Dissenting report by Senator Paul Scarr
1.1I thank all those who made submissions to the inquiry into the Australian Human Rights Commission Amendment (Costs Protection) Bill 2023 (the Bill).In particular, I would like to thank everyone who appeared to give evidence at the hearing held on 31 January and those who answered questions on notice within the relatively short period of time (please rest assured that I reviewed and considered your answers).
1.2I would also like to extend my appreciation to those witnesses who appeared at the inquiry. Many of the witnesses advocate for and represent those impacted by sexual harassment and discrimination. This is incredibly important work.
1.3The weight of the matters being considered by the Committee was exemplified by the testimony provided by Ms Melanie Schleiger of Victoria Legal Aid who described her experiences in advising clients who are victims of sexual harassment:
Even more heartbreaking is telling a person they've got a really strong case and that we will support them all the way, but they can't proceed because it is taking such a heavy toll on their mental health. Sorry, I have been doing this for a long time and I know it has an accumulative negative impact when you see that repeatedly time and again. It feels like the system is so broken.[1]
1.4There is strong evidence that there are issues with the current system that need to be addressed. There is largely consensus in this regard. However, there is no consensus with respect to the costs model which should apply to proceedings commenced under Part IIB, Division 2 of the Australian Human Rights Commission Act1986 (the AHRC Act). As the submissions and testimony to the Committee evidence, this is a contested area.
1.5This was perhaps best summed up by the evidence of the Australian Human Rights Commission (AHRC) who stated:
The Commission acknowledges that the question of an appropriate cost model that is fair, certain and facilitates access to justice, is complex and reasonable minds may differ on the most beneficial model. The Commission welcomes reform of these laws.[2]
1.6Having participated in two inquiries in relation to these issues, I agree–reasonable minds may differ on the most beneficial model. There are numerous models, and each has its advantages and disadvantages. However, it is incumbent on the Committee to weigh the evidence and make a recommendation to the Senate with respect to the cost model proposed in the Bill.
1.7The vexed nature of the issue being considered is illustrated by the fact that the matters dealt with in this Bill relate to the last remaining recommendation requiring legislative reform made in the Respect@Work: National Inquiry into Sexual Harassment in Australian Workplaces Report (the Respect@Work report).[3] The relevant recommendation is recommendation 25; namely:
Amend the Australian Human Rights Commission Act to insert a cost protection clause consistent with section 570 of the Fair Work Act 2009 (Cth).[4]
1.8Section 570 of the Fair Work Act 2009 (Cth) provides:
(1)A party to proceedings (including an appeal) in a court (including a court of a State or Territory) in relation to a matter arising under this Act may be ordered by the court to pay costs incurred by another party to the proceedings only in accordance with subsection (2) or section 569 or 569A.
Note: The Commonwealth might be ordered to pay costs under section 569. A State or Territory might be ordered to pay costs under section 569A.
(2)The party may be ordered to pay the costs only if:
The Commission acknowledges the concerns raised in submissions regarding the risk of cost orders acting as a disincentive to pursuing the sexual harassment matters in the federal jurisdiction.The Commission is concerned about the negative impact on access to justice, particularly for vulnerable members of the community.
Accordingly, the Commission considers that the Australian Human Rights Commission Act be amended to insert a cost protection provision consistent with section 570 of the Fair Work Act 2009 (Cth).Such a provision should ensure costs may only be ordered against a party by the court if satisfied that the party instituted the proceedings vexatiously or without reasonable cause, or if the court is satisfied that a party’s unreasonable act or omission caused the other party to incur costs.[6]
1.11Subsequent to the issue of the Respect@Work report, the AHRC completed a further report with respect to reform of discrimination laws more generally; namely: Free & Equal: A reform agenda for federal discrimination laws (the Free and Equal Report).[7] With respect to the issue of costs, the Commission made the following observations:
There are presently no specific provisions relating to costs in unlawful discrimination proceedings before the Federal Circuit Court and the Federal Court. These courts have a general discretion to order costs under the provisions of their establishing acts and generally exercise these powers according to the guiding principle that ‘costs follow the event’.Under this principle, an unsuccessful party to litigation is ordinarily ordered to pay the costs of the successful party.
While courts have the discretion to depart from this approach in certain circumstances – and also the power to make cost-capping orders – concerns have been raised that the threat of an adverse costs order discourages the pursuit of legitimate discrimination claims in the courts.The time and cost of litigation are also reasons identified for settling prior to court.[8]
1.12The Commission then came to the view:
After considering the competing arguments, the Commission considers that the default position should be that parties bear their own costs, as contained in the Human Rights and Anti-Discrimination Bill 2012 (HRAD Bill), with the court retaining a discretion to award costs in the interests of justice.The Commission considers, however, that clarity should be provided by amendment to the Australian Human Rights Commission Act (Cth) (AHRC Act) to include mandatory criteria to be considered by the courts in determining whether to award costs in the interest of justice.The list included in the HRAD Bill, which was based on the Family Law Act 1975 (Cth) (Family Law Act), is an instructive one.[9]
1.13The HRAD Bill (referred to above) provided that in considering whether the circumstances justify departing from the default position that each party is to bear their own costs, the court was to have regard to the following matters:
(a)the financial circumstances of each of the parties to the proceedings;
(b)whether any party to the proceedings is receiving assistance [from the Attorney General’s Department or by way of legal aid and the nature and terms of any such assistance;
(c)the conduct of the parties to the proceedings (including any conduct of the parties in dealings with the Commission);
(d)whether any party to the proceedings has been wholly unsuccessful in the proceedings;
(e)whether any party to the proceedings has made an offer in writing to another party to the proceedings to settle the proceedings and the terms of any such offer; and
(f)any other matters that the court considers relevant.[10]
1.14The above then became the basis for what was referred to in the Free and Equal Report as: ‘Major Reform 3 – Enhancing Access to Justice’.[11]
1.15The recommendation contained in the Free and Equal Report then became the basis for the costs model proposed in the Anti-Discrimination and Human Rights Legislation Amendment (Respect at Work) Bill 2022 (the ADHRLA Bill 2022).[12] The matters enumerated in the HRAD Bill were replicated in the ADHRLA Bill 2022. There was the addition of a further matter; namely: ‘whether the subject matter of the proceedings involves an issue of public importance’.[13]
1.16The ADHRLA Bill 2022 was the subject of an inquiry by this Committee. The Committee tabled its report in November 2022.
1.17The position of a majority of the Committee is discussed at paragraphs 1.18 and 1.19 of the Majority Report for this inquiry. In essence, the majority recommended adoption of the proposed costs model with a review to be undertaken by the Australian Law Reform Commission 6 to 12 months after passage of the ADHLRA Bill 2022.
1.18In additional comments, I made the following observations:
1.45Based on the evidence before the committee, there is a material question as to whether the change in the cost recovery regime may lead to unintended consequences. Under the current law, costs typically ‘follow the event’. The court has discretion to award costs and in most cases the unsuccessful party will be ordered to pay the costs of the successful party.
1.46Where a potential plaintiff has a strong case, this has the benefit that:
(a)The plaintiff may be better able to access legal support from barristers and solicitors on a ‘no-win, no-fee’ basis because the barristers and solicitors having assessed the merits of the case will have a level of confidence with respect to the payment of costs; and
(b)The likelihood of a costs order may be used as leverage by a plaintiff in settlement negotiations (the defendant will be advised that they have the risk of not only having to pay damages but also having to meet both their own costs and those of the plaintiff). This means that a claim may be settled earlier.
1.47Complicating the matter is that claims may be brought against a wide range of potential defendants. Some will be large corporates with great financial resources. However, other potential defendants will be small businesses with financial constraints. In such situations, the argument for adoption of an ‘equal access’ costs approach advocated by some stakeholders is weaker.[14]
1.19Having had the benefit of the evidence provided during the course of this inquiry, I have not materially changed my view.
1.20On the basis of the above observations, I made the following recommendation:
Recommendation 5: Further consideration be given to the appropriate costs allocation principles to avoid unintended consequences.[15]
1.21It should be noted that the Greens in their additional comments to the report, recommended an equal access scheme for the costs model.
1.22Subsequent to the tabling of the report, the Federal Government received strong representations that it should re-consider its cost model approach.
1.23The Government acted on the feedback it received from stakeholders. On 25January 2023, the Government responded to my recommendation 5 in the following terms:
The Government supports this recommendation. The Government carefully considered the Committee’s report and listened to stakeholder concerns in relation to the cost protection provisions originally in the Bill, which were based on a recommendation of the Australian Human Rights Commission. As a result of these considerations the Government moved amendments to remove the cost protection provisions from the Bill. The Government has referred the issue of costs in discrimination proceedings to the Attorney-General’s Department for review. That review will begin immediately and be completed in May 2023. The Government intends to legislate the costs model recommended by that review as quickly as possible.[16]
1.24The subsequent review undertaken by the Attorney General’s Department is discussed at paragraphs 1.21 to 1.44 of the Majority Report.
1.25One of the issues that the consultation process had to grapple with (as does this Committee) is that at a Federal level there is no intermediate level (low-cost tribunal stage) for resolution of disputes.This differs from the position at a State level.
1.26As noted in the consultation paper:
At the federal level, there is no intermediate low-cost stage. Matters proceed from the Commission to the courts, where the complexity of the litigation process and consequently costs increase. The lack of a no costs jurisdiction at the federal level exacerbates the need for costs reform to provide certainty for parties to discrimination matters before embarking on what is often a high cost, high risk process.
Across the majority of states and territories, the costs model adopted for tribunals to apply at the intermediate stage is soft costs neutrality – whereby the default position is that parties bear their own costs, but the tribunal retains discretion to awards costs otherwise where it considers this appropriate (often in reference to a list of prescribed factors – exhaustive or non-exhaustive).[17]
1.27The reason for this can be traced back to the Brandy Case where the High Court found that at a federal level there must be a separation of judicial powers (on the one hand) from the executive and legislative powers (on the other hand).[18] The judicial function may only be exercised by courts established under section 71 of the Constitution.[19] This adds another challenge to the reform process.
1.28Following the consultation process, the Government introduced this Bill which proposes a so-called: ‘modified equal access cost protection provision’. The reasons for the Government’s proposal are detailed in paragraphs 1.45 to 1.49 of the Majority Report. As stated at paragraph 1.47 of the Majority Report, the Government considers that this meets the policy objective of recommendation25 of the Respect@Work report.
1.29Whilst the Government considers that the costs model proposed in the Bill meets the policy objective of recommendation 25 of the Respect@Work report, it is different from the model proposed in that recommendation. Further, it is different from the model proposed by the AHRC in the Free & Equal Report.This was explained by Emeritus Professor Rosalind Croucher, President of the AHRC during her testimony to the Committee:
Senator SCARR: So it is the position of the Australian Human Rights Commission that what is being proposed in this bill is different from what was proposed in both the Respect@Work report and what was also proposed in the Free & Equal report. Is that correct?
Prof. Croucher: Yes, Senator, that is correct. It is a different model. The outcome focus of it is similar—as in the impact on applicants—but in terms of the detail of the model, yes, it is different.
The model that was advocated in the Free & Equal paper was not advocated in a vacuum. It was a model that was drawn from the Family Law Act, as well as from the human rights amendment bill in 2012.
It's also analogous to the state models and was one advocated for by the Productivity Commission, so it's a model that has a certain track record, but it is a different model from that that is recommended in this bill. It was the model that was included in the first iteration of the conversation about the amendments flowing from Respect@Work in relation to costs, but it is a different model. So, in answer to your question, yes.[20]
1.30The President’s testimony at the hearing on 31 January reflected the submission of the AHRC which stated:
The proposed regime also differs from the models recommended in the Respect@Work report, which recommended a model where each party bears their own costs, and the Commission’s ‘Free and Equal: A reform agenda for federal discrimination law — Position Paper’ (Free and Equal position paper), which recommended a model where each party bears their own costs with discretion for the court to award costs in the interests of justice having regard to prescribed mandatory criteria. In the Commission’s view, these models represent a more balanced approach to costs for claims of unlawful discrimination.[21][my emphasis added].
1.31The departure from the previous recommendations made by the AHRC caused concern for the Law Council of Australia who stated:
12. The Law Council is also concerned that the equal-access model as proposed in the Costs Protection Bill was not recommended by the AHRC, either in its Respect@Work or Free and Equal reports.If the Costs Protection Bill is passed, there is potential for the model’s expansion to other areas of law that are also beneficial or remedial in nature, and in which disparities of power between parties are common. This may exacerbate the potential ramifications described [in the Law Council of Australia’s submission].[22]
1.32The AHRC was concerned that the operation of the provisions in the Bill may impede the settlement of matters:
As Australia’s National Human Rights Institution, the Commission is concerned that the reforms proposed may have unintended consequences on the effectiveness of alternative dispute resolution options aimed at facilitating early resolution of complaints, including settlement offers and the Commission’s conciliation function, and may impact on the Commission’s role in stemming the flow of complaints that proceed to court…
The Commission raises concerns that the model proposed in the Bill may have unintended consequences on the efficacy of alternative dispute resolution options, including early offers of settlement and conciliation processes, and the processes of the Commission as a filter for complaints proceeding to court. First, the Bill removes s 46PSA of the AHRC Act, which currently provides that the court, in deciding whether to award costs in proceedings, may have regard to offers to settle.[23]
1.33It is noted that a number of stakeholders contested this view. However, the AHRC’s view is informed by their experience in operating the conciliation function of the AHRC. This was drawn out in the following exchange at the hearing:
Senator SCARR: You might have been here when I put to one of our earlier witnesses the Human Rights Commission's concerns of unintended consequences, including with respect to having a negative impact on whether or not matters settle. That witness said, 'Well, that's a theoretical argument,' so I want to give you an opportunity to perhaps give us some evidence as to the practical aspect of that and how the practical experience of the Human Rights Commission informed the position which it put in its submission with respect to alternative dispute resolution.
Prof. Croucher: The recommendation that we made in the submission to this committee is drawn from the experience of our investigation and conciliation service, which conducts all of the alternative dispute resolution under the four pieces of the antidiscrimination laws at the federal level. So it was based on their advice—their strong recommendation—for the recommendation to you, this committee, in relation to this bill to be shaped in the way it was. Now, insofar as things might be theoretical, indeed that is possible. The research, the experiences are based on the existing model. I think there's a commonality of agreement that whatever model is adopted would need to be reviewed. Let's get some evidence of whatever model plays out, because that informs whatever policy change in this area might then be a further iteration of the costs issues. So, in terms of the evidence that was drawn upon for the recommendation that the Human Rights Commission put to this committee, it was the evidence of the experience of our conciliation team. Ms De Abreu, did you want to add anything to that?
Ms De Abreu: Obviously, as President Croucher said, one of the concerns of that team is the potential unintended consequences. The commission performs an important function. The people who conduct these conciliations are experts. It's trauma informed, and they are confidential conciliations. At the moment the current model, as we've heard from other witnesses today, doesn't incentivise respondents to necessarily engage in that process, but that doesn't mean that we shouldn't incentivise all parties to do so. We'd also add that both of those considerations, with respect to settlement offers and in respect to engagement and the conciliation process, were parts of the two models that the commission recommended in the Free and equal report and also in the Respect@Work report.[24]
1.34As explained by the President of the AHRC, Emeritus Professor Rosalind Croucher:
The recommendations from those who've had experience in the community legal centre sector—indeed, as Dr Cody has herself—can speak from a particular perspective. The perspective conveyed in the commission's submission is very much the perspective of those who've run the conciliation function of the commission for a very long time, particularly in the context of that shift in pushing it all onto access to the Federal Court or nothing at the current point.[25]
1.35This echoed the sentiments of the Law Council of Australia who submitted:
9. The Law Council is concerned that the Costs Protection Bill tilts the balance overly in favour of the applicant and moves the financial risk and disincentive for unmeritorious claims to the respondents. Notwithstanding the Bill’s provisions regarding vexatious or unreasonable proceedings, this may result in large numbers of applicants bringing unmeritorious and protracted litigation without sufficient incentives to ensure efficiency within the justice system. In this context, the Law Council is concerned that the Costs Protection Bill reduces incentives for the parties to engage genuinely with the AHRC’s conciliation processes and, later, in any alternative dispute processes available in the courts and settlement negotiations. It could also render offers of compromise and Calderbank offers ineffective.[26]
1.36The AHRC considered it important that the Bill expressly provides that the Court may have regard to settlement offers (a number of stakeholders considered the opposite; namely that the Bill should expressly exclude the consideration of settlement offers).
1.37The AHRC recommended as follows:
The Commission recommends that the Bill be amended to enable the court to have regard to settlement offers made prior to, and during, the proceedings in the determination of costs.[27]
1.38The Law Council of Australia had similar concerns stating:
The Law Council agrees with the concerns expressed by the AHRC that the operation of these two amendments may mean that there is no or minimal incentive for an applicant to consider a reasonable offer to settle a matter during the AHRC stage, early in the trial preparation or at all. The courts are not precluded from considering the applicant’s response to settlement offers. However, having regard to the ‘high threshold/rare cases’ guidance in the Explanatory Memorandum, it is questionable whether, in most cases, the failure to accept a reasonable settlement offer will engage proposed section 46PSA(4) or section 46PSA(6)(b). As noted by the AHRC, this contrasts with the position under the FW Act, where the term ‘unreasonable act or omission’ has been interpreted to include the unreasonable rejection of a settlement offer.[28]
1.39Consistent with the above arguments, the AHRC recommended that the court should also be able to have regard to whether the parties participated in the AHRC’s complaints process.
1.40In this regard, the AHRC made the following observations with respect to the Bill:
Additionally, unlike the Fair Work Act, the Bill and Explanatory Memorandum explicitly exclude from the court’s consideration whether the parties unreasonably refused to participate in the complaints process before the Commission…
In expressly removing this from the court’s consideration of an appropriate award of costs, the proposed reforms may significantly reduce the incentive for parties to take genuine steps to resolve a complaint and meaningfully engage in the Commission’s complaints and conciliation process, significantly hampering the effectiveness of the Commission’s functions and processes.[29]
1.41After considering these matters, the AHRC made the following recommendation:
The Commission recommends that the Bill be amended to enable the court to have regard to the participation of the parties in the Commission’s complaints process in the determination of costs, to align with s 570(2)(c) of the Fair Work Act.[30]
1.42Again, the Law Council of Australia agreed with the concerns of the AHRC:
Similarly, there may be little incentive under the Costs Protection Bill for applicants to engage meaningfully in the AHRC’s conciliation processes. These are, in the Law Council’s view, essential to ensuring fairness, effective and speedy resolution, and efficiency. They assist parties to better understand the other parties’ perspective, and their own position under the relevant law. This can assist in managing unrealistic expectations and prevent unmeritorious contentions from being made by either party in court, at the more expensive end of the system.[31]
1.43If the Bill proceeds, I strongly agree with the recommendations of the AHRC in this regard. The courts should have the discretion to consider whether settlement offers are made and the participation of parties in the AHRC’s complaint processes.
1.44The AHRC observed that the AHRC’s grounds of termination of a complaint will have elevated importance under the Bill. This is because it will be the final barrier to a respondent’s costs exposure under the provisions of the Bill.
1.45Under the Bill, respondents could be reasonably expected to engage in the processes relating to termination of a complaint to maximise their prospects of minimising their exposure to the cost model under the Bill. In turn, this could place an unintended additional administrative burden on the AHRC.
1.46The AHRC explained their concerns as follows:
In addition, under this model, the Commission’s grounds of termination of a complaint may operate as the final barrier to a respondent’s costs exposure and the amendments may have the unintended consequence of significantly increasing the administrative burden on the Commission in having to consider and respond to detailed and lengthy submissions from respondents and their legal representatives advocating for termination of a complaint on grounds which would require the complainant to seek the leave of the court before being able to proceed with an application to the court.[32]
1.47In my view, this unintended consequence has not been adequately addressed.
1.48Whilst much attention has been paid to the application of the proposed cost model in sexual harassment cases (and rightly so), the Bill will apply to all claims brought to the court under federal anti-discrimination laws.This was confirmed by the Attorney General’s Department at the hearing:
Senator SCARR: Going to paragraph 9, and I quote again for the record: ‘This means the cost provision would apply to all unlawful discrimination matters that proceed to court—not just sexual harassment matters, and not just matters relevant to the Sex Discrimination Act.’ Is it the intention that this bill applies to, for example, claims brought under Section 18C of the Racial Discrimination Act?
Ms Sheehan: Yes, it would apply to all complaints that have been terminated by the Human Rights Commission process if they've been through that process first, so under all the federal anti-discrimination laws.[33]
1.49The broad application of the Bill to federal discrimination claims was the subject of the following exchange at the hearing with Mr Steenhof of the Human Rights Law Alliance:
Mr Steenhof: There are a number of concerns with this bill. One of them is the problem of the fact that it's going to apply across any action that is filtered through the Australian Human Rights Commission and under our Commonwealth discrimination laws, which includes not just sexual harassment but any discrimination claim and even any vilification claim or racial vilification claim.
Senator SCARR: So 18C.
Mr Steenhof: An 18C—yes. For instance, the two young fellows who were kicked out of the QUT computer lab—and then the AHRC solicited action against them under the Racial Discrimination Act about five or six years ago—would be the subject of this same disproportionate costs regime that's being proposed in this bill, in the same way that a very powerful employer and a very vulnerable woman who's experienced sexual harassment would be. In the one case it's clear that there's a very big power differential, and in the other case it's not and it's going to result in unfairness…[34]
1.50The broader application of the cost model proposed in the Bill to religious institutions was raised by a number of stakeholders. Refer to the following extract from the submission of the Human Rights Law Alliance:
This Bill will further imperil Christian schools by making them liable for the costs of any strategic discrimination lawfare that is partially successful. Schools will not be able to pursue claimants in costs for vexatious or worthless claims that are made that seek to weaponise discrimination laws. The Bill will be detrimental to Christian schools and will further erode the fundamental rights of parents to ensure the religious and moral education of their children in conformity with their own convictions...[35]
1.51The Freedom for Faith submission was made to the inquiry on behalf of the following churches: Australian Baptist Ministries, Australian Christian Churches, Anglican Church Diocese of Sydney, Presbyterian Church of Australia in NSW and Seventh-day Adventist Church.[36] They made the following points in their submission:
12. In addition, the Respect@Work report recommendation only dealt with cases involving allegations of sexual harassment, whereas the coverage of the Bill extends to allegations of sex discrimination (not the same thing as the separate ground of harassment), and discrimination on all grounds available under Commonwealth law (which will include a number of grounds covered by the Sex Discrimination Act 1984 (Cth) (“SDA”), as well as discrimination on the basis of age, disability and race, and presumably any future additional grounds). We agree with the criticisms of the Bill made by the Christian Schools submission that ‘The unbalanced nature of the proposals is an invitation for activist and punitive litigation, with low prospects of success but having the aim merely to generate media attention and create inconvenience…’ Although the focus of the Christian Schools submission was the impact on the education section, the same religious freedom concerns arise for religious organisations and people of faith generally.[37]
1.52The AHRC raised concerns that the proposed Bill insufficiently balanced fairness to smaller sized respondents stating:
The Commission is also concerned with the way the proposed reforms balance fairness to smaller sized respondents.[38]
1.53In this regard, the Law Council of Australia observed:
As well as its potential ramifications for the effective conduct of litigation and pre-trial settlement, this may impact respondents, including individuals, small business operators, charities and schools. Under the Costs Protection Bill, these respondents may find themselves unable to be recompensed for their costs, even where they successfully defend a claim. It may disincentivise respondents from being legally represented in proceedings, to reduce their overall risk and exposure to costs.[39]
1.54The Australian Chamber of Commerce & Industry was similarly concerned that the safeguards in the Bill were inadequate providing the following analysis with respect to each of the proposed safeguards:
Accordingly, the ground of vexatiousness will generally not entitle a successful respondent employer to obtain compensation for the legal costs they incurred unless they can prove that the applicant had some ulterior motive behind bringing the proceedings…
The availability of the ‘without reasonable cause’ ground would be similarly elusive for most successful respondent employers. It will only apply where, as held by French J in J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers (WA Branch) (No 2) (1993) 46 IR 301, ‘the applicant properly advised should have known it had no chance of success’ or the ‘party persists in what should on proper consideration be seen to be a hopeless case’…
Unless an employer is able to prove that no points of law affecting the outcome of the proceeding were arguable, this ground would not apply. An employer facing highly speculative litigation with extremely low (but arguable) prospects of success) will be deprived of compensation for their legal costs incurred.
The third exemption to the rule that an applicant is generally protected from cost awards applies where all of three criteria are met. First, the other party must be a ‘respondent who was successful in the proceedings’: section 46PSA(6)(c)(i). This requirement is straightforward. Second, the respondent must ‘not have a significant power advantage over the applicant’: section 46PSA(6)(c)(ii). The explanatory memorandum accompanying the legislation provides at [18] an example of such ‘a significant power advantage’ which is where: “the respondent is an individual applicant’s employer”. Third, the respondent must ‘not have significant financial or other resources relative to the applicant’: section 46PSA(6)(c)(iii). It is difficult to conceive of a scenario in which a business, even where it faces substantial financial difficulties, would not have ‘significant financial or other resources relative to’ an individual employee. Collectively, these requirements create a result that is highly prejudicial to employer respondents. If the explanatory memorandum’s explication of the provisions is correct, in proceedings brought by an employee against an employer, the employer would be deprived of access to this exemption virtually by default; they would always be deemed to, at minimum, not comply with paragraph (c)(ii), and, in most cases, likely (c)(iii) as well. This means that this exemption would generally only apply to non-employer respondents. This neglects recognition of the significant costs incurred by employers, particularly those in small businesses, in litigation of discrimination complaints. As alluded to earlier, these costs comprise not only legal fees, but also diversion away from managing the business and potential damage to their reputation, even where they are ultimately successful.[40]
1.55This is a very important point. Whilst the Government may say that there are safeguards in the Bill, once one works through the proposed safeguards in the context of the explanatory memorandum, the safeguards become nugatory.
1.56This was further drawn out during the hearing in the following exchange I had with Ms Jessica Tinsley, General Counsel at the Australian Chamber of Commerce and Industry:
Senator SCARR: It seems to me when you look at the legislation as a whole that no distinction is made between a multibillion dollar corporation with an internal legal department and resources at its disposal and a cafe owned by someone with three or four employees who's just come out of the COVID pandemic and is trying to keep their head above water. They're both treated essentially the same. Is that your interpretation?
Ms Tinsley: I would agree with that proposition, yes. A key issue that we have with this bill is that it doesn't, as you say, take into account the resources available to, say, a small business…
Senator SCARR: One of the reasons I made that comment about no distinction between a multibillion-dollar corporation and a cafe is that the explanatory memorandum explicitly says if you're an employee of someone then almost ipso facto you're considered to be at a disadvantage in a power context, which is one of the threshold tests. That's correct, isn't it?
Ms Tinsley: Yes.[41]
1.57The concerns of the Australian Chamber of Commerce and Industry were echoed by the Human Rights Law Alliance as evidenced by the following exchange at the hearing:
Senator SCARR: Okay. I'll go through the other potential shields—or, if I could put it this way, the provisions of the bill which would enable, say, a religious institution or faith-based school who's been the subject of an unsuccessful action to seek their costs against the applicant in that situation. A vexatious litigant is one of them. The second is: the applicant's unreasonable act or omission caused the other party to incur the costs. Why isn't that sufficient to provide comfort?
Mr Steenhof: Because unreasonability is quite a high standard to satisfy and to prove when asking the court for costs. It's a cumulative question as well: when you're looking for your costs you have to establish that there is not a significant power advantage.
Senator SCARR: That's the third element or test. The first one is vexatious, the second one is when an unreasonable act or omission caused the other party to incur the cost—I think the explanatory memorandum talks about it being an intentionally high bar. There has been discussion around settlement offers, and whether or not the rejection of a settlement offer would constitute an unreasonable action. The third one is this cumulative test, where the respondent was successful on all grounds, does not have a significant power or advantage, and does not have significant financial or other resources. How does that cumulative test play out in the context of a religious or faith-based institution?
Mr Steenhof: It's well suited to a commercial organisation—a large corporation. It's not well suited to a not-for-profit organisation, a charitable organisation or other entities that are able to be pursued under discrimination laws. It's just a blunt instrument. For a school that has, say, a yearly budget of $10 million, on the face of it that school is in a far better financial position than the claimant and is never going to get their costs back, even if they're successful… But if you delve behind to see where that money comes from and what it pays for, in a not-for-profit it's used for the education of children, and every dollar you have to pay to a lawyer to defend against an unreasonable claim is a dollar taken away from the education of children.
Senator SCARR: Ultimately, it would be fair to say that the cost would flow through to the parents who are choosing to send their child to a faith-based school; is that correct?
Mr Steenhof: Correct.[42]
1.58In commenting on this matter, the Law Council of Australia made the following observations:
The modifications in question take into account the fact that not all respondents to discrimination claims will have a significant advantage over the applicant in terms of resources or power (for example, being in a position to affect the applicant’s employment). However, this leaves intact the possibility that respondents who are not at fault and against whom unmeritorious claims are brought, will be required to pay the costs for the burden of disproving these claims [my emphasis added]. This will occur where respondents are considered to have a significant power advantage over, and significantly greater financial/other resources than, the applicant—even though the applicant was unsuccessful in making out their sexual harassment or unlawful discrimination claim. The Law Council’s consultations with practitioners revealed that, in their experience, many respondents in discrimination cases are in fact not well-resourced or powerful. That is, respondents are not all large corporations or government agencies. They may include, for example, schools, charities, small business operators, and individuals such as co-workers in the workplace, teachers or students in education settings, and volunteers who provide goods, services and facilities.[43]
1.59Can the issues referred to above be mitigated by potential respondents simply procuring insurance? In the context of faith-based schools, the issues were canvassed at the hearing in the following exchange with Mr Mark Spencer, representing Freedom for Faith:
Senator SCARR: Okay. Can I ask you, Mr Spencer, just about the insurance point. I think it's been raised in the context of sexual harassment claims that an organisation or business can get insurance to cover potential liability and their legal costs associated with defending a claim, whereas an applicant is at a disadvantage in the usual circumstance, in that respect. What do you say in response to that argument around insurance?
Mr Spencer: Again—excluding for a moment the sexual harassment or any cover which is more difficult, problematic and conditional—the general insurance cover for a school, for example, would be available but, again, limited by the insurance company and their desire to minimise their costs. They may move through these matters in a way that may not seek justice for anyone but comes to a settled outcome that really is not in our best interests, not in the applicant's best interests and not in society's best interests. Insurance is problematic in the first place. There's the cost of insurance. We've spoken to insurance providers to schools and raised this bill with them, and their informal comments back were that they would simply push up premiums. Prospectively, if the bill were passed without any actual matters afoot, simply in their anticipation they'd do their risk calculation. It increases the risk and increases the costs, and, again, that's money that's not going into providing education, whether there is a good claim or not.[44]
1.60Hence, it is no answer to the issues raised by stakeholders to simply say that potential respondents can simply procure insurance. There are cost consequences, especially for not-for-profit institutions.
1.61The Law Council of Australia reflected on the principles underlying the provisions of the Bill which would treat respondents differently based on their power or financial means as follows:
Further, as a matter of principle, it is inappropriate for the courts routinely to treat parties differently based on their power or financial means relative to other parties, particularly where they have not engaged in unlawful conduct.[45]
1.62This is an important point.It underlines the fact that what is proposed in this Bill is unique and without precedent in an Australian legal context.The Senate would do well to reflect on the following observations of the Law Council of Australia:
Although not an argument against adoption per se, the Law Council also raises for the Committee’s consideration the fact that the equal-access model has not been adopted in any other comparable Australian discrimination law jurisdiction, and is therefore effectively untested.[46]
1.63Moreover, if the proposed approach is adopted in the discrimination law context, then the argument will be that the same approach should be applied in multiple other contexts. Hence, the issues raised in this Bill go further than just the discrimination context. As observed by the Law Council of Australia:
The Law Council is conscious that should the Costs Protection Bill proceed, it may lead to adoption of the equal-access model with respect to other laws that are considered beneficial or remedial, and where disparities of power between parties commonly exist. It notes in this context that a variety of statutes have been accepted by the courts as being beneficial or remedial in nature. These concern subject matter such as Aboriginal land rights, native title and heritage, bridging visas, consumer protection, family law, social security, veterans’ entitlements, workers’ compensation and workplace relations.[47]
1.64Having carefully considered the evidence, I have the following material concerns with respect to the cost model proposed in the Bill.
1.65The model differs from that proposed by the AHRC in both the Respect@Work Report and the Free and Equal Report. Whilst the AHRC strongly support the policy intent and the need for reform, the AHRC considers the cost model in its recommendation in the Free and Equal Report to be a: ‘more balanced approach’. The fact that such a fiercely independent institution such as the AHRC considers that there are more balanced approaches than that proposed in the Bill should be a concern for all Senators.
1.66The concerns held by the AHRC are also held even more strongly by the Law Council of Australia. The Law Council of Australia is concerned that the Bill may result in an increase in unmeritorious claims which will lead to protracted litigation impacting the efficiency of our justice system. This represents a material red flag which should be carefully considered by all Senators.Ultimately, the Law Council of Australia came to the following conclusion:
Nevertheless, after extensive consultations, and recognising that there is a range of views amongst the legal profession, on balance, the Law Council does not support the measures in the Costs Protection Bill [my emphasis added].[48]
1.67I agree with the views of the AHRC, the Law Council of Australia and other stakeholders that the proposed cost model would impede the settlement of matters.Whilst the evidence is contested, the arguments made by a range of stakeholders are extremely strong.
1.68The protections for small business, charitable organisations, not-for-profits, and individuals who are successful in defending claims and seek compensation for their legal costs are problematic.There is strong evidence that meeting the relevant thresholds to obtain a costs order may be impractical.This was illustrated in the hearing when I had the following exchange with the Attorney‑General’s Department:
Senator SCARR: Okay. Could I take you to [paragraph 18 of the explanatory memorandum]. This paragraph has been the subject of some discussion during the course of today because of this term, 'significant power advantage'. One of the issues we've been discussing today—or which I've certainly been raising in questions—is to what extent the bill draws a distinction between, say, a multibillion-dollar corporation who's a respondent with an internal legal department, et cetera, and a cafe owner with four employees. I note, for the benefit of the Hansard record, this quote: ‘Under subparagraph 46PSA(6)(c)(ii), the court must consider whether the respondent has a significant power advantage over the applicant. For example, the respondent may have a significant power advantage where the respondent is an individual applicant's employer.’ …But there's nothing in that paragraph that draws a distinction between, say, a large corporation and your cafe owner who's just hanging on by their fingernails. Can you explain to me—is that the intention? If I'm the employer, it seems I'm not going to be able to enliven those protections because of the way the bill operates. I will always be taken, under this bill, to have a significant power advantage. Is that the intent?
Ms Gartmann: I think, in many circumstances where you have an employer and an employee, that is how the bill will play out, but not in all employment relationships. It might depend to some extent on the authority and power of the individual employee. They may be someone of significant standing or have significant personal resources of their own. [my emphasis added].[49]
1.69The Bill would apply in a much wider range of circumstances than sexual harassment and sex discrimination cases. The provisions of the Bill would apply to discrimination complaints concerning the provision of goods and services, transport, accommodation, sale of land, education, sporting clubs and in other areas. They would apply to complaints against individuals, small businesses, not-for-profits and community organisations. They would apply in relation to alleged discrimination on grounds including race, disability, age and potentially religious belief or activity. They may apply in representative proceedings and in appellate level litigation. They may apply to counter-claims made in the course of litigation. Is it appropriate to deprive the courts of discretion and apply the same cost model across such a wide ambit of claims? In my view, given the concerns which have been raised, the case has not been made out.
1.70In summary, the Bill as presently drafted creates complexity and risk for all those who might ever find themselves responding to a complaint, even if the complaint is unmeritorious.It would deprive the courts of the ability to exercise their discretion to consider all factors which may be relevant to making a costs order.This is in the context of: (a) there being no precedent for such an approach under Australian law; and (b) the AHRC having proposed more balanced approaches.
1.71On the basis of the above, I make the following recommendations:
Recommendation 1
1.72It is recommended that the Bill be amended to either: (a) implement the model originally recommended by former Commissioner Jenkins in recommendation 25 of the Respect@Work report; or (b) adopt a model that retains the general rule that costs follow the event with the Court having a discretion to consider any relevant additional factors in making a costs order.
Recommendation 2
1.73If the Bill is not amended in either of ways proposed above, it is recommended the Bill not be passed.
Senator Paul Scarr
Deputy Chair
Liberal Senator for Queensland
Footnotes
[1]Ms Melanie Schleiger, Special Advisor, Strategic Litigation, Equality Law Program, Victoria Legal Aid, Committee Hansard, 31 January 2024, p. 47.
[2]Australian Human Rights Commission (AHRC), Submission 3, p. 3.
[3]Refer to paragraph 1.11 of the Majority Report.
[4]AHRC, Respect@Work: National Inquiry into Sexual Harassment in Australian Workplaces(Respect@Work report), 2020, p. 45.
[5]AHRC, Respect@Work report, 2020, p. 507.
[6]AHRC, Respect@Work report, 2020, p. 507.
[7]AHRC, Free and Equal: A reform agenda for federal discrimination laws (the Free and Equal report), 2021; AHRC, Respect@Work report, 2020, p. 45.
[8]AHRC, Free and Equal report, 2021, p. 191.
[9]AHRC, Free and Equal report, 2021, p. 191.
[10]AHRC, Free and Equal report, 2021, p. 199.
[11]AHRC, Free and Equal report, 2021, p. 337.
[12]Schedule 5 of the Anti-Discrimination and Human Rights Legislation Amendment (Respect at Work) Bill 2022.
[13]Proposed subsection 46PSA(3) of the Anti-Discrimination and Human Rights Legislation Amendment (Respect at Work) Bill 2022.
[14]Senate Legal and Constitutional Affairs Legislation Committee, Report into the Anti-Discrimination and Human Rights Legislation Amendment (Respect at Work) Bill 2022 [Provisions], November 2022, p.49.
[15]Senate Legal and Constitutional Affairs Legislation Committee, Report into the Anti-Discrimination and Human Rights Legislation Amendment (Respect at Work) Bill 2022 [Provisions], November 2022, p. 50.
[16]Australian Government, Response to the Senate Legal and Constitutional Affairs Legislation Committee Report: Anti-Discrimination and Human Rights Legislation Amendment (Respect at Work) Bill 2022 [Provisions], 25 January 2023, p. 5.
[17]Attorney-General’s Department (AGD), Consultation paper: Review into an appropriate cost model for Commonwealth anti-discrimination laws, February 2023, p. 12.
[18]Brandy v Human Rights and Equal Opportunity Commission (1995) 127 ALR 1.
[19]It is noted that Emeritus Professor Rosalind Croucher AM, President, AHRC referred to the Brandy case in her opening statement at the hearing of the Committee held on 31 January 2024. See: Emeritus Professor Rosalind Croucher AM, President, AHRC, Committee Hansard, 31 January 2024, p. 36.
[20]Committee Hansard, 31 January 2024, p. 39.
[21]AHRC, Submission 3, p. 5.
[22]Law Council of Australia (Law Council), Submission 33, p. 7.
[23]AHRC, Submission 3, p. 6.
[24]Committee Hansard, 31 January 2024, pp. 39–40.
[25]Committee Hansard, 31 January 2024, p. 36.
[26]Law Council, Submission 33, p. 6.
[27]AHRC, Submission 3, p. 4.
[28]Law Council, Submission 33, p. 16.
[29]AHRC, Submission 3, p. 6.
[30]AHRC, Submission 3, p. 4.
[31]Law Council, Submission 33, p. 17.
[32]AHRC, Submission 3, p. 7.
[33]Ms Anne Sheehan, First Assistant Secretary, International Law and Human Rights Division, AGD, Committee Hansard, 31 January 2024, pp. 37–38.
[34]Mr John Steenhof, Managing Director, Human Rights Law Alliance, Committee Hansard, 31January2024, p. 27.
[35]Human Rights Law Alliance, Submission 5, p. 3.
[36]Freedom for Faith, Submission 21, p. 1.
[37]Freedom for Faith, Submission 21, p. 4.
[38]AHRC, Submission 3, p. 5.
[39]Law Council, Submission 33, p. 6.
[40]Australian Chamber of Commerce and Industry, Submission 34, pp. 10–11.
[41]Committee Hansard, 31 January 2024, p. 10.
[42]Committee Hansard, 31 January 2024, p. 28.
[43]Law Council, Submission 33, p. 15.
[44]Committee Hansard, 31 January 2024, pp. 27–28.
[45]Law Council, Submission 33, p. 15.
[46]Law Council, Submission 33, p. 18.
[47]Law Council, Submission 33, p. 20.
[48]Law Council, Submission 33, p. 6.
[49]Ms Petra Gartmann, Assistant Secretary, Human Rights Branch, AGD, Committee Hansard, 31January 2024, pp. 38–39.
An inquiry into the Australian Human Rights Commission Amendment (Costs Protection) Bill 2023 [Provisions].
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