The general rule in matters before the Fair Work Commission is
that parties must bear their own costs.1 This is
designed to free parties from the risk of having to pay the costs
of an opposing party. The downside is that it can be more difficult
to reach a quick commercial settlement with an applicant before or
during conciliation, because the applicant has nothing to lose by
refusing an offer and trying their luck for a better outcome at
hearing. For this reason, it's in employers' best
interests—and insurers covering employers under employment
practices liability insurance (EPL) claims—to try to resolve
unfair dismissal claims at the conciliation stage, by providing
reasonable settlement offers and also engaging in hard bargaining
with the applicant (as the conciliation process demands).
At the same time, applicants can't simply refuse a
reasonable settlement offer without considering the prospects of
their case if it does go before the Commission. This was reinforced
by the Commission last month when it ordered an applicant to pay
indemnity costs of almost $14,000 for unreasonably refusing an
offer to settle his unfair dismissal claim.
In Ferry v GHS Regional Pty Ltd  FWC 3120, the
Commission ordered the Applicant to pay indemnity costs of
$13,875.50 to his former employer for unreasonably refusing a
$3,000 offer to settle. The offer of settlement was made following
a conciliation conference on the basis that it was "without
prejudice save as to costs". In the letter, the employer
expressly advised the Applicant of its intention to rely on the
offer—and submit a costs application—if his unfair
dismissal claim was unsuccessful.
The self-represented Applicant did not advise the employer
directly of his refusal to accept the offer, but communicated his
decision in an email to the Commission. The Applicant did not make
The Applicant's unfair dismissal claim was unsuccessful at
hearing and the employer subsequently made an application for
The costs decision
The employer brought the costs application under s 400A of the
Fair Work Act 2009. The section states that the Commission
may order costs against a party, where the costs were incurred
because of an unreasonable act or omission by the party in
connection with the conduct or continuation of the matter. The
section, however, doesn't preclude parties from hard bargaining
or compel them to accept the best, or near best offer, of the other
In considering s 400A of the Act, the Commission was satisfied
the Applicant did not reasonably assess the prospects of his case.
The Applicant had already received the employer's witness
statements, supporting documents and outline of submissions by the
time the offer of settlement was made. The Commission concluded the
Applicant had sufficient information to determine that his case was
very weak, despite the Applicant being a self-represented litigant
with no legal experience.
The Commission found the Applicant's refusal to accept the
offer went beyond hard bargaining and the continuation of the
proceedings in wilful disregard of known facts was delinquent
conduct by the Applicant. As a result, the employer was awarded its
costs on an indemnity basis under s 400A of the Act.
Protecting your cost position
The decision highlights the strategic importance of employers
making reasonable offers on a "without prejudice save as to
costs" basis before hearing. (Offers made in conciliation are
"without prejudice" and cannot be taken into account in a
costs application unless the offer is subsequently repeated on an
For the best protection in matters that do not settle before or
in conciliation, an offer should be repeated on an open basis
following conciliation and contain an express
warning that the respondent will seek to recover its costs if the
applicant continues with the proceedings and the proceedings are
dismissed by the Commission. In doing so, both employers and, by
extension, insurers of employers will have their costs covered by
the applicant if they unreasonably refuse a settlement offer and
choose to proceed to hearing.
1 The general rule that a party must bear
their own costs in a matter before the FWC is found in s 611(1) of
the Fair Work Act 2009 (Cth). See s 611(2) for the
exception to this general rule in limited
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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