Reasonableness in Settlement Offers

In a recent case Dorsch v HEAD Oceania Pty Ltd (Costs) [2024] FCA 832, an employer who had previously defended a number of claims relating to the employee’s termination of employment sought an order that the employee pay its costs of the proceedings on or after 14 June 2023, or following the dismissal of his claims. The employer had made an offer to settle the dispute ahead of a hearing on the matter the offer of which expired on the 14 June 2024.

The employer foreshadowed in a letter of offer, its intent to seek costs if the offer was not accepted and the employee received an outcome less than the offer. This was on the basis that the failure to accept the offer was an unreasonable act or omission for the purposes of s 570 of the Fair Work Act.

The offer of $80,000 was a substantial one. It comprised almost the equivalent of the employees annual income. Additionally, the employee had mitigated his loss and obtained employment on a substantially higher basis, ten months after his termination.

The Court did not accept that the breadth of the deed or the time in which Employee was called on to answer it warrants against finding that the non-acceptance of the first offer was unreasonable. The Employee did not seek further time to consider the offers and indeed, made his own counteroffer of which was exceedingly high.

The Court ordered that Mr Dorsch pay his Employers costs of the proceedings on a party/party basis from 14 June 2023 (save for any costs associated with the penalty aspect of the proceedings).

Key Takeaway: where a reasonable offer is made, the parties should reasonably consider it, particularly when a case is not strong and the circumstances and amount of the offer are for all intents and purposes, highly reasonable.