Posted on November 22, 2023 by Lindsay Taylor and Dimitrious Havadjia 7

Bill to Change Costs in Discrimination Proceedings Introduced to Federal Parliament

Introduction

Following the Respect@Work report into harassment and discrimination in the workplace, many changes have been made to the harassment and discrimination legal framework at the Federal level, including extending the protections offered under the Age Discrimination Act 2004, Disability Discrimination Act 1992, Racial Discrimination Act 1975, and Sex Discrimination Act 1984 (together, Federal Discrimination Laws) to state and local government employees (in addition to those provided under the existing NSW Anti-Discrimination Act 1977) (NSW AD Act) and adding a duty for employers to take reasonable steps to eliminate, as far as possible, sexual harassment in the workplace.

The Respect@Work report recommended changes to the costs provisions for proceedings commenced under the Federal Discrimination Laws. To address this recommendation, a new bill has been introduced into Federal Parliament by the Government that, if passed, will have a profound impact on the way costs are awarded in federal discrimination proceedings.

Changes to Costs Provisions

Current Position

For someone to commence legal proceedings for discrimination under Federal Discrimination Laws, they must first lodge a complaint with the Australian Human Rights Commission (AHRC). The AHRC will usually arrange a conciliation conference between the parties to see if the matter can be resolved in an informal setting. However, if this process is unsuccessful, the AHRC will terminate the complaint, and a complainant will have 60 days to commence proceedings in federal court.

Currently, the position on costs in proceedings under Federal Discrimination Laws is the same as other civil ligation, meaning that, as a general rule, the unsuccessful party has to pay the successful party’s legal costs (usually between 60%-80%).

This is different to claims made under the NSW AD Act, where the general position is that each party must pay their own costs (although applications can be made for costs to be awarded in special circumstances).

Proposed Changes

The Australian Human Rights Commission Amendment (Costs Protection) Bill 2023 (Bill) proposes two substantial changes to the Australian Human Rights Commission Act 1986 (Cth) (AHRC Act) relating to costs for applicants and respondents in federal discrimination proceedings.

The proposed changes would apply consistently across Federal Discrimination Laws and provide that where an applicant is:

1. successful in proceedings on one or more grounds against a respondent, the court must order that the respondent pay the applicant’s costs, unless the court is satisfied that the applicant’s unreasonable act or omission caused the applicant to incur costs;
2. unsuccessful on all grounds against the respondent, the parties would generally be responsible for their own costs, however the applicant may be ordered to pay the respondent’s costs if the court is satisfied that:
   • the applicant instituted the proceedings vexatiously or without reasonable cause; or
   • 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;
     • the respondent does not have significant financial or other resources, relative to the applicant.

The proposed changes reflect a modified ‘equal access’ approach in which a court would still be able to award costs against an applicant, but only in certain (and limited) circumstances. Importantly, while the court would retain its discretion to apportion costs as it sees fit, it would also be able to order the respondent to pay the applicant’s costs on an indemnity basis (so 90-100% of costs may be recovered).

If the Bill is passed, the AHRC Act will still continue to apply in its current form if, before the amendments take effect, a complaint is terminated by the AHRC and an applicant subsequently commences proceedings in federal court.

Implications

For Applicants

The proposed changes would make it far more advantageous to pursue discrimination claims under Federal Discrimination Laws instead of the NSW AD Act. The proposed changes promise to offer greater certainty against the risk that an applicant will be required to pay the respondent’s costs. Applicants would also benefit from the fact that success on even one ground would require the court to order that the respondent pay the applicant’s costs, unless the applicant’s unreasonable act or omission caused the applicant to incur costs.

Further still, the discretion of a federal court to award damages on an indemnity basis means an applicant would be more likely to recover a greater portion of their costs in federal discrimination proceedings than those commenced under the NSW AD Act.

For Respondents

The exceptional circumstances in which a court would order either that the parties bear their own costs, or the applicant pay the respondent’s costs, would be both a high threshold to overcome and result in respondents being far less likely to recover the costs of proceedings (which can easily be hundreds of thousands of dollars), even if they are successful on all grounds.

Conversely, the proposed changes would also make it far more likely that a court would order a respondent to pay the applicant’s costs. Indeed, if an applicant is successful on even one ground, the court must make such an order, possibly on an indemnity basis, unless the respondent can show that the applicant’s unreasonable act or omission caused the applicant to incur costs. This is undoubtedly a burden that would be difficult to overcome by the respondent.

The result is that, if the Bill is passed, the risks to respondents in federal discrimination proceedings are increased because the cost implications are potentially very significant in all but the most exceptional cases.

Conclusion

Until recently, state and local government entities were excluded from coverage by some of the Federal Discrimination Laws (particularly regarding sex discrimination). The changes proposed in the Bill provide a further incentive for Councils and government agencies to review their current policies and procedures to ensure they are compliant with both Federal Discrimination Laws and the NSW AD Act, as the burden of litigation on respondents will be increased if the ability to recoup costs is limited.

Additionally, unlike in proceedings under the NSW AD Act, where damages are capped, there is no cap on damages in proceedings commenced under Federal Discrimination Laws, so applicants are further incentivised by this Bill to take action under Federal Discrimination Laws where the respondent’s cost exposure is increased.

If you have any questions in relation to the above, or how Lindsay Taylor Lawyers can assist you in reviewing your current policies and procedures, please contact Lindsay Taylor on 02 8235 9701, Dimitrious Havadjia on 02 8235 9724, or Adrian Talevski on 02 8235 9732.

The Bill, including the accompanying explanatory memorandum, can be accessed on the Parliament of Australia website via the following link.

The Respect@Work: Sexual Harassment National Inquiry Report (2020) can be accessed on the AHRC website here.