Alison McCaffery v Warren Smith & Partners Pty Ltd [2020] FWC 2491

1 Fair Work Act 2009 s.394—Unfair dismissal Alison McCaffery v Warren Smith & Partners Pty Ltd (U2019/3043) DEPUTY PRESIDENT CROSS SYDNEY, 12 MAY 2020 Application by respondent for costs arising from dismissal of unfair dismissal application. Cross application for costs by applicant. [1] An application was filed on 19 March 2019, by Ms Alison McCaffery (the “Applicant”) pursuant to s.394 of the Fair Work Act 2009 (Cth) (the “Act”). The Applicant sought an unfair dismissal remedy of monetary compensation following her dismissal by WS Partners Unit Trust trading as Warren Smith & Partners (the “Respondent”) on 28 February, 2019. [2] On 4 October 2019, the Applicant’s unfair dismissal application (the “Application”) was dismissed. That dismissal was contained in the decision of the Fair Work Commission (the “Commission”) dated 4 October 20191 (the “Decision”). The Proceedings at First Instance [3] The issues to be determined in the proceedings at first instance were: (a) Whether the Applicant had been dismissed; (b) If the Applicant was dismissed, was that dismissal harsh, unjust or unreasonable; and (c) If the dismissal was harsh, unjust or unreasonable, would the Commission order the payment of compensation. [4] There were significant differences between the various witnesses as to what occurred, particularly regarding certain conversations between those witnesses. Ultimately, based upon my observation of the Applicant and those witnesses called to give evidence, and my consideration of all the evidence, I preferred the evidence of the Respondent’s witnesses. That preference was ultimately made upon evidence that I specifically characterised as “finely balanced”2. 1 [2019] FWC 6824. 2 Ibid at [49]. [2020] FWC 2491 DECISION -- 1 of 17 -- [2020] FWC 2491 2 [5] As to the first issue, I found that I did not consider that the Applicant’s employment with the Respondent was terminated at the Respondent’s initiative (s.386(1)(a)). I did not consider that on an objective analysis of the Respondent’s conduct that the Respondent had any intention to bring the Applicant’s employment to an end. To the contrary, the Respondent in fact was involved in detailed efforts to redesign the position of the Applicant to eliminate any stressors. [6] The Applicant advanced an alternative submission that, pursuant to section 386(1)(b) of the Act, she was forced to resign her employment due to the conduct engaged in by the Respondent. My preference of the evidence of the Respondent’s witnesses effectively disposed of that submission of the Applicant, but I found that even were the Applicant’s evidence to have been accepted, it would have fallen well short of establishing dismissal pursuant to s.386(1)(b). [7] As I had found that the Applicant was not dismissed pursuant to s.385 of the Act, I noted that there was no recourse to consideration of the factors outlined in s.387, and no determination of whether there was a harsh, unjust or unreasonable dismissal. [8] I did however observe, in relation to remedy, that in the circumstance where the Respondent had made a unilateral ex gratia payment a month after the asserted termination date of four (4) weeks’ notice, plus an additional eight and a half (8.5) weeks’ pay, were compensation to be a consideration, I would not have ordered an amount exceeding the eight and a half (8.5) week payment that the Respondent voluntarily made. That determination arose from application of the criteria outlined in s.392(2) of the Act, and particularly a determination that pursuant to s.392(2)(c), I would not have expected the Applicant to remain in employment more than a further two months. [9] I note that in the principal proceeding the Applicant had conceded that any award of compensation would have to take into account at least the eight and a half (8.5) week ex gratia payment3. I did additionally note in the principal proceedings that a finding of dismissal would have had a likely effect on whether the Applicant could advance a claim for payment of pro rata Long Service Leave4. The Costs Application [10] The Respondent filed a Form F6 – Application for costs (the “Costs Application”) on 18 October 2019. The Respondent sought $29,578.34 representing asserted total costs and disbursements. The Costs Application expressed the basis for the claim as follows: “Section 611(2) Fair Work Act 2009: 20. The Applicant commenced the Primary Proceedings vexatiously or without reasonable cause. 21. In the alternative, it should have been reasonably apparent to the Applicant that her Application in the Primary Proceedings had no reasonable prospect of success. 3 Transcript of proceedings at first instance at PN 35 to PN 38, and PN 60 to PN62. 4 Transcript of proceedings at first instance at PN 40. -- 2 of 17 -- [2020] FWC 2491 3 Section 400A Fair Work Act 2009: 22. Additionally or in the alternative to section 611(2), the Respondent says that the Applicant caused the costs of the Respondent in the Primary Proceedings to be incurred because of the unreasonable acts or omissions of the Applicant in connection with the conduct or continuation of the Primary Proceedings. 23. The Respondent will make further submissions in support of this Application in accordance with any directions issued by this Commission. 24. The Respondent seeks costs on an indemnity basis.” [11] Directions were issued for the filing of submissions and evidence. The Applicant relied upon three statements from: (a) Mr Paul Dudley Almond, the Solicitor acting for the Respondent, dated 17 October 2019; (b) Mr Mark Bartlett, a Human Resources Consultant, dated 8 November 2019, who gave evidence regarding the respective positions of the parties at the Conciliation Conference on 30 April 2019; and (c) Mr Warren John Smith, the Managing Director of the Respondent, dated 14 November 2019. [12] The statements of Mr Almond and Mr Bartlett were admitted into evidence without objection. The Statement of Mr Smith, however, was objected to on the grounds of relevance. Mr Smith’s Statement was brief, and was as follows: 1. I am the Managing Director of the Respondent. 2. On the morning of Saturday 2nd November 2019, I attended a cricket game to watch my grandson play at Prince Alfred Park, Woronora. 3. At approximately 11:1Sam I walked with my daughter and son in law to the Woronora River Canoe Centre to purchase a coffee from ‘The Boatshed at Woronora’. 4. Sitting at a table was Cathie Isaacs, a former employee of the Respondent, and her husband Glen. Ms Isaacs gave evidence in these proceedings. 5. I said “hello” and engaged in small talk about my recent visit to Japan. 6. Towards the end of the conversation I said words to the effect: “... that the whole fair work claim was unnecessary as Alison [McCaffery] could have returned to another job with our company. The whole claim was driven by greed.” 7. Ms Isaacs replied in words to the effect: -- 3 of 17 -- [2020] FWC 2491 4 “... this was not about the money it was about getting at Ralph Eriksson and Tom Wise.” 8. I replied to the effect: “... it was purely driven by greed.” 9. Ms Isaacs replied to the effect: “... this was not about the money it was about getting at Ralph Eriksson and Tom Wise.” 10. I ended the conversation abruptly by saying: “This is not over.” 11. We then left the coffee shop and returned to the cricket match. [13] The Respondent pressed the admission of the Smith Statement on the basis that it, or more particularly the alleged utterances of Ms Isaacs, constituted an admission on the part of the Applicant. Ms Isaacs was a close friend of the Applicant, and a co-worker at the Respondent. Ms Isaacs had been a key witness for the Applicant in the proceedings at first instance. [14] It is simply incomprehensible that it could be asserted that various “throw away lines” by a friend of a party to proceedings, made in that party’s absence and clearly without authorisation, could constitute a binding admission by that party. The Applicant objected to the evidence on the grounds of relevance and, unremarkably, I wholly rejected the evidence of Mr Smith. As will be seen below, however, the date of the alleged conversation is a consideration on the question of vexation. The Relevant Facts [15] The Applicant’s last day of work with the Respondent was 27 February 2019. In the Application the Applicant alleged that she was dismissed on 28 February 2019. The Applicant engaged solicitors Brander Smith McKnight on 6 March 2019. [16] On 6 March 2019, Mr Eriksson and Mr Smith of the Respondent attempted to contact the Applicant, but she failed to respond to various SMS messages. Subsequently, and by letter dated 12 March 2019, the Respondent wrote to the Applicant’s Solicitors. That letter included the following: “We are more than happy to work with Alison if she would like to remain an employee of the company. We would like to engage directly with Alison but accept she may rather communicate through her representatives, so we await further direction on how she would like to proceed at this point.” [17] On 19 March 2019, the Applicant lodged the Application seeking a monetary compensation remedy for alleged unfair dismissal by the Respondent. -- 4 of 17 -- [2020] FWC 2491 5 [18] By letter dated 26 March 2019, after not receiving a reply to their letter of 12 March 2019, the Respondent wrote to the Applicant accepting the Applicant’s resignation effective 27 March 2019, and stating that she would be paid on 28 March 2019. [19] On 28 March 2019, the Respondent received a copy of the Application from the Commission. Also on that day, the Respondent paid the Applicant for the period from after the last day she worked, being 27 February 2019, until 28 March 2019, being 4 weeks’ pay plus an additional 8.5 weeks’ pay, making a total payment of 12.5 weeks’ pay. A week’s pay for the Applicant was $1050. [20] The Respondent lodged a Form F3 Employer’s Response on 3 April 2019, and the matter proceeded to a conciliation conference with the Commission on 30 April 2019. During that conciliation conference, the following offers to settle the unfair dismissal application were made: (a) With the Respondent raising a jurisdictional objection to the Application, the first offer was to maintain the payment already made (4 weeks’ notice plus a further 8.5 week pay in addition to any accrued but untaken Annual Leave). (b) The Applicant countered this offer by requesting 26 weeks be paid. (c) The Respondent then made an offer of an additional 1.5 weeks’ pay ($1,575). (d) The Applicant countered this offer by requesting 24 weeks be paid. (e) The Respondent then made a final offer of an additional sum of $8,000 (this being the additional 1.5 weeks plus a consideration for Long Service Leave). The Respondent was not in a position to confirm the Long Service Leave accrual value but worked off a stated value by the Applicant of $5,462. The total of the 1.5 additional weeks and the Long Service Leave accrual indicated by the Applicant was $7,875, however in the spirit of resolving the matter, that figure was rounded up to $8,000. (f) The Applicant countered with their final offer of 22 weeks to be paid. [21] On 1 May 2019, Paul Almond Employment Law Pty Ltd was first instructed by the Respondent. By letter dated 20 May 2019, the Respondent made a further offer of settlement on the basis that the parties sign terms of settlement based on the standard form used by the Commission, and that the Applicant discontinue the Application with the parties bearing their own costs. In that letter the Applicant was placed on notice about the risk of a claim for costs, including for its paid agent and solicitors. [22] The above offer was rejected by the Applicant who made a counter-offer on 21 May 2019, of a payment of $13,000.00 representing $5,462.10 long service leave, and that balance compensation which would equate to 7.18 weeks’ pay. This offer was rejected by the Respondent. [23] By letter dated 7 June 2019, at the time when the Respondent’s submissions and statements were being prepared and served, the Respondent made a further settlement offer which included an offer to pay the Applicant $1050 (one week’s pay). In that letter the -- 5 of 17 -- [2020] FWC 2491 6 Applicant was placed on notice about the risk of a claim for costs, including for its paid agent and solicitors. [24] On 13 June 2019 the Applicant rejected the Respondent’s offer made on 7 June 2019, and made a counter-offer of a payment of $11,964.59 representing $5,462.10 long service leave, annual leave of $2,302.49, and that balance being compensation of 4 weeks’ pay. This offer was not accepted by the Respondent. The Respondent’s Submission [25] The Respondent first identified that it relied on the ‘vexatious’ limb of section 611(2)(a). Section 611 provides: “(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.” [26] The two particular bases for the assertion of vexatious application were: (a) That prior to commencing proceedings the Applicant had received the 12 March 2019 letter. The Respondent submitted that the only interpretation that the Applicant could reasonably conclude from the 12 March 2019 letter was that the Respondent was offering her to return to work. The Respondent submitted the following: “The Respondent concludes that there must have been a motivation for the Applicant to proceed with her application in the Primary Proceedings that went outside what a reasonable person would normally consider to be for commencing proceedings against the Respondent given: a. she had the benefit of legal advice on and after 6 March 2019; b. her receiving the offer to return to work at the Respondent immediately after her solicitors filed the application in the Primary Proceedings on 19 March 2019; c. her not being prevented from accepting the return to work offer due to having another job; and d. her not being prevented from accepting the return to work offer due to domestic or international travel commitments.” and (b) That if Mr Smith’s statement is accepted it may be reasonably concluded from Mr Smith’s Statement that the Applicant pursued the application in the Primary Proceedings vexatiously namely, in concert with Ms Isaacs for some sort of revenge or ill-will directed -- 6 of 17 -- [2020] FWC 2491 7 against two senior employees of the Respondent, Mr Eriksson the Chief Financial Officer, and Mr Wise, a Director, both of whom gave evidence in the Primary Proceedings. [27] The Respondent also identified a basis for the Costs Application pursuant to s.400A(2) of the Act. Section 400A provides: 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. [28] The Respondent noted that the Explanatory Memorandum to the Fair Work Amendment Bill 2012 stated in respect of the provision that became section 400A: “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. [Emphasis added] [29] The Respondent identified the description of the applicable test that the Full Bench of the Commission outlined in Matthew Gugiatti v SolarisCare Foundation Ltd5: “[43] Section 400A(1) establishes two pre-conditions for the making of an order for costs under the subsection (in addition to the requirement in s.400A(2)). The first is that the Commission must be satisfied that a party engaged in an unreasonable act or omission in relation to the conduct or continuation of a matter. The second is that such act or omission caused the other party to the matter to incur costs. Once these preconditions are satisfied, a discretionary power to order the payment of such costs is enlivened.”10 [30] The Respondent submitted “that each offer by the Respondent as set out below was an unreasonable act or omission”6, though I have taken that submission to mean the rejection of each offer was an unreasonable act or omission. Those offers were identified as: (a) The 12 March 2019 letter, said to constitute reinstatement; (b) The final offer made in the conciliation of $8,000.00, or 7.6 weeks’ pay; 5 [2016] FWCFB 2478, at [43]. 6 Respondent’s Submission at [41]. -- 7 of 17 -- [2020] FWC 2491 8 (c) The offer of 20 May 2019, whereby the Applicant would discontinue her case without any compensation; and (d) The offer of 7 June 2019, involving payment of one week’s pay ($1,050.00). [31] The Respondent submitted that the Decision supported the Respondent’s position, and was largely consistent with the position that the Respondent maintained throughout namely: (a) The Applicant had not been dismissed; (b) There was no jurisdictional basis for her to maintain her claim; and (c) Even if she had been dismissed, and dismissed unfairly, the Applicant had been fully compensated by the Respondent. [32] The Respondent submitted that the Decision leaves it open to conclude that any of the offers to settle by the Respondent were reasonable, and the Applicant’s approach to settlement was unreasonable. Further, it goes without saying that the failure of the Applicant to accept any of the offers to settle caused the Respondent to incur costs. Other than with respect to the 12 March 2019 offer, with each offer being rejected by the Applicant, the Respondent’s costs were increasing. [33] Had the Applicant accepted her job back prior to the 12 March 2019 offer being withdrawn on 26 March 2019, the Respondent would not have incurred any legal costs. The decision to ignore this offer ultimately led to all of the costs claimed in the Application to be incurred. [34] The Respondent submitted that it has already established a basis for discretion to be exercised in its favour and to award costs as claimed, in full. The Applicant’s Submission [35] The Applicant submitted that the Cost Application was hopeless and must be dismissed. At the time it was instituted, the Costs Application had no real prospects of success, or was doomed to failure, and the Commission should make an order that the Respondent pay the Applicant’s costs of defending the Costs Application. [36] As to the first basis upon which the Respondent submitted that the Application was instituted vexatiously, the Applicant submitted that the gaping hole in the Respondent’s allegation was the Respondent’s assumption that the Applicant must have had improper motives when commencing her application because she did not accept the Respondent’s offer of reinstatement made shortly after the alleged dismissal. [37] Firstly, the Applicant submitted that such an allegation does not come up to the mark required. An imputation that the Applicant’s motivations “went outside what a reasonable person would normally consider” is not nearly the same as a positive allegation that the predominant purpose in instituting the proceeding is to harass or embarrass the other party, or to gain a collateral advantage. -- 8 of 17 -- [2020] FWC 2491 9 [38] Secondly, the Applicant submitted the assertion contained in the above paragraph is deeply flawed. When the Applicant commenced the proceedings, she believed that she had been dismissed. She did not claim reinstatement in her application as filed or in the hearing of the matter. That is, the Applicant held the view that the Respondent had dismissed her from her employment, and also held the view that she did not want to return to employment with the company that she believed had dismissed her. [39] Regarding the Respondent’s case in relation to an unreasonable act or omission, the Applicant referred to the judgment of Justice Tracey in Harpham v Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia (No 2)7, and submitted that the statutory purpose of the costs regime for unfair dismissal applications under the Act is to allow employees to make an application without the threat of a potentially disabling cost penalty if they are not successful. Whilst the Applicant was ultimately not successful, the Applicant was entitled to run her case free from the risk of having to pay her opponent’s costs. [40] Regarding her own application for costs in relation to the Costs Application, the Applicant submitted that the Costs Application had no reasonable prospects of success and was doomed to failure. The relevant test was submitted to be similar to that adopted in an application for summary judgment, being “so obviously untenable that it cannot possibly succeed”, “manifestly groundless” or “discloses a case which the Court is satisfied cannot succeed”. The Respondent’s Reply Submission [41] The Respondent filed a reply submission. That submission agitated various issues, including but not limited to the claim of vexation and relative calculations going to the reasonableness of offers, and those submissions are dealt with below in this decision. Consideration [42] Cost orders in proceedings under the Act are rare. In Australian Workers Union v Leighton Contractors Pty Ltd (No 2)8, the Full Court of the Federal Court observed in relation to s.570 of the Act, but with such observation being equally apposite to the costs provisions the subject of consideration in these proceedings, as follows: “In our view the authorities establish the following principles: (1) The purpose or policy of the section is to free parties from the risk of having to pay their opponents’ costs in matters arising under the Act, while at the same time protecting those parties who are forced to defend proceedings that have been instituted vexatiously or without reasonable cause. (2) It follows from the protection offered by s 570(2) that a person will rarely be ordered to pay the costs of a proceeding. But it is not necessary to prove that there are exceptional circumstances warranting the making of an order: Spotless Services Australia Ltd v Senior Deputy President Jeanette Marsh [2004] FCAFC 155 (Spotless) at [12]–[13] (to the extent that the Full Court in Council of Kangan Batman Institute of 7 [2017] FCA 140. 8 (2013) 232 FCR 428 at 430-431. -- 9 of 17 -- [2020] FWC 2491 10 Technology and Further Education v Australian Industrial Relations Commission (2006) 156 FCR 275 (Kangan) held otherwise, we would respectfully disagree).” [43] In Eghlima and another v Winco Systems Pty Ltd9, after considering a distillation of previous authorities of this Commission and its predecessors, Deputy President Sams highlighted the discretionary nature of the costs jurisdiction, and observed: “A number of important propositions arise from s 611 of the Act and the authorities to which I have just referred: 1. Unlike the general courts, costs in FWC proceedings do not ‘follow the event’. 2. The award of costs in industrial matters is to be approached with caution and with a strict application of the criteria expressed in subsection (2) of s 611 of the Act. 3. The three preconditions to the exercise of discretion in subsections (1) and (2) are disjunctive, meaning only one of either of the notions of ‘vexatiously’, ‘without reasonable cause’ or ‘no reasonable prospects of success’ need to be satisfied before the Commission may exercise its discretion to award costs. 4. Even if the Commission finds that the preconditions of subsection (2) are all, or either of them met, the Commission retains a discretion as to the extent or at all, of any costs order. 5. Nevertheless, the Commission’s power to award costs is quintessentially an exercise of discretion.” (a) Vexatious Claim by the Applicant [44] A proceeding will be instituted vexatiously where the predominant purpose in instituting the proceeding is to harass or embarrass the other party, or to gain a collateral advantage. In Qantas Airways Ltd v Paul Carter10, the Full Bench found: We refer to the approach we have taken to considering if the provisions of s.611(2)(a) or s.611(2)(b) are established. We first deal with the application made on the basis that Qantas has made its appeal vexatiously. The approach generally taken by members of the Commission as to the meaning to be ascribed to the word “vexatiously” in s.611(2)(a) is to adopt the comments of Justice North in Nilsen v Loyal Orange Trust (Nilsen). Nilsen was decided in 1997 when the then Workplace Relations Act 1996 applied however the relevant provision considered by his Honour was in terms similar to s.611(2)(a) being whether an applicant “instituted the proceeding vexatiously or without reasonable cause”. About this provision his Honour said: “The next question is whether the proceeding was instituted vexatiously. This looks to the motive of the applicant in instituting the proceeding. It is an alternative ground to the ground based on a lack of reasonable cause. It therefore may apply where there is a reasonable basis for instituting the proceeding. This context requires the concept to be narrowly construed. A proceeding will be instituted vexatiously where the predominant purpose in instituting the proceeding is to harass or embarrass the other party, or to gain a collateral advantage.” 9 [2013] FWC 2351, at [44]. 10 [2013] FWCFB 1811, at [17]. -- 10 of 17 -- [2020] FWC 2491 11 [45] The claim that the Application was vexatious was abandoned by the Respondent in the Hearing. Nonetheless, it must be considered due to the Applicant’s claim for her costs of defending the Costs Application. The first basis for the assertion of vexatious application was that the letter of 12 March 2019, could only be interpreted as offering the Applicant to return to work, and that there must have been a motivation for the Applicant to proceed with her application in the Primary Proceedings that went outside what a reasonable person would normally consider to be for commencing proceedings against the Respondent given that offer and the advice she received. [46] The above submission does not withstand the slightest scrutiny. The letter included the following: “We are more than happy to work with Alison if she would like to remain an employee of the company. We would like to engage directly with Alison but accept she may rather communicate through her representatives, so we await further direction on how she would like to proceed at this point.” (emphasis added) [47] The 12 March 2019 letter merely presented the Applicant with an option that she clearly chose not to exercise due to the acrimonious events of her departure from employment. There was simply no basis to attribute any malicious motivation to the Applicant. [48] It is clearly open to an applicant not to seek reinstatement in an unfair dismissal application, and it may be entirely reasonable for an applicant to insist, for example, upon a withdrawal of the dismissal and acceptance of a resignation in its stead if this were necessary to repair substantial damage done to such applicant’s professional reputation and future professional job prospects as a result of the dismissal11. [49] The second basis for the claim of vexatious application was the conversation that formed the contents of the Statement of Mr Smith. As noted above, that statement was wholly rejected, however, the date of that alleged conversation is a prominent consideration. The alleged conversation occurred on 2 November 2019, while the Costs Application was commenced on 18 October 2019. As a simple matter of chronology the alleged conversation could not have provided a basis for the allegation of vexatious application. (b) S.400A Unreasonable Act or Omission [50] In Matthew Gugiatti v SolarisCare Foundation Ltd12, the Full Bench of the Commission held: “Section 400A(1) establishes two pre-conditions for the making of an order for costs under the subsection (in addition to the requirement in s.400A(2)). The first is that the Commission must be satisfied that a party engaged in an unreasonable act or omission in relation to the conduct or continuation of a matter. The second is that such act or omission caused the other party to the matter to incur costs. Once these preconditions are satisfied, a discretionary power to order the payment of such costs is enlivened.” 11 Brazilian Butterfly Pty Ltd v Alissia Charalambous (2006) 155 IR 36 at [39]. 12 [2016] FWCFB 2478, at [43]. -- 11 of 17 -- [2020] FWC 2491 12 [51] By referring to a party who “unreasonably” fails to agree to terms of settlement, the legislature has adopted the standard of the reasonable person. Regarding a similar provision in predecessor legislation to the Act, a Full Bench of the Australian Industrial Relations Commission found13: “A reasonable person, who is a party to proceedings pursuant to s.170CE, when confronted with an offer of settlement from the other party, will determine whether, and if so, how to respond to such an offer after considering all the circumstances of the case, including: • the terms of the settlement offered in relation to the relief sought; • the relative strengths of the parties’ cases (and thus their relative prospects of success) in relation to both ‘liability’ and the relief sought; • any assessment of the merits in the certificate issued by the Commission pursuant to s.170CF(2); • the likely length and cost of proceeding to a hearing if the matter does not settle; and • any adverse consequences that will accrue to a party if they accept a settlement on particular terms rather than successfully prosecute or defend the primary application, as the case may be. This list is not intended to be exhaustive. All of the circumstances are relevant and, as is made clear in the joint judgment in Blagojevch, there is no basis in the Act for giving primacy to any particular factor in every case.” [52] As noted above, the Respondent submitted “that each offer by the Respondent as set out below was an unreasonable act or omission”14, though I have taken that submission to mean the rejection of each offer was an unreasonable act or omission. Those offers were identified as: (a) The 12 March 2019 letter, said to constitute reinstatement; (b) The final offer made in the conciliation of $8,000.00, or 7.6 weeks’ pay; (c) The offer of 20 May 2019, whereby the Applicant would discontinue her case without any compensation; and (d) The offer of 7 June 2019, involving payment of one weeks’ pay ($1,050.00). (i) The 12 March 2019 Letter [53] The 12 March 2019 Letter, as observed above, merely offered for the Respondent to work with the Applicant “if she would like to remain an employee of the company”. It was an option that the Applicant clearly chose not to exercise due the acrimonious events of her 13 Brazilian Butterfly Pty Ltd v Alissia Charalambous (2006) 155 IR 36 at [43] and [44]. 14 Respondent’s Submission at [41]. -- 12 of 17 -- [2020] FWC 2491 13 departure from employment. The Applicant did not seek reinstatement, and pursued compensation, such course of conduct being clearly available to her. [54] The submission of the Respondent was as follows: “As stated in paragraph 32 above, the Respondent offered the Applicant a job with the Respondent, but there was no response. The Respondent submits that this offer was tantamount to the Respondent acknowledging the strength of the Applicant’s claim and in effect, capitulating to it. The offer remained open for acceptance until it was withdrawn by the Respondent by letter to the Applicant of 26 March 2019, shortly before the Respondent was served with a copy of the application in the Primary Proceedings. By failing to accept the offer of 12 March, the Respondent submits that the Applicant engaged in an unreasonable omission.” [55] Quite simply, a capitulation by the Respondent in the circumstances of this matter and the relief sought would have sounded in compensation, not reinstatement. The Respondent’s submission that the failure to accept the 12 March 2019 offer was an unreasonable omission is entirely unacceptable and is rejected. (ii) The final offer made in the conciliation of $8,000.00, or 7.6 weeks’ pay [56] It is upon the consideration of monetary offers that an unfortunate feature of the Costs Application, and the manner upon which it was advanced, arises. While the Applicant correctly identified the notice and ex gratia payments previously made to the Applicant in the assessment of monetary offers, no such consideration was given to the issue of long service leave. Very early in the hearing of the substantive proceedings it was identified that the determination of the jurisdictional issue of whether the Applicant had been dismissed would, if found in her favour, provide the basis for a claim for long service leave that would appear to be compelling. That was confirmed by the Respondent’s representative at the hearing of the Costs Application15. [57] The calculations advanced in the Costs Application, however, made no account for any long service leave entitlements. A classic example of that failure is in relation to the final offer made in the Conciliation of $8,000.00. The Respondent’s submission on the Costs Application was as follows: “During the conciliation there were a number of offers of settlement made, as detailed in the statement of Mark Bartlett dated 8 November 2019. The last offer made by the Respondent to the Applicant was $8000 or 7.6 weeks’ pay. The last offer by the Applicant, in response to the Respondent’s last offer, was 22 weeks’ pay.” [58] The evidence of Mr Bartlett, who attended the Conciliation, was as follows: “The Respondent then made a final offer of an additional sum of $8,000 (this being the additional 1.5 weeks plus a consideration for Long Service Leave - the Respondent was not in aposition toconfirm theLong Service Leave accrual value but worked off a stated value by the Applicant of $5,462. The total of the 15 Transcript 11 December 2019, at PN 65 and 66. -- 13 of 17 -- [2020] FWC 2491 14 1.5 additional weeks and the Long Service Leave accrual indicated by the Applicant was $7,875. In the spirit of resolving the matter, this was rounded up to $8,000.” (Emphasis added) [59] Properly stated, with appropriate candour, the Respondent’s final position at conciliation was 1.5 additional weeks compensation plus $125.00. Considering the terms of the settlement offered in relation to the relief sought, the relative strength of the parties’ cases (which in the event were decided on a fine balance), it was not unreasonable for the Applicant to reject the Respondent’s offer. [60] Insofar as the Respondent submits that the Applicant’s final offer of 22 weeks’ pay in the Conciliation was an unreasonable act, the actual figure less long service leave was around 16 weeks. While a substantial figure in light of the jurisdictional limit on compensation, the Respondent completely fails to explain how the act of making that offer caused the Respondent to incur costs. (iii) The offer of 20 May 2019, whereby the Applicant would discontinue her case [61] The Respondent’s offer was submitted to be “… on terms of settlement based on the standard form used by the Commission and Ms McCaffery discontinuing the Application, with the parties bearing their own costs”. Such terms release all claims but for workers compensation and superannuation. [62] Properly and candidly stated, acceptance of this offer would have resulted in the Applicant abandoning a possible entitlement to long service leave. It could hardly have been an unreasonable omission to fail to accept such an offer, which effectively would have rendered the Applicant worse off. [63] Insofar as the Respondent also submits that the Applicant’s counter offer of 12.3 weeks’ pay was an unreasonable act, the actual figure less long service leave was around 6 weeks. The relative strength of the parties’ cases (decided on a fine balance) rendered it not unreasonable for the Applicant to make her counter offer. Also, the Respondent again completely fails to explain how the act of making that counter offer caused the Respondent to incur costs. (iv) The offer of 7 June 2019, involving payment of one weeks’ pay ($1,050.00). [64] I have assumed, and not been advised otherwise, that this offer would have also resulted in the loss of any entitlement to long service leave. As such, properly and candidly stated, acceptance of this offer would have effectively rendered the Applicant worse off. Again, it could hardly have been an unreasonable omission to fail to accept such an offer. [65] Insofar as the Respondent also submits that the Applicant’s counter offer of 10.5 weeks’ pay was an unreasonable act, the actual figure less long service leave was around 4.5 weeks. The relative strength of the parties’ cases (decided on a fine balance) rendered it not unreasonable for the Applicant to make her counter offer. Also, the Respondent again completely fails to explain how the act of making that counter offer caused the Respondent to incur costs. Conclusion of Costs Application -- 14 of 17 -- [2020] FWC 2491 15 [66] The claim that the Application was vexatious was abandoned by the Respondent in the Hearing. There were no unreasonable acts or omissions by the Applicant that caused the Respondent to incur costs. The Costs Application is therefore dismissed. The Applicant’s Costs Application [67] The Applicant submitted that the Costs Application lacked reasonable cause and that the Applicant is entitled to make her own costs application in relation to the Costs Application. The Costs Application had no real prospects of success at the time it was brought, and was doomed to failure. [68] The Applicant submitted the following: “At the time the present costs application was brought the Respondent relied upon three heads of claim: a) That the original proceedings were commenced without reasonable cause: this claim was properly abandoned but on the facts known to the Respondent it could not have been satisfied. Indeed the Respondent’s own stated assessment of the potential outcome of the Applicant’s original claim, made at the time of the cost application, was that the Respondent was facing the possibility of a substantial monetary compensation; b) That the original proceedings were commenced vexatiously: As explored above, this limb of the claim was hopeless. The Respondent relies upon the fact that the Applicant did not want to return to work as evidence of her supposed vexatious application. The Respondent also relies in evidence on a conversation with a third party at the initiative of the employer, that took place three weeks after the costs application was made. Quite bizarrely the “evidence” records the Respondent’s managing director initiating conversation about the proceedings with a current employee who gave evidence in the Applicant’s case, and saying that “the whole thing was driven by greed” and refuting alternate theories to conclude “it was purely driven by greed”. If what the Managing Director told this witness is what he truthfully believes, then his company should never have made a costs application relying on an allegation that the proceedings were commenced vexatiously. That is, if the Managing Director truly believed/believes that the Applicant commenced her application “purely out of greed” (ie that she commenced the proceedings to seek compensation rather than to cause damage) then he could not but know that the claim was not commenced primarily to harass or embarrass his company; c) That the Applicant acted unreasonably: As above, this claim is untenable insofar as it relies upon the hopeless premise that the Applicant’s rejection of various Calderbank letters was an unreasonable act for the purposes of s.400A of the Act.” [69] The totality of the Respondent’s written submission in response to the Applicant’s costs application was as follows: -- 15 of 17 -- [2020] FWC 2491 16 “It is assumed that the applicant relies on section 611(2) of the Act. The following submission arises should the Commission find against the respondent on costs. First, the respondent had a very real basis for pursuing the claim for costs. The unilateral (and unconditional) ex gratia payment even without consideration of the further offers to settle made by the respondent provide a sound argument for costs to have been pursued pursuant to section 400A of the Act. The subsequent offers to pay in addition to the payment that had already been made merely improved the respondent’s position. Secondly, the applications by the respondent under section 611 and 400A were made in the alternative and the respondent could succeed on either basis. The respondent says that no costs order should be made against it.” Consideration of the Applicant’s Costs Application [70] The claim in the Costs Application that original proceedings were commenced without reasonable cause was properly abandoned before the Applicant was required to expend costs defending that part of the claim. [71] That first limb was, however, linked to the second limb, that the original proceedings were commenced vexatiously. At the time the Costs Application was commenced, on the facts known to the Respondent, I consider that there was no prospect of success, substantial or otherwise, of the Application being found to be vexatious. That allegation was properly abandoned, but only in the hearing of the Costs Application. [72] The facts known at the time of the Costs Application was that the Applicant had rejected an offer to “to remain an employee of the company”, and had instead throughout the proceedings chosen not to seek reinstatement, but pursue compensation. The Applicant’s claim in the substantive proceedings was certainly not devoid of merit, and only failed due to the factual findings that preferred the evidence of the Respondent. [73] I find that the claim in the Costs Application that the original proceedings were commenced vexatiously was advanced without reasonable cause. Due to the sheer absence of any reasonable prospects of success in that claim I further exercise my discretion to order that the Respondent pay the Applicant’s costs associated with that part of the claim on an indemnity basis. [74] The claim that the Applicant acted unreasonably for the purposes of s.400A of the Act stands in contrast to the allegation of vexatious application. At the time the Respondent commenced the Costs Application it had the finding in the Decision that, were compensation to have been a consideration, no amount would have been ordered exceeding the ex gratia payment already made. [75] While I have raised my concerns regarding the failure to account for long service leave in the calculations advanced by the Respondent, I cannot find that it was reasonably apparent that this limb of the Costs Application had no reasonable prospects of success. I reject the Applicant’s application for costs in relation to this limb. [76] It is therefore necessary to apportion the proportion of costs relating to the claim in the Costs Application that the original proceedings were commenced vexatiously. Any -- 16 of 17 -- [2020] FWC 2491 17 apportionment must necessarily be somewhat arbitrary and based upon impression16. In my view a fair apportionment would be to require the Respondent to pay to the Applicant 30% of the Applicant’s costs relating to the Costs Application on an indemnity basis. [77] Costs shall be as agreed or assessed in respect to preparation for, and hearing of, the Costs Application. I direct the parties to confer as to the orders which are appropriate in light of this decision. The Applicant is directed to file such agreed orders within 14 days. Any dispute as to the terms of the orders may be referred to the Commission for final determination. DEPUTY PRESIDENT Printed by authority of the Commonwealth Government Printer <PR719316> 16 Thompson v Big Bert Pty Ltd [2008] FCA 792. -- 17 of 17 --