Court refuses costs even after employer wins on every issue and secures damages
In a decision handed down on 15 May 2026, Judge Forbes of the Federal Circuit and Family Court of Australia refused Melbourne Water's bid to recover costs from a former employee it had dismissed for serious misconduct - even though the utility won on every issue at trial and secured damages on its cross-claim.
The decision is a reminder of just how protective section 570 of the Fair Work Act really is, and how rarely Australian employers get to recover their legal spend in employment litigation.
Joshua Spiteri worked as a Works Coordinator at Melbourne Water's Western Treatment Plant in Werribee from August 2021 until his summary dismissal on 26 February 2024. The dismissal followed an internal investigation into his motor vehicle expense claims. In a later settlement letter, Melbourne Water put the value of the alleged improper reimbursements at approximately $17,000.
In May 2024, Spiteri sued under the general protections regime, alleging he had been dismissed because he complained about not having a work-supplied vehicle, because he had family and carer's responsibilities, and because he was a member of the Electrical Trades Union Victoria. Melbourne Water filed a cross-claim in October 2024 for breach of contract, saying Spiteri had been reimbursed for kilometres he had never actually driven, including on days he worked from home.
In February 2025, the company put a settlement proposal on the table. The terms: Spiteri pays Melbourne Water $10,000, both sides drop their claims, and both sign mutual releases and non-disparagement clauses. The letter warned that if Spiteri refused, lost at trial, and Melbourne Water did better on its cross-claim, the company would seek costs under section 570. The offer lapsed on 24 February 2025 without a response.
The trial ran from 12 to 15 May 2025. Spiteri dropped his general protections claims on day three, leaving only a breach of contract claim. He lost that too. Melbourne Water was awarded $12,000 in damages on its cross-claim.
The company then sought indemnity costs from the date of its offer, arguing that Spiteri's rejection of the settlement, his late abandonment of the statutory claims, and the surfacing of adverse documents during cross-examination had all forced it to spend money it should not have had to spend. Melbourne Water also said the surviving contract claim could have been heard more efficiently and at lower cost in a Magistrates' Court.
Judge Forbes was not persuaded. The judge agreed with Spiteri's submission that the February 2025 offer required "complete and utter capitulation" - Spiteri would have had to pay his former employer, drop his statutory case, and accept the misconduct finding before Melbourne Water had even filed its trial evidence.
On the late abandonment of the general protections claims, the judge said the reverse onus in section 361 of the Fair Work Act entitled Spiteri to test the employer's evidence before deciding whether to continue. Narrowing the case on day three of trial, the judge said, was responsible litigation practice, not unreasonable conduct.
On the documents that surfaced under cross-examination - records Spiteri conceded had been with his solicitors throughout - the judge found no concealment. Melbourne Water had spotted a hole in the case and successfully exposed it, but that was not the same as the worker breaching a disclosure obligation.
The judge also weighed what the decision called the "practical justice" of an indemnity costs order, accepting that Spiteri's mental health had deteriorated since the dismissal and noting that he had already paid the $12,000 judgment debt. Melbourne Water, the judgment said, was a significant and well-resourced public entity.
For HR teams in Australia, the operational message is direct. Even a clean win at trial, with damages and a settlement offer on the record, is unlikely to deliver costs recovery in a Fair Work matter. Internal investigations, documentation, and decision-maker evidence all need to stand up on their own - because the cost of defending the claim is almost certainly the employer's to wear.
