[2014] FWC 4871

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.394—Unfair dismissal

Christopher Bradshaw
v
BHP Coal Pty Ltd
(U2013/11809)

COMMISSIONER JOHNS

SYDNEY, 23 JULY 2014

Application for costs orders pursuant to ss.400A and s.611 of the Fair Work Act 2009 - without reasonable cause - no prospect of success - exercise of discretion.

Introduction

[1] This decision arises out of an application made under the Fair Work Act 2009 (FW Act) for costs incurred by BHP Coal Pty Ltd (Employer/Respondent) in defending an unfair dismissal application lodged by Christopher Bradshaw (Applicant).

[2] On 11 April 2014 the Fair Work Commission (Commission) published a decision 1 in which the Commission, as presently constituted, found that the Respondent’s decision to dismiss the Applicant from his employment was not,

... harsh, unjust or unreasonable. Accordingly, the Commission [found] the Applicant’s dismissal was not unfair. Consequently, [the Applicant’s] application for an unfair dismissal remedy [was] dismissed. 2

[3] In its decision the Commission noted that the termination of the Applicant’s employment “had a very significant impact on his life” 3 in that:

a) the termination of his employment meant that the Applicant could no longer afford to live in [the town he had lived in most of his life];

b) consequently, he had to leave [the town he had lived in most of his life], leaving behind his social networks and friends; and

c) termination for misconduct disentitled the Applicant to the payment out of leave accruals under the 2012 EA. The loss, before tax, was approximately $27,727.42 in leave accruals and $5,769.23 in bonus payments. 4

[4] The Respondent now seeks to have imposed upon the Applicant a further impact in the form of an order that he pay the Respondent’s costs (in part) incurred by it in defence of the unfair dismissal application. The Respondent seeks an order for costs on an indemnity basis.

[5] It might be said that the Applicant has suffered enough by reason of his conduct which justified the termination of his employment and that the imposition of a costs order is akin to kicking a man when he is down. It might be said that an Application for Costs in the present circumstances lacks a sense of Christian charity or empathy with the Applicant’s plight.

[6] However, Respondents aggrieved by the costs they have incurred in the defence of an unsuccessful unfair dismissal application, are not required to act charitably or empathetically. Further, whether an Application for Costs offends against common notions of decency is irrelevant.

[7] Consequently, the Commission, as presently constituted, has not entertained thoughts of charity, empathy or decency in deciding whether the Respondent should succeed in its Application for Costs. However, s.577 of the FW Act does require the Commission to perform its functions and exercise its powers in a manner that is fair and just. Further, s.578 of the FW Act which requires the Commission to take into account equity, good conscience and the merits of matter.

The Application for Costs

[8] The Application for Costs was made on 24 April 2014. Consequently, the requirement in s.402 of the FW Act (that the application be made within 14 days of the decision) has been met.

[9] The Respondent’s Application for Costs was heard on 21 May 2014. At that hearing the:

• Applicant was represented by Mr C Newman, a legal officer with the CFMEU; and

• Respondent was represented by Mr J Snaden of counsel.

[10] Although the Form F6 Application for Costs relied upon s.400A (an unreasonable act or omission causing costs) and s.611 (commencement vexatiously or without reasonable cause or without reasonable prospects of success), at the hearing of the Application for Costs the Respondent confined itself to s.400A. 5

[11] In its Application for Costs the Respondent sought costs against both the Applicant and his representative, the CFMEU. The CFMEU submitted that the application made against it was incompetent because the precondition in s.401 of the FW Act had not been made out (i.e. it was not a lawyer or paid agent granted permission to represent the Applicant under s.596 of the FW Act).

[12] On 20 May 2014 the Respondent advised the Commission that it conceded that the Commission could not make an order for costs against the CFMEU. However, it submitted that “if costs are to be awarded that this is a case where the Commission, as in other cases, should recommend that the CFMEU meet [the Applicant’s] obligation for cost”. 6 At the hearing on 21 May 2014 counsel for the Respondent confirmed that no order for costs was made against the CFMEU.7

Section 400A of the FW Act

[13] The FW Act presumes that parties will bear their own costs. 8 However, that is a presumption that can be displaced.

[14] Section 400A of the FW Act provides:

(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 subs.(1) only if the other party to the matter has applied for it in accordance with s.402.
(3) This section does not limit the FWC's power to order costs under s.611.

[15] In summary, s.400A allows for a costs order to be made against a party when there has been an unreasonable act or omission on their part in relation to the conduct of an unfair dismissal proceeding.

[16] Section 400A took effect in January 2013. It was inserted into the FW Act by the Fair Work Amendment Act 2012 (No. 174 of 2012). The Explanatory Memorandum introduced with the Bill containing the amendments included the following;

The amendments strike a balance between the need to protect workers from unfair dismissal, and to provide a deterrent against unreasonable conduct during proceedings. The amendments will enable costs orders to be more easily made in the case of unreasonable conduct but will not prevent genuine claims from being pursued. They will discourage frivolous and speculative claims and assist in the efficient resolution of claims by encouraging all parties to approach proceedings in a reasonable manner. These measures are reasonable and proportionate to address the time and expense that an unreasonable conduct by a participant and/or their representative may cause another party to incur. 9

[17] Further,

“169. As with the new power to dismiss applications under s.399A, the power to award costs under s.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 s.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.

...

173. Subs.400A(2) provides that the power to award costs against one party in these circumstances is only exercisable if the other party to the matter makes an application in accordance with s.402. Subs.400A(3) makes clear that the new power to award costs under subs.400A(1) operates in addition to subs.611(2), which enables the FWC to make costs orders against a person in certain circumstances, such as where an application is made vexatiously or without reasonable cause. 10

[18] Concepts of unreasonable behaviour by a party to a proceeding were also used in the Workplace Relations Act 1996. In summary, s.170CJ(1) concerned the unreasonable commencement of proceedings, s.170CJ(2) concerned unreasonably failing to agree to terms of settlement and s.170CJ(3) concerned unreasonable “acts or omissions” in the conduct of proceedings.

[19] The Respondent’s submissions drew the Commission’s attention to the decision in James Abbey v Daycare Management Pty Ltd (t/a Blinky Bill Childcare Centre) 11 made in the context of s.170CJ(2). However, that case can be distinguished from that of the Applicant’s. The James Abbey case involved a claim where it was found that the applicant should have approached offers of settlement on the basis that he “would be most unlikely to achieve reinstatement ... and would unlikely to receive significant compensation”12 (because he had already received a payment in lieu of notice). In the context of the factual matrix in that matter Mr Abbey’s case was characterised as weak. As will be explained below, Mr Bradshaw’s case was not weak. Until the issue of ‘out of hours’ work was decided against the Applicant, the possibility of reinstatement or significant compensation remained high.

[20] Sections 170CJ(2) and (3) were considered by a Full Bench in Brazilian Butterfly Pty Ltd and Charalambous. 13 It addressed the authorities relevant to these provisions before stating:

[39] Very strong prospects of success will not always justify a failure to participate in settlement negotiations initiated by a serious settlement offer from the other party. For example, where reinstatement is not sought and the amount offered by a respondent is equivalent to the statutory cap on compensation that can be ordered pursuant to s.170CH, it will likely be unreasonable for an applicant to fail to agree to a settlement on those terms, irrespective of how strong the applicant’s case is. Of course, even then, it is possible to conceive of circumstances where a failure to agree terms of settlement on the basis of such an offer would not be unreasonable. For example, depending upon the circumstances, it may be entirely reasonable for an applicant to insist upon a withdrawal of the dismissal and acceptance of a resignation in its stead if this were necessary to repair substantial damage done to an applicant’s professional reputation and future professional job prospects as a result of the dismissal.

[40] On the other hand, modest or even poor prospects of success on liability or remedy will not necessarily always make it unreasonable for a party to fail to agree terms of settlement that may lead to the discontinuance of the application. For example, an applicant who was a long term employee close to retirement may have very substantial contingent superannuation entitlements that will be lost unless he or she obtains reinstatement. The difference between the value of those contingent entitlements and the amount offered by the respondent as a monetary settlement may be so great as to make it reasonable for the applicant to refuse the respondent’s offer, notwithstanding that the applicants’ prospects of success are only modest or even poor. Again, each case will turn on its own facts. (References removed)

[21] The Full Bench continued:

[43] 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.

[44] 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.

[45] In many, if not most, cases there will be contested facts or contested interpretations of particular facts. What knowledge in this regard is to be attributed to the reasonable person considering whether, and if so, how to respond to an offer of settlement? The passage in Abbey, upon which the Commissioner relied was, clearly enough, an attempt to grapple with that problem. However, there is a tension between the way in which that passage is expressed and the apparent acceptance by the majority in Blagojevch that a party can act reasonably in responding to an offer of settlement by reference to that party’s “genuine perception or recollection of events”. The Full Court’s formulation is to be preferred although, even then, it is not to be seen as a substitute for the words of the Act. Of course, there is an issue as to what constitutes a “genuine” perception. The Full Bench in Kangan Batman TAFE observed, we think correctly, that:

“A party cannot simply disregard matters that should have been reasonably apparent and then claim that such matters were not apparent to them.” (References removed)

[22] Section 170CJ(3) was again considered in Goffet v Recruitment National Pty Ltd 14 (a case concerning a failure to attend a conciliation conference). In that matter the Full Bench characterised an unreasonable act as requiring intention (otherwise it would be an unreasonable omission).15 Intention was said to be either deliberate or reckless.16

[23] The Commission, as presently constituted, adopts the reasoning of the Full Benches in the Brazilian Butterfly and Goffet decisions.

The substantive hearing

[24] At the substantive hearing the Applicant submitted (in summary) that the dismissal was harsh, unjust or unreasonable because:

• the conduct engaged in by the Applicant was “out of hours and does not form a valid reason for termination due to the principles espoused in Rose v Telstra” 17

• even if the Applicant’s conduct was connected with his employment there remained no valid reason because:

• he was authorised to reside at the Grosvenor Drive Property by Ms Harris; 18

• the direction to leave the Grosvenor Drive Property was not a direction he had to comply with (unlike directions in relation to the performance of work) because he disagreed with it; 19

• he did not gain unlawful forced entry into the Grosvenor Drive Property on 17 June 2013 because the changing of the locks was improper; 20

• any costs incurred by the Respondent in trying to evict the Applicant were voluntarily incurred by it; 21 and

• even if there was a valid reason for termination, the termination of the Applicant’s employment was harsh having regard to his long service, lack of disciplinary record, impact on him personally and loss of leave accruals and bonus payments. 22

[25] At the substantive hearing the Respondent submitted (in summary) that the dismissal was not harsh, unjust or unreasonable because:

• the conduct engaged in by the Applicant was not ‘out of hours’ conduct; 23

• there were valid reasons for the termination; 24

• the decision to terminate the Applicant’s employment was otherwise not harsh, but a proportionate and appropriate response having regard to the gravity of the Applicant’s conduct. 25

[26] In its decision of 11 April 2014 the Commission essentially agreed with the Respondent’s submissions on all of the main points of contest between the parties.

[27] Consequently, the Commission rejected the Applicant’s further submission that he be reinstated or, in the alternative, that he be compensated. Rather, his application for a remedy was dismissed.

[28] Although the Applicant lost on all counts that does not mean that his case was without merit. In coming to its decision the Commission was required to give consideration to competing submissions and evidence about a range of issues including:

a) whether the conduct engaged in by the Applicant was ‘out of hours’ conduct;

b) what were the duties, express or implied, the Applicant owed to the Respondent;

c) whether the conduct of the Applicant breached those duties;

d) the characterisation of the Applicant’s relationship with the Respondent in respect of the Grosvenor Drive Property (i.e. whether he was a tenant);

e) what rights Ms Harris had vis a vis the Grosvenor Drive Property and what rights she could vest in the Applicant;

f) whether there was a valid reason/s for the termination of the Applicant’s employment because he:

i. continued to reside at the Grosvenor Drive Property without authorisation;

ii. refused to follow numerous directions to vacate the Grosvenor Drive Property; and

iii. unlawfully forced entry into the Grosvenor Drive Property;

g) a number of matters the Commission found were relevant to the determination of whether the dismissal of the Applicant was harsh, unjust or unreasonable.

[29] Significantly, in coming to its decision the Commission was required to resolve the competing evidence of the Applicant and his former partner Ms Harris. In short, the Commission found that Ms Harris “presented as a witness of truth and credibility” 26 and, consequently, preferred her evidence over the evidence of the Applicant.

[30] What is apparent from the Commission’s decision of 11 April 2014 is that, by reason of the need to resolve complex legal principles and competing factual evidence, in making an application for an unfair dismissal remedy the Applicant did not act vexatiously or without reasonable cause. Nor should it have been reasonably apparent to him that his application had no reasonable prospect of success at the time that he commenced it.

[31] At the hearing of the Application for Costs, counsel for the Respondent advised that his client no longer “press[ed] the contention that the substantive unfair dismissal application was commenced unreasonably or without reason cause.” 27 It was appropriate for the Respondent to make this deviation from the original Application for Costs.

[32] The question to be decided, therefore, is whether the Applicant caused the Respondent to incur costs because of an unreasonable act or omission by the Applicant in connection with the conduct or continuation of his unfair dismissal application.

Grounds for the Respondent’s Application for Costs

[33] The Respondent advances its Application for Costs upon two grounds.

a) First, it is said the Applicant “... [refused] to accept a generous settlement proposal made to him during the conciliation conference” on 30 August 2013.

b) Secondly, it is said the Applicant acted unreasonably in continuing “his maintenance of the application in the face of evidence that was to be given against him by [Ms Harris about whether he had her permission to continue to reside at the Grosvenor Drive Property]”. It is said he became aware of that evidence on or about 11 February 2014 and he should have discontinued his application for an unfair dismissal remedy as a result. 28

[34] In respect of each ground advanced by the Respondent, the Commission must, in accordance with the decision in Construction, Forestry, Mining and Energy Union v Clarke (Clarke) 29, undertake a two step process:

a) First, it must be established that a party engaged in “an unreasonable act or omission” (the first Clarke question);
b) Secondly, it must be established that the unreasonable act or omission “caused another party to the proceeding to incur costs in connection with the proceeding” (the second Clarke question).

[35] The Commission now asks each of the Clarke questions in respect of the two grounds for costs advanced by the Respondent.

Ground 1 - The Applicant’s refusal of a settlement offer

The first Clarke question: did the applicant engage in an unreasonable act or omission?

[36] It is uncontested that:

a) the parties participated in a conciliation conference on 30 August 2013; and

b) the Respondent offered to pay the Applicant $27,500 in full and final settlement of the matter (“Settlement Offer”);

c) the amount offered was close to the payment the Applicant would have been paid in respect of leave accruals under the 2012 EA if his employment had not been terminated for misconduct; and

d) the Settlement Offer was not subsequently repeated on an open basis or even on a “without prejudice, save as to costs” basis.

[37] The Applicant rejected the Settlement Offer and, in the proceedings before the Commission, continued to pursue reinstatement or compensation in lieu of reinstatement.

[38] Although the fact and amount of the Settlement Offer were not disputed, the Commission, as presently constituted, was concerned about whether it could have any regard to what had occurred during the conciliation conference when the offer was not put on a “save as to costs” basis. 30

[39] Counsel for the Respondent conceded that the without prejudice offer made in conciliation was not made “save as to costs”. 31 Further, as the Settlement Offer was not subsequently repeated on an open basis or even on a “without prejudice, save as to costs” basis, at no time was the Applicant put on notice that, if he rejected the offer and ultimately lost his unfair dismissal application, the fact of his rejection of the Settlement Offer would be used as a basis for seeking a costs order against him.

[40] However, counsel for the Respondent drew the Commission’s attention to s.131 of the Evidence Act 1995 (Cth) (Evidence Act). 32 In short, s.131(1) provides that communications “made between parties ... in connection with an attempt to negotiate a settlement ...” are not to be adduced in evidence. However, s.131(2) provides for a number of exceptions which, relevant for present purposes, include communications “relevant to determining liability for costs” .33

[41] It is clear that s.131(2)(h) of the Evidence Act does not expressly require the communications or documents, which are to be relied upon in determining liability for costs, to be made on an open or “save as to costs” basis.

[42] Section 131(2)(h) of the Evidence Act has been the subject of much judicial consideration. In:

a) Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (No. 3) 34 s.131(2)(h) of the Evidence Act was held to apply to the file note of a solicitor for the respondent that was clearly about a “without prejudice” discussion and a subsequent letter marked “without prejudice”;

b) Silver Fox Company Pty Ltd as Trustee for the Baker Family Trust v Lenard Pty Ltd (No. 3) 35 s.131(2)(h) of the Evidence Act was held to apply to what occurred during a mediation participated in by the parties under a Mediation Agreement containing a clause which stated that any settlement proposal made in the course of the mediation will be privileged and will not be tendered as evidence in any proceeding relating to the dispute;

c) an industrial matter, Burgess & Ors v Mount Thorley Operations Pty Ltd 36 Schmidt J of the IRC of NSW held that “there is nothing in s.131 which would suggest that an offer made in a s.109 conciliation conference was not caught by the section” (i.e. s.131(2)(h) applied).37

[43] All of the above cases support the Respondent’s contention in this matter.

[44] However, in a number of matters s.131(2)(h) has not been effective in shining a light on what occurred in a mediation. In

a) Pinot Nominees Pty Ltd v Commissioner of Taxation 38the Federal Court of Australia;

b) Tony Azzi (Automobiles) Pty Ltd v Volvo Car Australia Pty Ltd 39 the Supreme Court of NSW; and

c) Forsyth v Sinclair (No 2) the Supreme Court of Victoria, Court of Appeal,

held that s.131(2)(h) does not apply to court ordered mediation under the respective Acts governing the procedures of those courts.

[45] However, the conciliation of unfair dismissal matters in the Commission are not conducted under an statutory provision. Accordingly, the cases referred to immediately above do not assist a party wanting to maintain that, what occurs in conciliation is inadmissible when it is sought to be relied upon in respect of an Application for Costs.

[46] In the predecessor Commission to this Commission there were varying approaches.

[47] In I McKenzie & McDonald Murholme v Meran Rise Pty Ltd (t/a Nu Force Security Services 40 (I McKenzie) a Full Bench held that the Commissioner at first instance “fell into error” because she had relied upon an offer made in conciliation (and not subsequently repeated on an open basis) in deciding to award costs against the applicant and her legal representative. The Full Bench stated,

An offer of settlement made in conciliation proceedings is by its nature made on a without prejudice basis. It is inappropriate that an offer made in those circumstances should be taken into account in a costs application unless the offer is subsequently repeated on an open basis. It has long been accepted that positions taken in conciliation are without prejudice to the position to be taken in arbitration. The protection afforded to participants by this principle is an essential feature of conciliation proceedings. This is so whether the conciliation takes place in relation to an industrial dispute, an application pursuant to s.170CE or any other proceeding. In this case, however, the respondent's representative referred to the offer in the proceedings before Commissioner Foggo and relied upon the fact that the offer had been made. Mr McDonald acknowledged that when the offer was referred to by the respondent's representative, counsel then appearing for Mr McKenzie made no objection. We think it is clear that this failure to object constituted a waiver by Mr McKenzie of his right to object to the disclosure in arbitral proceedings of anything said or done in conciliation: s104(5). But does it follow that the Commissioner was entitled to take the offer into account when considering the question of costs? With respect to the Commissioner's view we do not think it does. Reference to the offer in the hearing before Commissioner Foggo did not change the offer from one which was made on a without prejudice basis to one which was appropriate to be taken into account on the question of costs. To hold otherwise would not only be contrary to principle but would also have the potential to do great damage to the conciliation process which is such a central part of the Commission's work. If the offer had subsequently been repeated in a fashion which deprived it of its without prejudice status in relation to costs, the position would have been quite different. In this case, however, there is no suggestion that the offer was repeated in that way. By relying on Mr McKenzie's failure to accept the respondent's offer of reinstatement the Commissioner fell into error. The offer could not be taken into account in considering an application for costs for the reasons we have given. Although this point was not raised before the Commissioner we cannot ignore it because of the importance of the issue which underlies it. 41

[48] While noting that s.131(2)(h) was not considered by the Full Bench in I McKenzie, in the present matter the Respondent would have the Commission, as presently constituted, do what exactly what was held to be erroneous in I McKenzie (i.e. rely upon an offer made in a conciliation conference and not subsequently repeated on an open or “save as to costs” basis).

[49] In Meacher v Natural Resources Conservation League of Victoria 42 Senior Deputy President Lacy did address s.131(2)(h) in the context of the Respondent wanting to lead evidence about what another Commission member had communicated during a conciliation conference. Lacy SDP held that the communication was “directed at settling the dispute ... [fell] within the exception contemplated by s.131(2)(h) and therefore capable of being adduced in evidence”43 Ultimately, Lacy SDP held the evidence to be inadmissible on a different basis, but his finding that the communications of a Commissioner during a conciliation conference falls within the exception contemplated by s.131(2)(h) is irreconcilable with the Full Bench decision in I McKenzie.

[50] More recently in this Commission Vice President Hatcher commented upon the decision in I McKenzie in the following terms,

It may be that the above reasoning in McKenzie should at some stage be the subject of review at the Full Bench level. The conduct of conciliation conferences is a key element of the process by which this Commission manages its unfair dismissal jurisdiction. It is the principal opportunity which parties have to settle their matters before they go to hearing. That is particularly the case for the many unrepresented litigants in this jurisdiction, who cannot be expected to have any understanding of the mechanisms of Calderbank offers and the like. In that context, there may be room for reconsideration of the rationale of an approach which may give parties at conciliation conferences a licence to behave unreasonably by declining to engage seriously in the process and failing to properly consider reasonable offers of settlement without the risk of any adverse consequences later in the proceedings. I note that in the New South Wales unfair dismissal jurisdiction, conduct in conciliation conferences has never been treated as being immune from consideration on the questions of costs. 44

[51] Ultimately the Vice President said that he,

...consider[ed] that the appropriate course is to follow the approach taken in McKenzie, with the result that any refusal by Mr Aggarwal of an offer of settlement by Vision Asia at the conciliation conference cannot be treated as an unreasonable act or omission for the purposes of s.400A(1). 45

[52] While the jurisprudence in relation to s.131(2)(h) of the Evidence Act ought to be persuasive on a single member of the Commission, s.591 of the FW Act makes it clear that the Commission “is not bound by the rules of evidence and procedure in relation to a matter before it.”

[53] In the present matter:

a) there is Full Bench authority for the proposition it is inappropriate that an offer made in conciliation should be taken into account in a costs application unless the offer is subsequently repeated on an open basis;

b) a learned Vice President of this Commission has (as recently as this month) considered it appropriate to follow the approach taken by that Full Bench; and so,

c) the Commission as presently constituted (by one of its most junior members) also feels compelled to follow the approach in I McKenzie. I do so regardless of the fact that:

i. I share the concerns expressed by Hatcher VP in Aggarwal; and

ii. the decision of SDP Lacy in Meacher seems to be more consistent with the line of authority in other jurisdictions.

[54] For the above reasons, the Commission, as presently constituted, determines that evidence of the offers made at the conciliation conference on 30 August 2013 is inadmissable. It therefore follows that, in rejecting the Settlement Offer, the Applicant did not engage in an unreasonable act or omission.

[55] If I am wrong about the operation of s.131(2)(h), in so far as it applies to offers made during unfair dismissal conciliations, in any case, I would have found that the Applicant did not engage in an unreasonable act or omission in rejecting the Settlement Offer.

[56] In deciding whether the Applicant was unreasonable the Commission is required to apply the standard of a reasonable person. 46 That is to say, would a reasonable person who found themselves in the same position (as the Applicant did on 30 August 2013) have rejected the Settlement Offer?

[57] At the time the Settlement Offer was made to the Applicant he was in a position where:

a) his employment had been terminated on 5 July 2013 (8 weeks earlier);
b) his employment had been terminated summarily;
c) he had received no payment in lieu of notice;
d) he had been denied a payment in respect of leave accruals under the 2012 EA in the amount of $27,727.42;
e) he had to leave (or was about to leave) the town he had lived in most of his life, leaving behind his social networks and friends, because he could no longer afford to live there;
f) the offer amounted to 10.6 weeks pay (noting that the Applicant earned $134,539.08 per annum);
g) at that time (indeed for the entire time leading up to the termination of his employment and after it (including before the Commission)), the Applicant:

i. did not believe his conduct (in refusing to leave the Grosvenor Drive Property) was connected with his work as a driller (a job, by all accounts, he was very good at);
ii. in any case, believed Ms Harris had authorised him to reside at the Grosvenor Drive Property;
iii. believed that, having regard to his long service, lack of disciplinary record, impact on him personally the termination of his employment was harsh even if there was a valid reason for termination; and
iv. was strongly motivated to be reinstated to his employment (noting that it is the primary remedy under the FW Act).

[58] As events came to pass, on 11 April 2014, after full argument and the evidence of 10 witnesses, the Commission found that (in summary):

a) the contention that the Applicant’s conduct had nothing to do with his employment too narrowly construed the obligations inherent in the employment relationship; 47 and

b) it “beggars belief” that the Applicant thought Ms Harris could give him greater rights to the Grosvenor Drive Property than the Respondent (i.e. the owner of the property). 48

[59] However, just because the decision of the Commission on 11 April 2014 went against the Applicant (as it turned out, on all accounts) that does not mean that he acted unreasonably when the Settlement Offer was made to him on 30 August 2013. Hindsight is a wonderful thing. No doubt the Applicant would have been better off had he accepted the offer of $27,500, but that is not to say he acted unreasonably when he did not accept it at the time it was offered.

[60] Had the Applicant’s conduct, in refusing to leave the Grosvenor Drive Property, been found to be ‘out of hours’ conduct (as he genuinely perceived it to be and strongly submitted it was) then it would have followed that:

a) the Respondent had no valid reason for dismissal;

b) the Applicant was unfairly dismissed; and

c) the Applicant would likely have been reinstated (if the failure to the leave the Grosvenor Drive Property was not a valid reason for dismissal then there is no basis upon which it could have been said reinstatement was inappropriate).

[61] The issue of ‘out of hours’ conduct was an open issue in the proceedings. Both sides had more than modest prospects of succeeding on the point and whoever won on that point was ultimately going to win the day. It could not have been apparent to the Applicant that his argument about ‘out of hours’ conduct would not succeed. This is apparent on the face of the application for an unfair dismissal remedy and the vigorous manner in which the Applicant pressed the point before the Commission. It may also explain why the Respondent did not press the Application for Costs on the basis of s.611 of the Act.

[62] Further, in circumstances where the Applicant genuinely wanted to be reinstated (and would likely have been had he won the ‘out of hours’ conduct point), in all the circumstances of this matter, a reasonable person in his position would have rejected the Settlement Offer. The offer was not reasonable compensation in lieu of reinstatement. It was not sufficient to compensate him for the loss of a job he had enjoyed for 33 years of unblemished service. It was not sufficient to compensate him for him needing to leave the town he had lived in most of his life, his social networks and friends.

[63] Given that the Applicant had more than reasonable prospects on the ‘out of hours’ conduct point and of being reinstated, the Commission is not satisfied that the Applicant acted unreasonably in rejecting the Settlement Offer. The Applicant’s conduct did not constitute clear evidence of unreasonable conduct. A reasonable person would not have considered the Settlement Offer to be an acceptable alternative to the more than reasonable prospects of being reinstated to a job where they earned $134,539 per annum.

[64] As stated above, in making an application for an unfair dismissal remedy the Applicant did not act vexatiously or without reasonable cause. Nor should it have been reasonably apparent to him that his application had no reasonable prospect of success at the time that he commenced it. Nothing much had changed 8 weeks later when the Settlement Offer was made. A reasonable person in his position would have been justified in continuing to insist on upon reinstatement.

[65] In any case, in circumstances where it was not explained to the Applicant that the rejection of the Settlement Offer put him at risk of a costs order being made against him (if he failed to achieve a result at arbitration that was better than the Settlement Offer) I would further have found that it was not unreasonable for him to reject it.

The second Clarke question: did the Applicant’s act or omission cause the Respondent to incur costs in connection with the proceeding?

[66] Having found that the Applicant did not engage in an unreasonable act in rejecting the Settlement Offer (because the Commission, following I McKenzie, cannot have regard to what occurred during conciliation), the second Clarke question does not arise.

Ground 2 - The Applicant’s continuing contention that Ms Harris gave him permission to reside at the premises

The first Clarke question: did the applicant engage in an unreasonable act or omission?

[67] On 11 February 2014 (two days before the hearing was due to commence) the Respondent filed in the Commission and served on the Respondent a summary of the evidence that Ms Harris was expected to give (Harris Summary).

[68] The Respondent submits that, in the face of the Harris Summary it was unreasonable for the Applicant to maintain:

a) “that he had her permission to reside at the property” 49 and, consequently,

b) his application for an unfair dismissal remedy. 50

[69] In relation to the issue of whether Ms Harris had given the Applicant permission to stay at the Grosvenor Drive Property the Harris Summary stated that:

• There was never any agreement when they moved in together in 2009 that [the Applicant] could stay at [the Grosvenor Drive Property] indefinitely - that was never said.

[70] The Respondent submits that,

Notwithstanding that he already had knowledge of the evidence that [Ms Harris] would have given had he decided to call her, it ought to have been apparent to [the Applicant] from at least the point the Respondent resolved to lead evidence from Ms Harris that his contention that he had her permission to reside at the property was unsustainable. 51

[71] The reference to the Applicant’s knowledge is a reference to a Statutory Declaration that he had obtained from Ms Harris around 28 August 2013. 52 In that Statutory Declaration Ms Harris said,

3. After the breakdown of the relationship, Mr Bradshaw remained living at the residence with my permission....

4. Subsequently, a Housing Agreement was signed by the company and the unions in late 2012 which would then allow Mr Bradshaw access to accommodation in the Single Person Village (SPV) in Moranbah and it was agreed Mr Bradshaw would vacate once this accommodation was made available to him.

5. Mr Bradshaw refused to leave until such time as a SPV room was made available to him, as per the Housing Policy that had been agreed.

[72] The Applicant’s evidence was to the effect that Ms Harris had given him permission to stay at the Grosvenor Drive Property. It was submitted that,

As Ms Harris was the lessee she, and not the respondent, had the right to authorise who could reside in the premises. It was only when the warrant of possession was issued against Ms Harris on 26 June 2013 that the lease was broken and the applicant no longer had authorisation to reside at the premises. 53

[73] The extent of the cross-examination of Ms Harris on the authorisation point was to the following effect:

Mr Newman: Did you ever start saying that he had to move out around April or May when you were having these conversations with Mr Hamilton?

Ms Harris: Yes, I did.

Mr Newman: When were those conversations?

Ms Harris: Every conversation that I had with Mr Bradshaw after the time that he was eligible to move into SPV, based on the EA agreement, was around why he didn't have himself on that list and why he wasn't moving out.

Mr Newman: And what was his responses?

Ms Harris: Well, he had all of the excuses under the sun as to why he hadn't done it. 54

[74] Further,

Mr Newman: So when it started dragging on and he was being tardy, did you ever then approach him and say, "This agreement is now off and I need you to leave"?

Ms Harris: Yes, that was never, not conveyed. That was the whole point of every conversation, was that he was now eligible so he needed to take up that accommodation. At that time BMA Town Services also stepped in and told Mr Bradshaw that he had to leave and he refused.

Mr Newman: But did you ever tell him that he had to leave?

Ms Harris: Yes, I did.

Mr Newman: When did you tell him that he had to leave

Ms Harris: In every conversation that we had. Once he was eligible, there was absolutely no doubt in my mind and his - and it was frequently discussed - that he had to leave. 55

[75] In its decision of 11 April 2014 the Commission found that,

[56] ... (even if it is relevant to the question of the Applicant’s authority to stay at the Grosvenor Drive Property) Ms Harris withdrew her authority on and from around December 2012. Any suggestion that the Applicant continued to have Ms Harris’ authority beyond this point in time is fanciful.

[76] As is apparent from the transcript extracts above, the evidence which supported the Commission’s finding was not challenged during the hearing. It was never put to Ms Harris that she had authorised the Applicant to stay at the Grosvenor Drive Property beyond December 2012. All of her evidence was consistent with what she had recorded in her Statutory Declaration and, from around August 2013, the Applicant knew this would be Ms Harris’ evidence. No attempt was made to challenge it. This was not a case where the Applicant had a different perception of events, genuinely held, or simply a different recollection of events.

[77] In circumstances where, 6 months before the substantive hearing, the Applicant knew what Ms Harris’ evidence was on the authorisation issue and, at the hearing, did not seek to challenge it, it was unreasonable for him to maintain, during the course of the hearing, that he had Ms Harris’ authority to stay at the Grosvenor Drive Property beyond December 2012. It follows, therefore, that it was unreasonable for him to maintain (as he did) that the Respondent did not have a valid reason for termination because he “continued to reside at the Property without authorisation”.

[78] However, the unreasonable continuing assertion of the authorisation by Ms Harris does not mean that the Applicant was unreasonable in maintaining his application for an unfair dismissal remedy.

[79] Valid reason is but one of the issues to be considered and determined by the Commission in the course of an unfair dismissal application. A finding (even an inevitable finding) that there was a valid reason under s.387(a) is not enough to establish that an applicant acted unreasonably to continue to pursue their application and seek a remedy.

[80] A reasonable person in the Applicant’s position would have been justified in continuing with their application for an unfair dismissal remedy even in the face of a valid reason for termination. An employee, like the Applicant, who had an unblemished 33 year work history with the Respondent had more than modest prospects that the dismissal might still have been found to be unfair and that he might be reinstated (a lesser likelihood) or awarded an amount of compensation in lieu of reinstatement. A reasonable person would have made this assessment and, like the Applicant, continued to pursue a remedy.

[81] As events came to pass the Commission, having found there was a valid reason for termination, then went on to decide against the Applicant on the question of unfairness and remedy. However, that does not mean there was clear evidence of unreasonable conduct by the Applicant in continuing with his application.

The second Clarke question: did the Applicant’s act or omission cause the Respondent to incur costs in connection with the proceeding?

[82] Having found that the Applicant did not engage in an unreasonable act by maintaining his application for an unfair dismissal remedy (even in the face of Ms Harris’ evidence about authorisation) the second Clarke question does not arise in those circumstances.

[83] However, having found that the Applicant did engage in an unreasonable act maintaining that Ms Harris gave him permission to stay at the Grosvenor Drive Property the second Clarke question does arise.

[84] The question, therefore, is did the Applicant’s continuing assertion that Ms Harris authorised him to stay at the Grosvenor Drive Property caused the Respondent to incur costs in connection with the proceedings?

[85] The answer is, likely “yes”.

[86] This is because the Applicant’s continuing assertion that Ms Harris authorised him to stay at the Grosvenor Drive Property resulted in the Respondent being required to call Ms Harris to rebut it. In the face of what the Applicant knew Ms Harris would say forcing the Respondent to call her was unreasonable. It is also to be noted that it caused Ms Harris great distress which was, in all the circumstances, unnecessary.

[87] However, it is further likely that those costs are marginal having regard to the totality of the proceedings which required the Commission to consider and decide:

• whether the conduct engaged in the Applicant was out of hours conduct;

• even if the Applicant’s conduct was connected with his employment, whether there was a valid reason because of the three reasons asserted by the Respondent;

• each of the elements of s.387 of the FW Act;

• even if there was a valid reason for termination, whether the termination of the Applicant’s employment was harsh having regard to his long service, lack of disciplinary record, impact on him personally and loss of leave accruals and bonus payments; and

• what remedy, if any, to award.

[88] In the grand scheme of things the unnecessary calling of Ms Harris did not add to the duration of the proceedings in anything other than a marginal sense, however, there were likely costs associated with obtaining a summary of evidence from her and arranging for her attendance before the Commission.

Conclusion

[89] Having considered all that has been submitted by each of the parties, the matters that the Commission is required to consider under s.400A of the FW Act and the criteria to be applied to s.400A in accordance with the decision in Clarke, the Commission is satisfied the Applicant engaged in an unreasonable act only by reason of him forcing the Respondent to call Ms Harris to give evidence (because he continued to maintain that she had authorised him to stay at the Grosvenor Drive Property).

[90] Consequently, there was an act that caused the Respondent to incur costs in connection with the proceeding, namely costs associated with obtaining a summary of evidence from her and arranging for her attendance before the Commission.

[91] The consequence of the above findings is that, in the exercise of its discretion, the Commission allows the Respondent’s application for a costs order in so far as it relates to the costs associated with:

a) obtaining a summary of evidence from Ms Harris; and

b) arranging for Ms Harris to attend before the Commission to give evidence.

[92] The parties are directed to confer about the quantum of the costs referred to in paragraph [91] and, by 4.00pm on Monday, 28 July 2014 submit a draft order to be issued by consent. Failing agreement between the parties the Commission will relist the matter for submissions on the issue of costs associated with Ms Harris being called to give evidence.

COMMISSIONER

Appearances:

Mr C Newman for the Applicant.

Mr J Snaden for the Respondent.

Hearing Details:

2014.

21 May

Brisbane & Melbourne.

1 [2014] FWC 2481.

2 [2014] FWC 2481, [85].

3 [2014] FWC 2481, [78].

4 [2014] FWC 2481, [77].