Smith v Secretary, Department of Industry

Submissions on behalf of the respondent in support of a costs order

1. In support of the assertion that the applicant unreasonably failed to agree to a settlement of the claim, the following submissions were put on behalf of the respondent (with footnotes omitted): 9. The Full Bench in Bankstown City Council v Paris (1999) 93 IR 209 at 219 construed section 181(2)(c) as providing two bases for the Commission to make a costs order against a party, "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." 10. In short, the Applicant (Respondent) submits that the Commission should exercise its discretion to award costs in its favour, as the Respondent put two reasonable settlement offers to the Applicant that were not accepted. Accordingly, the Respondent submits that the Commission should exercise its discretion as identified by the Full Bench in Paris and find that: a reasonable settlement was put by the Respondent and that, given the quantum of that offer (being a payment equivalent to 26 weeks' pay which is the statutory maximum amount of compensation which can be awarded), the Applicant unreasonably failed to agree to a settlement of the claim. …………………………….. Failure to accept the Respondent's reasonable offers of settlement 16. Both the March Offer and the April Offer expressly noted the potential consequences of not accepting those offers… in that the offers would be relied upon by the Respondent to make a costs application under section 181 of the Act, in the event the Applicant was unsuccessful in the proceedings. 17. The March Offer was reasonable, in circumstances where: (a) the amount offered represented the equivalent of six months' pay which is the maximum amount of compensation which can be awarded under section 89(5) of the Act; (b) at the time the offer was made, it should have been clear to the Applicant that there would be no prospect of re-establishing an employment relationship with the Respondent given the seriousness of the misconduct alleged against him; (c) the complaint made by the Applicant in the Anti-Discrimination Board of New South Wales lay in abeyance until it was withdrawn at the Applicant's request on 3 July 2018; and (d) although the Applicant had not yet been served with the Respondent's evidence, given the Respondent's evidence was predominantly records of emails sent by the Applicant himself, it should have nonetheless been clear that the Applicant's unfair dismissal application had little or no real prospects of success. 18. The April Offer was reasonable, in circumstances where: (a) again, the amount offered represented six months' pay and the maximum amount of compensation which can be awarded under section 89(5) of the Act; (b) on 13 April 2018, six days prior to the expiry of the April Offer, the Applicant was served with the Respondent's evidence; and (c) upon receipt of that evidence, it should have been clear to the Applicant that there: (i) was no arguable basis for the Applicant to continue to advance his application that the Respondent's termination of his employment was harsh, unreasonable or unjust; and (ii) in any case, would be no prospect of re-establishing an employment relationship with the Respondent, thus rendering his application for reinstatement unsustainable. 19. The Applicant engaged in extremely seriously misconduct. He had to know there was no prospect of him being reinstated or re-employed yet he failed to accept the March Offer or the April Offer which contained an offer which was equivalent to the maximum which could be awarded by the Commission under the Act. This meant he was only pursuing reinstatement as an outcome of the proceedings. Given the nature of his misconduct, his actions in falling to accept the April Offer must amount to an unreasonable failure to agree to a settlement of his claim. 20. Indeed, the Respondent's offers of settlement expressly noted the improbability of a reinstatement order being made. The April Offer stated: ....the offer is the maximum amount of compensation which our client can be ordered to pay your client. The only "more favourable" outcome which your client can possibly achieve is that of reinstatement, which we do not believe is a realistic or feasible outcome for your client, given the relationships between our clients has been destroyed beyond repair and the negative impact your client has had on staff within the Department. 21. The fact there was no prospect of re-establishing an employment relationship was noted by Commissioner Murphy in the decision dated 1 November 2018 in Smith v Secretary, Department of Industry [2018] NSWIRComm 1065 as follows: 167. …the conclusion which I have reached that the applicant was the architect of his own demise. He was given multiple opportunities to correct hrs behaviour and chose not to. His misconduct was extremely serious and occurred over a protracted period of time. His belated offer to resign as PSA delegate was too little and far too late. 168. This is not a case where the practicability of reinstatement or reemployment arises for consideration. However, were it otherwise, I would have no hesitation in finding that there was no prospect of re-establishing any form of viable employee/employer relationship between the applicant and the respondent for the reasons given by the respondent's witnesses, which I readily accept (Mr Gallagher at paragraphs 107-110 at [75] above; Dr Whitley at paragraphs 144-145 at [78] above; Mr Collins at paragraphs 92-94 at [82] above; Ms de Saram at paragraphs 90-91 at [83] above; Mr Murray at paragraphs 51-58 at [84] above; Mr Kempson at paragraph 64 at [85] above; and Mr Smith at paragraphs 68-72 at [86] above). 22. Further, the Applicant had been served with the Respondent's evidence, including the evidence referred to in paragraph [168] on 13 April 2018, 6 days prior to the expiry of the April Offer (which expired on 19 April 2018 at 4pm). This should have further reinforced that there was no prospect of him being reinstated or reemployed. Yet the Applicant failed to accept the April Offer and continued to pursue reinstatement, which along with reemployment which was not pursued, was the only possible outcome better than that what was contained in the April Offer and an outcome he had no reasonable prospects of achieving. 23. The Respondent's April Offer noted the unlikelihood of an order of reinstatement being made on the basis of the evidence before the Commission: Our client's evidence and your client's evidence establishes that: (a) the dismissal of your client was fair; and (b) should the Commission nevertheless find against our client, the relationship between our clients has been irretrievably damaged, to the effect that reinstatement is not in any way an appropriate remedy for the Commission to consider. 24. In these circumstances, the Commission must find the Applicant unreasonable failed to agree to a settlement of the claim and should exercise its discretion to award costs under section 181(1) of the Act. The Applicant's conduct after receiving the Respondent's offer 25. The Applicant acted unreasonably not only by failing to accept the Respondent's offers but also because he never made any counter offers to the Respondent nor sought to engage in any settlement discussions with the Respondent. The Applicant pursued reinstatement as the only remedy in the Proceedings. 26. In a recent costs decision of Commissioner Murphy in Colefax v Secretary, Department of Education; (No. 2) [2018] NSWIRComm 1043 (Colefax), the Commissioner considered submissions by the Department of Education in circumstances where the Applicant had been pursuing reinstatement as the only remedy. The submissions made by the Respondent in Colefax are equally applicable in these proceedings and are set out below as cited in paragraph 8 of the Colefax decision (the numbering reflects the numbering from the submissions being quoted): 32. The Applicant acted unreasonably in that not only did she reject the Respondent's offer but she made no counter offer nor did she seek to engage in any settlement discussions with the Respondent whatsoever. The Respondent confirmed that the Applicant was refusing the offer and still the Applicant maintained the position that re-instatement was the only remedy she sought. 33. In Phillips v Industrial Relations Commission of NSW & Anor [2006] NSWCA 183 at [17]-[21], the Court of Appeal considered a case in which the applicant had steadfastly refuse(d) to entertain anything except reinstatement. The Court of Appeal held that the proper test under s 181(2)(c) requires the Court to consider the response of the reasonable person. The Commission is to apply its own perception of what is reasonable as distinct from what the applicant thought was reasonable. 34. In the Full Bench decision in Phillips, it was held that that the applicant's "steadfast insistence on reinstatement to the exclusion of other negotiated outcomes disclosed a failure on his part to properly evaluate the strengths and limitations upon the case he was to propound and in such circumstances there can be little doubt on a proper application of the principles, that an order for costs against Mr Phillips was available and should have been made." 35. Similarly, in Bragg v NSW Department of Community Services [1999] NSWIRComm 55 at [43] it was held that a clear inflexibility demonstrating no preparedness to consider compromise despite reasonable and diligent attempts by the other side would logically establish an unreasonable failure to agree to a settlement of the claim. 36. In Imogen Pty Ltd v Sangwin (1996) 70 IR 254 at 261 it was submitted, the Court: ... emphasised the need for legal advisers to be constantly aware of the fact that claims in unfair dismissal proceedings were often very small and where avoidable costs are forced upon an opposing party the party bringing about that result must expect the Court to exercise its discretion in such a way as to allow recovery of costs. (Emphasis added). 27. The Respondent relies on the authorities of Phillips v Industrial Relations Commission of NSW & Anor [2006] NSWCA 183, Bragg v NSW Department of Community Services [1999] NSWIRComm 55 and Imogen Pty Ltd v Sangwin (1996) 70 IR 254 at 261 to support the submission that the Applicant's conduct in these Proceedings in failing to pursue settlement negotiations and steadfastly insisting on reinstatement is unreasonable and amounts to an unreasonable failure to agree to a settlement of the claim. Quantum of costs sought 28. Section 181(1) of the Act provides that if costs are to be awarded, the Tribunal may determine by whom and to what extent costs are to be paid. 29. The Respondent's costs in defending the proceedings total $248,394.90 (excl. GST) plus $59,671.34 (excl. GST) for disbursements. Furthermore, the Respondent will, in the opinion of Ms Moten, incur an additional $10,000 (excl. GST) in legal fees in relation to this application. 30. The Applicant's Counsel has been given a confidential tender bundle with copies of all invoices issued under this matter on the condition he has agreed to keep their contents strictly confidential and will not disclose them to his client or any other third party. 31. In Ms Moten's experience, approximately: (a) 60-75% of legal fees and 90-95% of disbursements would be recoverable in a costs assessment under a party-party costs order; and (b) 90-95% of legal fees and 95-100% of disbursements would be recoverable in a costs assessment under an indemnity costs order. 32. Applying these percentages to the total costs and disbursements incurred by the Respondent after the date of the expiry of the offers (3 April 2018 and 19 April 2018, respectively) yields the results set out in the table in paragraph 24 of the affidavit of Ms Moten. Orders sought 33. For the reasons set out above, the Respondent seeks the following orders. (a) The Applicant pay the Respondent's costs of these proceedings on an indemnity basis from 3 April 2018 and otherwise on a party-party basis. (b) Those costs be assessed in the gross sum that the court deems fit.

Submissions on behalf of the applicant in opposition to a costs order

1. In opposing the respondent's costs application, counsel for the applicant put the following submissions (with footnotes omitted): 1. These submissions are filed in response to the Respondent's claim for costs in the proceedings. To the extent mention is made below of the Applicant's circumstances, the Applicant relies on the evidence filed in the substantive proceedings. 2. It is not in dispute the Respondent made two offers of settlement: a. One in writing sent Tuesday, 27 March 2018 (the March Offer), more than a fortnight prior to the service of the Respondent's evidence, which proposed not only a settlement of the unfair dismissal claim but "a full release from all claims" relating to the Applicant's former employment, including a complaint which he had lodged with the Anti­Discrimination Board long before he was dismissed, and other terms in a Deed to be drafted by the Respondent's lawyers (which was never provided in draft); and b. One in writing sent Friday, 13 April 20183 (the April Offer), open for acceptance for 6 days (4 working days), sent on the same day the Respondent served its voluminous evidence in the proceedings (3 lever arch folders of tender bundle, and some 7 witness statements) which proposed settling the Proceedings on condition the parties enter into a Deed of release drafted by the Respondent's lawyers (again which was never provided in draft). 3. The Applicant contends the Commission would not find that the Applicant's conduct, in rejecting these offers and pursuing the primary relief under the Act was, in all the circumstances, so unreasonable as to open the jurisdictional "gateway" and enliven the discretion to award costs contemplated by s 181(2)(c). Taking account of all the circumstances, for the reasons outlined below the Commission would accept the failure to have accepted those offers did not render the Applicant's conduct of the litigation so unreasonable as to warrant the conclusion he "unreasonably failed to agree to a settlement of the claim''. 4. In the alternative, if the Commission made a finding that the Applicant had "unreasonably failed to agree to a settlement of the claim", it would: a. Not make any costs order in the exercise of its discretion, given the Applicant's circumstances; or in the further alternative b. Not make an adverse costs order in other than a nominal amount, and certainly not an amount reflecting the truly obscene level of costs expended by the Respondent in these proceedings. Relevant Principles 5. There is little dispute over the applicable principles. They are broadly summarised in Bankstown City Council v Paris (1999) 93 IR 209 at 219. 6. Whilst 181(2)(c) makes plain the power to award costs in unfair dismissal proceedings is to be subject to "strict limits", and has been described as "a discretionary power which is rarely used in unfair dismissal cases", there can be no doubt that its evident purpose is to encourage the settlement of "proceedings to which it applies". What is important in the context of the claim for costs now made, is that s 181(2)(c) operates to encourage settlement by requiring parties to "undertake a responsible and careful assessment of the prospects of the litigation". 7. The reasonableness of the Applicant's conduct with respect to the settlement of the litigation must be assessed in light of "all the circumstances" surrounding the offer, including: a. At the time of his dismissal the Applicant was 61 years of age; b. He suffered from (and continues to suffer from) dyslexia and a range of physically disabling medical conditions; c. Had been working for the Respondent continuously for 15 years; d. Had been dismissed for conduct as a delegate (misguided or otherwise) ostensibly conducted in pursuit of the interests of members of the PSA by whom he had been elected; and e. He had resigned from the office of delegate prior to his dismissal. 8. Additionally, relevant circumstances include: a. The Applicant was represented pro-bono by directly briefed counsel; and b. By the time the offers were made the Applicant had found it necessary (by virtue of his loss of his income) to relocate to a family farm in the regional town of Condobolin (the subject of an expensive ongoing estate dispute, following the passing of his parents), making: i. It highly unlikely the Applicant would find any comparable (it is submitted, any) alternative employment; and ii. Communication with his legal adviser more difficult. General Observation 9. It is acknowledged that the fact the primary remedy under the Act is reinstatement does not of itself mean an Applicant will act reasonably in steadfastly pursuing that remedy. Whether the pursuit of reinstatement renders a litigant's conduct unreasonable requires consideration of all the circumstances. 10. In the circumstances of this matter the Applicant did not act unreasonably by pursuing the primary remedy available under the IR Act. 11. The Applicant was (at the time of his dismissal and the offers) 61 years old, had 15 years service the vast bulk of which had led to no criticism of his work or conduct, and it was only after he had become elected as a PSA delegate that any substantive difficulties arose in the employment. Whilst the Commission found the Applicant's conduct amounted to serious misconduct, had his explanations for his conduct been accepted (a credit finding only available after trial) there was a reasonable argument his conduct ought not be characterised in that way. In any event, he had resigned from that delegates role (which had been the genesis of so much of the tension in his workplace) prior to his dismissal. He has no substantive educational or trade qualifications to fall back on. He lives in a remote regional area where, because of his disabling physical injuries, he was unlikely to ever find any comparable work (or indeed any work). He had no substantive savings upon which he could rely. 12. The actual conduct of the Applicant was not in dispute: he sent or provided the communications relied upon to dismiss him. The central factual dispute was why the Applicant did what he did, and involved debate about the relevant circumstances surrounding what he did. The Applicant provided extensive evidence both in chief and in reply, nothing the reply evidence was not completed until weeks after the April Offer closed. Whilst the Commission did not ultimately accept some of the Applicant's evidence and thus found the dismissal was not unfair, it appears from the judgment that centrally turned on credit findings that could not reliably be predicted at the point in time either offer was made. 13. The reasonableness of a party's response to an offer is to be assessed from the perspective of a reasonable person. An applicant does not act unreasonably in such circumstances by assessing the appropriate response to an offer on the basis the Commission may accept the evidence they give (or intend to give) on oath: acting reasonably in response to a settlement proposal does not require an applicant to be clairvoyant or to act as a judge in their own cause. 14. At no stage (and certainly not at the time of either the March Offer or the April Offer were open for acceptance), could the Applicant's contention that his dismissal was harsh, unjust or unreasonable have reasonably been described as unarguable, nor would the Commission accept it ought have been clear that the application had "little or no real prospects of success" at the time either the March Offer or the April Offer were open for acceptance: cf RSUB at 17, 18. Nor were his contentions that reinstatement was practicable unarguable. The Commission needs to guard against what the Court of Appeal referred to as "hindsight error" when assessing the reasonableness of a party's conduct. There were substantive reasons articulated in support of reinstatement advanced in the Applicants Final Written Submissions (at [203] - [207]). Indeed, not only did the jurisprudence on reinstatement generally emphasise reinstatement as a primary remedy (amongst a 'cascading' suite of remedies, if the dismissal had been found unfair), there are a number of authorities where, in broadly similar circumstances, the Commission has found the fact an individual had resigned from their union role supportive of a finding that reinstatement was practicable: For example, see the authorities set out in footnote 275 of the Applicant's Final Written Submissions, including Hunt at [44]-[46] and Sydney Ferries Corporation v The Seamen's Union of Australia NSW Branch o/b Levy [2009] NSWIRComm 126 at [84] - [85]. 15. The Commission would not find that by failing to accept the March Offer or the April Offer, taking account of the point in the proceedings the offers were made and the time for which they were open for acceptance, that the Applicant failed to "undertake a responsible and careful assessment of the prospects of the litigation" or engaged in a course of conduct so unreasonable as to warrant a conclusion he "unreasonably failed to agree to a settlement of the claim". March Offer 16. Whilst the quantum of the March Offer was six months of the Applicant's pre-dismissal income, it was made more than two weeks prior to the filing of the Respondent's evidence. It was an offer open for 6 days. It was made on conditions, including: a. The settlement of all claims arising out of the employment and was not simply a settlement of "the claim" to which s 181(2)(c) refers. The offer was also conditioned on settlement of the Anti-Discrimination Board complaint. b. That the Applicant enter into a contract (Deed of Release, drafted by the Respondent's lawyers) which was never produced in draft for consideration but would at the least impose obligations on the Applicant relating to confidentiality and non-disparagement. 17. It is submitted an offer of settlement involving a payment of 6 month's pay does not ipso facto make an offer of settlement reasonable, nor a failure to accept it tantamount to an unreasonable failure to agree to a settlement of a claim. 18. Whilst the offer was for a payment of six months wages, the offer was only open for a short time, was made at a point prior to the Applicant receiving the Respondent's evidential case (or responding to it), and involved both the settlement of the ADB Complaint and the Applicant entering into an unseen Deed of Release that would include undescribed terms about (amongst other things) confidentiality and non-disparagement. 19. It was not unreasonable for the Applicant to have not accepted the March Offer, abandoning the ABD Complaint and denying him the right to pursue the primary remedy under the Industrial Relations Act. By failing to accept the March offer it cannot be said the Applicant failed to undertake a responsible and careful assessment of his prospects in the litigation. There is no proper basis for the Commission to conclude that by failing to accept that offer at that point in time, the Applicant acted so unreasonably as to permit a conclusion that he "unreasonably failed to agree to a settlement of the claim". April Offer 20. Whilst the April Offer was also for a payment of 6 months wages, it was made on a Friday and closed the following Thursday, leaving only 4 working days for its consideration. It was made at the same time as the Respondent served 3 lever arch folders of tender bundle, and some 7 witness statements (which themselves had a number of annexures). The Applicant lives in a Regional area. The Commission would recall the Applicant's time for filing his reply evidence was extended because of, amongst other reasons, the significant volume of material served by the Respondent. The Applicant did in fact advance a substantial evidential case in Reply. Again, the offer was subject to an unseen Deed of Release. 21. By failing to accept the April Offer it cannot be said the Applicant failed to undertake a responsible and careful assessment of his prospects in the litigation. In order to undertake such an assessment the Applicant would have at least required that evidential case to have been received and reviewed by both the Applicant and his Counsel, and for them to have had the opportunity to have canvassed what evidence and contentions could be advanced in response. It was not reasonable for Respondent to have confined the April Offer in that way at that time: it was not a reasonable offer in all the circumstances. 22. Moreover, there is no proper basis for the Commission to conclude that by failing to accept that offer at that point in time, the Applicant acted so unreasonably as to permit a conclusion that he either failed to undertake a responsible and careful assessment of his prospects in the litigation or "unreasonably failed to agree to a settlement of the claim". General Discretion 23. In the event the Commission does not accept the Applicant's primary submissions and makes a finding contemplated by s 181(2)(c), the Applicant contends the Commission would nonetheless not make a costs order in favour of the Respondent in the exercise of its discretion. 24. The purpose of a costs order is to compensate the victorious party, not punish the unsuccessful party. In the course of the proceedings the Commission has received evidence of the Applicant's financial circumstances. His financial circumstances are dire. In substance, albeit not in form, the impact of any costs Order on the Applicant would be punitive. The Respondent is a government department, well able to absorb the costs of this litigation. In the exercise of its general discretion the Commission would embrace the prima facie position contemplated by s 181 of the IR Act and leave costs to be borne by the respective parties. 25. The Respondent seeks an indemnity costs Order, or in the alternative a party/party costs Order. 26. An indemnity costs order is very much an exception to the general rule that costs, where ordered, ought be paid on a party/party basis as agreed or assessed. It is submitted there are no special or unusual features of an unmeritorious or improper nature surrounding the case of the Applicant to warrant costs being ordered on an indemnity basis. 27. Even a party/party costs would, for the reasons advanced above, likely be crippling to the Applicant. 28. If an adverse costs Order were to be made, the Commission would make a nominal fixed costs Order in an amount considered reasonable by the Commission, not an indemnity costs or a general order on a party/party basis.

Submissions in reply by the respondent

1. In reply to the applicant's submissions, the respondent submitted that the applicant's personal circumstances should not form part of the assessment of the reasonableness of his failure to agree to a settlement of his claim or, alternatively, be given little weight.
2. The respondent also submitted that its requirement that the applicant effectively withdraw his complaint to the Anti-Discrimination Board, which was part of the settlement offer made on 27 March 2018, was not significant. Further, the non provision by the respondent of a draft deed of release at the time the settlement offers were made was consistent with the usual approach to settlements.
3. It was also submitted that the applicant's reliance on the timing of the offers and the content of the offers failed to address or explain the complete absence of any attempt, reasonable or otherwise, by the applicant to settle the claim or even respond to the respondent's "substantial settlement offers".
4. The respondent also rejected the applicant's "attempt to argue that absent 'a credit finding a trial', there was a reasonable argument that the Applicant's conduct did not amount to serious misconduct".
5. The respondent's reply submissions then continued as follows: 23. In light of the Applicant's extremely serious misconduct, it can hardly be said the Applicant took a responsible and careful assessment of the prospects of the proceedings before failing to agree to the Respondent's offers of settlement both of which offered to pay him the statutory maximum amount of compensation he could have been awarded. Yet section 181(2)(c) operates to encourage settlement by requiring parties to "undertake a responsible and careful assessment of the prospects of the litigation", something the Applicant acknowledges in his submissions. 24. The Applicant's unlikely prospects of success should have been obvious to the Applicant from the outset of the proceedings. This is especially so when the Applicant filed a substantive witness statement, accompanied by 26 attachments at the interlocutory proceedings on 22 February 2018. The lack of evidence supporting any of the Applicant's implausible excuses should have been telling from this time. 25. The prospects of the Applicant being reinstated were even more unlikely than his prospects of success. The Applicant's submissions about the fact reinstatement is the primary remedy are irrelevant given the seriousness of the Applicant's misconduct. As the Commission noted, "this is not a case where the practicability of reinstatement or reemployment arises for consideration." 26. In the circumstances, the Respondent's two offers of settlement to the Applicant to pay him the equivalent to 26 weeks' pay, being the statutory maximum amount of compensation that can be awarded by the Commission, were incredibly generous. Those offers demonstrate the Respondent's commitment to settlement and its desire to avoid a costly and time-consuming hearing. 27. When the Applicant failed to accept the Respondent's offers of settlement coupled with his refusal to participate in settlement discussions, it left the Respondent with no choice but to defend proceedings of which it wanted no part. This is the type of case contemplated in Imogen Pty Ltd v Sangwin (1996) 70 IR 254 at 261 where "avoidable costs are forced upon an opposing party" and where the "party bringing about that result must expect the Court to exercise its discretion in such a way as to allow recovery of costs." Conclusion 28. It would be hard to find a better example than the present case of circumstances warranting a costs order under section 181(1). The circumstances referred to in section 181(2)(c) of the Act have been satisfied. The unreasonableness of the Applicant's failure to agree to a settlement of his claim is evident from the findings of the Commission in the substantive proceedings, the Respondent's opening submissions, the affidavit of Sally Louise Moten dated 21 December 2018 and the Respondent's reply submissions. 29. The Respondent has satisfied the Full Bench's construction of the relevant test in Bankstown City Council v Paris (1999) 93 IR 209, being that the Applicant's failed to agree to a reasonable settlement of the claim and that the Applicant's engaged in a course of conduct throughout the proceedings which was inconsistent with an intention to settle the proceedings on any basis that could be considered reasonable. 30. As the Applicant's conduct amounts to an unreasonable failure to agree to a settlement of the claim, the Commission should exercise its discretion to award costs in favour of the Respondent under section 181(1) of the Act. 31. The quantum of costs sought by the Respondent and the orders sought are as set out in the Respondent's submissions dated 21 December 2018.

Determination of the respondent's application for a costs order

1. In Bankstown City Council v Paris ([1999] 93 IR 209) a Full Bench of the Commission (Wright P, Peterson J, Bishop C) stated (at 219): 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.
2. In Phillips v Industrial Relations Commission (NSW) ([2006] 154 IR 96) the Court of Appeal (Spigelman CJ, Mason P, Beazley JA) referred to the Full Bench in Paris and stated (at [19]-[21] per Mason P): 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 s181(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. 21 I therefore cannot read the "objective" aspect of Paris as embodying a jurisdictional or other error of law in regard to the application of s181(2)(c).
3. Balanced against the statutory intention to encourage conciliation and to discourage parties to unfair dismissal proceedings from unreasonably failing to agree to a settlement of the claim, it needs to be recognised that reinstatement is the primary remedy available Part 6 of Chapter 2 of the Act. Depending on the circumstances of the case, dismissed employees should not be dissuaded from pursuing the primary remedy by the prospect of a costs order if they fail to achieve reinstatement.
4. After considering the passages from the Court of Appeal judgement in Phillips cited at [13] above, a Full Bench of this Commission (Walton J, Vice-President, Sams DP, Ritchie C) in Carlton and United Beverages Ltd v Brunt ([2007] 164 IR 184) stated (at [34]): We would observe that in some unfair dismissal proceedings a dismissed employee will consistently seek reinstatement (or re-employment) as the primary remedy for the alleged unfair dismissal. In these circumstances, even an apparently generous financial offer of settlement will be rejected because the employee simply wants his/her job back. Of course, a dismissed employee is perfectly entitled to maintain a steadfast desire for reinstatement, without necessarily demonstrating an unwillingness to settle the claim as contemplated by s181(2)(c) of the Act. This is because of the scheme of Pt 6 of Ch 2 of the Act and the primacy given to the remedy of reinstatement. Similarly, an employer may be entitled in appropriate circumstances to maintain a firm position of refusing to make any offers of settlement. In both these circumstances however, there is an element of risk associated when any future costs application is considered within the statutory framework.
5. In the present case, there was an "element of risk" in the applicant failing to accept the respondent's settlement offers. However, given his obvious determination to pursue the primary remedy of reinstatement, he was prepared to take the risk. It does not necessarily follow that, having taken the risk but having failed to be reinstated, he should now be burdened with a costs order in favour of the respondent.
6. I have determined to exercise my discretion against the making of a costs order for the reasons set out below.
7. Both settlement offers made by the respondent were for a considerable sum of money, being the equivalent of six months' pay, the maximum amount of compensation that the Commission is able to award pursuant to subsection 89(5) of the Act. However, in considering whether the applicant unreasonably failed to accept these offers, I have given consideration to the following circumstances: (a) The applicant was a long serving employee having worked in his role as a Training Advisor for approximately 15 years. The degree of attachment to his job will naturally have been much stronger than it would be for an employee with a shorter length of service. (b) At the time of his dismissal, the applicant was 61 years of age. Given his age and the range of disabilities he claims to have, some of which are obvious, I accept that he may well find it extremely difficult to find suitable alternative employment. As I noted in Smith No.1 at [167], the loss of his employment will cause the applicant a great deal of hardship. (c) In Smith No.1 I rejected the applicant's claim that his conduct was, in some way, connected to his dyslexia (at [102]-[110]). There was no medical evidence placed before the Commission to support such a claim. However, I accept that the applicant genuinely held the belief that there was such a connection and he had maintained this throughout the disciplinary process which preceded his dismissal. The applicant's perception that his conduct was, at least in part, explicable by his dyslexia, may well have impacted on his capacity to objectively assess the strengths and weaknesses of his case when considering the respondent's settlement offers. (d) The applicant had been encouraged, to some extent at least, in his belief that there had been a lack of consultation about the change in reporting lines in the workplace, by a report from a SafeWork NSW Inspector (at [115]). I rejected the applicant's claim as to a lack of consultation (at [117]-[119]). Nevertheless, this misplaced criticism of the respondent by a SafeWork Inspector may well have encouraged the applicant to believe that his case for reinstatement was stronger than it really was. (e) Also, in Smith No.1 I rejected the applicant's submission that his conduct could be excused on the basis that he had been acting in the capacity of a PSA delegate (at [131]). However, I am prepared to accept that the applicant thought that his role as a PSA delegate had brought him into conflict with management of the Department and that his resignation from that role strengthened his case for reinstatement.
8. Applying my own assessment of what constitutes an unreasonable failure to agree to settle his unfair dismissal application, but not ignoring the standpoint or standards of the applicant, I find that, in all the circumstances, it was not unreasonable for the applicant to fail to agree to the settlement offers from the respondent and to pursue, instead, his claim for reinstatement.
9. It follows that I find that the "jurisdictional gateway" to the exercise of discretion to award costs has not been opened in this case. Were it otherwise, I still would have exercised my discretion to refrain from making a costs order in favour of the respondent.
10. I accept that the loss of his job and the bleak prospects of obtaining alternative employment have placed the applicant in a dire financial situation. Any costs order in favour of the respondent, especially an order which even remotely approaches the quantum being sought by the respondent here, is likely to be crushing for the applicant.
11. One of the objects of the Act is "to provide a framework for the conduct of industrial relations that is fair and just" (subsection 3(a)). An order that would financially destroy a 62 year old, unemployed, disabled former employee of the respondent would hardly be consistent with that object.

Order

1. The application by the Secretary, Department of Industry, for a costs order against Graham Smith is dismissed. John Murphy Commissioner

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