Industrial Relations Commission of New South Wales CITATION: Cooma Rural Lands Protection Board v Phillips and Greenwood [2005] NSWIRComm 313 Cooma Rural Lands Protection Board Winston Churchill Phillips PARTIES: Gregory Walter Greenwood FILE NUMBER(S): IRC 3685, 3986, 3963, 5823 of 2004 CORAM: Wright J President; Grayson DP; McLeay C Unfair dismissal - Appeal - Leave to appeal - Cross-appeals - Whether findings of unfairness at first instance correct - Whether reinstatement in one case and refusal to reinstate in other case in first instance decisions correct - Allegations of protracted misconduct by dismissed employees significant entrenched and bitter interpersonal conflict - Extension of conflict into work environment - Substantial disruption over lengthy period to proper functioning of enterprise - Small statutory enterprise - Whether finding at first instance that employer could have done more to resolve conflict was speculative and incompatible with employee behaviour - Interpersonal dispute between employees properly a matter for managerial intervention - Extent to which employer is required to go or to which it should be accountable for failure to resolve dispute must depend on circumstances of each case - Whether employee protagonists by their conduct repudiated employment contract and or effectively initiated termination of employment - Whether reinstatement order was open at first instance in circumstances where employee absent on workers compensation - Whether order supplementing weekly compensation payments with sick leave available under statute - Whether order for full back pay properly made - Employee thereby bears no responsibility for culpable conduct - Culpable conduct of employees outweighed by deficiencies in procedural fairness - Costs - Tests to be applied in considering whether to award costs - Discussion of relevant criteria - Significant risk in parties taking unduly firm and inflexible approach to settlement - Obligation to consider in objective way the strengths or limits upon case to be propounded at arbitration - Steadfast insistence on reinstatement amounts to conduct inconsistent with intention to settle on any reasonable basis - Prospect of reinstatement at best problematic in circumstances of case - Findings at first instance as to unfairness reasonably open although alternative findings may have been available on the evidence - Appeal bench should not substitute its own views if decision at first instance was reasonably open - Primacy of first instance decision making - Leave to appeal granted in all matters - Appeals upheld in two matters - Orders in one matter set aside - Decision in other matter set aside - Costs on a party and party basis ordered - Appeals otherwise dismissed. CATCHWORDS: Agricultural and Veterinary Chemicals Act 1994 Industrial Relations Act 1996 Pesticides Act 1999 Rural Lands Protection Act 1998 Stock (Chemical Residues) Act 1975 LEGISLATION CITED: Stock Diseases Act 1923 Workers Compensation Act 1987 Antonokopoulos v State Bank of New South Wales (1999) 91 IR 385 Bankstown City Council v Paris (1999) 93 IR 209 Bankstown City Council v Paris (1999) 100 IR 363 Barbaro v Certegy Australia (AIRC PR 930171 27 April 2003) Bigg & Anor v New South Wales Police Service (1998) 80 IR 434 Big W Discount Stores v Donato (1994) 58 IR 239 Box Valley Pty Ltd v Price (2000) 97 IR 484 Byrne and Anor v Australian Airlines (1955) 181 CLR 410 Byrnes v Treloar (1997) 77 IR 332 CASES CITED: Day v Lumley Life (1999) 90 IR 70 Four Sons Pty Limited v Sakchai Limsiripothong (No 2) (2000) 100 IR 400 House v The King (1936) 55 CLR 499 North v Television Corporation (1976) 11 ALR 616 Pastrycooks Employees v Gartrell White (No 3) (1990) 35 IR 70 Rapp v Wauhope RSL Club Limited (1995) 81 IR 116 Wang v Crestell Industries Pty Ltd (1997) 73 IR 454 Ward v Mobile Innovations Limited [2002] NSWIR Comm 287 Western Excavating CECC Ltd v Sharp (1978) ICR 221 HEARING DATES: 04/21/2005; 04/22/2005 DATE OF JUDGMENT: 08/31/2005 COOMA RURAL LANDS PROTECTION BOARD Ms K Nomchong of counsel instructed by Ebbsworth & Ebbsworth, lawyers LEGAL REPRESENTATIVES: Messrs. PHILLIPS and GREENWOOD (the employees) Ms J Keyes of counsel instructed by Last & Maxwell, solicitors JUDGMENT: INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES FULL BENCH CORAM: WRIGHT J, President GRAYSON, DP McLEAY, C Wednesday 31 August 2005 Matter No IRC 3685 of 2004 WINSTON CHURCHILL PHILLIPS v COOMA RURAL LANDS PROTECTION BOARD Application by Winston Churchill Phillips for leave to appeal and appeal a decision of Commissioner Bishop given on 3.6.2004 in Matter No IRC 6871 of 2002 Matter No IRC 3986 of 2004 COOMA RURAL LANDS PROTECTION BOARD v GREGORY WALTER GREENWOOD Application by Cooma Rural Lands Protection Board for extension of time to appeal against a decision of Commissioner Bishop given on 3.6.2004 in Matter No IRC 6873 of 2002 Matter No IRC 3963 of 2004 COOMA RURAL LANDS PROTECTION BOARD v WINSTON CHURCHILL PHILLIPS Application by Cooma Rural Lands Protection Board for extension of time to appeal against a decision of Commissioner Bishop given on 3.6.2004 in Matter No IRC6871 of 2002 Matter No IRC 5823 of 2004 COOMA RURAL LANDS PROTECTION BOARD v WINSTON CHURCHILL PHILLIPS Application by Cooma Rural Lands Protection Board for leave to appeal and appeal against a decision and orders of Commissioner Bishop given on 7.9.2004 in Matter No IRC 6871 of 2002 DECISION OF THE COMMISSION [2005] NSWIRComm 313 1 On 3 June 2004, Bishop C published reasons for finding that Gregory Walter Greenwood and Winston Churchill Phillips (the employees) had been unfairly dismissed by the Cooma Rural Lands Protection Board (the employer) within the meaning of Part 2 Chapter 6 Unfair Dismissals of the Industrial Relations Act 1996 (the Act). The dismissals occurred on 29 November 2002. In the result, Mr Greenwood was reinstated with full continuity of service for purposes of leave entitlements and no loss of earnings. Mr Phillips was not reinstated and was awarded 12 weeks pay by way of compensation under s 89(5) of the Act. 2 On 7 September 2004 Bishop C published a further decision in which she refused an application for costs against Mr Phillips. The application was brought by the employer under s 181(2)(c) of the Act on grounds which alleged that Mr Phillips unreasonably failed to agree to settlement of his unfair dismissal claim. 3 The employer now makes application for leave to appeal and to appeal against each of those decisions and Mr Phillips makes the same applications with respect to those elements of the Commissioner's decision of 3 June 2004 which refused him the reinstatement he claimed and which limited the relief he obtained to twelve weeks compensation. Leave to Appeal 4 We have decided given the scope and substance of the matters sought to be raised on appeal that the relevant tests prescribed by s 188(2) of the Act have been met such that leave should be granted. The Appeals 5 The primary grounds for appeal are those raised by the employer bearing upon the correctness of the findings below that the two dismissals were relevantly unfair. For convenience and simplicity, we will deal with those issues at the outset. We note in that regard, the unusual factual matrix in these matters and the submissions of the opposing counsel as to those aspects of the respective cases which can be taken as mutually applicable to both dismissals and those aspects which are peculiar to each. 6 By way of background, the employer is a statutory body constituted under the Rural Lands Protection Act 1998 (the enabling legislation) and is responsible for animal health, the protection of rural lands and the administration of drought and other disaster relief. In that capacity, it is responsible for administering the Stock Diseases Act 1923 and the Stock (Chemical Residues) Act 1975 in the regional area of Cooma in southern New South Wales. The employer, as the title implies, is governed by a Board of Directors who are in the main farmers in the district who volunteer their time to assist in the work of the employer. Under the enabling legislation, the Board is required to meet monthly and may engage employees in order to carry out its functions. One such employee must be a full-time veterinarian. 7 At all material times, the full-time veterinarian was Dr McPhie and two of the three employed rangers were Messrs Phillips and Greenwood. 8 By or about mid 2001, a significant entrenched and bitter interpersonal conflict had developed between Messrs Phillips and Greenwood. The conflict is said to have had its origins in an earlier employment relationship at the Cooma-Monaro Shire Council and later, in marital discord occurring in Mr Phillips life with Mr Greenwood being seen by Mr Phillips to have taken his wife's side against him. Despite the very personal nature of the conflict, it extended into the work environment with complaint and counter-complaint being made by each employee of victimisation and bullying by the other and with significant disruption over a lengthy period, to the proper functioning of the enterprise. 9 The evidence before the Commissioner made it abundantly clear that the two men engaged in a form of behaviour towards each other in the work environment which was found by the Commissioner to be immature and childish. The behaviour consumed much of the time of the protagonists over an extended period and much of the time of the employer in its attempts to properly investigate and manage the resultant disruption to its operations. 10 Additionally and at the time Mr Phillips was an authorised control officer in relation to the use of 1080 poison, allegations of failure to follow correct procedure were raised against him. 1080 is a poison used in the eradication of wild dogs and is of such toxicity as to require special procedures and applications to be followed under various New South Wales statutes (for example Pesticides Act 1999; Agricultural and Veterinary Chemicals Act 1994; Rural Lands Protection Act 1998). 11 In broadly stated terms, Mr Phillips was alleged to have carried out aerial baiting using 1080 poison firstly, without notifying State Forests; secondly, notwithstanding that the approval of neighbouring property owners had not been obtained and thirdly, by laying baits in excess of the number usually permitted. It was further alleged that he failed to carry out prerequisite follow-up checks involving among other things, the collection of untaken baits and that contrary to accepted practice, he permitted his teenage daughter to accompany him whilst he and the landowner laid the poison baits. 12 The matter proceeded by way of formal investigation involving various government agencies and regulatory authorities namely the Environment Protection Authority, the Department of Agriculture, the employer's State Council, the Pest Animal Council, the National Parks and Wildlife Service and State Forests. 13 In the result, Mr Phillips was reprimanded in April 2001 and in September 2001 was removed from 1080 duties and from duties involving the supervision of other employees in relation to 1080 for a period of twelve months. The decision which also deprived Mr Phillips of a supervisory allowance he had hitherto received (effectively demoting him) resulted in a significant worsening of the relationships within the work environment. 14 In April 2002, the State Council to whom Mr Phillips appealed against the sanction determined to rescind the reprimand as procedurally wrong and to reduce the duration of the demotion from twelve months to six months. 15 The Commissioner came to the view after a thorough analysis of the 1080 incident and noting the fact that Mr Phillips was still seeking the withdrawal of all complaints against him and complete redress on his terms of grievances he had lodged about the matter right up to the time of his dismissal in November 2002, that his attitude completely overlooked the fact that he was at fault and was correctly found to be at fault in relation the incident. The Commissioner noted that Mr Phillips had not at any stage acknowledged any failings or errors whatsoever and further, that it was difficult to know what else could have been done by the employer in the face of Mr Phillips' steadfast refusal to accept the full implications of the 1080 incident. 16 Clearly the Commissioner laid the responsibility for wrongdoing squarely at Mr Phillips feet in that respect, a circumstance which founds one of the employer's main complaints about the inconsistency of the Commissioner's approach when she came to deal with the ongoing acrimony between Mr Phillips and Mr Greenwood. 17 There the Commissioner found demonstrable fault on the part of Mr Phillips in perpetuating the antagonism and disruption and that as the senior and more experienced of the two protagonists, a higher standard of conduct could reasonably have been expected of him, and in spite of so finding, she nonetheless concluded that had the employer done more than it did to counsel, manage or discipline him in relation to that matter, then Mr Phillips would have accepted such measures and modified his behaviour. 18 The employer complains that such a finding on the part of the Commissioner was speculative and incompatible with the manner in which Mr Phillips behaved and continued to behave when counselled and disciplined in relation to the 1080 incident. The employer contends that a more appropriate conclusion would have been that further attempts at counselling, management or intervention would have been unlikely to assist and that Mr Phillips as a 50 year old man and a senior officer, was responsible for his own actions which persisted over a two and a half year period and which were found by the Commissioner to be childish and immature. By way of illustration, the employer cites Mr Phillips' outburst towards the Board of Directors at a meeting he attended on 16 August 2002 which he recorded in his own work diary in the following terms: - I said 'As a group you are the most disgusting and loathsome bunch it has ever been my misfortune to have anything to do with'. When I said this Michael Green protested that he was not going to stand being spoken to like that. I said 'Well, it's true: you have sold your ratepayers down the river and you should be ashamed of yourselves'. … The most violent or abusive thing I said was 'Oh, shut up' to the Board Chairman when he kept repeating that my words were 'inappropriate'. 19 Prior to that, Mr Phillips was abusive towards an officer of the New South Wales Department of Agriculture with whom the employer had a close co-operative working relationship upon which it relied in carrying out its statutory functions. Again, Mr Phillips recorded the incident in his work notebook which included the following streams of invective: - I said 'I have only one thing to say to you Peter & that's fuck you & people like you And later: - I said 'I am fuckin disgusted with you Peter because of what you have done; you should be fuckin ashamed of yourself & you are nothing but a fuckin disgrace". I then put the phone down. 20 There are other examples such as Mr Phillips indicating during a Board meeting that sitting beside Mr Greenwood made him want to vomit and Mr Phillips behaving towards the veterinarian Dr McPhie in a manner which was to say the least out of keeping with the supervisory role Dr McPhie was authorised to exercise over him. 21 The employer further complains that the Commissioner erred in failing to find that Mr Phillips by his conduct had repudiated the employment contract and/or that by his conduct he had effectively initiated the termination of his employment. Certainly, there is a manifest abundance of evidence of dysfunctional relationships between Mr Phillips and Mr Greenwood; between Mr Phillips and veterinarian Dr McPhie and between Mr Phillips and the Board of Directors and those matters were each visited comprehensively by the Commissioner in the impugned decisions. We note also in that regard the issue of Mr Phillips' interaction with third parties such as the NSW Department of Agriculture with whom the employer had an important working relationship. The Commissioner referred variously to Mr Phillips' conduct as antagonistic and insulting, and as being inconsistent with the actions of an employee carrying out his fiduciary obligations to his employer. 22 The employer argues that notwithstanding the abundance of evidence to the contrary and the findings made by the Commissioner about Mr Phillips and his conduct, the manifest error attending the decision was her conclusion that the employer could and should have done more to resolve the issue. As an important element of the Commissioner's decision, this is effectively a finding that the blame for the events which ultimately led to the termination of employment rested squarely on the employer thus rendering the dismissal unfair. The same decision was reached by the Commissioner in the matter involving Mr Greenwood and, to the extent that the employer mounts the same attack on both decisions, we will deal with the argument collectively although in so doing, we note the other, and as we would read and understand them, arguably the most important elements of the decisions, namely the Commissioner's conclusion, that neither Mr Phillips nor Mr Greenwood were afforded procedural fairness. 23 As to the first element and whilst the employer accepts that an interpersonal dispute between employees which affects the proper functioning of the workplace is properly a matter for managerial intervention, it is contended that the extent to which the employer is required to go or to which it should be held accountable for failure to resolve such an interpersonal dispute is a matter which must at law, depend on the circumstances of each case. In these matters, it is argued that the Commissioner failed to take proper account of the numerous Board meetings, disciplinary fact finding investigations and other measures adopted by the employer (including the commissioning of external consultants) in so concluding and further, that by directing herself to perceived shortcomings in that regard on the part of the employer, the Commissioner gave insufficient attention to the culpability of Mr Phillips and Mr Greenwood. 24 In circumstances where there were findings at first instance in Mr Phillips' case of failure to follow reasonable and lawful directions and where both officers on the facts found had been significantly responsible albeit in varying degrees for the instigation, escalation and continuation of the interpersonal conflict and further, where that conflict had been permitted to interfere with work duties, relationships with other staff and the proper functioning of the employer, the Commissioner ought to have found that in destroying the trust and confidence between the employer and its employees, such conduct struck at the heart of the employment contract: see for example Western Excavating CECC Ltd v Sharp (1978) ICR 221; North v Television Corporation (1976) 11 ALR 616; Byrnes v Treloar (1997) 77 IR 332; Day v Lumley Life (1999) 90 IR 70; Pastrycooks Employees v Gartrell White (No 3) (1990) 35 IR 70; Barbaro v Certegy Australia (AIRC PR930171 27 April 2003). The Commissioner is thereby said to have erred in finding that the dismissals were unfair. 25 We note further the employer's contention that the Commissioner failed to find that the conduct exhibited by Mr Phillips which she held to be conduct incompatible with an ability to work within the employment relationship and which therefore counted against reinstatement, was conduct which evinced a breakdown with the employment relationship justifying termination. 26 In Mr Greenwood's case, it is submitted by the employer that the Commissioner's decision to reinstate Mr Greenwood ignored or failed to take into account the fact that there had been demonstrated in the evidence a fundamental breakdown in the employment relationship between the employer and Mr Greenwood and that this fact, taken together with the small size of the employer and the nature of its enterprise, should have led to a conclusion that reinstatement was impracticable. 27 As to the finding that Mr Greenwood's dismissal was harsh, unjust and unreasonable we note that the Commissioner formed the clear view that Mr Greenwood's conduct whilst childish and immature was essentially limited to his relationship with Mr Phillips and that unlike Mr Phillips, he had no or minimal conflict with any other staff member or with the Board of Directors. The Commissioner was critical of the employer in its decision to dismiss both officers, for failing to make the necessary distinction between the severity and degree of misconduct of one compared with the other and clearly, the Commissioner viewed Mr Phillips as being the major offender in that regard. Having said that, we note also that Mr Greenwood was held to have made a significant contribution by his own disruptive conduct, to the degree of dysfunction in the workplace about which there was ample evidence. 28 It is submitted on Mr Phillips' behalf that the appeal against the Commissioner's finding of wrongful dismissal does not identify any error of the type described in House v The King (1936) 55 CLR 499 such as to warrant review and appellate intervention. In particular, it is not enough that the employer contends that the Commissioner, after a comprehensive and balanced consideration of all the evidence, should have reached a different result. It is submitted that the Commissioner's approach which is said by the employer to be flawed by internal inconsistencies is merely reflective of the balance brought to the matter by the Commissioner in her comprehensive analysis of all the circumstances and that whilst the commissioner was critical of Mr Phillips behaviour and expressed sympathy for the employer's predicament, she also noted the deficiencies in the employer's conduct and/or management structure identified by the State Council and touched upon in the reports furnished to the employer by Mr MacErlean and later Mr Sautelle, the external consultants to which we have earlier referred. 29 It is further submitted on Mr Phillips' behalf that no error of law has been identified in the context of the Commissioner's finding that the steps taken by the employer in dismissing Mr Phillip's were fatally flawed by procedural unfairness. In that regard, the Commissioner found at p 128 of her decision: - There is no doubt that Mr Phillips was a difficult person to deal with from mid 2000 to November 2002 and his own manner and actions contributed to the animosity and conflict between the parties. As I have previously indicated I can understand how the Board felt at a loss in knowing how to deal with the conflicts that arose. I have also indicated how the very structure and operation of the Board mitigated against dealing with the various issues and incidents that arose in a more appropriate way. There is also no doubt that on some issues Mr Phillips was clearly at fault and deserving of disciplinary action. However the procedural unfairness arising out of the Sautelle report and the meeting of 28 November undo all the well intentioned actions of the Board prior to that time. and later at p 129: - The failure of the Board to provide Mr Phillips and the PSA with both the opportunity of considering the Sautelle report and having the opportunity to respond to it before any decision was made to terminate Mr Phillips I find procedurally unfair. I also find it procedurally unfair for the Board to contrive to meet with Mr Phillips and the Union with seemingly the intention of resolving the conflict between Mr Phillips and the Board when all the time those meeting on behalf of the Board were made aware that legal advice was actually being sought (or in the process of being sought) about terminating Mr Phillips. Whilst warnings issued to Mr Phillips about his behaviour to the Board and Mr Fleming were appropriate and warranted, no specific allegations about inappropriate conduct/behaviour towards Mr Greenwood or Dr McPhie had been given to Mr Phillips and he had not had the opportunity of responding to any such allegations. Having very carefully considered the evidence and submissions and all the circumstances leading up to Mr Phillips' termination I can come to no other conclusion than that Mr Phillips' termination was harsh and unjust. 30 In relation to Mr Greenwood's dismissal, it is submitted on his behalf that the Commissioner's conclusions as to unfairness were well founded and cannot be called into question on the grounds relied upon by the employer including for example, that the employer being a small employer with limited resources cannot be expected to devote and continue to devote substantial time and energy to the resolution of an intractable conflict between employees. In Mr Greenwood's case, it is argued, the Commissioner was more concerned with the employer's ultimate obligation to afford Mr Greenwood procedural fairness and in that regard, her findings are clearly and unambiguously recorded at p 74 as follows: - There was a complete absence of any warnings whatsoever in relation to the alleged "long history of management complaints" about your conduct in the workplace and the performance of his duties. There was a complete absence of any warnings whatsoever about his alleged disruptive personal and professional conduct. There was no advice whatsoever at any stage about the "implications of your conduct". No opportunity was given to Mr Greenwood to read and respond to the Sautelle report before a decision was made as to his dismissal. And later on the same page: - In addition to the matters outlined above Mr Greenwood was treated in exactly the same way as Mr Phillips in his dismissal even to the identical wording of the termination letter. It was that failure to differentiate between employees that was at the heart of the Decision of Commissioner McLeay in finding that the dismissal of Mr Paris by Bankstown City Council was unfair. That decision and the reasons for the Decision were upheld by the Full Bench in the appeal proceedings Bankstown City Council v Paris IRC 262 of 1999, 3 August 1999 (as distinct from the subsequent Costs Decision at (1999) 93 IR 209). In the Commission's very firm and considered view the matters outlined above not only make Mr Greenwood's dismissal procedurally unfair but also substantively unfair. The Impugned Orders in the Greenwood matter 31 Turning then to the further aspects of the employer's appeal going to Mr Greenwood's reinstatement, we note the Commissioner's orders were as follows: - 1. Gregory Walter Greenwood is re-instated to the position of Senior Ranger with the Cooma Rural Lands Protection Board as from the 29 November, 2002. 2. The service of Mr Greenwood is deemed to have been continuous for all purposes of leave to which he is entitled under Award and Statute. 3. Mr Greenwood is entitled to apply to the respondent to have debited from any accrued sick leave entitlements, sick leave to cover any time when he was not in receipt of the award rate of pay. 4. Any payment for wages forthcoming as a consequence of this reinstatement is to be discounted by any payments he has received during that time. 5. This Order takes effect on and from 3rd June, 2004. 32 The employer contends that the orders have the effect, among other things, of putting Mr Greenwood in a better position and we infer, the employer in a worse position than if there had been no dismissal. This is so because at the date of the dismissal on 29 November 2002 and until January 2004, Mr Greenwood was in receipt of weekly payments of workers compensation, the first six months at his full award rate of pay and thereafter at the relevant statutory rate under the Workers Compensation Act 1987. During this period, Mr Greenwood submitted medical certificates to the effect that he was totally incapacitated for work. The employer contends that but for the dismissal in November 2002, the employer would have been validly entitled to dismiss Mr Greenwood six months after he first become fit for employment as a result of his injury (see s 99 of the Act) which the employer estimates to be 28 May 2003 and even though Mr Greenwood may have been able to apply for reinstatement upon becoming medically fit to resume duties in January 2004, he would not have been entitled to back pay for the period 28 May 2003 to January 2004. Accordingly, it is submitted that the orders made by the Commissioner on 3 June 2004 deprived the employer of its statutory and common law right to have dismissed Mr Greenwood on the grounds of incapacity for work. 33 Moreover, the effect of Order 3 above affording Mr Greenwood a form of supplementation from his sick leave entitlement to make up for earnings lost by reason of statutory limitations on the amount of weekly compensation payments, is unsupported by explanatory reasons and on the face of it, would not be available under s 89 of the Act. It is also submitted by the employer that the order raises important questions of law and policy in relation to the interaction of the Workers Compensation legislation and the use of accrued sick leave in the reinstatement of an injured employee. We note these questions are undefined. 34 The employer further submits that the effect of Order 4, assuming that the term "payments" is intended to include the five weeks pay in lieu of notice together with weekly payments of compensation he received, is to entitle Mr Greenwood to receive full wages in addition to those contemplated by Order 3, for the period between January 2004 when workers compensation payments ceased and June 2004 when reinstatement was ordered. 35 The employer contends that absent the dismissal on 29 November 2002 and all other things being as they were, Mr Greenwood's ability to supplement any shortfall in wages from accrued sick leave was subject to discretionary approval and could therefore be refused under the terms of the Rural Lands Protection Boards Salaries and Conditions Award 2002 which set the conditions of Mr Greenwood's employment. Additionally, it is submitted, the effect of Order 4 is to deprive the employer of the ability to argue that the amount payable by way of back-pay for the period of January 2004 when workers compensation payments ceased and June 2004 when reinstatement was ordered, should be discounted by reason of the absence of any evidence that Mr Greenwood had attempted to mitigate the loss. 36 As to Order 1 and in addition to its submission as to the impracticability of reinstatement in circumstances where there had been a fundamental breakdown in the employment relationship, the employer submits that it was simply not open to the Commissioner to order reinstatement in circumstances where at the time of hearing in June 2003, Mr Greenwood had been off work for a period of 7 months and continued to be certified by his doctor as medically unfit into the future. The employer contends that the absence of medical evidence as to Mr Greenwood's fitness for work should have led the Commissioner to find that the reinstatement was not practicable. 37 We note the Commissioner's findings in connection with Mr Greenwood's reinstatement at p 78 as follows: - He has been on workers compensation from the date of termination until at least the dates of the hearing. As Ms Keys rightly points out, in the normal course of events he would have returned to work under a Return to Work Plan developed by the Board and its rehabilitation provider. That is what now should happen. If in the intervening period Mr Greenwood has been certified as fit for pre-injury duties then I see no reason why he cannot resume his position of Senior Ranger immediately. It should not be forgotten that his injury was not a physical one but stress related arising from his relationship with and treatment by Mr Phillips. And later at p 79: - I see no barrier to his resumption of work even if it is part of an appropriate Return to Work Plan. 38 As to those matters, it is submitted on Mr Greenwood's behalf by reference to Big W Discount Stores v Donato (1994) 58 IR 239 that no error in the Commissioner's decision has been demonstrated and implicitly, that the orders made as to reinstatement properly took into account the particular circumstances of his disability and rehabilitation considerations and further, that there was evidence of attendance by Mr Greenwood at Cooma Technical College as part of his rehabilitation; there was evidence that his failure to apply for alternative employment after dismissal was due to the absence of opportunities in his area of experience plus the humiliation he felt and his consequent inability to explain the circumstances of his dismissal to potential employers rather than to any medical incapacity and conversely, there was no evidence as to the specific content of his medical certificate which was current at the time of hearing in July 2003. We take the latter submission to mean that the certificate could have postulated incapacity for a circumscribed and limited period of time. Costs 39 We turn now to the employer's appeal against the Commissioner's decision of 7 September 2004 wherein the employer's application for costs against Mr Phillip's was refused. 40 The factual background to the application, which is set out in the affidavit of Mr Sloan , solicitor who acted for the employer, is not in dispute and may be conveniently summarised in the essential form in which it appears in the affidavit as follows: - I. Mr Phillips was dismissed on 29 November 2002. II. On termination, Mr Phillips was paid 5 weeks pay in accordance with clause 18.4(d)(i) of the relevant Award. This amounted to $3,606.35 (gross). III. Mr Phillips filed an Application for Relief in Relation to Unfair Dismissal on 4 December 2002. IV. In that application, the only remedy sought was reinstatement. This was a position maintained by Mr Phillips throughout the matter, save for a five week period between 4 March and 11 April 2003. V. The employer, on the other hand, attempted to reach a compromise from the time the matter fist came before the Commission on 12 December 2002., at which time it suggested a monetary settlement. Throughout December 2002 to February 2003, the employer continued to press for a monetary settlement and on 11 February 2003 made an offer to settle for payment of $7,500 less applicable tax (10.4 weeks pay). That offer was rejected and the employer was advised that the only remedy that Mr Phillips would entertain was reinstatement. VI. On 4 March 2003 Mr Phillips' solicitors sent a letter in which an offer of settlement was made in the following terms: - 1. The Board withdraw all accusations, allegations and charges related to any issues that led to or were taken into account by the Board in deciding to terminate Phillips' employment on 29 November 2002. 2. The decision to dismiss Phillips be revoked and Phillips to tender his resignation effective 29 November 2002. 3. In addition to the statutory entitlements paid to Phillips at termination, the Board to pay Phillips: a) supervision allowance for the period 21 September 2001 to 29 November 2002 inclusive; b) 6 months remuneration as an eligible termination payment based at the rate of a senior ranger plus supervision allowance; and c) $2000 as part payment of all the personal expenses which Phillips had incurred arising out of the Board's decision to dismiss him, such as telephone calls, medical expenses and travelling expenses to Queanbeyan to attend the Industrial Relations Commission. 4 . The Board to permit Phillips to return to the Board's offices to retrieve his personal effects and personal files. 5. The Board to retain Phillips' diaries and notebooks and return them to him after the statutory period during which the Board is required to keep those documents. 6. The amounts in paragraph 3 to be kept confidential. 7. Phillips to release the Board from all further claims. VII. The offer contained provisions which were outside the scope of the jurisdiction of the Commission in these proceedings. Specifically, the Commission would be unable to order a retraction of the allegations in relation to the improper use of 1080 baits. It would be unable, in the proceedings, to order back pay of the supervision allowance from the date of Mr Phillip's demotion. More importantly, the monetary compensation sought was in excess of the amount prescribed in s 89(5) of the Act. VIII. On 2 April 2003, the employer offered to pay Mr Phillips an amount equivalent to six months salary, forgive an outstanding debt in the sum of $580.38 and agree to the terms set out in paragraphs 2,4,6 and 7 of the letter dated 4 March 2003. IX. On 7 April 2003 Mr Phillips' solicitor imposed a further condition to any settlement which required the employer to issue a statement. The matter was left on the basis that Mr Phillips would advise the employer as to a proposed form of words for the statement. X. On 11 April 2003, however, Mr Phillips himself contacted Mr Sloan , solicitor for the employer indicating that he was no longer represented by Jones Staff and Co, and that all previous offers were off the table. Mr Phillips indicated that the only outcome he would accept was reinstatement with full back pay. XI. No further settlement discussions occurred until 24 May 2003. By that time, the employer had undertaken the bulk of its preparation for the case - involving numerous witness statements and the collation of a voluminous bundle of documents containing the relevant materials in the proceedings. XII. The substantial legal costs that were sought to be avoided by an early resolution of the proceedings had been incurred. XIII. On 24 May 2003 (five weeks before the hearing) Mr Casey , solicitor, who had by then taken over the representation of Mr Phillips contacted Mr Sloan by telephone. The discussion centred on whether a form of words for a public notice/announcement could be found. Again, the issuance of a public notice was not a matter which was within the power of the Commission to order and it was outside the remedies sought by Mr Phillips in his application. Mr Sloan asked for a speedy proposal - that is, within a few days. XIV. It was not until 9 June 2003 (three weeks prior to hearing) that Mr Casey responded by which time Mr Sloan had formally advised Mr Casey , although not strictly required to, that the offer which Mr Phillips had rejected on 11 April 2003 was withdrawn. XV. The matter thereafter proceeded to a five day hearing during the course of which Mr Phillips maintained that the only remedy he wanted was reinstatement. 41 The employer contends by reference to Bankstown City Council v Paris (1999) 93 IR 209 that the test properly to be applied and properly identified by the Commissioner in considering whether to award costs is an objective one and further that a decision to award costs may be permissible by either of the following criteria being satisfied: - · 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; or · 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. 42 Attention is also drawn by the employer (and correctly identified by the Commissioner) to the significant risks in terms of exposure to the provisions of s 181(2) of the Act in taking a firm and inflexible approach to settlement of an unfair dismissal claim particularly where 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. This involves an obligation to consider in an objective way the strengths or limits upon the case to be propounded should the matter proceed to arbitration. 43 In her decision the Commissioner found and expressly found that the offers made by the employer were reasonable. That being so, the rejection of the offer by Mr Phillips was the objective basis upon which a cost order should have been made. The employer argues that in failing to do so, the Commissioner fell into error, an error which was compounded by her adoption of a subjective test namely whether Mr Phillips rejection of the offer was unreasonable. In essence, the employer argues, the Commissioner held that because Mr Phillips sought reinstatement to the exclusion of any other outcome, then an offer contemplating any other outcome would not be reasonable to him and therefore, his rejection of the employer's offer was not unreasonable. 44 It is further contended by the employer that Mr Phillips' steadfast insistence on reinstatement demonstrated an unreasonable refusal to settle given that on any objective assessment of his case and the history of the matter, the prospect of reinstatement was at best problematic. As to that, the employer points by way of example to the following factors which militated against reinstatement as a practicable option: - a) Mr Phillips had displayed obvious and ongoing contempt and disdain for the Board of Directors; b) Mr Phillips' refusal to carry out reasonable and lawful directions including the directions of veterinarian Dr McPhie to whom he was answerable and the ongoing difficulties in that regard; c) the nature of the protracted dispute with Mr Greenwood d) Mr Phillips' continuing unwillingness to accept the adverse finding against him in relation to pre-existing disciplinary matters. 45 Against that, it is submitted on Mr Phillips' behalf, that the employer has not established any error of law in the Commissioner's decision and that the Commissioner was not precluded from taking subjective factors into account in considering whether Mr Phillips unreasonably failed to agree to a settlement of his claim. Consideration 46 As to whether the Commissioner's finding in each of the first instance decisions that the dismissals were unfair should be quashed and set aside by reason, among other things, of failure to find that the conduct of the applicant employees in effect, amounted to a repudiation of the employment contract, we have given careful consideration to the evidence generally and in particular to the evidence as to the procedures adopted by the employer in relation to the dismissals. We have also carefully considered the submissions of the parties to the appeals in relation to all matters raised. In our view, the Commissioner was entitled to find as she did on the evidence before her, that the manifest deficiencies in the procedures adopted by the employer were such as to, in both cases albeit more so in Mr Greenwood's case, outweigh the circumstances of the conduct of both Mr Phillips and Mr Greenwood. 47 We further consider that the Commissioner was entitled to find as she did in Mr Greenwood's case, that in addition to the procedural deficiencies to which she alluded, there were also elements of substantive unfairness having regard in particular to the employer's failure to differentiate between the varying degrees of culpability as between the two dismissed employees (see Bankstown City Council v Paris (1999) 100 IR 363. 48 We consider in reaching those conclusions the Commissioner properly took into account and correctly applied the relevant legal principles (see for example Byrne and Anor v Australian Airlines (1955) 181 CLR 410; Wang v Crestell Industries Pty Ltd (1997) 73 IR 454; Rapp v Wauchope RSL Club Limited (1995) 81 IR 116; Bigg & Anor v New South Wales Police Service (1998) 80 IR 434; and Antonokopoulos v State Bank of New South Wales (1999) 91 IR 385). 49 In saying that, we express the view that an alternative finding as to the fairness of the dismissal may have been available to the Commissioner in Mr Phillips' case having regard to the nature of his conduct but we are of the view that in the balancing of all the considerations by the Commissioner in her careful analysis of the evidence and the competing contentions, a conclusion was reached which was reasonably open and we will apply the approach in Antonokopoulos to the effect that this appeal bench should not substitute its own views as to a decision which was reasonably open at first instance. This is particularly so when regard is had to the provisions of the Act which give primacy to first instance decision making: see again Antonokopoulos and also Box Valley Pty Ltd v Price (2000) 97 IR 484 and Ward v Mobile Innovations Limited [2002] NSWIRComm 287. Moreover, we do not consider the Commissioner's conclusions as to the impracticability of reinstating Mr Phillips and as to the measure of compensation awarded to have been shown to be erroneous and we propose to dismiss Mr Phillips' appeal accordingly. 50 As to the impugned orders in Mr Greenwood's case we consider the Commissioner having found as she did that Mr Greenwood's misconduct although not as serious as that of Mr Phillip's, was nevertheless deserving of censure, should have taken that matter into account in the exercise of discretion called for by s 89(3) of the Act and in so doing, should not have required the employer to pay to Mr Greenwood the remuneration he would, but for being dismissed, have received before being reinstated with effect from 3 June 2004. It may be implied from that observation that we consider the intended effect of Orders 3 and 4 above was restitutive and not for the purpose of putting Mr Greenwood in a better position or the employer in a worse position than if there had been no dismissal. We do not consider that Mr Greenwood on the findings made by the Commissioner should be restored to a position whereby he bears no responsibility for his conduct and we will therefore set aside Orders 3 and 4 made by the Commissioner on 3 June 2004. 51 As to Order 1 in Mr Greenwood's case, namely the order for reinstatement, it does not seem to us on a proper analysis that there was any constraint imposed upon the Commissioner in making that order merely because Mr Greenwood was unfit for work at the point in time the order was made. Indeed on the evidence before her and we note in that regard firstly, the absence of evidence postulating permanent or indefinite incapacity for work and secondly, the evidence of a Return to Work Plan and a Rehabilitation Plan which had been developed and at least in part implemented in accordance with the workers compensation laws, it would have been an error to have found otherwise merely by reason of Mr Greenwood's injured state. 52 Turning then to the Commissioner's refusal of the application for costs against Mr Phillips, we are of the view that the employer has made out its case on appeal and that the Commissioner in failing to properly apply the relevant principles (see Bankstown City Council v Paris (1999) 93 IR 209 and Four Sons Pty Limited v Sakchai Limsiripothong (No 2) (2000) 100 IR 400), fell into error. We consider that Mr Phillips steadfast insistence on reinstatement to the exclusion of other negotiated outcomes disclosed a failure on his part to properly evaluate the strengths and limitations upon the case he was to propound and in such circumstances there can be little doubt on a proper application of the principles, that an order for costs against Mr Phillips was available and should have been made. 53 In so concluding, we are mindful of the offer made on Mr Phillips' behalf on 4 March 2003 by solicitors then acting for him to settle the matter on terms involving among other things, a revocation of the termination of his employment together with his resignation with effect from the same date as the termination and the payment of monies in excess of the maximum prescribed by the Act. We note further the employer's counter offer on 2 April 2003 involving among other things, agreement to the termination/resignation proposal as well as a payment of a sum equivalent to or marginally above the maximum prescribed by the Act and it may be observed that had the parties persevered with settlement negotiations involving such a narrow compass, then a settlement was clearly in good prospect. 54 Mr Phillips, however, in taking matters into his own hands and abandoning the above bargaining position by reverting on 11 April 2003 to his earlier insistence on reinstatement with full back-pay as the only outcome, effectively placed himself in a position where failing absolute success in his case (a prospect which as we have said was always problematic) he was highly exposed in the costs application which was foreshadowed from the outset by solicitors acting for the employer. In the circumstances, we have found that the relevant criterion in s 181 of the Act has been established to provide the jurisdictional basis upon which to grant costs against Mr Phillips and Bishop C erred in that regard. We however consider that although there was also the discretionary basis to make such an order it is inappropriate to do so on the basis of indemnity costs (compare Bankstown City Council v Paris (1999) 93 IR 209 at 224-225). The appeal in Matter No 2004/5823 should be upheld to that extent and a costs order made against the Respondent from a reasonable period after 11 April 2003. 55 We make the following orders: - 1. Leave to appeal is granted in all matters. 2. The appeal in Matter No IRC 2004/3685 is dismissed 3. The appeal in Matter No IRC 2004/3963 is dismissed 4. The appeal in Matter No IRC 2004/3986 is upheld in part and Orders 3 and 4 made at first instance are set aside. In all other respects, the appeal is dismissed. 5. The appeal in Matter No IRC 2004/5823 is upheld and the decision at first instance is set aside. 6. The Respondent in Matter No IRC2004/5823 is to pay the Appellant's costs from 30 April 2003 on a party and party basis as agreed or assessed. - 1 - 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.