Fair Work Act 2009

s.394 - Unfair dismissal

Trustees of the Roman Catholic Church for the Diocese of Wagga Wagga

Application for relief from unfair dismissal - application for costs - costs awarded on a party to party basis.

[1] On 14 August 2018 I issued a decision[1] (the Decision) with respect to an application made by Ms Roche for unfair dismissal remedy pursuant to s.394 of the Fair Work Act 2009. In the Decision I made a finding that the respondent, the Trustees of the Roman Catholic Church for the Diocese of Wagga Wagga (the CSO)[2], did not have a valid reason to terminate Ms Roche's employment and that the dismissal was unfair.

[2] The CSO was ordered to reinstate Ms Roche to her former position and pay her the lost remuneration for the period between the dismissal and reinstatement.

[3] Ms Roche subsequently applied for an order for costs against the CSO. Ms Roche seeks that costs be awarded on an indemnity basis, or in the alternative, on a party to party basis.

[4] Ms Roche's costs application was made on two grounds, namely that:

1. under s.400A(1) of the Act, the CSO engaged in unreasonable act and/or omission in connection with the conduct or continuation of the matter; and

2. under s.611(2)(b) of the Act, it should have been reasonably apparent to the CSO that its response to the application had no reasonable prospect of success.

[5] The parties filed written submissions and each agreed that it was appropriate for the costs application be determined 'on the papers'.

[6] For the reasons set out below, I am satisfied that the CSO caused costs to be incurred because of an unreasonable act in connection with the continuation of the matter, and as a result, I have decided to award costs on a party to party basis from the expiry of the Second Offer, as defined below.

[7] Sections 400A and 611 of the Act provide as follows:

(1) The FWC may make an order for costs against a party to a matter arising under this Part (the first party) for costs incurred by the other party to the matter if the FWC is satisfied that the first party caused those costs to be incurred because of an unreasonable act or omission of the first party in connection with the conduct or continuation of the matter.

(2) The FWC may make an order under subsection (1) only if the other party to the matter has applied for it in accordance with section 402.

(3) This section does not limit the FWC's power to order costs under section 611.

(1) A person must bear the person's own costs in relation to a matter before the FWC.

(2) However, the FWC may order a person (the first person) to bear some or all of the costs of another person in relation to an application to the FWC if:

(a) the FWC is satisfied that the first person made the application, or the first person responded to the application, vexatiously or without reasonable cause; or

(b) the FWC is satisfied that it should have been reasonably apparent to the first person that the first person's application, or the first person's response to the application, had no reasonable prospect of success.

Note:The FWC can also order costs under sections 376, 400A, 401 and 780.

(3) A person to whom an order for costs applies must not contravene a term of the order."

[8] The Explanatory Memorandum to the Fair Work Bill 2012 is helpful in determining the scope of the statutory powers to award costs_._ It relevantly provides the following with respect to ss.400A and 611 of the Act:

1. Item 4 inserts a new section 400A to enable the FWC to order costs against a party to an unfair dismissal matter (the first party) if it is satisfied that the first party caused the other party to the matter to incur costs by an unreasonable act or omission in connection with the conduct or continuation of the matter.

2. As with the new power to dismiss applications under section 399A, the power to award costs under section 400A is not intended to prevent a party from robustly pursuing or defending an unfair dismissal claim. Rather, the power is intended to address the small proportion of litigants who pursue or defend unfair dismissal claims in an unreasonable manner. The power is only intended to apply where there is clear evidence of unreasonable conduct by the first party.

3. The FWC's power to award costs under this provision is discretionary and is only exercisable where the first party (whether the applicant or respondent) causes the other party to incur costs because of an unreasonable act or omission. This is intended to capture a broad range of conduct, including a failure to discontinue an unfair dismissal application made under section 394 and a failure to agree to terms of settlement that could have led to the application being discontinued.

4. However, the power to award costs is only available if the FWC is satisfied that the act or omission by the first party was unreasonable. What is an unreasonable act or omission will depend on the particular circumstances but it is intended that the power only be exercised where there is clear evidence of unreasonable conduct by the first party."

5. Subclause 611(1) provides that generally a person must bear their own costs in relation to a matter before FWA.

6. However, subclause 611(2) provides an exception to this general rule in certain limited circumstances. FWA may order a person to bear some or all of the costs of another person where FWA is satisfied that the person made an application vexatiously or without reasonable cause or the application or response to an application had no reasonable prospects of success."

[9] Ms Roche was dismissed on 22 November 2017 by the CSO following an investigation of an incident that found she had engaged in misconduct.

[10] She filed her application for unfair dismissal remedy on 11 December 2017. On 8 February 2018 the Commission issued directions requiring the filing of submissions, witness statements and documentary evidence. Both parties complied with the directions and extensive material was filed. The hearing took place in Wagga Wagga on 28 and 29 March 2018 and in Sydney for a further three days between 21 and 23 May 2018. Final written submissions were provided on behalf of Ms Roche and the CSO on 7 June and 15 June 2018 respectively.

[11] Both Ms Roche and the CSO were given permission to be legally represented in the proceedings. Ms Roche was represented by Mr A Aleksov of counsel with Mr C Ni of MST Lawyers, and the CSO by Mr D O'Sullivan of counsel with Mr S Cooper of the Catholic Commission for Employment Relations (CCER). Both parties retained the same representation for this costs application.

[12] Ms Roche provided a statutory declaration made on 13 September 2018 in which she stated:

1. On or around 1 March 2018, she instructed MST Lawyers to make an offer to settle the proceedings (the First Offer). The First Offer, which included her being reinstated with no payment of lost wages, lapsed at 4 pm on 16 March 2018 as it was not accepted by the CSO.

2. She sought to be reinstated and was prepared to compromise on back pay. She was aware that she was liable to pay her legal costs.

3. On around 3 April 2018, she instructed her lawyers to make a further offer to settle the proceeding (the Second Offer) on the same terms as the First Offer. The Second Offer lapsed at 4 pm on 20 April 2018.

4. Although she was prepared to accept no monetary compensation from the CSO to settle the matter, legal costs had become a burden. She said: "[i]t was impacting on my day to day life with spending on everyday items a constant concern and many events were not attended or cancelled for both myself and my son because of my commitment to this case."

5. Apart from the legal costs, she also had to pay for flight and accommodation costs for her solicitor and barrister to travel from Melbourne to attend the hearing in Wagga Wagga on 28 and 29 March 2018 and in Sydney between 21 and 23 May 2018.

6. Following the order issued by the Commission on 14 August 2018, she was reinstated on 28 August 2018. She received payment from the CSO on 30 August 2018 of an amount of $36,806.52 for her lost wages.

7. The total costs she incurred after the expiry of the First Offer were $52,383.42.

8. The total costs she incurred after the expiry of the Second Offer were $27,519.47.

[13] It was submitted on behalf of Ms Roche that the CSO had engaged in unreasonable act and/or omission in connection with the conduct or continuation of the proceeding by:

1. rejecting, or failing to accept, the two offers made by Ms Roche, and

2. failing to participate in genuine or reasonable settlement negotiations prior to the expiry of the two offers.

[14] The two offers (made on 1 March and 3 April 2018) were identical and were expressed in the following terms:

1. that the respondent reinstate the applicant to full time employment in the role of assistant to the Principal or school support officer at St Patrick's Primary School, St Mary's Primary School or Marian Catholic College (located within the vicinity of Griffith NSW) within 7 days of the offer being accepted by the respondent;

2. that the applicant will, subject to the reinstatement of employment taking place, file a notice of discontinuance within 14 days of the offer being accepted by the respondent;

3. that no further orders be made; and

4. the applicant will not seek back-payment for lost wages since her purported dismissal.

[15] Submissions made on behalf of Ms Roche identified the following matters in support of the claim that Ms Roche should be awarded costs from the time that the First Offer lapsed:

• The CSO knew that Ms Roche intended on calling Ms Campbell, Mr Morrell and Mr Tawfiq to give evidence (none of whom had been called by the CSO);

• With the benefit of hindsight, the only explanation for the decision of the CSO not to call Ms Campbell was that she would not have given favourable evidence for their case;

• The risks associated with the CSO's defence position after Ms Campbell's evidence was clearly stipulated in the letter accompanying the First Offer;

• Ms Roche made a genuine and significant compromise in the First Offer in offering to release the CSO from a potential claim for a four month period of lost wages and a potential claim for legal costs

• The CSO was placed on notice that the First Offer was made in the form of a Calderbank offer and that Ms Roche would seek costs upon the CSO failing to obtain a more favourable result than the First Offer;

• The CSO was given a reasonable period of time to consider the First offer; and

• At the time the First Offer was made, it should have been apparent to the CSO that there was no valid reason for Ms Roche's dismissal and that the requirements of procedural fairness were not complied with. The CSO's failure to accept the First Offer therefore constituted an unreasonable act or omission within the meaning of s.400A.

[16] It was submitted in the alternative that Ms Roche should be awarded costs from the time the Second Offer lapsed. In that regard, Ms Roche relied on the following matters:

• Prior to the Second Offer lapsing, the parties had attended two days of hearing in Wagga Wagga. After hearing the opening submissions of Ms Roche's case, the CSO should have known about the legal risks that it would face if the matter went on to be determined;

• Evidence had been given that Ms Culla was the principal cause for the breakdown of working relationships within the front office of St Patrick's Primary School (including between Ms Campbell and Ms Culla) and that Ms Culla was emotionally volatile and unpredictable;

• Evidence had been given by Ms Campbell and Mr Morrell which was favourable to reinstatement of Ms Roche into her former position;

• Evidence given by Mr Bowyer in cross examination revealed that his reasons for decision were not quite as set out in the letter to Ms Roche, and to the extent that he relied on Mr Tawfiq's investigation report, the report was affected by serious flaws and was unreliable;

• Evidence yet to be given by the remaining witnesses (Mr Bowyer, Ms Delaney, Ms Price and Mr Tawfiq) was unlikely to assist the CSO and to the contrary, its case would be further weakened by the cross-examination of its remaining witnesses;

• Ms Roche made a genuine and significant compromise in the Second Offer in offering to release the CSO from a potential claim for a five month period of lost wages and a potential claim for legal costs;

• The CSO was placed on notice that the Second Offer was made in the form of a Calderbank offer and that Ms Roche would seek costs upon the CSO failing to obtain a more favourable result than the Second Offer;

• The CSO was given a reasonable period of time to consider the Second Offer;

• The CSO had the benefit of advice from experienced Counsel on its legal risks and the inference must be drawn that the CSO had made a conscious decision to reject the Second Offer and take on the risk of a reinstatement order;

• It should have been apparent to the CSO by this time that Ms Roche would be reinstated;

• "A deliberate decision to refuse a reasonable offer of settlement is a factor which would normally weigh more heavily in favour of a finding of unreasonable action than would a mere failure to respond by an unrepresented litigant." (Cugura v Frankston City Council [2012] FCA 1299 at [31]); and

• The CSO's "rejection of, or failure to accept the Second Offer and/or failure to participate in genuine or reasonable settlement negotiations prior to the expiry of the Second Offer was an unreasonable act or omission within the meaning of s.400A(1) of the Act, and justifies an order for costs at least from the date on which the Second Offer lapsed."

[17] It was further submitted that the following matters are relevant in support of the granting of costs:

• Ms Roche has incurred significant legal costs in pursuing the unfair dismissal application.

• The costs incurred by Ms Roche significantly exceeded her annual salary. The CSO would have had a reasonable appreciation of the costs incurred by Ms Roche and that provides context to the assessment of the CSO's conduct in prolonging the litigation.

• Ms Roche made substantial accommodations in favour of the CSO, to her prejudice, including:

  1. accepting delays due to the unavailability of the CSO's witnesses. For example,

     1. Mr Bowyer was allowed to leave court in Wagga Wagga after the first day and not return on the second day for cross-examination, as would otherwise have been the norm;

     2. Mr Bowyer was not available during the relisted period of 22 May to 24 May 2018 and so caused Ms Roche an additional half day's costs to be incurred on 21 May 2018 to complete Mr Bowyer's cross examination; and

     3. Ms Roche had to incur additional costs associated with written closing submissions because of the CSO's objection that the parties made verbal closing submissions on 23 May 2018.

b. accepting that the matter be listed in Sydney largely at the convenience of the CSO because its legal team and Mr Tawfiq were based in Sydney.

[18] Submissions on behalf of Ms Roche in respect of s.611(2)(b) contended that it should have been reasonably apparent to the CSO that its response to the application had no reasonable prospect of success, given the CSO had, prior to the filing of its response, knowledge that:

1. Ms Culla's heightened state, volatility and unpredictability was accepted by the CSO; and

1. that the reason for Ms Roche's dismissal was not justifiable on any objective analysis of the relevant facts.

[19] In reply, the CSO provided statements of Mr Mark MacLean and Ms Rita Bhattacharya.

[20] Mr MacLean is the Acting Director of Schools of the CSO. He commenced this role around early to mid January 2018, following the retirement of Mr Bowyer. In this role he is the most senior employee of the CSO and is responsible for providing overall strategic and operational leadership for a system of 26 primary and 5 secondary schools in the Diocese of Wagga Wagga.

[21] Mr MacLean said that he was the authorised decision maker for offers of settlement with respect to legal proceedings including matters before the Commission.

[22] Mr MacLean set out the offers exchanged between the parties as follows:

1. On 21 February 2018, the CSO offered to pay Ms Roche $13,476.30 less applicable taxation, being an amount equivalent to 12 weeks' pay, as well as mutual confidentiality and non-disparagement clauses.

2. On 1 March 2018, Ms Roche made an offer to the CSO to be reinstated to her previous position at St Patrick's, or alternatively at St Mary's or Marian College, and no back-payment sought for lost wages.

3. On 3 April 2018, Ms Roche made an offer to the CSO in identical terms to her first offer.

1. On 24 April 2018, the CSO offered to pay Ms Roche $54,000 less applicable taxation.

[23] Mr MacLean strongly denied that neither he nor the CSO acted unreasonably at any time throughout the proceedings. The CSO attempted to negotiate a reasonable settlement with Ms Roche in good faith, and made two financial offers of settlement including one extremely generous offer of $54,000 less applicable tax, which was substantially above the maximum amount of compensation the Commission is able to award under the Act.

[24] According to Mr MacLean, he instructed the CSO not to accept Ms Roche's offers for two reasons; first, he was of the view that there were reasonable prospects of success for defending the claim and in particular the orders sought for reinstatement by Ms Roche; and second, he was seriously concerned that if he voluntarily reinstated Ms Roche, it would pose an unacceptable risk to the workplace health and safety of employees and to do so would place himself and the CSO in contravention of the Work, Health and Safety Act 2011 (NSW) (the WHS Act). Further, if Ms Roche were reinstated, he believed there would be a high risk of her repeating the past pattern of interpersonal conflict and poor behaviour towards others, which would damage workplace relationships and cohesion in the schools as a consequence.

[25] Mr MacLean's statement sets out in detail the circumstances which led to his decision not to reinstate Ms Roche.

[26] Mr MacLean said that in deciding the quantum for the CSO's second offer, he took into account that the CSO was offering Ms Roche well in excess of the maximum amount of compensation that can be awarded in unfair dismissal matters. The amount was roughly designed to cover some or all of the legal costs Ms Roche may have incurred at that point in time, while still leaving a substantial amount of money left over for Ms Roche personally.

[27] Ms Bhattacharya is an Employment Relations Specialist with the Catholic Commission for Employment Relations (CCER) and is one of the practitioners acting for the CSO in these proceedings.

[28] In her statement, Ms Bhattacharya said:

• At a directions hearing on 29 January 2018, no requests were made by either party with respect to the location of any hearing and she did not recall either party objecting to the matter being listed in Wagga Wagga.

• It was after being advised that Ms Roche would be briefing Counsel that the CSO decided to also brief counsel, which resulted in both parties incurring significant costs.

• She had a conversation with Mr Ni, Ms Roche's solicitor, in about early February 2018 where they discussed whether the CSO would be calling Ms Campbell, Mr Morell and Mr Tawfiq to give evidence. She recalled telling Mr Ni that she would not know who the CSO would be leading evidence from until she saw Ms Roche's evidence.

• The procedural matters that led to costs being incurred by various parties were matters over which the CSO had little, if any, control.

• The fact that the evidence of Mr Bowyer was split was also inconvenient and costly for the CSO.

• The CSO did not request that the matter be concluded in Sydney and that the relisting in Sydney was not made in the CSO's favour. The CSO is based in Wagga Wagga and was also required to travel in order to conclude the hearing.

• The transcript of the hearing on 28 and 29 March 2018 indicates that the Commission asked a number of witnesses where they were based in order to form a view about the location for any relisting. Ms Roche made no submission as to her preferred location and made no suggestion that it would be prejudicial for her representatives to travel from Melbourne.

• The prospect of using video link facilities was discussed between the parties and the Commission. Ms Roche chose to pursue the use of video link for only the completion of Mr Bowyer's evidence despite the costs savings it could offer if she had sought to complete the trial by video link.

• It is misleading to suggest that Ms Roche had to incur 'additional' costs associated with written closing submissions. An email of 3 April from Mr Ni to CCER indicated that Ms Roche specifically proposed written submission only if the hearing spilled over to further dates in June 2018. Further, Ms Roche's submissions before the Commission conceded that access to transcript would be of assistance to her and that it was fair that the respondent not be forced on to provide oral submissions.[3]

[29] The CSO's submissions in response can be summarised as follows:

• On 21 February 2018 the CSO made an offer to settle the proceedings which included payment of twelve weeks' pay in addition to the five weeks' notice already paid to Ms Roche.

• The offer of 21 February lapsed on 26 February when it was not accepted by Ms Roche.

• On 24 April 2018, the CSO made a further offer to settle the matter on the basis of a payment of $54,000. The offer lapsed on 8 May as it was not accepted by Ms Roche.

• It is well settled that a cautious approach is to be taken with respect to determining whether any of the exceptions is to be made out and only where in a clear case that the exceptions to the general rule has been made out (Chahwan v Sutherland Shire Montessori Society Incorporated [2015] FWC 814 at [18]).

• In Ryan v Primesafe (2015 ALR 107) (Primesafe), Mansfield J held, in the context of s.570, the following:

"[65] ... The discretion conferred by the confined terms of s 570(2) should be exercised cautiously, and the case for its exercise should be clear ... The reason for caution is the potential for discouraging parties' pursuit in a complete and robust way of the claims for contravention which they seek to make under the Fair Work Act, or the defence of such claims. The policy behind s 570 is to ensure that the spectre of costs being awarded if a claim is unsuccessful does not loom so large in the mind of potential applicants (in particular, in my opinion) that those with genuine grievances and an arguable evidentiary and legal basis for them are put off commencing or continuing proceedings. It is an access to justice provision. Insofar as it operates to the benefit of respondents, it is designed to ensure respondents feel free to pursue arguable legal and factual responses to the claims made against them. There is an almost identical provision in s 611 of the Fair Work Act, giving the Fair work Commission a similar costs power, conditioned by similarly-worded considerations. ..."

• The intent of the cost provisions, with respect to respondents, is to ensure that they feel free to pursue arguable legal and factual responses which are available to them.

• In Wederay v Airline Cleaning Services Pty Ltd T/A Cabin Services Australia ( [2017] FWC 6232), Deputy President Anderson reviewed the authorities with respect to s.400A and summarised the principles as follows:

1. Before an order can be made, causation must be found to have existed between the unreasonable conduct or continuation of the matter and the incurring of the costs;

2. The power to order costs is the exercise of a general discretion. Section 400A of the FW Act provides that the Commission 'may' make an order. Where the Commission finds that a party acted unreasonably in the conduct or continuation of a matter and that unreasonable conduct caused the costs to be incurred, then an order may be made. However, the statute does not provide that the Commission shall make an order even in those circumstances;

3. Being a general discretion, all relevant factors need to be taken into account. The discretion must be exercised judicially that is to say not arbitrarily, capriciously or so as to frustrate the legislative intent. Ultimately the provision sits within a framework where the objects include that the parties be provided 'a fair go all round';

4. An 'unreasonable' act in the context of proceedings is to be objectively assessed but is not limited to a defined circumstance."

• The approach in relation to applications is that the elements of unreasonable acts and/or omissions and the causative impact on unnecessary costs expenditure needs to be established. Following this, the Commission retains a discretion whether to make the orders or not.

• The consideration of Ms Roche's two offers should be viewed in light of all the circumstances in which they were made and by consideration, not only as to the relative strengths of the party's case in relation to the substantive claim but more importantly that of the remedy of reinstatement with continuity of employment.

• Prior to the expiry of the two offers (16 March and 3 April), the CSO had a reasonable basis upon which to believe that it would be able to defend the application, both as to whether the dismissal was harsh, unjust and unreasonable as to the remedy of reinstatement with continuity of employment and back pay.

• Ms Roche's submissions incorrectly seek to construe that procedural fairness was part of the reason for the finding that the dismissal was harsh. The decision did not make such a finding and the finding was one based on valid reason.

• In relation to valid reason, the CSO had commissioned and received a report from Mr Tawfiq, an independent and experienced workplace investigator, upon which it had based its decision to dismiss Ms Roche.

• In preparing the report, Mr Tawfiq had access to, and took into account of, the observations made by Ms Campbell concerning Ms Culla's role as the principal cause for the breakdown of the relationship in the front office and that she was emotionally volatile and unstable.

• By the expiration of Ms Roche's second offer, Mr Bowyer, the decision maker, had not finished providing evidence and Mr Tawfiq had not commenced his evidence. Ms Roche incorrectly submitted that Mr Morell gave evidence under cross examination on 28 March 2018 that the report of Mr Tawfiq was affected by serious flaws and was unreliable. In the circumstances, the CSO was entitled to believe that the evidence of Mr Morrell and in particular Mr Tawfiq would be accepted.

• With respect to the remedy of reinstatement, the CSO relied on the evidence of Ms Price and Ms Delaney, including their second statements filed after the expiration of the second offer.

• The statement of Mr MacLean made it clear that the foreshadowed evidence of Ms Campbell prior to the hearing of 28 March 2018 was anticipated to be favourable. Despite Ms Campbell's evidence as to the performance of Ms Roche was not favourable to the CSO, she went on to express concerns as to the practicability of reinstatement which was consistent with the evidence that the CSO anticipated would be given by her.

• The CSO had a reasonable argument in relation to valid reason and reinstatement by reference to the police report that Ms Roche was the instigator of the dismissal events.

• In the circumstances, prior to the expiry of Ms Roche's first and second offers, the CSO had a reasonable legal and factual basis on which to defend the application and was therefore not unreasonable for rejecting the offers.

• As to the alleged failure to participate in genuine or reasonable negotiations for a settlement, the evidence disclosed that the CSO had initiated negotiations for a settlement and had made the last offer to settle these proceedings.

• The CSO's first offer, being an amount of twelve weeks' pay, was made within a week of receipt of Ms Roche's first witness statement and outline of submissions.

• The CSO's second offer was an amount of $54,000.00 which, when considering the five weeks' notice that Ms Roche had already been paid and her weekly salary of $1,123.03, provided an amount which was $30,416.37 in advance of the statutory cap. This amount, subject to taxation, would have gone close to paying all of Ms Roche's legal costs incurred to the date of the expiry of the offer calculated on an indemnity basis.

• The CSO had participated in settlement negotiations and on any objective analysis the CSO's attempts to settle the matter were genuine and reasonable.

• At all times prior to the expiry of Ms Roche's offers, the CSO's rejection of the offers of reinstatement without back pay and its attempt to settle the matter on a significant monetary basis did not constitute an unreasonable act or omission for the purposes of s.400A and an order for costs should not be made.

• Although further costs were incurred by Ms Roche following the rejection by the CSO of her offers, it also caused further costs incurred by the CSO when its offers were rejected by Ms Roche. In any event, the costs incurred by Ms Roche were not as a result of any unreasonable acts or omissions of the CSO.

• As for the substantial accommodations alleged made by Ms Roche, the CSO noted that the matter was initially listed for two days on the estimate provided by Ms Roche. Based on this estimate the CSO had arrangements in place to ensure that all of their witnesses were available to be examined during the course of these two days. Further, Ms Roche had consented to submissions being made in writing on the last day of the hearing which she now sought to renege on. Therefore, any suggestion that the general conduct of the matter is a basis for establishing an order for costs pursuant to s.400A should be rejected.

• Should the Commission determine that the jurisdictional gateway be made out with respect to s.400A, there is a compelling reason for the Commission not to exercise its discretion in granting an order for costs.

• The CSO at the times the offers were made were faced with two independent sources of information, being the Tawfiq report and the findings of the NSW Police, that Ms Roche was responsible for the dismissal events. The CSO had also been advised by its insurer that Ms Culla's workers compensation claim had been accepted and that Ms Roche's behaviour had caused, or been part of the cause, of Ms Culla's psychological injury. Faced with this information, and absent a finding by the Commission to the contrary, the CSO would place itself in breach of its statutory duties under the WHS Act as well as its common law duty of care if it were to accept the offers and reinstate Ms Roche.

• In Baker v Salva Resources Pty Ltd ( [2011] FWAFB 4014) the Full Bench in considering the approach to s.611(2)(b) stated that:

1. the term 'should have been reasonably apparent' must be objectively determined; and

2. conclusion that an application 'had no reasonable prospect of success' should only be reached with extreme caution in circumstances where the application is manifestly untenable or groundless or so lacking in merit or substance to be not reasonable arguable.

• On any objective view of the CSO's case, its defence in Ms Roche's unfair dismissal case was not manifestly untenable or not reasonably arguable and therefore the exception under s.611 to the general rule against costs is not enlivened.

[30] Submissions in reply made on behalf of Ms Roche, in summary, stated:

• The CSO's submissions demonstrate that since at least 24 April 2018, it was aware of the weakness of its position. The fact that the CSO made an offer on 24 April which was significantly exceeded the maximum compensation award available, justifies an inference that the CSO was aware that it did not have reasonable prospects in resisting Ms Roche's unfair dismissal claim. This fortifies the submission that it was unreasonable conduct by the CSO not to accept the Second Offer which lapsed two days prior to its offer on 24 April.

• Alternatively, the offer of 24 April 2018 indicates that the CSO was aware at the least that it did not have reasonable prospects of success in these proceedings. The CSO should have conceded that the dismissal was unfair and such concession would have made it possible for the parties to reduce the scope of the proceedings to the question of remedy only, which would have saved considerable time and expense.

• Further, had the CSO confronted the weakness of its position, the proceedings in the period between 21 and 23 May 2018 would have been reduced to one hearing day, given much of the cross examination of the CSO's witnesses would become unnecessary and closing submissions can be made orally within the same hearing day.

• For these reasons, Ms Roche should be entitled to her costs of two hearing days and her written closing submissions.

s.400A - whether the CSO caused costs to be incurred by Ms Roche because of an unreasonable act or omission in connection with the conduct or continuation of the matter

[31] It is a well-accepted principle that each party bears its own costs in relation to a matter before the Commission.[4] The power under s.400A to award costs is discretionary and can only be enlivened if there is clear evidence of 'unreasonable act or omission' by a party. What is an unreasonable act or omission will depend on the facts and circumstances of the particular case.

[32] In Rahman v Commonwealth of Australia as represented by the Australian Taxation Office[5], Driver J considered costs under the Act and said: "A finding of an unreasonable act or omission must be the exception rather than the rule. It follows that a reasonably high bar needs to be set for a party alleging an unreasonable act or omission."

[33] As noted earlier in this decision, section 400A is not intended to prevent a party from robustly pursuing or defending an unfair dismissal claim in good faith.

[34] In Roy Morgan Research v Baker[6], the Full Bench held that "a reasonable person will determine if and how to respond to an offer of settlement after considering all of the circumstances of the case including the terms of settlement in relation to the relief sought; the relative strength of the parties cases; the likely length and cost of proceeding to hearing if the matter does not settle; and adverse consequences of acceptance of a settlement rather than prosecuting or defending the primary application."

[35] Having considered the evidence and submissions of the parties, I am satisfied that the CSO's failure to agree to terms of settlement in the form of the Second Offer was unreasonable.

[36] While there were some matters which may have supported a view by the CSO that dismissal was appropriate at the time Ms Roche was dismissed, such as the report of the workplace investigator (the Tawfiq Report) and the report of the NSW Police, the CSO could not reasonably have continued to hold the view that Ms Roche's dismissal was justified, or that it could defend an order for reinstatement, after the first two days of hearing. In particular, at the time of the expiration of the Second Offer, it ought to have been clear to the CSO that there were significant risks in continuing to defend the application. In this regard, I accept the submissions made on behalf of Ms Roche.

[37] I do not accept the CSO's argument that it would have placed itself in breach of its duty under the WHS Act if it were to reinstate Ms Roche because it alleged Ms Roche was the cause, or part of the cause, of Ms Culla's psychological injury. First, Ms Culla had resigned prior to Ms Roche's dismissal. Second, the evidence given prior to the expiration of the Second Offer made it clear that Ms Culla was the principal cause of the difficulties experienced within the office, and that she was emotionally volatile and unpredictable.

[38] The CSO did not call Ms Campbell, a key witness, to give evidence. She gave evidence in response to an order to attend and give evidence which was sought by Ms Roche. Both Ms Campbell and Mr Morrell had given evidence that was favourable to Ms Roche, including that Ms Campbell considered Ms Roche to be an "amazing front of house person".[7]

[39] The primary remedy in relation to unfair dismissal is reinstatement. Clearly, Ms Roche placed great value on her role with the CSO and at no point did she resile from her stated desire to return to her position. Her willingness to spend a significant amount of money (more than one year of her annual salary) on legal fees towards obtaining reinstatement, and her willingness to forgo backpay in both of her offers to settle, also made it evident that Ms Roche was completely focussed on reinstatement.

[40] The offers put to Ms Roche by the CSO on 21 February and 24 April were both principally of a financial nature. In light of Ms Roche's very clear desire to be reinstated, I do not consider these offers reasonable in the circumstances. At the time the second financial offer was made by the CSO, their prospects of success were obviously and significantly diminished. The significantly increased monetary sum the CSO offered at this time supports a view that the CSO recognised their diminished prospects of success in defending the application.

[41] In addition, the CSO was represented by experienced Counsel throughout the proceedings, and was put on notice that Ms Roche would seek costs upon the CSO failing to obtain a more favourable result than the Second Offer.

[42] I am not satisfied that the CSO's conduct prior to the expiration of the First Offer was unreasonable. At the time of the expiration of the First Offer, the hearing had not commenced and the evidence referred to above had not been given. There is no basis for me to conclude that its conduct prior to the expiration of the First Offer was unreasonable in the manner required by s 400A.

[43] I am satisfied that the actions by the CSO in continuing to defend the application and refusing to accept the Second Offer, were unreasonable from the time of, and subsequent to, the Second Offer expiring, and that Ms Roche incurred costs as a result of those actions.

[44] Taking into account the principles guided by the authorities cited, and having considered the facts and circumstances of the present matter, I am persuaded that, when viewed objectively, it is appropriate to exercise my discretion and award Ms Roche her costs on a party/party basis from 4pm on 20 April 2018, being the expiration of the Second Offer.

s.611(2)(b) Whether it should have been reasonably apparent to the CSO that its response to the application had no reasonable prospect of success

[45] Given my decision to award costs under s 400A, it is unnecessary for me to deal with this part of the application.

[46] I am not satisfied that the circumstances in this case are rare or unusual, or that there is "a level or blameworthiness which involves conscious or deliberate choices to flout the norms by which litigation is usually conducted....", as described by Mortimer J in Primesafe.

[47] Accordingly, the application for indemnity costs is refused.

[48] In conclusion, I am satisfied that the CSO's actions in continuing to defend the application and refusing to accept the Second Offer were unreasonable, and that Ms Roche incurred costs as a result of those actions. Accordingly, I award costs in favour of Ms Roche on a party to party basis from the expiration of the Second Offer, being 4pm on 20 April 2018.

[49] I direct Ms Roche to file within 14 days, a Schedule of Costs according to Schedule 3.1 of the Fair Work Regulations. This should include the costs associated with this application. Formal orders will follow as a consequence.

[1] [2018] FWC 3933.

[2] The respondent was referred to as Catholic Schools Office Wagga Wagga (the CSO), throughout the proceedings and in the Decision, and I will continue to refer to it as the CSO in this decision.

[4] Section 611(1) of Fair Work Act 2009.

[5] [2013] FCCA 388.

[6] [2014] FWCFB 1175.

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