Cretney v Director General, New South Wales Department of Education and Training

LEGISLATION CITED: Industrial Relations Act 1996

Alltrans Express Ltd v CVA Holdings Ltd [1984] 1 WLR 394 Anglo-Cyprian Trade Agencies Ltd v Paphos Wine Industries Ltd [1951] 1 All ER 873 Arian v Nguyen (2001) 33 MVR 37, [2001] NSWCA 5 Bonic v Pacific General Securities Ltd [2009] NSWSC 1221 Bostik Australia Pty Ltd v Liddiard (No. 2) [2009] NSWCA 304 Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (No 2) [2008] FCAFC 107 Bowker v Software Engineers Australia [2004] NSWIRComm 104 Cretazzo v Lombardi [1975] 13 SASR 4 Cretney v State of New South Wales [2005] NSWIRComm 216; (2005) 144 IR 81 Cretney v Director General, New South Wales Department of Education and Training (No 2) [2009] NSWIRComm 107 Cretney v Director General, New South Wales Department of Education and Training (No 3) [2009] NSWIRComm 175 Dodds Family Investments Pty Ltd (formerly Solar Tint Pty Ltd) v Lane Industries Pty Ltd [1993] FCA 259; (1993) 26 IPR 261 Elite Protective Personnel Pty Ltd v Salmon (No 2) [2007] NSWCA 373 Hodge v TCN Channel Nine (No 2) [2006] NSWSC 1272 Hooker v Gilling (No 2) [2007] NSWCA 214 Inspector Yeung v Donald Wilson trading as Wilson's Tree Service [2005] NSWIRComm 158; (2005) 143 IR 187 CASES CITED: James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 Kim Hollingsworth v Commissioner of Police [2007] NSWIRComm 137 King v State Bank of New South Wales (No 2) [2002] NSWIRComm 353, (2002) 126 IR 407 Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534 New South Wales v Stanley [2007] NSWCA 330 Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 O'Sullivan v Crown in Right of the State of New South Wales (Department of Education and Training) [2003] NSWIRComm 303; (2003) 128 IR 158 Patricia Cretney v State of New South Wales [2008] NSWIRComm 181 Powerlan Ltd v Squires (No 2) [2007] NSWIRComm 68; (2007) 162 IR 389 Rose v Meriton Apartments Pty Ltd [2008] NSWIRComm 25; (2008) 171 IR 49 Sabah Yazgi v Permanent Custodians Ltd (No 2) [2007] NSWCA 306 Standard Commodities Pty Ltd v Societe Socinter Department Centragel [2005] NSWSC 493; (2005) 54 ACSR 496 State of New South Wales v Banas [2004] NSWIRComm 255; (2004) 137 IR 63 Sydney City Council v Geftlick (No 2) [2006] NSWCA 374 Veney v New South Wales Local Government, Clerical, Administrative, Energy, Airlines and Utilities Union (No 2) [2009] NSWIRComm 33 (2009) 181 IR 395 Waters v P C Henderson (Aust) Pty Ltd (Court of Appeal, 6 July 1994, unreported) WorkCover Authority of New South Wales (Inspector Keenan) v Lucon (Australia) Pty Limited (No 2) [2003] NSWIRComm 40; (2003) 124 IR 459

HEARING DATES: Written submissions: 23 November 2009, 4 December 2009

Ms C M Howell of counsel (Appellant) Turner Freeman Lawyers LEGAL REPRESENTATIVES: Ms K T Nomchong of counsel (Respondent) Hicksons Lawyers

CORAM: BOLAND J, President WALTON J, Vice-President BACKMAN J

PATRICIA CRETNEY v DIRECTOR GENERAL NEW SOUTH WALES DEPARTMENT OF EDUCATION AND TRAINING (No 4)

Application by Patricia Cretney for leave to appeal and appeal against a judgment of Justice Kavanagh given on 6.8.2008 in Patricia Cretney v State of New South Wales [2008] NSWIRComm 131

1 In Cretney v Director General, New South Wales Department of Education and Training (No 3) [2009] NSWIRComm 175, the Full Bench granted leave to the parties to file and serve written submissions on the question of costs. This judgment deals with that question. 2 The question of costs remains to be determined following the decision of the Full Bench in Cretney v Director General, New South Wales Department of Education and Training (No 2) [2009] NSWIRComm 107 ('the Appeal Decision'). That was an appeal from a decision of Kavanagh J in which her Honour dismissed an application by Patricia Cretney for relief under s 106 of the Industrial Relations Act 1996. Ms Cretney had been employed as a part time senior school assistant at a primary school. The background to the claim was summarised at [2] of the Appeal Decision: [2] It was alleged in the summons that following a Management Review into certain staffing matters at the School in 2000, ten allegations of 'breaches of discipline' were put to Ms Cretney. Subsequently, a 'Recommendation' was made by the 'Review Team' that Ms Cretney be transferred from the School (that Recommendation was not finally acted upon). In August 2000, the contents of a 'short version' of a Final Report ('Report of the Management Review') handed down by the Assistant Director General of the Department of Education and Training was published. The Report contained statements that Ms Cretney alleged were false, inaccurate and defamatory. The appellant claimed she suffered anxiety, distress, hurt and humiliation as a consequence of the Report's publication and other events. It was asserted in the second further amended summons for relief that the contract of employment between the appellant and the respondent (State of New South Wales (Department of Education and Training)) was unfair, harsh and unconscionable and contrary to the public interest in that it did not contain certain specified terms to prevent or avoid the unfairness and that it permitted the respondent to conduct itself towards the appellant in the adverse manner set out in the summons. The appellant sought compensation totalling $101,500 for: pain, anxiety, hurt, humiliation and distress; damage to reputation; and the costs of medical treatment and medication. 3 The appeal by Ms Cretney was upheld, with the Full Bench finding that the trial judge had erred in a number of respects. The Full Bench ordered that: (1) Leave to appeal is granted. (2) The appeal is upheld. (3) The decision and orders of Kavanagh J in Matter No IRC 7430 of 2003 are set aside. (4) The Full Bench declares that the contract as pleaded in the appellant's second further amended summons was unfair in that it denied the appellant procedural fairness and in doing so operated so as to permit: (i) the respondent to make Recommendations and findings adverse to the appellant and publish adverse findings without a proper foundation for doing so, (ii) the respondent to avoid its obligation to protect the appellant's professional integrity. (5) The contract is varied, ab initio , to provide that the appellant shall be accorded procedural fairness in any management review or disciplinary process to which she is subjected and that the respondent shall protect the appellant's professional integrity in accordance with the School Development Policy. (6) In connection with the varied contract, the respondent shall pay to the appellant the sum of $2500. (7) The respondent shall pay the appellant's costs of both the proceedings at first instance and on appeal as agreed or assessed. 4 In relation to order (7), in Cretney (No 3) the Full Bench accepted the respondent's submission that it was not provided with an opportunity to be heard on costs and consequently, as we have indicated, the Full Bench granted leave to both parties to file submissions regarding costs. Respondent's submission

5 In relation to costs, the respondent submitted that the Full Bench should set aside the costs order it made on 15 July 2009 in Cretney (No 2) and make orders as follows: (a) each party to pay its own costs in relation to the hearing at first instance being Cretney v State of New South Wales [2008] NSWIRComm 131 including the application for costs in relation to those proceedings: Cretney v State of New South Wales [2008] NSWIRComm 181: or, in the alternative that the Respondent be ordered to pay 50% of the Appellant's costs in relation to those proceedings; (b) each party to pay its own costs in relation to the appeal being Cretney v Director General, New South Wales Department of Education and Training (No 2) [2009] NSWIRComm 107 (including the costs application); or, in the alternative that the Respondent be ordered to pay 50% of the Appellant's costs in relation to those proceedings. 6 The respondent accepted that the orders it sought required a departure from the usual order that costs follow the event. However, in this matter, it was submitted it was appropriate to do so essentially on two grounds: (a) the appellant was not wholly successful in her appeal in that: (i) the Appellant has only succeeded on a small portion of her claims: see Hughes v Western Australian Cricket Association (1986) ATPR 40-748; or such as that which persuaded Young J in Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd and Ors (No 3) [1998] NSWSC 616 , that the appropriate order was that the plaintiff received only 50% of his costs; (ii) the Appellant failed in relation to a distinct and severable portion of her claims: see Inn Leisure Industries Pty Ltd v D F McCloy Pty Ltd (1991) 28 FCR 172 at 174; (iii) the majority of the claims made were unsuccessful - such as in Thiess v TCN Channel Nine Pty Ltd (No 5) [1994] 1 Qd 156 where 13 out of 25 imputations in a defamation case failed; (iv) a generalized or broad brush approach should be taken in circumstances where the court recognizes that the plaintiff/applicant has not been wholly successful and that, in the interests of fairness, the defendant/respondent ought not be required to meet the whole of the costs: see Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd [1993] FCA 259; (1993) 26 IPR 261 and the other authorities cited. … (b) in circumstances where there was a combination of a failure to succeed on the majority of the appellant's claims and the award of modest or trivial compensatory damages, it was a proper case for the Court to apply the principles expressed in Anglo-Cyprian Trade Agencies Ltd v Paphos Wine Industries Ltd [1951] 1 All ER 873 and in Alltrans Express Ltd v CVA Holdings Ltd [1984] 1 WLR 394.

7 For her part, the appellant submitted, in summary: (a) That the usual order of costs to a successful party will (absent relevant settlement offers) only be departed from in special circumstances;

(b) The fact that an applicant did not succeed on all grounds does not constitute special circumstances;

(c) There are no other special circumstances warranting a departure from the usual order as to costs in the present case. In particular even if it were relevant the respondent is wrong in asserting that Ms Cretney succeeded in only a small part of her case;

(d) Even if there was otherwise some merit in the respondent's submissions on apportionment (which is denied), the conduct of the matter below by the respondent would be fatal to the application for a departure from the usual order as to costs. These factors included: (i) The respondent's failed jurisdictional arguments, which were pressed below and on appeal; (ii) The respondent's failure to admit extensive matters pleaded by the applicant which were not genuinely in dispute; (iii) The filing of numerous affidavits which were not read in its case; (iv) The filing of important evidence thirteen months after the date for the filing of the respondent's evidence; and (v) The contested claim of privilege by the respondent over a crucial document which was ultimately tendered as part of the respondent's evidentiary case.

(e) An offer made by Ms Cretney immediately prior to the appeal being filed to walk away with no order as to costs is fatal to the respondent's arguments for a departure from the usual order as to costs. Legal principles

8 The principles that apply to the awarding of costs in this jurisdiction, as they are relevant to these proceedings, may be summarised in the following fashion: (a) Costs are in the discretion of the Industrial Court which has power to determine by whom and to what extent costs are to be paid: s 181(1) of the Industrial Relations Act. (b) The powers and discretions of the Court under s 181(1) are to be exercised in accordance with Pt 27 of the Industrial Relations Commission Rules 1996; (c) The discretion must be exercised judicially: Cretazzo v Lombardi [1975] 13 SASR 4; Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 at 96-98 per McHugh J. (d) Costs are compensatory in the sense that they are awarded to indemnify the successful party against the expense to which he or she has been put by reason of the legal proceedings. The order is not made to punish the unsuccessful party: Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534 per Mason CJ at 543, per Toohey J at 562 - 563, per McHugh J at 566 - 567. (e) The 'usual approach', the 'general position' or 'ordinary' approach is that costs will follow the event: Inspector Yeung v Donald Wilson trading as Wilson's Tree Service [2005] NSWIRComm 158; (2005) 143 IR 187 at [126]; Veney v New South Wales Local Government, Clerical, Administrative, Energy, Airlines and Utilities Union (No 2) [2009] NSWIRComm 33 (2009) 181 IR 395 at [5]; Rose v Meriton Apartments Pty Ltd [2008] NSWIRComm 25; (2008) 171 IR 49 at [8]; WorkCover Authority of New South Wales (Inspector Keenan) v Lucon (Australia) Pty Limited (No 2) [2003] NSWIRComm 40; (2003) 124 IR 459 at [19]. (f) A successful litigant is, prima facie , entitled to an award of costs, unless there are special circumstances warranting a departure from the rule: O'Sullivan v Crown in Right of the State of New South Wales (Department of Education and Training) [2003] NSWIRComm 303; (2003) 128 IR 158 at [198] - [199]; Powerlan Ltd v Squires (No 2) [2007] NSWIRComm 68; (2007) 162 IR 389; Kim Hollingsworth v Commissioner of Police [2007] NSWIRComm 137 at [14]. '[T]he making of an order that a successful party pay his or her opponent's costs requires strong justification and exceptional circumstances must exist before a party will ... be ... required to pay part of the opponent's costs': Arian v Nguyen (2001) 33 MVR 37, [2001] NSWCA 5 at [37]; Hooker v Gilling (No 2) [2007] NSWCA 214 at [21]. (g) Whether an order contrary to the general rule that costs follow the event should be made depends on the circumstances of the case viewed against the wide discretionary powers of the court, which powers should be liberally construed: Elite Protective Personnel Pty Ltd v Salmon (No 2) [2007] NSWCA 373 , citing New South Wales v Stanley [2007] NSWCA 330 at [18] per Hislop J (with whom Beazley and Tobias JJA agreed) (see also Bostik Australia Pty Ltd v Liddiard (No. 2) [2009] NSWCA 304 at [38]; Bonic v Pacific General Securities Ltd [2009] NSWSC 1221 at [12]). (h) Where there are multiple issues in a case the Court generally does not attempt to differentiate between the issues on which a party was successful and those on which it failed. Unless a particular issue or group of issues is clearly dominant or separable it will ordinarily be appropriate to award the costs of the proceedings to the successful party without attempting to differentiate between those particular issues on which it was successful and those on which it failed: Elite Protective Personnel , citing Waters v P C Henderson (Aust) Pty Ltd (Court of Appeal, 6 July 1994, unreported) (see also Bostik and Bonic ). However, in Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (No 2) [2008] FCAFC 107 Finkelstein and Gordon JJ stated that: Costs are in the court's discretion. Fairness should dictate how that discretion is to be exercised. So, if an issue by issue approach will produce a result that is fairer than the traditional rule, it should be applied. See also Hodge v TCN Channel Nine (No 2) [2006] NSWSC 1272 and Standard Commodities Pty Ltd v Societe Socinter Department Centragel [2005] NSWSC 493; (2005) 54 ACSR 496. (i) A separable issue can relate to 'any disputed question of fact or law' before a court on which a party fails, notwithstanding that they are otherwise successful in terms of the ultimate outcome of the matter: Elite Protective Personnel citing James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 at [34] (see also Bostik and Bonic ).

(j) It may be appropriate to deprive a successful party of costs or a portion of the costs if the matters upon which that party was unsuccessful took up a significant part of the trial, either by way of evidence or argument: Elite Protective Personnel, citing Sabah Yazgi v Permanent Custodians Ltd (No 2) [2007] NSWCA 306 at [24] (see also Bostik and Bonic ). (k) If the appellant loses on a separate issue argued on the appeal which has increased the time taken in hearing the appeal, then a special order for costs may be appropriate which deprives the appellant of the costs of that issue: Elite Protective Personnel, citing Sydney City Council v Geftlick (No 2) [2006] NSWCA 374 at [27] (see also Bostik and Bonic ). (l) Where there is a mixed outcome in proceedings, the question of apportionment is very much a matter of discretion and mathematical precision is illusory. The exercise of the discretion depends upon matters of impression and evaluation: Elite Protective Personnel citing James v Surf Road Nominees Pty Ltd (No 2) , which in turn cited Dodds Family Investments Pty Ltd (formerly Solar Tint Pty Ltd) v Lane Industries Pty Ltd [1993] FCA 259; (1993) 26 IPR 261 at 272 (see also Bostik and Bonic ). (m) A successful party may, in appropriate circumstances, be ordered to pay the costs of an unsuccessful party where the Court finds disentitling conduct, or misconduct, on the part of the successful party such as to warrant a costs order against it: Anglo-Cyprian Trade Agencies at 874. (n) In determining whether the successful party is guilty of misconduct (or disentitling conduct), the conduct must relate either or both to the litigation and/or the circumstances leading up to the litigation: Oshlack at 97 per McHugh J. (o) A plaintiff who wins nominal or trivial damages ought not necessarily be regarded as a 'successful' plaintiff for the purpose of awarding costs: Anglo-Cyprian Trade Agencies; Alltrans Express . However, regard should be had to the special character of orders under s 106. There is no requirement that a monetary order be sought at all under s 106. Substantive findings of unfairness referred may be sufficient to support the usual order as to costs irrespective of the order for payment of money under s 106(5). 9 In assessing the merit of the respondent's claim that the general costs rule should be displaced, consideration needs to be given to the appellant's claims at first instance and subsequent success on appeal. Relief claimed 10 The appellant's second further amended summons for relief claimed: 1. An order declaring that the contract of employment between the Applicant and the Respondent whereby the Applicant performed work as a Senior School Assistant of the NSW Department of Education and Training from 1986 to 2005 was unfair, harsh, and unconscionable and contrary to the public interest. 2. Further, in addition or in the alternative, an order declaring void in whole or in part or varying in whole or in part and either from its commencement or from some other time the said contact between the Applicant and the Respondent, except as to money sums paid thereunder. 3. An order varying contract or arrangement or collateral arrangement ... in order to: ii) [sic] Require the respondent to investigate fully, thoroughly and fairly all and any allegations involving the applicant's conduct or work performance; iii) Require the respondent to grant to the applicant a reasonable opportunity to be heard in any Management review or other process involving assessment of the applicant's conduct or work performance;

iv) Require the respondent to refrain from making unsubstantiated allegations concerning the applicant's conduct or work performance;

v) Require the respondent to refrain from publishing inaccurate and defamatory statements about the applicant in any report or other document.

vi) Require that in the event that the respondent publishes inaccurate or defamatory or unsubstantiated statements about the applicant in any report or other document it is required to withdraw such statements by publication of such withdrawal in the Electronic Newsletter "In Principal" in a form to be agreed between the applicant and the respondent.

vii) Require that in the event that the respondent publishes inaccurate or defamatory or unsubstantiated statements about the applicant it is required to apologise in writing to the applicant for such publication.

viii) Prohibit the respondent from engaging in conduct, whether during or at any time after the term of the contract, that damages, or is calculated, or likely, to damage the personal, and professional reputation of the applicant, or to cause her anxiety, distress and embarrassment. 3. [sic] An order that the document(s) known as The Penrose Public School Management Review Report June 2000 be withdrawn from circulation by the respondent. 4. An order that the respondent advise all those persons who received a copy of or have an interest in the Penrose Public School Management Review Report June 2000 that the Report has been withdrawn from circulation due to inaccuracies about the applicant contained in the Report. 5. An order that the respondent apologise to the applicant for publishing inaccurate and defamatory material about her in the Penrose Public School Management Review Report June 2000 . 6. An order that the Respondent pay to the Applicant such amount of money in connection with the contract as may appear to be just in the circumstances. 7. An order that the Respondent pay to the Applicant interest upon such an amount of money as is ordered to be paid to the Applicant in connection with the contract as such rates and in respect of such period of time as the Court considers appropriate. 8. An order that the Respondent pay the Applicant's cost of and incidental to these proceedings. 9. Such further or other orders as appear to this Honourable Court to be fit or just. D. Particulars of any Amount Claimed Pain, suffering, anxiety, hurt, humiliation and distress: $50,000 Damage to reputation: $50,000 Cost of Medical Treatment and Medication: $1,500 TOTAL: $101,500.00 Grounds of appeal 11 The grounds of the appeal were set out at [39] - [41] of the Appeal Decision: [39] The grounds of appeal were as follows: 1. Her Honour erred in failing to find that the contract of employment between the appellant was unfair, harsh and unconscionable and contrary to the public interest because it permitted the respondent without recourse to its disciplinary procedures to make wrong and adverse findings against the appellant and to publish those findings widely throughout the Southern Highlands community of Penrose. 2. Her Honour erred in finding (par. 108) that at Stage 5 of the Management Review Ms Cretney was accorded procedural fairness regarding the 'newsletter incident'. 3. Her Honour erred in finding (par. 108) that there was no unfairness in the conduct of the Management Review that could be connected to the 'newsletter incident'. 4. Her Honour erred in failing to find that the respondent took into account as if proved, for the purpose of making findings and recommendations in the Management Review, matters which it had referred for further investigation and possible disciplinary action. 5. Her Honour erred in failing to find that the conduct of the respondent in taking into account as if proved, for the purpose of making findings and recommendations in the Management Review, matters which it had referred for further investigation and possible disciplinary action, rendered the contract unfair. 6. Her Honour erred in failing to find that the respondent failed to apply the School Development Policy in the course of the Management Review process in that it failed to protect the professional integrity of staff . 7. Her Honour erred in finding (par. 116) that Ms Cretney failed to provide full professional support to all Principals appointed to Penrose Public School. 8. Her Honour erred in finding (par. 117) that Ms Cretney's actions in respect of the Assistant Teacher were 'inappropriate'. 9. Her Honour erred in finding (par. 117) that Ms Cretney 'contributed to conduct which was at the heart of some difficulties faced by the various Principals at Penrose Public School'. 10. Her Honour erred in finding (par. 122) that the Review Team did not make findings or purported findings. 11. Her Honour erred in finding that the conclusion of the Review Team set out in paragraph 122 of her decision was ' a reasonable conclusion and open on the evidence before the Review Team and therefore fair'. 12. Her Honour erred in failing to find (par. 123) that the respondent, during the Review process, took no steps to check the veracity of its purported findings. 13. Her Honour erred in finding (par. 123) that 'Mr Chalmers and Mr Armstrong only reported on matters which were raised by at least two persons in the conduct of the investigation'. 14. Her Honour erred in finding (par. 131) that the conclusion drawn affecting Ms Cretney in the Management Review was not unfair because it related in its terms only to the effect of her conduct had on the management of the school. 15. Her Honour erred in failing to find that the contract was unfair in that it did not require the respondent to take any steps to correct or qualify findings and recommendations concerning Ms Cretney made in the management review and read out to the Public Meeting on 1 August 2000. 16. Her Honour erred in failing to apply the correct, or any indeed any, test in determining whether the contract of employment was relevantly unfair, harsh and unconscionable and contrary to the public interest. 17. Her Honour erred in failing to find that irrespective of the respondent's purported, claimed or asserted adherence to 'policy' the contract of employment operated so as to permit the respondent to make wrong findings, publish adverse findings and to deny the appellant procedural fairness which conduct was, irrespective of any policy, such as to render the contract of employment relevantly unfair, harsh and unconscionable and contrary to the public interest. 18. Her Honour erred in finding, in particular, that the contract of employment was fair even though it permitted: a. the respondent to apply a procedure other than its disciplinary procedure in making adverse (and disciplinary) findings against the appellant; b. the respondent to make adverse findings against the appellant without affording the appellant (contrary to Her Honour's findings) a fair opportunity to be heard in her own defence in respect of those matters; c. the respondent to publish widely without any justification at all to the school community and further matters that were adverse to the appellant and which affected her good name and character. 19. Her Honour erred in finding that it was fair and open to the review team to determine whether there were disciplinary matters to be addressed in circumstances where it had not afforded the appellant procedural fairness and conducted no fair investigation into the allegations and in fact published its 'conclusions' widely. 20. Her Honour erred in failing to find that the damage done to the appellant's good name and character was by reason of the failure of the contract of employment to contain appropriate protective or security provisions so as to ensure that the respondent: a. dealt with matters of discipline under it disciplinary policy; b. dealt with matters of management review under its Management Review Process; and c. maintained confidentiality of all process so as to protect the applicant's good name and character. 21. Her Honour erred in failing to find that the Management Review Policy was both in its terms and in its operation unfair, harsh and unconscionable and contrary to the public interest. 22. Her Honour erred in that she misunderstood and misapplied the principles of natural justice or procedural fairness. 23. Her Honour erred in refusing to grant the appellant the relief sought and in failing to make an order for the payment of money that was just in the circumstances. 24. Upon such other grounds and for such other reasons as this Honourable Court considers just.

[40] The manner in which the appeal grounds were formulated did not assist in an understanding of the appellant's case: some grounds overlapped to a confusing degree and others were not easy to make sense of. Nevertheless, we will accept the appellant's contention that the grounds may be divided into three main categories, they being: (1) errors in findings concerning procedural fairness issues raised by Ms Cretney (grounds 2 - 6);

(2) errors associated with findings of fact concerning supposed inappropriate conduct by Ms Cretney (grounds 7 - 13); and

(3) errors in respect of failure to find unfairness in the contract consequential upon the errors in the first two categories (grounds 1, 14, 17, 18, 19, 20, 21, 22 and 23).

[41] In addition, the appellant addressed grounds 15 and 16 separately. Appeal findings 12 The Full Bench's principal finding was that the respondent failed to accord to the appellant procedural fairness, and that grounds 2, 3, 4, 5 and 6 were made out. Grounds 7, 8 and 9 dealt with essentially the same issues in grounds 10 - 13, and the Court dealt with those issues together. In relation to grounds 10 -13, the Full Bench found that grounds 12 and 13 were made out, ground 11 was not, and concluded the following at [94]:

[94] Whether or not the Review Team made findings or purported findings, seems to us to matter little and we do not propose to deal with ground 10 any further, other than to say that the matters referred for further investigation were partly in the nature of allegations and partly findings. 13 The Full Bench did not consider it necessary to deal further with ground 15, given its findings in relation to ground 11. The Court further found that ground 16 was not made out. 14 The Full Bench dealt with the other grounds of appeal as follows:

Grounds 1, 14, 17, 18, 19, 20, 21, 22 and 23 [111] The errors asserted in these grounds were in respect of an alleged failure by the trial judge to find unfairness in the contract consequential upon the errors in the first two categories of grounds that we have dealt with. That is to say, her Honour made errors of a more general nature in failing to draw appropriate conclusions concerning the unfairness of the contract. [112] Much of what is contained in grounds 1, 14, 17, 18 and 19 may be regarded as somewhat repetitive or duplicitous. However, it is our finding that the trial judge erred in failing to find that the contract of employment operated so as to deny the appellant procedural fairness, which conduct was such as to render the contract of employment relevantly unfair. We also consider her Honour erred in failing to find that the contract of employment operated so as to permit the respondent to avoid its obligation to protect the appellant's professional integrity, thereby rendering the contract unfair. 15 The appellant sought $50,000 for damage to her reputation. The Full Bench found in the appeal proceedings that there was no proper basis for awarding monetary compensation for damage to reputation in this case. 16 The appellant sought an order for payment of an amount in respect of pain, suffering, hurt, humiliation and distress which arose from the unfairness of the contract. The amount claimed was $51,500, $1,500 of that being for the cost of medical treatment and medication. The Full Bench determined (at [125]) that 'it is appropriate to award compensation of $2,500 to the appellant in connection with the unfairness found on appeal for the stress and suffering she experienced'. 17 The respondent claimed that the appellant failed in relation to 10 of her claims. However, it is not a matter of looking at how many claims were successful and how many were not and determining on that simplistic basis how costs are to be apportioned. The Court must have regard, amongst other matters, to the nature of the unsuccessful claims and whether the claims formed the substantial character of the case, whether a substantial portion of the hearing time was devoted to establishing or defending claims that were unsuccessful and whether there was any unreasonable or inappropriate conduct on behalf of the successful party. Four main issues

18 It may be seen that in the appeal there were essentially four main issues arising out of the challenge to the first instance decision: (i) whether the respondent had failed to accord the appellant procedural fairness; (ii) whether the respondent had not protected the appellant's professional integrity in accordance with the School Development Policy; (iii) whether the statements and conclusions in the Management Review Report were 'false, inaccurate and defamatory' and, if so, whether the appellant was entitled to compensation for damages to her reputation; and (iv) whether the appellant was entitled to an order for payment of an amount in respect of pain, suffering, hurt, humiliation and distress which arose from the unfairness of the contract. 19 In relation to the first and second issues, the respondent submitted that the appellant did not plead or claim anywhere in the Second Further Amended Summons for Relief that the appellant was denied procedural fairness and that such denial of procedural fairness permitted the respondent to make recommendations and findings adverse to the appellant and publish adverse findings without a proper foundation for doing so or to avoid its obligation to protect the appellant's integrity, which was the ultimate finding made by the Full Bench. 20 It was submitted that Kavanagh J determined that the only incident where there was a lack of procedural fairness involved the 'Newsletter Incident'. In relation to this one incident it was noted that Kavanagh J determined that the appellant had not been given an opportunity to respond but that lack of procedural fairness had either been cured by the remaining processes in the Management Review or that it was not of such importance to render the entirety of the contract unfair within the meaning of s 106. It was further noted that the Full Bench did not accept that such a finding was open to Kavanagh J. Nevertheless, it was submitted, it was not procedural fairness that was the central issue upon which the appellant claimed that her contract was unfair. 21 We disagree with the respondent. Procedural fairness was an issue squarely raised by the appellant; it was at the heart of the litigation. In the course of the Management Review, the respondent applied a procedure that denied Ms Cretney procedural fairness in that it failed to offer her any opportunity to respond to certain allegations against her and failed to give her an adequate opportunity to respond to other allegations against her, but it nonetheless relied upon these matters as if they were proved for the purpose of making adverse conclusions and recommendations in the Management Review. 22 In an interlocutory decision of 8 July 2005 (Cretney v State of New South Wales [2005] NSWIRComm 216; (2005) 144 IR 81) on an amendment sought by the appellant, Marks J was required to consider whether the two versions of the summons which differed in the words used were in substance the same case. His Honour observed at [7]: [7] In essence, the complaint made by the applicant relates to the procedures adopted by the respondent in conducting a review of incidents which occurred at a school at which the applicant was employed, and the content of a report issued in June 2000, including the dissemination of information contained within the report. ... (emphasis added) 23 On 15 February 2006, the appellant wrote to the respondent, identifying the issue raised in the proceedings: The proceedings involve simple but important issues including the following: The respondent published allegations and adverse conclusions about Ms Cretney to the general community in the Management Review in August 2000 in circumstances where those allegations had not been tested and due process had not been accorded to Ms Cretney.

The respondent at no time subsequently tested the allegations in accordance with proper disciplinary procedures and Ms Cretney was at no time given an opportunity to respond to those matters.

Ms Cretney was nevertheless subject to quasi-disciplinary sanctions following the publication of the Report.

There was significant systemic failure in that the respondent failed to properly distinguish between a management review and a disciplinary proceeding. The respondent has since steadfastly refused to publish any retraction, or qualification of, the statements made in the Report.

The respondent has pleaded in its defence in these proceedings in a manner that is calculated to increase costs by failing to admit numerous matters which are within its knowledge and should be uncontroversial.

The respondent did not respond to this summary or suggest that the issues were not properly raised. The respondent could have been under no misapprehension that procedural fairness was a central issue in the proceedings. Further, the appellant clearly asserted in her claim that her professional integrity had not been respected in accordance with the School Development Policy. 24 In relation to the third and fourth issues it was contended that the focus of the appellant's complaint at first instance and in the appeal, was an allegation of defamation by reason of the publication of the Management Review Report and an allegation that the appellant had sustained personal injuries being '[p]ain, suffering, anxiety, hurt, humiliation and distress' arising out of the publication of defamatory matters in the Report. 25 The respondent noted that the appellant did not succeed in relation to her claim of defamation, nor did she succeed in relation to her claim for personal injuries damages. The sole basis on which the appellant succeeded was in relation to the procedural fairness issue. Further, that: Pursuant to s. 106(5) of the Act, money orders may only be made in relation to a contract which is declared wholly or partly void or varied. As such, the money order made by the Full Bench in the amount of $2,500 related only in relation to the variation of the contract to the effect that the contract provide procedural fairness in relation to a management review or disciplinary process and that the Respondent comply with its existing School Development Policy. No monies were ordered in relation to one of the primary claims of the Appellant, that being for damage to reputation: in the amount of $50,000. No money orders were made in relation to the cost of medical treatment and medication in the sum of $1,500 or at all. It is not just that the Appellant was "not wholly successful", it is the fact that the Appellant was primarily unsuccessful in relation to the majority of her central claims that underpins the Respondent's contention that the Appellant ought not be awarded costs.

26 The proposition that the appellant was unsuccessful in this claim is describing it too simplistically. The Full Bench relevantly found that: [55] … To the extent Ms Cretney was not given an opportunity to respond to the allegation prior to publication, she was not accorded procedural fairness. The effect of not providing that opportunity created a real risk that it might be inferred, by those who read the edited Report, that the appellant acted without authority and in a deceitful way. Given there was no basis for the inference cast in both the edited and Final Report - something the respondent may have discovered if Ms Cretney had been given an opportunity to respond to the allegations - the respondent was not entitled to create that risk in the way it did and in doing so treated the appellant unfairly.

[56] That the respondent ultimately decided that there was no basis to institute disciplinary proceedings against Ms Cretney in relation to the Newsletter Incident (or any of the other four matters recommended for disciplinary investigation), cannot be said to have cured completely the failure to accord procedural fairness. The decision not to proceed with a disciplinary investigation was not based on the conclusion that the appellant had not been guilty of any wrongdoing, which is perhaps the reason why no public apology was given to Ms Cretney and why there was no statement by the respondent that no basis existed for the inference cast in both the edited and Final Report. Nor was it clear how the communication by her Union was treated in the process. That left the appellant in the position of being concerned and stressed that an adverse impression of her had been created in the minds of those who read the edited Report in so far as it referred to the Newsletter Incident. That concern was one reasonably held by her, especially when it had been recommended the appellant be transferred to another School. Whilst transfers may be effected from time to time not as a result of a disciplinary process, the overwhelming inference in this case is that the transfer was proposed to be undertaken for disciplinary reasons or at least in that context. The respondent was not entitled to place the appellant in a position whereby her integrity might become a matter of speculation without at least having provided her with an opportunity to vindicate herself. 27 It is true that the Full Bench did not conclude the Management Review Report was defamatory and it did not award damages. But it may be seen that the Full Bench regarded Ms Cretney's treatment at the hands of the respondent as unfair and placed her integrity at risk. 28 As for the damages claim itself, regard must be had to what the Full Bench said about it: [114] We acknowledge there was evidence that the appellant was subjected to disparaging comment. Perhaps the most hurtful was that she had engaged in deceptive conduct. However, even if we were inclined to entertain an application that we regard as tantamount to a claim in defamation, there was no evidence called from any person involved with the Review or present at the meetings, other than the appellant herself, to found a proper basis for assessing damage to reputation. It is necessary to know the reputation said to have been injured: Amalgamated Television Services Pty Ltd v Marsden [2002] NSWCA 419 at [1370].

[115] The other difficulties associated with the claim for damages to reputation include those referred to by the trial judge at [137]. Further, the incident giving rise to the claim occurred nine years ago and for most of that time Ms Cretney has continued in employment at the School. There was no evidence that throughout that period the appellant's reputation has continued to suffer. Finally, on this aspect, the unfairness we have found in relation to the contract of employment would necessarily provide a large degree of comfort to Ms Cretney that she should not have been subjected to the treatment she received in 2000. [116] We have decided that there is no proper basis for awarding monetary compensation for damage to reputation in this case. 29 The appellant's claim in relation to damages did not constitute a substantial portion of her case at first instance or on appeal. Moreover, it was not as though there was no prospect of the damages claim ever being granted: see, for example, Bowker v Software Engineers Australia [2004] NSWIRComm 104. Accordingly, it could not be said the appellant was unreasonable in pursuing the claim. 30 The same may be said about the claim for compensation in respect of pain, suffering, hurt, humiliation and distress. There were clear precedents in that respect (see King v State Bank of New South Wales (No 2) [2002] NSWIRComm 353, (2002) 126 IR 407; State of New South Wales v Banas [2004] NSWIRComm 255; (2004) 137 IR 63). Further, whilst the evidence adduced by the appellant as to her pain and suffering was not strong, the Full Bench did award Ms Cretney compensation in connection with the unfairness found on appeal for the stress and suffering she experienced. In that respect, the Full Bench stated: [124] Notwithstanding the deficiencies in the medical evidence, it cannot be doubted that Ms Cretney suffered distress or 'stress and suffering' that may well have been avoided if the appellant had been treated in a procedurally fair manner. She had to suffer the indignity of being accused of deceitful conduct and acting without authority and Mr Irvine and Ms Murphy, two of the principals she had to work with, taking the view that she was untrustworthy, disloyal or deceitful as a result of the publication of the Reports. What is more, the respondent did not take steps to publicly explain why the disciplinary process was not proceeded with, leaving it a matter for speculation about what the respondent believed in relation to the matters referred for disciplinary investigation. 31 The amount of compensation awarded was $2500. The amount is not large even having regard to the conservative approach taken to such claims in this jurisdiction: see Banas at [105]. The amount may be regarded as nominal because it is apparent from the judgment that the Full Bench did not consider a strong case had been made out regarding stress and suffering and because the Full Bench did not regard it as open to alter the trial judge's findings regarding Ms Cretney's uncooperative behaviour. Nevertheless, whilst the amount may be regarded as nominal, there were substantive findings of procedural unfairness by the Full Bench sufficient, in our view, to support the usual order as to costs irrespective of the order for payment of money under s 106(5).

Appellant's attempt to limit scope of litigation 32 Further, we note that in the course of the hearing at first instance, the appellant made application to amend the proceedings to narrow the issues before the Court by removing the assertion that the findings of fact of the review team were false, inaccurate and defamatory, and confining the case to the procedures followed.

33 The proposed amendment was opposed by the respondent on the basis that it would be taken by surprise and could not deal with the amendments without an adjournment. The appellant submitted that in the face of an application for an adjournment, with the appellant to pay the respondent's costs on an indemnity basis, her attempt to limit the issues to procedural issues was not pursued.

34 The proposed amendment by the appellant was the subject of comment in the judgment of Kavanagh J on an application by the respondent for indemnity costs: Patricia Cretney v State of New South Wales [2008] NSWIRComm 181 at [22]: [22] ... I also accept the applicant's submission that in the conduct of the litigation the respondent, through its jurisdictional argument and refusal to allow the amendment proffered to purposefully limit the issues for litigation, added substantially to the costs incurred. I also accept, with the late service of the affidavits and in the tender of a prior legally protected document, the applicant was at a disadvantage in the preparation of her case, though she had opportunity to rebut the respondent's case at the hearing.

35 Her Honour also stated at [19] that the respondent's conduct had caused the appellant to incur extra costs and had extended the litigation: [19] While I do not accept the proposition posed by the applicant that I should make a finding that the State of New South Wales in this litigation was not a model litigant I, nonetheless, do find that in filing the two substantial and vital affidavits of the officers who conducted the Management Review in February 2008, some 13 months after the close of the timetable for the filing of its evidence, in accordance with the directions of the Court, the respondent failed to meet the standard required of a model litigant. Also in the tender of a document on which it formerly had claimed privilege, towards the end of the hearing, there was conduct which caused the applicant extra costs and extended the litigation and could have affected the applicant's consideration of the offers in the pre-trial negotiations. It is relevant that, after the serving of the affidavits in February 2008, no further offers were forthcoming from the respondent.

36 Additionally, we note that on 4 December 2009 an affidavit of Michelle Walsh was filed by the appellant. Ms Walsh was the solicitor who had carriage of the matter on behalf of Ms Cretney. The affidavit referred to a letter sent prior to the filing of the appeal from the appellant's solicitors to the respondent's solicitors to the following effect: Mrs Cretney has instructed us that if the Respondent will agree to an order that there be no order as to costs, then she will not proceed with an Appeal. 37 There was no substantive response to the appellant's proposal from the respondent. Instead, it chose to pursue its unsuccessful indemnity costs application before Kavanagh J and unsuccessfully resisted the appeal.

38 Whilst the letter is not an offer of compromise for the purpose of Pt 23 of the Industrial Relations Commission Rules 1996, it is a relevant consideration for the purpose of a discretionary decision as to costs. Order

39 Having regard to all of the circumstances, there are no special circumstances that would lead us to depart from the usual order as to costs in either the proceedings below or the appeal. Accordingly, we confirm the costs order made in the Full Bench decision of 15 July 2009, namely: (7) The respondent shall pay the appellant's costs of both the proceedings at first instance and on appeal as agreed or assessed.

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