Victim of workplace sexual harassment awarded indemnity costs

28 January 2021

The Full Court of the Federal Court of Australia (FCAFC) has ordered a law firm pay a victim of sexual harassment the costs of defending an appeal on an indemnity basis.

The background

In May 2015, Ms Catherine Mia Hill (Ms Hill) commenced employment at Owen Hughes T/AS Beesley and Hughes Lawyers (B & H Lawyers). In or around July 2015, the Principal of B & H Lawyers, Mr Owen Hughes (Mr Hughes) began bombarding Ms Hill with emails professing his love to her and proposing a romantic relationship. Ms Hill repeatedly rejected these overtures. During the course of Ms Hill’s employment, a number of other physical and cyber incidents occurred which often involved Mr Hughes preventing Ms Hill from leaving her own office unless she first gave him a hug and sending her inappropriate emails.

In October 2015, Ms Hill confronted Mr Hughes, asking that he stop sending her personal emails and advising him that his behaviour was harassment. On 20 October 2015, Ms Hill sought medical assistance from a psychologist to deal with the stress she was expressing due to Mr Hughes’ actions. On 9 November 2016, Ms Hill filed a complaint with the Australian Human Rights Commission (AHRC) and when the AHRC was unable to resolve the complaint, she commenced proceedings in the Federal Circuit Court of Australia.

The decision at trial

At first instance, the trial judge determined that the conduct of Mr Hughes was outrageous and that sexual harassment was established. Accordingly, the trial judge ordered B & H Lawyers to pay Ms Hill $120,000 in general damages and $50,000 in aggravated damages.

The issues on appeal

Mr Hughes appealed the decision a trial. On Appeal, the FCAFC was required to consider whether:

  1. the harassment was sexual (Issue 1);
  2. the award of general damages in the sum of $120,000 be set aside (Issue 2); and
  3. the award of aggravated damages in the sum of $50,000 be set aside (Issue 3).

The decision on appeal

In relation to Issue 1, the FCAFC agreed with the trial judge’s view that Mr Hughes’ overall pursuit was sexual.

With respect to Issue 2, the FCAFC placed significant emphasis on her expert medical testimony from her treating psychologist and psychiatrist to highlight the chronic adjustment disorder she was left with as a result of Mr Hughes’ conduct. In the circumstances, the FCAFC rejected the contention that general damages in the sum of $120,000 was manifestly excessive and outside the range which was open to the trial judge.

Finally, in relation to Issue 3, the FCAFC upheld the trial judge’s award for aggravated damages. Such damages were awarded to reflect (a) the threats Mr Hughes made to Ms Hill to prevent her from making a complaint about his sexual harassment and the appalling manner in which Mr Hughes conducted his defence during the trial.

The issue on costs

The principal issue before the FCAFC was whether B & H Lawyers should be paying the costs of Ms Hill and if so, on what basis.

The decision on costs

Having relied on the principle established in Colgate Palmolive v Cussons [1993] FCA 536, the FCAFC determined that the pursuit of a meritless appeal for the ulterior purpose of harassing Ms Hill is more than sufficient to warrant an order that her costs be paid on an indemnity basis.

Implications for you

This case serves as an important reminder that pursing an appeal that clearly is an abuse of process will enable a respondent to such appeal successfully claim indemnity costs. This is the case notwithstanding that an award for general and aggravated damages is made in favour of that respondent. Parties wishing to pursue an appeal need to ensure that they maintain a reasonable statutory and/or common law right to so.

Hughes trading as Beesley and Hughes Lawyers v Hill (No 2) [2021] FCAFC 1

Hughes trading as Beesley and Hughes Lawyers v Hill [2020] FCAFC 126

Dr Laura Sowden
Lucinda Touma

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