Lichi v Industrial Relations Secretary on behalf of Department of Communities and Justice

OUTLINE OF SUBMISSIONS FOR THE RESPONDENT ON COSTS Introduction 1. These submissions respond to an application for costs made by the Applicant pursuant to section 181(2) (c) in the proceedings. 2. The Commission made relevant orders on 10 February 2022 and then published its reasons on 10 March 2022- Lichi v Industrial Relations Secretary on behalf of the Department of Communities and Justice, [2022] NSWIRComm 1011. 3. In that decision Commissioner Murphy determined that: (i) The Applicant engaged in misconduct by attending a public rally on 24 July 2021 in breach of public health orders in place at the time- at [53]; (ii) The Applicant engaged in serious misconduct by posting certain images on her Facebook in particular one likening the then Premier to Adolf Hitler- at [53] and following; (iii) The disciplinary process that led to the Applicant's dismissal was fair- at [58] (iv) Mr Vevers, as decision-maker, took into account all mitigating factors in coming to his final decision- at [59] (v) The dismissal was neither unreasonable nor unjust- at [60] (vi) The Commission was not minded to make any order providing for reinstatement or re-employment and further could not attach a condition to such an order allowing (or requiring) that the Applicant immediately resign- at [67]; (vii) The dismissal was harsh and ordered the Respondent to pay to the Applicant 12 weeks' pay- at [74] and [76]; (viii) Confirmed the order made on 10 February 2022, reserved the question of costs but referred the parties to remarks made on that issue during the proceedings on 10 February 2022- at [77]. 4. In this case the Applicant seeks orders that her costs of the proceedings be paid on an indemnity basis, or, in the alternative, that an order for costs be made in a fixed sum as identified in paragraph 17(b) of the Applicant's submissions on costs. 5. In light of the above findings and for the reasons put below, the Respondent submits that the Commission should make no order as to the costs of the proceedings and should reject the Applicant's application. Applicable law 6. The application is made pursuant to section 181(2) (c). That provision is not re produced herein but it is uncontroversial to observe that the general rule in the Commission is that each party pay their own costs. Section 181(2) (c) offers a particular exception to that rule where the Commission may, in its discretion, award costs. 7. The wording of section 181(2) (c) is thus set against the backdrop of it being a noncosts jurisdiction. What enlivens the exercise of the Commission's discretion is the unreasonable failure of a party 'to agree to the settlement of the claim.' 8. In addition, it is also submitted that, in order to enliven the Commission's discretion, the party applying for an order for costs would need to establish a relationship between the unreasonable failure to agree to the settlement of a claim and the incurring by the innocent party of the costs in question. 9. The authorities referred to in paragraphs 7-9 of the Applicant's written submissions on costs are acknowledged. To those authorities may be added Phillips v Industrial Relations Commission (NSW) [2006] NSWCA 183 (Phillips) at [19]-[20] as referred to in Dul v Health Secretary, in respect of Sydney Local Health District (No.2) [2021] NSWIRComm 1024 (Dul) at [19]. 10. The Commission's discretion can be exercised in two different scenarios as described in Bankstown City Council v Paris [1999) NSWIRComm 585 (Paris). Firstly, where a proposal is put for settlement that is (unreasonably) not agreed to by the other party. Secondly, where the party from whom costs are sought has conducted itself 'over a relevant period' in a manner inconsistent with an intention to settle the proceedings on any reasonable basis. 11. The application of the second limb in Paris is, it is submitted, somewhat problematic in the context of hard fought proceedings where two parties hold diametrically opposed positions. It is submitted that, taking into account the actual wording of section 181(2) (c), a party does not fall foul of the second limb in Paris by failing to put an offer of settlement-rather, in light of the words of the section, attention must be directed towards an unreasonable failure to engage in the process of settlement discussions where an offer has been made. 12. To the above may be added the observations in Phillips that the test is an objective one to be undertaken by the Commission adopting the position of the hypothetical (reasonable) person on the 'Clapham Omnibus', but also being cognisant of the standards or standpoint of the party concerned but without being 'captive' to those views-otherwise, as the Court of Appeal stated (at [20]), any unreasonably obstinate recipient of an offer could justify rejection of any offer without potential consequence. Why no order as to costs should be made in this case 13. Dealing with the first limb of Paris, the Applicant relies on an offer made the day before the hearing which was open for acceptance until 9am on the day of the hearing. That offer is set out at paragraph 10 of the Applicant's submissions. The Respondent did reject that offer on 10 February 2022. 14. The first observation that may be made is about the timing of the offer. In the absence of any evidence to the contrary it may be submitted that by the time the offer was responded to (in accordance with the terms of that offer), most, if not all of the Applicant's costs up to and including 10 February 2022 would likely have already been incurred. 15. Secondly, the proposition put by the Applicant that it has beaten its offer of 9 February 2022 is not accepted. That offer was to have the termination reversed and for the Applicant to be allowed to resign, as well as get a reference from a nominated former work colleague. The Applicant was unsuccessful in obtaining either of those remedies. 16. It is further submitted (in addition to the above point regarding the timing of the offer) that there is no basis put on which indemnity costs would be awarded in any event. No formal offer was made in accordance with the rules and it could not be put that any aspect of the Respondent's behaviour was so egregious as to amount to a justification for a special order as to costs. 17. In addition to the above points, the failure of the Respondent to accept the applicant's offer of 9 February 2022 to settle the proceedings was not unreasonable. 18. The offer involved the Respondent agreeing to overturn its decision to dismiss the Applicant and then allow her to resign. The Respondent, through the decision-maker Mr Vevers, had already considered that option before dismissing the Applicant and rejected it. He set out very cogent reasons for the position he took in his statement at paragraphs 41-42. Those particular paragraphs and Mr Vevers evidence generally are relied upon in support of the Respondent's position on this application for costs. 19. It can further be observed that Mr Vever's evidence was generally accepted by the Commission. No part of his statement or his opinions (in the sense of him expressing why he dismissed the Applicant) was subject to any criticism by the Commission. 20. Further it was noted in the decision itself that the Commission (at [67]) could not make an order of the nature contemplated by the offer. 21. Mr Vevers gave very compelling evidence about why he dismissed the Applicant and explained clearly and cogently the motivations and reasoning behind the actions of the Respondent. 22. This was an important issue. A government employee had acted completely contrary to public health orders and also disseminated highly objectionable material on the internet about the Premier as well as spreading plainly incorrect information about the 'military' planning to take people's children from them. 23. This was a significant matter because the conduct was very serious and the government was entitled to stand its ground until and unless the Commission advised it that its actions were unreasonable or unjust. The Respondent's position in dismissing the Applicant was not the subject of any criticism by the Commission. The Commission did not accept the Applicant's submissions at all in relation to the proper categorisation of the Applicant's conduct. 24. Viewed from the position of the hypothetical person on the 'Clapham Omnibus', and noting that the offer was made the day before the hearing, the position of the Respondent to not agree to allow a resignation was entirely reasonable. The fact that no money was being sought in that offer is not relevant. The terms of the offer would be to allow a resignation. The Respondent had very cogent reasons for not wanting to agree to that. First and foremost was the seriousness with which it viewed the Applicant's conduct. 25. It may also be observed that the decision of the Commission rejected the Applicant's case that her dismissal was unjust or unreasonable. It also did not find that the dismissal was harsh because it was too severe a consequence as a response to the actions of the Applicant. Rather, a fair reading of the decision is that the Commission only found that the dismissal was harsh on the alternative basis of its effects on the Applicant. 26. In relation to the second limb of Paris, the Commission would reject the propositions put by the Applicant at paragraphs 15 and 16 of its submissions on costs. There is no basis or evidence that support the submission that the Respondent acted unreasonably over any relevant period in respect of settlement discussions. The mere failure to agree to settle the proceedings cannot of itself be unreasonable. 27. It is noted that the Applicant initially sought re-employment and then subsequently changed her position to seeking compensation and payment of her legal costs. Noting the above submissions at paragraphs 21 to 24, there is no basis to allege that the Respondent acted unreasonably. 28. The decision maker in this case, Mr Vevers, gave clear, cogent and sound reasons why the Respondent took a firm view in relation to the Applicant and the application. The Commission accepted (at paragraph [59] of the Commission's judgement) that Mr Vevers took into account the mitigating factors put to him by the Applicant before reaching his final decision. 29. The Respondent, in these circumstances, was the polar opposite of the inflexible and and unreasonable litigant being described by his Honour Mason P in Phillips at [20], see also Dul at [25]. Conclusion 30. The application for costs should be dismissed. 31. The Respondent is content to rely on these written submissions on the question of costs and for the Commission to determine the matter on the papers. If however the Commission would be assisted with further oral addresses the Respondent is of course prepared to assist in this regard.

Determination

I propose to determine the question of costs "on the papers".
Relevant parts of s 181 of the Act are set out below: 181 Costs (1) Subject to the rules of the Commission and any other Act or law - (a) the Commission may award costs, and (b) costs are in the discretion of the Commission, and (c) the Commission may determine by whom and to what extent costs are to be paid, and (d) the Commission may order costs to be assessed on the basis set out in the legal costs legislation (as defined in section 3A of the Legal Profession Uniform Law Application Act 2014) or on any other basis. (2) However, the Commission may award costs only in the following cases - … (c) the Commission may award costs against a party to proceedings under Part 6 of Chapter 2 (Unfair dismissals) who, in the opinion of the Commission, unreasonably failed to agree to a settlement of the claim or whose application was frivolous or vexatious,
It is readily apparent from the structure of this statutory provision that the Commission's power to award costs in unfair dismissal proceedings is restricted to certain defined circumstances, apart from which it is essentially a "no costs" jurisdiction.
In Dul v Health Secretary, in respect of Sydney Local Health District (No. 2) [2021] NSWIRComm 1024, I stated as follows: 15. It is clear from the terms of section 181 that the power to award costs is discretionary but it is also clear that there are restrictions on the exercise of that discretion. Costs may only be awarded against the respondent in this matter if I form the opinion that the respondent unreasonably failed to agree to a settlement of the Application (subsection 181(2)(c)). 16. In Bankstown City Council v Paris (1999) 93 IR 209 a Full Bench of the Commission (Wright J, President, Peterson J, Bishop C) stated (at 218-220): Section 181(2)(c) on its face is a provision which is designed to apply only to unfair dismissal proceedings. It is the only provision designed to be applied specifically in that context. Also, when read in terms of the other provisions in the Act as to costs, it is one of only three provisions which may have application to unfair dismissal proceedings. The other provisions are paras (a) and (b) of s 181(2). However, those provisions apply to many other proceedings before the Commission and, unlike the particular limb of s 181(2)(c) relied on in this application, they are designed to operate where the Commission considers either the application itself, or the institution of the proceedings, was affected by considerations which made it manifestly inappropriate for the proceedings to have been commenced. The relevant part of s 181(2)(c), on the other hand, does not require the Commission to focus upon the circumstances of the commencement of the proceedings, or to consider only the situation of the applicant. Instead the Commission is required to consider in a more general way, the conduct of the party in respect of which an application for costs is made; and, in that regard, to consider the conduct of the party in relation to the question of settlement of the claim. An understanding of the meaning and purpose of s 181(2)(c) is assisted by reference to the particular provisions in Pt 6, Unfair Dismissals, of Ch 2 of the Act, which relate to conciliation or settlement of unfair dismissal applications. Section 86 for example, provides: "The Commission must endeavour, by all means it considers properly necessary, to settle the applicant's claim by conciliation." Section 87(1) is also relevant. Its effect is to preclude the Commission from proceeding to determine the claim by arbitration until "all reasonable attempts to settle the applicant's claim by conciliation have been made but have been unsuccessful". Section 87(2) continues the statutory emphasis upon conciliation by specifying that the earlier provisions do not prevent further conciliation from being attempted at any time before the Commission makes an order in the proceeding. Construing the relevant part of s 181(2)(c) in its overall statutory context, we conclude that the evident purpose of the provision is to encourage the settlement of proceedings to which it applies. The criterion set out in the provision is to be applied objectively and requires a consideration of the whole of the conduct of the party against whom the order is sought, or some discrete part of that party's conduct, with a view to ascertaining whether it unreasonably failed to agree to a settlement of the claim. We also consider that on the proper construction of the provision, an affirmative conclusion may be reached on at least two bases. First, where there was a proposal put by a party which could be described as a reasonable settlement of the claim and that was not agreed by the other party. The second situation in which the criterion could be satisfied is where the course of conduct of the party over a relevant period could be said to amount to conduct inconsistent with an intention to settle the proceedings on any basis that could be considered reasonable. We emphasise that, although the legislature has clearly intended that there be strict limits on the power of the Commission to award costs in unfair dismissal proceedings, the legislature has also evinced a clear intention that costs orders be available in circumstances where there has been a failure on the part of a party to properly conciliate proceedings to the extent that they have failed reasonably to facilitate a potential settlement of them. Further, the Commission is obliged to consider all relevant circumstances in deciding whether such failure has occurred. Once the statutory criterion has been met, the Commission's broad powers and discretions under s 181(1) are available for exercise. When the circumstances of this matter are approached accordingly, two particular considerations are crucial to the determination of this issue. The first is that part of the decision on appeal, which is included in the extract set out earlier, where reference is made to the inadequate nature of the appellant's investigation of the matter and that, in the context of that investigation, three employees, including the respondent, were "tarred with the same brush" notwithstanding the different circumstances pertaining to the respondent. The second consideration, which is to be considered in the context of the other matters adverted to, was the failure and thus apparent unwillingness of the appellant, to respond to the various offers of compromise and settlement made on behalf of the respondent. The one exception to the appellant's otherwise consistent course of conduct was the proposal made by it on the second last day of a five day hearing which invited the respondent to capitulate. Only a very short period (in the order of a few hours) was provided for the respondent to consider the offer. Far from indicating any retreat from the inflexible approach adopted by the appellant, its approach in relation to settlement on this occasion, served only to emphasise the consistent position that had been adopted. We emphasise that there will be many circumstances in which parties to litigation, including unfair dismissal proceedings, may appropriately take a firm position generally, including on the question of conciliation or settlement. Nevertheless, such a position runs significant risks in terms of the exercise of the power and discretion under s 181(2)(c). This is particularly so where such a position is assumed without due regard to the policy of the Act which requires parties to take seriously their obligation to attempt to settle the proceedings. That in turn involves an obligation to consider in an objective way the strengths or limits upon the case that they will be propounding should the matter proceed to arbitration. On the material before us, we consider that the appellant failed to give appropriate consideration to such matters before it adopted its inflexible position. We consider that, in the circumstances of this matter, the criterion in the relevant provision has been made out. It has been met as to the proceedings both at first instance and on appeal. 17. In Four Sons Pty Limited v Sakchai Limsiripothong (No 2) (2000) 100 IR 400 a Full Bench of the Commission (Wright J, President, Hungerford J, Cambridge C) stated (at [11]): 11 The obligations imposed on parties to proceedings under s 84 of the Act, as identified in the Full Bench judgment in Bankstown City Council v Paris, require parties to such proceedings to undertake a responsible and careful assessment of the prospects of the litigation, in the absence of which an unsuccessful party may realistically face the prospects of a costs order being made against it. In those circumstances, it may often be appropriate for a party to consider making an offer to settle, even if the offer could be seen, either with the benefit of hindsight or otherwise, to be at a rather low level. However, the making of such an offer on "the low side" does not exhaust the responsibilities of a party to reasonably attempt to settle the claim. It is conceivable that if the respondent had responded to those offers in a more timely way, the proceedings may have settled. We doubt, however, that that is the appropriate finding on the evidence before us. Rather, the evidence as to further negotiations makes plain that the appellant had no realistic intention to make an offer which was likely to settle the proceedings before McKenna C. However, it would be inappropriate not to take into account the lack of a timely response from the respondent to the nominal offers of settlement which were made by the appellant in August and September 1999. 18. In IGA Distribution Pty Ltd v Moses (No 3) (2003) 150 IR 145 a Full Bench of the Commission (Wright J, President, Walton J, Vice-President, Redman C) stated (at [85] and [100]): 85 In submissions in reply, the respondent emphasised that from the commencement of proceedings, he had sought what was identified in Commonwealth Steel v Ward to be the primary remedy under the Act, that is, reinstatement, or failing that, re-employment. This was not a matter which should count against him on the question of costs. …………………………………. 100 The position adopted by the appellant essentially amounted to a demand that the respondent bargain against himself in a way which would require him to step back from his primary remedy under the Act. In the absence of any offer from the appellant, it is in our view, inappropriate to conclude that the respondent's stance was unreasonable. The appellant did not take the necessary steps to deal with its situation in the litigation as discussed in Paris and Four Sons (No 2). Certainly it gave little or no weight to the fact that reinstatement is the primary remedy under the statute: Little v Commissioner of Police (No 2) (2002) 112 IR 212 at 243. 19. The respondent relied upon the following passages from the Court of Appeal in Phillips v Industrial Relations Commission (NSW) [2006] NSWCA 183 (at [19]-[20] per Mason P with whom Spigelman CJ and Beazley JA agreed): 19 When the Full Bench in Paris spoke of applying the statutory criterion "objectively" it was correctly discerning that the standard of unreasonable failure was to be applied by reference to the hypothetical yardstick of the fictional "man on the Clapham omnibus" or his Australian, gender-neutral counterpart. This does not mean that this hypothetical personage is placed anywhere other than in the context of the party in question (here the party against whom costs are sought). Nor does it mean the reasonableness assessment may commit hindsight error. But it does mean that the standards of the actor in question are not determinative. Thus, in the realm of negligence law, a person's conduct may be held unreasonable even though he or she was ignorant of the circumstances calling for a particular response or even if he or she lacked the capacity to discern or provide a correct response in the circumstances. 20 Under s 181(2)(c) costs may be awarded against the employer or the employee, depending on who has failed to agree to a settlement and done so unreasonably. The reference to the opinion of the Commission emphasises, if emphasis were required, that the criterion is to be decided by the Commission applying its own perception of what was unreasonable, as distinct from the perception (if any) of the party. This does not permit the Commission to ignore the standpoint or standards of the party concerned, but the Commission must not be captive to those matters. Were it otherwise, the costs discretion could not be invoked against a pig-headed litigant blinded by self-absorbed stupidity or malice. 20. I will apply the principles that emerge from the above cited authorities in the exercise of my discretion in this case.
I will again apply the principles that emerge from the authorities cited in the passage from Dul (No. 2) extracted above.
As is clear from the Full Bench decision in Bankstown City Council v Paris (1999) 93 IR 209, the primary consideration in a matter such as this is the conduct of the party against whom a costs application is made "in relation to the question of settlement of the claim". This consideration "is assisted by reference to the particular provisions in Pt 6, Unfair Dismissals, of Ch 2 of the Act, which relate to conciliation or settlement of unfair dismissal applications. Section 86 for example, provides: 'The Commission must endeavour, by all means it considers properly necessary, to settle the applicant's claim by conciliation'". The Full Bench concluded "that the evident purpose of the provision is to encourage the settlement of proceedings to which it applies" and that "the legislature has also evinced a clear intention that costs orders be available in circumstances where there has been a failure on the part of a party to properly conciliate proceedings to the extent that they have failed reasonably to facilitate a potential settlement of them".
These sentiments were echoed in successive Full Bench decisions in Four Sons Pty Limited v Sakchai Limsiripothong (No 2) (2000) 100 IR 400 and IGA Distribution Pty Ltd v Moses (No 3) (2003) 150 IR 145.
In this matter, the only "evidence" before the Commission of any settlement negotiations between the parties comprises the offer made on behalf of the applicant on 9 February 2022, the day before the substantive hearing was scheduled to occur, that the respondent accept the applicant's resignation in lieu of the dismissal; that she be provided with a "letter of recommendation" from her former supervisor; and that she, effectively, "walk away" without any monetary compensation bearing whatever legal costs she may have incurred up to that point. This settlement offer was rejected by the respondent and no counter offer was made.
The facts of the present case contrast starkly with the facts in Dul (No. 2) where there had been a history of settlement negations between the parties extending over a period of several months culminating in an "offer" from the applicant, made on the day before the hearing was due to begin, that he be reinstated to his former position with full back pay, with continuity of service and with no release of the respondent from further claims. That "offer" was rejected by the respondent in that matter but a previously made counter offer was reinstated which included treating the applicant's termination of employment as a resignation and paying him an amount equivalent of 16 weeks' pay. This counter offer was rejected by the applicant.
In Dul (No. 2) I concluded as follows: 21. I reject the submission put… that "it should have been obvious to the SLHD that it would not be able to discharge its onus, and further that its defence was hopeless and doomed to fail…"... The respondent acted on the basis of findings made by an investigation team and set out in an investigation report. Whilst I came to a different conclusion based on the evidence presented in the substantive proceedings, I am not of the opinion that SLHD should have, before that evidence was presented and tested, concluded that its defence to the Application was doomed to fail and simply capitulated to the applicant's claim for reinstatement with back pay. 22. Further, I am of the opinion that the exchange of settlement offers between the parties that occurred between 16 July and 14 September 2020, none of which involved reinstatement of the applicant, demonstrated a preparedness on the part of the respondent to engage in genuine settlement negotiations which did not involve the applicant returning as an employee of SLHD. Through this process, the respondent increased its offer of monetary compensation to the applicant from an amount equivalent to 6 weeks' salary up to an amount equivalent to 16 weeks' salary. 23. The "offer" made on behalf of the applicant on 17 September 2020, the day before the hearing was scheduled to commence…, was, in reality, no offer at all but, rather, an invitation to the respondent to capitulate to the Application. Up until that "offer" was made, the applicant had demonstrated a willingness to settle the Application on a basis that did not involve reinstatement or re-employment. What had divided the parties was the quantum of monetary compensation to be paid, where the applicant's settlement offers had ranged from five months to as low as 8 weeks' salary and the respondent's offers had ranged from 6 up to 16 weeks' salary. 24. The attitude of the parties towards settlement negotiations in this matter, apart from the applicant's "offer" referred to immediately above, can be contrasted to the attitude of parties in cases such as Paris where the Full Bench considered, as one of "two particular considerations" crucial to the determination of the costs issue, the employer's "failure and thus apparent unwillingness" to respond to the various offers of compromise and settlement made on behalf of the dismissed employee until a proposal was made on the second last day of a five day hearing which invited the applicant to capitulate. The approach of the employer in cases such as Paris, Four Sons (No 2) and IGA Distribution (No 3) towards settlement negotiations stands in stark contrast to the approach of the respondent in this matter.
The facts in Dul (No. 2) stand in stark contrast to the facts in the present matter.
I accept that the Department's decision maker, Mr Vevers, genuinely believed with good reason that there was a valid reason, namely the applicant's misconduct, to dismiss her and that, as a consequence, the dismissal was not unfair in that it was not harsh, unreasonable or unjust. I also accept that, as far as Mr Vevers was concerned, there were good reasons for dismissing the applicant as opposed to allowing her to resign. However, once the applicant had filed her unfair dismissal application, the respondent should have been alive to the possibility that this Commission might form a different opinion.
As is clear from the passage from Byrne v Australian Airlines Ltd (1995) 185 CLR 410 cited at paragraph 61 of my decision of 10 March 2022 (at [4]), a dismissal which is not unreasonable nor unjust may still be found to be unfair because it is harsh. This is what occurred in this matter for the reasons set out in my earlier decision. The respondent should have appreciated that this could have been the outcome and that an order for compensation might be made in favour of the applicant.
Unfair dismissal matters are regularly settled in this jurisdiction in conciliation on a "without admission" basis which involves acceptance of a resignation in lieu of the dismissal, provision of a statement of service, payment of an amount of compensation to the applicant, often on a purely commercial basis, and a mutual deed of release.
A settlement offer, such as was made by the applicant in this matter, albeit late in the day, which involved no payment of compensation to the applicant, should have received more favourable consideration from the respondent than it apparently did. Acceptance of the offer would have avoided the unnecessary utilisation of the time and resources of the parties and of this Commission in conducting the hearing on 10 February 2022 and would have also avoided the risk to the respondent that the applicant would be awarded a substantial amount of compensation, which is precisely what occurred.
If the issue of the "letter of recommendation" was thought by the respondent to be problematic then, at the very least, a counter offer could and should have been made which addressed this issue, by way of example as an alternative, nominating the applicant's supervisor as the point of contact for potential future employer enquiries. This, again, is a very common aspect of settlement agreements reached in unfair dismissal matters, but this was not taken up by the respondent in this case.
In light of the offer made, the applicant should not be required to bear the costs she has incurred for the hearing of her application on 10 February 2022. The respondent unreasonably failed to agree to a settlement of applicant's claim on the basis of the offer made on the applicant's behalf on 9 February 2022.
I order that the respondent pay the costs incurred by the applicant after 9 February 2022 for the conduct of the hearing on 10 February 2022. John Murphy Commissioner

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Judgment (4 paragraphs)

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Cases Cited (21)