1
Fair Work Act 2009
s.394—Unfair dismissal
Lorraine Roche
v
Trustees of the Roman Catholic Church for the Diocese of Wagga Wagga
(U2017/13136)
DEPUTY PRESIDENT DEAN SYDNEY, 24 APRIL 2019
Application for relief from unfair dismissal - application for costs – costs awarded on a party
to party basis.
[1] On 14 August 2018 I issued a decision1 (the Decision) with respect to an application
made by Ms Roche for unfair dismissal remedy pursuant to s.394 of the Fair Work Act 2009.
In the Decision I made a finding that the respondent, the Trustees of the Roman Catholic
Church for the Diocese of Wagga Wagga (the CSO)2, did not have a valid reason to terminate
Ms Roche’s employment and that the dismissal was unfair.
[2] The CSO was ordered to reinstate Ms Roche to her former position and pay her the
lost remuneration for the period between the dismissal and reinstatement.
[3] Ms Roche subsequently applied for an order for costs against the CSO. Ms Roche
seeks that costs be awarded on an indemnity basis, or in the alternative, on a party to party
basis.
[4] Ms Roche’s costs application was made on two grounds, namely that:
1. under s.400A(1) of the Act, the CSO engaged in unreasonable act and/or omission
in connection with the conduct or continuation of the matter; and
2. under s.611(2)(b) of the Act, it should have been reasonably apparent to the CSO
that its response to the application had no reasonable prospect of success.
[5] The parties filed written submissions and each agreed that it was appropriate for the
costs application be determined ‘on the papers’.
[6] For the reasons set out below, I am satisfied that the CSO caused costs to be incurred
because of an unreasonable act in connection with the continuation of the matter, and as a
result, I have decided to award costs on a party to party basis from the expiry of the Second
Offer, as defined below.
Relevant legislation
[2019] FWC 2768 [Note: This decision has been quashed - refer to Full
Bench decision dated 24 July 2019 [2019] FWCFB 4684]
DECISION
E AUSTRALIA FairWork Commission
https://www.fwc.gov.au/documents/decisionssigned/html/2019fwcfb4684.htm
[2019] FWC 2768
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[7] Sections 400A and 611 of the Act provide as follows:
400A Costs orders against parties
(1) The FWC may make an order for costs against a party to a matter arising under
this Part (the first party) for costs incurred by the other party to the matter if
the FWC is satisfied that the first party caused those costs to be incurred
because of an unreasonable act or omission of the first party in connection with
the conduct or continuation of the matter.
(2) The FWC may make an order under subsection (1) only if the other party to
the matter has applied for it in accordance with section 402.
(3) This section does not limit the FWC’s power to order costs under section 611.
611 Costs
(1) A person must bear the person’s own costs in relation to a matter before the
FWC.
(2) However, the FWC may order a person (the first person) to bear some or all of
the costs of another person in relation to an application to the FWC if:
(a) the FWC is satisfied that the first person made the application,
or the first person responded to the application, vexatiously or
without reasonable cause; or
(b) the FWC is satisfied that it should have been reasonably
apparent to the first person that the first person’s application, or
the first person’s response to the application, had no reasonable
prospect of success.
Note:The FWC can also order costs under sections 376, 400A, 401 and 780.
(3) A person to whom an order for costs applies must not contravene a term of the
order.”
[8] The Explanatory Memorandum to the Fair Work Bill 2012 is helpful in determining
the scope of the statutory powers to award costs. It relevantly provides the following with
respect to ss.400A and 611 of the Act:
168. Item 4 inserts a new section 400A to enable the FWC to order costs against a
party to an unfair dismissal matter (the first party) if it is satisfied that the first
party caused the other party to the matter to incur costs by an unreasonable act
or omission in connection with the conduct or continuation of the matter.
[2019] FWC 2768
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169. As with the new power to dismiss applications under section 399A, the power
to award costs under section 400A is not intended to prevent a party from
robustly pursuing or defending an unfair dismissal claim. Rather, the power is
intended to address the small proportion of litigants who pursue or defend
unfair dismissal claims in an unreasonable manner. The power is only intended
to apply where there is clear evidence of unreasonable conduct by the first
party.
170. The FWC's power to award costs under this provision is discretionary and is
only exercisable where the first party (whether the applicant or respondent)
causes the other party to incur costs because of an unreasonable act or
omission. This is intended to capture a broad range of conduct, including a
failure to discontinue an unfair dismissal application made under section 394
and a failure to agree to terms of settlement that could have led to the
application being discontinued.
171. However, the power to award costs is only available if the FWC is satisfied
that the act or omission by the first party was unreasonable. What is an
unreasonable act or omission will depend on the particular circumstances but it
is intended that the power only be exercised where there is clear evidence of
unreasonable conduct by the first party.”
2353. Subclause 611(1) provides that generally a person must bear their own costs in
relation to a matter before FWA.
2354. However, subclause 611(2) provides an exception to this general rule in certain
limited circumstances. FWA may order a person to bear some or all of the
costs of another person where FWA is satisfied that the person made an
application vexatiously or without reasonable cause or the application or
response to an application had no reasonable prospects of success.”
Background
[9] Ms Roche was dismissed on 22 November 2017 by the CSO following an
investigation of an incident that found she had engaged in misconduct.
[10] She filed her application for unfair dismissal remedy on 11 December 2017. On 8
February 2018 the Commission issued directions requiring the filing of submissions, witness
statements and documentary evidence. Both parties complied with the directions and
extensive material was filed. The hearing took place in Wagga Wagga on 28 and 29 March
2018 and in Sydney for a further three days between 21 and 23 May 2018. Final written
submissions were provided on behalf of Ms Roche and the CSO on 7 June and 15 June 2018
respectively.
[11] Both Ms Roche and the CSO were given permission to be legally represented in the
proceedings. Ms Roche was represented by Mr A Aleksov of counsel with Mr C Ni of MST
Lawyers, and the CSO by Mr D O’Sullivan of counsel with Mr S Cooper of the Catholic
[2019] FWC 2768
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Commission for Employment Relations (CCER). Both parties retained the same
representation for this costs application.
Evidence and submissions
Ms Roche
[12] Ms Roche provided a statutory declaration made on 13 September 2018 in which she
stated:
a. On or around 1 March 2018, she instructed MST Lawyers to make an offer to
settle the proceedings (the First Offer). The First Offer, which included her being
reinstated with no payment of lost wages, lapsed at 4 pm on 16 March 2018 as it
was not accepted by the CSO.
b. She sought to be reinstated and was prepared to compromise on back pay. She was
aware that she was liable to pay her legal costs.
c. On around 3 April 2018, she instructed her lawyers to make a further offer to settle
the proceeding (the Second Offer) on the same terms as the First Offer. The
Second Offer lapsed at 4 pm on 20 April 2018.
d. Although she was prepared to accept no monetary compensation from the CSO to
settle the matter, legal costs had become a burden. She said: “[i]t was impacting on
my day to day life with spending on everyday items a constant concern and many
events were not attended or cancelled for both myself and my son because of my
commitment to this case.”
e. Apart from the legal costs, she also had to pay for flight and accommodation costs
for her solicitor and barrister to travel from Melbourne to attend the hearing in
Wagga Wagga on 28 and 29 March 2018 and in Sydney between 21 and 23 May
2018.
f. Following the order issued by the Commission on 14 August 2018, she was
reinstated on 28 August 2018. She received payment from the CSO on 30 August
2018 of an amount of $36,806.52 for her lost wages.
g. The total costs she incurred after the expiry of the First Offer were $52,383.42.
h. The total costs she incurred after the expiry of the Second Offer were $27,519.47.
[13] It was submitted on behalf of Ms Roche that the CSO had engaged in unreasonable act
and/or omission in connection with the conduct or continuation of the proceeding by:
a. rejecting, or failing to accept, the two offers made by Ms Roche, and
b. failing to participate in genuine or reasonable settlement negotiations prior to the
expiry of the two offers.
[2019] FWC 2768
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[14] The two offers (made on 1 March and 3 April 2018) were identical and were
expressed in the following terms:
a. that the respondent reinstate the applicant to full time employment in the role of
assistant to the Principal or school support officer at St Patrick’s Primary School,
St Mary’s Primary School or Marian Catholic College (located within the vicinity
of Griffith NSW) within 7 days of the offer being accepted by the respondent;
b. that the applicant will, subject to the reinstatement of employment taking place,
file a notice of discontinuance within 14 days of the offer being accepted by the
respondent;
c. that no further orders be made; and
d. the applicant will not seek back-payment for lost wages since her purported
dismissal.
[15] Submissions made on behalf of Ms Roche identified the following matters in support
of the claim that Ms Roche should be awarded costs from the time that the First Offer lapsed:
The CSO knew that Ms Roche intended on calling Ms Campbell, Mr Morrell and
Mr Tawfiq to give evidence (none of whom had been called by the CSO);
With the benefit of hindsight, the only explanation for the decision of the CSO not
to call Ms Campbell was that she would not have given favourable evidence for
their case;
The risks associated with the CSO’s defence position after Ms Campbell’s
evidence was clearly stipulated in the letter accompanying the First Offer;
Ms Roche made a genuine and significant compromise in the First Offer in offering
to release the CSO from a potential claim for a four month period of lost wages and
a potential claim for legal costs
The CSO was placed on notice that the First Offer was made in the form of a
Calderbank offer and that Ms Roche would seek costs upon the CSO failing to
obtain a more favourable result than the First Offer;
The CSO was given a reasonable period of time to consider the First offer; and
At the time the First Offer was made, it should have been apparent to the CSO that
there was no valid reason for Ms Roche’s dismissal and that the requirements of
procedural fairness were not complied with. The CSO’s failure to accept the First
Offer therefore constituted an unreasonable act or omission within the meaning of
s.400A.
[16] It was submitted in the alternative that Ms Roche should be awarded costs from the
time the Second Offer lapsed. In that regard, Ms Roche relied on the following matters:
[2019] FWC 2768
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Prior to the Second Offer lapsing, the parties had attended two days of hearing in
Wagga Wagga. After hearing the opening submissions of Ms Roche’s case, the
CSO should have known about the legal risks that it would face if the matter went
on to be determined;
Evidence had been given that Ms Culla was the principal cause for the breakdown
of working relationships within the front office of St Patrick’s Primary School
(including between Ms Campbell and Ms Culla) and that Ms Culla was
emotionally volatile and unpredictable;
Evidence had been given by Ms Campbell and Mr Morrell which was favourable to
reinstatement of Ms Roche into her former position;
Evidence given by Mr Bowyer in cross examination revealed that his reasons for
decision were not quite as set out in the letter to Ms Roche, and to the extent that he
relied on Mr Tawfiq’s investigation report, the report was affected by serious flaws
and was unreliable;
Evidence yet to be given by the remaining witnesses (Mr Bowyer, Ms Delaney, Ms
Price and Mr Tawfiq) was unlikely to assist the CSO and to the contrary, its case
would be further weakened by the cross-examination of its remaining witnesses;
Ms Roche made a genuine and significant compromise in the Second Offer in
offering to release the CSO from a potential claim for a five month period of lost
wages and a potential claim for legal costs;
The CSO was placed on notice that the Second Offer was made in the form of a
Calderbank offer and that Ms Roche would seek costs upon the CSO failing to
obtain a more favourable result than the Second Offer;
The CSO was given a reasonable period of time to consider the Second Offer;
The CSO had the benefit of advice from experienced Counsel on its legal risks and
the inference must be drawn that the CSO had made a conscious decision to reject
the Second Offer and take on the risk of a reinstatement order;
It should have been apparent to the CSO by this time that Ms Roche would be
reinstated;
“A deliberate decision to refuse a reasonable offer of settlement is a factor which
would normally weigh more heavily in favour of a finding of unreasonable action
than would a mere failure to respond by an unrepresented litigant.” (Cugura v
Frankston City Council [2012] FCA 1299 at [31]); and
The CSO’s “rejection of, or failure to accept the Second Offer and/or failure to
participate in genuine or reasonable settlement negotiations prior to the expiry of
the Second Offer was an unreasonable act or omission within the meaning of
s.400A(1) of the Act, and justifies an order for costs at least from the date on which
the Second Offer lapsed.”
[2019] FWC 2768
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[17] It was further submitted that the following matters are relevant in support of the
granting of costs:
Ms Roche has incurred significant legal costs in pursuing the unfair dismissal
application.
The costs incurred by Ms Roche significantly exceeded her annual salary. The CSO
would have had a reasonable appreciation of the costs incurred by Ms Roche and
that provides context to the assessment of the CSO’s conduct in prolonging the
litigation.
Ms Roche made substantial accommodations in favour of the CSO, to her
prejudice, including:
a. accepting delays due to the unavailability of the CSO’s witnesses. For
example,
i. Mr Bowyer was allowed to leave court in Wagga Wagga after the first
day and not return on the second day for cross-examination, as would
otherwise have been the norm;
ii. Mr Bowyer was not available during the relisted period of 22 May to
24 May 2018 and so caused Ms Roche an additional half day’s costs to
be incurred on 21 May 2018 to complete Mr Bowyer’s cross
examination; and
iii. Ms Roche had to incur additional costs associated with written closing
submissions because of the CSO’s objection that the parties made
verbal closing submissions on 23 May 2018.
b. accepting that the matter be listed in Sydney largely at the convenience of the
CSO because its legal team and Mr Tawfiq were based in Sydney.
[18] Submissions on behalf of Ms Roche in respect of s.611(2)(b) contended that it should
have been reasonably apparent to the CSO that its response to the application had no
reasonable prospect of success, given the CSO had, prior to the filing of its response,
knowledge that:
a. Ms Culla was often in a ‘heightened’ state;
b. Ms Culla was volatile and unpredictable;
c. Ms Culla’s heightened state, volatility and unpredictability was accepted by
the CSO; and
d. that the reason for Ms Roche’s dismissal was not justifiable on any objective
analysis of the relevant facts.
[2019] FWC 2768
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The CSO
[19] In reply, the CSO provided statements of Mr Mark MacLean and Ms Rita
Bhattacharya.
Mr MacLean
[20] Mr MacLean is the Acting Director of Schools of the CSO. He commenced this role
around early to mid January 2018, following the retirement of Mr Bowyer. In this role he is
the most senior employee of the CSO and is responsible for providing overall strategic and
operational leadership for a system of 26 primary and 5 secondary schools in the Diocese of
Wagga Wagga.
[21] Mr MacLean said that he was the authorised decision maker for offers of settlement
with respect to legal proceedings including matters before the Commission.
[22] Mr MacLean set out the offers exchanged between the parties as follows:
a. On 21 February 2018, the CSO offered to pay Ms Roche $13,476.30 less
applicable taxation, being an amount equivalent to 12 weeks’ pay, as well as
mutual confidentiality and non-disparagement clauses.
b. On 1 March 2018, Ms Roche made an offer to the CSO to be reinstated to her
previous position at St Patrick’s, or alternatively at St Mary’s or Marian
College, and no back-payment sought for lost wages.
c. On 3 April 2018, Ms Roche made an offer to the CSO in identical terms to her
first offer.
d. On 24 April 2018, the CSO offered to pay Ms Roche $54,000 less applicable
taxation.
[23] Mr MacLean strongly denied that neither he nor the CSO acted unreasonably at any
time throughout the proceedings. The CSO attempted to negotiate a reasonable settlement
with Ms Roche in good faith, and made two financial offers of settlement including one
extremely generous offer of $54,000 less applicable tax, which was substantially above the
maximum amount of compensation the Commission is able to award under the Act.
[24] According to Mr MacLean, he instructed the CSO not to accept Ms Roche’s offers for
two reasons; first, he was of the view that there were reasonable prospects of success for
defending the claim and in particular the orders sought for reinstatement by Ms Roche; and
second, he was seriously concerned that if he voluntarily reinstated Ms Roche, it would pose
an unacceptable risk to the workplace health and safety of employees and to do so would
place himself and the CSO in contravention of the Work, Health and Safety Act 2011 (NSW)
(the WHS Act). Further, if Ms Roche were reinstated, he believed there would be a high risk
of her repeating the past pattern of interpersonal conflict and poor behaviour towards others,
which would damage workplace relationships and cohesion in the schools as a consequence.
[25] Mr MacLean’s statement sets out in detail the circumstances which led to his decision
not to reinstate Ms Roche.
[2019] FWC 2768
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[26] Mr MacLean said that in deciding the quantum for the CSO’s second offer, he took
into account that the CSO was offering Ms Roche well in excess of the maximum amount of
compensation that can be awarded in unfair dismissal matters. The amount was roughly
designed to cover some or all of the legal costs Ms Roche may have incurred at that point in
time, while still leaving a substantial amount of money left over for Ms Roche personally.
Ms Bhattacharya
[27] Ms Bhattacharya is an Employment Relations Specialist with the Catholic
Commission for Employment Relations (CCER) and is one of the practitioners acting for the
CSO in these proceedings.
[28] In her statement, Ms Bhattacharya said:
At a directions hearing on 29 January 2018, no requests were made by either party
with respect to the location of any hearing and she did not recall either party
objecting to the matter being listed in Wagga Wagga.
It was after being advised that Ms Roche would be briefing Counsel that the CSO
decided to also brief counsel, which resulted in both parties incurring significant
costs.
She had a conversation with Mr Ni, Ms Roche’s solicitor, in about early February
2018 where they discussed whether the CSO would be calling Ms Campbell, Mr
Morell and Mr Tawfiq to give evidence. She recalled telling Mr Ni that she would
not know who the CSO would be leading evidence from until she saw Ms Roche’s
evidence.
The procedural matters that led to costs being incurred by various parties were
matters over which the CSO had little, if any, control.
The fact that the evidence of Mr Bowyer was split was also inconvenient and costly
for the CSO.
The CSO did not request that the matter be concluded in Sydney and that the
relisting in Sydney was not made in the CSO’s favour. The CSO is based in Wagga
Wagga and was also required to travel in order to conclude the hearing.
The transcript of the hearing on 28 and 29 March 2018 indicates that the
Commission asked a number of witnesses where they were based in order to form a
view about the location for any relisting. Ms Roche made no submission as to her
preferred location and made no suggestion that it would be prejudicial for her
representatives to travel from Melbourne.
The prospect of using video link facilities was discussed between the parties and
the Commission. Ms Roche chose to pursue the use of video link for only the
completion of Mr Bowyer’s evidence despite the costs savings it could offer if she
had sought to complete the trial by video link.
[2019] FWC 2768
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It is misleading to suggest that Ms Roche had to incur ‘additional’ costs associated
with written closing submissions. An email of 3 April from Mr Ni to CCER
indicated that Ms Roche specifically proposed written submission only if the
hearing spilled over to further dates in June 2018. Further, Ms Roche’s submissions
before the Commission conceded that access to transcript would be of assistance to
her and that it was fair that the respondent not be forced on to provide oral
submissions.3
[29] The CSO’s submissions in response can be summarised as follows:
On 21 February 2018 the CSO made an offer to settle the proceedings which
included payment of twelve weeks’ pay in addition to the five weeks’ notice
already paid to Ms Roche.
The offer of 21 February lapsed on 26 February when it was not accepted by Ms
Roche.
On 24 April 2018, the CSO made a further offer to settle the matter on the basis of
a payment of $54,000. The offer lapsed on 8 May as it was not accepted by Ms
Roche.
It is well settled that a cautious approach is to be taken with respect to determining
whether any of the exceptions is to be made out and only where in a clear case that
the exceptions to the general rule has been made out (Chahwan v Sutherland Shire
Montessori Society Incorporated [2015] FWC 814 at [18]).
In Ryan v Primesafe (2015 ALR 107) (Primesafe), Mansfield J held, in the context
of s.570, the following:
“[65] … The discretion conferred by the confined terms of s 570(2) should be
exercised cautiously, and the case for its exercise should be clear … The reason
for caution is the potential for discouraging parties’ pursuit in a complete and
robust way of the claims for contravention which they seek to make under the
Fair Work Act, or the defence of such claims. The policy behind s 570 is to
ensure that the spectre of costs being awarded if a claim is unsuccessful does
not loom so large in the mind of potential applicants (in particular, in my
opinion) that those with genuine grievances and an arguable evidentiary and
legal basis for them are put off commencing or continuing proceedings. It is an
access to justice provision. Insofar as it operates to the benefit of respondents,
it is designed to ensure respondents feel free to pursue arguable legal and
factual responses to the claims made against them. There is an almost identical
provision in s 611 of the Fair Work Act, giving the Fair work Commission a
similar costs power, conditioned by similarly-worded considerations. …”
The intent of the cost provisions, with respect to respondents, is to ensure that they
feel free to pursue arguable legal and factual responses which are available to them.
In Wederay v Airline Cleaning Services Pty Ltd T/A Cabin Services Australia
([2017] FWC 6232), Deputy President Anderson reviewed the authorities with
respect to s.400A and summarised the principles as follows:
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1. Before an order can be made, causation must be found to have existed
between the unreasonable conduct or continuation of the matter and the
incurring of the costs;
2. The power to order costs is the exercise of a general discretion. Section
400A of the FW Act provides that the Commission ‘may’ make an
order. Where the Commission finds that a party acted unreasonably in
the conduct or continuation of a matter and that unreasonable conduct
caused the costs to be incurred, then an order may be made. However,
the statute does not provide that the Commission shall make an order
even in those circumstances;
3. Being a general discretion, all relevant factors need to be taken into
account. The discretion must be exercised judicially that is to say not
arbitrarily, capriciously or so as to frustrate the legislative intent.
Ultimately the provision sits within a framework where the objects
include that the parties be provided ‘a fair go all round’;
4. An ‘unreasonable’ act in the context of proceedings is to be objectively
assessed but is not limited to a defined circumstance.”
The approach in relation to applications is that the elements of unreasonable acts
and/or omissions and the causative impact on unnecessary costs expenditure needs
to be established. Following this, the Commission retains a discretion whether to
make the orders or not.
The consideration of Ms Roche’s two offers should be viewed in light of all the
circumstances in which they were made and by consideration, not only as to the
relative strengths of the party’s case in relation to the substantive claim but more
importantly that of the remedy of reinstatement with continuity of employment.
Prior to the expiry of the two offers (16 March and 3 April), the CSO had a
reasonable basis upon which to believe that it would be able to defend the
application, both as to whether the dismissal was harsh, unjust and unreasonable as
to the remedy of reinstatement with continuity of employment and back pay.
Ms Roche’s submissions incorrectly seek to construe that procedural fairness was
part of the reason for the finding that the dismissal was harsh. The decision did not
make such a finding and the finding was one based on valid reason.
In relation to valid reason, the CSO had commissioned and received a report from
Mr Tawfiq, an independent and experienced workplace investigator, upon which it
had based its decision to dismiss Ms Roche.
In preparing the report, Mr Tawfiq had access to, and took into account of, the
observations made by Ms Campbell concerning Ms Culla’s role as the principal
cause for the breakdown of the relationship in the front office and that she was
emotionally volatile and unstable.
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By the expiration of Ms Roche’s second offer, Mr Bowyer, the decision maker, had
not finished providing evidence and Mr Tawfiq had not commenced his evidence.
Ms Roche incorrectly submitted that Mr Morell gave evidence under cross
examination on 28 March 2018 that the report of Mr Tawfiq was affected by
serious flaws and was unreliable. In the circumstances, the CSO was entitled to
believe that the evidence of Mr Morrell and in particular Mr Tawfiq would be
accepted.
With respect to the remedy of reinstatement, the CSO relied on the evidence of Ms
Price and Ms Delaney, including their second statements filed after the expiration
of the second offer.
The statement of Mr MacLean made it clear that the foreshadowed evidence of Ms
Campbell prior to the hearing of 28 March 2018 was anticipated to be favourable.
Despite Ms Campbell’s evidence as to the performance of Ms Roche was not
favourable to the CSO, she went on to express concerns as to the practicability of
reinstatement which was consistent with the evidence that the CSO anticipated
would be given by her.
The CSO had a reasonable argument in relation to valid reason and reinstatement
by reference to the police report that Ms Roche was the instigator of the dismissal
events.
In the circumstances, prior to the expiry of Ms Roche’s first and second offers, the
CSO had a reasonable legal and factual basis on which to defend the application
and was therefore not unreasonable for rejecting the offers.
As to the alleged failure to participate in genuine or reasonable negotiations for a
settlement, the evidence disclosed that the CSO had initiated negotiations for a
settlement and had made the last offer to settle these proceedings.
The CSO’s first offer, being an amount of twelve weeks’ pay, was made within a
week of receipt of Ms Roche’s first witness statement and outline of submissions.
The CSO’s second offer was an amount of $54,000.00 which, when considering the
five weeks’ notice that Ms Roche had already been paid and her weekly salary of
$1,123.03, provided an amount which was $30,416.37 in advance of the statutory
cap. This amount, subject to taxation, would have gone close to paying all of Ms
Roche’s legal costs incurred to the date of the expiry of the offer calculated on an
indemnity basis.
The CSO had participated in settlement negotiations and on any objective analysis
the CSO’s attempts to settle the matter were genuine and reasonable.
At all times prior to the expiry of Ms Roche’s offers, the CSO’s rejection of the
offers of reinstatement without back pay and its attempt to settle the matter on a
significant monetary basis did not constitute an unreasonable act or omission for
the purposes of s.400A and an order for costs should not be made.
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Although further costs were incurred by Ms Roche following the rejection by the
CSO of her offers, it also caused further costs incurred by the CSO when its offers
were rejected by Ms Roche. In any event, the costs incurred by Ms Roche were not
as a result of any unreasonable acts or omissions of the CSO.
As for the substantial accommodations alleged made by Ms Roche, the CSO noted
that the matter was initially listed for two days on the estimate provided by Ms
Roche. Based on this estimate the CSO had arrangements in place to ensure that all
of their witnesses were available to be examined during the course of these two
days. Further, Ms Roche had consented to submissions being made in writing on
the last day of the hearing which she now sought to renege on. Therefore, any
suggestion that the general conduct of the matter is a basis for establishing an order
for costs pursuant to s.400A should be rejected.
Should the Commission determine that the jurisdictional gateway be made out with
respect to s.400A, there is a compelling reason for the Commission not to exercise
its discretion in granting an order for costs.
The CSO at the times the offers were made were faced with two independent
sources of information, being the Tawfiq report and the findings of the NSW
Police, that Ms Roche was responsible for the dismissal events. The CSO had also
been advised by its insurer that Ms Culla’s workers compensation claim had been
accepted and that Ms Roche’s behaviour had caused, or been part of the cause, of
Ms Culla’s psychological injury. Faced with this information, and absent a finding
by the Commission to the contrary, the CSO would place itself in breach of its
statutory duties under the WHS Act as well as its common law duty of care if it
were to accept the offers and reinstate Ms Roche.
In Baker v Salva Resources Pty Ltd ([2011] FWAFB 4014) the Full Bench in
considering the approach to s.611(2)(b) stated that:
a. the term ‘should have been reasonably apparent’ must be objectively
determined; and
b. conclusion that an application ‘had no reasonable prospect of success’
should only be reached with extreme caution in circumstances where the
application is manifestly untenable or groundless or so lacking in merit or
substance to be not reasonable arguable.
On any objective view of the CSO’s case, its defence in Ms Roche’s unfair
dismissal case was not manifestly untenable or not reasonably arguable and
therefore the exception under s.611 to the general rule against costs is not
enlivened.
Ms Roche’s submissions in reply
[30] Submissions in reply made on behalf of Ms Roche, in summary, stated:
The CSO’s submissions demonstrate that since at least 24 April 2018, it was aware
of the weakness of its position. The fact that the CSO made an offer on 24 April
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which was significantly exceeded the maximum compensation award available,
justifies an inference that the CSO was aware that it did not have reasonable
prospects in resisting Ms Roche’s unfair dismissal claim. This fortifies the
submission that it was unreasonable conduct by the CSO not to accept the Second
Offer which lapsed two days prior to its offer on 24 April.
Alternatively, the offer of 24 April 2018 indicates that the CSO was aware at the
least that it did not have reasonable prospects of success in these proceedings. The
CSO should have conceded that the dismissal was unfair and such concession
would have made it possible for the parties to reduce the scope of the proceedings
to the question of remedy only, which would have saved considerable time and
expense.
Further, had the CSO confronted the weakness of its position, the proceedings in
the period between 21 and 23 May 2018 would have been reduced to one hearing
day, given much of the cross examination of the CSO’s witnesses would become
unnecessary and closing submissions can be made orally within the same hearing
day.
For these reasons, Ms Roche should be entitled to her costs of two hearing days
and her written closing submissions.
Consideration
s.400A – whether the CSO caused costs to be incurred by Ms Roche because of an
unreasonable act or omission in connection with the conduct or continuation of the matter
[31] It is a well-accepted principle that each party bears its own costs in relation to a matter
before the Commission.4 The power under s.400A to award costs is discretionary and can
only be enlivened if there is clear evidence of ‘unreasonable act or omission’ by a party. What
is an unreasonable act or omission will depend on the facts and circumstances of the particular
case.
[32] In Rahman v Commonwealth of Australia as represented by the Australian Taxation
Office5, Driver J considered costs under the Act and said: “A finding of an unreasonable act or
omission must be the exception rather than the rule. It follows that a reasonably high bar
needs to be set for a party alleging an unreasonable act or omission.”
[33] As noted earlier in this decision, section 400A is not intended to prevent a party from
robustly pursuing or defending an unfair dismissal claim in good faith.
[34] In Roy Morgan Research v Baker6, the Full Bench held that “a reasonable person will
determine if and how to respond to an offer of settlement after considering all of the
circumstances of the case including the terms of settlement in relation to the relief sought; the
relative strength of the parties cases; the likely length and cost of proceeding to hearing if the
matter does not settle; and adverse consequences of acceptance of a settlement rather than
prosecuting or defending the primary application.”
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[35] Having considered the evidence and submissions of the parties, I am satisfied that the
CSO’s failure to agree to terms of settlement in the form of the Second Offer was
unreasonable.
[36] While there were some matters which may have supported a view by the CSO that
dismissal was appropriate at the time Ms Roche was dismissed, such as the report of the
workplace investigator (the Tawfiq Report) and the report of the NSW Police, the CSO could
not reasonably have continued to hold the view that Ms Roche’s dismissal was justified, or
that it could defend an order for reinstatement, after the first two days of hearing. In
particular, at the time of the expiration of the Second Offer, it ought to have been clear to the
CSO that there were significant risks in continuing to defend the application. In this regard, I
accept the submissions made on behalf of Ms Roche.
[37] I do not accept the CSO’s argument that it would have placed itself in breach of its
duty under the WHS Act if it were to reinstate Ms Roche because it alleged Ms Roche was the
cause, or part of the cause, of Ms Culla’s psychological injury. First, Ms Culla had resigned
prior to Ms Roche’s dismissal. Second, the evidence given prior to the expiration of the
Second Offer made it clear that Ms Culla was the principal cause of the difficulties
experienced within the office, and that she was emotionally volatile and unpredictable.
[38] The CSO did not call Ms Campbell, a key witness, to give evidence. She gave
evidence in response to an order to attend and give evidence which was sought by Ms Roche.
Both Ms Campbell and Mr Morrell had given evidence that was favourable to Ms Roche,
including that Ms Campbell considered Ms Roche to be an “amazing front of house person”.7
[39] The primary remedy in relation to unfair dismissal is reinstatement. Clearly, Ms Roche
placed great value on her role with the CSO and at no point did she resile from her stated
desire to return to her position. Her willingness to spend a significant amount of money (more
than one year of her annual salary) on legal fees towards obtaining reinstatement, and her
willingness to forgo backpay in both of her offers to settle, also made it evident that Ms
Roche was completely focussed on reinstatement.
[40] The offers put to Ms Roche by the CSO on 21 February and 24 April were both
principally of a financial nature. In light of Ms Roche’s very clear desire to be reinstated, I do
not consider these offers reasonable in the circumstances. At the time the second financial
offer was made by the CSO, their prospects of success were obviously and significantly
diminished. The significantly increased monetary sum the CSO offered at this time supports a
view that the CSO recognised their diminished prospects of success in defending the
application.
[41] In addition, the CSO was represented by experienced Counsel throughout the
proceedings, and was put on notice that Ms Roche would seek costs upon the CSO failing to
obtain a more favourable result than the Second Offer.
[42] I am not satisfied that the CSO’s conduct prior to the expiration of the First Offer was
unreasonable. At the time of the expiration of the First Offer, the hearing had not commenced
and the evidence referred to above had not been given. There is no basis for me to conclude
that its conduct prior to the expiration of the First Offer was unreasonable in the manner
required by s 400A.
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[43] I am satisfied that the actions by the CSO in continuing to defend the application and
refusing to accept the Second Offer, were unreasonable from the time of, and subsequent to,
the Second Offer expiring, and that Ms Roche incurred costs as a result of those actions.
[44] Taking into account the principles guided by the authorities cited, and having
considered the facts and circumstances of the present matter, I am persuaded that, when
viewed objectively, it is appropriate to exercise my discretion and award Ms Roche her costs
on a party/party basis from 4pm on 20 April 2018, being the expiration of the Second Offer.
s.611(2)(b) Whether it should have been reasonably apparent to the CSO that its response
to the application had no reasonable prospect of success
[45] Given my decision to award costs under s 400A, it is unnecessary for me to deal with
this part of the application.
Indemnity costs
[46] I am not satisfied that the circumstances in this case are rare or unusual, or that there is
“a level or blameworthiness which involves conscious or deliberate choices to flout the norms
by which litigation is usually conducted….”, as described by Mortimer J in Primesafe.
[47] Accordingly, the application for indemnity costs is refused.
Conclusion
[48] In conclusion, I am satisfied that the CSO’s actions in continuing to defend the
application and refusing to accept the Second Offer were unreasonable, and that Ms Roche
incurred costs as a result of those actions. Accordingly, I award costs in favour of Ms Roche
on a party to party basis from the expiration of the Second Offer, being 4pm on 20 April
2018.
[49] I direct Ms Roche to file within 14 days, a Schedule of Costs according to Schedule
3.1 of the Fair Work Regulations. This should include the costs associated with this
application. Formal orders will follow as a consequence.
DEPUTY PRESIDENT
Printed by authority of the Commonwealth Government Printer
PR707301
De OF THE FAIR WORK GO NOISS
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1 [2018] FWC 3933.
2 The respondent was referred to as Catholic Schools Office Wagga Wagga (the CSO), throughout the proceedings and in the
Decision, and I will continue to refer to it as the CSO in this decision.
3 See Transcript PN 4573-4574.
4 Section 611(1) of Fair Work Act 2009.
5 [2013] FCCA 388.
6 [2014] FWCFB 1175.
7 Transcript PN1973.
