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Department denied costs after winning misconduct case


The applicant, Mr Graham Smith, claimed he had been unfairly dismissed by the Department of Industry following five allegations of misconduct being sustained against him. This misconduct included a failure to adhere to multiple formal directions requiring him to cease sending inappropriate or offensive communication to staff, including a number of emails with cartoons. Rejecting the Applicant’s submissions about his use of cartoons to deal with his dyslexia, the Commission dismissed Mr Smith’s application, commenting he was “the architect of his own demise…[h]e was given multiple opportunities to correct his behaviour and chose not to”. Commissioner Murphy also emphasised the misconduct was extremely serious and occurred over an extended period of time.

The Commission’s decision re costs

The Department of Industry previously offered to pay Mr Smith $43,890.50 (being equivalent to 6 months' pay – the maximum amount of compensation that can be awarded for an unfair dismissal under the Act) and provide him with a statement of service in full and final settlement of all claims relating to the Applicant's employment, excluding any workers' compensation claims.

However, Mr Smith did not accept this nor engage in settlement discussions with the Department. Instead, he pursued reinstatement as the only remedy in the Proceedings. The Department asserted that Mr Smith’s conduct in failing to agree to a reasonable settlement of the claim meant the Commission should exercise its discretion to make orders requiring him to pay the respondent’s costs in defending the proceedings (totalling $248,394.90 plus $59,671.34 for disbursements).

Commissioner Murphy found that, in all the circumstances, it was not unreasonable for the applicant to fail to agree to the settlement offers from the respondent and to pursue, instead, his claim for reinstatement. Furthermore, he noted that Mr Smith’s dire financial situation meant that a costs order in favour of the respondent would be “likely to be crushing for the applicant”.

Comments on this matter

The approach of the Industrial Relations Commission in the above matter of costs closely reflects another Commission decision concerned North Sydney Council following the alleged constructive dismissal of an employee wanting more time to work in secondary employment as a pole dancer and fitness instructor – (Moore v North Sydney Council [2018] - you can read our article on this case here).

After successfully defending its case, Council then initiated action for cost orders relying on the Applicant’s conduct in instituting a frivolous or vexatious application without reasonable cause and unreasonably failing to agree to a settlement offer. Again, the Commission (Constant C) decisively ruled it was unwilling to open the jurisdictional gateway to the exercise of the discretion to award costs, dismissing submissions the Applicant had unreasonably failed to agree to a settlement offer which included payment of $11,238.16 of Council’s costs.

Smith v Secretary, Department of Industry (No.2) [2019] NSWIRComm 1019

Read the full case here


Graham Evans is the Managing Partner of O'Connell Workplace Relations, a Sydney-based provider of independent investigations into workplace issues. He has over 20 years' experience in working with NSW State and Local Government to deal with complex issues within their workplaces.


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