The Federal Court has ordered indemnity costs against a successful applicant in a sexual harassment claim, following her rejection of reasonable offers of compromise.1

Facts

In our Autumn 2013 Workplace Relations & Safety Bulletin, we reported on the Federal Court’s decision in Richardson v Oracle Corporation Australia Pty Limited2 and the steps an employer can take to defend a case of vicarious liability that is brought under discrimination legislation.

In that case, orders were made awarding the applicant (Ms Richardson), $18,000 by way of damages as compensation for a breach of the Sex Discrimination Act 1984 (Cth). Justice Robert Buchanan said he was satisfied that a male sales representative (Mr Tucker) sexually harassed Ms Richardson, a senior employee at Oracle, and that the company was vicariously viable for his conduct.

Following the decision, both Oracle and Mr Tucker applied for a special order for costs. The basis for Oracle’s application was that Ms Richardson had rejected offers of compromise made under the Federal Court Rules and had obtained judgment on terms which were less favourable than the terms of the offers.

Decision

Justice Buchanan took into account three relevant offers of settlement made under the Federal Court Rules by the parties before the case went to trial:

  • on 3 September 2010, Oracle and Mr Tucker jointly made an offer of comprise to Ms Richardson of $55,000 plus interest and costs as agreed or assessed;
  • on 20 September 2010, Ms Richardson made a counter offer of $106,500 plus interest and costs as agreed or assessed;
  • on 21 December 2011, by “notice of offer to compromise” Oracle and Mr Tucker jointly made a second offer of $85,000 “exclusive of costs”.

On 24 January 2012, the last offer was rejected by Ms Richardson’s solicitors for reasons including it did not address the full range of relief sought.

Oracle asked the Court that its obligation to pay any costs to Ms Richardson be limited up to 4 September 2010, or as an alternative, Ms Richardson pay its costs on an indemnity basis from 22 December 2011.

Ms Richardson argued that her rejection of the offers should be viewed in light of their failure to address the full range of relief sought (including an apology from Oracle and a change to company policies and practices with respect to sexual harassment), and that public vindication of her position was important to her.

Ms Richardson further argued that the offer dated 21 December 2011 did not satisfy the Federal Court Rules 2011 (2011 Rules) which came into effect on 1 August 2011, and which provide that:

The notice must state whether:

  1. the offer is inclusive of costs; or
  2. costs are in addition to the offer.

Ms Richardson contended that, as the offer said it was “exclusive of costs”, it did not comply with the 2011 Rules.

The Court rejected Ms Richardson’s arguments. Justice Buchanan was satisfied that the real position was that Ms Richardson thought the offers were inadequate in monetary terms. This was evident from the absence of a request for an apology or admission of liability from Ms Richardson’s counter offer of 20 September 2010.

Further, the Court held that Oracle’s 21 December 2010 offer was in accordance with the 2011 Rules, finding that even though the offer did not conform with the Court form template of “This offer is [inclusive of/in addition to costs]”, it was sufficiently apparent that the offer was not inclusive of costs, and that any payment of costs would be in addition to the offer.

Notwithstanding the Court’s decision to accept the 21 December 2011 offer as being compliant with the Federal Court Rules, Justice Buchanan ultimately concluded that Oracle had an entitlement to costs on an indemnity basis arising from their offer to Ms Richardson made on 3 September 2010 under the former Federal Court Rules.

Justice Buchanan considered that the initial offer had been a genuine one, and that it was “imprudent and unreasonable” of Ms Richardson not to accept it in light of the findings in the judgment.

Ms Richardson has said she will appeal the costs decision, as well as the original judgment awarding her $18,000 in compensation.

Bottom line for employers

Employers should be aware of the utility of correctly made offers of compromise as effective mechanisms for costs protection, even if the defence of a claim is ultimately unsuccessful. However, employers should also be aware that this option is not always available. For example, the Fair Work jurisdiction is generally “no-cost”, meaning offers such as these are rarely used.