David Hairman v FileNET Corporation Pty Limited

APPLICANT: Mr M Christie of counsel SOLICITORS: Lazarus Smith Lawyers LEGAL REPRESENTATIVES: RESPONDENT: Mr J Phillips of counsel SOLICITORS: Baker & McKenzie Solicitors

JUDGMENT: - 17 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES IN COURT SESSION CORAM: Schmidt J

Matter Number IRC 3065 of 2000 DAVID HAIRMAN v FILENET CORPORATION PTY LIMITED Application under section 106 of the Industrial Relations Act 1996

1 Judgment in this matter was given on 7 December 2001, dismissing the applicant's claim brought under s106 of the Industrial Relations Act 1996 ('the Act'). The parties were given liberty to approach on the question of costs, in the event that they could not be agreed.

2 No agreement was reached. The respondent sought an order of indemnity costs in its favour, for the whole of the proceedings. The applicant argued that there would be no departure here from the usual order as to costs, on a party/party basis.

3 The respondent relied upon an offer of compromise which it had made the applicant in April 2001, for the sum of $10,000 including interest, plus payment of costs incurred by the applicant to that time. It was submitted that the Court's Rules, like the Supreme Court Rules, did not expressly deal with this situation. Reference was made to the judgment of Boland J in Ballard v Incoll Management (No 2) [2001] NSWIRComm 217, where his Honour referred to the purpose of the rules as to offers of compromise described by the Court of Appeal in Maitland Hospital v Fisher [No 2] (1992) 27 NSWLR 721 at 724 as involving the twin measures of a "carrot" and "stick" with the "stick" being the imposition of an indemnity costs order. The approach adopted by Rolfe J in Multicon Engineering Pty Ltd v Federal Airports Corporation (1996) 138 ALR 425 was followed by Boland J (at para [17]). There Rolfe J considered a number of authorities in which this situation was considered. His Honour said at p440: 'Whether it is correct to say that there is a general policy or whether it is, perhaps, with respect, more correct to say that normally a Calderbank letter generally will be given effect according to its terms, and thus fulfil the functions of an Offer of Compromise, does not seem to me to differ in substance. However, all these authorities support the view, which in my opinion is correct, that when an Offer of Compromise is made in either of the forms to which I have referred, in circumstances where there can be no doubt that if the offeree does not accept it the making of the offer will be called in aid of an application for an award of indemnity costs if the offer is not bettered and, provided the offer reflects a compromise, the Court commences its consideration of the application from the position that such an order should be made unless the offeree can persuade the Court that it should not be. However, as I have said on several occasions the ultimate decision will depend on a consideration of the particular facts and circumstances in each case.'

4 The respondent also relied upon the comprehensive rejection in the December judgment of the applicant's evidence and the claim, which it was submitted put this case into that category of cases which should never have been brought. That, it was argued, provided a proper basis for an indemnity costs order in favour of the respondent for the entirety of the proceedings.

5 Like the rules which apply in other courts, the Court's Rules deal with offers of compromise in Rules 168 and 216, which provide: 168. Time for making or accepting offer

(1) An offer may be made at any time before the time prescribed by subrule (8) in respect of the claim to which it relates.

(3) An offer may be expressed to be limited as to the time it is open to be accepted but the time expressed must not be less than 28 days after it is made.

(4) An offeree must, within 3 days after service, serve a written acknowledgment of receipt on the offeror.

(5) An offeree may accept the offer by serving notice of acceptance in writing on the offeror before: (a) the expiration of the time specified in accordance with subrule (3) or, if no time is specified, the expiration of 28 days after the offer is made; or (b) the time prescribed by subrule (8) in respect of the claim to which the offer relates, whichever is sooner.

(6) An offer must not be withdrawn during the time it is open to be accepted, unless the Commission otherwise orders.

(7) An offer is open to be accepted within the period referred to in subrule (5) notwithstanding that during that period the party to whom the offer (the "first offer") is made makes an offer (the "second offer") to the party who made the first offer whether or not the second offer is made in accordance with this Part.

(8) The time prescribed for the purposes of subrules (1) and (5) and Rule 216 (3) is after the Commission or Registrar gives a decision or begins to give reasons for a judgment (except an interlocutory judgment).

(9) Where an offer is accepted under this Rule, a party to the compromise may request the Commission or Registrar to order in accordance with the compromise.

(1) Upon the making of an order under Rule 168 (9), a party entitled to costs may, unless the Commission otherwise orders, have those costs assessed up to and including the day the offer was accepted.

(2) If a notice of offer contains a term which purports to negative or limit the entitlement to costs, that term shall, unless the Commission otherwise orders, be of no effect for any purpose under Part 23 or this Rule.

(3) Subrules (4) - (7) apply to an offer which has not been accepted at the time prescribed by Rule 168 (8).

(4) Where an offer is made by an applicant and not accepted by the respondent, and the applicant obtains an order on the claim to which the offer relates no less favourable than the terms of the offer, then, unless the Commission otherwise orders, the applicant shall be entitled to an order against the respondent for costs in respect of the claim from the day on which the offer was made, assessed on an indemnity basis in addition to costs incurred before and on that day, assessed on a party and party basis.

(5) For the purpose of subrule (4), where the offer was made on the first or a later day of the hearing of the proceedings, then, unless the Commission otherwise orders, the applicant shall be entitled to costs in respect of the claim from 11 am on the day following the day on which the offer was made, assessed on an indemnity basis, in addition to costs incurred before that time, assessed on a party and party basis.

(6) Where an offer is made by a respondent and not accepted by the applicant, and the applicant obtains an order on the claim to which the offer relates not more favourable than the terms of the offer, then, unless the Commission otherwise orders, the applicant shall be entitled to an order against the respondent for costs in respect of the claim up to and including the day the offer was made, assessed on a party and party basis, and the respondent shall be entitled to an order against the applicant for costs in respect of the claim thereafter, assessed on a party and party basis.

(7) For the purpose of subrule (6), where the offer was made on the first or a later day of the hearing of the proceedings, then, unless the Commission otherwise orders, the applicant shall be entitled to costs in respect of the claim up to 11 am on the day following the day on which the offer was made, assessed on a party and party basis, and the respondent shall be entitled to costs in respect of the claim thereafter, assessed on a party and party basis.

(8) Where an applicant obtains an order for the payment of a remuneration, compensation or damages and: (a) the amount payable under the order includes interest or damages in the nature of interest; or (b) by or under any Act the Commission awards the applicant interest or damages in the nature of interest in respect of the amount, then, for the purpose of determining the consequences as to costs referred to in subrules (4) and (6), the Commission shall disregard so much of the interest as relates to the period after the day the offer was made.

(9) For the purpose only of subrule (8), the Commission may be informed of the fact that the offer was made, and of the date on which it was made, but shall not be informed of its terms.

(10) Subrules (4) and (6) shall not apply unless the Commission is satisfied by the party making the offer that the party was at all material times willing and able to carry out what the party offered.

6 It will be seen that the Rules do not expressly deal with the situation which has here arisen, where the respondent who made an offer of compromise was later entirely successful in resisting the claim brought.

7 A similar question arose in Alpine Hardwood (Aust) Pty Limited v Hardys Pty Limited (No 2) [2002] FCA 224 (8 March 2002), where Weinberg J took the view that the Federal Court Rules did not expressly deal with this situation. Nevertheless, his Honour noted that when the situation had arisen, it had been dealt with in accordance with the principles underpinning those Rules at para [16].

8 The approach to be adopted to offers of compromise has now oft been discussed by the Court of Appeal. Recently in Bailey v Meredith [2001] NSWCA 149, the strict operation of the rule, in that case in the context of the District Court Rules, was discussed by Stein JA, with whom Beazley and Giles JJA agreed, at [15] to [25]. There it was said: 15 The strictness of the rule was underlined by the judgment of the Court of Appeal in Hillier v Sheather . President Kirby explained the provision in his judgment commencing at page 419 where he said: 'Once the present offer was made, the cross-respondent had a limited time to decide whether to accept it or not. The refusal, or failure, to accept the offer had consequences for the operation of the rule. Thereafter, the parties were litigating at a risk that, if the cross-respondent were to obtain a judgment not more favourable to her than the terms of the offer made, the cross-appellant would be entitled to an order against the cross-respondent for his costs in respect of the claim thereafter, that is, from the day following the day on which the offer was made. Depending upon the terms of the offer, the common law doctrine might continue to attach to its availability. But that would have no consequence to the application of the rule. The operation of the rule crystallised at the moment the offer was rejected or lapsed. It is important not to confuse the operation of the law on offers and counter-offers with the operation of the rule attracting the risks of party and party costs.'

16 The President went on in his judgment (at page 420) to say that: 'Once an offer is made which turns out to be higher than the judgment recovered, prima facie the rule applies. On the theory of the rule the litigation after that offer (which, ex post, is shown to have been a reasonable one) has been occasioned by the refusal or failure of the plaintiff to accept the offer. That is why, exempting order apart, the plaintiff must bear the costs from that time. Far from seeing any practical difficulties in such an operation of the rule, I consider that it is precisely the way in which the rule maker expected and provided that rule would apply. '

17 The President continued (at page 423) that it was important that Courts not approach the exercise of the discretion to `otherwise order' (now changed into the words I have indicated earlier) in a mechanical way. Further, that even skilled legal practitioners did not have the gift of prophecy and that calculating damages verdicts was inescapably inexact because of the many imponderables which have to be taken into account. His Honour added: 'Yet the general considerations of chance and risk would have been known to the rule maker when part 19A, rule 9, of the District Court Rules was introduced into the District Court rules.'

18 Kirby P further added that: 'If this puts the plaintiff's legal representatives in an impossible position and, in practice, forces the settlement of cases for sums less than they are worth because the costs of litigation cannot be wagered against their risks, the complaint must be against the terms of the rules and the apparently narrow provision for exempting orders.'

19 I should say that, as I mentioned earlier, the rule has changed since its consideration in Hillier v Sheather and, if anything, has been tightened up. Cole JA in Hillier succinctly said at page 431: 'Subject to the Court's power to make a contrary order, once an offer is made and not accepted, [the rule[ operates upon that offer. It lies alive yet dormant awaiting the decision of the court in that action. If the decision is less favourable to the plaintiff than an offer made by the defendant in accordance with [the rule] is immediately enlivened in respect of that offer.'

20 Statements also abound in that case, and in earlier cases, as to the rationale and reason for the rule. See, for example, the judgment of the Court in Maitland Hospital v Fisher . The judgment of the Court comprising the Kirby P, Mahoney and Samuels JJA said at 725 that: 'Litigation is inescapably chancy. The purpose of the rule is to put a premium on realistic assessment of cases. It is not to demand perfect foresight which is denied even to the judges. That is why a discretion is retained under the rule, for the Court to order otherwise than as the rule provides. But the ordinary provision is expected to apply in the ordinary case. It has added a new duty to the functions of legal practitioners advising litigants. It is a duty which is both protective of the interests of litigants and of the public interests in the prompt and economical disposal of litigation.'

21 The issues arising under the particular rule were considered more recently in the Court of Appeal in Morgan v Johnson (1998) 44 NSWLR 578 where Mason P reviewed the authorities, some of which I have referred to. His Honour indicated, in extracting the principles to be applied, that: 'The prima facie consequence of non-acceptance will be that the rule will be enforced against the non-accepting party. (at 581)'

22 His Honour cited New South Wales Insurance Ministerial Corporation v Reeve (1993) 42 NSWLR 100 and Hillier at 422. The President went on to say that this was because from the time of non-acceptance, notionally the real cause and occasion of the litigation is the attitude adopted by [the party] which has rejected the compromise.

23 Mason P also referred to and quoted from an earlier decision of the Court of Appeal of Houatchanthara v Bednarczyk , an unreported decision of the Court of Appeal of 14 October 1996. This was a case where the difference between the offer of compromise and the verdict was only $750. Clarke JA said as follows: 'It is clear that if the rule operates, the plaintiff will be significantly disadvantaged, but that disadvantage flows naturally from the risks of litigation. The idea behind the rule is to encourage settlement or compromise of proceedings, and more specifically, to encourage litigants to give serious consideration to the settlement of proceedings. Where an offer is made by a defendant to a plaintiff, the latter is put on notice that unless he or she accepts that offer, there is a significant risk that the order provided for by the rule may follow. In declining to accept the offer, the plaintiff undertakes the risk and the consequences that flow naturally from that risk. Whereas, as here, the claim was a very small one, the risk was very great indeed.'

24 Handley JA, in agreeing with the order proposed by Clarke JA, referred to the rule as establishing a prima facie rule which should be applied unless the unsuccessful party is able to point to special factors which justify departure from that rule in the particular case. His Honour went on: 'General factors which apply in most, if not all cases, such as hardship, and difficulty in predicting the result of the trial cannot support an exercise of the discretion in favour of the unsuccessful party.'

9 Mr Christie of counsel for the applicant argued that no indemnity costs order would here be made. While he conceded that regard could be had to the offer made, it at the least being available to be considered on a Calderbank basis, in his submission the offer, given its size, was not truly a compromise. The judgment of Rogers CJ Comm D in Tickell v Trifleska Pty Ltd and Anor (1990) 25 NSWLR 353, was relied upon. That, however, concerned a case where the offer made was for settlement for the whole of the amount claimed, plus interest. Giles J in Hobartville Stud Pty Ltd v Union Insurance Co Ltd (1991) 25 NSWLR 358 dealt with offers of a similar kind. The fact that the respondent sought execution of a deed which contained a confidentiality provision, was submitted to be but another reason for refusing the indemnity order sought.

10 Reference was also made to the decision of Hely J in Sydney Markets Limited v Sydney Flower Market Pty Limited [2002] FCA 283 (19 March 2002). His Honour was there considering various Calderbank letters, rather than offers of compromise. In para [16], his Honour referred to the Federal Court authorities, which would not support the conclusion that '… there is any presumption that costs should be ordered on any indemnity basis if the party in receipt of a Calderbank offer does not accept the offer or achieve a result more favourable than the offer.' Hely J referred to the decision of Giles J in Hobartville and declined to make an indemnity costs order, in circumstances of an offer which he found required '…capitulation, rather than compromise.'(at para [23].)

11 In Maciver v Hilton Nursing Home Pty Limited [2001] NSWIRComm 56, I observed at para [34]: 'The Court has a discretion to award costs on the basis sought, as a departure from the usual rule. Section 131 of the Evidence Act 1995 now expressly deals with such offers being received in evidence in relation to the question of costs. The position of a Calderbank letter is rather different to that of an offer of compromise made in accordance with Part 23 of the Rules, which gives the party who made the offer certain rights as to costs, which the recipient of the offer may seek to dislodge. A Calderbank letter, on the other hand, provides but a basis for the maker of the offer to ask the Court to exercise a discretion in its favour as to costs.'

12 However the offer made in this case is viewed, it must, in my view, lead to an indemnity costs order in favour of the respondent in respect of the period following the offer. The offer cannot be viewed as inconsistent with the principle underpinning the Court's Rules in relation to offers of compromise, namely to encourage settlement of litigation by way of compromise. Here I am also satisfied that the offer, while not large, truly was a compromise. Nor do I take the view that the desire for confidentiality made the offer one which the applicant could reasonably have refused, particularly when it is considered that here the applicant was entirely unsuccessful in the claim advanced.

13 The Federal Court authorities relied upon by the applicant in relation to Calderbank offers, require that if an indemnity costs order is to be made, the party making the offer must show, not that they acted reasonably in making the offer, but rather that the recipient acted unreasonably in not accepting it. (See for example Wenzel J in Alpine Hardwood at para [35] to [36] and the authorities there discussed.) In those authorities reference is also made to a need for the party making the offer to clearly explain why the other side's case cannot succeed.

14 Rolfe J in Multicon dealt with this type of approach and disagreed with it. In his view, if an indemnity costs order was to be resisted, an onus lay on the party rejecting the offer to establish the reasonableness of that course (at p448). Mr Christie relied upon a decision of Hunter J in Walter Construction Group Ltd v Walker Corporation Ltd [2001] NSWSC 359 (4 May 2001), where his Honour expressed some disagreement with the view of Rolfe J. He preferred the view that the onus is always on an applicant to demonstrate why the ordinary rule as to costs should be departed from observing at para [31] to [34]: 31 Although I think the effect is the same, I prefer to express the exercise of the discretion as one in which the onus is on the applicant to show why, in all of the circumstances, the ordinary costs rule should not apply and why the court should "otherwise order". It may be that in some, if not most cases, the rejection of a Calderbank offer in proceedings in which the outcome to the offeree is less advantageous will be sufficient evidence to show why indemnity costs should be awarded. However, in my view, that exercise of discretion will always be dependent upon the circumstances of the case, with the onus resting upon the applicant to show why the court should depart from the usual order by imposing indemnity costs.

32 Whether that involves departure from conventional wisdom as revealed in the authorities is of no consequence in this case for the reason that I am satisfied that the Walker defendants were neither unreasonable nor imprudent in rejecting CCG's Calderbank offer. Further, I think the way I have approached the factual considerations in the exercise of this discretion, is in keeping with that adopted by the Court of Appeal in Nobrega v Trustees of the Roman Catholic Church for the Archdiocese of Sydney (No 2) [1999] NSWCA 133 (21 May 1999, Unreported)

33 In referring to Nobrega I do not intend to adopt the proposition that it must be shown that the rejection of the subject offer was clearly or plainly unreasonable. The question is whether, in all of the circumstances, the rejection of the offer was unreasonable or imprudent, so as to call for the imposition of indemnity costs.

34 There is no justification in my view for requiring anything other than the ordinary standard of proof as to reasonableness or prudence in relation to the offeree's conduct, particularly when regard is had to the policy considerations underpinning the exercise of the Court's discretion.

15 Hunter J was referring to Rolfe J's judgment at p451, where his Honour outlined the conclusion which he had reached as to the proper approach in cases such as this, where a respondent is entirely successful in resisting a claim and has had an earlier offer of compromise rejected. That was not the circumstance with which Hunter J was dealing. I respectfully agree with the approach of Rolfe J. It appears to me to be entirely consistent with the approach recently discussed by the Court of Appeal in Bailey and also appropriate in this statutory scheme, which requires the parties to actively consider settlement in compulsory conciliation proceedings chaired by a member of the Commission. It is also consistent with the approach adopted by Boland J in Ballard. Rolfe J said: 'In my opinion the proper approach to take to an Offer of Compromise, whether made under the Rules or pursuant to a Calderbank letter, is that there should be a prima facie presumption in the event of the offer not being accepted and in the event of the recipient of the offer not receiving a result more favourable than the offer, that the party rejecting the offer should pay the costs of the other party on an indemnity basis from the date of the making of the offer. I proceed on the basis that the unreasonableness was the failure by the offeree to accept the offer, which unreasonableness is demonstrated, prima facie, by the ultimate result. This approach is consistent with the decisions to which I have referred, the policy evidenced by the Act and the Rules and the widely accepted philosophy that settlements should be encouraged. The relevant Rules provide that costs will be paid on the basis set out therein "unless the Court otherwise orders". My understanding is that the Court is required to proceed on the basis that it should make the order provided for by the Rules, unless the party rejecting the offer is able to establish good reason for having done so.

It seems to me anomalous that there is no provision whereby a defendant, which is totally successful, is placed in the same position as a plaintiff, which is totally successful. In my view the Rules should be reviewed. The decisions of this Court have overcome the anomaly by an application of similar reasoning in the event of an offer of compromise by way of a Calderbank letter. Cole J observed that by taking that step the defendant, which is ultimately successful, has done everything it can to extricate itself from expensive and extensive litigation, and it seems to me that if a defendant has done that and its prognostication of the case proves to be correct, in the relevant sense, it is totally unfair that it should be required to pay costs as if it had not acted in that way. In the circumstances the relevant unreasonableness of the recipient of the offer is the failure to accept what is established to be an appropriate offer.'

16 Here the claim was for $70,000 plus interest and costs. The offer was for $10,000 including interest, plus costs. It was made after the compulsory conciliation required by s109 of the Act, conducted by Boland J on 27 February 2001. Indeed, as Mr Christie submitted, even offers of compromise made in the course of such conciliation proceedings, may later be relied upon, in relation to the question of costs. This approach accords with that adopted in a different context, by Walton J in Van Huisstede v Commissioner of Police (No 2) (2001) 106 IR 56; the Full Court in Kelly v Foler (1993) 51 IR 331 at p75 and also accords with the provisions of s131(2)(h) of the Evidence Act 1995.

17 Here, the conclusion that the respondent's offer, while not high, was one which the applicant should have accepted as reflecting a reasonable settlement of his claim, cannot be avoided.

18 In all of those circumstances, it must be concluded that this was not a case where any departure from the approach inherent in the Rules was warranted. That is, an indemnity costs order should here follow from the offer of compromise made by the respondent and rejected by the applicant, as a matter of justice between the parties. To adopt any other approach would lead to a result the reverse of that intended by the Rules - namely to encourage sensible settlement of litigation by compromise.

19 Compromise is a notion which, after all, requires all parties to the dispute to accept a settlement of less than they respectively claim they are entitled to receive, or obliged to pay, if they are successful in either bringing or resisting the claims pressed. It also requires parties to make realistic assessments of their prospects of success. In litigation brought under s106, that question is almost invariably explored in s109 conciliation conferences, with the assistance of a member of the Commission. The parties are not left to their own devices, or even with just the assistance which their legal advisers may provide. Such assessments also must have regard to each parties' conduct. How a party has relevantly conducted itself, is always best known by that party, with whom the knowledge resides from the outset of the litigation. That aspect of this type of litigation, also cannot be overlooked.

20 I turn then to the claim for an indemnity costs order in relation to the period prior to the making of the offer. The approach to be adopted to the making of indemnity costs orders has been discussed in various authorities. In Dr Payne v the University of Sydney & Anor [2000] NSWIRComm 158, I noted at para [4] to [5]: 6. The Court undoubtedly has the power to make an indemnity costs order. In Anderson v Boner (1993) 52 IR 114 at 118 and AMP & Anor v Avis & Anor , Avis & Anor v AMP & Anor (Unreported, Bauer, Peterson and Marks JJ, 18 December 1997) reference was made by the Full Court to what Hill J had observed at first instance in Boner: 'There is little doubt that orders for costs on an indemnity basis still constitute exceptions to the general rule. While costs are, under the Act and the rules, within the absolute discretion of the Court, nevertheless the Court must exercise its discretion judicially. Many of the criteria upon which such discretion is exercised in cases involving indemnity costs are to be found in the cases to which Mr Shaw referred and in a number of other cases dealing with the matter. It is fair to say that generally speaking an order for costs on an indemnity basis is justified in a case in which there are special or unusual features of an unmeritorious or improper nature surrounding the case of one party (usually the loser) which make it unreasonable and unfair that the successful party should be out of pocket as a result of the proceedings.

It is unnecessary to traverse the cases in any detail; they demonstrate in one form or another special or usual circumstances which manifest themselves in improper or unmeritorious conduct by the unsuccessful party, as for example, in cases involving the maintenance of a vexatious claim or defence, the institution and/or maintenance of an action or defence which while not vexatious or involving an ulterior or collateral purpose, may, on a rational basis, be described as untenable or doomed to failure and cases where a party has conducted its case in wilful disregard of known facts or clearly established law. However, even where there are special or unusual circumstances attaching to a particular case it does not follow as of course that indemnity costs will be awarded. But it may be observed, and the authorities demonstrate, that the categories of special or unusual circumstances justifying indemnity costs are not closed; a too rigid or narrow approach can lead to error in the exercise of the discretion. (See generally on indemnity costs Singleton v Macquarie Broadcasting Holdings Ltd and Qantas Airways Ltd v Dillington (unreported, Supreme Court, 14 May 1987) and Baltic Shipping Co v Dillon (1991) 22 NSWLR 1 at 33-35, per Kirby P, Gleeson CJ concurring).' 5. In AMP the Full Court went on to observe at pp71-72: 'In the course of determining an application for the awarding of indemnity costs Morling J in the Federal Court of Australia in Australian Federation of Consumer Organisations Inc. v Tobacco Institute of Australia Ltd (1991) 100 ALR 568 said (at 570): "I was referred to a number of cases in which orders for costs have been made on a solicitor and client or indemnity basis. Those orders have usually been made in circumstances where the conduct of the parties against whom the orders have been made has been deserving of criticism: see, for example, Degman Pty Ltd (in liq) v Wright No 2) (1983) NSWLR 354 (sic); Packer v Meagher (1984) 3 NSWLR 486; and Australian Guarantee Corporation Ltd v De Jager (1984) VR 483. The respondent fought these proceedings fiercely and left no stone unturned in resisting the application. But I do not think the conduct of its case is deserving of criticism of the kind referred to in the authorities relied upon by the applicant. Accordingly, the cases in which orders for costs have been made on a solicitor and client or indemnity basis by reason of the undeserving conduct of a litigant are distinguishable from the present case." The New South Wales Court of Appeal considered the appropriateness of making an order for the payment of indemnity costs on appeal in Huntsman Chemical Co (Australia) Ltd v International Pools (Australia) Ltd (1995) 36 NSWLR 242. The judgments of Kirby P and Mahoney JA (as they then were) suggest that a cautious approach should be adopted to the awarding of indemnity costs, especially on appeal. This is consistent with the approach taken by Kirby P in Baltic Shipping Co v Dillon (1991) 22 NSWLR 1 (at 32-4).

Despite certain decisions (referred to by Hill J in Boner v Anderson (No. 2) to the effect that there should be an increase tendency towards the awarding of indemnity costs, we consider that there is still in existence and operation a general approach to the effect that costs will be normally awarded on a party-party basis with the indemnity costs to be awarded in the more exceptional case where conduct of a party justifies it. Hill J referred to those matters this way: ". . . . a case in which there are special or unusual features of an unmeritorious or improper nature surrounding the case of one party (usually the loser) which make it unreasonable and unfair that the successful party should be out of pocket as a result of the proceedings." The view of Morling J in the Tobacco Industry Case , consistently with our thinking, was that fierce opposition to the claim was insufficient to ground indemnity costs; something more is needed.'

21 Here, there might have been a basis for an indemnity order to be made, following after the conciliation proceedings, had the respondent there made this offer of settlement, which the applicant rejected. There was, however, no reliance here on what occurred in the conciliation. It follows that the proper inference is that nothing of relevance to this application arose at the conciliation conference.

22 The question of indemnity costs prior to the offer of compromise, thus falls to be decided upon the approach discussed above. Here, despite the rejection of the claims advanced by the applicant in the judgment and the criticism which I there directed to the applicant's evidence, I am not satisfied, on the respective cases advanced and the cautious approach required to be adopted to the making of indemnity costs orders, that the circumstances warrant the making of such orders, in relation to the period prior to the offer of compromise.

23 Mr Phillips of counsel for the respondent argued that my comprehensive rejection of the applicant's case in the December judgment led to the conclusion that the proceedings should never have been instituted and that they were in reality vexatious. I do not agree. That view is not properly available, given the basis upon which I concluded that the commission scheme was not unfair. That required consideration of the question of whether a commission scheme, which had as a significant element retention of employees for a period, was thereby unfair. In the circumstances of the particular employment in question, I concluded that such a scheme was not unfair. In my view, that question was not so obvious as to warrant the conclusion, at this stage, that the claim brought by the applicant was in reality hopeless from the outset and should not have been brought at all.

24 Claims brought under s106 do not only involve a consideration of existing rights as between the parties, but also whether those rights should be altered, if, the contract having been found to be unfair as that term is defined in s105 of the Act, the Court determines to exercise a discretion in favour of an applicant. In this case, the conclusion reached was that the commission scheme in question was not unfair, the applicant's evidence on important matters in issue was not accepted, and a view was taken of his conduct, a matter expressly required to be taken into account by the Court under s106(2) of the Act, inconsistent with the relief sought being granted. Despite this, I cannot conclude that the claim was so hopeless from the outset, that it should never have been brought at all.

25 The concerns which I expressed in the judgment as to the conduct of the applicant in pursuing the same claim against the respondent and a later employer and the basis upon which his evidence as to that and other relevant conduct was rejected, in my view is properly encompassed by the indemnity order made in relation to costs, after the offer of compromise was made. This reflects both a cautious and fair approach to the making of an indemnity costs order, as the authorities require.

26 For all of these reasons, I order that the applicant bear the respondent's costs, as agreed or assessed, on a party/party basis up until the offer of compromise and thereafter on an indemnity basis. ------------------------

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