Clair Petersen v Kizuri Capital Pty Ltd, Maycorp Pty Ltd and Cricklewood Capital Pty Ltd. T/A Allpet Products

[2021] FWC 526

[2021] FWC 526

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
Section 394 - Application for unfair dismissal remedy

Clair Petersen
v
Kizuri Capital Pty Ltd, Maycorp Pty Ltd and Cricklewood Capital Pty Ltd. T/A Allpet Products
(U2020/6126)

DEPUTY PRESIDENT ANDERSON ADELAIDE, 5 FEBRUARY 2021

Application for an unfair dismissal remedy - costs - order sought against employer under sections 611(2) and 400A FW Act - whether employer had no reasonable prospect of success - whether employer’s failure to respond to settlement offers an unreasonable act or omission - discretion enlivened - costs ordered

[1] This decision concerns an application for costs made by Clair Petersen (the Applicant or Ms Petersen). Ms Petersen seeks an order for costs in the sum of $7,978.10 against her former employer Allpet Products 1 (Allpet or the Respondent).

[2] The order sought arises from unfair dismissal proceedings brought by Ms Petersen on 4 May 2020. On 20 October 2020 2 I decided that Ms Petersen’s dismissal was harsh, unjust or unreasonable. I ordered compensation of $7,476.31 plus $1,644.23 superannuation.

[3] The costs application was filed on 3 November 2020. As Ms Petersen’s application was a matter under Part 3-2 of the FW Act, the costs application was required to be filed within fourteen days of the Decision (section 402 FW Act). The costs application is within time.

[4] The costs application is opposed by Allpet.

[5] I issued directions on 3 November 2020, received written materials in advance of the hearing and heard the matter on 11 December 2020.

[6] Both Ms Petersen and Allpet filed written submissions on the costs application, which were supplemented by oral submissions. Ms Petersen also relied on two statements – one from her lawyer Ms Kaukas 3 and one from herself.4

[7] Both parties appeared with continuing permission to be legally represented.

Facts

Pre-hearing communication

[8] Ms Petersen was dismissed as a Field Sales Executive on 14 April 2020. Two days later (16 April 2020) she sought legal advice.

[9] On 16 April 2020 her lawyer (Ms Kaukas of Andersons Solicitors) wrote to Allpet advising that the dismissal and related matters were in dispute, of the potential for litigation and an intent by Ms Petersen to resolve the dispute.

[10] Five days later (21 April 2020) a one sentence reply was received from a director of Allpet, Ms Hall: 5

“We strenuously deny any allegations and will vigorously defend any claim by your client.”

[11] On 4 May 2020 (and within the statutory 21 day period) unfair dismissal proceedings were filed in the Commission. Ms Petersen claimed unfairness having regard to the alleged absence of a valid reason, and alleged procedural unfairness.

[12] On 15 May 2020 Allpet filed a response (F3), as required by the Fair Work Rules. The response rejected the assertion of unfairness and provided certain particulars.

[13] Conciliation was conducted by a staff conciliator on 3 June 2020. The matter did not resolve. Ms Petersen was represented at the conciliation. Allpet were self-represented.

[14] On 9 June 2020 a lawyer filed a notice of acting on behalf of Allpet.

[15] I held a directions hearing on 10 June 2020. I set the matter down for hearing and issued directions. Notwithstanding reservations then expressed by Ms Petersen’s lawyer on the utility of further conciliation given the earlier failed conciliation, I directed that Member Assisted Conciliation be held unless both parties advise otherwise. 6

[16] On 11 June 2020 the Commission advised the parties that Member Assisted Conciliation would be conducted by Commissioner Hampton on 25 June 2020.

[17] On 18 June 2020 the lawyer ceased to act for Allpet.

[18] On 18 June 2020 Ms Kaukas wrote to Allpet. In that email: 7

•  Ms Kaukas advised that Ms Petersen was only prepared to expend further resources on Member Assisted Conciliation if Allpet was prepared to negotiate in good faith and make a monetary offer, noting that a monetary offer had been made by Ms Petersen at the earlier conciliation (said to have been 16 weeks);

•  made a second settlement offer (of 12 weeks);

•  made a request for discovery of documents; and

•  advised that if Allpet did not respond by 22 June 2020, Ms Petersen would ask the Commission to vacate the Member Assisted Conciliation.

[19] Ms Kaukas’s email of 18 June 2020 was marked “without prejudice except in relation to costs”. It went on to made specific reference to costs:

“We hereby put you on notice that, should you fail to negotiate in good faith towards the resolution of this matter, when my client succeeds in establishing that your dismissal of her was harsh, unjust and unreasonable, she will ask the Fair Work Commission to order that you pay her costs of the unfair dismissal matter pursuant to section 611 of the Fair Work Act 2009 on the ground that you acted unreasonably in failing to settle this matter.”

[20] Allpet did not reply to Ms Petersen’s lawyer on any of these issues (settlement or discovery) by 22 June 2020 or otherwise. However, the following day (19 June 2020) a director of Allpet (Mr Hall) advised the Commission 8 (and copied to Ms Petersen’s lawyer) that Allpet was “happy to proceed” with Member Assisted Conciliation. Allpet further advised that it would be seeking new legal representation. Mr Hall added:

“The Respondent remains committed to resolving this matter without a hearing.”

[21] Later that day (19 June 2020) Ms Kaukas wrote again Allpet in the following terms: 9

“If, as you have represented to DP Anderson, you are “committed to resolving this matter without a hearing”, then I suggest that you respond to my client’s latest offer. I reiterate that my client will not agree to participate in a further conference unless you confirm that you are willing to engage in negotiations and make a monetary offer of settlement, by responding to my client’s latest offer. As indicated in my earlier email, if you have not responded to the offer contained in that email by 9am on Monday 22 June I am instructed to advise Commissioner Hampton that my client does not wish to participate in further conciliation.”

[22] Ms Petersen’s lawyer received no response from Allpet.

[23] On 22 June 2020 (11.40) Ms Kaukas wrote to Commissioner Hampton (copied to Allpet) in the following terms: 10

“…I have received no response to my recent communications to the respondent. Given:

•  the respondent’s failure to make any monetary offer of settlement at the previous conference;

•  the respondents failure to respond to my client’s further offer contained in my email sent on 18 June 2020 or indeed to respond to my emails at all;

•  the fact that the solicitor appointed by the respondent prior to 10 June 2020 is no longer acting for them; and

•  the resources which my client has already expended in attempted conciliation of this matter and the significant resources she will have to expend in the hearing of this matter,

I am instructed to advise that my client does not wish to participate in the member assisted conciliation scheduled for Thursday 25 June 2020….Of course my client remains willing to negotiate with the respondent and to explore the possibility of settling this matter should the respondent be willing to do so.”

[24] One hour later (12.41) Mr Hall of Allpet replied to the Commission (copied to Ms Kaukas): 11

“Although I have no legal representation, I am prepared to proceed to the scheduled conciliation conference in an attempt to resolve the claim.”

[25] Within minutes, Ms Kaukas replied to the Commission (copied to Allpet): 12

“In the absence of a response to my client’s offer / a monetary offer from the respondent prior to the conference my client believes that the respondent has no intention of making any monetary offer to “resolve the claim” and, as such, my client is not willing to participate in a further conference…I look forward to receiving confirmation that the conference has been vacated.”

[26] In light of this correspondence, the Member Assisted Conciliation was vacated.

[27] On 26 June 2020 Ms Kaukas, on behalf of Ms Petersen, again wrote to Allpet. She noted that she had received no response to her email of 18 June 2020. She renewed her request for discovery. She repeated her instructions that Ms Petersen: 13

“will be seeking an order that Allpet pay our client’s costs of the hearing. Any such application will include any costs incurred in interlocutory matters…I confirm my client’s offer to settle this matter...is still on the table for a short period of time at least…”

[28] Ms Petersen’s lawyer again received no response from Allpet.

[29] On 8 July 2020 Allpet wrote to the Commission seeking permission to be represented.

[30] On 13 and 14 July 2020 Ms Petersen filed materials for the hearing (witness statement, outline of argument, list of documents, submissions seeking to be represented).

[31] On 14 July 2020, 14 I granted permission to both Ms Petersen and Allpet to be represented in the matter.

[32] On 16 July 2020 Allpet made an interlocutory application which, amongst other matters, sought an extension of time to file its materials. A limited extension was granted (as had earlier been to Ms Petersen).

[33] On 24 July 2020, following a directions hearing on Allpet’s interlocutory application, I issued further directions and an order relating to the confidentiality of certain company documents which had been produced by Ms Petersen.

[34] On 10 August 2020 Allpet filed its materials (witness statement, outline of argument) together with a Notice of Representative commencing to act filed by a legal practitioner acting for Allpet (Ms Saraceni).

[35] On 19 August 2020 Ms Petersen filed materials in reply including a lengthy supplementary witness statement.

[36] On 20 August 2020, four days before the hearing, Ms Kaukas, on behalf of Ms Petersen, made a further offer of settlement to Allpet “in a last attempt to resolve the matter”. 15 The sum sought was a lesser sum than the earlier two offers and was said to be actual loss of income since dismissal. Ms Kaukas repeated her earlier instructions that Ms Petersen will:

“seek a costs order against you on the basis that you have acted unreasonably in refusing to negotiate in this matter”.

[37] That same day (20 August 2020), Ms Petersen made an interlocutory application for production of documents by Allpet beyond those which had accompanied its materials.

[38] I heard the production application on 21 August 2020. I made an order 16 for production of certain categories of documents (in particular a category that came to be referred to as ‘the Rafferty emails’). These were produced by Allpet in accordance with my Order, on the morning of the hearing.

Hearing

[39] The merits hearing (including remedy) occupied five days (24 and 25 August and 14, 21 and 29 September 2020).

[40] Both parties were legally represented. Although only two witnesses gave evidence (Ms Petersen and Mr Hall), the evidence was lengthy and the documentary material voluminous.

[41] The proceedings were factually complex. All matters in issue were fully litigated. Factual matters encompassing Ms Peterson’s performance and conduct over a substantial period of employment and the employer’s process of decision-making were relevant, and in dispute. This included whether there was a valid reason for dismissal having regard to both pre-dismissal and post-dismissal conduct, issues of procedural fairness and remedy (including relevant mitigation).

[42] The taking of evidence was made more complex by the fact that, as became apparent from Mr Hall’s witness statement of 10 August 2020, Allpet relied not just on the reasons for dismissal advised to Ms Petersen at the time of her dismissal, but also on other alleged pre-dismissal conduct which had not been advised to her at that time, as well as certain alleged post-dismissal conduct.

[43] The Rafferty emails which were produced in consequence of my production order of 21 August 2020, were brought into evidence and were the subject of extensive evidence and submission by both parties.

Decision

[44] The Decision was delivered on 20 October 2020.

[45] I determined that Ms Petersen’s dismissal was harsh, unjust or unreasonable.

[46] On whether there was a valid reason, I observed:

“[317] I have found that whilst there were performance deficiencies that warranted counselling and warning, those deficiencies in the context of Ms Petersen’s overall work output together with mitigating factors operating at the time of dismissal lead to the conclusion that there was no valid reason for dismissal.”

[47] On procedural fairness I observed:

“[319] I have also found that whilst Ms Petersen was on notice concerning legitimate concerns with her performance, there were serious failures of procedural fairness in the decision to dismiss and its implementation. This is not a matter where procedural deficiencies in implementing a dismissal are not significant nor is this a matter where a valid reason of substance existed so as to outweigh procedural deficiencies.

[321] Regrettably however, Mr Hall allowed a view he formed on 31 March 2020 (a view that was in part warranted that there was problem with his South Australian and Queensland sales representative) to result in dismissal two weeks later based on wrongly made assumptions, an inadequate appreciation of the then operating COVID-19 employment context impacting Ms Petersen and an impulsive examination of social media posts and tracking information without the benefit of securing Ms Petersen’s response or explanation.

[48] I concluded:

“[322] It is clear that this is a case of a committed but occasionally deficient employee who was already starting to sink amidst a heavy workload being unable to sustain strictly enforced internal reporting obligations on top of her customer servicing obligations across two States without lapses. When COVID-19 hit, the combination of reduced hours to do the job, demotivation arising from reduced hours and pay and an additional reporting obligation combined to create a set of circumstances in which an objective assessment of performance was fraught. Yet in that very context untested assumptions about conduct from social media posts led to an unfair conclusion that Ms Petersen had fooled the business.

[323] Allpet tried to act fairly but its judgement in the final analysis was rash and impaired. When considered objectively Ms Petersen’s dismissal was harsh, unjust or unreasonable.”

[49] On remedy, I found that reinstatement was inappropriate and that Ms Petersen had sought to mitigate her loss. I ordered compensation of $7,476.31 plus $1,644.23 superannuation. This comprised fifteen weeks of prospective employment ($19,955.85 gross) less deductions for monies received in lieu of notice and earnings received from contract work since dismissal.

Submissions

Ms Petersen

[50] Ms Petersen seeks an order for costs in the sum of $7,978.10. An itemised costs schedule accompanied her application. The sum sought comprises party to party costs and disbursements incurred from 4 June 2020 to 2 November 2020.

[51] The order is sought on four basis:

•  under section 400A(1) of the FW Act, on the ground that Allpet failed to produce the Rafferty emails in its materials and only did so once ordered, and that this was “an unreasonable act or omission…in connection with the conduct or continuation of the matter”;

•  under section 400A(1) of the FW Act, on the ground that Allpet failed to disclose, at the time of dismissal or in its F3 response all of the reasons for dismissal (and only did so in the witness statement of Mr Hall), and that this was “an unreasonable act or omission…in connection with the conduct or continuation of the matter”; and

•  under section 400A(1) of the FW Act, on the ground that Allpet failed to enter into negotiations for a settlement and that this was “an unreasonable act or omission…in connection with the conduct or continuation of the matter”; and

•  under section 611(2)(b) of the FW Act, on the ground that it should have been reasonably apparent to Allpet from at least the time the application was filed that its response to the application “had no reasonable prospect of success”.

[52] In support of her application under section 400A, Ms Petersen submits:

•  the Rafferty emails were directly relevant to whether a valid reason for dismissal existed and this ought to have been clear to Allpet from the outset. Allpet selectively produced some of the emails only. Those not produced were then the subject of orders made on Ms Petersen’s application. Having to make the interlocutory application and having the emails produced so late in the piece added cost and expense to the litigation;

•  it was only in the fortnight before the hearing and after the filing of the witness statement by Mr Hall that Ms Petersen was aware of new allegations against her that were being relied upon by Allpet. This added cost and expense to the litigation by requiring Ms Petersen to prepare and file a further detailed statement in reply;

•  through her lawyer, Ms Petersen made three offers of monetary settlement (3 June, 18 June and 20 August);

•  each monetary offer was made in good faith and was reasonable. Notwithstanding Ms Petersen incurring costs as time elapsed, each settlement offer was at a lower sum than the previous offer;

•  the first offer was simply rejected at the staff conciliation. Whilst Ms Petersen did not receive any response at all from Allpet or its representatives with respect to either the second or third offer;

•  Allpet’s failure to communicate with Ms Petersen’s lawyer on the offers was discourteous and unreasonable given the seriousness of the litigation and the directions which had been issued by the Commission;

•  Allpet’s failure to communicate with Ms Petersen’s lawyer on the matter generally directly caused costs to be incurred. Those costs would not have been incurred or incurred at the level incurred had the matter settled;

•  the consequence of having incurred those costs is that the compensation order awarded to Ms Petersen has been wholly absorbed by her costs incurred, resulting in Ms Petersen achieving no net financial benefit from the litigation and being unable to enjoy the fruits of her success; and

•  on multiple occasions Allpet was put on notice that its failure to settle the matter or negotiate a settlement would give rise to an application for costs against it.

[53] In support of her application under section 611, Ms Petersen submits:

•  it ought to have been reasonably apparent to Allpet that there was no valid reason for dismissal given the overall circumstances, and particularly once it read the witness statement of Ms Petersen and her Outline of Submissions. In the absence of a valid reason, Allpet’s defence of its dismissal was doomed to fail;

•  leaving aside the reason for dismissal, it ought to have been reasonably apparent to Allpet that the dismissal was unfair on the ground of egregious procedural unfairness, including the fact that a decision to dismiss was made without providing Ms Petersen an opportunity to respond and in circumstances where not a day had been worked by Ms Petersen after she had been given an earlier warning. The procedural unfairness was such that Allpet’s response to the application had no reasonable prospect of success; and

•  for considerable periods of time during the course of the matter, Allpet had access to and were in receipt of advice from professional advisers with respect to its defence of the matter.

Allpet

[54] Allpet submit that the costs application should be dismissed on all grounds. It submits that it neither acted unreasonably in its conduct of the matter, nor was its defence to the application without reasonable prospects of success.

[55] In particular, Allpet submit:

•  the basic rule applicable to Commission proceedings is that each party bears their own costs and it is only where the relevant statutory tests are made out and where it is appropriate to exercise a discretion to do so, that costs are to be ordered;

•  Allpet complied with all directions and orders of the Commission, including with respect to the Rafferty emails. There was no general order for discovery made compelling production of all documents. It produced those documents it sought to rely upon, and then produced other documents when it was ordered to do so;

•  Allpet identified the reasons for dismissal and led evidence about the reasons in an orthodox manner via its form F3 and then its witness statement, as directed. The preparation of a supplementary witness statement by Ms Petersen was her choice and entirely consistent with the Commission’s direction that she file material in reply;

•  Allpet was not unresponsive to Ms Petersen’s lawyer. At the outset it advised her lawyer that it would strenuously oppose the application;

•  there is no obligation on an employer to settle an unfair dismissal matter in advance of a hearing or to negotiate a settlement;

•  Allpet’s refusal of the settlement offers made by Ms Petersen was not unreasonable as the quantum of each settlement offer (including the final offer) was higher than the sum of compensation ordered by the Commission;

•  it was Ms Petersen, not Allpet, which caused Member Assisted Conciliation to be vacated. In contrast, Allpet had on three occasions advised the Commission and Ms Petersen’s lawyer that it was willing to participate in the Member Assisted Conciliation (at the directions hearing and in two subsequent emails);

•  Allpet’s defence of the matter could not be said to have had no reasonable prospect of success because, as found by the Commission, there were relevant and material failures on the part of Ms Petersen; and

•  Allpet’s defence of the matter could not be said to have had no reasonable prospect of success because, as found by the Commission, there had been prior counselling of Ms Petersen and a prior warning.

Consideration

Statutory provisions

[56] A decision to order costs against a party is governed by sections 400A and 611 of the FW Act. Section 400A, which is specific to Part 3-2 ‘Unfair Dismissal’, provides:

“400A Costs orders against parties

(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.”

[57] Section 611, which sits amongst the general provisions in Part 5-1 “The Fair Work Commission”, provides:

“611 Costs

(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.

Note:          This subsection is a civil remedy provision (see Part 4-1).”

Costs sought under section 611(2)

[58] Section 611(2) of the FW Act deals with circumstances where there has been what might broadly be termed ‘an abuse of process’ by a party. 17 The discretion embodied in this sub-section sits within a statutory framework where the primary position is that each party bears their own costs in proceedings before the Commission (section 611(1)).

[59] Importantly, the concept that it should have been reasonably apparent to an applicant that their claim had “no reasonable prospect of success” is to be determined objectively, applying a reasonable person test. A subjective belief of reasonableness, even where genuinely held, is neither sufficient nor determinative. 18

[60] Principles governing the application of section 611(2) have been summarised by a full bench of the Commission as follows: 19

“[9] There is overlap between the two jurisdictional bases for awarding costs under s 611(2). An application brought “without reasonable cause” could often also be described as one which, objectively considered, had “no reasonable prospect of success”. Nevertheless each basis is to be considered separately.

[10] Authority in relation to the first jurisdictional basis indicates that an application could be regarded as brought “without reasonable cause” if the claim was misconceived. On the other hand it could not be so described simply because a person’s arguments had been rejected. In Kanan v Australian Postal & Telecommunications the Federal Court observed that one way of ascertaining whether a proceeding had been brought “without reasonable cause” was to ask whether, on the applicant’s own version of the facts, it was clear that the proceeding must fail. If so, it could properly be said that the proceeding had no reasonable cause. But if the success of the claim depended upon the resolution in the applicant’s favour of arguable points of law, it would be “inappropriate to stigmatise the proceeding as being ‘without reasonable cause’”.

[11] As to the second jurisdictional basis for awarding costs under s 611(2), a Full Bench of the Commission in Baker v Salva Resources Pty Ltd concluded that the words “should have been reasonably apparent” are directed to a belief formed on an objective basis, not a subjective one, and that a conclusion that an application had no reasonable prospect of success should only be reached with great caution, in circumstances where the application is “manifestly untenable or groundless or so lacking in merit or substance to be not reasonably arguable.”” (citations omitted)

[61] Should it have been “reasonably apparent” to Allpet that its response to the application had “no reasonable prospect of success”?

[62] For the following reasons, I think not.

[63] Firstly, unfair dismissal applications are multifactorial 20. As is abundantly clear from section 387 of the FW Act, all relevant issues that pertain to fairness require consideration. This includes both the reason (or reasons) for dismissal (and whether they were a valid reason) and procedural fairness. Whilst relevant, it does not necessarily follow that a dismissal which is procedurally deficient (for example, by an employee not being given an opportunity to explain their conduct or performance prior to a decision being made, or an employee not having been warned or counselled) will, simply by virtue of that fact, be harsh, unjust or unreasonable. Each matter rests on its circumstances and the weighing of relevant factors. Many a case comes before the Commission where performance or conduct constitutes a valid reason such that the dismissal is not unfair despite objectively found procedural unfairness. Conversely, many a case exists where procedural deficiencies are so serious that the dismissal is harsh notwithstanding an objectively found valid reason.

[64] Secondly, from the time it first responded to Ms Petersen’s application, Allpet was of the view that it had a valid reason for dismissal having regard to her performance and conduct. I did not conclude that the performance and conduct matters relied upon by Allpet formed a valid reason. However, I found failures of duty that were relevant and material:

“[250] I have found that Ms Petersen’s performance was deficient in a number of important respects.

[251] Most significantly, she was inconsistent and unreliable in meeting formal reporting obligations required and repeatedly asked of her. However, for reasons outlined, there were significant mitigating factors that minimised what would otherwise have been a fundamental breach of a core condition of her employment: her overall workload (including the priority she was required to give to customer service over internal reporting) and the COVID-related changes to her hours and salary from 24 March 2020.

[252] Relevantly, there were also instances of error and oversight in servicing customers but these were sporadic. Overall her customer engagement was competent, productive and professional. The instances of error and oversight were prejudicial to customers but some mitigating factors arising from her overall workload existed that explain (though not justify) the failures.

[253] Relevantly, there were also instances of poor organisation of her time especially during the work trip to Queensland in January 2020 but overall she did not fail to do her job during this trip or, given the give and take of her working arrangements, otherwise misconduct herself.”

[65] On valid reason I concluded:

“[257] The mitigating factors applying pre-COVID-19 together with the accentuation of those factors from mid-March 2020 significantly weigh against a conclusion that the failures of duty, whilst real, were individually or collectively a valid reason for dismissal.”

[66] In these circumstances, Allpet’s view that the performance deficiencies would outweigh other circumstances was not, in an objective sense, unreasonable.

[67] Thirdly, the Decision made multiple findings of procedural unfairness associated with the dismissal. These included that the dismissal was made without an opportunity to respond to misconduct allegations, was made in circumstances where not a day of further work had been performed after an earlier warning (thus precluding any capacity to address deficiencies in performance after the warning), the non-disclosure of certain misconduct allegations in the letter of dismissal, unwanted assumptions by the employer over Easter 2020 about alleged misconduct, and dismissal expressly by email and with a specific desire that it and the allegations not be discussed with the employer before the dismissal letter was read.

[68] These were serious breaches of the fairness principle and were described in the Decision as such. However, they sit alongside other findings which concluded that Ms Petersen was, to a limited degree, on notice about her performance: 21

“[292] …Ms Petersen had a somewhat of a tin ear to the seriousness with which her employer viewed her failure to meet contractual reporting obligations. Sufficient concerns were expressed verbally and in the various emails about this issue to constitute prior warning. Although not said expressly, in light of Mrs Hall’s email of 15 October 2019, the two performance meetings and the fact that the 6 April 2020 warning was signed by all three directors it ought to have been reasonably apparent to Ms Petersen that that non-compliance with her reporting obligations could lead to dismissal.

[272] There were two performance meetings (31 January 2020 and 31 March 2020). These provided an opportunity to discuss the reporting concerns and the then concerns with some aspects of her customer engagement.”

[69] The ultimate conclusion reached was the product of a weighing exercise and evaluative assessment. As it apparent from the Decision, some of the relevant factors in section 387 weighed strongly in favour of a finding of unfair dismissal, some less so, and others weighed somewhat against such a finding, whilst others were neutral. It was thus not unreasonable for Allpet to consider that weight to be given to matters on which it relied would trump other relevant matters.

[70] In these circumstances, and taking into account that a conclusion that an application has no reasonable prospect of success should only be reached with caution, I do not consider the statutory pre-requisite for ordering costs under section 611 to be made out. Allpet’s case, whilst having considerable weaknesses, was not “manifestly untenable or groundless or so lacking in merit or substance” as to not be reasonably arguable.

Costs sought under section 400A(2)

[71] I now deal with each of the grounds on which Ms Petersen submits that the discretion under section 400A(2) is enlivened

[72] Whether the conduct of a party is “an unreasonable act or omission” is to be objectively assessed. 22 Although decided under an earlier statutory regime, the observation that “what attracts the discretion to award costs is unreasonable action or the absence of sufficient reason for the action taken”23 remains apposite. Each case will turn on its own facts.24

Failure to produce Rafferty emails

[73] I do not consider that Allpet’s failure to produce the full bundle of Rafferty emails in its materials (and that it only did so once ordered) was “an unreasonable act or omission…in connection with the conduct or continuation of the matter”.

[74] There is no doubt, as the Decision makes plain, that the Rafferty emails were relevant to both Ms Petersen’s case, and (to a lesser degree) the employer’s. Whilst declining to draw an adverse inference against Allpet for not calling Ms Rafferty, I observed that “it would have been helpful to fact-finding” to have received her evidence. 25

[75] However, the direction I issued on 10 June 2020 was that Allpet (and for that matter, Ms Petersen) file “any document intended to be relied upon”. 26 This was not akin to a general order for discovery compelling production of all documents which may be relevant to proceedings.

[76] The Rafferty emails initially produced by Allpet were selective – but they were those on which it sought to rely – and no more. When this gap in evidence was identified by Ms Petersen, her lawyer applied for a production order, an order was made and, in the course of the weekend before the hearing, Allpet sourced and then produced the bundle (which was considerable), as it had been ordered to do so.

[77] There was no unreasonable conduct or omission on Allpet’s part on this account.

Failure to provide full reasons for dismissal

[78] I do not consider Allpet’s failure to disclose all of the reasons for dismissal at the time of dismissal or in its F3 response “an unreasonable act or omission…in connection with the conduct or continuation of the matter.

[79] Section 400A(1) concerns itself only with failures “in connection with the conduct or continuation of the matter”. An employer’s failure, at the time of dismissal, to disclose all of the reasons for dismissal may be relevant to procedural fairness, but it is not a failure in connection with “the matter”. The “matter” for the purposes of section 400A(1) is the matter before the Commission – that is, the originating application. At the time of dismissal, self-evidently no such application under section 394 of the FW Act had been made. Hence, there could have been no such failure on 14 April 2020 given that the “matter” did not exist until 4 May 2020.

[80] As submitted by Ms Petersen, it is correct that not until the witness statement of Mr Hall was filed on 10 August 2020 were certain allegations of misconduct disclosed and said to be matters on which Allpet relied in making its decision to dismiss. These were largely matters addressed in the Decision under the following headings:

•  non-disclosure of personal business; 27

•  disparaging social media posts about Allpet; 28

•  engaging in private activities during work hours; 29 and

•  driving during work hours whilst consuming alcohol. 30

[81] These were primarily matters which had been brought to Mr Hall’s attention over Easter 2020 by his wife, as a result of her searches of Ms Petersen’s social media posts, and their alignment with Ms Petersen’s work responsibilities at the relevant time(s).

[82] I accept that Ms Petersen was disarmed to learn of these allegations late in the piece, and was put to cost and expense in preparing a lengthy witness statement in reply addressing each of them. I also accept that their late disclosure created some prejudice to her, given that the alleged events occurred some six months prior to her having to recall her version of the relevant circumstances.

[83] However, Allpet disclosed in its initial response (F3) the letter of termination, and that identified three reasons for dismissal (failure to provide run sheets; failure to provide satisfactory representation to clients; and disrespectful attitude towards management). These matters formed a substantial portion of the evidence at the hearing and were responded to in detail by Ms Petersen in her first witness statement.

[84] It was prejudicial for Allpet to not disclose in its F3 all of the reasons for dismissal on which it relied and sought to rely. It chose to disclose only those which it had set out in its letter of dismissal.

[85] For an act or omission to be “unreasonable” within the meaning of section 400A(1), the conduct needs to be considered in the context of the matter at hand. Whilst Allpet’s conduct in this regard fell short of best practice in litigation, I take into account that, at the time of filing its F3, Allet were self-represented and did so under the hand of one of its working directors (Mrs Hall). I also take into account the fact that the reasons it initially disclosed were matters of substance, and became a primary focus in proceedings. Some latitude must also be given to the fact that a party is entitled to take advice on the nature of its response and on matters which it is required to disclose in contested litigation. It was not until after it filed its F3 that Allpet was legally represented.

[86] In the context of this matter, I do not consider that Allpet’s failure to identify all of the reasons on which it relied until it filed its materials was “an unreasonable act or omission” within the meaning of section 400A of the FW Act.

Failure to settle

[87] Ms Petersen’s submitted that Allpet acted unreasonably in failing to settle the matter.

[88] On three occasions settlement offers (including monetary and non-monetary components) were put by Ms Petersen. The first was rejected when the matter came before the staff conciliator. The second and third were made in open correspondence from Ms Petersen’s lawyer and rejected without response. Allpet made no counter settlement offer, monetary or otherwise.

[89] Was the failure to settle on the terms sought or put an alternative settlement offer unreasonable conduct within the meaning of section 400A?

[90] None of the settlement terms (monetary and non-monetary) proposed were unreasonably advanced in the context of this litigation notwithstanding that each sought a sum higher than the sum of compensation ultimately ordered. The sum ordered was approximately fifteen weeks before being discounted by earnings. The sums sought ranged from sixteen weeks, to twelve weeks and (an equivalent of) about ten weeks.

[91] Allpet’s decision to reject the offers and make no counter-offer was a calculated decision. The first offer was rejected whilst the employer was self-represented. The second was rejected whilst self-represented but after having had a lawyer acting then ceasing to act. However both the first and second offers were rejected before Allpet had the opportunity to view and consider Ms Petersen’s witness statement and materials, which were considerable. In a matter such as this where the evidence traversed performance and conduct across many months of employment, comprehending the nature of the evidentiary case against it and identifying the narrative alleged by Ms Petersen was relevant to the employer considering its position on the offers. In an evidence-heavy matter such as this, rejection of settlement offers in advance of seeing Ms Petersen’s evidentiary case was not unreasonable.

[92] Rejection of the third offer is in a somewhat different category. It occurred when Allpet had had the benefit of legal advice from its representative for more than a month and when it had received (that same day) a final (detailed) evidentiary statement in reply from Ms Petersen. However, it occurred at an advanced stage of proceedings when Allpet had already put on file its own a substantial body of materials including a statement of Mr Hall attaching voluminous documents in support of the decision to dismiss.

[93] The principle to be applied is whether, objectively considered in the context of the particular matter, the rejection of settlement offers was unreasonable. Modest or even poor prospects of success on liability or remedy will not necessarily always make it unreasonable for a party to fail to agree terms of settlement that may lead to the discontinuance of the application. 31

[94] In circumstances where the defence of its dismissal was arguable and not doomed to fail, and its response to the applicant’s case equally thorough and raised serious matters warranting adjudication, rejection of the third settlement offer was not unreasonable. As much as Ms Petersen was within her rights to have her dismissal independently tested for unfairness so was the employer, by that time, within its rights to have its evidence supporting its claim that the dismissal was not unfair independently assessed. Settlement would have represented a decision that removed the risk of an adverse finding by the Commission but would also have removed the potential for an independent finding that its decision was not unfair.

Failure to respond to settlement offers

[95] Aside from whether Allpet acted unreasonably in failing to settle the matter following the settlement offers, Ms Petersen advances a separate but related submission that Allpet’s failure to communicate with Ms Petersen’s lawyer on such matters was an unreasonable act or omission in connection with the proceedings.

[96] On the issue of communication, it is apparent that Allpet, both whilst self-represented and whilst represented, took the view that it would simply not respond to emails from Ms Petersen’s lawyer containing settlement offers. Doing so was discourteous and reflective of a defensive and defiant attitude to the litigation. It rightly frustrated Ms Petersen and her lawyer and had the inevitable effect of bringing the matter to a head in a formal hearing.

[97] Allpet was not however entirely uncommunicative. Before proceedings were issued, once (and once only) Allpet’s director (Mrs Hall) advised Ms Petersen’s lawyer that it “will vigorously defend any claim”. It was entitled to respond to the threat of litigation with that defiance.

[98] However, once the matter was commenced Allpet took that defiance to another level by not responding at all to the second and third settlement offers. The offers were put seriously and in good faith. The second offer was put on 18 June 2020. No reply was received. The offer was repeated in an email of 26 June 2020. Again no reply was received, despite Ms Petersen’s lawyer specifically expressing concern that “as appears to be your usual practice, you have failed to respond to that email”. 32 The third offer was put on 20 August 2020 (21 August 2020 to Allpet’s lawyer). Again, no reply was received.

[99] Each of these three communications, one making an offer, one repeating an offer and one making a varied offer, fell into what became a costly litigation black hole.

[100] Was the failure to respond to the second and third offers an unreasonable act or omission?

[101] In the context of this matter, I conclude it was for the following reasons.

[102] Firstly, the non-response was not an isolated occurrence. It was a pattern of behaviour once the proceedings commenced.

[103] Secondly, although there were relevant periods of self-representation, Allpet had the benefit of professional representation both prior to the second offer and at the time of the third offer. Allpet was not a respondent unaware of the nature of the proceedings and its litigation risks.

[104] Thirdly, the failure to communicate a response to the offers was not inadvertent. Allpet had the capacity to do so, but chose not to do so. Across these very periods, Allpet communicated with the Commission and copied Ms Petersen’s lawyer into those communications. Allpet adopted an approach of complying with and communicating on procedures, directions or orders of the Commission but completely ignoring Ms Petersen’s communication and settlement offers once litigation commenced.

[105] Fourthly, the offers were not flippantly communicated. They were sent by a legal practitioner who held duties to both her client and to the Commission. They warranted a response that reflected the professional services sourced by Ms Petersen to advance her interests.

[106] Fifthly, whilst there was no legal obligation on Allpet’s part to settle or make a counter offer, the failure to communicate rendered it impossible for Ms Petersen’s lawyer to negotiate a private settlement on behalf of her client. Not only did it frustrate her lawyer, the conduct placed substantial litigation pressure on Ms Petersen. Short of discontinuing proceedings with no outcome, an out-of-court settlement would have had the effect of resolving the matter more quickly and more informally than a five day hearing. The objects of Part 3-2 of the FW Act (in which section 400A sits) are to establish procedures for dealing with unfair dismissal claims that are “quick, flexible and informal”. 33 The failure to respond to the settlement offers (whatever the terms of the response may have been) was inimical to the statutory object because it shut down any process of dialogue with or between representatives. Ms Petersen’s evidence, which I accept, was that her second offer was “intended to draw out a response from Allpet in the hope that we would eventually arrive at a position which was acceptable to both parties”.34

[107] Conduct of the type that inhibits settlement is capable of being objectively viewed as unreasonable for the purposes of section 400A. Although decided under a different statutory provision, in Brazilian Butterfly Pty Ltd v Charalambous, citing an earlier decision in Blagojevich, 35 it was said:

“…failure to respond to a plausible offer will, depending upon the circumstances, expose the non-responding party to risk of a costs order pursuant to s.170CJ(2)(b) in the event that the other party is successful. The joint judgement put this in terms of “the expressed willingness, or otherwise, of the other party to enter into negotiation” as being a relevant factor.” 36

[108] In Veal v Sundance Marine Pty Ltd, 37 a full bench of the Commission, in declining to make a costs order under section 401 in circumstances where the employer had made a not unreasonable settlement offer, passed the observation that “we note we may have arrived at a different conclusion had Sundance Marine not put any form of settlement offer.”

[109] However, consideration must be given to a countervailing consideration. It was Ms Petersen who, though her lawyer, and shortly after the second offer was not responded to, withdrew from participation in the Member Assisted Conciliation (MAC) which had been directed by the Commission. In contrast, Allpet advised the Commission that it intended to participate in the MAC, and said that it remained “committed to resolving this matter without a hearing”.

[110] Had the MAC not been aborted by Ms Petersen, Allpet would in all probability have attended and may well have communicated its position on the second offer if it had remained live. Ms Petersen’s lawyer explained to Allpet her reasons for not intending to participate in the MAC. She made an assessment that given Allpet’s unwillingness to entertain dialogue on settlement offers the investment of time and expense by her client was futile. Whilst this was not an unreasonable view, it failed to take into account two important considerations; firstly, the MAC had been directed, and secondly, conciliation facilitated by a Commission Member can be a more conducive environment for some employers to negotiate settlement than private negotiation.

[111] Minimising somewhat the force of this is however two other factors. Firstly, Ms Petersen’s lawyer made it clear on 18 June 2020 that if there was no response to the second settlement offer her client would not participate in the MAC. It was open to Allpet to reply, if only to indicate that it preferred to put forward a response at the MAC. It did not do so. Secondly, whilst Allpet advised the Commission on 19 June 2020 that it remained committed to resolving the matter without a hearing, its conduct belied this intimation. It made no settlement offer, monetary or otherwise, at any stage. It made no counter-offer to offers that were made. It failed to reply at all to offers made on 18 June, 26 June and 20 August despite being asked to reply.

[112] In these circumstances, whilst the conduct of Ms Petersen in aborting the MAC was unwise and had the potential to colour the approach of Allpet, the employer’s approach both before the aborted MAC and after the aborted MAC remained unaltered – non-responsive and non-communicative to seriously advanced settlement offers.

[113] Allpet submitted that the failure to communicate a response to the settlement offers was itself a response that should reasonably have been interpreted as rejection of the offers. I do not accept this submission. The issue for the purposes of section 400A is one of reasonableness. A reasonable response (even in the form of rejection of offers) requires some form of active communication, not a presumption of rejection based on stony silence. Where a non-response (or, as in this case, a series of non-responses) is objectively unreasonable then the discretion to order costs under section 400A is enlivened.

[114] In these circumstances, I consider Allpet’s refusal to communicate a response to settlement offers two and three to have been unreasonable conduct.

[115] I do not accept Allpet’s submission that the costs incurred were not “caused by” this act or omission within the meaning of section 400A. Dialogue is a pre-condition to agreement. As noted, the failure to communicate on offers rendered it impossible for Ms Petersen’s lawyer to negotiate a settlement on behalf of her client. This left Ms Petersen with two options only – discontinue or proceed to a hearing. As Ms Petersen’s case was not unmerited, discontinuance absent some beneficial outcome was not a reasonable course. Her evidence was that she was open to “any offer made by the respondent in order to avoid the need for a hearing as long as it included some compensation and the non-monetary conditions”. 38 The necessary consequence of Allpet’s conduct was a hearing and its associated costs.

[116] Nor do I accept Allpet’s submission that the costs were not “incurred” because evidence of a costs agreement is not before me. Ms Petersen’s evidence was that she engaged her solicitors for the purposes of providing professional advice and that her instructions to put settlement offers was informed by the expense she would otherwise incur should the matter proceed to hearing. The solicitors she engaged were legal practitioners who owed duties under legislation governing the profession. The evidence of Ms Kaukas was that she was acting for Ms Petersen in that capacity, communicated her “instructions” to Allpet at an early stage and that the compensation awarded will be “expended on legal fees”. 39

[117] For these reasons, the discretion to order costs under section 400A(1) is enlivened.

Should the discretion to order costs be exercised?

[118] I take into account the starting principle that the Commission is a jurisdiction in which parties bear their own costs 40. The discretion to award costs is subject to strict conditions41. Orders should be made only where there is a clear case. The discretion should be exercised with care. These are significant considerations but not determinative. The legislature has equally provided circumstances in which costs can, at the Commission’s discretion, be ordered particularly in the context of unfair dismissal proceedings. Section 400A is a specific costs power relating to unfair dismissal matters that sits alongside and in addition to the general costs provisions in Part 5-1 of the FW Act. It is under section 400A that I have concluded the discretion is enlivened.

[119] Noting the general principle against costs and the strictures in exercising the discretion, and exercising the appropriate caution, I consider that it is appropriate in this matter to make a costs order for the following reasons.

[120] Firstly, there is no good reason not to do so given that the statutory pre-condition has been enlivened. It would be a pyrrhic victory for Ms Petersen to enliven a statutory basis on which to have an order made in her favour to then not have the order made where there is no good reason not to do so.

[121] Secondly, Allpet were put on notice on multiple occasions by Ms Petersen during the course of the matter that Ms Petersen considered its non-responsiveness unreasonable and that its refusal to engage in dialogue on settlement would expose it to an application for costs. Allpet elected to be non-responsive notwithstanding being put on notice. Its non-responsiveness caused reasonable settlement offers made in good faith to fall into a costly litigation black hole.

[122] Thirdly, the order to be made will be proportionate to the costs incurred on account of the unreasonable conduct, and not otherwise. It will be in a lesser sum than sought by Ms Petersen.

[123] Fourthly, if no costs order is made the consequence of Allpet having chosen to adopt a pattern of non-responsiveness to seriously made and communicate settlement offers will pass without consequence or sanction (other than having incurred its own costs). In the context of this matter, that would not be fair nor consistent with the statutory object of the Part 3-2 of “a fair go all round”. 42

Quantum of order

[124] Ms Petersen seeks an order in the sum of $7,978.10 being party to party costs and disbursements incurred from 4 June 2020 to 2 November 2020.

[125] I consider the individual value of specific items in the schedule of costs submitted by Ms Petersen to not be unreasonable amounts. Further, the individual items claimed are not, where provided for, at a rate in excess of those prescribed for the purposes of section 403 of the FW Act. 43

[126] As the unreasonable conduct I have found occurred from 18 June 2020 and not earlier, costs incurred in the period 4 June to 18 June 2020 are not to be included. This requires a discount of $84.00 from the costs schedule (resulting in a figure of $7,894.10).

[127] I also consider it reasonable to make a discount that takes into account that even had Allpet communicated a position on the settlement offers to Ms Petersen’s lawyer (as would have been reasonable), it was under no obligation to make a counter-offer nor was it unreasonable that it did not accept the settlement offers made, for reasons I have set out. Allpet’s unreasonable conduct was a failure to participate in an initial step that may have led to dialogue on settlement, not a failure to settle. Although of consequence, it was a failure of form. As rejection of the settlement offers was not unreasonable, it does not necessarily follow that all the costs of the hearing and preparation for the hearing can be fully attributable to the unreasonable conduct.

[128] The discount on this account requires an assessment to be made of the potential for a response to the settlement offers to have ultimately led to a settlement. Two factors are particularly relevant in this regard. Firstly, Allpet had a firm conviction, not unreasonably held, that its decision to dismiss was fair and capable of being respectably argued at a hearing. Secondly, Ms Petersen was open to a settlement and was ultimately advised to accept modest settlement offers in order to avoid the stress and expense of a hearing. 44 These considerations somewhat weigh against each other.

[129] In the circumstances I consider that a 50% discount on this account should be made.

[130] The costs order will be 50% of $7,894.10, being $3,947.05.

Conclusion

[131] In failing to communicate a response on at least three occasions to settlement offers made on 18 June 2020, 26 June 2020 and 20 August 2020, Allpet caused costs to be incurred by Ms Petersen because of an unreasonable act or omission in connection with the conduct or continuation of matter U2020/6126. The discretion to order costs under section 400A(1) of the FW Act is enlivened.

[132] It is appropriate to exercise the discretion to order costs under section 400A of the FW Act.

[133] Costs in the sum of $3,947.05 will be ordered against Allpet to be paid to Ms Petersen.

[134] Costs are ordered to be paid within fourteen (14) days of this decision.

DEPUTY PRESIDENT

Appearances:

M. Kaukas, with permission, for Clair Petersen
M. Saraceni, with permission, for Kizuri Capital Pty Ltd, Maycorp Pty Ltd and Cricklewood Capital Pty Ltd. T/A Allpet Products

Hearing details:

2020.
Adelaide; telephone.
11 December.

Printed by authority of the Commonwealth Government Printer

<PR726621>

 1   Maycorp Pty Ltd (as trustee for the Craig Richards Trust), Cricklewood Capital Pty Ltd and Kizuri Capital Pty Ltd (as trustee for the Jemucada Family Trust) trading as Allpet Products

 2   [2020] FWC 5332 (Decision)

 3   A1 Statement of Margaret Mary Kaukas 27 November 2020

 4   A2 Statement of Clair Petersen 27 November 2020

 5   MMK1

 6   Directions 10 June 2020 at [12] [13]

 7   MMK2 (extract)

 8   Email 19 June 2020 15.04 (extract)

 9   MMK4 (extract)

 10   MMK5 (extract)

 11   Ibid (extract)

 12   Ibid (extract)

 13   MMK6 (extract)

 14   Email Chambers - Anderson DP 14 July 2020 09.02

 15   MMK7 (extract)

 16   PR722033

 17   Dean Weikl v Western Australian Turf Club T/A Perth Racing[2019] FWCFB 5362 at [18]

 18   Baker v Salva Resources Pty Ltd [2011] FWAFB 4014 at [10]

 19   Linfox Australia Pty Ltd v Australian Federated Union of Locomotive Employees; Australian Rail, Tram and Bus Industry Union[2019] FWCFB 7020 at [9] to [11]

 20   Jones v Brite Services[2013] FWC 4280 at [24]

 21   Decision at [292] and [272]

 22   Roy Morgan Research v Baker[2014] FWCFB 1175

 23   Stagno v Frews Wholesale Meats (1998) 84 IR 270

 24   Brazilian Butterfly Pty Ltd v Charalambous PR968915 on 25 August 2006 at [40]

 25   Decision at [25] - [26]

 26   Directions 10 June 2020 at [3]

 27   Decision at [217] – [226]

 28   Decision at [227] – [232]

 29   Decision at [233] – [241]

 30   Decision at [242] – [247]

 31   Brazilian Butterfly Pty Ltd and Charalambous PR968915 on 25 August 2006 at [40]

 32   MMK6

 33   Section 381(1)(b)(i)

 34   A2 paragraphs 8 and 12

 35   Blagojevch v Australian Industrial Relations Commission (2000) 98 IR 32 at [34]

 36   PR968915 on 25 August 2006 at [41]

 37   [2013] FWCFB 8960 at [41]

 38   Ibid paragraph 13

 39   A1 paragraphs 2, 4 and 30

 40 Section 611(1)

 41   Fictiv Pty Ltd v Lucisano and Hutchinson Legal Pty Ltd[2021] FWC 73 at [28]

 42   Section 381(2)

 43 See regulation 3.08 and Schedule 3.1 Fair Work Regulations 2009

 44   A1 paragraphs 25 - 27