Blagojevch v Australian Industrial Relations Commission

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

AND: THE HONOURABLE JUSTICE GIUDICE, PRESIDENT, THE HONOURABLE DEPUTY PRESIDENT ACTON, AND COMMISSIONER WHELAN (CONSTITUTING A FULL BENCH OF THE AUSTRALIAN INDUSTRIAL RELATIONS COMMISSION)

MOORE J: 1 I have read the reasons of Marshall and Lehane JJ in a draft form and I gratefully adopt what they have set out of the background and the relevant statutory provisions. I am in substantial agreement with their reasons and I agree with their conclusions and the orders they propose. I should, however, elaborate on why the proposed orders should be made. 2 Mr Blagojevch ("the applicant") was the applicant in the proceedings before the Commission. He had been dismissed by the second respondent on 9 September 1997. The second respondent's business was the distribution of products to the cleaning industry. The applicant was employed as a delivery driver and his responsibilities were to assemble and deliver orders to the second respondent's clients. 3 During the arbitration before Deputy President Watson the second respondent's case was, in substance, that the performance of the applicant had been deficient in that:

(ii) he misused a vehicle, telephone and facsimile machine owned by the second respondent;

(iii) he failed to obey directions (as to the loading of the vehicle, use of a mobile phone and the manner in which delivery rounds were completed).

4 The applicant's case before the Deputy President as to the first matter was that he was occasionally late but that this was tolerated by the second respondent. This was accepted by the Deputy President in his decision of 13 October 1998 and he made findings to that effect. The Deputy President rejected the evidentiary case of the second respondent that the applicant was often late. In doing so, the Deputy President found that diary entries by Mr Kaplan, a director of the second respondent, evidencing more frequent late arrivals were not contemporaneous. A finding was not made that the entries relied on were false and were falsified to bolster the evidentiary case of the respondent. However, that was an inference that might have been drawn from the finding made. 5 The applicant's case as to the second matter was to concede that he used the second respondent's phone and facsimile for personal business but that was also tolerated. Again the Deputy President found that was so. As to the use of the vehicle the applicant's case was that he denied using the vehicle for personal business or that he was tardy in completing his deliveries. The second respondent's case was that Mr Kaplan confronted the applicant almost daily about delays in completing his deliveries. The Deputy President found that it was probable the applicant did, on limited occasions, utilise the vehicle for personal activities on the basis that he believed such use was tolerated. The Deputy President did not accept that the applicant was constantly tardy or was spoken to almost daily. 6 What appears to have been a central feature of the second respondent's case in the arbitration, was that letters had been written and given to the applicant on 27 June 1997, 31 July 1997 and 20 August 1997. The letters were warning letters and addressed the matters referred to above. They asserted that the applicant had engaged in the conduct that later led to his dismissal. These letters were presumably intended to be corroborative of the evidence of witnesses called by the second respondent that the conduct complained of had been occurring. While proceedings in the Commission are not regulated by the Evidence Act 1995 (Cth), the letters may have been relevant evidence of what was asserted in them: see ss 55, 59 and 64. The letters were also presumably intended to address the matters raised in s 170CG(3)(c) and (d). That is, the issue of whether the applicant had been given an opportunity to respond to any reason relating to his capacity and also that he been warned about unsatisfactory performance. 7 The conclusion of the Deputy President concerning these letters was that it was improbable that the applicant had been given the three written warnings as suggested by witnesses called by the second respondent. That constitutes a finding that he was not given the letters and also constitutes a wholesale rejection of the evidence called by various witnesses from the second respondent concerning the circumstances in which the letters were said to have been given to the applicant and perhaps also the circumstances in which the letters were created. One of the pieces of evidence that the Deputy President accepted and relied upon in finding that the letters had not been given to the applicant was forensic evidence that the applicant had not handled the second of the warning letters which, on its face, was an original document. The task of the Deputy President, at least at this point in the proceedings, was to determine, as a matter of fact, whether the warning letters had been given to the applicant. It was probably unnecessary, at least at this stage, for any express finding to be made by the Deputy President about circumstances in which and the purpose for which the documents relied upon by the respondent came into existence. 8 After the Deputy President gave his decision on 13 October 1998 there was a further hearing on 6 November 1998 dealing with the question of costs. The case put by counsel for the applicant was somewhat discursive. However when asked by the Deputy President why the second respondent's conduct was unreasonable (a matter relied on by the applicant) the following was said: "[T]he respondent well knew what its case would be and it well knew what the applicant was saying. It had the same opportunity to assess the merits as the applicant had." 9 It is to be recalled that an offer of settlement was contained in a letter of 23 February 1998 which made plain that the applicant would challenge the authenticity of the written warnings that had been raised, for the first time, during the earlier conciliation before Senior Deputy President Polites. That the authenticity of the letters would be challenged is what is meant by the expression "well knew what the applicant was saying". The submission of counsel for the applicant on 6 November 1998 included reference on a decision of Commissioner Smith of 9 April 1998 in Betts v Madafferi Haulage Pty Ltd Print P9940. In that decision Commissioner Smith had taken into account the conduct of the parties prior to and after conciliation in assessing whether an offer had been unreasonably refused. Having referred to that decision counsel for the applicant then adverted to the observations of Senior Deputy President Polities made in the certificate issued after conciliation in the present application. Those observations included: "[A]s to the assessment of merits in the absence of hearing evidence I am unable to make an unqualified assessment as to whether the applicant was fairly selected for termination for unsatisfactory performance. However, if the respondent's version of events were to be accepted then evidence of unsatisfactory performance such as to justify termination exists."

After this was read to Deputy President Watson the following submission was made by counsel for the applicant:

"So that what the respondent did here was reprehensible in the terms that Commissioner Smith referred to in his decision of Betts v Madafferi Haulage. Because what the respondent did was bring allegations of fact which were wholly untrue that there were witnesses to written warnings, written warnings and we are bound by your findings, your Honour, were found on the balance of probabilities not to have been given." 10 The above raised, in my opinion, as a matter to be considered by the Deputy President, the reasonableness or otherwise of the rejection of the offer by the second respondent at a time when it might have known the deficiencies in its case and might then have known (if they then existed - and the warning letters did) that documents it might rely upon were either, at best, misleading or even falsified (the diary entries) or had not been given to the applicant or even fabricated for the proceedings (the warning letters). 11 In his decision of 9 November 1998 refusing to order costs the Deputy President dealt with the reasonableness of the conduct of the second respondent in not settling the matter on the terms offered in February 1998. The Deputy President said: "13. In my view, the respondent properly characterised the issue as to whether or not the respondent acted unreasonably in failing to settle the matter on the basis offered in February 1998. I am not satisfied that the respondent was unreasonable in not settling the matter on the basis offered at that time, in light of: (a) the certificate in Exhibit 3, which is more favourable to the respondent than to the applicant and, (b) the independent evidence the respondent proposed to bring which held some prospect of supporting a favourable outcome in arbitration. 14. In this context, I note that some findings in Print Q 7555 were made against the applicant and that the applicant's case succeeded ultimately on the basis of findings made on the balance of probability in the context of conflicting evidence. The level of the offer made was high, and would not support a conclusion that it was unreasonable in all the other circumstances for the respondent not to contest the application." (Emphasis added) 12 What this means is not entirely clear. In particular, it is not clear what is meant by the reference to the applicant's case succeeding ultimately on the basis of findings made on the balance of probability in the context of conflicting evidence. It may mean one of two things. The first is that notwithstanding the findings of fact that had been made by the Deputy President in his decision of 13 October 1998, doubt continued to attend the findings of fact recorded in that decision including whether the diary entries were contemporaneous and the warning letters were ever given. The second, and more probable, meaning is that while at the time the letter of 23 February 1998 was being considered by the respondent it was entitled to proceed on the basis that evidence that might be called might be accepted notwithstanding that, as a matter of fact, it was ultimately rejected. On either approach this consideration of the issue manifests error on the part of the Deputy President. 13 The following is the error if the reasons of the Deputy President is to be read the first way. The nature of the arbitration undertaken by the Commission under Div 3 is not industrial arbitration. The following appears in Mine Management Pty Ltd v Construction Forestry Mining and Energy Union (1999) 164 ALR 73 at pars 73-74: "A breach by an employer of the obligation, impliedly created by Div 3, not to terminate employment harshly, unjustly or unreasonably may give rise to proceedings in the Commission to enforce rights which are quite unlike proceedings of the type with which the Commission (and its predecessors) has been traditionally involved, namely, proceedings to prevent and settle, by conciliation and arbitration, industrial disputes extending beyond the limits of a State. Proceedings under Div 3 involve the enforcement of individual rights by reference to past events. They involve a process of hearing and determination which is (at least) quasi-judicial in character. The Commission must ascertain what the relevant facts are and whether the established facts demonstrate contravention of the standard established by Div 3 and, if demonstrated, what the statutory remedy should be. The Act uses the word 'arbitration' to describe the adjudication undertaken by the Commission under Div 3: see ss 170CG and 170CH. However, the use of that word does not mean the Commission's power under that Division is arbitration of the type referred to in s 51(xxxv) of the Constitution. The word might have been adopted in order to signify that the Commission was not being invested with judicial power. The process of hearing and determination under Div 3 is not the same as the arbitral process which involves the Commission determining what quasi-legislative regime should regulate the future industrial relationship between an employer and its existing and future employees. The industrial arbitral power is primarily exercised, not for the purpose of vindicating rights having regard to past conduct, but rather to prevent or settle a dispute that may cause future difficulties or losses." 14 This distinction is of some significance in this case. There remains an unresolved issue whether issue estoppel can arise as a result of proceedings in the Commission involving the exercise of the arbitral power: see Australian Transport Officers Federation v State Public Service Federation (1981) 34 ALR 406. However, in my opinion, different considerations arise in relation to the arbitration of a claim in which it is alleged that the termination of an employee's employment has been harsh, unjust or unreasonable. That enquiry falls, in my opinion, squarely within the observations of Gibbs J in Administration of Papua and New Guinea v Daera Guba (1972) 130 CLR 353 at 453: "The doctrine of estoppel extends to the decision of any tribunal which has jurisdiction to decide finally a question arising between parties, even if it is not called a court, and its jurisdiction is derived from statute or from the submission of parties, and it only has temporary authority to decide a matter ad hoc."

There is now a well settled doctrine concerning the judicial determination of issues of fact or of law. As Dixon J said in Blair v Curran (1939) 62 CLR 464 at 531-532:

"A judicial determination directly involving an issue of fact or of law disposes once or for all of the issue, so that it cannot afterwards be raised between the same parties or their privies. The estoppel covers only those matters which the prior judgment, decree or order necessarily established as the legal foundation or justification of its conclusion …" 15 It is unnecessary to decide, in these proceedings, whether an estoppel arises (or its scope) in relation to findings by the Commission in an arbitration under Div 3 on material questions of fact. However it cannot be doubted, in my opinion, that both the parties and the Commission would be constrained in their arguments about, and conclusions upon, questions of costs by any relevant findings of fact made by the Commission in determining the application itself. That is, the Commission must determine whether an order for costs should be made by reference to the facts as found. 16 In the present case that would mean the Deputy President should have considered the position of the second respondent in February 1998 in the light of his findings that the diary entries were not contemporaneous and the warning letters had not been given to the applicant. Had the Deputy President approached the matter this way he may have inferred that in February 1998 the second respondent knew that its case was not a strong one. Moreover the fact that entries which were not contemporaneous were made in the diary would have supported an inference that the second respondent had believed it was necessary to bolster its case by concocting evidence. Both these inferences would have been available had the Deputy President appreciated that his consideration of the costs application had to proceed by reference to his earlier findings. Moreover the Deputy President may also have inferred that it would have also been apparent to the second respondent in February 1998 that its success in the conciliation (in terms of the positive comments in the certificate) might have been attributable, and attributable in substantial part, to the warning letters produced at the conciliation and about which the later finding was made by the Deputy President. Thus, if the Deputy President meant by his observations about the quality of his findings that some doubt continued to attend the facts, then this manifests an error of law. 17 It is more likely the Deputy President was not questioning or doubting the findings he earlier made and was addressing the position the second respondent was in on 23 February 1998 based on these findings. That is why the Deputy President referred to "at that time" in the passage from his reasons quoted in par 11 above. However what does not emerge from the Deputy President's reasons, is that he considered the implications of the findings he made on the position the second respondent was likely to have been in at that time. The second respondent would then have been contemplating its prospects in the arbitration knowing that its success might be dependent on evidence that would be rejected because of its dubious quality. In my opinion, it would be wrong, in principle, to fail to view the position the second respondent had adopted in those circumstances as tending strongly against a conclusion that the offer was reasonably refused. That failure would involve a misapprehension of what was meant by "acted unreasonably" in s 170CJ(2)(b). The objects of Div 3 are set out in s 170CA(1). They include: "(b) to provide, if the conciliation process is unsuccessful, for recourse to arbitration or to a court depending on the grounds on which the conciliation was sought."

"The procedures and remedies referred to in paragraphs (1)(a) and (b), and the manner of deciding on and working out such remedies, are intended to ensure that, in the consideration of an application in respect of a termination of employment, a 'fair go all round' is accorded to both the employer and the employee concerned." 18 It is inconceivable, in my opinion, that consistent with those objectives a refusal to settle could be characterised as not unreasonable because, inter alia, a party adopted a position that it might succeed in an arbitration because it intended to rely upon what might have been contrived evidence or at least evidence of dubious quality for reasons already discussed. That a party might succeed in an arbitration on that basis could not, in my opinion, lead to, or lend support to, a conclusion that the rejection of the offer was not unreasonable. The apparent failure of the Deputy President to recognise that this was so involved a misapprehension of what is meant by "acted unreasonably" in the statutory context in which it appears. That is an error of law of the type referred to in Craig v State of South Australia (1995) 184 CLR 163 at 180-183. That is not to say that in the usual case reasonableness cannot be assessed by the Commission in a comparatively summary way when considering the position a party was in when an offer of settlement was made and, in that context, asking what would have been known to the party at that time about the prospects of their case succeeding or not in the arbitration: see e.g. Kanan v Australian Postal and Telecommunications Union (1992) 43 IR 257 . However this was plainly not a usual case having regard to the findings made. 19 The submissions of the applicant to the Full Bench were, as theyhad been to Deputy President Watson, somewhat discursive. However the following submission was made to the Full Bench by counsel for the applicant: "CMR WHELAN: But, Mr McDonald, [counsel for the applicant] does not the figure [offered to settle] only become relevant if you get beyond the fact that the party who is either phoned to settle the matter has no reason to believe that their case will be successful, because while they have a reason to believe their case will be successful, why should they accept a figure whatever that figure is? MR McDONALD: Yes. If they have a reason to believe that, Commissioner, that would be right. But this respondent has got no reason to believe that. This respondent has gone about a course of conduct setting up written warnings, making false entries in a diary, or erroneous entries in a diary, setting up arguments that, yes, we screwed up a written warning, bringing in witnesses before the Commission, that is what it is. It is not - this conduct is somewhat unusual and somewhat special. It is not just that two people could - one person was to be preferred in his oath to someone else. It runs much deeper than that in this particular case. But I, with the greatest respect, Commissioner, would not think that it should be confined to that. I would, with respect, Commissioner, say that every party that approaches the Commission ought to know that it could lose, and it ought to have, as it were, some appreciation of what if it does lose, and…" Again, this submission raises for consideration, though not with crystal clarity, the position of the second respondent prior to the hearing when it refused the offer. 20 In refusing to grant leave to appeal the Full Bench said: "We are not persuaded on the material before us that leave should be granted to appeal. Nothing which was put by Mr McDonald, who appeared on behalf of the appellant, that persuades us that the Senior Deputy President made an appealable error. In particular, we are unable to discern any mistake on the facts or any error in principle." 21 The Full Bench failed to appreciate that the approach of the Deputy President was erroneous on either of the bases just discussed. It follows that the decision of the Full Bench to refuse leave involves legal error when leave to appeal was refused as the approach of the Deputy did evidence an error of principle. Accordingly the writs sought by the applicant should issue. 22 I should refer to one other matter which was adverted to during the proceedings in this Court but not developed at any length by counsel for the applicant. Section 170 CJ(2)(b) raises for consideration whether a party has "acted unreasonably in failing … to agree to terms of settlement…". A "failure to agree" comprehends not only the rejection of an offer of settlement but probably more. The section does not say "refusal to agree to terms of settlement". The expression "failing to agree" describes a wider range of conduct than "refusing to agree". An offer was made in this case and no counter offer made. However the rejection of an offer can be absolute or qualified. By that I mean an offer can be rejected and no counter offer made or, on the other hand, an offer can be rejected but a counter offer made. If an offer is made which, as to monetary amount, is in the upper range of what might be an appropriate figure to settle on, and is rejected but no counter offer is made then that may, in my opinion, constitute conduct which was acting "unreasonably in failing to agree to terms of settlement" in some circumstances. Those circumstances might arise if the only real dispute between the parties is the amount for which the matter might be settled. Ordinarily, of course, the amount for which any proceeding (claiming, inter alia, a monetary amount), might reasonably be settled will depend on the actual and perceived strengths and weaknesses of the cases of the parties. However in a situation where an offer was made which was not fanciful and no counter offer was made by the opposing party to bring the negotiations into the range the opposing party thought was reasonable, the failure to make any counter offer could, depending on the circumstances, constitute acting unreasonably in failing to agree to terms of settlement. I certify that the preceding twenty-two (22) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Moore.

AND: THE HONOURABLE JUSTICE GIUDICE, PRESIDENT, THE HONOURABLE DEPUTY PRESIDENT ACTON, AND COMMISSIONER WHELAN (CONSTITUTING A FULL BENCH OF THE AUSTRALIAN INDUSTRIAL RELATIONS COMMISSION)

MARSHALL AND LEHANE JJ: 23 The applicant seeks writs of certiorari and mandamus directed to the first respondents, members of a Full Bench of the Australian Industrial Relations Commission. The proceeding was commenced in the High Court of Australia and has been remitted to this Court. 24 The order of which the applicant complains is one made by the Full Bench under s 45 of the Workplace Relations Act 1996 (Cth) (the Act) by which he was refused leave to appeal from the decision of a Senior Deputy President of the Commission: the Senior Deputy President had refused an application for an order, under s 170CJ(2) of the Act, for payment by the second respondent of the applicant's costs of a successful application for relief, under s 170CE(1)(a) of the Act, in respect of the termination by the second respondent (the employer) of the applicant's employment.

Background 25 The applicant began work for the employer in January 1994. The employer terminated his employment on 9 September 1997. In essence, the employer's case before the Commission was that the termination was for valid reasons related to the conduct of the applicant, including persistent late arrival at work; the applicant's conduct continued to be unsatisfactory despite three formal warnings; additionally, the employer claimed, the applicant had attempted to mislead the employer by altering a medical certificate. The Commission attempted, under s 170CF(1) of the Act, to settle the applicant's claim by conciliation. That conciliation took place on 6 November 1997. A certificate under s 170CF(2) was issued on that day and the applicant elected, under s170CFA, to proceed to arbitration by the Commission under s 170CG of the Act. We were told, and it was not disputed, that the Commission first listed the matter for arbitration on 23 January 1998, with a hearing date of 20 February 1998. The hearing did not take place on that day; it ultimately began on 3 August 1998 and extended over two additional days, 1 and 9 September 1998. The Commission, constituted by a Senior Deputy President, found that there was no valid reason for the termination of the applicant's employment and that the termination was harsh, unjust and unreasonable. The Commission ordered that the employer pay the applicant gross compensation of $10,500. 26 In reaching its conclusion, the Commission, on a number of significant matters, rejected evidence of witnesses called by the employer and preferred the evidence of the applicant. For example, the Commission rejected evidence of three witnesses, including a director of the employer who appears to have controlled its operations, that the three warning letters were read to the applicant and then given to him in the presence of a witness; it found, additionally, that the second of the warning letters, which according to the evidence of the director of the employer had been retrieved, crumpled, from a bin, had not been received by the applicant (that was the applicant's evidence, and forensic evidence established that there were no fingerprints of the applicant on it); and the Commission found that the applicant did not arrive late for work nearly as frequently as the director of the employer claimed and that entries which the director made in a diary, as to the applicant's time of arrival daily over an extended period, were "not contemporaneous" (and, by necessary implication, false). 27 On 23 February 1998 the applicant's solicitors wrote to the employer's solicitor the following letter, stated to be without prejudice save as to costs: "We adamantly believe that when forensic tests are concluded they will indicate that: (a) the document referred to as the "Original Warning Letter" dated 31 July 1997" has never been touched by the applicant; and more importantly (b) the inspection of the computer hard drive will identify that the documents enumerated nine and four on the list dated 21 November, 1997 [two of the warning letters] were created after the date of the termination of the applicants contract of employment. We advise that in order for our client to minimise costs he is willing to settle the above matter prior to the commencement of the forensic testing for an amount of $8,500.00 by way of full and final settlement of all claims against the respondent. We advise that if this matter proceeds and the applicant's claim is successful we shall pursue the issue of costs both legal and forensic against the respondent. …." 28 The employer's solicitor responded on 27 February 1998: "I refer to your letter dated 23 February. My client has instructed me to reject the settlement offer contained therein."

Application for order of payment of costs 29 Following the success of his application under s 170CE, the applicant sought an order, under s 170CJ(2), that the employer pay his costs. Section 170CJ(2) provides: "If (a) the Commission has begun arbitrating a matter the subject of an application under section 170CE; and (b) the Commission is satisfied that a party to the proceeding has acted unreasonably in failing … to agree to terms of settlement that could lead to the discontinuance of the matter before the conclusion of the arbitration; the Commission may, on an application under this section by the other party to the proceeding, make an order for costs against the first-mentioned party." 30 The Senior Deputy President dismissed the application for costs. The essence of his reasons appears in the following paragraphs: "13. In my view, the respondent properly characterised the issue as to whether or not the respondent acted unreasonably in failing to settle the matter on the basis offered in February 1998. I am not satisfied that the respondent was unreasonable in not settling the matter on the basis offered at that time, in the light of: (a) the certificate [under s 170CF(2)], which is more favourable to the respondent than to the applicant and,

(b) the independent evidence the respondent proposed to bring which held some prospect of supporting a favourable outcome in arbitration.

14. In this context, I note that some findings … were made against the applicant and that the applicant's case succeeded ultimately on the basis of findings made on the balance of probability in the context of conflicting evidence. The level of the offer made was high, and would not support a conclusion that it was unreasonable in all the other circumstances for the respondent not [sic] to contest the application.

15. I have also had regard to the fact that there is no suggestion … that the respondent acted unreasonably in relation to the conciliation process. The February 1998 offer was a one-off offer. I am not satisfied that the respondent acted unreasonably in not accepting it at that time for the reason just enunciated. 16. In all the circumstances, I am not satisfied that the respondent did act unreasonably in not accepting the February 1998 offer at that time. Accordingly, I am not satisfied that the respondent acted unreasonably in not agreeing to terms of settlement that would have at that time led to the discontinuance of the matter prior to the arbitration." 31 The Senior Deputy President said this, in response to submissions on behalf of the applicant: "9. I do not accept that there exists a necessary relationship between the level of settlement made and rejected, and the level of compensation arising from an arbitration. That relationship says nothing in itself about the reasonableness or otherwise of a party in refusing to accept the offer to settle the matter, although it will be a relevant consideration, among others."

Application for leave to appeal to the Full Bench 32 In his application for leave under s 45 of the Act, the applicant's primary submission was that the Senior Deputy President was in error (s 170JF(2)) in failing to accept that the relationship between the amount offered and the amount of compensation ultimately awarded was the primary factor in the exercise of the discretion under s 170CJ(2). The applicant also submitted that the Commission was in error in failing to take account of the circumstance that, as to critical aspects of the claim for compensation, the Commission had rejected evidence given on behalf of the respondent. Those submissions are reflected in the reasons given by the Full Bench for its decision now under challenge: "(2) The appellant submitted that the respondent had acted unreasonably in not agreeing to terms of settlement proposed by the appellant prior to the hearing. One of the terms proposed was financial compensation of $8,500 - $2,000 less than Senior Deputy President Watson ordered the respondent to pay.

… (4) The appellant's counsel directed our attention to conduct by the respondent and its legal representatives prior to and during the proceedings in order to show that the respondent had behaved unreasonably. It is not necessary or desirable that we rehearse that material here. It is important to observe, however, that not all conduct of a party is relevant to a consideration of whether the party has acted unreasonably within the meaning of s 170CJ(2). Costs may only be awarded under that section if the Commission is satisfied, relevantly to this case, that a party had "acted unreasonably in failing … to agree to terms of settlement". The section is not concerned as such with whether a party has acted unreasonably in the conduct of its case, for example by refusing inspection of documents or by the use of delaying tactics. Such conduct, reprehensible as it might otherwise be, will only be relevant if it bears upon the reasonableness of a party in failing to agree to terms of settlement.

… (6) We reject the submission made by Mr McDonald that in considering applications under s170CJ(2) the Commission should give pre-eminence to the relationship between any offer of compromise and the sum awarded by way of compensation in the substantive proceedings. The weight to be given to such matters will vary, depending on the circumstances in each case. We have considered what has been put in this case, and we have reached the view that Senior Deputy President Watson's treatment of that issue was not in any way incorrect."

Application for prerogative relief 33 The applicant's initial formulation of his claim for prerogative relief alleged error of law on the face of the record. When the record is identified in accordance with the principles in Craig v State of South Australia (1995) 184 CLR 163 at 180-183, it is plain that a claim formulated in that way cannot succeed. It was submitted before us that the reasons of the Full Bench revealed errors of law which amounted, in accordance with the principles discussed in Craig, to jurisdictional error. The Commission, it was submitted, erred in two ways: it failed to hold that the relationship between the amount offered and the amount awarded was the primary factor in the exercise of the discretion under s 170CJ(2) and it failed to perceive the relevance of the findings of the Senior Deputy President as to the conduct of the employer. 34 We do not think there is any basis in the Act for giving primacy to any particular factor. Section 170CJ(2) directs attention to the reasonableness, or otherwise, of the conduct of a party in failing, when the question arises, to agree to terms of settlement. The reasonableness of the terms offered (together with the expressed willingness, or otherwise, of the other party to enter into negotiation) will be relevant in applying the statutory test but is unlikely, usually, to be the only, or primary, relevant matter. Certainly there is no reason to give primacy to the result of a mechanical comparison between an amount offered and the amount of compensation ultimately awarded; although, if an applicant offers to settle for a particular amount and the arbitration results in the award of a substantially lesser amount by way of compensation, it would no doubt be only in unusual circumstances that the respondent would be held to have acted unreasonably in rejecting the offer. We see no error in the Commission's approach to that aspect of the case. 35 The second alleged error gives rise to more difficult questions. The applicant, in submissions before the Senior Deputy President and the Full Bench, relied on aspects of the employer's conduct in the course of the proceeding; but it is fair to say that the precise basis on which that conduct was said to be relevant emerged only in the course of oral argument before us. Principally, the applicant relied on the conduct of the employer in resisting the applicant's claim for compensation, and rejecting the offer of settlement, in intended reliance on evidence which, ultimately, the Commission did not accept. That conduct was relevant and should have been taken into account, the argument proceeds, because although the Commission made no express finding of fraud or that evidence had been deliberately concocted, it nevertheless found, on the balance of probabilities, among other things, that a director of the employer both gave evidence, which was untrue, of the giving of warnings and made a series of entries in a diary, after the event, which did not reflect what had actually happened. The necessary consequence of those findings was that, at the time when the settlement offer was made and refused, the employer (by its director) knew that the applicant had not been given the warnings which it claimed had been given and knew also that the applicant had not arrived late for work on anything approaching the number of occasions which the employer alleged (an allegation which the employer then sought to corroborate by producing the diary entries). Thus, it was said, the findings as to the employer's conduct should not have been excluded as irrelevant to a consideration of the reasonableness of its conduct in refusing the offer of settlement: what it knew of the relative merits of claim and defence must be material to that consideration. It could hardly be said, after all, that a finding as to the knowledge of the employer at the date of the settlement offer required the application of a standard of proof different from that applied in determining the claim for compensation; nor could it be said that a finding of knowledge at the time of the settlement offer did not follow from the Commission's findings in deciding the claim for compensation, merely because the latter findings were made according to the civil standard. In those circumstances, to deny the relevance of the Commission's findings on the evidence would lead to a conclusion that could not possibly be right: the more confident an employer is of its ability to defeat a claim for compensation on the basis of evidence which it knows to be false, the more reasonable its conduct in rejecting an offer of settlement. 36 To state the argument in that way is, in our view, to demonstrate its correctness. Knowledge on the part of the employer as to the truth of matters alleged against the applicant and as to whether, as claimed, he had been warned should have been taken into account in assessing the reasonableness of the employer's response to the applicant's offer. The terms of the offer itself could have left the employer in no doubt that the truth of its account would be vigorously challenged. It may well be, of course, that the same conclusion will not always follow in cases where the Commission prefers the evidence of one party to that of another; it is not unreasonable to respond to an offer in the light of the offeree's genuine perception or recollection of events. But this, on the Commission's findings, was not such a case: it is implicit that false evidence had been deliberately given. 37 More generally, there is no doubt, in our view, that s 170CJ arms the Commission with a power designed to discourage frivolous or vexatious applications, to encourage genuine participation in conciliation and reasonable and genuine negotiation and to avoid outcomes of the kind which happened in this case: a three day hearing before the Commission (followed by separate applications under s 170CJ to the Senior Deputy Commissioner and then to the Full Bench) concerning a claim the maximum potential value of which did not significantly exceed the amount actually awarded, $10,500. It is inappropriate, in our view, to take a confined or technical approach to a consideration of which matters are relevant to the question whether a party has acted unreasonably in failing to do either of the things with which s 170CJ(2) is concerned. 38 Before turning to the question whether prerogative relief is justified, there is one other matter with which we should deal. The employer's written submission raised the question whether, in the circumstances, the Commission had begun arbitrating the matter, so as to have power to make an order for costs (s 170CJ(2)). That topic was not developed substantially in oral argument. The Commission proceeded on the basis that the time at which the condition in s 170CJ(2) must be met is the time when the Commission is called upon to consider whether to exercise its power to make an order for payment of costs. In our view that is correct: it is what the provision literally means and we can see no reason to depart from the literal meaning. Though it does not matter, we think, also, that the applicant was plainly right, on the basis of the chronology which we have recorded, in submitting that the Commission had already "begun arbitrating" at the time when the settlement offer was made and rejected.

Jurisdictional error? 39 In Craig the High Court stressed, at 179, the "critical distinction which exists between administrative tribunals and courts of law". Their Honours continued: "At least in the absence of a contrary intent in the statute or other instrument which established it, an administrative tribunal lacks authority either to authoritatively determine questions of law or to make an order or decision otherwise than in accordance with the law. That point was made by Lord Diplock in In re Racal Communications Ltd [[1981] AC 374 at 383]: 'Parliament can, of course, if it so desires, confer upon administrative tribunals or authorities power to decide questions of law as well as questions of fact or of administrative policy; but this requires clear words, for the presumption is that where a decision-making power is conferred on a tribunal or authority that is not a court of law, Parliament did not intend to do so.' The position is, of course, a fortiori in this country where constitutional limitations arising from the doctrine of the separation of judicial and executive powers may preclude legislative competence to confer judicial power upon an administrative tribunal. If such an administrative tribunal falls into an error of law which causes it to identify a wrong issue, to ask itself a wrong question, to ignore relevant material, to rely on irrelevant material or, at least in some circumstances, to make an erroneous finding or to reach a mistaken conclusion, and the tribunal's exercise or purported exercise of power is thereby affected, it exceeds its authority or powers. Such an error of law is jurisdictional error which will invalidate any order or decision of the tribunal which reflects it." 40 In our view, and with respect, the Full Bench, in dismissing as immaterial the findings concerning the evidence given on behalf of the employer, made an error of the kind described in that passage. It ignored relevant material and, more generally, in our view acted on an unduly narrow view of what the Parliament intended by the phrase "has acted unreasonably in failing … to agree to terms of settlement". For that reason the applicant, is, in our opinion, entitled to the relief claimed.

Orders 41 The orders required to give effect to that conclusion are:

1. That a writ of certiorari issue to the Australian Industrial Relations Commission, removing into this Court and quashing the decision of the Full Bench of the Commission of 9 February 1999 in matter No C75627 of 1998, being an application by the present applicant for leave to appeal pursuant to s 45 of the Workplace Relations Act 1996 (Cth) against a decision of Senior Deputy President Watson dated 9 November 1998 in matter No U33143/97.

2. That a writ of mandamus issue to the Australian Industrial Relations Commission, directing it to hear and determine matter No C75267/98 in accordance with law.

3. That the matter accordingly be remitted to the Australian Industrial Relations Commission.

I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Marshall and Lehane.

Associate: Dated: 18 April 2000 Counsel for the Applicant: A McDonald

Solicitor for the Applicant: McDonald Murholme

Solicitor for the Second Respondent: Christopher Bunnett

Date of Hearing: 15 February 2000

Date of Judgment: 18 April 2000