Department of Health v Perihan Kaplan

LEGISLATION CITED: Industrial Relations Act 1996 Uniform Civil Procedure Rules

CASES CITED: Bankstown City Council v Paris (1999) 93 IR 219 Department of Health v Perihan Kaplan [2010] NSWIRComm 65

Mr M Easton of counsel (Appellant) LEGAL REPRESENTATIVES: Director-General of NSW Health Department, Health Services Division

CORAM: WALTON J, Vice-President HAYLEN J BISHOP C

Application by Director-General of NSW Health Department, Health Support Services Division for leave to appeal and appeal against the decision of Commissioner Ritchie given in Kaplan v Dept of Health Support Service [2009] NSWIRComm 1088

1 The factual background to this Department of Health v Perihan Kaplan matter is conveniently set out in the Full Bench decision of 28 May 2010 (see [2010] NSWIRComm 65). The appellant now seeks leave to discontinue the appeal proceedings currently part-heard before the Full Bench of the Commission. Leave is sought pursuant to Pt 12 of the Uniform Civil Procedure Rules. It is said to be necessary to rely upon that provision because of the absence of consent of the respondent to the appeal.

2 The sole reason advanced by the appellant to support the grant of leave is the contention that, following conciliation by a Member of the Full Bench, the parties ultimately reached an agreement to settle the appeal and all claims the respondent may have against the appellant. Before the Commission, by consent of the parties, is an affidavit of the respondent, Ms Kaplan, and a copy of a document relied upon by both parties, entitled 'Heads of Agreement'. That affidavit solely concerns the application for leave to discontinue. Ms Kaplan accepts that she signed that document but disputes that it represents what she agreed to, especially as to the payment of her costs. She relies on the circumstances surrounding the preparation of the document and discussions in which she participated whereby amendments were to be made to a draft document then under consideration. Having spoken to her solicitor and a representative of the appellant just prior to those final amendments being made to the document, Ms Kaplan was under the impression that the agreement would reflect the fact that her costs would be paid and, therefore, she did not bother to check the document again prior to signing it. The document she signed is said to only partly address the costs alleged to be incurred by the respondent.

3 It is in those circumstances that the respondent supports the appellant's application to discontinue the appeal proceedings but does so on condition that the appellant pay the costs of the proceedings and all appeal proceedings pursuant to the provisions of s 181(2)(c) of the Industrial Relations Act 1996 ('the Act'). The respondent also submits that Ms Kaplan, having lodged a complaint with the Legal Services Commissioner concerning the conduct of her legal representatives (who have since withdrawn their appearance), raises issues that go directly to the circumstances in which the Heads of Agreement document was prepared and signed and, therefore, this aspect of the appeal should be adjourned for a further three months, being the anticipated period required by the Legal Services Commissioner to determine Ms Kaplan's complaint. In this context is to be noted that s 181(2)(c) provides as follows: The Commission may award costs against a party to proceedings under Part 6 of Chapter 2 (Unfair Dismissals) who, in the opinion of the Commission, unreasonably failed to agree to a settlement of the claim or whose application was frivolous or vexatious. As pointed out by the Full Bench in Bankstown City Council v Paris (1999) 93 IR at 219, the criteria set out in s 181(2)(c) is to be applied objectively and requires consideration of the whole of the conduct of the party against whom the order is sought or some discrete part of that party's conduct with a view to ascertaining whether it unreasonably failed to agree to a settlement of the claim.

4 The appellant's response to the respondent's position on this Application for Leave to Discontinue is to rely wholly upon the terms of the Heads of Agreement document. That document makes provision for the prior and future employment of Ms Kaplan, makes some provisions as to costs, expressly consents to the appeal proceedings being discontinued, the making of consequential orders regarding the stay of the order of reinstatement made by Commissioner Ritchie and the appellant's release from undertakings given in securing that stay.

5 In summary, the appellant's argument in support of its application for Leave to Discontinue is its assertion that it has a binding agreement to settle the proceedings and that any misunderstanding by Ms Kaplan as to its terms cannot now be visited upon the appellant. In arguing this position, the appellant traverses numerous legal arguments as to why the agreement is binding and why Ms Kaplan has little prospects of overturning the agreement she signed. The submissions canvassed the possibility that the Commission may intervene to alter or amend the agreement, although strongly arguing against that course.

6 The written submissions for the respondent advanced reasons why leave to discontinue would be granted to the appellant only on condition that the appellant pay the respondent's costs pursuant to the provisions of s 181(2)(c) of the Act. In support of this submission, it was stated that the appellant had failed in its appeal because it was now attempting to withdraw from the proceedings prior to the resolution of the matter and, thus, had caused the respondent to incur substantial and unnecessary costs in the conduct of the proceedings. In circumstances where the appellant's withdrawal ultimately meant that it was unsuccessful, costs should follow the event. Secondly, it was said that, as negotiations to settle the matter had not resulted in a reasonable settlement offer, no reasonable settlement could be said to have been offered given the appellant's unwillingness to pay the respondent's costs after seeking to withdraw from its own appeal. That unreasonable settlement offer was never accepted by the respondent on 8 June 2010, as indicated in Ms Kaplan's affidavit. It was further submitted that the settlement offer did not bind the Commission on the issue of costs and it did not bind the parties.

7 It was asserted for the respondent that the power to award costs under s 181(2)(c) was a discretionary power in which the Commission had an "absolute discretion". Further, it was submitted that the Commission's discretion to override an agreement between the parties was supported by s 327 of the Act. Both these statements are inaccurate: s 181(2) imposes restrictions on the general discretion to award costs and s 327 does not deal with the general powers of the Commission but is referrable to those powers contained within Ch 6 of the Act dealing with Public Vehicles and Carriers.

8 The respondent's submission then proceeds from the assertion of a general discretion in the Commission to award costs under s 181(2)(c) to request the Commission to declare void cl 3(a) of the Heads of Agreement, namely, removing the obligation on the appellant to pay the sum of $45,000 as a contribution to the respondent's legal costs. In this way it seems to be suggested that any impediment to the Commission awarding costs on the application to discontinue would be entirely overcome. There was a further submission addressed to the effect of cl 3(a) of the Heads of Agreement as ousting the jurisdiction of the Commission and, thereby, being void: that submission is also misconceived.

9 Lastly, the respondent submitted that, if the Commission found that the agreement bound the parties as to the issue of costs, for the reasons outlined in Ms Kaplan's affidavit, cl 3(a) of the Heads of Agreement should be declared void on the basis of negligent misstatement. Submissions were made in support of that proposition.

10 The circumstances in which leave will be granted and the consequences of granting leave to discontinue proceedings in accordance with Pt 12 of the Uniform Civil Procedure Rules have been considered on a number of occasions. The commentary in Ritchies "Uniform Civil Procedure NSW" (LexisNexis Butterworths) at [12.1.20] states that a party who discontinues must ordinarily pay the other party's costs of the discontinued claim for relief unless the Court otherwise orders or where the Notice of Discontinuance makes some other provisions. Circumstances in which it may be appropriate to make a different costs order include: where the discontinuance is a consequence of having achieved practical success in relation to claims; where the costs have been significantly increased by the unreasonable conduct of the opposing parties; and where both parties have acted reasonably but the proceedings have been rendered futile by circumstances beyond their control. 11 In [12.1.25] of the commentary, Ritchies refers to the fact that a plaintiff will not usually be granted leave to discontinue "on terms" that an order for costs be made against the defendant, although there are cases where such an order may be justified. The same three circumstances identified in [12.1.20] are referred to as supporting a discontinuing party being relieved of costs. Under [12.1.40] the commentary states that it will be rarely appropriate to grant leave to discontinue where the case has proceeded to a contested hearing. There were examples where there had been a departure from that approach in circumstances where leave to discontinue was granted after the hearing but before judgment where legislative amendments had increased the amount of recoverable damages. It was further noted in [12.1.50] that, while the court will normally allow a plaintiff to discontinue, leave may be refused where the discontinuance would cause an injustice to the defendant. It was open to the court to grant leave to discontinue on terms but as a general proposition, the terms imposed on the grant of leave to discontinue would operate against the party applying for leave. By and large the parties have not debated these propositions, and they do not, therefore, require elaboration.

12 The present application is most unusual. In different ways, both parties rely on the circumstances surrounding the respondent signing the Heads of Agreement. The appellant relies on the Heads of Agreement to support a finding by the Commission that there has been an enforceable agreement and that the matter is thereby concluded. The respondent relies upon the circumstances surrounding the agreement to convince the Commission that the agreement is not binding at least as to costs, and should not therefore, pose an impediment to the order for costs she seeks - alternatively, the costs provision of cl 3(a) of the agreement should be set aside by the Commission to allow an order for costs to be made in granting leave to discontinue. 13 In both submissions the parties invited the Commission to enter the contest as to the enforceable nature of the agreement. That invitation is extended to the Commission in circumstances where the parties, during the course of argument, have clearly indicated that the validity or otherwise of the agreement is to be dealt with in another jurisdiction where all the evidence surrounding the entering of the agreement will be available. It should be noted that the Commission has very little evidence concerning the circumstances in which the agreement was entered into and that the legal representatives for the respondent have now ceased to act for her. The Commission does not know why the document is entitled 'Heads of Agreement' or whether it was anticipated that terms would be added and, if so, in relation to what matters. A further difficulty is the paucity of evidence from the respondent that would permit the conclusions to be reached that could justify a costs order pursuant to s 181(2)(e).

14 In all the circumstances, it is not proper or appropriate for the Commission to enter the contest as to the enforceable nature of the Heads of Agreement. It is up to the parties to pursue their remedies in that regard as they may be advised but it is not appropriate for this Commission, in any way, to entertain those issues in deciding an application for leave to discontinue the appeal. In view of the fact that the only reasons put forward for the grant of leave to discontinue the proceedings concerned the existence of an enforceable agreement that is strongly contested by the respondent, the Commission's inability to address that proposition (as earlier indicated) leads to the inevitable result that leave cannot be granted. 15 Two further matters require attention. The argument on the application for leave to discontinue was conducted on the basis that the affidavit of Ms Kaplan could be taken at its highest, however, the appellant would need to call its own evidence if it failed in its primary argument that leave should be granted. Having regard to the views expressed by the Full Bench concerning the inappropriateness of the Commission becoming involved in the issue of enforceability of the Heads of Agreement, it is unnecessary, therefore, to further consider that issue or any evidence that might be called by the appellant to rebut the evidence of Ms Kaplan. 16 The last issue concerns the process required to conclude the appeal. The appellant has failed in its challenge to the finding that the dismissal was harsh and the parties were proposing to address the issue of appropriate remedies when conciliation, by agreement, was taken up. If any further brief written submissions are required in relation to this issue, the appellant shall file and serve such submissions within seven days of the delivery of this judgment and the respondent shall have a further seven days to file and serve her submissions regarding that issue. The Full Bench will contact the parties to arrange a brief hearing to address this issue if the parties express in writing their desire to do so, otherwise the issue will be dealt with on the written submissions filed and served by the parties. 17 We order that leave to discontinue be refused. ________________________

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