Kristy Fraser-Kirk outside the Federal Court in Sydney this week. She reportedly sought only $8 million in damages during negotiations with David Jones. Picture: Ross Schultz Source: The Australian

According to a report in The Sydney Morning Herald, David Jones and Mr McInnes were busy negotiating a settlement with Ms Fraser-Kirk's lawyers in the week before she lodged her $37 million claim on August 2.

However, talks broke down after David Jones decided to reject Ms Fraser Kirk's demand for $850,000 in damages.

Mr McInnes resigned from David Jones in July after admitting inappropriate conduct towards a female staff member.

He said that he acted in a manner "unbecoming" of his position but claims that many of Ms Fraser-Kirk's allegations are "simply untrue".

Ms Fraser-Kirk, 27, claims that the nine David Jones board members breached their duty of care to her because they failed to protect her from Mr McInnes's alleged sexual advances.

She also claims that David Jones breached the Trade Practices Act and that after McInnes quit, the company failed to correct statements that his conduct was an isolated incident.

David Jones denies the claims.

The Herald reported that Ms Fraser-Kirk's lawyers had initially asked for $8 million in damages during negotiations but that David Jones offered only $250,000.

Both parties revised their figures as talks continued but after David Jones rebuffed a proposed settlement of $850,000, Ms Fraser-Kirk's lawyers filed the $37 million lawsuit.

At a hearing earlier this week, Ms Fraser-Kirk's lawyer said that Mr McInnes made unwelcome sexual advances to four other David Jones employees.

Rachel Francois told Justice Geoffrey Flick at the Federal Court in Sydney that the claim may be amended to include 11 more women who allegedly were subjected to sexual harassment.