Mr Demesw Wederay v Airline Cleaning Services Pty Ltd T/A Cabin Services Australia

[2017] FWC 6232

[2017] FWC 6232

FAIR WORK COMMISSION

DECISION

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

Mr Demesw Wederay
v
Airline Cleaning Services Pty Ltd T/A Cabin Services Australia
(U2017/4972)

DEPUTY PRESIDENT ANDERSON ADELAIDE, 24 NOVEMBER 2017

Application by employer for costs in defending unfair dismissal claim – employer unsuccessful at hearing – forced dismissal found harsh, unjust or unreasonable – compensation ordered – section 400A – legal test of reasonableness - alleged unreasonable act or omission in not accepting pre-hearing settlement offers – solicitors conduct consistent with applicant’s evidence and instructions – position adopted not unreasonable – discretion not exercised – application dismissed

[1] By decision of 5 September 2017 1 the Fair Work Commission (the Commission) found that Demesw Wederay’s dismissal on 19 April 2017 by Airline Cleaning Services Pty Ltd trading as Cabin Services (Cabin Services) was harsh, unjust or unreasonable. In doing so, I dismissed the employer’s threshold claim that Mr Wederay had not been dismissed. I found that Mr Wederay resigned but that his resignation was a forced dismissal within the meaning of section 386(1)(b) of the Fair Work Act 2009 (FW Act).2

[2] By decision dated 22 September 2017 3 the Commission, having found that reinstatement was inappropriate, ordered that within 21 days Cabin Services pay Mr Wederay the sum of $2,881.02 to be taxed according to law as compensation for the unfair dismissal.

[3] On 6 October 2017 Cabin Services, through their representative the Australian Industry Group (Ai Group), applied to the Commission for an order for costs under section 400A of the FW Act (the costs application). The employer seeks costs in the sum of $35,255.99. The application was opposed by Mr Wederay through his representative (Mr Irvine).

[4] This decision concerns the employer’s costs application.

[5] I issued directions 4 for the filing of written evidence and submissions on the costs application. As neither party sought a hearing in person or to cross examine on affidavit material I determined the costs application on the papers. The submissions filed5 include the following witness evidence:

•  Statement of Maria Romeo of the Ai Group dated 20 October 2017 plus sixteen attachments (MR1 to MR16);

•  Statement of Maria Romeo of the Ai Group dated 3 November 2017 plus six attachments (MRR1 to MRR6);

•  Statement of Michael Irvine of Andersons Solicitors 6 dated 9 November 2017.

[6] I take into account this material except paragraphs 22, 23 and 25 of Mr Irvine’s statement of 9 November which I consider new material. When leave was granted to Mr Irvine to file this statement I indicated 7 that I would not accept new material beyond that contained in written submissions which had been filed. I also take into account the evidence and submissions before me at the primary hearing, and in submissions on remedy. I adopt the findings and conclusions of my decisions of 5 September 2017 and 22 September 2017 as terms of this decision, without repeating them.

The Legal Principles

[7] A decision to order costs against a party in an unfair dismissal matter is governed by sections 400A and 402 of the FW Act:

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.

[8] Section 402 provides as follows:

402  Applications for costs orders

An application for an order for costs under section 611 in relation to a matter arising under this Part, or for costs under section 400A or 401, must be made within 14 days after:

(a) the FWC determines the matter; or

(b) the matter is discontinued.

[9] The application is within time. It was lodged 14 days after I determined the matter.

[10] I made two procedural rulings relating to the costs application. On 13 October Cabin Services requested that I vary the compensation order by suspending its obligation to make payment until the costs application is determined. This was opposed. After considering the matter, I declined that request 8.

[11] On 20 October Cabin Services sought an order that certain of the attachments to the affidavit of Maria Romeo be confidential to the parties to proceedings only. On 9 November I made the following decision:

“Having provided the parties an opportunity to express a view on the request for confidentiality (and received no contrary view), and having considered the material and grounds for the request, the Commission is satisfied that the material contained in the annexures marked confidential in the statements of evidence of Ms Maria Romeo dated 20 October 2017 and 3 November 2017 contain information which is of confidence to the employer’s representative. I consider there to be no benefit in such information being made available to third parties, and consider that the employer’s representative may be commercially prejudiced should that occur. As the information has been provided to the costs respondent (Mr Wederay through his solicitor) and is able to be fully responded to, I do not consider that a confidentiality order would prejudice the costs respondent. In these circumstances the Commission makes the following order:

Pursuant to section 594 of the Fair Work Act 2009 and unless and until further order, it is ordered that the annexures to the statements of evidence of Ms Maria Romeo dated 20 October 2017 and 3 November 2017 which are marked “Confidential Annexure” be confidential to the parties to matter U2017/4972 and to the Fair Work Commission, and not used for any purpose other than the proceedings, and not otherwise published by the parties or the Commission except in the course of and for the purposes of these proceedings.” 9

[12] Noting that this decision will be published and publicly available, I have had regard to but avoided specific reference in this decision to those aspects of the evidence of Ms Romeo that are subject to the confidentiality order.

[13] The principles governing the operation of section 400A (and its predecessors) have been considered by full benches of the Commission in Roy Morgan Research v Baker [2014] FWCFB 1175, Hansen v Calvary Health Care Adelaide Ltd [2016] FWCFB 8162, Gugiatti v SolarisCare Foundation Ltd[2016] FWCFB 2478 and Baxter Healthcare Pty Ltd v Portelli[2017] FWCFB 3891.

[14] Without being exhaustive, the principles emerging from these authorities are summarised as follows:

1. Before an order can be made, causation must be found to have existed between the unreasonable conduct or continuation of the matter and the incurring of the costs 10;

2. The power to order costs is the exercise of a general discretion. Section 400A of the FW Act provides that the Commission “may” make an order. Where the Commission finds that a party acted unreasonably in the conduct or continuation of a matter and that unreasonable conduct caused the costs to be incurred, then an order may be made. However, the statute does not provide that the Commission shall make an order even in those circumstances 11;

3. Being a general discretion, all relevant factors need to be taken into account. The discretion must be exercised judicially that is to say not arbitrarily, capriciously or so as to frustrate the legislative intent. Ultimately the provision sits within a framework where the objects include that the parties be provided ‘a fair go all round’ 12;

4. An “unreasonable” act in the context of proceedings is to be objectively assessed but is not limited to a defined circumstance 13. Relevant considerations concerning reasonableness were discussed in Roy Morgan Research v Baker14and summarised in Sidney v Employsure Pty Ltd:

“A failure to inform another party of an inability to attend proceedings would be, if intentional, unreasonable and if accidental, an unreasonable omission;

A failure to advise the other party of the first party’s intentions, if deliberate or reckless, would be unreasonable and if an omission could be equally unreasonable;

Very strong prospects of success will not always justify a failure to participate in settlement negotiations;

A reasonable person will determine if and how to respond to an offer of settlement after considering all of the circumstances of the case including the terms of settlement in relation to the relief sought; the relative strength of the parties cases; the likely length and cost of proceeding to hearing if the matter does not settle; and adverse consequences of acceptance of a settlement rather than prosecuting or defending the primary application.” 15

[15] While the language of the section should be given its full effect, section 400A sits within a statutory scheme in which costs in matters before the Commission do not generally follow the event. It was a provision included into the statutory scheme following a review of the FW Act. 16 It was intended to dissuade certain conduct in unfair dismissal cases but to not frustrate or deter access to the jurisdiction or the robust pursuit of genuine claims17. As said by the Full Bench in Hansen v Calvary Health Care Adelaide Ltd:

“Section 400A is a relatively recent amendment to the Act (1 January 2013) and is designed to provide the Commission with a discretionary power to award costs against a small proportion of litigants who pursue or defend unfair dismissal claims in an unreasonable manner. As stated in the Explanatory Memorandum accompanying the s 400A amendment, ‘the power is only intended to apply where there is clear evidence of unreasonable conduct by the first party’ and ‘is intended to capture a broad range of conduct, including a failure to discontinue an unfair dismissal application made under s 394.’” 18

The Facts

[16] The relevant facts concerning my earlier decisions in this matter are as follows:

•  I found the dismissal of Mr Wederay to be a resignation but a forced resignation;

•  I concluded that the employer’s conduct was harsh, unjust or unreasonable, primarily because a fair procedure had not been offered to Mr Wederay despite valid concerns being held about his conduct that had led to prior counselling and warnings;

•  I found that compensation payable to Mr Wederay for loss of earnings was $7,857.28 less monies earned since dismissal of $2,095.24 totalling $5,762.04. However, I exercised my discretion to discount that amount by 50% on account of Mr Wederay’s misconduct which materially contributed to the circumstances in which he found himself. The compensation order was thus $2,881.02 (gross);

•  In making these findings, I did not accept the full version of events given in sworn testimony by either Mr Wederay or the principal witness called by Cabin Services (Ms Crook). I found the evidence of both to be unreliable on key points.

[17] The relevant facts before me concerning the conduct of the parties in the litigation before the Commission are as follows:

•  Mr Wederay lodged an unfair dismissal application in the Commission (dated 8 May) on 10 April 2017. It was within time;

•  Cabin Services filed its response on 19 May. It opposed the claim;

•  At all relevant times Mr Wederay was represented by Mr Irvine of Andersons Solicitors and Cabin Services was represented by specialists from an industry body, the Ai Group. I granted permission for Mr Wederay to be legally represented on 17 July 19. It was not opposed;

•  Conciliation was conducted on 31 May by a Commission-appointed conciliator. The matter did not settle. At my initiative and with the support of both parties a further effort at conciliation was scheduled before Commissioner Hampton for 10 July. This conference did not proceed as Cabin Services subsequently advised (after its second settlement offer had not been accepted) that it “no longer wished to participate in the conciliation” 20;

•  I issued directions for the management of the matter on 14 June and (at the request of Cabin Services) amended the directions on 29 June. Those Amended Directions required both Mr Wederay and Cabin Services to file witness statements and submissions by close of business 4 July 2017. The Amended Directions extended the date for filing materials from 30 June to 4 July;

•  Cabin Services filed its materials on 4 July. Mr Wederay did not;

•  Following a non-compliance directions hearing on 7 July I issued Further Directions in which I extended the time for Mr Wederay to lodge his materials to 10 July;

•  Mr Wederay’s materials were filed on 10 and 11 July;

•  I heard the matter (jurisdiction, merits and remedy) on 20 and 21 July.

[18] The relevant facts before me concerning the conduct of the parties between themselves in the litigation include the following:

•  On 19 June Cabin Services (via Ai Group) made a settlement offer of $3,000 (gross) (settlement offer 1). The offer was expressed to be “without prejudice save as to costs”. The offer was said to be “open until 5pm on 22 June 2017 after which time the offer will lapse”. 21 No response was received by that time.

•  On 26 June Mr Wederay (via his solicitor Mr Irvine) made a without prejudice counter offer of $15,000 (gross). 22

•  On 27 June at 8.24am AEST Cabin Services (via Ai Group) made a second settlement offer of $7,000 (gross) (settlement offer 2). It too was “without prejudice save as to costs”. The offer was said to be “open until 5pm today, at which time we will be preparing to file CSA’s materials and this offer will no longer be available”. 23 No response was received by that deadline. However, at 6.40pm AEST (6.10pm ACST) Mr Irvine emailed Ai Group advising that he was awaiting instructions and hoped to have them by week’s end (30 June). Ai Group replied at 7.40pm AEST indicating that the deadline had passed but that he should seek instructions “as a matter of urgency”.

•  On 28 June Ai Group emailed Mr Irvine indicating, inter alia: “Both parties are due to file on Friday. Given the state of settlement discussions, we are preparing our materials in earnest and our client is incurring further costs.” 24 A suggestion was then made that directions could be amended by consent (which they subsequently were).

•  On 4 July at 3.02pm (ACST) Mr Irvine responded to the second settlement offer in the following terms:

“I refer to previous correspondence. You and your member may no longer be in any position to negotiation, however I was just in the process of working with my client on the statement for filing and he has instructed me to respond to your recent offer of $7,000. Unfortunately my client’s bottom line at this time is $7,000 net (i.e. he has instructed me that if he receives $7,000 in his pocket after payments of legal fees he will be prepared to settle).

Is your member prepared to settle on the following basis: $7,000 but not as an employment separation, rather perhaps a payment for future retraining or a lump-sum for general damages; and $1,700 contribution towards legal costs.

If we cannot structure a settlement resulting in a net amount of $7,000 my client would likely instruct me to provide a counter offer with a gross amount of closer to $10,000.

I look forward to your response. Without Prejudice.

Michael Irvine” 25

•  At 3.26pm (AEST) on 4 July Ai Group responded to Mr Irvine as follows:

“We are preparing to file our materials by the 5pm deadline. We will respond to you in due course after we obtain instructions. We note there has been radio silence from you since this time last week.” 26

[19] The remaining evidence before me concerns evidence of Ai Group’s invoicing to its member and evidence of the commercial arrangements established with its member. These are matters subject to my confidentiality order. They are only relevant to issues of quantum should I exercise my discretion in favour of making a costs order. In that respect, Cabin Services has identified costs incurred from three relevant dates (19 June, 28 June and 1 July).

Consideration

[20] Cabin Services advance its case for an order for costs on the ground that the conduct of Mr Wederay in the litigation is said to have been unreasonable and that this unreasonable conduct caused Cabin Services to incur the costs it seeks. The unreasonable conduct which it asserts is (individually or collectively):

•  The rejection of settlement offer 1;

•  The rejection of settlement offer 2;

•  The failure to respond to settlement offer 2 within the time frames set (i.e. by 27 June and then 30 June);

•  The failure to put a counter offer until “after the deadline” for filing and serving materials on 4 July; and

•  Non-compliance with the Commission’s directions to file material by 5pm 4 July.

[21] In support of its contentions Cabin Services point to the fact that both of the settlement offers exceeded the amount of compensation ordered, and in the case of settlement offer 2, by more than double.

[22] Cabin Services also rely on the fact that it put Mr Wederay’s representative on notice that it was due to incur significant costs in order to comply with the Commission’s directions, that this provided the explanation for the tight time frames it set for responses to its settlement offers, that the lack of response was followed up, that it conveyed a sense of urgency, and that Cabin Services complied with Commission directions in full and on time.

[23] Cabin Services submit that it is appropriate, in the exercise of my discretion, to make an order for costs (and in the quantum I consider appropriate) as this would be consistent with the purposes of section 400A.

[24] Mr Wederay contends that there was no unreasonable failure to respond to either of the settlement offers as they were conditioned by unreasonably short time frames for response which did not take into account the need to secure instructions and the multiple commitments of a solicitor in private practice. He further contends that rejection of the settlement offers was not unreasonable and the response to them should be viewed in the context of the overall settlement discussions prior to arbitration and not in isolation. In support of this submission he points to the attempts made by Mr Wederay (through Mr Irvine) to settle the matter post 27 June 2017 and in particular the counter-offer of 4 July.

[25] Mr Wederay further contends that, in any event, in the exercise of discretion a costs order should not be made for the following reasons:

•  Cabin Services unilaterally withdrew its support for Member Assisted Conciliation 48 hours prior to the scheduled conference before Commissioner Hampton;

•  Mr Wederay had the right to test the evidence of Cabin Services witnesses and was vindicated in doing so as certain adverse findings were made against the employer’s witnesses and in the finding that Cabin Services had acted unreasonably;

•  Mr Wederay succeeded at the hearing on the jurisdictional issue and then on the merits;

•  Mr Wederay remains in a vulnerable financial position and with certain adverse health conditions impacting his earning capacity;

•  Mr Wederay’s earnings since the compensation order was made have, in fact, been less than that which was estimated in the calculations of the compensation order. A costs order would financially cripple him; and

•  the quantum of the costs sought is manifestly excessive.

Did the conduct cause the costs to be incurred?

[26] I am satisfied on the evidence of Ms Romeo and on the facts set out above that both settlement offer 1 and settlement offer 2 were rejected through non responsiveness within the time frames set by their terms and by the later presentation of counter offers. The uncontested evidence is that both offers were put by the employer prior to the time the employer had been directed by the Commission to submit its materials. I am also satisfied on the evidence of Ms Romeo that the employer’s intention was to put the offers and have them responded to in order to avoid (if the matter was to be settled) the incurring of costs associated with complying with those directions. The employer says this is why the time frames it set for response were very short.

[27] In these circumstances I find that Mr Wederay’s conduct (via his representative) in rejecting the settlement offers and in not responding within the designated timeframes was conduct which caused the employer to incur costs in preparing and lodging the materials filed on 4 July. Although settlement offer 2 was responded to (and rejected via a counter proposal) at 3.02pm (ASCT) on 4 July (that is, 90 minutes in the eastern states before the close of business deadline specified in my directions) I consider that, for all practical purposes, the employer had incurred those costs by that time. The relevant causation required by section 400A has been established at least with respect to that component of costs incurred.

[28] To the extent that Cabin Services relies on non-compliance with Commission directions of 4 July, that is not conduct which caused the incurring of costs. Both parties were required to comply with the 4 July deadline. The employer’s obligation was not conditional on Mr Wederay’s compliance.

Was the conduct unreasonable?

[29] I am determining this question in the context of evidence before me relating to settlement offers. In doing so, I am guided by the approach taken by a Full Bench of the Commission in 2014 in Roy Morgan Research v Baker 27 citing an earlier (2006) Full Bench decision (under the Act that preceded the FW Act) in Brazillian Butterfly Pty Ltd v Charalambous28:

“A reasonable person, who is a party to proceedings pursuant to s.170CE, when confronted with an offer of settlement from the other party, will determine whether, and if so, how to respond to such an offer after considering all the circumstances of the case, including:

•  the terms of the settlement offered in relation to the relief sought;

•  the relative strengths of the parties’ cases (and thus their relative prospects of success) in relation to both ‘liability’ and the relief sought;

•  any assessment of the merits in the certificate issued by the Commission pursuant to s.170CF(2);

•  the likely length and cost of proceeding to a hearing if the matter does not settle; and

•  any adverse consequences that will accrue to a party if they accept a settlement on particular terms rather than successfully prosecute or defend the primary application, as the case may be.

This list is not intended to be exhaustive. All of the circumstances are relevant and, as is made clear in the joint judgment in Blagojevch, there is no basis in the Act for giving primacy to any particular factor in every case.”

[30] I also apply the principle next cited with approval in Roy Morgan Research v Baker:

“In many, if not most, cases there will be contested facts or contested interpretations of particular facts. What knowledge in this regard is to be attributed to the reasonable person considering whether, and if so, how to respond to an offer of settlement? The passage in Abbey, upon which the Commissioner relied was, clearly enough, an attempt to grapple with that problem. However, there is a tension between the way in which that passage is expressed and the apparent acceptance by the majority in Blagojevch that a party can act reasonably in responding to an offer of settlement by reference to that party’s “genuine perception or recollection of events”. The Full Court’s formulation is to be preferred although, even then, it is not to be seen as a substitute for the words of the Act. Of course, there is an issue as to what constitutes a “genuine” perception. The Full Bench in Kangan Batman TAFE observed, we think correctly, that:

‘A party cannot simply disregard matters that should have been reasonably apparent and then claim that such matters were not apparent to them.’” 29

[31] I adopt this principle because a litigation process is iterative. Not uncommonly it will progressively reveal a fuller narrative than the facts understood by a party at the outset. It is that fuller narrative on which tribunal determinations are ultimately made. Section 400A requires a test of reasonableness, objectively assessed, based on facts (including inferences from facts) which were known or which should reasonably have been known to a party at the time of the relevant conduct, that is, the stage of proceedings at which they occur. As noted by a Full Bench in Stagno v Frews Wholesale Meats:

“What is considered to be without reason is determined by reference to the stage that the proceeding has reached. We note that this leaves open the possibility that proceedings may commence which are with reasonable cause but may, in particular circumstances at a later stage, be further prosecuted unreasonably.” 30

[32] Applying this principle in the context of the application before me I rely on facts (or inferences from facts) which were known or which should reasonably have been known to Mr Wederay (or his representative) at the time the conduct was engaged in, which is primarily the period 19 June to 4 July.

[33] This does not however mean that later findings of the Commission are irrelevant to an objective assessment of reasonableness. Findings are a relevant measure against which reasonableness of earlier conduct can be assessed. This is because a party should reasonably be expected, in managing their case, to have regard to their prospects of success and what that success may look like. 31 The degree to which that measure reflects objectively assessed reasonableness will depend on the circumstances of each case. For example, where the Commission decides a matter solely on facts that were known or could have reasonably been known at the time of the conduct then that measure may be more strictly applied than when, for example, the facts are only established after the Commission makes findings of credit on disputed facts. This case falls in the latter category given my finding that neither Mr Wederay’s version of critical events nor the version of Cabin Services could be fully relied upon.

[34] For similar reasons it is not a bar to granting an application for costs by a party simply because (as in this case) that party was unsuccessful in the determination of the matter. While it may be unusual for an application to be made in that instance, it is not contrary to principle when the terms of section 400A are considered. The section is directed to acts or omissions of parties to litigation in connection with the conduct or continuation of the matter. It makes no express reference to the determination of the matter. It does not prevent an unsuccessful employer pursuing a successful applicant for costs, and vice versa.

Rejection of settlement offers

[35] The evidence before me is that settlement offers of $3,000 (gross) and $7,000 (gross) respectively were rejected by Mr Wederay. Were either of these rejections an unreasonable act?

[36] Both rejections occurred in advance of Mr Wederay knowing the full parameters of the evidence and case against him. They occurred before the employer’s material had been filed (4 July) and before he had a reasonable opportunity to take advice from his solicitor on the case that the employer’s material advanced. Thus the body of knowledge he was operating on at the time of rejection was his version or understanding of events, the material in the employer’s initial response (Form F3), matters emerging from the telephone conciliation of 31 May and advice (if any) he received from his solicitors on his prospects (advice which is governed by legal professional privilege).

[37] The offers were not repeated by Cabin Services after 4 July, that is, after he had a fuller view of the case against him.

[38] Both offers were conditioned as relevant as to costs. In other words, they were offers that needed to be taken seriously as Mr Wederay was on notice that there could be a costs consequence arising from their rejection.

[39] In terms of quantum, settlement offer 1 represented approximately three weeks of earnings (including superannuation), and settlement offer 2 represented approximately seven weeks. For an employee whose service was of relatively short duration (sixteen months) and who had three written warnings and one verbal counselling I consider that settlement offer 2 represented a reasonable proposal which warranted serious consideration. Reasonably assessed, it was capable of being within the range of potential outcomes even on his case (assuming he held a moderate degree of ambition for his litigation). However, I also take into account:

•  his belief (one that was genuinely held even in the witness box, albeit misguided 32) that the warnings he had received were over minor incidents and unwarranted; and

•  that, on his case (and as I found), the employer had sent mixed signals concerning his conduct because, despite the warnings, he had been approached to take a temporary re-assignment in Western Australia. 33

[40] Also relevant is the fact that Mr Wederay was in receipt of legal representation at the time of rejection, and had access to legal advice. Thus, he knew or should reasonably have known that under section 392(3) of the FW Act he was exposed to the risk that the Commission would discount a compensation order for contributory misconduct (if the conduct contributed to the decision to dismiss). However, he could not have reasonably anticipated a specific level of discount as that is a discretionary matter for the Commission on the basis of evidentiary findings about the relevance and seriousness of misconduct.

[41] I accept, at least in principle, the submission of Mr Irvine that a dismissed employee is entitled to test the case against them. 34 However, an overambitious litigant or one indifferent to the case against them runs the risk of conduct that falls foul of section 400A.

[42] I also accept, at least in principle, the submission that it is reasonable for a dismissed employee to pursue litigation not just for the sake of remedy but to also to protect their reputation. 35 However, such action also risks conduct that falls foul of section 400A if reasonable settlement offers are rejected on the way. Terms of settlement are also capable of addressing reputational issues. In any event, on the facts of this matter there is no evidence that Mr Wederay had a particular need or motivation to litigate for reasons associated with the protection of his reputation. Indeed, on the employer’s case he resigned and was not dismissed. Resignation carries less damage to reputation than dismissal.

[43] Also relevant is the fact that this matter involved some complexity. It raised considerable factual disputes about the circumstances in which Mr Wederay ceased to be employed. Those factual disputes concerned events across a number of days. They involved, in part, the application of law concerning what is a dismissal (on his version) and (on the employer’s F3) what is a resignation.

[44] I do not impose a test of reasonableness based on hindsight. That would be an unfair and oppressive standard and a misapplication of principle. In this matter, the fact that the Commission on 22 September ordered that compensation in the sum of $2,881.02 (after a 50% discount for misconduct) should be paid does not, of itself, mean that rejection of an offer of $7,000 on 27 June was unreasonable. That said, the reasons I gave in my decisions provide some basis against which reasonableness can be assessed. However, in circumstances such as these where the genuine perception and belief of Mr Wederay on 4 July did not wholly accord with the facts as I found them, and where I made findings of fact on contested evidence (which also did not wholly accord to the employer’s version) a degree of caution is required.

[45] Having regard to the above, the rejection of settlement offer 1 was not unreasonable. It was a low offer that tested the water. However settlement offer 2 was of a different magnitude. Ultimately it is a matter of fact and degree whether its rejection (at the time it was rejected) was or was not unreasonable. There may have been good reasons to accept it, but that is not the statutory test. The test is whether its rejection was unreasonable. It was a reasonable offer but, given Mr Wederay’s counter offer of 4 July, it was not dismissed out of hand. On balance, and having regard to the above factors and the principles set out in Roy Morgan Research v Baker, I do not find that the rejection of settlement offer 2 at the relevant time can be characterised as unreasonable.

Delays in communicating responses to settlement offers

[46] Settlement offer 1 was made at 5.48pm on Monday 19 June. It lapsed on 5pm Thursday 22 June. It was open for three working days. It was responded to on 26 June at 2.09pm.

[47] I do not consider that the delay in responding to settlement offer 1 was unreasonable. The offer was open for a relatively short time only. It was responded to four days after it lapsed but it was responded to. That response was a week after it had been received. By then it was off the table, but there was no reason why Cabin Services could not have put it back on the table. While the clock was ticking for the lodgement of materials they were (at that stage) required to be lodged by 30 June (a full four working days later).

[48] Settlement offer 2 was made at 8.24am on Tuesday 22 June. It lapsed at 5pm that day. It was open for nine hours. It was responded to with a holding email from Mr Irvine at 6.40pm that day and substantively on 4 July at 3.02pm. In the interim the parties had successfully secured from me an extension of the time for filing materials from 5pm 30 June to 5pm 4 July.

[49] I do not consider that the delay in responding to settlement offer 2 was unreasonable. The offer was open for an extremely short time, less than a day. It was responded to by Mr Irvine on that day (but 100 minutes post deadline) with a request for more time to gain instructions from Mr Wederay. That request was not unreasonable. Mr Irvine then supported the employer’s request to me to extend the lodgement deadline. It is not clear if settlement offer 2 was back on the table once the lodgement date was extended, but I accept the submission 36 of Cabin Services that the correspondence from Cabin Services to Mr Irvine suggested that it (Cabin Services) was willing to receive his further instructions if they were secured urgently. In this regard Cabin Services action was reasonable. It waited until the latest possible moment before starting to incur costs in preparing its materials. By the time the response came on 4 July costs had been incurred.

[50] The primary issue under section 400A is not however whether Cabin Services conduct was reasonable. It is whether Mr Wederay’s conduct (directly or through his representative) was unreasonable. Mr Irvine’s evidence is that he sought to secure instructions from Mr Wederay in that week 37 but that he was unable to do so until Monday 4 July. He was also anticipating that the Member Assisted Conciliation scheduled for 10 July would provide a settlement opportunity even if the offer had lapsed.

[51] I do not consider that the delay of a week to respond to a settlement offer that had only been made available for nine hours was unreasonable. However, I find that the delay in response did materially prejudice Cabin Services desire to minimise its costs. That prejudice not unsurprisingly led Cabin Services to not further proceed with conciliation which had been set for 10 July. Nonetheless, the delay had an explanation. Instructions needed to be secured by Mr Irvine around his other work commitments. The evidence is that this requirement was communicated by Mr Irvine to Ai Group. 38 On 28 June the Ai Group made reference to this fact in its request to me for an extension of the lodgement deadline:

“We understand that Mr Irvine is awaiting instructions from his client, and may not be in a position to respond until Friday.” 39

[52] I also accept that the prospect of Member Assisted Conciliation on 10 July gave Mr Irvine false hope that settlement could be achieved even if he were to receive instructions late in the piece. Relying on that process to procure a settlement once written materials were filed by Cabin Services was likely to be a more difficult task given the costs expended by the employer, but it was not an unreasonable option for the applicant to still pursue. It is noted that Cabin Services request to me for an extension of the deadline did not rule out that prospect:

“In our view, this leaves sufficient time for the remainder of the timetable, including the conciliation on 10 July, in the event that ongoing discussions do not yield a settlement.” 40

[53] In all the circumstances I find that the delay compromised the chances of securing a settlement of the matter but, given that instructions needed to be obtained, was not unreasonable.

Non-compliance with directions

[54] It is contended by Cabin Services that Mr Wederay’s conduct in the period 27 June to 4 July suggests that his representative did not intend to comply with the Commission’s directions requiring material to be filed by 4 July, and that this was unreasonable conduct. There is some evidence that would enable an inference of this kind to be drawn.

[55] As a matter of fact Mr Wederay did not comply with the Commission’s directions. His materials were filed on 10 and 11 July and only after I conducted a non-compliance hearing on 7 July.

[56] Having regard to my earlier finding that this conduct, if it occurred, did not cause Cabin Services to incur the costs (given that it too had to file materials by 4 July) I do not need to make findings on this point.

Unreasonable in a cumulative sense?

[57] Although individual acts or omissions may not, in and of themselves, be unreasonable, I accept the submission of Cabin Services that conduct may be unreasonable for the purposes of section 400A if, in a cumulative sense, individual acts or omissions in combination establish unreasonableness. 41

[58] On the evidence before me I do not consider that the combined rejection of settlement offers and delays in the communication of responses to offers establish unreasonableness in an overall sense. I am satisfied that the parties remained in communication over this period, albeit most of that communication was in the form of prompts by Ai Group on behalf of Cabin Services to secure responses or to secure an extension for the 30 June lodgement date. Proposals were seriously considered and countered. The conduct had the effect that securing agreement to settlement offer 2 or the counter-proposal was less likely but, as a whole, was not unreasonable.

Other discretionary considerations

[59] Were I to have found unreasonable acts or omissions on the part of Mr Wederay that caused the incurring of costs I would then have had regard to the totality of the facts and circumstances of this matter before exercising my discretion to award costs. These include:

•  the fact that Mr Wederay (through his representative) was not indifferent to settlement. He did make two settlement offers of $15,000 (on 26 June) and $7,000 (as general damages) plus $1,700 towards legal costs (on 4 July). He also foreshadowed an offer of $10,000 if the latter offer was rejected;

•  the fact that a conciliation option before Commissioner Hampton was available to the parties but not proceeded with;

•  the fact that neither Mr Wederay’s version of events nor the employer’s version (including that presented by its principal witness) was considered reliable;

•  the fact that Mr Wederay did succeed on the jurisdictional point;

•  the fact that Mr Wederay did succeed on the merits;

•  the fact that Mr Wederay is a person of modest earnings who would be severely impacted by a financial order of significance against him; and

•  the fact that a costs order would, even if it was applied only to only a fraction of the costs sought, be likely to consume the whole of the compensation paid to Mr Wederay thus denying him the fruits of his success in the litigation and resulting in a penalty for having exercised his lawful rights.

[60] In these circumstances I would have exercised my discretion to not make a costs order.

Conclusion

[61] Cabin Services diligently and in good faith sought to settle the matter with a reasonable second offer that warranted serious consideration and which was made at a time when, if accepted, was capable of defraying costs subsequently incurred by both parties. Its conduct in the management of the litigation, through its representative the Ai Group, was considered and professional.

[62] However, for the reasons set out in this decision the conduct of Mr Wederay, through his representative, was not, on balance, unreasonable within the meaning of section 400A of the FW Act. In addition, there are good reasons why, in the exercise of my discretion, it would be inappropriate to make a costs order.

[63] For these reasons the application for a costs order is dismissed. An Order giving effect to this decision is published. My Order of 9 November 2017 concerning the confidentiality of certain evidence in the costs proceeding remains ongoing.

DEPUTY PRESIDENT

Final written submissions:

Costs Applicant (Airline Cabin Services), 20 October, 3 and 20 November 2017

Costs Respondent (Mr Wederay), 27 October and 9 November 2017

 1   [2017] FWC 4603 Deputy President Anderson, 5 September 2017

 2   Ibid at [88] – [92]

 3   [2017] FWC 4941 Deputy President Anderson, 22 September 2017

 4   Directions, Deputy President Anderson, 11 October 2017

 5   Application for Costs 6.10.17; Cabin Services Submission in Support 20.10.17; Wederay Submissions in Opposition 27.10.17; Cabin Services Submissions in Reply 3.11.17; Cabin Services Supplementary Submissions in Reply 20.11.17

 6   For the record, Deputy President Anderson has no association directly or indirectly or past or present with the firm Andersons Solicitors

 7   Email, Chambers to Parties, 6 November 2017 10.54am

 8   Email Chambers to Parties 13 October 2017 1.44pm

 9   Email Chambers to parties 9 November 2017 3.26pm

 10   Gugiatti v SolarisCare Foundation Ltd[2016] FWCFB 2478 at [43]

 11   Baxter Healthcare Pty Ltd v Portelli[2017] FWCFB 3891 at [95] – [96]

 12   Section 381(2); see also Baxter Healthcare Pty Ltd v Portelli[2017] FWCFB 3891 at [97] and [113]

 13   Roy Morgan Research v Baker [2014] FWCFB 1175 at [12]

 14   Ibid at [10]

 15   [2016] FWC 2659 at [28] per Commissioner Bissett

 16 Fair Work Act Review Panel ‘Towards More Productive and Equitable Workplaces: An Evaluation of the Fair Work Legislation’ (June 2012)

 17   Second Reading Speech, Minster for Employment and Workplace Relations (Hon Bill Shorten MP), House of Representatives, 30 October 2012; Explanatory Memorandum to Fair Work Amendment Bill 2012 at [169] – [171]

 18   [2016] FWCFB 8162 at [18]

 19   Decision on Representation, Deputy President Anderson, 17 July 2017

 20   Email Ai Group to Chambers 7 July 2017 at 4.51pm

 21   Exhibit MR6

 22   Exhibit MR8

 23   Exhibit MR9

 24   Exhibit MR13

 25   Exhibit MR15

 26   Exhibit MR16

 27   [2014] FWCFB 1175 at [13]

 28   PR968915, 25 August 2006

 29   [2014] FWCFB 1175 at [13] citing Brazillian Butterfly Pty Ltd v Charalambous PR968915 at [45]

 30 (1998) 84 IR 270

 31   Roy Morgan Research v Baker [2014] FWCFB 1175 at [13]

 32   Wederay v Airline Cleaning Services Pty Ltd[2017] FWC 4603 at [98] – [102] (5 September 2017); Wederay v Airline Cleaning Services Pty Ltd[2017] FWC 4941 at [27] (22 September 2017)

 33   Wederay v Airline Cleaning Services Pty Ltd[2017] FWC 4603 at [65] (5 September 2017)

 34   Submissions, 27 October 2017 at paragraph 5.3(b) – (d)

 35   Ibid at paragraph 5.3(i)

 36   Submissions in Reply, 3 November 2017 at paragraph 4.10

 37   Statement of Michael Irvine para 15

 38   Exhibit MR11

 39   Exhibit MR14

 40   Ibid

 41   Submissions, 20 October 2017 at paragraph 3.1

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