[1] On 27 February, 2015, it was ordered by the Queensland Civil and Administrative Appeals Tribunal that the decision of the Tribunal on 18 September, 2014 is set aside. It was further ordered that the application for costs be returned to the Tribunal for reconsideration according to law and the findings disclosed in the reasons for judgment.

[2] The Appeal Tribunal made findings in addressing Ground 1 of the appeal that I misapplied the test in s102 of the QCAT Act in that I failed to consider all of the circumstances relevant to the exercise of my discretion. In particular it was found that I did not consider in my reasons that Mrs Bell failed to prove three out of four of her allegations of sexual harassment and that I did not accept Mrs Bell's contention that Ms Ralph bullied and harassed her because she (Mrs Bell) failed to accept Ms Ralph's sexual proposition.

[3] The Appeal Tribunal found that the respondents in the proceedings had been able to respond successfully to three out of four allegations. The Appeal Tribunal said that these are relevant considerations for the purposes of exercising the discretion under s102 of the QCAT Act.

[4] It was found that I considered the success of a party in finding that legal representation was ultimately necessary to achieve that outcome, however the interests of justice goes both way and I must also consider the respondents case and whether certain contentions were ultimately found to be accepted or rejected by the Tribunal in making its decision.

[5] The Appeal Tribunal made the point that the costs order has serious ramifications for the respondents in this case because the costs payable to Mrs Bell are substantial being approximately $113,131.02.

[6] I do not understand the Appeal Tribunal to be critical of my findings or reasoning in any other respect.

[7] I have reconsidered the parties' submissions in relation to costs filed in the original proceedings. I have expanded on my original reasons and also expressly set out my consideration, in relation to the issue of costs, of Mrs Bell's failure to prove three of her four pleaded allegations of sexual harassment and failure to prove her allegation that Ms Ralph bullied and harassed her as a result of Mrs Bell having failed to accept Ms Ralph's sexual proposition.

[8] It was found that on 17 December, 2011, comments were made to the applicant Mrs Bell, by the second respondent, Ms Ralph, which amounted to sexual harassment under section 119 of the Anti-Discrimination Act 1991 (Qld). It was found that this sexual harassment played a material role in causing the psychological injury suffered by Mrs Bell.

[9] Mrs Bell was awarded the sum of $9,000.00 as against both respondents.

[10] The parties were invited to make submissions in relation to costs of the proceedings.

[11] Section 100 of the Queensland Civil and Administrative Tribunal Act 2009 (Qld) (QCAT Act) sets the basic principle that each party to a proceeding must bear the party's own costs for the proceeding, unless in the proper exercise of its discretion by reference to the matters set out in the QCAT Act, it is appropriate for an award to be made.

[12] This Tribunal may make an order for costs if the interests of justice require it. The Tribunal may have regard to whether a party acted in a way that unnecessarily disadvantaged another, the nature and complexity of the dispute, the relative strengths of the claims, the financial circumstances of the parties and anything else the Tribunal considers relevant.[1]

[13] The Tribunal has found in considering claims for costs based on the "interests of justice" ground that the relevant factors must "point so compellingly to a costs award that they overcome the strong contra-indicator against costs orders in section 100"[2]. However, the phrase "in the interests of justice" is to be construed according to "its ordinary meaning, which obviously covers a broad discretionary power on the decision maker."[3]

[14] The Tribunal may also order costs pursuant to section 105 of the QCAT Act and Rule 86 of the QCAT Rules, if an offer to settle the dispute the subject of the proceedings has been made but not accepted and the offer is more favourable to the other party than the ultimate decision.

[15] Mrs Bell seeks recovery of her costs under section 102 and under Rule 86.

[16] In relation to section 102 of the QCAT Act, Mrs Bell raises a number of factors said to be in the interests of justice and relevant to the exercise of the Tribunal's discretion. Mrs Bell submits that the respondents placed her at an unnecessary disadvantage by refusing to accept reasonable offers to settle the dispute.

[17] In relation to the exercise of the Tribunal's discretion, Mrs Bell says that the case was complex and necessitated legal representation. Mrs Bell relies on the principle expressed by Keane JA, as he then was, in Tamawood Pty Ltd & Anor v Paans[4] that in the absence of countervailing considerations, where a party has reasonably incurred the cost of legal representation, and has been successful before the Tribunal, it could not rationally be said to be in the interests of justice to allow that success to be eroded by requiring that party to bear the costs of the representation which was reasonably necessary to achieve that outcome. I accept that submission and deal with it in more detail later in the decision.

[18] Mrs Bell also submits that the applicant has been put to significant unnecessary disadvantage by the way that the respondents have conducted themselves. In particular, the respondents should have recognized two weaknesses in their case - that Mrs Bell was not raising complaints of sexual harassment to deflect management of poor performance; and problems inherent in the investigation conducted by Mr Suter. She says that if they had done so they would have been prompted to settle the proceedings. Mrs Bell says that it was unnecessary for the respondents to run a case attempting to destroy her credit and reputation as a hard worker. Mrs Bell says that the first respondent did not conduct the proceedings as a model litigant because of its failure to make an offer of settlement.

[19] I do not agree that recognition of the weakness of these areas of the respondents' case would necessarily have prompted a settlement of the case. I agree with the submission of Mrs Bell that the assertion she had raised allegations of sexual harassment to deflect attention from poor work performance, was a weakness in the respondents' case. I consider that by pursuing the allegation of poor work performance at the hearing the respondents lengthened the case with resultant cost to themselves and Mrs Bell. I accept Mrs Bell's submission that the attack on her credit in this respect and on her reputation was unnecessary, particularly given the lack of supporting evidence on the question of poor work performance. A substantial part of the hearing was dedicated to cross examination of Mrs Bell and to Mrs Bell meeting the allegations of poor performance raised against her. I found Ms Ralph's evidence unimpressive on these issues. More than that, I found it incredible that if Mrs Bell was exhibiting the extent of poor performance alleged by Ms Ralph there was no record of any problem in the annual performance appraisal forms. Further, Queensland Health's guidelines for managing unsatisfactory performance; its directive in relation to unsatisfactory performance and its Human Resources policy were not followed. These points go to the issue of which party increased the costs of the proceedings and the relative importance of issues successfully or unsuccessfully raised. I find that the respondents increased the costs of the proceedings by pursuing an argument without merit or supporting evidence. I find that this was a significant plank in the respondents' case and one on which they failed.

[20] In relation to the submission that the respondents should have recognized the problems inherent in the investigation conducted by Mr Suter, I do not agree that recognition of these problems would have prompted a settlement. However, the investigation is relevant to the way in which Mrs Bell was treated upon making her complaint of sexual harassment. I found that the investigation was unsatisfactory. I found that it added to the hurt and humiliation caused to her by the incident of sexual harassment. It is a matter raised by Mrs Bell and an issue on which she succeeded at the hearing. It goes to the relative strength of the parties cases.

[21] As to the other submissions, I do not criticize the respondents for failing to settle the matter prior to hearing, given the significance issues of credit played in this case. I do not consider that the first respondent has acted inconsistently with the model litigant principles.

[22] Mrs Bell points to the disparity in financial position of the respondents and her. Mrs Bell has sworn an affidavit as to the detrimental impact the costs of the proceeding have had on her and her family. I note that the respondents have not had an opportunity to test this evidence and I do not rely upon it. However, I note the figure of $113,131.00 referred to in the appeal decision as the amount of Mrs Bell's costs. That is a very significant sum which entirely erodes her award of compensation and makes the litigation and its result worthless. It is self-evident that Mrs Bell is financially far worse off from bringing proceedings than if she had done nothing.

[23] Finally, Mrs Bell refers to the history of offers of settlement made by her during the course of the proceeding. She submits that the decision of the Tribunal awarding her $9,000.00 in compensation was not more favourable to the respondents than her first two offers, which were:

• (a) to be moved to a location where she would not have to work with the second respondent (made in writing on 30 May, 2012 before proceedings were commenced);

• (b) a verbal offer made as part of the conciliation process in the Anti-Discrimination Commission (made 19 September, 2012);

[24] In these circumstances Mrs Bell says that Rule 86 is engaged so that a discretion to award costs arises and costs should be awarded from 30 May, 2012 or from September, 2012.

[25] A further offer to settle for $45,000.00 "all inclusive" was made on 23 April, 2013. That is now said to comprise $5,000.00 for the claim and $40,000.00 for costs.

[26] Mrs Bell submits that there can be no reasonable explanation as to why the respondents refused to accept such reasonable offers to settle. I reject that submission. I consider the relevant enquiry to be whether the rules relating to formal offers of settlement set out in the Queensland Civil and Administrative Tribunal Act are engaged.

[27] I reject the applicant's submissions that Rule 86 is engaged by either of the first two offers of settlement. I accept the respondents' submissions that the first offer was not an offer of settlement contemplated by Rule 86 as it was not expressed to be in settlement of any claim and expressly reserved the applicant's rights. I accept the respondents' submissions that the second offer was not in writing as required by Rule 86. The second proposal included an unspecified amount for monetary compensation for hurt, humiliation, aggravated damages and medical expenses. I do not consider these proposals to be certain offers able to compromise the dispute or the proceedings. Nor are they able to be analysed as to whether they amount to a more favourable outcome for the respondents than the ultimate decision. I accept the respondents' submission that the third offer was made before any statements were filed and before the hearing and at that stage the Tribunal would not have ordered costs. Further, that offer was expressed as an offer inclusive of both claim and costs but not specifying the amount sought for each, making it difficult for the respondents to make an informed decision about the nature of the offer.[5] I do not consider it to be effective for the purpose of Rule 86.

[28] The respondent submits that:

• (a) the applicant's case was largely unsuccessful. The Tribunal rejected three of the four claimed incidents of sexual harassment, rejected the asserted cause of the harassment in the workplace and awarded damages in the sum of $9,000.00 only.

• (b) A large portion of the evidence sought to be relied on by the applicant consisted of assertions relating to the second respondent's conduct generally in the workplace and was ultimately considered to be irrelevant. The evidence was unnecessary and of itself needlessly inflated the costs of the parties.

• (c) Some of the evidence was ruled inadmissible early in the proceeding and other evidence was ruled inadmissible. The respondents refer to paragraph 11 of the decision.

• (d) The public policy intent of the Act is that the Tribunal was established as a no costs jurisdiction.

• (e) To the extent the applicant relies on the decisions of Tamawood Ltd & Anor v Paans [2005]QCA 111 and Ralacom Pty Ltd v Body Corporate for Paradise Island CTS 17653 (No2) [2010] QCAT 412, they are distinguishable.

• (f) The respondents did not, as alleged adopt an unnecessarily hardline approach to settling the dispute, or in relation to settlement proposals or offers and in relation to allegations of poor performance.

• (g) The fact that the Respondents were ordered to pay the applicant the sum of $9,000.00 does not of itself lead to the conclusion that it would be in the interests of justice to require the respondents to pay costs. The decision of Oehlman v Community Services Australia Pty Ltd and Anor [2012] QCAT 174 should be followed. In that case earlier offers of settlement were not considered sufficient by the Tribunal to justify a departure from the general rule under s100 of the Act that the Tribunal is a no-costs jurisdiction.

• (h) Just because a matter justifies legal representation does not mean a successful party is entitled to a costs order. The level of complexity of the matter was not such as to warrant a conclusion that it would be in the interests of justice to require a departure from each party bearing their own costs. Reliance on Tamawood is misplaced. A different test now applies. It would be an error of law to find (as the applicant asserts) that the need for legal representation entitled the payment of costs. That is not the test prescribed by ss100 and .

[29] I will deal with each of these submissions.

[30] As to the applicant's lack of success in three of the four allegations of sexual harassment made against the respondent; and her lack of success in the contention that bullying by Ms Ralph was a response to rejection of her sexual harassment of Mrs Bell, the respondents suggest that in having regard to the relative strengths of the claims made by each of the parties to the proceeding pursuant to section 102(3) of the Act, the applicant was largely unsuccessful.

[31] In relation to each of the allegations of sexual harassment, I accepted Mrs Bell's version of events. I am of the view that her allegations and the contention put by her were fairly arguable, even though I found that she had not established sexual harassment within the meaning of section 119 of the Anti-Discrimination Act 1991, in relation to 3 incidents and the evidence did not support her contention.

[32] Recognizing that the costs in this Tribunal do not follow the event, as is the case in the civil courts, it is nevertheless useful to look to the principles adopted by Judges exercising their discretion as to costs in circumstances where a party has only partially succeeded. A helpful discussion is to be found in Australand Corporation (Qld) Pty Ltd v Johnson and Ors [2007] QSC 128 at [17] where McMurdo J said: "But ordinarily the fact that a successful plaintiff fails on particular issues does not mean that the plaintiff should be deprived of some of its costs." His Honour referred to a decision of Waterman v Gerling Australia Insurance Co Pty Ltd (No.2) [2005] NSWSC 1111 where Brereton J said:

"The starting point is that the plaintiff, having been successful, is entitled to his costs. It is for the defendants to establish a basis for departing from that rule. A successful plaintiff who has failed on certain issues may be deprived of costs on those issues, or even ordered to pay the defendant's costs of them. [Hughes v Western Australia Cricket Assn Inc (1986) ATPR 40-748,48,136]. But this course, while open, is one on which the court embarks with hesitancy...From these cases emerge consistent themes that:

• justice may not be served if parties are dissuaded by the risk of costs from canvassing all issues which might be material to the decision in this case; but
• it may be appropriate to award costs of a separate issue where a clearly definable and severable issue, on which the otherwise successful party failed, has occupied a significant part of the trial."

[33] In BHP Coal Pty Ltd and Ors v O and K Orenstein and Koppel AG and Ors (No2) [2009] QSC 64, McMurdo J said at [20]: "If plaintiffs were to be at risk of adverse costs consequences simply by unsuccessfully advancing arguable points, then in a great deal of litigation the orders for costs would be quite different and with many unjust outcomes."

[34] In considering s102(c) of the Act - the relative strengths of the claims made by each of the parties to the proceeding, I do not think it is as simple as concluding that because three of the four incidents complained about were found not to amount to sexual harassment, and that the evidence did not support the contention, that the applicant's case was relatively weak. Her case was not weak. The matters on which Mrs Bell failed were fairly arguable and she did in fact succeed on strong grounds in relation to the fourth incident. Mrs Bell was also required to meet as part of a positive case conducted by the respondents, allegations in relation to her performance, her credit, her motivation being affected by the relationship between her son and Ms Ralph and her medical condition. She succeeded in relation to all these issues.

[35] I am of the view that just because some parts of her claim were not successful, Mrs Bell should not be deprived of her costs or some part of her costs if it is otherwise in the interests of justice within the framework of the Act that she be awarded costs.

[36] In relation to the respondents' submission that some of the applicant's evidence was unnecessary and of itself needlessly inflated the costs of the applicant and the respondent, I note that there were three short affidavits from witnesses Hubber, Fullick and Eyles which were attributed no weight. I do not consider the length of the hearing was affected by their evidence. Likewise I do not consider that ruling any evidence inadmissible added to the length of the case. I note at the start of the hearing the applicant agreed not to rely on parts of her statements of evidence. Later in the hearing the respondents indicated that parts of Ms Ralph's statement of evidence were not relied upon.

[37] In relation to the respondents' submissions in relation to the inapplicability of the Tamawood decision, I reject those submissions. I rely upon the decision of the then President of the Tribunal Wilson J., in Ralacom Pty Ltd v Body Corporate for Paradise Island Apartments (No.2)[6] and his Honour's statement that: "the principles found in Tamawood provide guidance about the circumstances in which it may be in the interests of justice for this tribunal to award costs against parties." [7]

[38] The respondents suggest that the Ralacom decision is distinguishable_._ The case may be distinguishable on its facts, however, it provides a solid basis for interpreting and applying sections 100 and 102 of the QCAT Act. The decision has been relied upon many times in the Tribunal and in the Appeal Tribunal.

[39] The respondents submit that Tamawood's case is distinguishable on its facts and that it applies to a different statutory framework. That is acknowledged. However, the principle extracted from the judgment of Keane JA, relied upon by the applicant, remains, on the authority of Ralacom, relevant to provide guidance in the exercise of the broad discretionary power to award costs where it is in the interests of justice to do so.

[40] The respondents' submit that the public policy intent of the Act is that the Tribunal was established as a no costs jurisdiction. The respondents ignore the relevance of s102 of the Act. I note the comments of Dr JR Forbes in Fast Access Finance (Beaudesert) Pty Ltd and Anor v Charter and Anor (No2) [2012] QCATA 172 at [11] : "Section 100 notwithstanding, orders "in the interests of justice" are contemplated by s102. It is now trite law that in this jurisdiction costs orders should be the exception not the rule, but it would be an exaggeration to describe them as rare." At [13]: "The circumstances of cases in which s102 has been applied are many and various, and a finding that any particular set is "compelling" is a matter of judgment and degree."

[41] I accept the respondents' proposition that just because a matter justifies legal representation does not mean a successful party is entitled to a costs order. However, in this case I consider that the level of complexity of the case was such as to warrant legal representation in order to achieve the success Mrs Bell did achieve. I consider that the guidance given by Keane JA, is apposite and that it is not in the interests of justice for Mrs Bell to have her award completely eroded by the costs of representation.

[42] I do not find that the need for legal representation entitled the payment of costs. I do not find that this is the test prescribed by ss100 and 102. I find that it is a relevant factor in the exercise of my discretion that, as Keane JA said, in the absence of countervailing considerations, where a party has reasonably incurred the cost of legal representation, and has been successful before the Tribunal, it could not rationally be said to be in the interests of justice to allow that success to be eroded by requiring that party to bear the costs of the representation which was reasonably necessary to achieve that outcome.

[43] Although the respondents have not put their submissions in this way, it seems to me that it is relevant to an analysis of whether there are any countervailing considerations to take into account the failure of the applicant to prove sexual harassment in relation to three of the four incidents the subject of the claim. That is a basis on which it is appropriate to make a reduction in any costs awarded to Mrs Bell.

[44] The respondents acknowledge that the cases of the respective parties met with mixed success in the final outcome. I have dealt with the significance of the applicant not succeeding in three of her claims and her contention in relation to bullying. It is submitted that I should accept that the elements of the respondents' case which were criticized by the applicant were, in the case of Mr Sutor's investigation, peripheral; and in the case of the applicant's work performance of secondary relevance, having only been raised to meet Mrs Bell's allegation of bullying.

[45] I have addressed these issues earlier in the decision. I find that as submitted by the applicant, the respondents ran a positive case that Mrs Bell fabricated her allegations against Mrs Bell in order to deflect attention from her poor performance. The respondents' witnesses gave evidence on the issue and Mrs Bell was cross examined at great length on the issue. There was no objective supporting evidence for the respondent's assertion. The respondents' conduct in prosecuting this assertion is a factor in the exercise of my discretion, given that it lengthened the hearing and added to its cost. I reject the respondents' submission that the type of evidence led by the respondents cannot be considered to constitute an exceptional circumstance sufficient to warrant a departure from s100 of the Act. I do not agree that it is necessary in the exercise of my discretion that I find an "exceptional" circumstance. I consider the respondents conduct in prosecuting its assertion without supporting evidence, lengthening the hearing and putting Mrs Bell to the cost of meeting the claim to be a strong factor, which together with other elements of this case, support a finding that it is in the interests of justice to award costs in Mrs Bell's favour.

[46] In relation to Mr Sutor's investigation, findings were made against the respondents. The findings were relevant to the treatment of Mrs Bell and had a direct relationship with the loss and damage she suffered. I reject the submission that the issue was merely peripheral. In considering the relative strengths of the parties' cases, it is a factor that weighs in favour of Mrs Bell.

[47] In relation to the financial position in which Mrs Bell finds herself as a result of the litigation, I acknowledge that the costs incurred are to be expected in a hearing of the length, complexity and involving the volume of material as in this case. However, the fact remains that Mrs Bell is much worse off as a result of successfully pursuing her legal rights than if she had not done so. I do not consider that to be in the interests of justice.

[48] Finally, for the reasons set out earlier I accept the respondents' submissions that they did not adopt an unnecessarily hardline approach to settling the dispute. I have also earlier found that Rule 86 of the QCAT Rules is not engaged so that it is unnecessary to further consider any claim for costs pursuant to s105 of the QCAT Act and Rule 86 of the QCAT Rules.

[49] For the reasons set out in this decision I find that it is in the interests of justice to order that the respondents pay part of the costs of the applicant. I have considered the matters set out in s102(3) of the QCAT Act and the submissions of the parties in relation to the factors set out in the section. The key matters which in my view point compellingly to a costs award are:

• (a) it is not in the interests of justice that Mrs Bell suffer the complete erosion of her award of compensation by legal costs necessarily incurred in successfully bringing her claim. The dispute was complex and necessitated legal representation.

• (b) Mrs Bell brought a strong case on the one incident of sexual harassment on which she succeeded and ran an arguable case in relation to the other issues. Further, she defeated the case mounted against her by the respondents that she fabricated her claims to deflect attention from poor work performance. These matters go to the relative strengths of the claims by each party.

• (c) the respondents increased the costs of the proceedings by pursuing an argument that Mrs Bell fabricated her claims to deflect attention from poor work performance, in circumstances where the contentions were without merit or supporting evidence. This is a matter to which I have regard pursuant to s102(3)(f) of the Act.

• (d) in relation to the financial circumstances of the parties Mrs Bell is far worse off financially from bringing proceedings than if she had done nothing to address the harm done to her.

[50] I have concluded that just because some parts of her claim were not successful, Mrs Bell should not be deprived of her costs or some part of her costs, if it is otherwise in the interests of justice within the framework of the Act that she be awarded costs. I have found that it is in the interests of justice that Mrs Bell be awarded costs. I do however recognize that although Mrs Bell ran arguable cases in relation to three incidents, she did not succeed. The incidents were discrete matters. They added to the length and complexity of the proceedings. That is a countervailing consideration as contemplated by Keane JA in Tamawood's case. That has to be balanced however, against the additional length and complexity added to the proceedings by the meritless contentions prosecuted by the respondents.

[51] Given the costs that have been incurred by the parties to date, I do not consider it to be just that they should be put to the expense of complex cost assessments. Doing the best I can I consider that the respondent should pay two thirds of the applicant's costs of the proceeding. In this regard, I note the power under s102 to award part of the costs of a party.

[52] I order that:

• (a) The applicant, Karen Bell's application for costs is allowed to the extent of two thirds of her costs.
• (b) The respondents, State of Queensland and Lindy Ralph are to pay two thirds of Karen Bell's costs of and incidental to the proceeding, including reserved costs (if any) on the standard basis of assessment in accordance with the District Court Scale of Costs.
• (c) If the amount of Karen Bell's costs is not agreed between the parties within 14 days, the costs are to be assessed by Hickey & Garrett, Legal Costs Consultants, level 21,141 Queen Street, Brisbane at the respondents' cost.
• (d) The respondents are to pay two thirds of Karen Bell's costs (as agreed or assessed) within 14 days of such agreement or assessment.

[1] Queensland Civil and Administrative Tribunal Act 2009 (Qld) s 102.

[2] Ralacom Pty Ltd v Body Corporate for Paradise Island Apartments (No2) [2010] QCAT 412 at [29].

[4] [2005] QCA 111.

[5] Holloway Nominees (Q) P/L v George & Ors (No2) [2008] QSC 71.

[6] [2010] QCAT 412.