Dave Sharma (NSW, Liberal Party) Share this | Hansard source

I rise to associate myself with the comments of my colleague Senator Scarr and commend the work he did on the committee in scrutinising the Australian Human Rights Commission Amendment (Costs Protection) Bill 2023, because there are some serious concerns about the implications and consequences of this piece of legislation.

I would group them into five categories. Firstly and foremost, the bill does not follow the recommendation of the Jenkins report.

Secondly, it goes well beyond its original scope. It extends not just to claims of sexual harassment or discrimination but, as my colleague Senator Scarr just said, to any and all types of claims under discrimination law.

Thirdly, it removes the discretion of judges in the awarding of costs, which is an important feature of our justice system and is intended to take into account the wide variety of circumstances that exist between an applicant and a respondent in these sorts of matters.

Fourthly, it's likely, as the Australian Human Rights Commission and others have said, to inhibit the efforts to reach a settlement at an earlier stage of the dispute. In fact, if you're an applicant, it disincentivises you from reaching a settlement because the approach it encourages is one of all reward and no risk if you proceed down the path of litigation.

And, fifthly and finally, the legislation takes into account the characteristics of litigants in a way that is unusual, untested and sets a dangerous precedent. One of the features of our justice system is that justice is meant to be blind—that is, justice is meant to assess the law impartially without having regard to the characteristics of the litigants before the court. But what this legislation does is instruct the court to take into account whether there is a power imbalance, whether there is a financial imbalance and what means or resources a respondent has behind them in a way that renders nugatory this injunction that justice should be blind.

Now, undoubtedly, the main thrust of this bill is to address an important issue that was identified in the Jenkins review. During that review, the commission received several submissions urging them to insert a cost protection provision into the Australian Human Rights Commission Act, recognising that the current costs regime, where costs follow the event, can operate as a disincentive for pursuing sexual harassment matters under the Sex Discrimination Act. This is an important issue that should be addressed because we have heard—this parliament has heard and the Senate committee has heard—how complainants may be deterred from pursuing legitimate discrimination claims in the courts because of the risk that they will ultimately be liable for the costs of the respondent.

What the Jenkins review recommended in recommendation 25 was that the Australian Human Rights Commission Act be amended to insert a cost protection provision consistent with what exists in section 570 of the Fair Work Act 2009, which provides for costs only being awarded against a party by the court if 'the court is satisfied that the party instituted the proceedings vexatiously or without reasonable cause' or if 'the court is satisfied that the party's unreasonable act or omission caused the other party to incur the costs'. That is the recommendation of the Jenkins review. It basically recommends the importation of an entire provision very similar to that which exists in section 570 of the Fair Work Act.

But what we're dealing with in this legislation goes way beyond that. The scenario we have here is that, if a person takes a complaint to the Human Rights Commission and that ends up in the Federal Court, the bill says that the court must award costs to the complainant if they are successful on only one or more grounds. The complainant could bring a claim on five, six, 10, 11 or 12 grounds, but if they are successful on one or more grounds they should be awarded costs. That rule in this legislation is to apply in all circumstances to all cases except when the costs are incurred as a result of a complainant 's unreasonable act or omission.

The model also says in this legislation that the court must not award costs against the complainant unless some very narrow exceptions are met. The court can only award costs against a complainant and to a respondent if they are satisfied that the complainant instituted proceedings vexatiously or without reasonable cause or that the complainant's unreasonable acts or omissions caused the respondent to incur costs, and only if the respondent is successful in the proceedings if the respondent does not have a 'significant power advantage' or does not have significant financial or other resources relative to the complainant.

The way this bill is drafted means that, if a complaint is brought on 10 grounds and nine of those are dismissed, the respondent will still have to pay all the costs because they lost on that one ground. And, even if the respondent is successful on all counts—that is, the court finds no claim of discrimination or discriminatory conduct—they will not get their costs paid if they have a significant power advantage over the applicant. That would often be the case in employer-employee relationships. Nor will they get their costs paid if the respondent has significant financial or other resources. Again, that would often be the case because it will often be a corporation or a business that is the respondent in these circumstances.

What this bill does, effectively, is incentivise litigation and disincentivise negotiated outcomes because it removes any substantial risk for the complainant that they will need to carry the costs of the other side if their claim is unmeritorious or found to be without foundation.

The bill even removes the provision that allows the court, in assessing costs, to take into account offers to settle. That means that, if you have a complaint made against you and you make a good-faith offer to settle but the applicant chooses not to settle and ultimately their claim is unsuccessful, in the decision about whether costs should be awarded the court does not have the discretion to take into account the fact that there was an attempt to settle this matter earlier.

So, effectively, there is now no downside to pressing ahead with a low-prospect claim, and that will undoubtedly be exploited.

We heard from the Human Rights Commission during the inquiry into this bill their own concern that this bill would perhaps unintentionally take away their own ability to encourage early settlement of these disputes, rather than going to court. We heard similar concerns expressed by the Law Council of Australia as well.

I did want to read some of the comments that were made in response to that committee's inquiry because they bear it out quite clearly. The Human Rights Commission said:

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.

So here we have the Australian Human Rights Commission warning that this bill may well have unintended consequences, that it may well frustrate the early resolution of complaints, including settlement offers, and that it may well impact on the commission's role in stemming the flow of complaints that proceed to the court. We also heard from the Law Council of Australia, who said:

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 … 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 … It could also render offers of compromise and Calderbank offers ineffective.

We have here legislation that is not actually doing what the Jenkins review recommended. It's not helping to level the playing field or remove disincentives to bring in legitimate sexual discrimination claims. Instead, it is going a lot further than that. In particular, I wanted to touch on one provision that is genuinely unprecedented in many respects, and that is the characteristics of the litigants, or the applicant and the respondent. This is the provision which would require the courts, when they're assessing whether costs can be awarded, to treat respondents differently based on their financial power or financial means. The Law Council had this to say about that provision:

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.

But what this bill does is exactly that. You can be a respondent who has not engaged in unlawful conduct, and all the grounds on which a discrimination claim has been made have failed. You have not been found to have a case to answer. You may well have made earlier offers to settle this dispute through the Australian Human Rights Commission's conciliation procedures or other channels, but the applicant has denied to do so. Ultimately, if the court decides that you are, as the respondent, successful—that there is no case to answer—you will not see any of your costs recovered, you will not be able to recover any costs, if you have a significant power advantage over the applicant or if you have significant financial or other resources relative to the applicant. As I said earlier, this will almost inevitably be the case. If you had an employee suing an employer or a corporation that stood behind them, it would be hard for the court to find that you did not have a significant power advantage over the applicant or that you did not have significant financial or other resources relative to the applicant.

This strikes at the heart of the principle that justice should be blind—that is, it should not take into account the characteristics of litigants when making an assessment, the law should be applied impartially and we are all equal before the courts. Particularly, if you have not been found to have been at any fault whatsoever, the idea that things that are unrelated to your conduct should be taken into account by the courts, which is being alleged in this case—your financial means, your relative resources and whether you're in a position of high status within society—strikes at the heart of liberal democracies and the principle of the rule of law, the principle of equality before the rule of law. What it effectively seeks to do is import a power based calculus into a legal system that is founded, instead, upon the impartial application of principles.

Why has the government done this in this legislation? Why has the government gone significantly further than was urged in the Jenkins review, gone significantly further than recommendation 25 in that review, to import an entirely new test for the ordering of costs rather than to take on board that in section 570 of the Fair Work Act, as suggested in the Jenkins report? It goes beyond the original scope, extending not just to claims for sexual harassment or discrimination but to any and all types of claims under discrimination law and to removing the discretion of judges in the awarding of costs. Undoubtedly, this will have class action lawyers and litigation funders rubbing their hands together with enthusiasm because, unintentionally or otherwise, it will encourage unmeritorious claims, it will discourage early dispute resolutions and offers of settlement, it will add complexity and risk to the lives of anyone involved in commercial activity, and it will clog our courts with potentially quite unmeritorious claims in a way that goes way beyond what Kate Jenkins recommended in her review recommendations and that goes much further than what is required to remove what I accept are at the moment significant disincentives to the pursuit of sexual discrimination claims.

That is why I do not support this legislation as drafted. That is why the coalition has put forward an amendment which faithfully, comprehensively but not expansively seeks to implement recommendation 25 in the Jenkins review. I urge all in this chamber to study this legislation closely because it could well be the thin end of the wedge.