Federal Court of Australia

Dorsch v HEAD Oceania Pty Ltd (Costs) [2024] FCA 832

ORDERS

THE COURT ORDERS THAT:

1.    The applicant pay the respondent’s costs incurred from 14 June 2023 (save for any costs associated with the penalty aspect of the proceedings) on a party/party basis, to be assessed on a lump sum basis in an amount to be determined by a Registrar of the Court.

2.    The Registrar be directed pursuant to r 1.37 of the Federal Court Rules 2011 (Cth) to determine the quantum of the lump sum for costs payable pursuant to order 1 above in such manner as he or she deems fit including, if thought appropriate, on the papers.

3.    The Registrar be directed pursuant to r 1.37 of the Rules, at the conclusion of the quantification process, to order that the applicant is to pay whatever sum has been quantified pursuant to order 2 above within 28 days from the date of the Registrar’s order.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

RAPER J:

1    The respondent, HEAD Oceania, seeks an order that Mr Dorsch pay its costs of the proceedings (other than the penalty hearing and costs incidental to it) on or after 14 June 2023, or alternatively on and after 20 June 2023, on an indemnity basis or as agreed or assessed following the dismissal of his claims (save in one admitted respect) in Dorsch v HEAD Oceania Pty Ltd [2024] FCA 162 (liability judgment or LJ). Familiarity with that judgment is assumed and the abbreviations within it are adopted here.

2    The liability judgment found that Mr Dorsch has been lawfully summarily dismissed by two of his concurrent employers; HEAD Oceania and Mares Asia Pacific (who was not a co-respondent in the proceeding). Mr Dorsch had asserted numerous contractual and statutory claims, all of which failed save for in one admitted respect: HEAD Oceania had failed to pay Mr Dorsch the amount that would have been payable to him had he taken his accrued but untaken annual leave entitlement at the time of his employment coming to an end: s 90(2) of the Fair Work Act 2009 (Cth); LJ at [331], [445]. HEAD Oceania was ordered pay $10,000 in general damages to Mr Dorsch arising from this claim and also a pecuniary penalty of $17,000 on account of this contravention, which was the subject of a subsequent decision: Dorsch v HEAD Oceania Pty Ltd (Penalty) [2024] FCA 484.

3    In support of its application, HEAD Oceania relied upon the affidavit of Mr Aaron Dearden, a partner of Hall & Wilcox lawyers, affirmed 16 May 2024 in which Mr Dearden deposes to HEAD Oceania having made two offers of compromise to Mr Dorsch on a without prejudice basis save as to costs: the first on 7 June 2023, one week prior to the first day of the trial (first offer); the second, on 16 June 2023 (second offer).

4    For the reasons which follow, I find that Mr Dorsch should pay the costs incurred by HEAD Oceania from 14 June 2023 (upon the expiry of the first offer) on a party/party basis, save for any costs incurred in relation to the penalty aspect of the proceedings, on a lump sum basis.

5    It is worthwhile first considering the two offers made by HEAD Oceania, as well as the intervening counteroffer made by Mr Dorsch.

HEAD Oceania’s first offer

6    HEAD Oceania’s first offer to Mr Dorsch (through their respective legal representatives) was made on a without admission basis and was subject to Mr Dorsch executing a deed accompanying the letter of offer within a period of six days. The terms of the offer included: Mr Dorsch discontinuing the proceeding; HEAD Oceania making payment of $80,000 (inclusive of costs) within 21 days; and Mr Dorsch releasing all entities within the HEAD Oceania corporate group (as defined). The offer contained no reciprocal release of Mr Dorsch. It is useful to extract aspects of the letter and certain clauses of the deed in full.

7    HEAD Oceania’s first letter of offer contained the following:

2     Offer of compromise

2.1     Whatever the result of the proceedings, the parties are likely to incur further substantial costs in connection with the proceedings, and the proceedings are likely to be disruptive to both HEAD Oceania’s business and Mr Dorsch. Naturally HEAD Oceania would prefer that the parties avoid those costs and the expenditure of time and resources. HEAD Oceania is confident it will be successful in the proceedings however it is prepared to take a commercial approach to the proceedings.

2.2     For these reasons, and to avoid the time and cost of preparing for and attending the hearing, HEAD Oceania is prepared to resolve this matter on the terms set out in the enclosed deed of release.

2.3     This offer is open for acceptance until 12 noon on Tuesday, 13 June 2023, after which it will automatically lapse without further notice.

2.4     This offer is made on a without prejudice and without admissions basis and is strictly conditional on the parties executing the deed of release referred to above.

2.5     This offer is made in accordance with the principles set out in Calderbank v Calderbank [1975] 3 All ER 333; [1975] 3 WLR 586.

3     Cost consequences

3.1     If Mr Dorsch does not accept this offer HEAD Oceania will continue to vigorously defend the proceedings. If Mr Dorsch is unsuccessful in the proceedings or obtains relief less than the value of the payment described above (which we consider to be likely), HEAD Oceania reserves its rights to produce and rely on this letter on the question of costs, including seeking and obtaining:

(a)     an order that Mr Dorsch pay HEAD Oceania’s costs pursuant to s.570 of the Fair Work Act including on the basis that Mr Dorsch’s failure to accept the offer constituted an unreasonable act or omission for the purposes of the Fair Work Act; and/or

(b)     an order that Mr Dorsch pay HEAD Oceania’s costs on an indemnity basis on and from the above date in accordance with the principles in Calderbank v Calderbank [1975] 3 All ER 333; [1975] 3 WLR 586.

8    The deed recited:

Recitals

A    Mr Dorsch commenced employment with Mares Asia Pacific Limited (Mares AP) in around May 2008. Mr Dorsch commenced employment with the Company (formerly known as Mares Oceania Pty Ltd) in around 2018. Mr Dorsch was most recently employed concurrently by Mares AP and the Company (collectively, the Employment).

B    The terms and conditions of the Employment were most recently governed by a written contract of employment with Mares AP dated 17 March 2016 and a written contract of employment with the Company dated 15 October 2018 (collectively, the Employment Contracts).

C     The Employment with both Mares AP and the Company was terminated on 10 December 2021 (Termination).

D     Mr Dorsch commenced proceedings against the Company in the Federal Court of Australia being proceedings number NSD271/2022 (Proceedings).

E     Without any admission of liability, the parties have agreed to settle all issues between them, including any issue arising out of the Employment, the Employment Contracts, the Termination and the Proceedings, in accordance with the terms of this deed.

9    Whilst Mares AP was not a party to the offered deed, it fell within the scope of the release, (at cl 3.1), part of the bar on further proceedings (at cl 6) and as a beneficiary of the deed (at cl 10):

3     Releases and acknowledgements

3.1     Mr Dorsch’s release

(a)     Mr Dorsch releases absolutely and forever discharges the Group from all Claims which Mr Dorsch may have had, may now have or but for this deed, may have had at any future time against the Group.

(b)     Mr Dorsch agrees to indemnify and keep indemnified the Group from all Claims which may be made by Mr Dorsch.

(c)     Mr Dorsch promises not to bring or commence or seek to enforce any Claims in any court, commission, tribunal, or body against the Group which Mr Dorsch may have had, may now have or but for this deed, may have had at any future time against the Group.

3.2     Mr Dorsch’s acknowledgment

(a)    Mr Dorsch acknowledges that they have entered into this deed voluntarily and have had an opportunity to take legal advice as to its terms and effect.

(b)    Mr Dorsch is aware of and understands the consequences of entering into this deed and providing the release at clause 3.1, including that this deed constitutes full and final settlement of all Claims which Mr Dorsch may have had, may now have or may have had at any future time against the Group if the parties had not executed this deed.

…

6 Bar to proceedings and failure to comply

(a)     Mr Dorsch acknowledges and agrees that each member of the Group may plead this deed as a bar to any proceedings brought or commenced by Mr Dorsch that are directly or indirectly arising out of or in connection with the Employment, the Employment Contracts, the Termination or the Proceedings or any other matters referred to or contained in this deed.

…

10 Benefit of deed

The Company executes this deed for the benefit of the Group, and Mr Dorsch acknowledges and agrees that each of them may independently rely on and enforce this deed against Mr Dorsch.

Mr Dorsch’s counteroffer

10    By letter dated 14 June 2023, Mr Dorsch rejected HEAD Oceania’s first offer and made a counteroffer on terms which included the addition of a mutual release in his favour, non-disparagement obligations, and HEAD Oceania making payment of $475,000 (inclusive of costs and characterised as general damages). Mr Dorsch’s letter enclosing his counter offer as contained in a deed stated, inter alia:

4     The settlement offer contained in the deed of release enclosed to Your Letter is woefully inadequate for the loss and damage actually suffered by our client, as evidenced by the expert reports filed in this matter. Not only does the offer fail to recognise the significant suffering that our client has endured, but it also fails to provide vindication that his legal rights were violated by the conduct of your client which will be important in enabling him to recover from the damage suffered.

…

6     We are instructed to write to you to give your client a further opportunity to resolve this matter in a timely fashion, absent recourse to costly and lengthy cross-examination of your client's witnesses. Notwithstanding the strength of our client’s case, at this stage of the proceedings Mr Dorsch is prepared to resolve this matter in its entirety on the terms set out in the enclosed deed of release, which has marked up our client’s counter-offer on the face of the deed sent with Your Letter.

7     The above offer is open for acceptance until close of business on 9.30 am on Friday 16 June 2023, after which time the offer will lapse.

8     The above offer is made pursuant to the principles in Calderbank v Calderbank [1975] 3 All ER 333 and will be relied upon in support of an application for indemnity costs should it not be accepted.

9     We note that pursuant to section 570 of the Fair Work Act 2009 (“FW Act”), the Court can make an order for costs against a party where it is satisfied that the party's unreasonable act or omission caused the other party to incur costs (including on the basis of a party’s unreasonable rejection of a settlement offer). The Full Court of the Federal Court has confirmed that costs may be awarded on an indemnity basis under section 570(2)(b) of the FW Act if a party unreasonably fails to accept a settlement offer: Trustee for The MTG1 Trust v Johnston (No 2) [2016] FCAFC 190 at [24]-[26].

10     The above offer involves a significant compromise to the value of our client’s claim and is significantly less than the amount offered at the mediation on 15 August 2022. The quantum of the offer above is set at a level that is designed to avoid lengthy, costly and public litigation, and to protect our client’s costs position where we are confident of achieving a greater outcome at any final hearing.

11    Mr Dorsch’s offer was open to be accepted for a period of two days.

HEAD Oceania’s second offer

12    On 16 June 2023, HEAD Oceania rejected Mr Dorsch’s offer and made a counteroffer on terms the same terms as their first save for agreeing to the release of Mr Dorsch and mutual non-disparagement he proposed. This offer was made on the third day of the hearing and after Mr Dorsch’s cross-examination had concluded (though it is noted he was cross-examined again in relation to evidence in reply at the end of the hearing).

13    HEAD Oceania’s 16 June 2023 letter stated:

2     HEAD Oceania does not consider your offer to represent a genuine compromise.

3     Relevantly, there has been no attempt to particularise, with any degree of precision, the loss and damage Mr Dorsch claims to have suffered nor the basis upon which the proposed settlement sum of $475,000 has been calculated.

4     You will be aware that Mr Dorsch has accepted, under cross examination, his salary with HEAD Oceania at the time of his dismissal was $82,000 per annum in accordance with the contract of employment between himself and HEAD Oceania.

5     Mr Dorsch has readily conceded under cross examination that he has been dishonest in his dealings with the Australian Taxation Office. Insofar as the evidence of Mr Dorsch conflicts with that of HEAD Oceania’s witnesses, including Mr Skrobanek, we are confident that the Court will prefer the evidence of HEAD Oceania’s witnesses to that of Mr Dorsch.

6     HEAD Oceania maintains that Mr Dorsch engaged in serious misconduct justifying summary dismissal. Even if the Court concludes that HEAD Oceania did not have grounds to summarily dismiss Mr Dorsch (which is not admitted), there is no dispute that HEAD Oceania had the right to terminate Mr Dorsch’s employment contract, without cause, by giving Mr Dorsch 12 weeks’ notice or making an equivalent payment in lieu thereof. This equates to $23,492.30 (including Mr Dorsch’s car allowance).

14    HEAD’s second offer was open to be accepted by Mr Dorsch for three days. Mr Dorsch did not accept HEAD Oceania’s second offer.

Organising principles

15    Despite these proceedings involving contract as well as multifarious breaches of the FW Act, the authorities recognise that the statutory costs regime under s 570(2) of the FW Act, and its limitations, apply: In Melbourne Stadiums Ltd v Sautner [2015] FCAFC 20; 229 FCR 221 the Full Court (Tracey, Gilmour, Jagot and Beach JJ at [157], White J agreeing at [173]) opined that s 570(1) will, absent a relevant s 570(2) exception, preclude a Court making any order as to costs over a proceeding where there are mixed common law and FW Act claims.

16    Section 570 provides:

570 Costs only if proceedings instituted vexatiously etc.

(1)    A party to proceedings (including an appeal) in a court (including a court of a State or Territory) in relation to a matter arising under this Act may be ordered by the court to pay costs incurred by another party to the proceedings only in accordance with subsection (2) or section 569 or 569A.

Note:    The Commonwealth might be ordered to pay costs under section 569. A State or Territory might be ordered to pay costs under section 569A.

(2)    The party may be ordered to pay the costs only if:

(a)    the court is satisfied that the party instituted the proceedings vexatiously or without reasonable cause; or

(b)    the court is satisfied that the party’s unreasonable act or omission caused the other party to incur the costs; or

(c)    the court is satisfied of both of the following:

(i)    the party unreasonably refused to participate in a matter before the FWC;

(ii)    the matter arose from the same facts as the proceedings.

17    As recognised by Burley J in Salama v Sydney Trains (No 2) [2021] FCA 1200 at [11], the policy objective for the s 570 costs regime was to reflect a choice:

11    … on the part of the legislature that costs should not ordinarily follow the event, but rather that they should ordinarily be borne by the party incurring them: Commonwealth of Australia v Construction, Forestry, Mining and Energy Union [2003] FCAFC 115; 129 FCR 271 at [10] (Black CJ, Tamberlin and Sundberg JJ); Augusta Ventures Ltd v Mt Arthur Coal Pty Ltd [2020] FCAFC 194 at [102] (White J, with whom Middleton J agreed at [89]). It has been said that the policy ensures that the spectre of costs being awarded if a claim is unsuccessful does not loom so large in the mind of potential applicants (in particular) that those with genuine grievances and an arguable evidentiary and legal basis for them are put off commencing or continuing proceedings: Ryan v Primesafe [2015] FCA 8; 323 ALR 107 at [64] (Mortimer J); Trustee for The MTGI Trust v Johnston (No 2) [2016] FCAFC 190 at [8] (Siopis, Collier and Katzmann JJ)…..

18    The discretion must be exercised with caution given the exceptional nature of the power in what is otherwise a no-cost jurisdiction. The discretion requires an evaluative assessment of the objective facts, in a prospective sense, at the point that the offers were made, and not with the benefit of hindsight. The assessment gives focus to whether the failure to accept the offer was unreasonable rather than the reasonableness per se of the offer.

Competing positions

19    HEAD Oceania submitted that they were entitled to the benefit of the Court exercising its discretion to award costs from the expiry of the first offer (on 14 June 2023) or from the expiry of the second offer (20 June 2023) on an indemnity or alternatively a party-party basis.

20    HEAD Oceania urged these conclusions on the Court by reason of the following four primary submissions. First, HEAD Oceania had made reasonable offers on each occasion. Secondly, each of those offers were rejected. Thirdly, costs should be awarded because Mr Dorsch’s non-acceptance of each of those offers caused HEAD Oceania to incur all the subsequent preparatory and hearing costs (save for those associated with the penalty hearing arising from HEAD Oceania’s acceptance of one portion of Mr Dorsch’s claim). Fourthly, the non-acceptance constituted an unreasonable act within the meaning of s 570(2)(b) of the FW Act.

21    The submission was expanded by reference to the terms of the offer(s) as contained in the deed of release, said to comprise a material compromise, including by reference to the payment of $80,000 (almost the equivalent of a year’s base salary). Whilst, there had been an admission with respect to one aspect of the claim regarding penalty, HEAD Oceania submitted that it could not have been envisaged that a large monetary award would eventuate from this claim given the maximum penalty comprised $66,000 and the relevant circumstance was the delay (not refusal) in paying an amount for accrued annual leave to the value of $8,022.82. HEAD Oceania emphasised that the quantum of the offer (almost a year’s salary) needed to be understood in the context of Mr Dorsch having mitigated any purported loss, by having obtained employment approximately 10 months after his termination and earning $200,000 per annum.

22    Furthermore, at the time of making the first offer, HEAD Oceania submitted, Mr Dorsch had the benefit of HEAD Oceania’s affidavit evidence and outline of submissions, and he also had made deemed admissions which relevantly included him being paid a salary by Mares AP, such that, he must have appreciated the significant risk of the Court finding that he had engaged in the serious misconduct that was alleged against him and consequently would have appreciated the risk of judgment in his favour being less favourable than $80,000, which was, in all the circumstances, an offer which would have been reasonable for Mr Dorsch to accept.

23    These admissions were submitted to have bearing on the veracity of Mr Dorsch’s claims generally, including the statutory and contractual claims arising from the allegations of long working hours predicated on his testimony primarily rather than any contemporaneous record. HEAD Oceania submitted that the majority of Mr Dorsch’s non-dismissal adverse action claims (adopting the abbreviations from the liability judgment) were predicated on fundamentally flawed logic that the conduct (and underpinning entitlements) was engaged in by HEAD Oceania which would have been known by Mr Dorsch given Mr Dorsch had all the evidence and HEAD Oceania’s opening submissions. In addition, with respect to the remaining claims they were, either ultimately abandoned or flawed for other reasons. Furthermore, even if it were asserted that Mr Michl was acting on behalf of HEAD Oceania, it was Mr Michl’s evidence that he had no knowledge of the existence of the rights underpinning the claims. As to the s 62 claim, HEAD Oceania submitted that it was at best speculative and Mr Dorsch ought to have known the weakness of this claim given the absence of any contemporaneous records. Addressing the adverse action claim relating to dismissal, HEAD Oceania submitted that it would have been obvious to Mr Dorsch, by reason of the extensive evidence of those who claimed to have been the subject of the conduct relied upon by Mr Skrobanek, as well as the evidence of Mr Skrobanek himself as to the state of his knowledge about Australian law, that the claim was seriously flawed.

24    HEAD Oceania submitted that their first offer expressly foreshadowed to Mr Dorsch that if he did not accept it and obtained less favourable relief that non-acceptance would be relied upon by HEAD Oceania for the purpose of constituting an unreasonable act or omission within the meaning of s 570(2)(b) of the FW Act.

25    HEAD Oceania thereafter submitted, that by the time of the second offer, Mr Dorsch had been the subject of cross-examination (though not the entirety of it) and had made material admissions against his case, including admissions that he must have understood would lead to the Court to have very serious reservations about his credit as a witness. The relevant admissions concerned Mr Dorsch’s failure to declare income he received from Mares AP to the Australian Tax Office in the 2020, 2021 and 2022 financial years and had acted dishonestly. As a consequence, HEAD Oceania submitted, that when the settlement offers where made, Mr Dorsch was pursuing claims for entitlements in reliance on alleged income from Mares AP which he had not declared as income to the ATO and where he had not fully declared his HEAD Oceania income (relevant both to the veracity of his claims and his credit).

26    Mr Dorsch submitted that while it is established that a failure to accept an offer of compromise may enliven and justify the exercise of the Court’s discretion to award costs in certain circumstances, the present matter is not one of them. In answer to each of HEAD Oceania’s four propositions, Mr Dorsch accepted the offers were made and refused but denied that his conduct in refusing them was unreasonable.

27    Mr Dorsch submitted that HEAD Oceania bears the onus of proving that one or more of the s 570(2) criteria are met, and to that end it was necessary for HEAD Oceania, who relied upon s 570(2)(b), to identify and prove what it is that constitutes Mr Dorsch’s unreasonable conduct and the relationship, if any, between that conduct and them incurring costs. This assessment, according to Mr Dorsch, had to be understood through the statutory lens requiring caution given that ordinarily costs do not follow the event and that the policy behind the section is to ensure that “the spectre of costs being awarded if a claim is unsuccessful does not loom so large in the mind of potential applicants …that those with genuine grievances and an arguable evidentiary and legal basis for them are put off commencing or continuing proceedings: Ryan v Primesafe [2015] FCA 8; 323 ALR 107 at [64].

28    Mr Dorsch relied upon the reasoning of the Full Court in Stratton Finance Pty Ltd v Webb [2014] FCAFC 110; 314 ALR 166 in which consideration was given to the correctness of the primary judge’s conclusion that the failure by Stratton to accept an offer of compromise by way of a “Calderbank letter” was an unreasonable act within the meaning of s 570(2)(b) and opined, (at [79]–[80]):

79    The question must be examined from the perspective that there was a contract claim for unpaid salary by way of commission and statutory claims. The statutory claims were subject to the FW Act, s 570(2) that relevantly provided that a party may only be ordered to pay costs if the Court is satisfied that the party’s unreasonable act or omission caused the other party to incur the costs.

80    Caution should be exercised as to how a Calderbank offer, even a generous one, is viewed in such circumstances. Calderbank letters presuppose what might be called a “costs jurisdiction”, in contrast to the usual rule in FW Act claims. To group together contractual and FW Act claims in an offer may permit the conclusion that the refusal of the offer was unwise, even unreasonable, but it does not follow that such is an unreasonable act or omission, for the purposes of s 570(2).

29    In rejecting the first and second offers Mr Dorsch submitted that he did not act unreasonably. All of the relevant circumstances required consideration given not every refusal to accept an offer, despite being unwise or even unreasonable, will lead to the conclusion that the refusal was an unreasonable act. In support of that submission, Mr Dorsch submitted that there was factual complexity, the existence of the possibility of success in the adverse action claims given the operation of the reverse onus under s 361, the number of the matters which turned on a range of legal issues evident from the length of the liability judgment required to resolve them and that many of the relevant facts were not disputed such that rather it was the legal questions required resolution (which was particularly evident by the events which surrounded the adverse action claims). In answer to HEAD Oceania’s submission, as to the stage at which the offers were made (after evidence and submissions just prior or during the initial part of the hearing), Mr Dorsch submitted that consideration of the roles of Mr Prete and Mr Michl required exploration at hearing (and therefore both the written and oral testimony) and were relevant not only to the adverse action claims but also the contractual claims. Their oral testimony post-dated the making of the offers. Purported illustrations of factual determinations that affected multiple causes of action included the determination of when Mr Dorsch commenced employment, the continuity of employment (as from Mares AP to HEAD Oceania) and the components of Mr Dorsch’s salary. Whilst Mr Dorsch’s arguments in the latter respects all failed, they arose in part, from Mr Prete’s evidence at hearing, such that it could not be said that Mr Dorsch had failed to appreciate the same as at the time the offers were made. With respect to the s 62 claim, there was little previous authority as to the “required precision” (one assumes as to when and in what circumstances he was required to work).

30    As to the offers themselves, Mr Dorsch submitted that they were not simply in the form of an offer to pay a certain amount and consent orders dismissing the proceedings but were dependent on the entering of a deed which encompassed a release of a broad range of “Claims” beyond the extant dispute and as against a broader “Group” than HEAD Oceania. Mr Dorsch emphasised that HEAD Oceania’s first and second offers were open for the short period of seven and three days respectively.

31    Further, Mr Dorsch submitted that in the context of a “certainly arguable” claim involving the reverse onus under s 361 of the FW Act, HEAD Oceania’s substantive success at trial depended upon the Court making positive findings in relation to the credibility of HEAD Oceania’s witnesses and where the offers expired before his own evidence and that of Mr Michl and Skrobanek such that he had not acted unreasonably by failing to accept the offers.

32    Mr Dorsch submitted that “unreasonableness” is not synonymous with “imprudence” and does not include a circumstance where a party has conducted litigation inefficiently or adopted a misguided approach (citing the decision of Bromberg J in Celand v Skycity Adelaide Pty Ltd [2017] FCAFC 222; 256 FCR 306 at [165]).

33    Mr Dorsch submitted that even if he acted unreasonably within the meaning of s 570(2)(b), he engaged in no conduct in defiance of the statutory imperative and overarching purpose and there is no basis for this Court to order him to pay indemnity costs. Rather, it was Mr Dorsch’s submission that he pursued a genuine grievance with an arguable evidentiary and legal basis. Mr Dorsch submitted that this Court was required not merely to consider whether the act itself was unreasonable but “to determine whether the proceedings were unreasonable in the context of not accepting the offer”. But then appeared to concede that the submission was whether each refusal was unreasonable when considered in the context of the nature of the proceedings, the nature and the timing of the offers. Mr Dorsch submitted that he had arguable claims for which potentially entitled to more significant amounts.

Resolution

34    As is evident from the foregoing, the unfortunate history reveals that Mr Dorsch would have achieved a substantially better outcome, had he accepted either of the offers made by HEAD Oceania after the commencement of the litigation. However, the benefit of hindsight, has no place in the assessment of the objective circumstances: Not every failure to accept a reasonable settlement offer will comprise an unreasonable act for the purpose of s 570(2)(b).

35    For the reasons which follow, I conclude that HEAD Oceania has established that Mr Dorsch should pay the costs incurred by HEAD Oceania from 14 June 2023 (the expiry of the first offer) on a party/party basis (save for any costs incurred a result of the claim for penalty) and that those costs should be assessed by a Registrar of the Court on a lump sum basis. I do not consider that the circumstances of the second offer amplify the unreasonableness such that an order of indemnity costs should be made from the expiry of that second offer.

36    Critically, both offers were made after all of the evidence had been filed in the proceedings and the parties had exchanged their opening submissions. It is worthwhile considering in some detail the nature of the filed evidence and those submissions within the orientation of Mr Dorsch’s claims.

37    Mr Dorsch contended that he had been dismissed unlawfully on prohibited bases (arising from rights and assertions of those rights under the FW Act) or without a warranted contractual basis. Accordingly, central to the veracity of these claims was the evidence leading up to his termination of his employment. HEAD Oceania asserted in its pleadings, submissions and evidence (that was before Mr Dorsch at the time of the offers) that Mr Skrobanek had terminated his employment on the basis of his ‘unacceptable conduct in the workplace’ which included but was not limited to him “acting in an aggressive manner and swearing at [his] work colleagues” (as articulated in the letter of termination): LJ[161]. As at the time of the offers, Mr Dorsch had received the evidence from the following seven subordinate employees who had either experienced or witnessed his aggressive behaviour including swearing, Ms Borden, Mr Bramich, Ms Andersen, Ms Hawkes, Mr Butler, Mr Montgomery and Ms Fookes. Mr Dorsch denied the majority of the alleged offending conduct. Accordingly, contrary to the submission of Mr Dorsch, this was not a case where the majority of the evidence was not disputed. Whilst it may be agreed that much of the evidence of Mr Dorsch in which he asserts to have made complaints or inquiries was not disputed, critical evidence as to his abhorrent behaviour was alleged repeatedly, and consistently, by a number of employees, for which he denied or sought to recast in a sanitised way. As observed in the liability judgment, Mr Dorsch’s evidence responsive to the claims of numerous employees regarding his conduct was perplexing and could not be accepted.

38    Accordingly, Mr Dorsch, was in a different position, to a party at the commencement of or early in proceedings, where little is known about the evidentiary and legal case against it. Furthermore, whilst the existence of the reverse onus is a factor to be taken into account, when considering adverse action claims, I do not consider, in the circumstances of this case, given what Mr Dorsch knew at the time of the offers, as to what was an insurmountable challenge for him, from a credit perspective, and also in the face of the strong evidence against him, that the success of any challenge concerning his dismissal would be remote. Furthermore, to the extent that Mr Dorsch challenged Mr Skrobanek’s authority, I do not think, within the broad range of considerations contained in these reasons, that Mr Dorsch can avoid a finding of unreasonableness.

39    Mr Dorsch made multifarious claims of alleged non-dismissal adverse action, involving action taken by Mr Michl regarding Mr Dorsch’s asserted claims to annual leave, purported unfair scrutiny and false allegations and the receipt of what he perceived to be low salary increases. The claims associated with his purported annual leave entitlements required an acceptance of his assertions of the same. Mr Dorsch was the most senior employee in Australia. Mr Dorsch’s own evidence revealed that he had a great level of autonomy regarding the taking of leave. Mr Mr Dorsch’s own evidence revealed that he was not a reliable historian, even at the time he made the first allegations regarding his annual leave balances. As noted in the liability judgment, (at LJ[283]), Mr Dorsch’s own evidence (from the email exchanges as between himself and Mr Michl between April and June 2018) revealed that he grossly inflated his claim, initially stating he was entitled to 87 days’ leave, then suggesting 53 days’ leave but based on assumption not contemporaneous recording and then ultimately suggested a lower amount. As at the time of the offers, the filed evidence of Mr Skrobanek also revealed that Mr Dorsch had significant autonomy as to his work hours and his leave. Accordingly, Mr Dorsch must have appreciated at the time that the offers were made that there was significant risk that these claims would fail, even if there was a dispute regarding whether the alleged conduct was taken by Mr Michl as agent or employee for HEAD Oceania. This is because Mr Dorsch was aware of the fact that he was not relying on contemporaneous evidence supportive of his claims of leave and he had made inflated claims in the past about leave and there were serious challenges to his credit from all of the respondents’ witnesses. Therefore, regardless of legal argument, there were significant problems with the factual premises underpinning his claims. In any event, the quantum of this claim was low and comprised a fraction of what HEAD Oceania had offered. Furthermore, the claims regarding the alleged scrutiny and the low offers, at best, would not yield, any significant award of damage or penalty.

40    As to the statutory and contractual claims regarding the alleged long hours he worked, again Mr Dorsch was on notice, at the time of the offers, that he had put on no contemporary evidence to substantiate his baldly asserted claim that HEAD Oceania had “imposed” a workload in excess of 38 hours per week, and where he “regularly worked around 70 or 80 hours per week”: LJ[332]. Mr Dorsch would have known that at the point the offers were made he had put on no evidence of who within HEAD Oceania, had “imposed” the unidentified workload nor had he put on any contemporaneous evidence over the asserted four year period proving the same. Further, he was aware of the evidence of Mr Skrobanek, and the submission that would be made in this regard, as to his level of (undisputed) seniority in the Australian business and the allegation of his level of autonomy regarding the setting of his hours. Despite his solicitors answering requests for particulars regarding these broad, ambiguous claims, as noted in the liability judgment, no evidence was ever filed as to the precise dates or periods over which Mr Dorsch asserted he was required and did in fact work those purported spans of hours: LJ[347]. Even if this were not required, Mr Dorsch was on notice that it was his word that would need to be accepted, in the face of the respondents’ evidence. Furthermore, prior to the offers, as part of the discovery process, HEAD Oceania had provided Mr Dorsch with copies of the calendar invitations in 2020 for scheduled meetings Mr Dorsch had attended, which revealed, a pattern well below that asserted by Mr Dorsch or Ms Terry: LJ[351]. Furthermore, at the time of the offers, HEAD Oceania had the filed evidence of numerous employees that he often stared work later and left work early: LJ[354]. As a consequence, Mr Dorsch had to have been on notice that any chance of him proving the requisite underlying factual substratum necessary to succeed in either these statutory or contractual claims was remote. Accordingly, to extent that Mr Dorsch sought to assert his conduct was not unreasonable by reason of there being limited jurisprudence regarding the operation of s 62 of the FW Act, is not accepted. Mr Dorsch was again, on notice, of the extent of the challenge and his own limited evidence regarding the foundational factual substratum.

41    I do not accept that by reason of Mr Dorsch bringing a myriad of unsuccessful claims, this created such smoke, that the fire of his unreasonableness could not be detected. I do not accept that Mr Dorsch is able to avoid a finding of unreasonableness by asserting factual and legal complexity as a way to avoid the reality of the circumstances: Mr Dorsch advanced a number of claims without a proper evidentiary foundation and where he was aware, at the time that the offers were made, of the significant broad-ranging factual challenges to his evidence from a number of the respondents’ witnesses. I do not accept that, it was only after the hearing, that pivotal factual determinations which affected multiple causes of action were truly exposed. However, even if there is an acceptance of this submission to some extent, the extent of the offer, being a substantial one, illustrates the unreasonableness.

42    The offer of $80,000 was a substantial one. It comprised almost the equivalent of one year’s annual income with HEAD Oceania, in circumstances where he had mitigated his loss and obtained employment on a substantially higher basis, ten months after his termination.

43    A person in Mr Dorsch’s position would have had to have considered that his primary adverse action claim (for which general damages and future losses would flow) being that of dismissal was a difficult claim in the light of the evidence, not only of Mr Skrobanek, but of all the other witnesses. Whilst, such damages may arise in the case of the other forms of adverse action, it was clear, based on the lack of differentiation in the expert evidence, that the primary trigger for those damages, arose from the termination itself. Mr Dorsch must have known that the offer was substantial and would have represented an amount equivalent to him succeeding on more than one of his claims.

44    One aspect which could possibly tell against the award, was the reach of the compromise, to a non-party, Mr Dorsch’s other former concurrent employer, Mares AP. However, this case was peculiar. The parties had always accepted he was concurrently employed by both entities. Mr Dorsch had made a conscious choice to sue only HEAD Oceania, despite being on notice from, at least the point of HEAD Oceania’s defence, that HEAD Oceania would claim that the alleged non-dismissal adverse action was action taken by Mares AP not HEAD Oceania. The same was reiterated in HEAD Oceania’s evidence and its opening submissions.

45    I do not accept that the breadth of the deed or the time in which Mr Dorsch was called on to answer it warrants against finding that the non-acceptance of the first offer was unreasonable. Mr Dorsch was represented by solicitors and Counsel. Mr Dorsch did not seek further time to consider the offers and indeed, made his own counteroffer.

46    The question is then whether the circumstances changed and there was subsequent unreasonableness by Mr Dorsch by failing to accept HEAD Oceania’s second offer, after he was cross-examined and the admissions he made. The admissions concerned the remuneration he had received from HEAD Oceania and Mares AP and his failure to declare the entirety of his income in three financial years in Australia for income he had received from Mares AP and the entirety of the income he received from HEAD Oceania. HEAD Oceania submitted that by the time of the second offer Mr Dorsch had made material admissions against his case, including admissions which he must have understood would lead the Court to have very serious reservations about his credit as a witness.

47    It is my view that, whilst Mr Dorsch made significant admissions under cross-examination with respect to his tax affairs, they did not materially change the circumstances such that there was an accentuation of his unreasonableness.

48    The question is then whether the costs ought to be awarded on an indemnity basis. The authorities recognise that there is a discretion to award indemnity costs under the s 570 regime: Sabapathy v Jetstar Airways (No 2) [2021] FCAFC 68 at [15]. The relevant principles giving rise to the making of such orders were neatly summarised by Wigney J in Australian Competition and Consumer Commission v Colgate-Palmolive Pty Ltd (No 5) [2021] FCA 246; 151 ACSR 26 at [6]–[10].

49    In addition, as observed by Burley J in Salama (No 2) at [13]–[14], attention must be given to the intersection between this particular statutory regime and those developed by reference to Calderbank v Calderbank [1976] Fam 93; [1975] 2 All ER 333. His Honour refers to the existing jurisprudence that the rejection of a Calderbank offer does not per se warrant an order for indemnity costs, there remains the need to consider the unreasonableness of the rejection of the offer, and cites with approval Bromberg J’s obiter remarks in Celand at [163]–[165] and the recognised caution in Stratton Finance. In that case, the Full Court counselled: “Caution should be exercised as to how a Calderbank offer, even a generous one, is viewed” in circumstances where an applicant has brought claims under the FW Act and for breach of contract on the basis that Calderbank letters “presuppose” a “costs jurisdiction” (at [80]; see also Sautner at [168] (White J)) but did not disturb the primary judge’s finding that the appellant employer had engaged in unreasonable conduct in satisfaction of s 570(2)(b).

50    I am not persuaded, that the circumstances here, are of the kind that would fall within the recognised circumstances identified by Wigney J in Colgate-Palmolive at [10], and by having regard to the statutory context and all the circumstances of this case.

51    Accordingly, I find and will make orders that Mr Dorsch must pay HEAD Oceania’s costs of the proceedings on a party/party basis from 14 June 2023 (save for any costs associated with the penalty aspect of the proceedings) and where those costs should be assessed by a Registrar of the Court on a lump sum basis in accordance with the Court’s Costs Practice Note (GPN-COSTS). The making of such an order on a lump sum basis is the Court’s preference, wherever practicable and appropriate to do so and where no formal application is required.

Associate:

Dated:    31 July 2024