Darrow v FreshFood Management Services Pty Limited

SOLICITOR Swebeck Legal BONDI. LEGAL REPRESENTATIVES: RESPONDENT Mr J Clarke of counsel

SOLICITOR Clayton Utz SYDNEY.

JUDGMENT: - 5 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES

JASON DARROW v FRESHFOOD MANAGEMENT SERVICES PTY LIMITED

Application under s 106 of the Industrial Relations Act 1996 JUDGMENT RE COSTS

1 This judgment concerns the issue of costs in relation to proceedings brought by Jason Byron Darrow against his then employer, FreshFood Management Services Pty Limited. The summons for relief filed in the matter sought the removal from his contract of employment of a restraint of trade provision, the effect of which was to prevent the applicant from working with a competitor in New South Wales for a period of 12 months after the termination of employment.

2 The judgment on the merits given 15 August 2003 found the restraint of trade, or non-competition, clause and thus the contract unfair to the extent that it provided a restraint for a period of 12 months. Six months was substituted to date from 31 March 2003. On that date the applicant had tendered two months' notice of termination of employment to terminate on 30 May 2003. He was from that date disconnected from the respondent's computer system and was thereafter unable to perform his duties effectively. After continuing to work until 17 April, he was sent on "garden leave".

3 The question of costs to be awarded in the case is disputed between the parties. Section 181 of the Industrial Relations Act 1996 permits the Commission in Court Session to award costs in its discretion (see also Part 27, Costs, of the Commission's Rules). That discretion is not at large and must be exercised judicially.

4 Two issues arise: (1) the apportionment of costs between the parties given the mixed success in the proceedings; and (2) resolution of the issue of costs concerning a notice of motion filed by the applicant simultaneously with the summons for relief, seeking interlocutory relief of the same nature as the final relief sought by the summons.

5 For the purposes of the costs proceedings the parties agree to the following facts: (a) The respondent knew on the morning of 9 May 2003 that the motion would not proceed to hearing.

(b) There was agreement between the parties that conciliation was appropriate and that costs of the motion, and whether the motion should be discussed or discontinued remained in issue. (c) At the conciliation conference the applicant's previous offer to reduce the period of restraint to two months remained open to the respondent to accept.

6 Other relevant facts which emerge from the evidence tendered in this stage of the proceedings is that the respondent had offered to reduce the restraint period to 10 months after termination of employment. Thus the parties remained effectively 8 months apart in that respect.

7 With respect to the costs of the motion, they may be described as the costs thrown away by the respondents to the extent that they prepared written submissions for use by Kavanagh J, without any order having been made therefor. The non-use of those submissions, of course, resulted from the agreement between the parties to substitute conciliation for the processing of the motion, in circumstances where the Commission (Kavanagh J) was not able to allot the parties sufficient time then to deal with the motion because of the intervention of an urgent industrial dispute.

8 The parties have referred me to a number of authorities, to some of which I will refer. The general rule with respect to costs is that costs follow the event. Any order contrary to that approach must be supportable by reference to the factual circumstances. The degree of success of a particular party is a material consideration in that context.

9 Here, the applicant, by his approach on costs, accepts that he did not succeed to the fullest extent and submits that the Commission ought apportion costs between the parties on the basis that the respondent pay 70% of the applicant's costs. This is the amount I adopted in Gambotto v John Fairfax Publications Pty Limited [2001] NSWIRComm 249, 12 October 2001, unreported. In Lane v Commonwealth Bank of Australia [2001] NSWIRComm 57, 3 April 2001, unreported, Schmidt J ordered that the respondent bear 60% of the applicant's costs as agreed or assessed on a party party basis and in Pym v Oracle Corporation & 2 Ors [2003] NSWIRComm 299, 17 October 2003, unreported, Glynn J ordered that the applicant receive 30% of his costs in circumstances where the applicant failed on all the substantive issues raised in the proceedings.

10 In Lane, Schmidt J had found the relevant contract of employment unfair in part with respect to the absence of a fair procedure to deal with allegations of misconduct against the applicant and, on the other side, that misconduct justifying summary dismissal had occurred. This dichotomy led to her Honour concluding that a departure from the usual rule as to costs should occur and assessed that 60% was the appropriate figure in the applicant's interest.

11 Here, the applicant submits that the costs in relation to the motion should be costs in the cause.

12 It seems to me that costs in relation to the motion ought not be costs in the cause. The motion, as I have said, sought final relief but on an interlocutory basis. That relief would have absolved the applicant from any burden arising from the restraint of trade provision immediately. It obviously raised serious issues from the respondent's point of view and justified a defensive reaction on its part. That may be now seen as particularly so given the conclusions in the respondent's favour on the substantive merits of the case, other than the duration of the restraint.

13 There was also a question raised by the motion and defended by the respondent's intended written submissions that the Commission was without jurisdiction to grant those orders on an interlocutory basis. There is much to support that proposition. To conclude that the Commission had power to make the interlocutory orders sought would have necessitated the Commission forming the view that the relevant contract was unfair in the sense defined in s105 of the Act and that there was sufficient material before the Commission to justify the granting of the order on an interlocutory basis. In my experience, such a course is extremely rare. One example, perhaps the only one, is the judgment of Watson J in Elliott v Royal Motor Yacht Club of New South Wales, Newcastle Branch (1988) 42 IR 35.

14 The limitation of the respondent's claim in respect of costs of the motion to those costs thrown away arises from the fact that other costs in relation to the day were not wasted because of the ability of the parties to enter upon conciliation, an essential requirement of the statute.

15 I consider the respondent in the particular circumstances of this case, and bearing in mind the difficulties which seem to me to have been raised by the motion, is entitled to its costs thrown away in relation to the motion. I would so order.

16 With respect to the remaining costs of that day and generally, those costs are, because of the nature of the proceedings, costs in the cause. The issue is apportionment.

17 The determination of the apportionment of costs is not a mathematical exercise. As was observed in Gambotto v John Fairfax Publications (ibid), adopting an observation of R D Nicholson J in Gabor Martin Nargy and anor v Master Dairy Limited [1988] FCA 104, 20 February 1988, unreported, the test is one of "impression and evaluation".

18 The applicant has been successful in the proceedings but to a limited degree. On one view, the reduction he achieved in the restraint term was from 12 months from 30 May 2003 to four months. On another view, the period adopted was six months, not from the date of termination but the date from which he ceased to have connection with the respondent's relevant sources of information. On either approach the applicant has achieved a greater degree of success than 50%. In my view, an appropriate apportionment would be that the applicant have 60% of his costs as agreed or, in the absence of agreement as assessed.

19 I would make the following orders: (1) That the applicant pay the respondent's costs thrown away in relation to the motion on a party/party basis in an amount as agreed or, in the absence of agreement, as assessed.

(2) Otherwise, that the respondent pay 60% of the applicant's costs of the proceedings on a party/party basis in an amount as may be agreed or, in the absence of agreement, as assessed.

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