Unfair Dismissal: Shea v Energy Australia Services Pty Ltd (No 7) [2014] FCA 1091

Indemnity costs against unsuccessful adverse action claim

Former Director of Corporate and Government Affairs, Ms Kate Shea, alleged that her employer, EnergyAustralia Servives Pty Ltd, took adverse action against her by terminating her employment. Ms Shea made what she described as several workplace complaints and argued that this was the actual reason for her dismissal, not the stated reason of genuine redundancy.

The Trial Judge dismissed the application. Significantly, applications under the Fair Work Act 2009 (Cth) do not usually attract cost orders as it is a non-costs jurisdiction. EnergyAustralia subsequently brought an application for indemnity costs against Ms Shea. Judge Jessup held that due to several unreasonable acts by Ms Shea, which caused her employer to incur costs, she should be liable to pay those costs on an indemnity basis.

The Facts

Whilst Ms Shea was employed as the Director of Corporate and Government Affairs at EnergyAustralia she made five complaints regarding the conduct of several senior members of the company. Ms Shea’s employment was terminated on the grounds of redundancy and she subsequently filed an adverse action claim against her employer. At the hearing, the trial judge found that only one of these complaints fell within the meaning of “complaint” for the purposes of theFair Work Act 2009 (Cth).his complaint regarded the conduct of a senior member of the company “making a pass” at Ms Shea. However, it was found that this complaint did not play an operative role in the decision to terminate her employment and the application was dismissed.

EnergyAustralia proceeded to seek costs against Ms Shea under section 570 of the Fair Work Act 2009 (Cth) on the basis that she:

  • instituted the proceedings vexatiously;
  • instituted the proceedings without reasonable cause; and
  • made certain unreasonable acts or omissions which caused EnergyAustralia to incur costs.

The Decision

The Judge only found favour with the last argument, finding that Ms Shea acted unreasonably when making several serious allegations in the proceedings, specifically that the CEO:

  • received a telephone complaint from the irate husband of a female employee whom he had sexually pursued;
  • presented a book on oral sex to another employee in the workplace and discussed and displayed the book in the workplace;
  • sexually harassed a female employee  at a staff party in 2006; and
  • attempted to engage in sexual misconduct, or evinced a propensity to do so, at a staff Christmas party in 2010.

The judge found that these serious allegations of impropriety were false and were made unreasonably for two reasons. Firstly, Ms Shea made them in the knowledge that there was no admissible evidence to support her claims and secondly, she made them with a motive to embarrass and humiliate the CEO. It also constituted an abuse of process and caused EnergyAustralia to incur costs within the scope of section 570(2)(b).

Significantly, the Judge held that the rejection of two settlement offers by Ms Shea was not an unreasonable act within the meaning of section 570. He stated that there is a distinction between failing to accept a reasonable offer and acting unreasonably in refusing an offer: Alpine Hardwood (Aust) Pty Ltd v Hardys Pty Ltd (No 2) [2002] FCA 224. It was held that Ms Shea did not act unreasonably by declining the settlement offers in order to pursue her primary remedy of reinstatement, despite the offers being “reasonable” and “attractive”.

The Judge ruled that Ms Shea had to pay EnergyAustralia’s costs of defending the allegations that she unreasonably made and also those costs of and incidental to the matters disposed of in the judgment in Shea v TruEnergy Services Pty Ltd (No 3) [2013] FCA 935.

This decision highlights the need for an applicant’s allegations to be genuinely-made and to be backed up with admissible evidence, otherwise it may be found to be unreasonable and open such litigants up to indemnity costs orders.


* PCC Lawyers are a team of employment practitioners based in Sydney, with many years of combined knowledge and experience in workplace law, industrial relations, workplace investigations and training.  They provide a high standard of excellence and an exceptional level of personal service to a variety of clients in the Sydney metropolitan area, Central Coast, regional NSW and interstate.