The relevance of settlement offers to costs orders in the Fair Work Commission

In a recent case Perth Fair Work Commissioner Williams has put together a very useful (as usual) summary of the role that an offer of settlement made during the conciliation process may later be relied upon, in this particular case, for a costs order.
“In I McKenzie & McDonald Murholme v Meran Rise Pty Ltd (t/a Nu Force Security Services Print S4692, Guidice J, Watson SDP, Whelan C, 7 April 2000. a Full Bench held that the Commission at first instance erred in relying on an offer made in conciliation which was not later repeated on an open basis when deciding to award costs against the applicant and her legal representative. The Full Bench stated at [12]:
“An offer of settlement made in conciliation proceedings is by its nature made on a without prejudice basis. It is inappropriate that an offer made in those circumstances should be taken into account in a costs application unless the offer is subsequently repeated on an open basis. It has long been accepted that positions taken in conciliation are without prejudice to the position to be taken in arbitration. The protection afforded to participants by this principle is an essential feature of conciliation proceedings. This is so whether the conciliation takes place in relation to an industrial dispute, an application pursuant to s.170CE or any other proceeding. In this case, however, the respondent’s representative referred to the offer in the proceedings before Commissioner Foggo and relied upon the fact that the offer had been made. Mr McDonald acknowledged that when the offer was referred to by the respondent’s representative, counsel then appearing for Mr McKenzie made no objection. We think it is clear that this failure to object constituted a waiver by Mr McKenzie of his right to object to the disclosure in arbitral proceedings of anything said or done in conciliation: s104(5). But does it follow that the Commissioner was entitled to take the offer into account when considering the question of costs? With respect to the Commissioner’s view we do not think it does. Reference to the offer in the hearing before Commissioner Foggo did not change the offer from one which was made on a without prejudice basis to one which was appropriate to be taken into account on the question of costs. To hold otherwise would not only be contrary to principle but would also have the potential to do great damage to the conciliation process which is such a central part of the Commission’s work. If the offer had subsequently been repeated in a fashion which deprived it of its without prejudice status in relation to costs, the position would have been quite different. In this case, however, there is no suggestion that the offer was repeated in that way. By relying on Mr McKenzie’s failure to accept the respondent’s offer of reinstatement the Commissioner fell into error. The offer could not be taken into account in considering an application for costs for the reasons we have given. Although this point was not raised before the Commissioner we cannot ignore it because of the importance of the issue which underlies it.”
This approach was more recently considered by Members of this Commission in the cases of Harsha Aggarwal v Vision Asia Pty (2014) FWC 4479 and in Christopher Bradshaw v BHP Coal Pty Ltd (2014) FWC 4871 and on both occasions adopted, albeit with some misgiving. For my part I also am of the view that I am bound to follow the Full Bench approach on this issue and will do so.

Nevertheless Commissioner Williams went on to find “Commissioner Jones in Stanley v QBE Management Services Pty Limited 10 discussed the particular circumstances in which this Commission may award indemnity costs. Commissioner Jones helpfully reviewed the relevant authorities and the principles to be applied. Those principles are that generally costs orders are not made to punish an unsuccessful party however in a case involving some delinquency on the part of the unsuccessful party an order is made not for party and party costs but for costs on a “solicitor and client” basis or on an indemnity basis. Some circumstances which have been thought to warrant indemnity costs being ordered are making allegations of fraud knowing them to be false, the fact that proceedings were commenced or continued for some ulterior motive or in wilful disregard of known facts or clearly established law, the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions or an imprudent refusal of an offer to compromise.

Section 400A of the Act had effect from 1 January 2013 which was after the above decision of Commissioner Jones was made. Justice Bolton, Senior Deputy President in a previous decision expressed the view that it would seem almost axiomatic that an unreasonable act or omission, as referred to in section 400A of the Act, that causes a party to incur costs would provide a basis for an order being made not for party and party costs but rather for costs on a “solicitor and client” basis or on an indemnity basis 11. I agree with his view on this point.

In the circumstances of this case I am satisfied that Mr Ferry’s failure to accept the offer of settlement involved the continuation of proceedings in wilful disregard of known facts and also was an imprudent refusal of an offer to compromise and this delinquent conduct warrants the Commission exercising its discretion to award indemnity costs under section 400A of the Act.”

Ferry v GHS Regional WA Pty Ltd (2016) FWC 3120 delivered 24 May 2016 Williams C