The Federal Court of Australia has dismissed a union claim that an employer's decision to cease payroll deductions of union dues was an attempt by the employer to coerce union members into reaching a new agreement and made to frustrate the lawful process of industrial action.

The Liquor, Hospitality and Miscellaneous Union (LHMU) was ordered to pay costs on an indemnity basis to the employer, i.d.entity.wa.

Gilmour J. took the view that the interlocutory application had "no reasonable prospect of success", the proceedings were instituted "without reasonable cause", or alternatively that in bringing the claim the LHMU involved "unreasonable acts or omissions" which caused the employer to incur costs.

The claim arose after the employer sent a memo to union member employees setting out the employer's intention to no longer undertake payroll deductions, where union membership dues were paid by the employer on a monthly basis by deducting the amount of the dues from the union members’ wages and forwarding the amount to the LHMU. Union members were advised to make their own arrangements directly with LHMU.

The LHMU made a claim that the decision to cease payroll deductions was without prior warning, consultation or notice and was an attempt by the employer to coerce union members into reaching a new agreement. They claimed the decision was made in order to frustrate the lawful process of industrial action and was discriminating against the LHMU's members.

The employer sought costs on the basis that the claim had been instituted vexatiously and without reasonable cause or that pursuit of the claim by the LHMU involved unreasonable acts or omissions which caused the employer to incur costs. The employer submitted that the LHMU's claim never had any prospect of success.

Gilmour J took the opinion that the urgent interlocutory application had no realistic prospect of success as no union members were in any immediate threat of becoming unfinancial under the membership rules of the LHMU.

The LHMU was ordered to pay the Respondent's costs on an indemnity basis.

The observations of Gray J in Hamon v New South Wales (2002) 188 ALR 659 at [20] were adopted by the Court in finding that:

Indemnity costs are not designed to punish a party for persisting with a case that turns out to fail. They are not awarded as a means of deterring litigants from putting forward arguments that might be attended by uncertainty. Rather, they serve the purpose of compensating a party fully for costs incurred, as a normal costs order could not be expected to do, when the Court takes the view that it was unreasonable for a party against whom the order is made to have subjected the innocent party to the expenditure of costs.

By Johnny Brits

Solicitor