FEDERAL COURT OF AUSTRALIA Shea v Energy Australia Services Pty Ltd (No 7) [2014] FCA 1091 Citation: Shea v Energy Australia Services Pty Ltd (No 7) [2014] FCA 1091 Parties: KATE SHEA v ENERGY AUSTRALIA SERVICES PTY LTD File number: VID 289 of 2012 Judge: JESSUP J Date of judgment: 13 October 2014 Catchwords: PRACTICE AND PROCEDURE – costs – whether proceeding instituted vexatiously or without reasonable cause – whether established by absence of genuine belief in truth of facts that would sustain some elements of cause of action – whether unreasonable act or omission by applicant caused respondent to incur costs – whether unreasonable not to accept monetary settlement offer when claim made for reinstatement – whether unreasonable to advance allegations known to be unsupported by admissible evidence – whether unreasonable to seek to adduce evidence of value only to embarrass or humiliate other party's witness – whether costs to be raised on an indemnity basis Legislation: Evidence Act 1995 (Cth) s 138 Fair Work Act 2009 (Cth) ss 340, 341, 361, 545, 570 Cases cited: Alpine Hardwood (Aust) Pty Ltd v Hardys Pty Ltd (No 2) (2002) 190 ALR 121 Black v Lipovac (1998) 217 ALR 386 CGU Insurance Limited v Corrections Corporation of Australia Staff Superannuation Pty Ltd [2008] FCAFC 173 Parker v Comptroller-General of Customs (2009) 252 ALR 619 Shea v TRUenergy Services Pty Ltd (No 6) [2014] FCA 271 Williams v Spautz (1992) 174 CLR 509 Date of hearing: 28 May 2014 Place: Melbourne Division: FAIR WORK DIVISION Category: Catchwords Number of paragraphs: 67 Counsel for the Applicant: Mr C Gunst QC with Mr R Millar Solicitor for the Applicant: K R Legal Counsel for the Respondent: Mr JL Bourke QC with Mr PM O'Grady Solicitor for the Respondent: Minter Ellison IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY FAIR WORK DIVISION VID 289 of 2012 BETWEEN: KATE SHEA Applicant AND: ENERGY AUSTRALIA SERVICES PTY LTD Respondent JUDGE: JESSUP J DATE OF ORDER: 13 OCTOBER 2014 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. The applicant pay the respondent's costs of defending the allegations referred to in items (b)(v), (b)(vi), (d) and (e) of the list in paragraph 424 of the Court's reasons for judgment published on 25 March 2014: [2014] FCA 271. 2. The applicant pay the respondent's costs of and incidental to the matter disposed of by the Court's judgment given on 27 August 2013. 3. The costs referred to in Orders 1 and 2 above be taxed on an indemnity basis. 4. Save as aforesaid, and save for any orders as to costs previously made, there be no order as to costs in this proceeding. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY FAIR WORK DIVISION VID 289 of 2012 BETWEEN: KATE SHEA Applicant AND: ENERGY AUSTRALIA SERVICES PTY LTD Respondent JUDGE: JESSUP J DATE: 13 OCTOBER 2014 PLACE: MELBOURNE REASONS FOR JUDGMENT 1 This is an application for costs by the successful respondent in a proceeding alleging a contravention of s 340(1)(a)(ii) of the Fair Work Act 2009 (Cth) ("the FW Act"), constituted by the termination of the employment of the applicant because she exercised the right of making a complaint in relation to her employment (see s 341(1)(c)(ii) of the FW Act). 2 In a proceeding of this kind, the power of the court to award costs is limited by s 570 of the FW Act, which provides as follows: 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) exercising jurisdiction 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 FWA; (ii) the matter arose from the same facts as the proceedings. 3 The respondent relies upon three of the exceptions for which s 570(2) provides, namely, that the applicant instituted the proceeding vexatiously, that she instituted the proceeding without reasonable cause and that certain unreasonable acts or omissions on her part caused the respondent to incur the costs which it now claims. 4 The proceeding was heard and determined by Dodds-Streeton J before her Honour's retirement from the court: Shea v TRUenergy Services Pty Ltd (No 6) [2014] FCA 271. I am, accordingly, in the unusual position of being obliged to rule upon a party's entitlement to costs with respect to a proceeding at first instance which was heard and determined by another Judge. As will become clear, this has necessarily placed certain constraints upon the findings which I am able to make in the disposition of the respondent's application. In my reasons which follow, I assume an acquaintance with the reasons given by Dodds-Streeton J in her disposition of the merits of the applicant's case. 5 The applicant alleged that she had made five complaints in relation to her employment. I shall commence by identifying those complaints, and by setting out, in summary, the findings which the trial Judge made about them. 6 As pleaded, the first complaint had been made on or about 24 February 2010 to David Purvis, the Human Resources Director of the respondent. The subject of the complaint was that, on 24 February 2010, the applicant had been sexually harassed by Kevin Holmes, the Chief Financial Officer of the respondent, after a work function in Hong Kong. Mr Purvis, whose evidence was accepted by the trial Judge, testified that the applicant told him that Mr Holmes propositioned her, and touched her shoulders and hair, but did not indicate that the proposition was offensive or disturbing. Her Honour described Mr Holmes' reported conduct as being in the nature of "making a pass". The applicant told Mr Purvis that she was not making a formal complaint, and did not want an investigation or any other action to be taken. Her Honour held that the applicant did not make a complaint that she was able to make in relation to her employment. 7 As pleaded, the second complaint had been made on or about 5 April 2011 to Richard McIndoe, the Chief Executive Officer of the respondent. The subject of the complaint was the same as that of the first complaint, namely, that, on 24 February 2010, the applicant had been sexually harassed by Mr Holmes after a work function in Hong Kong. The trial Judge held that the applicant did make a complaint to Mr McIndoe about Mr Holmes' conduct on 24 February 2010, but it was not a complaint of sexual harassment. Rather, according to her Honour, the applicant "told Mr McIndoe that Mr Holmes made a pass at her, hit on her, propositioned her, or words to that effect". Her Honour continued: Although Ms Shea expressly told Mr McIndoe that she did not want to make a formal complaint, in all the circumstances, it was clear that Ms Shea wished to notify the employer of a grievance (her anticipated subjection to the authority of someone who had allegedly made a sexual advance) and also sought a remedy. That is, to be exempt from reporting in any sense to Mr Holmes, who allegedly made the sexual advance. Her Honour accepted that the applicant perceived the Hong Kong incident "as a sexual advance by Mr Holmes which was unwelcome, even if it did not, in itself, significantly perturb her". 8 The trial Judge proceeded to find, however, that the making of the second complaint was not an operative factor in the respondent's decision to terminate her employment. That is to say, the respondent displaced the presumption for which s 361 of the FW Act provides. 9 As pleaded, the third complaint had been made orally to Ms Mercuri in the course of her investigation into the second complaint, and related to the conduct of Messrs Holmes, McIndoe and Purvis, and of Linda Robertson. However, the trial Judge noted that the applicant "gave no evidence of what she told Ms Mercuri as constituting the third complaint and there was no evidence on that question from Ms Mercuri, who was not called as a witness". Accordingly, her Honour held that "the applicant did not establish that she made the compendious third complaint to Ms Mercuri as alleged". 10 As pleaded, the fourth complaint was made on or about 21 June 2011, and was constituted by a draft letter of that date over the hand of the applicant's solicitor, Katrina Raymond, about the manner in which her client's concerns of sexual harassment had been dealt with by the respondent, and deficiencies in the investigation report produced by Ms Mercuri. I say "draft letter" because the letter was addressed to the Chief Executive Officer of CLP Holdings Ltd, based in Hong Kong, but had not been, and was not on that day, sent to him. Rather, the draft was an attachment to an email sent by the applicant herself to Mr McIndoe. The text of the email read as follows: Against all advice, I am providing you with an advance copy of a letter which my lawyer is intending to send to Andrew Brandler next Monday. If you are willing to provide firm commitments in writing to each of the conditions set out on page 6, please respond to my lawyer at the above email address by 5 pm Friday 24 June 2011 (Melbourne time). 11 In this area of the case, the trial Judge said: The specific alleged misconduct of Messrs Holmes, McIndoe and Purvis, and the alleged general culture where such misconduct was condoned, were not, in my view, advanced as independent grievances but primarily in support of the allegation that Messrs McIndoe, Holmes and Purvis had lied to the investigator and the allegation that the investigation had failed to take into account relevant matters (alleged further misconduct by Mr Holmes). Accordingly, on the better view, the fourth complaint did not include an independent complaint about the existence of a lewd or predatory workplace culture or independent complaints of further sexual misconduct by Mr Holmes and sexual misconduct by Mr McIndoe. Her Honour continued: The letter asserted that Ms Shea could identify a number of independent witnesses of the alleged incidents, but no witnesses were identified. Despite the letter's reference to witnesses, other than for the applicant herself, no victim or other witness of any of the alleged specific incidents or the alleged lewd culture gave evidence at trial. At trial, [the applicant] conceded that she was neither a direct victim nor a witness of the three additional incidents of misconduct alleged against Mr Holmes or the two specific incidents of sexual misconduct alleged against Mr McIndoe. As discussed above, there was no evidence that Ms Shea made investigations or inquiries which provided a reasonable basis for the allegations. Nor was there evidence that the alleged victims or witnesses had a grievance in relation to the incidents or that they, or any other employee, wished Ms Shea to complain on their behalf. Further, … the evidence did not establish that [the applicant] had reasonable grounds to believe or allege that the additional incidents involving Mr Holmes amounted to misconduct on his part. At most, her state of knowledge would have justified the making of further inquiries. 12 Having discussed the relevance of the respondent's grievance policy, the trial Judge held that "the applicant was able to make a complaint about a flawed investigation of her primary allegation of sexual harassment". But her Honour was not persuaded that the fourth complaint "was a genuinely held grievance made in good faith", or that the applicant "held a genuine belief that Mr McIndoe was guilty of misconduct which contributed to a lewd corporate culture and would cause him to lie to the investigator". With respect to some new allegations against Mr Holmes in the 21 June letter which had not been previously ventilated, her Honour said: Although a complainant might in some circumstances genuinely believe allegations that are not reasonably based, I was not persuaded that the applicant held a genuine grievance based on the failure to incorporate the new allegations into the Mercuri investigation or the Mercuri investigation's acceptance of false evidence motivated at least in part by the additional misconduct alleged, albeit not proved, against Mr Holmes. 13 Her Honour held that the applicant was not "able to dictate the form of the investigation or to require it to include and examine rumours or hearsay accounts of other misconduct". Therefore, "a complaint that the investigation failed to include such matters was not a complaint that she was able to make in relation to her employment". Her Honour continued: Accordingly, in my opinion, Ms Shea did not hold a genuine grievance about the flaws in the investigation alleged in the 21 June letter. …. While the applicant may have genuinely disagreed with the findings of the Mercuri report, an allegation that the investigation and report were flawed on grounds which were not reasonable or genuine did not, however, constitute a complaint that the applicant was able to make in relation to her employment. 14 The trial Judge took the view that there were "other aspects of the communication on 21 June 2011 which appear[ed] inconsistent with, or extend[ed] beyond, the expression of grievances or accusations in good faith." Her Honour canvassed those aspects, and concluded: The applicant's email and attached 21 June letter sent to Mr McIndoe were, in the circumstances, coercive and threatening. They effectively required her various allegations, which were either untested or found to be unsubstantiated in the Mercuri Report, to be treated as substantiated. In my opinion, the communication was designed to place pressure on Mr McIndoe to accede forthwith to the applicant's demands in order to protect his personal interests by forestalling the disclosure of grave allegations of his misconduct to his "boss", Mr Brandler. That circumstance fortifies my conclusion that the fourth complaint, whether it be viewed narrowly as relating to deficiencies in the Mercuri investigation or as encompassing the many allegations of misconduct advanced as supportive grounds, was not a genuine grievance communicated in good faith and was not a complaint which the applicant was able to make in relation to her employment. 15 As pleaded, the fifth complaint was made on 4 October 2011, and was constituted by the applicant telling Mr McIndoe that it was unlawful to terminate her employment, which he had attempted to do by handing her a letter to that effect. After this conversation, it was alleged, Mr McIndoe withdrew the termination. However, the trial Judge held that the applicant's statement that it would be unlawful to terminate her employment was not in response to an attempt by the respondent to do so. It was an observation that did not amount to an expression of grievance, and was not a complaint within the meaning of s 341(1)(c)(ii) of the FW Act. 16 It was submitted on behalf of the respondent that the applicant had instituted the proceeding vexatiously in the sense that she did so for the collateral purpose of using the embarrassment and humiliation that would presumably be visited upon senior members of the respondent's management by the airing of her so-called complaints, particularly those contained in her letter of 21 June 2011, to force the respondent into a position of settling the proceeding on terms much more favourable to herself than the merits of her case justified. In this regard, emphasis was placed upon the findings of the trial Judge that the applicant did not genuinely believe, and had no evidence that was reasonably available to her to support, the serious allegations which she made about those members of management. Much the same primary material was relied upon to support the contention that the proceeding was brought without reasonable cause. It was said that the applicant not only had, but knew that she had, no evidence reasonably available to her to support the serious accusations which she made and, therefore, that she had no reasonable cause to institute the proceeding. 17 I accept, of course, that recourse to the process of a court in order to achieve a purpose collateral to any remedy or outcome legitimately available in such a proceeding will amount to an abuse of process. I am also prepared to take the further step pressed upon me by counsel for the respondent, and assume that a proceeding brought in such circumstances would be a vexatious one within the meaning of s 570 of the FW Act. However, where the applicant concerned genuinely seeks a remedy or outcome which is within the conventional curial jurisdiction which he or she invokes, the question whether the contemporaneous harbouring of a desire to achieve some collateral or incidental advantage will necessarily amount to an abuse of process has a less obvious answer: Williams v Spautz (1992) 174 CLR 509, 526-527. In the present case, there is no suggestion that the applicant was using the court process to achieve some remedy or outcome separate from, or collateral to, those conventionally available to her in the event that she succeeded in the case. She might well have introduced into her case allegations which were embarrassing – even scandalous – but, so long as her project was to achieve a successful outcome on a cause of action properly open to her, I cannot see that the introduction of such allegations would make the proceeding itself an abuse of process, or a vexatious one. 18 It should also be remembered that the initiating cause of this proceeding was not the applicant's decision to damage, or to retaliate against, the respondent. Rather, that cause was the respondent's act in terminating the applicant's employment. As counsel for the applicant pointed out, there was enough in the case to provide at least a colourable justification for the applicant's scepticism as to the genuineness of the corporate reorganisation which, according to the respondent, led to the loss of the applicant's job. It could not be said (and I did not understand counsel for the respondent to say) that the applicant was acting beyond all reasonable limits in supposing that her selection for dismissal might have been related, to an extent at least, to the events about which she made allegations. For the most part, those events were real ones in the sense that, even where the trial Judge held that no complaint had been made, such a holding arose from the characterisation of real events in which the applicant and other members of the respondent's management had been involved. And it should be added, of course, that the applicant had the benefit of s 361 of the FW Act. 19 In her Application in this proceeding, the applicant alleged a single statutory delict. That allegation was linked to five actuating circumstances, any one of which would have been sufficient for her purposes. On the present motion, counsel for the respondent submitted that the fourth complaint was so much at the centre of the applicant's case that the whole proceeding, and thus the applicant's purpose in bringing it, should be seen as coloured with the unfounded factual allegations which that complaint involved. I could not accept that submission. In the nature of things, the fourth complaint required the trial Judge to consider a very large body of evidence about the parties' relationships and interactions over a period of years and, in some cases, evidence about events in which the applicant herself had not been a participant. But each of the other allegedly actuating circumstances had the potential to deliver a result for the applicant. In all but one of them, she failed in her primary case that she had exercised the right to make a complaint, but an applicant's failure on the merits is not, of itself, sufficient to open the gate for which s 570 provides. 20 In relation to the applicant's second complaint, the trial Judge held that a complaint had been made, but the respondent displaced the s 361 presumption. It was not the specific complaint which the applicant had alleged, but it was sufficiently proximate for her Honour to proceed to deal with the issues raised on their merits. In the area of this complaint as such, I could not find that the proceeding had been brought without reasonable cause. Absent evidence led by the respondent, the applicant would have succeeded on her allegation under s 340 of the FW Act to the extent that it was linked to this complaint. 21 That raises the question as to how s 570(2)(a) operates where more than one allegation, each (if made good) being sufficient of itself to deliver success in the case, has been made by the applicant concerned. In such a case, if only one allegation is sustained by "reasonable cause", has the applicant instituted the proceeding without reasonable cause within the meaning of s 570(2)(a)? It seems, from the researches of counsel, that this question has never been judicially answered. 22 From the words of that provision itself, the question must, in my view, be answered in the negative. The section is concerned with proceedings rather than with allegations or causes of action. De minimus situations aside, unless the applicant's case is wholly bereft of any reasonable cause, it will not be possible to conclude that the proceeding was brought without reasonable cause. 23 Because so much of the proceeding as involved the second complaint was not instituted without reasonable cause, the respondent's contention that the proceeding as a whole was so instituted must be rejected. 24 Counsel for the respondent submitted that a conclusion to that effect would leave open the question whether the proceeding was brought vexatiously. Even if there was one aspect in relation to which the applicant had reasonable cause to institute her proceeding, it might yet be held that, because of collateral purpose, for example, she brought the proceeding vexatiously. Notwithstanding what was said in Williams v Spautz, I am prepared to accept the conceptual basis of that submission. 25 I do not accept, however, that it reflects the facts of the present case. No finding of the trial Judge would justify the conclusion on my part that the proceeding was brought vexatiously. It is true that her Honour made quite damaging findings about the absence of any basis for much of the allegations made by the applicant in connection with her fourth complaint, but, as mentioned previously, there is a distinction between making allegations for which there is no reasonably apparent foundation, on the one hand, and instituting proceeding for a collateral purpose, on the other hand. I am not prepared to treat her Honour's findings as the equivalent of a conclusion that the proceeding was vexatiously instituted. Although there was a time when the relations between the applicant and the other managers of the respondent were strained, they had, it seems, reconciled their differences some months before the respondent decided to terminate the applicant's employment. It was that termination which gave the applicant her cause of action. On the findings of the trial Judge, it would have to be considered that the applicant overstated her case to a substantial degree. But I am not persuaded that her decision to litigate as such was taken for reasons extraneous to the remedy which was conventionally available to her, assuming the respondent to be unable to displace the s 361 presumption. 26 That leaves the respondent's reliance on para (b) of s 570(2), in which respect it contends that there were several unreasonable acts or omissions of the applicant which caused it to incur costs. 27 The first such circumstance was the applicant's rejection of a settlement offer made by the respondent on 17 December 2012. At that time, pleadings were closed but outlines of evidence were yet to be served. The offer would have involved the respondent paying the applicant the sum of $440,000 within 14 days of the making of an order that the proceeding be dismissed with no order as to costs. The applicant would be required to provide the conventional release, and the terms were to be kept confidential. 28 In its submissions on the present occasion, the respondent set out the components of what would have been the applicant's remuneration had she remained at work for a further year, and for a further year beyond that, after the termination of her employment: $551,842 and $597,236 respectively. The applicant was in fact paid the sum of $455,549.58 on termination and, according to contingent findings made by the trial Judge, this would be set off against any sum to which she would otherwise be entitled in the event of a successful result in the litigation. In the submissions of the respondent, the applicant would then have been required to bring into account the sum of $8,523, being the remuneration which she in fact earned in the period subsequent to her termination, and the sum of $597,236, being the sum which she would presumptively have earned had she taken steps to mitigate her losses (the evidence being, it seems, that, given a conscientious approach to job-search, the applicant would have found other, comparable, employment within 12 months). 29 Had this been a case on the contract for wrongful dismissal, there would have been considerable force in the respondent's submissions. However, damages was not the only, nor even the primary, remedy which the applicant sought. She sought an order for her reinstatement under s 545(2)(c) of the FW Act. In the respondent's letter of 17 December 2012, it was proposed that it was "fanciful" to suggest that the applicant had a reasonable prospect of being reinstated. However, aside from the suggestion, also made in the letter, that the applicant's claim on the merits was "weak", it is hard to understand what this proposal could have meant. Had the case succeeded, the prospect of the applicant securing a reinstatement order would not, on the authorities, properly have been described as fanciful. 30 I regard the respondent's offer of 17 December 2012 as a reasonable, even an attractive, one. There is, however, a distinction between failing to accept a reasonable offer and acting unreasonably in refusing an offer: see Alpine Hardwood (Aust) Pty Ltd v Hardys Pty Ltd (No 2) (2002) 190 ALR 121, 128 [34]-[35]. Notwithstanding the criticisms of the substance of the applicant's case which the respondent justifiably makes, it would be a considerable step for the court to take to hold that the applicant acted unreasonably in failing to abandon what was the primary remedy which she sought, in a proceeding in which she had the benefit of s 361 of the FW Act, in return for a payment of money, however generous. In the circumstances of the case, I am not persuaded that it is a step which should be taken. 31 The second circumstance upon which the respondent relies under s 570(2)(b) of the FW Act is the applicant's rejection of a later settlement offer made to her on 15 August 2013. This time, acceptance of the offer would have involved her receiving the sum of $200,000, inclusive of costs and interest, to be taxed as an "employment termination payment". It will be clear from my reasons above that I would not hold it to have been an unreasonable act when the applicant rejected this later offer. 32 The third circumstance upon which the respondent relies under s 570(2)(b) is that the applicant introduced into her case, and prosecuted, serious allegations of impropriety against Mr McIndoe when she lacked, and must have appreciated that she lacked, admissible evidence to support those allegations. If the respondent's point is justified on the facts, there can be no doubt but that the applicant's conduct would have been, in relevant respects, unreasonable. On an interlocutory motion before the Chief Justice on 26 April 2013, his Honour expressed the view that the making of such allegations would amount to an abuse of process and, with respect, I agree. It is necessary, therefore, to consider each of the allegations of impropriety with which this aspect of the respondent's application is concerned. 33 The trial Judge noted the applicant's allegation that "Mr McIndoe sexually harassed a female employee, Ms McLeod, at a staff party in 2006". Her Honour said that the applicant was not employed by the respondent at the time, and was not present at the party. Her Honour added that the alleged incident had not been reported to the respondent's human resources unit, and was not well known within the respondent. The applicant called no admissible evidence in support of the allegation. 34 The trial Judge expressed the following conclusion with respect to the staff party matter: In the circumstances, I was not persuaded that Ms Shea had a reasonable basis to believe that Mr McIndoe had sexually harassed an employee at the staff party in 2006 or had shown propensities that posed a current threat or problem to anyone in the workplace. While it is possible that a person could hold a genuine belief in an accusation without any reasonable basis, in this case, I was not persuaded that Ms Shea entertained a genuine belief that Mr McIndoe sexually harassed Ms McLeod in 2006. Ms Shea testified that she would consider it intolerable to report directly to or befriend a person who condoned, much less promoted, a culture of sexual harassment. Although well aware of Ms Barnett's claims about the alleged incident, she readily commenced employment at the respondent although it entailed working closely with Mr McIndoe, the alleged offender. Ms Shea explained that she did so because she did not know that Mr McIndoe was "a serial offender" and believed that he had apologised for the incident. The evidence indicates that, for some years, Ms Shea enjoyed working and socialising with Mr McIndoe. She never raised the 2006 party incident with Mr McIndoe or advised him that his conduct was inappropriate, although her responsibilities included safeguarding his reputation. There is no evidence that the alleged victim or any witness of the alleged incident other than Ms Barnett was offended by or complained about the 2006 party incident. There was no evidence that Ms Shea consulted the alleged victim or any witness save for Ms Barnett, or that any such person requested her to complain on his or her behalf. Moreover, on any view, by 2011, the incident was in the past and had no current impact on the respondent's workplace, employees generally or on Ms Shea's conditions of employment in particular. Ms Shea's apologies to Mr McIndoe on at least three occasions for including the allegation in the 21 June letter, and her concession to Mr McIndoe that she was not employed when the incident occurred but was motivated to accuse him due to anger and the advice of Ms Barnett, fortify the conclusion that she did not hold a genuine belief in its validity. It was, in my view, an unreasonable act for the applicant to have made this allegation in her case before the trial Judge. 35 The trial Judge noted the applicant's allegations that "Mr McIndoe attempted to engage in sexual misconduct, or evinced a propensity to do so, at a staff Christmas party in 2010". It turned out that the applicant was not present at the Christmas party and did not witness this misconduct. Neither, it seems, was any specific misconduct, or of specific behaviour "evincing" a propensity to engage in misconduct, reported to the applicant. Rather, this allegation was based on the the applicant's evidence that Mr Purvis had said to her after the party that he had had to follow Mr McIndoe around to "make sure that he behaved himself". Mr Purvis denied saying that, and the trial Judge accepted his denial. 36 The trial Judge concluded her consideration of the matter in the following terms: Further, I was not persuaded that Mr Purvis made the statement on which Ms Shea claimed to rely in making the allegation in the 21 June letter. Ms Shea's testimony was, in my view, evasive and unconvincing. I did not accept her evidence that Mr Purvis made the relevant statement or her denial that she knew that it was highly improbable that Mr McIndoe would engage in sexual misconduct at the function in the circumstances, of which she was well aware. It was highly unlikely either that Mr McIndoe, given his recent serious surgery, would attempt to engage in sexual misconduct at the 2010 party even if (which I do not find) he had a propensity to do so, or that Mr Purvis would state that Mr McIndoe had made such an attempt. In my opinion, the evidence did not establish that the applicant had a reasonable basis for believing to be true the allegation of actual or attempted misconduct by Mr McIndoe at the 2010 party. Nor was I persuaded that the applicant had a genuine belief in the validity of the allegation. It was, in my view, an unreasonable act for the applicant to have made this allegation in her case before the trial Judge. 37 The trial Judge noted the applicant's allegation that "Mr McIndoe used obscene language or language demeaning to women in the workplace and engaged in sexually predatory conduct towards subordinate female employees". A number of instances of this conduct were referred to. 38 The first instance was Mr McIndoe's description of a visiting female consultant as "a little blonde". In substance, the trial Judge upheld the allegation to this extent and described Mr McIndoe's use of the term as "inappropriate". Her Honour was not of the view that this language provided a genuine basis for any view on the part of the applicant that the respondent tolerated a lewd workplace culture, or that Mr McIndoe engaged in sexual misconduct, but I could not conclude that the applicant's making of the allegation amounted to an unreasonable act by her. 39 The second instance was Mr McIndoe's description of a female ministerial chief of staff as "hot" and sexually attractive. The applicant gave evidence that she heard Mr McIndoe make a comment, more than once, to the effect that he found Susanne Legena, the chief of staff for Peter Batchelor, the Victorian Minister for Energy and Resources, "hot", "very attractive" and "very sexy" so that if he were not married he would try his luck with her. Her Honour did not accept that evidence, preferring Mr McIndoe's evidence that he went no further than to refer to Ms Legena as "intelligent, articulate, smart and attractive" and "engaging, smart, bright and a person who people want to deal with". 40 The trial Judge concluded as follows: I considered Mr McIndoe's testimony credible. I was not persuaded that he made a comment in the terms alleged. Accordingly, it could not support the applicant's reasonable or genuine belief in sexual impropriety by Mr McIndoe or a lewd workplace culture. 41 Notwithstanding her Honour's conclusion, this was an instance in which the applicant gave direct evidence of conduct which would have sustained her allegation. I do not think that s 570(2)(b) of the FW Act is concerned with conduct constituted by nothing more than giving evidence which is not accepted by the court. I reject the contention that, in this respect, the relevant act on the part of the applicant was unreasonable. 42 The third instance was Mr McIndoe having "laughed and made obscene jokes after viewing pornography found on an employee's computer". The trial Judge noted that the applicant had given evidence that, in about 2008 or 2009, after Samantha Bray, a human resources manager at the respondent, was dismissed for misconduct when pornography was discovered on her work computer, Messrs McIndoe and Purvis laughed and joked to the applicant about the contents of Ms Bray's computer, discussed bestiality and gave graphic descriptions of the photographs they had seen. The applicant did not attribute any particular comment to Mr McIndoe, but said that his tone was "very jocular". 43 Mr Purvis and Mr McIndoe both denied that they had seen the pornography on Ms Bray's computer, and that they had discussed it, or joked about it. Her Honour accepted those denials. Her conclusion was as follows: In my opinion, the allegation that Messrs McIndoe and Purvis joked about and described pornography detected on a workplace computer was not established. Accordingly, it cannot support a reasonable or bona fide belief in sexual misconduct by Messrs McIndoe or Purvis or in a lewd workplace culture. Moreover, after the alleged incident, Ms Shea maintained her friendship with Messrs Purvis and McIndoe until May or June 2011. As stated above, she also continued voluntarily to socialise with Mr McIndoe, professed to enjoy his company and failed to alert him of the potential damage to his reputation. Her conduct is thus not consistent with a genuine belief that Mr McIndoe was guilty of sexual misconduct. 44 This is another instance of the applicant having given direct evidence of something she witnessed and heard, which evidence was not accepted. In my view, it falls into the same category as the second instance referred to above. I reject the contention that, in this respect, the relevant act on the part of the applicant was unreasonable. 45 The fourth instance was Mr McIndoe having "received a telephone complaint from the irate husband of a female employee whom he had sexually pursued". According to the trial Judge, this was something of which the applicant heard only indirectly, "via the rumour mill". Mr McIndoe denied the allegation. According to him, the telephone call from the husband involved only a complaint that his wife had been made redundant soon after returning from maternity leave. 46 On this matter, the trial Judge's conclusion was as follows: In such circumstances, not only is there no admissible evidence that Mr McIndoe was accused of sexual predation in a telephone conversation (which would not, in any event, establish its truth); there is nothing to suggest that Ms Shea had a reasonable basis for believing that Ms Reid's husband made the accusation or that it was true. She initially stated that the telephone call allegedly occurred in about 2007, but thereafter, Ms Shea continued to maintain a close, friendly relationship with Mr McIndoe for some years and did not advise or caution him about reputational damage from his alleged conduct. When challenged, Ms Shea explained the apparent inconsistency between her belief in Mr McIndoe's tendencies and her continued cordial relationship and voluntary social contact with him by testifying that she became aware of many of the allegations only in June 2011. That response appeared opportunistic and reflected poorly on her credit. I was not persuaded that Ms Shea held a reasonably based or genuine belief that Mr McIndoe had misconducted himself in relation to Ms Reid and had been reprimanded by Ms Reid's husband in a telephone call. Accordingly, the allegation cannot support a reasonable or genuine belief in misconduct by Mr McIndoe or in a lewd workplace culture, particularly as at June 2011, if, as Ms Shea at one point testified, she learnt of the allegation only after she left the respondent's employment. This is, in my view, a clear instance of the applicant having acted unreasonably. 47 The fifth instance was Mr McIndoe having "referred to a female employee's breasts". On this matter, the trial Judge referred to the applicant's evidence that, at the first employee briefing that she attended, Mr McIndoe said to her afterwards, when no-one else was present, "I was completely off my game today because I couldn't stop staring at Sam Bray's breasts. Do you think she has had a breast enlargement?" Mr McIndoe denied seeking the applicant's opinion on that subject, although he did observe that Ms Bray "dressed inappropriately for the office in a very low cut shirt, which made people uncomfortable". 48 The trial Judge's conclusion on this matter was: I was not persuaded that Mr McIndoe made the alleged comments and accordingly, they cannot support a reasonable or bona fide belief in sexual misconduct by Mr McIndoe or a lewd workplace culture. This is another instance of a conflict of evidence, where the applicant's version was based on a conversation to which she claimed to have been a party. I am not prepared to hold that her act in making this allegation was unreasonable. 49 The sixth instance was Mr McIndoe having presented a book on oral sex to Ms Barnett in the workplace, and discussed and displayed the book there. The trial Judge found that Mr McIndoe had indeed given Ms Barnett such a book, but that the presentation was done "discreetly and privately, not publicly", as "an amusing birthday gift". The applicant did not see the presentation of the book, but gave evidence that Ms Barnett showed the book to her in her (the applicant's) office, and that, later the same day, there were some people in Ms Barnett's office, including Mr McIndoe, who were "laughing and joking about the contents of the book". The applicant also said that Mr McIndoe displayed the book to Ms Barnett, to herself, and to two or three others who were present, on this occasion. There was no suggestion that the gift was not well-received by Ms Barnett, or that it was Mr McIndoe, rather than Ms Barnett, who was responsible for introducing the book to a wider (although, even then, not particularly wide) audience within the respondent's workforce. 50 With respect to this instance, the trial Judge said: The presence and discussion in the workplace of a book on oral sex would, in the usual course, be inappropriate and could constitute sexual harassment. I was not persuaded, however, that the book was displayed or circulated in the workplace. I accept that Mr McIndoe presented the book as a private gift to Ms Barnett and did not intend, encourage or authorise its production or discussion in the workplace. The propriety of the gift was accordingly a matter for the personal tastes and standards of the parties to the relationship. The evidence relating to the presentation and discussion of the book did not support the allegation that a lewd corporate culture prevailed in the respondent's workplace or a reasonable or genuine belief in such an allegation. This matter involves more than a mere conflict of evidence. Although there was a gravamen of substance in the applicant's allegation, the underlying truth of the matter is that this was a harmless gesture made by Mr McIndoe to Ms Barnett and, aside from joining in some banter about the book in circumstances where it was not he who initiated the occasion, Mr McIndoe bore no responsibility for making this a "workplace" subject, even on the evidence of the applicant herself. The allegation as made placed this episode in an entirely unjustified context, one which implied conspicuously inappropriate conduct on the part of Mr McIndoe. In my view, it was unreasonable of the applicant to have made this allegation. 51 The seventh instance was Mr McIndoe having stated that he had enrolled in a university course on historical deviance and pornography in Victorian England in order to gain access for himself and his friends to the "vast" restricted library holdings of pornography at Cambridge. In this area both the applicant and another witness gave evidence that, if accepted, would have justified a finding broadly consistent with the allegation. The trial Judge appears to have accepted that Mr McIndoe did enrol in a course of the kind alleged, and "informed people of his study in some terms". However, her Honour found it to be "very implausible that Mr McIndoe boasted to, or seriously informed [the applicant] or other employees that he had an appetite for pornography and pursued a university course or undertook a thesis in order to satisfy it". 52 In my view, this matter gives rise to nothing more than a conflict of evidence, or possibly of the applicant having misinterpreted what she was told by Mr McIndoe as a boast. In the circumstances, I am not persuaded that the applicant acted unreasonably in including this allegation in her case. 53 The next allegation (if that be the right word) made by the applicant against Mr McIndoe and identified by the respondent in support of its present application was a passage in a written submission signed by the applicant's counsel on the respondent's interlocutory application, in April 2013, to have certain proposed evidence ruled inadmissible. The whole of the relevant paragraph read as follows: The complaints make allegations of sexual and other misconduct in the workplace against employees of the Respondent, including Mr McIndoe. The fact that the decision-maker himself is a sexual predator in the workplace, and that one of the complaints about him personally, is obviously a matter which could rationally affect the assessment of the probability of the existence of a fact in issue in the proceeding, namely whether the fact of the making of one or more of these complaints was part of the reason for the adverse action. Such a person will have a very real incentive to dismiss any woman who complains of sexual harassment, especially against himself, both to stifle that complaint and to send a message to other victims in the organisation not to complain. 54 Assuming, as I must, that the description of Mr McIndoe as a "sexual predator" was based either in the evidence proposed to be called or in instructions given to counsel by the applicant, I must proceed on the footing that this was a statement by the applicant. Given the seriousness of the matter, I see no reason to treat this passage as no more than the advocate's flourish, as it were. So understood, I would regard the passage as presaging the kind of case which the applicant intended to run, and did run, as mentioned in para 37 above. I consider that the subject has been sufficiently dealt with in paras 38-52. There is no need to treat it as an independent element of the respondent's case under s 570(2)(b) of the FW Act. 55 The next limb of the respondent's application relates not to an allegation made by the applicant but to her attempt to place into evidence the report of David Caldwell, a forensic practitioner, setting out the content of a number of telephone text messages which had, apparently, been extracted from a mobile telephone previously used by Ms Barnett. On 27 August 2013, the trial Judge rejected the report, and the messages, as irrelevant. 56 On the content of the messages, her Honour said: Albeit the record of telephone calls is not reliable or complete even, apparently, in relation to those of Ms Barnett and Mr McIndoe, the text messages concern a number of different subjects, including family matters and the state and future of the interlocutors' personal relationship. Some messages, including those identified by senior counsel, refer to sexual matters and contain explicit sexual statements, erotic statements and expressions of sexual desire. While the applicant submitted that the tone and content of the relevant text messages were obscene, I was not persuaded that those attributed to Mr McIndoe would be adjudged obscene according to, or outrage, prevailing standards of decency when sent, as these messages were, in a private exchange between consenting adult sexual partners. It is unsurprising that such exchanges include risquÉ or sexual statements, particularly when part of a continuing dialogue which testifies to mutual encouragement and willing participation. 57 The means by which the applicant came into possession of the mobile telephone do not show her in a good light. Having ascertained from a former employee of the respondent, Ms Nicola Wocjik, that the latter had the former mobile telephone of Ms Barnett or Mr McIndoe in her possession, the applicant requested, and was given, the phone. What then happened was stated by the primary Judge as follows: Ms Shea stated that she initially did not know what the telephone contained but assumed that it contained confidential messages. She also assumed that such messages should have been cleared from the telephone. That is, Ms Shea implicitly acknowledged the probability that the messages remained on the telephone by oversight. Ms Shea nevertheless took the telephone to Ferrier Hodgson because she suspected that it might contain evidence which would assist her in this case. She did not seek Ms Barnett's consent to use the telephone or the messages and records produced from it by Ferrier Hodgson. Ms Shea stated that she had fallen out with Ms Barnett, who was her best friend in 2007. …. Ms Shea acknowledged that she did not know Ms Wocjik well. She did not ask Ms Wocjik if she were the lawful owner of, or entitled to, the telephone and assumed that it had belonged to Ms Barnett. Ms Shea had never seen any of the messages on the telephone before, although she stated that Ms Barnett had showed her other personal text messages she received from Mr McIndoe during the course of their relationship. 58 In the context of a need for an urgent ruling on the question, the trial Judge did not decide whether the applicant had obtained this telephone message improperly, within the meaning of s 138(1)(a) of the Evidence Act 1995 (Cth). But, picking up on a discussion of the subject by French CJ in Parker v Comptroller-General of Customs (2009) 252 ALR 619, 626 [29], her Honour held that the proposed evidence had been obtained "irregularly". She said: In my opinion, however, the way in which the telephone in this case was obtained and dealt with and the messages thereon extracted and recorded, was "abnormal" or "irregular". First, the circumstances bespoke a probability that the possessor of the telephone was not entitled to it. Such entitlement appeared contrary to the convention and practice of recycling telephones at the respondent which Ms Shea acknowledged. Although ownership of the telephone might nevertheless have passed by some lawful means to Ms Wocjik, Ms Shea did not clarify that by asking Ms Wocjik whether she was entitled to the telephone and could properly license Ms Shea to deal with it as she did. Secondly, the manifestly private nature of the text messages, including those that concern family and interpersonal matters, would, in the ordinary course, bespeak an obligation to treat them as confidential. Although first suspecting, and ultimately ascertaining that the telephone contained intimate personal messages of Mr McIndoe and Ms Barnett which she considered would or might assist her case, Ms Shea did not seek their consent or approval, for the obvious reason that it would have been withheld. 59 The question which now arises is whether it was an unreasonable act on the part of the applicant to obtain the mobile telephone in the way that she did and to attempt to place the messages on it into evidence. In my view it was. I so conclude not just because the proposed evidence was ruled inadmissible, although I would have to say that there would never have been any real doubt about that aspect. I take into account also, and particularly, the unseemly means by which the applicant came into possession of the telephone, and the strong probability, as would reasonably have appeared to the applicant at the time, that the messages on the telephone would have related exclusively to the private affairs of other individuals and would have been of utility to herself only for the embarrassment and humiliation that their exposure would visit upon Mr McIndoe, with whom she was then in a forensic contest. 60 It follows that the respondent should have its costs of the issue which was ruled upon by the trial Judge on 27 August 2013. 61 The final matters raised by the respondent involve two factual allegations contained in a supplementary outline of evidence served by the applicant and dated 1 August 2013. Of those, the first was no more than an elaboration upon what was to be the applicant's evidentiary case on the matter covered by paras 33-34 above. I need say nothing further on the subject here. 62 The second allegation related to Mr Merrick, and was in the following terms: I refer to paragraph 2 of the supplementary outline of evidence of Mr Merrick. Mr Merrick is in a personal relationship with a woman who was at the time he commenced the relationship, a secretary in the Retail business unit of the Respondent. Mr Merrick is in charge of this unit. This woman is now the executive assistant to the Respondent's Director of Human Resources, Tom Brown. She was promoted to this role after the commencement of the relationship with Mr Merrick with no interview process and no internal or external advertising for the role. 63 This allegation was persisted with at trial, and was dealt with by the trial Judge. It was the applicant's evidence that Mr Merrick's relationship with the woman started about ten months after she (the applicant) had left the employ of the respondent. The applicant said that she had pieced the allegation together from "credible sources". There was such a relationship, and the woman was moved to another position in the respondent. This was done by Mr McIndoe because the woman was the executive assistant of a member of staff who reported to Mr Merrick. Mr McIndoe said that the new position was "an equivalent level job". 64 Of this matter, the trial Judge concluded as follows: I was not persuaded that there was anything unlawful or improper about Mr Merrick's personal relationship with a fellow employee or that it, or the respondent's related arrangements, suggested the existence of a lewd workplace where sexual harassment or predation was prevalent or condoned. The allegation, of which Ms Shea became aware in 2012, did not support the existence of her reasonable or genuine belief in a lewd or predatory workplace culture as at June 2011 or at any time thereafter. 65 While it is hard to see how this allegation materially added to the applicant's case, and it is tempting to view it as a gratuitous swipe at someone who was to give evidence for the respondent, ultimately there was found to be substance in the factual skeleton of the allegation, albeit that the construction which the applicant sought to place on the facts was unfounded. Strictly, this might have been a matter to be raised in the cross-examination of Mr Merrick as something which impugned his credit, but it would, in my view, be to take too severe an approach to treat the inclusion of it in a memorandum of the applicant's proposed evidence-in-chief as an unreasonable act on her part. 66 The remaining matter for consideration here is the respondent's application for its costs to be taxed on an indemnity basis. Unreasonableness is the broad criterion which is now accepted as the basis for justifying the making of an indemnity costs order against a party who has rejected a Calderbank offer: Black v Lipovac (1998) 217 ALR 386, 432; CGU Insurance Limited v Corrections Corporation of Australia Staff Superannuation Pty Ltd [2008] FCAFC 173 [75]. Although I would not automatically apply the same criterion to the assessment of costs awarded consequent upon a ruling under s 570(2)(b) of the FW Act, in the circumstances of the present case I consider that that would be an appropriate and just approach to take. I cannot think of any good reason why a party whose costs have been inflated by an unreasonable act on the part of some other party, and who succeeds in the case on the issue to which the act was relevant, should have to fund the difference between the costs which are in fact incurred and the costs which would be allowable as between party and party. 67 In the light of my conclusions above, and given the constraints of s 570 of the FW Act, there can, of course, be no suggestion of an award of costs in relation to the application which has been disposed of by these reasons. I certify that the preceding sixty-seven (67) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jessup. Associate: Dated: 13 October 2014