicant is unsuccessful [sic]—that is, when the court has found that the respondent has engaged in discriminatory conduct, in which case the respondent will be liable to pay the applicant's costs, as they should. You should not be excused from bearing costs when you have broken the law. People and organisations found to have engaged in discrimination or harassment in breach of the law should have to pay the legal costs of the applicant. This will act as an incentive to change workplace cultures that permit discriminatory treatment. This should apply not only to sex discrimination cases but also to cases or instances of discrimination on the basis of race, age or physical capacity. (p. 2425)

The proposed amendments were disagreed to by both the Government and the Opposition. The amendments were supported by the Australian Greens, as well as the following independents: Kate Chaney, Sophie Scamps, Dai Le and Andrew Wilkie.

The Australian Greens and the Jacqui Lambie Network had originally provided notice that they would move amendments similar to those proposed by the Member of Kooyong to the Respect at Work Bill 2022 in the Senate. However, following the Government’s decision to remove the costs provisions from the Bill, Senator Waters advised that they would not proceed with moving the amendments.

Australian Greens

In their additional comments on the Committee’s inquiry into the Respect at Work 2022 Bill, the Australian Greens recommended that the Government amend the Bill to adopt an ‘equal access’ approach to costs protection for complaints (pp. 56–58).

Upon the tabling of this Bill, Senator Larissa Waters stated that Greens welcomed its introduction as it ‘heeds the calls of advocates, victim-survivors, legal experts and unions, the Greens and the crossbench, for equal access costs protections’.

Position of major interest groups

Australian Human Rights Commission

In its submission to the AGD review, the AHRC recommended that the Government retain the model proposed in the Respect at Work 2022 Bill (the ‘soft cost neutrality’ model) and include a provision requiring a review of the operation of the amendments to be conducted within 5 years of their commencement.

In examining the other models proposed in the consultation paper, the AHRC noted that the asymmetrical model (or equal access model) does not represent a balanced approach and therefore did not support its adoption:

Significantly, complaints of unlawful discrimination to the Commission are commonly made against individuals and small businesses, not just government agencies and large corporations. As expressed in the Free and Equal position paper, an appropriate cost model must strike a balance between reducing barriers to complainants’ participation in the courts and the burden on respondents and the court system. Moving the financial risk and disincentive for unmeritorious claims to the respondent may not always be fair in the circumstances of the case. (p. 8)

The AHRC stated that the ‘soft cost neutrality’ model:

… represents a more balanced, flexible and holistic approach to the determination of costs across all unlawful discrimination matters, allowing the courts to make cost orders in the interests of justice having regard to the particular circumstances of the case. (p. 10)

Law Council of Australia

In its submission to the AGD review, the Law Council of Australia (LCA) stated that it was not currently in a position to support any of the proposed models for reform set out in the discussion paper and reserved its position (pp. 1–2). In arriving at this outcome, the LCA noted that in consulting with its constituent bodies, ‘a range of views was presented, and no single model could be said to have attracted overwhelming support’ (p. 5).

The LCA confirmed that the ‘cost neutrality’ model was no longer supported by a majority of practitioners in most jurisdictions, while some of its larger constituent bodies (including the Law Society of New South Wales, the Law Institute of Victoria and the Victorian Bar) expressed support for the asymmetric model (pp. 6–7). However, the LCA noted that practitioners had raised similar concerns to the AHRC regarding the adoption of such a model on respondents (p. 8).

In light of concerns regarding each of the proposed costs models, ‘a significant number of practitioners on expert committees consulted by both the Law Council and Constituent Bodies have expressed support for maintaining the status quo’ (p. 8). Given the Parliamentary Joint Committee on Human Right’s current inquiry into the Commonwealth human rights framework, the LCA commented that it might be more appropriate to revisit the cost issue in the context of that review (p. 10).

Australian Discrimination Law Experts Group

The Australian Discrimination Law Experts Group (ADLEG), a group of legal academics with significant experience and expertise in discrimination and equality law and policy, were supportive of the asymmetrical costs model and noted academic research which supported such a model:

Drawing on extensive empirical research on age discrimination complaints in Australia and the UK, Blackham concludes that existing cost regimes deter claiming and limit access to justice for the most vulnerable claimants. Blackham therefore recommends the adoption of qualified, one-way costs shifting, such that claimants only can recover legal expense. (p. 5)

ADLEG argues that the ‘soft costs neutrality model’ does not go far enough in supporting claimants in making anti-discrimination claims as the fear of costs being awarded, or uncertainty around the award of costs, can still act as a significant deterrent (p. 13). The ADLEG was also supportive of a statutory review of any proposed amendments to ensure they achieve their objective (p. 27).

Australian Council of Trade Unions

The Australian Council of Trade Unions (ACTU) recommended that the Government should legislate to adopt an equal access costs model, though careful consideration should be given to its exact wording:

Respondents should be able to recover costs in circumstances where the court is satisfied that the applicant instituted the proceedings vexatiously or without reasonable cause, thereby providing disincentives to applicants to initiate such actions and protecting respondents from unmeritorious claims. (p. 18)

The ACTU also recommended that that wording regarding unreasonable behaviour is not included as it was concerned that the mere refusal of a settlement offer or Calderbank offer could constitute unreasonable behaviour (p. 19). If such wording was included, the ACTU argued that further clarity should be provided on what it constitutes:

It should be made clear that the rejection of a settlement offer by an applicant or lack of participation in a process would not be considered an unreasonable act that could lead to a costs order, and any ‘unreasonable conduct’ should also be considered in the context of other factors such as whether the person was legally represented. (p. 20)

Financial implications

The Government has stated that the Bill will have no financial implications (p. 7).

Statement of Compatibility with Human Rights

As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011, the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act.

The Government has stated that the Bill engages the following rights:

• the right to an effective remedy in Article 2(3) of the International Covenant on Civil and Political Rights (ICCPR), Article 6 of the Convention on the Elimination of All Forms of Racial Discrimination, Article 2 of the Convention on the Elimination of All Forms of Discrimination Against Women and implicitly required in Article 4 of the Convention of the Rights of Persons with Disabilities and
• the right to equality and non-discrimination in Articles 2, 16 and 26 of the ICCPR.

The Government considers that the Bill is compatible.[13]

Parliamentary Joint Committee on Human Rights

At the time of writing, the Parliamentary Joint Committee on Human Rights had yet to consider the Bill.

Key issues and provisions

Following the termination of a complaint to the AHRC, an application may be made to the federal courts, by or on behalf of an affected person, alleging unlawful discrimination by one or more of the respondents to the terminated complaint.[14]

Currently section 46PSA of the AHRC Act provides that where an application has been made to the court and either party makes an offer to settle which is then rejected, the court may take this into account when awarding costs. Notes to this section also confirm that under the relevant provisions in the Federal Court of Australia Act 1976 and the Federal Circuit and Family Court of Australia Act 2021, a judge of either court may award costs.

Item 3 of the Bill will replace section 46PSA with new provisions which give effect to the Government’s “modified ‘equal access’ approach” for awarding costs.

Proposed section 46PSA provides that if the applicant is successful on one or more grounds, the court must order the respondent to pay the applicants costs except the costs that the court is satisfied were incurred due to the applicant’s unreasonable act or omission. Further, the applicant will only be liable to pay the respondent’s costs where the court is satisfied that:

• the applicant instituted the proceedings vexatiously or without reasonable cause
• the applicant’s unreasonable act or omission caused the other party to incur the costs or
• all of the following apply:
  • the other party is a respondent who was successful in the proceedings
  • the respondent does not have a significant power advantage over the applicant and
  • the respondent does not have significant financial or other resources, relative to the applicant.

The Explanatory Memorandum includes a diagram setting out how the costs provisions will work (Figure 1, p. 6).

According to the Explanatory Memorandum, proposed section 46PSA would apply to unlawful discrimination proceedings commenced under Part IIB, Division 2 of the AHRC Act in the federal courts, as well as to appeals pursued in the High Court of Australia. (p. 12).

The Respect at Work Act 2022 amended the AHRC Act to allow a representative body (such as a trade union, advocacy group or human rights organisation) to initiate proceedings in the federal courts if it has lodged a complaint with the AHRC on behalf of one or more ‘persons aggrieved’ and the representative complaint is not able to be conciliated at the AHRC and is terminated. Proposed subsection 46PSA(7) provides that where the costs order relates to an application by a representative body, the order can only be made against the representative body and not the individuals on whose behalf the application is made.

The provisions will leave it for the courts to determine where an applicant has acted unreasonably, which may be of concern to some stakeholders who advocated for stronger wording (for example, the ACTU). It will also be left for the courts to determine where a respondent has significant power advantage over the applicant or has significant financial or other resources, relative to the applicant. The Explanatory Memorandum states that ‘[i]f a respondent seeks to rely on paragraph 46SA(6)(c), the respondent would need to provide evidence of their financial position’ (p. 15).

The Respect at Work Act 2022 includes provisions requiring the Minister to cause an independent review to be conducted of the operation of the amendments made by that Act (section 4). However, as the review only relates to the provisions of that Act, it will not be required to consider the provisions of this Bill.