Bankstown City Council v Paris 93 IR 209.

Matter No. IRC00/2579 BILL PASSAS AND SKOULOUDIS GROUP PTY LTD t/as O KOSMOS. Application by Bill Passas re unfair dismissal pursuant to section 84 of the Industrial Relations Act 1996 DECISION AS TO COSTS

1 On 12 April 2001, the Commission published it's reasons for decision in this matter. The Commission's findings and orders are recorded at para 50-52 of the decision. Shortly stated, the Commission, pursuant to s89(5) of the Industrial Relations Act 1996 ("the Act"), ordered the Skouloudis Group Pty Ltd t/as O Kosmos ("the respondent") to pay to Mr Bill Passas ("the applicant") an amount of $30,888 equivalent to 26 weeks pay, within 21 days.

2 In addition, the Commission ordered that "any application for costs should be made by way of notice of motion filed within 14 days of today" (12 April 2001). Such notice of motion was duly filed on 23 April 2001 and listed on 15 May 2001.

3 Mr Reitano of Counsel appeared for the applicant to the notice of motion. There was no appearance by, or on behalf of the respondent and no explanation provided for it's failure to appear.

4 It is pertinent to note that on 24 April 2001, the respondent was advised of these proceedings by hand delivery at both the Company's registered office and business premises. Affidavits of service were tendered and marked Exhibits 2 and 3, respectively. In addition, the Industrial Registry advised the respondent of the appointment for hearing in writing and by phone on 27 April 2001. The Commission is satisfied that the respondent was appropriately advised of the listing of the notice of motion and, without any explanation or contact with the Commission, it failed to attend the proceedings on 15 May 2001.

5 The Commission is minded to observe at this point, that it is not the least bit surprised by the respondent's non-attendance. The one thing that can be said about the respondent's conduct is that it is entirely consistent with its approach to the substantive proceedings and about which I commented upon in para 5-11 of the published decision.

6 The respondent continues to thumb its nose at directions and orders of this Commission in such a disdainful and disrespectful fashion as to be bordering on contempt. Indeed, Mr Reitano informed the Commission, that my orders of 12 April have not been complied with. Similarly, a consent order for costs made on 16 November 2000, has been ignored and not complied with.

7 The Commission was not prepared to tolerate this persistent appalling conduct and I determined to consider, ex parte, the applicant's notice of motion on 15 May 2001.

8 In my opinion, it would be sufficient to make positive discretionary findings based entirely on the evidence tendered by Mr Reitano. Such evidence went to the two affidavits of Mr John Ralston, the applicant's solicitor. The first, Exhibit 1, details, inter alia, the applicant's costs subsequently amended to a total of $11,655 and the second, Exhibit 4, went to settlement negotiations between the parties, directly involving Mr Ralston. I shall refer to these negotiations later in this decision.

9 In deference to the comprehensive written and oral submissions of Mr Reitano, I propose to shortly summarise his arguments as to costs pursuant to s181(2)(c) of the Act. 1. Section 181(1) of the Act is the general power for the Commission to award costs. Section 181(2) limits the power of the Commission to award costs when the Commission is not sitting in Court Session. Section 181(2)(c) relevantly applies to unfair dismissal proceedings and is applicable in this case.

2. The respondent, Skouloudis Group Pty Ltd, unreasonably failed to settle the applicant's claim, in accordance with the tests established in Bankstown City Council v Paris (93 IR 209). 3. The applicant is entitled to a costs order having regard for the entire circumstances of the case and the unsubstantiated and outrageous allegations made against him. 4. Offers of settlement made by the respondent were unreasonable and silly. 5. Settlement conferences were treated by the respondent with contempt and disdain and were an attempt to bully the applicant into a settlement. 6. A relevant consideration was the respondent's defence in the proceedings and what the Commission found and observed about its conduct. 7. Costs are sought on an indemnity basis because this was a case "out of the ordinary". It was based on the respondent making false allegations. See Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (81 ALR 397). 8. The Commission is able to assess costs for itself, particularly in an ex parte hearing: s181(1)(d).

10 Mr Ralston's uncontested affidavit (Exhibit 4) traces the brief history of settlement negotiations that commenced on the day the matter was first listed before the Commission on 24 August 2000. Mr Pertsoulis, the respondent's then solicitor, made an offer of settlement of $2000. Mr Ralston, proposed an amount of $25,000 inclusive of costs. After a phone call (presumably to the respondent) Mr Pertsoulis proposed a final offer of $3000. This was rejected. It seems that no further attempts at settlement were made until the day of the hearing, when Counsel for both parties requested a delay in commencing the proceedings to enable further settlement discussions. Discussions took place between both Counsel and a meeting was held, involving the applicant, Mr Ralston, Mr Skouloudis and Mr Pertsoulis.

11 Mr Ralston deposed that Mr Skouloudis dominated the discussion talking over himself and the applicant in a bombastic and disdainful way. By contrast, the applicant's demeanour was calm. After about ten minutes, Mr Skouloudis made a number of insulting references to the applicant's wife, which caused him to become distressed. The meeting broke up shortly thereafter and the hearing proceeded.

12 The Commission's power to award costs in Pt 6, ch 2 proceedings is limited by the express provisions of s181 of the Act: 181(1) Subject to the rules of the Commission and any other Act or law: (a) the Commission may award costs, and (b) costs are in the discretion of the Commission, and (c) The Commission may determine by whom and to what extent costs are to be paid, and (d) the Commission may order costs to be assessed on the basis set out in Division 6 of Part 11 of the Legal Profession Act 1987 or on any other basis. 181(2) However, the Commission, when it is not in Court Session, may award costs only in the following cases:

(a) the Commission may award costs against an applicant if it considers that the application to it was frivolous or vexatious, or

(b) the Commission may award costs against a party to proceedings who, in the opinion of the Commission, instituted proceedings without reasonable cause, or

(c) the Commission may award costs against a party to proceedings under Part 6 of Chapter 2 (Unfair Dismissals) who, in the opinion of the Commission, unreasonably failed to agree to a settlement of the claim or whose application was frivolous or vexatious, or

(d) the Commission may award costs in proceedings for a breach of an industrial instrument or the recovery of money under Chapter 7, as provided by sections 357 and 373.

13 As discussed in Bankstown City Council v Paris, the legislative intention of Pt 6, ch2 of the Act is to encourage, and give primacy to, the settlement of unfair dismissal applications. Seen in this way, s181(2)(c) particularly focuses on what might be considered a reasonable settlement and a party's conduct and attitude to settling a particular claim. A passage from Bankstown City Council v Paris, demonstrates this proposition: The relevant part of s 181(2)(c), on the other hand, does not require the Commission to focus upon the circumstances of the commencement of the proceedings, or to consider only the situation of the applicant. Instead the Commission is required to consider in a more general way, the conduct of the party in respect of which an application for costs is made; and, in that regard, to consider the conduct of the party in relation to the question of settlement of the claim.

An understanding of the meaning and purpose of s 181(2)(c) is assisted by reference to the particular provisions in Pt 6, Unfair Dismissals, of Ch 2 of the Act, which relate to conciliation or settlement of unfair dismissal applications. Section 86 for example, provides: "The Commission must endeavour, by all means it considers properly necessary, to settle the applicant's claim by conciliation."

Section 87(1) is also relevant. Its effect is to preclude the Commission from proceeding to determine the claim by arbitration until "all reasonable attempts to settle the applicant's claim by conciliation have been made but have been unsuccessful". Section 87(2) continues the statutory emphasis upon conciliation by specifying that the earlier provisions do not prevent further conciliation from being attempted at any time before the Commission makes an order in the proceeding.

Construing the relevant part of s 181(2)(c) in its overall statutory context, we conclude that the evident purpose of the provision is to encourage the settlement of proceedings to which it applies. The criterion set out in the provision is to be applied objectively and requires a consideration of the whole of the conduct of the party against whom the order is sought, or some discrete part of that party's conduct, with a view to ascertaining whether it unreasonably failed to agree to a settlement of the claim. We also consider that on the proper construction of the provision, an affirmative conclusion may be reached on at least two bases. First, where there was a proposal put by a party which could be described as a reasonable settlement of the claim and that was not agreed by the other party. The second situation in which the criterion could be satisfied is where the course of conduct of the party over a relevant period could be said to amount to conduct inconsistent with an intention to settle the proceedings on any basis that could be considered reasonable.

We emphasise that, although the legislature has clearly intended that there be strict limits on the power of the Commission to award costs in unfair dismissal proceedings, the legislature has also evinced a clear intention that costs orders be available in circumstances where there has been a failure on the part of a party to properly conciliate proceedings to the extent that they have failed reasonably to facilitate a potential settlement of them. Further, the Commission is obliged to consider all relevant circumstances in deciding whether such failure has occurred.

Once the statutory criterion has been met, the Commission's broad power and discretions under s 181(1) are available for exercise.

14 While s181(2)(c) is a discrete provision directed exclusively to Pt 6, ch2 proceedings, the Commission's general powers to award costs under s181(1) flow from a positive finding under the discrete provision. I refer to the final sentence of the passage from Paris just cited. Thus the Commission's task may involve a two staged process; i.e. a finding under s181(2)(c) and secondly, the exercise of more general powers under s181(1). I note a Full Bench of the Commission in Four Sons Pty Limited v Sakchai Limsiripothong (No 2) (100 IR 400) described s181(2)(c) as the "jurisdictional gateway" to the Commission's general discretionary powers to award costs.

15 Bankstown City Council v Paris identified two bases upon which the Commission might make an affirmative conclusion as to a party unreasonably failing to agree to a settlement: 1. The rejection by a party of a reasonable settlement of the claim. 2. The conduct of a party that could be said to be inconsistent with an intention to settle the proceedings.

16 In this case, the Commission is well satisfied that a positive finding can be made on both bases. In my view, the respondent's final offer of settlement of $3,000 was not reasonable in the circumstances disclosed in the case and as later exemplified by the Commission's findings in the decision. Some short observations from the decision are sufficient to make the point: Mr Skouloudis' evidence is riddled with extraordinary inconsistencies, omissions and wild and unsubstantiated allegations…. They include threats, blackmail, sexual harassment, "arranging to destroy Mr Skouloudis' business", drinking at a club while on duty, arrogance and rudeness……there is not a shred of evidence to substantiate Mr Skouloudis' wild and irresponsible allegations. I am completely satisfied that Mr Skouloudis deliberately and wilfully concocted these allegations to slander the applicant and mislead the Commission (Par 37-38).

17 I have earlier referred to the respondent's conduct in respect to these proceedings. It was indicative of his conduct through the proceedings of the substantive matter. Without detailing my earlier remarks, it is sufficient to refer to para 5-11 of the decision.

18 The Commission accepts Mr Reitano's submission that s181(1) permits the Commission to determine for itself the extent of costs to be paid, and on what basis, including on an indemnity basis. It seems to me that this must be particularly so in circumstances where the respondent chooses not to appear in the proceedings, let alone oppose the notice of motion and where the costs calculated by the applicant appear to be soundly based and reasonable. The award of costs on an indemnity basis is, of course, only available where, in the exercise of its discretion, the Commission regards such a case as "being out of the ordinary".

19 The principles to be applied in indemnity cost applications, arising in Pt 6, ch 2 proceedings, is helpfully discussed at p224 of Bankstown City Council v Paris: We consider that the following principles should be applied in relation to the application for indemnity costs made in circumstances where the Commission has held that the first criterion in s181(2)(c) has been held to be satisfied, and an application for costs is made. The Commission can properly, in the appropriate exercise of its discretion, make an order for indemnity costs. The power to make a costs order of that kind is clearly available because of the terms of s181(1)(b).

It must, however, be recognised that the exercise of discretion is being called for in the context of circumstances which are out of the usual. That is, the discretion is only available in non-Court Session matters where one or more of specified criteria are met. Secondly, although the finding that a relevant criterion has been met may, in some circumstances, be satisfaction of circumstances which might lead to the award of indemnity costs, and although the existence of such circumstances is relevant to the grant of costs on that basis, the Commission should exercise the discretion in full recognition of the caution that should be exercised before making a costs order on a basis other than that costs should simply follow the event, since that is the way in which a discretion to order costs would be exercised 'regularly and judicially': see, for example, Moama Bowling Club Limited v Armstrong (No 2) 64 IR 264 at 267 per Cahill Deputy CJ and Peterson J).

Nevertheless, and thirdly, provided such caution is exercised, where the circumstances clearly fall within those where the courts have recognised and indemnity costs should, or may, be granted, then the Commission should consider, in the exercise of its discretion, whether costs should be awarded on that basis. Nevertheless, even at that stage of the exercise of the discretion, the Commission is to recognise that, as the authorities in relation to indemnity costs make clear, the categories in which the discretion may be exercised are not closed and the exercise of the power in relation to indemnity costs remains throughout discretionary. The discretion must be exercised judicially.

We have paid regard to the detailed discussion of principles set out in the judgment of Shepherd J in Colgate-Palmolive Company v Cussons Pty Limited , particularly to the distillation of authority set out therein at 232-234. On a consideration of those authorities it is clear that, for example, a court (or this Commission) ought not usually make a payment of costs on a basis other than the party and party basis; and there must be circumstances which would warrant a court (or this Commission) departing from the usual course.

20 While observing the appropriate caution, I am satisfied that this case has plainly met the criteria of being "out of the usual" or "out of the ordinary". The Commission has not been able to identify, nor could I imagine another example of a case where a party's conduct during the proceedings, and it's attitude to settling a claim, has been so manifestly unreasonable. I propose to make an order for costs on an indemnity basis. I am fortified in making this finding, by the respondent's failure to pay a consent costs order made on 16 November 2000 and advice by Mr Reitano that the respondent has not complied with the Commission's orders of the 12 April 2001 and has lodged no appeal against such orders.

21 Pursuant to s181(1) and (2) of the Industrial Relations Act, 1996, the Commission orders that: 1. The respondent, Skouloudis Group Pty Ltd, t/as O Kosmos, shall pay the applicant, Mr Bill Passas, costs of the proceedings in Matter 2579 of 2000 and in the respect of this notice of motion, on an indemnity basis. 2. Such costs shall be as agreed or assessed. 3. Such costs so ordered shall be paid within 28 days of today. Peter Sams Deputy President.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.