Industrial Relations Commission of New South Wales CITATION : Van Huisstede and the Commissioner of Police (No.2) [2001] NSWIRComm 139 APPLICANT: Ian John Van Huisstede PARTIES : RESPONDENT: Commissioner of Police FILE NUMBER: IRC 440 of 1999 CORAM: Walton J Vice-President CATCHWORDS : Review of an order removing an officer from the Police Service - Orders made to reinstate officer - Application for indemnity costs made by applicant - Jurisdiction of Commission to award costs in relation to review proceedings - Principles applicable to application for costs under s181(2)(c) of the Act - Principles applicable to an application for costs on an indemnity basis - Relevant issue whether party against whom costs order was sought unreasonably failed to agree to a settlement of the claim - Statutory criteria under s181(2)(c) of the Act met - Failure by Commissioner to adequately investigate and assess grounds for removal of officer - Commissioner not have before him information necessary to make adverse findings as to allegations against officer - Failure by respondent to adequately respond to offers of compromise - Observations by member of Commission in conciliation may be relevant to assessing jurisdiction and exercise of discretion under s181(2) - Limitations of such observations when making such determinations - Observations by member of Commission relevant in this matter - Potential merit case not enough to indicate reasonable prospects - Insufficient regard to procedural difficulties - Not made serious response to offer of settlement - Exercise of discretion - Costs order on a party and party basis appropriate - Reject application for indemnity costs orders based on nature of case brought by parties - Order made for respondent to pay applicants costs on a party and party basis Industrial Relations Act 1991 LEGISLATION CITED : Industrial Relations Act 1996 s181 Police Service Act 1990 s181D Bankstown City Council v Paris (1999) 93 IR 209 Bartlett v Commissioner of Police (1993) 87 IR 436 Bigg v New South Wales Police Service (No. 2) (1998) 80 IR 434 Byrne v Australian Airlines (1995 ) 185 CLR 410 Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 Connor, Kim and Leichardt Uniting Church Homes [1993] NSWIRComm 96 Crisp v. Keng (Supreme Court of New South Wales, 27 September 1993, unreported, Court of Appeal) CASES CITED : Four Sons Pty Limited v Sakchai Limsiripothong (No.2) (2000) 100 IR 400 Kelly v Foley (1993) 51 IR 331 Maitland Hospital v. Fisher (No. 2) (1992) 27 NSWLR 721 Messiter v. Hutchinson (1987) 10 NSWLR 525 Newton v New South Wales Police Service (No.2) (1999) 87 IR 66 Oswald v New South Wales Police Service (No.2) (1999) 90 IR 42 Thors v Weekes (1989) 92 ALR 131 Tuholi Pty Ltd v Caltex Australia Petroleum Pty Limited [2001] NSWIRComm 7 Van Huisstede v Commissioner of Police (2000) 98 IR 57 HEARING DATES: 07/18/2000 DATE OF JUDGMENT: 06/25/2001 APPLICANT: Mr B Docking of Counsel Solicitor - Mr M Treharne Walter Madden Jenkins Solicitors LEGAL REPRESENTATIVES: RESPONDENT: Mr G Willis of Counsel Solicitor - Mr F Hutchison General Manager Legal Services NSW Police Service JUDGMENT: - 1 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES CORAM: WALTON J, Vice-President 25 June 2001 MATTER NO. IRC 440 OF 1999 IAN JOHN VAN HUISSTEDE AND THE COMMISSIONER OF POLICE. APPLICATION BY IAN JOHN VAN HUISSTEDE PURSUANT TO SECTION 181E OF THE POLICE SERVICE ACT 1990. DECISION [2001] NSWIRComm 139 1 An application was made by Ian John Van Huisstede ("the applicant") for a review of an order made by the Commissioner of Police ("the Commissioner") pursuant to s181D(1) of the Police Service Act 1990 ("the order") removing the applicant from the Police Service of New South Wales ("the Police Service"). 2 A decision in favour of the applicant was delivered by the Commission on 26 June 2000 (Van Huisstede v Commissioner of Police (2000) 98 IR 57), at which time leave was granted for an application as to costs to be filed within seven days. A costs application was subsequently made by the applicant in the following terms: Ian John Van Huisstede, the applicant, makes the following applications: (a) An application for an order of costs pursuant to s181(2)(c) of the IR Act 1996 (NSW) on the basis of the criterion that the respondent "unreasonably failed to agree to a settlement of the claim". (b) An application for an order of costs on an indemnity basis from 4 February 1999 being the date of his application for reinstatement. Alternatively, an order of costs on the basis of costs as agreed or assessed from the date of his application for reinstatement until conciliation proceedings before Marks J on 25 March 1999 and, furthermore, an order of costs on an indemnity basis since conciliation proceedings before Marks J on 25 March 1999. 3 Section 181 of the Industrial Relations Act 1996 ("the Act") is in the following terms: 181 Costs (1) Subject to the rules of the Commission and any other Act or law: (a) the Commission may award costs, and (b) costs are in the discretion of the Commission, and (c) the Commission may determine by whom and to what extent costs are to be paid, and (d) the Commission may order costs to be assessed on the basis set out in Division 6 of Part 11 of the Legal Profession Act 1987 or on any other basis. (2) However, the Commission when it is not in Court Session may award costs only in the following cases: (a) the Commission may award costs against an applicant if it considers that the application to it was frivolous or vexatious, or (b) the Commission may award costs against a party to proceedings who, in the opinion of the Commission, instituted proceedings without reasonable cause, or (c) the Commission may award costs against a party to proceedings under Part 6 of Chapter 2 (Unfair dismissals) who, in the opinion of the Commission, unreasonably failed to agree to a settlement of the claim or whose application was frivolous or vexatious, or (d) the Commission may award costs in proceedings for a breach of an industrial instrument or the recovery of money under Chapter 7, as provided by sections 357 and 373. ... (4) In this section, costs includes: (a) costs of or incidental to proceedings in the Commission, and (b) in the case of an appeal to the Commission, the costs of or incidental to the proceedings giving rise to the appeal, as well as the costs of or incidental to the appeal. 4 Both parties contended that the provisions of s181 of the Act were applicable to these proceedings. I consider that these submissions are well founded for the following reasons: 1. Subject to certain limited exceptions, section 181G(1) of the Police Service Act 1990 incorporates the provisions of the Act generally in relation to applications to the review of an order made under the Act, and not merely those provisions of the Act falling within Part 6 of Chapter 2; 2. The incorporation of the provisions of the Act by the operation of s181G(1) is only affected by the limited range of exceptions appearing in that section. Those exceptions do not include the provisions of s181 of the Act. 3. The provisions in the Act which are excluded from the review process by s181G(1) are not confined to those sections of the Act falling within Part 6 of Ch 2. It is reasonable to infer, therefore, that the legislature intended that those aspects of the Act which are brought into the review process by s181G are similarly not confined to the sections of the Act falling within Pt6 of Ch2. Evidence Relied upon by the Applicant 5 A chronology in the following terms was tendered by the applicant, and not disputed by the respondent. It was in the following terms: (a) 5 January 1999 - s181D Order signed removing the applicant from the N.S.W Police Service. (b) 25 January 1999 - s181D Order served upon the Applicant. (c) February 1999 - application seeking reinstatement filed (d) 26 February 1999 - Conciliation proceedings before Marks J - adjourned (e) 25 March 1999 - conciliation proceedings before Marks J (f) 29 March 1999 - letter of KJM [Kenneth James Madden] seeking reinstatement and all salary and entitlements that he would have received Annexure A to Affidavit of KJM. (g) April - reply of NSW Police Service advising no instructions as the Commissioner was overseas - Annexure B to Affidavit of KJM (h) 13 April 1999 - letter of KJM referring to in "the lamentable delays" and wanting advice if the Commissioner is going to reinstate - Annexure C to Affidavit of KJM. (i) 16 April - reply of NSW Police Service advising "We would be happy to consider any other proposal ..." Annexure D to Affidavit of KJM. (j) 20 April 1999 - letter of KJM confirming the applicant was seeking reinstatement, "Marks J pointed out a number of fundamental flaws in the process ..." and "... that upon the inevitable success of our clients application at the IRC for reinstatement, we will be making an application for costs". - Annexure E to Affidavit of KJM. (k) 27 April 1999 - letter of KJM pointing out there had been no response - Annexure F to Affidavit of KJM. (l) 27 April - reply of New South Wales Police Service claiming "I note your client does not wish to put forward any further proposal with respect to the conciliation of the matter" - Annexure G to Affidavit of KJM. (m) May 1999 - Parties report to Marks J that conciliation has failed. (n) May 1999 - letter of KJM concluding that it was a "Calderbank letter and as stated above, we will tender it on an application for indemnity costs". The applicant expressly relied upon the personal advice of Marks J to the Commissioner as to how he had failed as a decision maker and that the applicant "is a walk up start" and "had no other alternative" other than to reject any terms other than reinstatement - Annexure H to Affidavit of KJM. (o) 20 July 1999 - letter of KJM stating "we again suggest that your client should seriously consider his position" and "we will seek an order for indemnity costs" - Annexure I to Affidavit of KJM. 6 The applicant also relied upon an affidavit of Kenneth James Madden sworn 5 July 2000. The affidavit expands upon the chronology as to the conciliation process before Marks J. Mr Madden gave a summary of observations made by his Honour during the course of the conciliation (which were not challenged in cross-examination) as follows: 5. The Honourable Justice Marks indicated he had perused the documents in Exhibit A and expressed a view that the Respondent had failed to afford the Applicant procedural fairness when removing him from the Police Service and as such the Applicant "has a walk up start" to his Application before the Industrial Relations Commission. … 7. The Conciliation resumed at 2:30pm with the Respondent present. The Honourable Mr. Justice Marks took the Respondent to the document headed Commissioner's Comments Re Section 181D Notices found at paginated page 4 of Exhibit A and pointed out in particular that:- i) The applicant had never been afforded the opportunity of addressing those matters outlined in paragraph 3 therein and as such had been denied procedural fairness. ii) He had taken into account irrelevant matters when considering the removal of the Applicant and failed to take into account relevant matters such as any transcript of evidence given at either the committal proceedings or the trial of the Applicant other than that provided by the Applicant and annexed to his Response. iii) He could not have determined to remove the Applicant from the Police Service based on the material available to him because that material supported the Applicant's case. iv) The manner in which he had processed and considered the removal of the Applicant from the Police Service had denied him procedural fairness. v) That as he had failed to discharge his functions according to law, he should reconsider his decision to remove the Applicant from the Police Service. 7 Mr Madden also gave evidence as to the circumstances arising after the failure of conciliation as follows: 16. On 5 May 1999 I appeared before the Honourable Justice Marks to advise him that the formal conciliation had failed. The Judge expressed a view that he was not surprised the Applicant was not prepared to consider any alternative short of reinstatement to the Police Service and he thought he had no alternative other than to reject any compromise falling short of that remedy. 8 Annexed to the affidavit were various pieces of correspondence, which were relied upon as containing the offers of settlement that the applicant claimed had been 'unreasonably refused' by the respondent. It is necessary to set out in some detail the contents of that correspondence. 9 The first relevant piece of correspondence was dated 29 March 1999. Having regard to the chronology, this correspondence apparently emerged during the conciliation proceedings before Marks J. The only offer that can be gleaned from this correspondence is in the following terms: It is our most respectful suggestion to you, that given the comments made by Marks J, that the only course open to your client is to revoke the Notice and reinstate out client to the Police Service. That reinstatement to be on terms agreed between us but it is only fair to let you know that we would expect nothing less than reinstatement and that our client receive all salary and other entitlements that he would have received had he not been removed. 10 There was some delay in a formal response to the offer due to difficulties in obtaining instructions. The response from the respondent came by way of a letter dated 16 April 1999, in the following terms: My client is not prepared to conciliate this matter by way of the withdrawal of the section 181D Notice and reinstatement of your client. We would be happy to consider any other proposal you may wish to raise with respect to the conciliation of this matter. In the absence of any other proposal it would appear that the matter will need to be relisted before Justice Marks in order that he can certify that conciliation has failed. The matter would then need to be placed before another Justice for the purposes of a hearing of the application. 11 The applicant's letter in reply, dated 20 April 1999, was in the following terms: We note by your letter of 16 April 1999 that your client will not reinstate Mr. Van Huisstede to the Police Service. We also note that you have asked us to put forward any other proposal to conciliate the matter. Please note, our client has no other proposal to put forward other than that the matter be withdrawn and that he be reinstated to the Police Service. … Marks J., pointed out to your client a number of fundamental flaws in the process which led to the Order being issued by your client, removing our client from the Police Service. We advise, that upon the inevitable success of our client's application at the IRC for reinstatement, we will be making an application for costs. 12 This was followed by a reply from the respondent in which it was acknowledged that the applicant "does not wish to put forward any further proposal with respect to the conciliation of this matter" and, as such, the respondent agreed that the matter would need to proceed to arbitration. 13 The final piece of correspondence from the applicant to the respondent, dated 7 May 1999, followed the final appearance before Marks J. The letter set out various comments that were said to have been attributable to Marks J during the conciliation (set out above from the affidavit), and then went on: Probably all that needs to be further said is that Marks J commented that if he was to hear out client's case, the Mr Van Huisstede "is a walk up start" to succeed. When the matter was before his Honour on 5 May 1999, his Honour commented that he was not at all surprised that our client had not offered any alternative to reinstatement. His Honour said that he "would have thought" that Mr Van Huisstede "had no alternative" other than to reject any terms other than reinstatement to the Police Service. Those comments were in the context that his Honour had indicated previously that your client's case was hopeless (our expression not his Honour's). It must be blindingly obvious to your client that Mr Van Huisstede is going to be successful with his appeal. We appreciate that another Judge of the IRC will hear the arbitration, but given the remarks of Marks J, we implore your client to not contest our client's application. We again ask that you client reconsider his decision, and he determine to withdraw the Order removing Mr Van Huisstede from the Police Service and he reinstates our client. If this matter proceeds to a hearing, we will (as we have already advised you) seek an order for costs on an indemnity basis, and in support of that application we will tender this letter. Our offer of compromise is in the following terms:- 1. Your client rescinds/withdraws the Order removing our client from [t]he Police Service 2. Our client is reinstated to the Police Service on terms no less favourable than those that would have applied to him if he had not been dismissed. 3. No Order as to costs. … 14 Mr Madden conceded, in cross-examination that there was another offer made to the applicant, which in broad terms, involved the order being revoked on the condition that the applicant would then immediately resign. This offer was rejected by the applicant. 15 There was no evidence led from the respondent on the issue of costs and no issue was taken by the respondent as to there being power in the Commission to make an order as to costs in these proceedings. Submissions for the Applicant 16 Mr Docking of counsel, who appeared for the applicant, relied on Kelly v Foley (1993) 51 IR 331 and Connor, Kim and Leichhardt Uniting Church Homes [1993] NSWIRComm 96 in submitting that matters raised in conciliation are appropriate to be raised in proceedings on a costs application. Relying on Bankstown City Council v Paris (1999) 93 IR 209, Mr Docking also submitted: (a) The respondent's conduct meant that "… there had been a failure on the part of a party to properly conciliate proceedings to the extent that they have failed reasonably to facilitate a potential settlement of them." (b) One consideration crucial to the determination of this issue is the inadequate nature of the respondent's investigation of the matter. See Van Huisstede [221-222], [231-233] and [251]. (c) Another consideration crucial to the determination of this issue is the inflexible approach adopted by the respondent in relation to settlement on this occasion. The respondent failed in its obligation to consider in an objective way the strengths of its case in arbitration. 17 In his oral submissions, Mr Docking contended that the Act required significant weight and importance to be given to the conciliation process and that the observations made by Marks J were simply an indication as to the relevant strengths and weaknesses of the applicant's case. 18 He submitted that the comments made by Marks J, which were supported by the findings made by the Commission in the substantive judgment delivered on 26 June 2000, clearly indicated that the respondent acted upon a fundamentally inadequate assessment of the available information. It was, inter alia, this fact that provided the applicant with a compelling case in relation to the costs application. 19 It was submitted that the respondent failed to give adequate consideration to the objective strengths and weaknesses of its case before adopting its inflexible approach to conciliation. 20 It was also submitted that the "offer" which the respondent had "unreasonably failed to agree" to was that found in the letter from the applicant's solicitor to the respondent's solicitor dated 7 May 1999 which was is in the following terms : We again ask that your client reconsider his decision, and he determine to withdraw the Order removing Mr Van Huisstede from the Police Service and he reinstates our client. If this matter proceeds to a hearing, we will (as we have already advised you) seek an order for costs on an indemnity basis, and in support of that application we will tender this letter. Our offer of compromise is in the following terms:- 1. Your client rescinds/withdraws the Order removing our client from [t]he Police Service 2. Our client is reinstated to the Police Service on terms no less favourable than those that would have applied to him if he had not been dismissed. 3. No Order as to costs. 21 Upon the Commission raising with Mr Docking whether this "offer of compromise" was to the effect that the respondent should entirely withdraw its opposition to the application, he submitted: DOCKING: Yes, your Honour. At the risk of being repetitive, your Honour would look at the objective facts, which include his Honour Justice Marks' comments that the applicant, in effect, is a walk up start, and the matter later came back before his Honour Justice Marks , his Honour agreed that really the applicant had no other alternative, was the expression used by his Honour Justice Marks , other than to reject any terms other than reinstatement … 22 With regard to costs on an indemnity basis, Mr Docking relied on Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 and Bankstown City Council for the submission that indemnity costs were warranted in this case on the basis that: (a) The respondent continued the s181D order in wilful disregard of known facts or clearly established law. (b) The respondent made allegations which ought never to have been made. (c) The respondent did not settle the proceedings after offers were made by the applicant to compromise these proceedings. 23 Mr Docking submitted that the weaknesses in the respondents' case were never going to be cured in any way by other evidence that could have been led in these proceedings and, therefore, the respondent continued the s181D order in wilful disregard of known facts. As those facts clearly disclosed procedural unfairness, it was submitted, the continuation of the proceedings was also in disregard of established law: see Bigg v New South Wales Police Service (No. 2) (1998) 80 IR 434, Oswald v New South Wales Police Service (No.2) (1999) 90 IR 42, Newton v New South Wales Police Service (No.2) (1999) 87 IR 66 and Byrne v Australian Airlines (1995 ) 185 CLR 410. 24 It was also submitted that the applicant would be significantly out of pocket as a result of the proceedings as he was only partially funded by the Police Association of New South Wales. Submissions for the Respondent 25 In the written submissions filed on behalf of the respondent, Mr Willis, counsel for the respondent, submitted that the comments of Marks J were made at a very preliminary stage of the proceedings and that, as there is some scope for the introduction of new evidence in review proceedings, the respondent was entitled to anticipate that the case ultimately presented may be stronger than that examined by Marks J. 26 It was the position of the respondent at the conciliation, which he personally attended, and beyond, that the respondent was "happy to consider any other proposal" the applicant wished to put, but that the respondent was not prepared to offer reinstatement. It was submitted that the applicant would settle for nothing less and that no alternative proposal was ever put by the applicant. 27 Mr Willis submitted that the Commission can only award costs against the respondent if it is of the opinion that he unreasonably failed to agree to a settlement of the applicant's claim. In that context the following considerations were relevant: (a) The allegations against the Applicant were not made by the Respondent, they were made by three young women; (b) the allegations made against the Applicant were of serious criminal offences involving conduct that is incompatible with suitability to remain a police officer; (c) the Respondent is charged with the statutory responsibility of managing and controlling the Police Service – s8(1) Police Service Act 1990. Those responsibilities must be taken to include managing it in a way that maintains the integrity of the Police Service and maintains public confidence in it; (d) In making his decision to remove the Applicant, the Respondent was clearly concerned about public perception and public confidence. It is not unreasonable to suggest that these considerations also weighed in his mind in relation to the question of reinstating the Applicant; (e) the review provisions of Division 1C of the Police Service Act are relatively new provisions. The Commission had heard only one previous case to completion ( Bartlett v Commissioner of Police (1993) 87 IR 436) prior to hearing this case. The Applicant in that case chose to conduct his case in a manner which amounted to more of a challenge of the factual issues; (f) there were still many issues to be resolved on the construction of the legislation, involving the manner in which reviews were to be conducted. In particular, it was unclear whether in cases such as this, the Respondent was required to, in effect, conduct a retrial of the same issues litigated in the criminal trial and prove the conduct relied upon; (g) in those circumstances, the Respondent was entitled to test the legislation by asking the Commission to decide this case; 28 It was submitted the respondent did not adopt an inflexible approach to conciliation as reinstatement was not the only possible outcome of the proceedings and it was always the respondent's position that he would consider any proposal the applicant was prepared to make. 29 In relation to the question of costs on an indemnity basis, the respondent submitted: (a) the respondent did not continue the s181D order in wilful disregard of known facts or clearly established law. The facts were very much at issue and the applicable law had not been determined; (b) the allegations against the Applicant were not made by the Respondent. They were made by three young women who were members of the public; (c) the only offer made by the Applicant was for reinstatement. The Respondent does not see that as being an offer of compromise. 30 In his oral submissions, Mr Willis emphasised that until the decision by the Commission in Van Huisstede, there had not been a definitive decision of the Commission as to the operation of the Police Service Act 1990 bearing upon the issues in this case. It was difficult, therefore, for the respondent to assess the relevant strengths and weaknesses of his case in the conciliation. It was, however, conceded that the respondent could not have improved his position in relation to the "procedural unfairness issues". General Principles 31 The parties did not put submissions on this issue at any length in the proceedings, and so I do not consider it appropriate to consider this issue in any great length. For present purposes I consider it appropriate to adopt the comments of the Full Bench set out above in Kelly v Foley as I consider that the relevant provisions of s181 of the Industrial Relations Act 1996 are in relevantly similar terms to those there under consideration by the Full Bench in Foley. 32 The principles applicable to determining an application for costs pursuant to s181(2)(c) of the Act, were comprehensively discussed by a Full Bench of this Commission in Bankstown City Council v Paris (at 219 - 220). Due to the significance of that decision to the issues raised in this matter, it is appropriate to set out extensively the relevant passages from that decision. Those extracts are as follows: Section 181(2)(c) on its face is a provision which is designed to apply only to unfair dismissal proceedings. It is the only provision designed to be applied specifically in that context. Also, when read in terms of the other provisions in the Act as to costs, it is one of only three provisions which may have application to unfair dismissal proceedings. The other provisions are paragraphs (a) and (b) of s 181(2). However, those provisions apply to many other proceedings before the Commission and, unlike the particular limb of s 181(2)(c) relied on in this application, they are designed to operate where the Commission considers either the application itself, or the institution of the proceedings, was affected by considerations which made it manifestly inappropriate for the proceedings to have been commenced. The relevant part of s 181(2)(c), on the other hand, does not require the Commission to focus upon the circumstances of the commencement of the proceedings, or to consider only the situation of the applicant. Instead the Commission is required to consider in a more general way, the conduct of the party in respect of which an application for costs is made; and, in that regard, to consider the conduct of the party in relation to the question of settlement of the claim. … Construing the relevant part of s181(2)(c) in its overall statutory context, we conclude that the evident purpose of the provision is to encourage the settlement of proceedings to which it applies The criterion set out in the provision is to be applied objectively and requires a consideration of the whole of the conduct of the party against whom the order is sought, or some discrete part of that party's conduct, with a view to ascertaining whether it unreasonably failed to agree to a settlement of the claim. We also consider that on the proper construction of the provision, an affirmative conclusion may be reached on at lest two bases. First, where there was a proposal put by a party which should be described as a reasonable settlement of the claim and that was not agreed by the other party. The second situation in which the criterion could be satisfied is where the course of conduct of the party over a relevant period could be said to amount to conduct inconsistent with an intention to settle the proceedings on any basis that could be considered reasonable. We emphasise that, although the legislature has clearly intended that there be strict limits on the power of the Commission to award costs in unfair dismissal proceedings, the legislature has also evinced an intention that costs orders be available in circumstances where there has been a failure on the part of a party to properly conciliate proceedings to the extent that they have failed to reasonably to facilitate a potential settlement of them. Further, the Commission is obliged to consider all relevant circumstances in deciding whether such failure has occurred. Once the statutory criterion has been met, the Commission's broad powers and discretions under s 181(1) are available for exercise. When the circumstances of this matter are approached accordingly, two particular considerations are crucial to the determination of this issue. The first is that part of the decision on appeal, which is included in the extract set out earlier, where reference is made to the inadequate nature of the appellant's investigation of the matter and that, in the context of that investigation, three employees, including the respondent, were "tarred with the same brush" notwithstanding the different circumstances pertaining to the respondent. The second consideration, which is to be considered in the context of the other matters adverted to, was the failure and thus apparent unwillingness of the appellant, to respond to the various offers of compromise and settlement made on behalf of the respondent. The one exception to the appellant's otherwise consistent course of conduct was the proposal made by it on the second last day of a five day hearing which invited the respondent to capitulate. Only a very short period (in the order of a few hours) was provided for the respondent to consider the offer. … Far from indicating any retreat from the inflexible approach adopted by the appellant, its approach in relation to settlement on this occasion, served only to emphasise the consistent position that had been adopted. We emphasise that there will be many circumstances in which parties to litigation, including unfair dismissal proceedings, may appropriately take a firm position generally, including on the question of conciliation or settlement. Nevertheless, such a position runs significant risks in terms of the exercise of the power and discretion under s181(2)(c). This is particularly so where such a position is assumed without due regard to the policy of the Act which requires parties to take seriously their obligation to attempt to settle the proceedings. That in turn involves an obligation to consider in an objective way the strengths or limits upon the case that they will be propounding should the matter proceed to arbitration 33 The decision in Bankstown City Council v Paris was followed in Four Sons Pty Limited v Sakchai Limsiripothong (No.2) (2000) 100 IR 400. The Full Bench in Four Sons discussed the obligations imposed on parties to proceedings under s84 of the Act as follows (at [11]): The obligations imposed on parties to proceedings under s 84 of the Act, as identified in the Full Bench judgment in Bankstown City Council v Paris, require parties to such proceedings to undertake a responsible and careful assessment of the prospects of the litigation, in the absence of which an unsuccessful party may realistically face the prospects of a costs order being made against it. In those circumstances, it may often be appropriate for a party to consider making an offer to settle, even if the offer could be seen, either with the benefit of hindsight or otherwise, to be at a rather low level. However, the making of such an offer on "the low side" does not exhaust the responsibilities of a party to reasonably attempt to settle the claim. It is conceivable that if the respondent had responded to those offers in a more timely way, the proceedings may have settled. We doubt, however, that that is the appropriate finding on the evidence before us. Rather, the evidence as to further negotiations makes plain that the appellant had no realistic intention to make an offer which was likely to settle the proceedings before McKenna C. However, it would be inappropriate not to take into account the lack of a timely response from the respondent to the nominal offers of settlement which were made by the appellant in August and September 1999. 34 The principles to be applied in determining whether costs should ordered on an indemnity basis were considered by the Full Bench in Bankstown City Council v Paris as follows (at 224): We consider that the following principles should be applied in relation to the application for indemnity costs made in circumstances where the Commission has held that the first criterion in s 181(2)(c) has been held to be satisfied, and an application for costs is made. The Commission can properly, in the appropriate exercise of its discretion, make an order for indemnity costs. The power to make a costs order of that kind is clearly available because of the terms of s 181(1)(b). It must, however, be recognised that the exercise of discretion is being called for in the context of circumstances which are out of the usual. That is, the discretion is only available in non-Court Session matters where one or more of specified criteria are met. Secondly, although the finding that a relevant criterion has been met may, in some circumstances, be satisfaction of circumstances which might lead to the award of indemnity costs, and although the existence of such circumstances is relevant to the grant of costs on that basis, the Commission should exercise the discretion in full recognition of the caution that should be exercised before making a costs order on a basis other than that costs should simply follow the event, since that is the way in which a discretion to order costs would be exercised "regularly and judicially": see, for example, Moama Bowling Club Limited v Armstrong (No 2) (1995) 64 IR 264 at 267 per Cahill Deputy CJ and Peterson J. Nevertheless, and thirdly, provided such caution is exercised, where the circumstances clearly fall within those where the courts have recognised that indemnity costs should, or may, be granted, then the Commission should consider, in the exercise of its discretion, whether costs should be awarded on that basis. Nevertheless, even at that stage of the exercise of the discretion, the Commission is to recognise that, as the authorities in relation to indemnity costs make clear, the categories in which the discretion may be exercised are not closed and the exercise of the power in relation to indemnity costs remains throughout discretionary. The discretion must be exercised judicially. We have paid regard to the detailed discussion of principles set out in the judgment of Shepherd J in Colgate-Palmolive Company v Cussons Pty Limited , particularly to the distillation of authority set out therein at 232-234. On a consideration of those authorities it is clear that, for example, a court (or this Commission) ought not usually make a payment of costs on a basis other than the party and party basis; and there must be circumstances which would warrant a court (or this Commission) departing from the usual course. 35 The passages in Colgate Palmolive referred to by the Full Bench were as follows (at 234): 24. It seems to me that the following principles or guidelines can be distilled out of the authorities to which I have referred:- 1. The problem arises in adversary litigation, i.e. litigation as between parties at arm's length. Different considerations apply where parties may be found to be entitled to the payment of their costs out of a fund or assets being administered by or under the control of a trustee, liquidator, receiver or person in a like position, eg. a government agency or statutory authority. 2. The ordinary rule is that, where the Court orders the costs of one party to litigation to be paid by another party, the order is for payment of those costs on the party and party basis. In this Court the provisions of Order 62, rules 12 and 19, and the Second Schedule to the Rules will apply to the taxation. In many cases the result will be that the amount recovered by the successful party under the Order will fall short of (in many cases well short of) a complete indemnity. 3. This has been the settled practice for centuries in England. It is a practice which is entrenched in Australia. Either legislation (perhaps in the form of an amendment to rules of Court) or a decision of an intermediate court of appeal or of the High Court would be required to alter it. No doubt any consideration of whether there should be any change in the practice would require the resolution of the competing considerations mentioned by Devlin LJ in Berry v British Transport Commission and Handley JA in Cachia v. Hanes on the one hand and by Rogers J in Qantas on the other. The relevant passages from the respective judgments have been earlier referred to. 4. In consequence of the settled practice which exists, the Court ought not usually make an order for the payment of costs on some basis other than the party and party basis. The circumstances of the case must be such as to warrant the Court in departing from the usual course. That has been the view of all judges dealing with applications for payment of costs on the indemnity or some other basis whether here or in England. The tests have been variously put. The Court of Appeal in Andrews v. Barnes (1988) 39 Ch D 133 at 141 said the Court had a general and discretionary power to award costs as between solicitor and client "as and when the justice of the case might so require." Woodward J in Fountain Selected Meats appears to have adopted what was said by Brandon LJ (as he was) in Preston v. Preston ((1982) 1 All ER 41 at 58) namely, there should be some special or unusual feature in the case to justify the Court in departing from the ordinary practice. Most judges dealing with the problem have resolved the particular case before them by dealing with the circumstances of that case and finding in it the presence or absence of factors which would be capable, if they existed, of warranting a departure from the usual rule. But as French J said (at 8) in Tetijo , "The categories in which the discretion may be exercised are not closed". Davies J expressed (at 6) similar views in Ragata . 5. Notwithstanding the fact that that is so, it is useful to note some of the circumstances which have been thought to warrant the exercise of the discretion. I instance the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud (both referred to by Woodward J in Fountain and also by Gummow J in Thors v. Weekes (1989) 92 ALR 131 at 152; evidence of particular misconduct that causes loss of time to the Court and to other parties (French J in Tetijo ); the fact that the proceedings were commenced or continued for some ulterior motive (Davies J in Ragata ) or in wilful disregard of known facts or clearly established law (Woodward J in Fountain and French J in J-Corp ); the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions (Davies J in Ragata ); an imprudent refusal of an offer to compromise (eg Messiter v. Hutchinson (1987) 10 NSWLR 525, Maitland Hospital v. Fisher (No. 2) (1992) 27 NSWLR 721 at 724 (Court of Appeal), Crisp v. Keng (Supreme Court of New South Wales, 27 September 1993, unreported, Court of Appeal) and an award of costs on an indemnity basis against a contemnor (eg Megarry V-C in EMI Records ). Other categories of cases are to be found in the reports. Yet others to arise in the future will have different features about them which may justify an order for costs on the indemnity basis. The question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on a party and party basis. 6. It remains to say that the existence of particular facts and circumstances capable of warranting the making of an order for payment of costs, for instance, on the indemnity basis, does not mean that judges are necessarily obliged to exercise their discretion to make such an order. The costs are always in the discretion of the trial judge. Provided that discretion is exercised having regard to the applicable principles and the particular circumstances of the instant case its exercise will not be found to have miscarried unless it appears that the order which has been made involves a manifest error or injustice. 36 The principles as to indemnity costs have been recently considered by Wright J, President, in Tuholi Pty Ltd v Caltex Australia Petroleum Pty Limited [2001] NSWIRComm 7. In that matter his Honour firstly considered the judgment of Badgery-Parker J in Rouse v Sheperd (No 2) (1994) 35 NSWLR 277. He then proceeded to consider other authorities, which are relevant in the present matter, as follows (at [30] and [31]): 30 Another judgment which also synthesises relevant authority in this area, albeit with somewhat different emphases to that of the judgment of Badgery-Parker J in Rouse v Shepherd (No 2) and which does so by reference to the other important Full Bench judgment in this jurisdiction is the judgment of the Full Bench of the Court Session (Bauer, Peterson and Marks JJ) in Australian Mutual Provident Society v Avis (unreported, Matter Nos IRC96/5473 and IRC96/5941, 18 December 1997). Their Honours' consideration included the following: A number of observations have been made about the circumstances in which costs may be ordered on an indemnity basis in decided cases. In Boner v Anderson (No 2) (1993) 50 IR 406 Hill J said (at 475): There is little doubt that orders for costs on an indemnity basis still constitute exceptions to the general rule. While costs are, under the Act and the Rules, within the absolute discretion of the Court, nevertheless the Court must exercise its discretion judicially. Many of the criteria upon which such discretion is exercised in cases involving indemnity costs are to be found in the cases to which Mr Shaw referred and in a number of other cases dealing with the matter. It is fair to say that generally speaking an order for costs on an indemnity basis is justified in a case in which there are special or unusual features of an unmeritorious or improper nature surrounding the case of one party (usually the loser) which make it unreasonable and unfair that the successful party should be out of pocket as a result of the proceedings. It is unnecessary to traverse the cases in any detail; they demonstrate in one form or another special or unusual circumstances which manifest themselves in improper or unmeritorious conduct by the unsuccessful party as, for example, in cases involving the maintenance of a vexatious claim or defence, the institution and/or maintenance of an action or defence which, while not vexatious or involving an ulterior or collateral purpose, may, on a rational basis, be described as untenable or doomed to failure and cases where a party has conducted its case in wilful disregard of known facts or clearly established law. However, even where there are special or unusual circumstances attaching to a particular case it does not follow as of course that indemnity costs will be awarded. But it may be observed, and the authorities demonstrate, that the categories of special or unusual circumstances justifying indemnity costs are not closed; a too rigid or narrow approach can lead to error in the exercise of the discretion. (See generally on indemnity costs Singleton v Macquarie Broadcasting Holdings Ltd and Qantas Airways Ltd v Dillington (unreported, Supreme Court, 14 May 1987) and Baltic Shipping Co v Dillon (1991) 22 NSWLR 1 at 33 - 35, per Kirby P, Gleeson CJ concurring. These observations were approved by the Full Court of the Industrial Court of New South Wales in Anderson v Boner (1993) 52 IR 114. ... The New South Wales Court of Appeal considered the appropriateness of making an order for the payment of indemnity costs on appeal in Huntsman Chemical Co (Australia) Ltd v International Pools (Australia) Ltd (1995) 36 NSWLR 242. The judgments of Kirby P and Mahoney JA (as they then were) suggest that a cautious approach should be adopted to the awarding of indemnity costs, especially on appeal. This is consistent with the approach taken by Kirby P in Baltic Shipping Co v Dillon (1991) 22 NSWLR 1 (at 32 - 4). Despite certain decisions (referred to by Hill J in Boner v Anderson (No 2)) to the effect that there should be an increased tendency towards the awarding of indemnity costs, we consider that there is still in existence and operation a general approach to the effect that costs will be normally awarded on a party-party basis with indemnity costs to be awarded in the more exceptional case where conduct of a party justifies it. Hill J referred to those matters this way: ... a case in which there are special or unusual features of an unmeritorious or improper nature surrounding the case of one party (usually the loser) which make it unreasonable and unfair that the successful party should be out of pocket as a result of the proceedings. The view of Morling J in Tobacco Industry Case, consistently with our thinking, was that fierce opposition to the claim was insufficient to ground indemnity costs; something more is needed. It seems to us that findings that the applicant should succeed under s 106 with respect to conduct which is unfair, harsh or unconscionable would be insufficient to meet that test. Further, the fact that the respondent has acted in a way which justifies the application of the section would equally be insufficient. 31 Lastly, on the question of general principles, I should refer to a passage relied upon by the applicants in the recent judgment of Greg James J in Lolomanaia v Roads and Traffic Authority [2000] NSWSC 780 at [22]. Although his Honour was dealing with a slightly different matter, that is, the question of the extent of indemnity provided by indemnity costs, his Honour did, however, make an important observation in these terms: It is clear that costs on an indemnity basis have increasingly more frequently become available and that, although generally costs should not be seen as a punishment of an unsuccessful party, either when they are awarded or in the extent to which they [are] awarded, regard must be had to the principle that costs operate by way of compensation to the successful party for what has had to be incurred in successfully asserting that party's rights in court. It must be noted that indemnity costs are limited to those costs which are reasonably incurred in prosecuting the proceedings to a successful conclusion. Costs on an indemnity basis merely restore fully the successful party's position. 37 His Honour then gave an overview of these general authorities, with which I concur, as follows (at [40]): I consider that it is possible to deduce the following propositions for the present matter from the more general authorities earlier referred to: 1. It is only in exceptional cases where a court would make a costs order other than on the usual party/party basis. 2. The grant of indemnity costs is to be seen as an unusual and exceptional course and would only occur where there is some special or unusual feature of the case to justify the Court in departing from the usual practice. 3. Nevertheless, the grant of indemnity costs is, as with any exercise of judicial discretion, one to be exercised in all the circumstances of the case and, provided regard is had to the "exceptional" nature of such an order, the primary consideration with all such discretionary orders is that it will occur "as and when the justice of the case might so require". 4. Although most judges dealing with the problem have resolved the particular case before them by dealing with the circumstances of that case and finding in it the presence or absence of facts which would be capable, if they existed, of warranting a departure from the usual rule, nevertheless "the categories in which the discretion may be exercised are not closed". 5. Further, a too rigid or narrow approach may lead to error in the exercise of discretion. 6. Although there are a number of recent judgments to the effect that there should be an increased tendency towards the awarding of indemnity costs, such statements should be applied with great caution in the light of the existence and operation of the general approach as to the usual way in which costs orders will be made. 7. It is also important to ensure that considerations such as mere "fierce opposition to the claim" or the conduct of a respondent which might justify the grant of the substantive application are not matters which, in themselves, would lead to the grant the costs on an indemnity basis. Consideration 38 In order for the jurisdiction of the Commission to award costs to be enlivened in this matter (in the sense of the jurisdictional 'gateway' referred to in Four Sons at [13]) the Commission must first find either that the application initiating the proceedings were frivolous or vexatious, or that the party against whom the costs order is sought "unreasonably failed to agree to a settlement of the claim". It is only the latter statutory test which is relevant in this matter. 39 The Full Bench in Bankstown City Council (at 219) identified that there were at least two bases upon which the Commission may reach an affirmative conclusion that the statutory criteria in s181(2)(c) of the Act had been met in a particular case. 40 The two situations identified by the Full Bench as meeting the statutory criteria were as follows: 1. Where there was a proposal put by a party which could be described as a reasonable settlement of the claim and that was not agreed by the other party; 2. Where the course of conduct of the party over a relevant period could be said to amount to conduct inconsistent with an intention to settle the proceedings on any basis that could be considered reasonable. 41 It is the second of these criteria which, in my view, is applicable in the present matter and warrants an affirmative conclusion as to the jurisdiction to determine the application for costs pursuant to s181(2)(c) of the Act. 42 There are two aspects of the matter which warrant this conclusion: 1. In circumstances analogous to those considered in Bankstown City Council, the Commissioner failed to adequately investigate and assess the grounds identified for the removal of the applicant as specified in the notice issued pursuant to s181D(3)(a) of the Police Service Act 1990. Further, the Commissioner did not have before him (for the purposes of reaching his decision to remove the applicant from the Police Service) such information as would properly permit him to reach a conclusion as to the removal of the applicant pursuant to s181D(1) or to sustain the finding made by the Commissioner that he believed the allegations made against the applicant. 2. The failure of the applicant to adequately respond to the offers of compromise and settlement advanced on behalf of the applicant. 43 As to the first of these considerations, it is appropriate to revisit some of the pertinent findings made by the Commission in Van Huisstede (at [222], [227 - 228] and [231 - 233]) as follows: 222 The decision of the Commissioner and the reasons advanced in support of his decision were, in my view, founded on a fundamentally inadequate assessment of the available information. The insufficiency of the consideration given to the available information is revealed by the finding made by the Commissioner that he tended "to believe the allegations which were made rather than the account and denials by the Senior Constable". It is clear from the Commission's earlier discussion of the decision-making process that the Commissioner did not have before him such information as would properly permit him to come to such a conclusion. He did not, in essence, have the substance of those allegations before him. Excepting for the submission of the applicant, the Commissioner had only bare details of the allegations as originally stated by the complainants and advice of the outcome of the internal investigation and the criminal trial. … 227 The decision of the Full Bench in Oswald (No. 2) was concerned with the correctness of a finding made at first instance in light of the evidence available at the hearing. However, in my opinion, the failure of the Commissioner in this matter to have regard to readily available material which corroborated the account of the applicant demonstrates the inadequacy of the approach adopted by him to the consideration of the allegations. It is true that the evidence of Mr Wadsworth was not before the Commissioner, nor was it referred to in the response of the applicant. Nonetheless, the Commissioner was aware that Mr Wadsworth was charged and acquitted in relation to the same alleged incident and that his evidence was likely to be important in considering the veracity of the allegations. In a situation in which the material before him was manifestly deficient, the Commissioner should have sought and had regard to such information. 228 The information not considered by the Commissioner (that is, the transcript of evidence of the complainants and Mr Wadsworth), which is now in evidence in these proceedings, calls the opinion formed by the Commissioner into doubt (see Bigg (No. 2) at 457 and 458). Further, the material which was before the Commissioner, in substance, substantially supported a conclusion consistent with the innocence of the applicant. … 231 In the present case, if the Commission forms the view that the dismissal of the applicant was harsh, unreasonable or unjust having regard to the procedure adopted by the Commissioner, the unfairness involved is not, in my view, removed by virtue of the right of the applicant to bring a claim before the Commission: see Abboud at 51. The dismissal remains harsh, unreasonable and unjust for that reason (although this does not suggest the relief which may be appropriate in a given case). In any event, the deficiencies in the process adopted by the Commissioner were not restricted to deficiencies in the profile. As I have said, the Commissioner made positive findings preferring the evidence of the complainants to that of the applicant without having before him sufficient information which could have properly supported such a finding. 232 In addition to the inadequacies in his consideration of the available materials, the Commissioner also introduced considerations of the publicity and community outrage concerning the applicant's case into his reasoning process. It was conceded by counsel for the respondent that these considerations were not raised with the applicant prior to the making of the order under s181D. This concession recognises a failure on the part of the Commissioner to comply with the requirement of s181D(3)(a) to give notice of the grounds on which he does not have confidence in an officer. Counsel also conceded that it was not appropriate for the Commissioner to take into account mere 'public agitation' about an event in assessing whether or not there was an effect on public confidence and that it would be unfair to the applicant to do so (although he sought to distinguish the Commissioner's reasons in this case as being merely connected with a consideration of the public interest for the purposes of the Act). Detective Inspector Champion, in his evidence, agreed that there should not have been a reference to the publicity or community outrage in the decision of the Commissioner (and that it was not relevant to the s181D process). Further, he conceded that reliance upon this community outrage was procedurally unfair to the applicant. This concession was, in my view, properly made by the witness. I would add that considerations of alleged publicity or community concern, undertaken by the Commissioner in his decision, are foreign to the determination the Commissioner was required to make, namely, whether he had confidence in the suitability of the applicant to continue as a police officer. 233 In this case, the conclusion that the applicant's removal was harsh, unreasonable or unjust follows from the inadequacies in the approach adopted by the Commissioner in the s181D process. The Commissioner's decision was, in my view, "uninformed" in the sense that that expression was used in the Full Bench decisions in Bigg (No. 2) and Oswald (No. 2). The Commissioner made explicit findings as to the veracity of the allegations against the applicant without having before him details of the allegations made and without regard of other evidence which would have thrown light upon the nature of the allegations. He did so in circumstances in which the evidence which was before him would have caused considerable disquiet in the mind of a reasonable observer. In addition, the Commissioner had regard to undetermined considerations of publicity and community concern which were not brought to the attention of the applicant and which were, in any event, unfair and largely irrelevant. In relying upon those considerations, the exercise of the discretion by the Commissioner plainly miscarried having regard to requirements for the exercise of such a discretion enunciated in the decision of Kitto J in R v Anderson; Ex parte Ipec-Air Pty Ltd . The decision was also infected by considerations which fell outside rules of reason and justice which should have applied in the decision making process. 44 Furthermore, the Commission considered that the failures in the decision making process described above provided, of themselves, a sufficient basis for concluding that the applicant's removal was harsh, unreasonable and unjust. In that respect the Commission found (at [234]): Hence, the procedural deficiencies in the approach adopted by the Commissioner to the s181D process in this case provide a sufficient basis to determine that the applicant's removal was harsh, unreasonable and unjust. However, having regard to the decision of the Full Bench in Newton (No. 2) (at 79), the earlier discussion of the legislative scheme and relevant general principles in this decision, the respective cases put by the parties (in which the substance or merit of the allegations was debated) and, further, given the Commissioner's assessment of "allegations" in his reasons for decision (see s181F(1)(a)), it is appropriate to also consider the substance of the decision to remove the applicant. It is also appropriate, in my view, to express a view as to whether the allegations against the applicant were made out. 45 In this context, it is also important to reiterate the concession made by Mr Willis, on behalf of the respondent, that the position of the respondent, in relation to what may be referred to as the procedural issues complained of by the applicant, could not have been improved upon by the respondent beyond that which was before his Honour Justice Marks during the conciliation proceedings. 46 These considerations are significant. As observed by the Full Bench in Bankstown City Council, the respondent was required to consider, in an objective way, the strengths or limits of the case provided by him should the matter proceed to arbitration. The Commissioner should have had, in my view, active in his mind at the conciliation proceedings the findings of Full Benches of the Commission in Bigg (at 457 - 460) and Oswald (at 64 - 69). Whilst those decisions concerned determinations made under s181B of the Police Service Act 1990 (which is now repealed) they contained cogent observations as to obligations reposing on the Commissioner when exercising a power of the kind found in s181D of the Police Service Act 1990. A cursory view of the findings made in those decisions would have alerted the Commissioner to the potential difficulties with his case in this matter; at least, in relation to the procedures adopted by him and the findings made by him as to the allegations made against the applicant (having regard to material which was before him at the time of reaching his decision in that respect). 47 The applicant placed considerable reliance upon the observations of Marks J made during the course of conciliation in order to contend that the Commissioner should have been aware of the deficiencies in his case (and, it would appear from Mr Dockings submission, to accept outright the offer of settlement made by the applicant). 48 It seems reasonably clear that, in an appropriate case, the observations made by a member of the Commission during the course of conciliation may be taken into account in the assessment of costs. 49 Under the Industrial Relations Act 1991, there was some consideration given to this question by a Full Bench in Kelly v Foley (1993) 51 IR 331 at 334: We agree with the submissions of the Appellant that the ordinary rules of natural justice require the Commission to determine a matter being arbitrated on the basis of the evidence called and submissions made before it, considered of course in the context of the relevant legal principles. The Commission must take care, especially in proceedings pursuant to Part 8 of Chapter 3 of the Act, which envisages conciliation, then arbitration with the possibility of further conciliation intervening, that the conduct of a party in conciliation proceedings does not inappropriately influence the view which is taken of the evidence and submissions made in arbitration. One obvious reason for this is that in the interests of achieving a settlement a party may not wish to raise in conciliation a matter upon which it would properly wish to rely in arbitration if the matter is not settled. Another is that evidence is given on oath in arbitration, where in the ordinary course it is tested in cross-examination. This is generally not so in conciliation. Some matters which have arisen in conciliation may however be relevant in arbitration. Section 252 gives rise to this possibility. It provides: 'Costs The Commission may make an order for the payment of costs if it appears to the Commission to be just to do so, but only if: (a) the Commission dismisses the application on the ground that it is frivolous or vexatious and makes the order against the applicant; or (b) the Commission makes the order against a party the Commission considers to have unreasonably failed to agree to a settlement of the claim.' In a case where an application for costs is made under this provision, matters revealed in conciliation or offers of settlement made in conciliation, may properly be introduced and relied on by a party in arbitration. 50 These comments were adopted by a Full Bench in Connor, Kim and Leichhardt Uniting Church Homes [1993] NSWIRComm 96 (13 December 1993). 51 It follows, in my view, that the observations so made, may potentially assist in the determination as to whether the statutory criteria for the exercise of a jurisdiction to award costs is met under s181(2)(c) of the Act. 52 However, an observation made by a member of the Commission in conciliation may be of little practical assistance in the determination of that statutory test or, for that matter, whether the Commission should exercise a discretion to award costs (in the event that the statutory threshold is crossed). The member of the Commission making suggestions during the course of conciliation may not have the benefit of evidence relied upon by the parties in the proceedings or for that matter the entirety of the case which the parties may ultimately mount in an arbitration of a matter. Hence, whilst observations made by the Commission in conciliation will, no doubt, be of considerable assistance to parties in making and assessing offers of compromise advanced during the course of such proceedings, they will normally be purely preliminary in nature and constrained by the limits (and deficiencies) of any information provided by the parties at that stage. In that event, the observations may not become significant issues in relation to an application for costs. 53 These same considerations are, to some extent, applicable to the observations attributed to Marks J during the course of conciliation in this matter. For this reason, I consider that Mr Docking overstated the significance of his Honour's observations in relation to the determination of this application. 54 However, I do consider that his Honour's observations do have some significance in the present matter and should factor in the assessment of the statutory criteria in s181(2)(c) and any discretionary considerations as to costs. 55 It is clear from s181E(3) of the Police Service Act 1990 that documents and other material relied upon by the Commissioner, in coming to a decision to issue an order removing an officer from the Police Service, are to be made available to the applicant. That material was before his Honour during the conciliation process and, hence, a substantial part (if not all) of the available evidential material as to procedural issues was before the Commission for the purposes of the conciliation. 56 Hence, his Honour was in, perhaps, the unusual position where the evidence relevant to the question of procedural difficulties was before him in all relevant respects. Further, and as noted earlier, Mr Willis conceded that this information would not have been improved upon in any arbitration. 57 In the result, the Commissioner had considerable assistance in assessing the potential strengths and weaknesses of his case in any arbitration conducted in this matter. 58 A counterbalancing consideration was suggested, however, during the hearing of this matter. In the hearing of this matter the Commissioner brought a case which was directed toward substantive matters, namely, the allegations levelled against the applicant. In this respect, the Commissioner may have considered that the prospects of his case might be improved after the conciliation stage by reliance upon the merits of his case. I note, in this respect, that there is scope under s181G of the Police Service Act 1990 for the admission of new evidence during review proceedings. Indeed, in Van Huisstede, the Commission found that such new evidence is admissible without the Commission being required to grant leave in certain circumstances; see Van Huisstede at [139] - [163] and, in particular, [149]. 59 However, I consider this consideration ultimately does little to assist the respondent in resisting the costs application in this matter. Firstly, the Commissioner ultimately only put a case based on the transcript of evidence at a committal hearing and trial. The persons making the allegations against the applicant were not called to give evidence. The limitations of this approach were discussed by the Commission in Van Huisstede (see paras [236 - 242]). 60 Secondly, the Commissioner was still required to weigh his prospects in the light of the procedural difficulties earlier described (which difficulties ultimately resolved the matter in favour of the applicant). 61 I now turn to the second aspect earlier referred to in Paragraph 40 of this decision. 62 The applicant's final offer of compromise was expressed in the following terms:- 1. Your client rescinds/withdraws the Order removing our client from the Police Service. 2. Our client is reinstated to the Police Service on terms no less favourable than those that would have applied to him if he had not been dismissed. 3. No Order as to costs. 63 As was conceded by counsel for the applicant, this proposal essentially amounted to an abandonment of the respondent's case in its entirety. It was submitted that such a conclusion was warranted given the clear strength, on an objective assessment, of the applicant's case. 64 On the evidence, the only communication that could be said to have amounted to an offer in reply to this offer of settlement was that referred to by Mr Madden in cross-examination. His evidence as to this reply was somewhat unclear. However, it essentially involved the respondent offering to revoke the order on the condition that the applicant would immediately resign. No other concessions were offered by the respondent in that reply. 65 Aside from that matter, the only reply to the applicant's offer of settlement was that the respondent would consider "any other proposal". 66 Mr Willis submitted that the applicant's approach should be characterised as 'inflexible'. However, I consider that it was the respondent's approach to settlement which was, in fact, flawed. It was incumbent upon the respondent to make a clear offer of settlement in response to the applicant's initiative, even if that offer of settlement was nominal, as was discussed in Four Sons. This was a fortiori the case where the respondent's prospects in the matter were relatively weak. 67 The respondent's invitation to the applicant to simply make a further offer of settlement represented a complete failure by the respondent to make any counter offer and was, of itself, an abrogation of the respondent's obligation in relation to the settlement process. 68 The 'resignation' proposal advanced by the respondent offered no material advantage to the applicant, either in terms of the restitution of his position or monetary compensation. It effectively represented an invitation for the applicant to abandon his claim. On the basis of this offer, he could leave the Police Service of his own accord but what was offered was by no means truly in the nature of a voluntary discharge of his service. In the circumstances of this matter, such a proposal by the respondent did not represent any attempt to settle the matter in a serious manner. 69 Indeed, the situation is analogous to that found in Bankstown City Council in that the respondent failed to properly assess the strengths of his case before adopting an inflexible approach to the conciliation process. 70 As has been clearly set out by the Full Bench in Bankstown City Council and Four Sons, the evident purpose of s181(2)(c) of the Act is to encourage the settlement of proceedings to which it applies. This requires parties to such proceedings to undertake a responsible and careful assessment of the prospects of the litigation. I am satisfied that the respondent failed to undertake such an assessment. The Commissioner failed to take reasonable steps to facilitate a potential settlement of the matter. The conduct of the respondent was such as to amount to conduct inconsistent with an intention to settle the proceedings on any basis that could be considered reasonable. As such, I consider that the jurisdictional requirements of s181(2)(c) have been met, enlivening the power of the Commission to award costs under s181 of the Act. 71 Having reached this conclusion, there remains for the Commission to exercise the broad powers and discretions in relation to the question of costs arising under s181(1). As observed in Four Sons (at [12]) there remains the exercise of a discretion as to "what costs order should be made". 72 Those factors (as discussed above) which gave rise to a finding that the statutory criteria under s181(2) had been met in this matter provide, in my view, an ample basis for the exercise of a discretion to award costs in this matter on a party/party basis. The respondent's case was such as required a much more active and diligent approach to the settlement of the matter by him. Such an approach may well have resulted in a settlement and, in any event, was inconsistent with the policy of the Act which requires parties to take seriously the obligation to attempt to settle proceedings (even if they are desirous of testing the scope of legislation in a particular case). 73 This is not an appropriate case, however, to order costs on an indemnity basis. 74 It was common ground that the substantive decision in this matter was, in essence, the first time that the legislative scheme adopted in the Police Service Act 1990, as amended by the Police Service Amendment Act 1997, had been fully considered to any significant extent by the Commission. There were issues concerning the operation of the Act which both parties actively raised during the proceedings. Those issues transcended a consideration of the settled law going to procedural issues arising from Bigg (No. 2) and Oswald (No. 2). The time spent on these issues in the proceedings is attributable to both parties. Those matters were perceived by the parties as being of some significance to the exercise of the Commission's jurisdiction under the Police Service Act 1990. I note, in this respect, that the applicant received some assistance from the Police Association of New South Wales in prosecuting his case. 75 I consider that this factor, when considered in the light of the earlier discussion of the principles which are applicable to the awarding of indemnity costs, makes it inappropriate to award costs on an indemnity basis in this matter. 76 The Commission makes the following orders: 1. The applicant's application for costs on an indemnity basis is dismissed; 2. The respondent is to pay the costs of the applicant on a party/party basis in an amount as agreed or assessed. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.