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[2011] NSWIRComm 63
Industrial Relations Commission (NSW)
2011-05-18
Walton J, Haylen J
Original judgment source is linked above.
DECISION 1On 2 December 2010, the Full Bench delivered a further decision in this matter dealing with the question of relief: Department of Health v Perihan Kaplan (No 3) [2010] NSWIRComm 170 (' Kaplan No 3' ). 2In that decision, the Full Bench reserved the question of costs. However, it was noted that Ms Kaplan had commenced making submissions as to costs and, in the result, the Full Bench made some preliminary observations as to that issue. The Full Bench stated (at [33]): 33. The respondent submitted the following as to costs: Costs and Unpaid Wages 26. On 30 November 2009, the parties agreed that NSW Health was to pay the Respondent's wages for the period throughout the Appellant's Appeal. On 16 June 2010 and without warning, the Appellant ceased paying the Respondent's wages. 27. Accordingly, we are specifically instructed to request that the Commission intervene to enforce the Agreement between the parties of 30 November 2009. 28. The Respondent seeks to recover all unpaid wages since 16 June 2010. 29. The Respondent seeks the costs of all proceedings to date. 30. In support of such an order, the Respondent submits that it has ultimately been successful at First Instance and in substantive proceedings on Appeal. It is further submitted that the Appellant has unnecessarily prolonged proceedings by seeking to admit fresh evidence on Appeal which carries scant probative value. Accordingly, the Applicant has been put to substantial and unnecessary expense for litigation brought by an opponent backed by significant financial resources that has waged in an ongoing legal battle with apparently no result. 34. The appellant made no submission as to costs, having regard to the intimation from the Full Bench that the question was properly addressed in the light of our ultimate rulings in this matter. 35. The question of costs, if it arises, will require determination under s 181(2)(c) of the Act. By way of brief, preliminary and general observation, however, we would note that the parties' successes in these proceedings have been mixed. 36. We will, therefore, reserve the question the costs. Any further submission as to costs (by either party) should be filed and served within seven days of this decision. This is a strict timetable and we will resolve the question on the papers (given that we have already received some oral submissions on the issue) in accordance with any submissions received within the time specified. 37. As to the question of the respondent's wages after 16 June 2010, arising under the Orders of 30 November 2009, we do not propose to take any further steps whether by Final Orders or some form of enforcement. The Orders or any agreement underpinning it, can be enforced, so far as applicable, by the parties, as they might be advised, in separate proceedings. 3The timetable referred to in these passages was altered following the filing of an affidavit of Shannon Cook by the Department of Health ('the appellant') on 8 December 2010 as to the issue of costs (as well as a submission as to costs of the appeal) and following a submission made by the respondent ('Ms Kaplan') that she was unable to meet the timetable fixed. 4In the result, an amended timetable was fixed as follows:
Respondent's submissions on costs 10Ms Kaplan sought an order for costs of the appeal proceedings. 11In the hearing concerning remedies on 14 December 2010, Ms Kaplan's then solicitor, Mr Schofield, submitted that the 'Heads of Agreement' entered into between the parties in 2010 was not determinative of the issue of costs but rather the "relevant document binding the parties in respect to both costs and the ongoing relationship between the parties is found in this document which my client recently handed to me of 30 November 2009". 12In her written submissions of 10 December 2010, Ms Kaplan further submitted (while referring to parts of the evidence), in summary, the following: (a) The 'Heads of Agreement' document was not relevant to the resolution of the question of costs. The settlement offered was a voluntary redundancy package equivalent to $45,000. The voluntary redundancy package was required to be returned should Ms Kaplan gain employment in any Government department within 12 months of redundancy paid. Ms Kaplan was recently offered employment by Nepean Hospital in the Nutrition and Dietetics Department. (b) Section 181(2)(c) of the Industrial Relations Act 1996 ('the Act') does not apply to these proceedings. The offers of settlement made by the appellant were unreasonable throughout the duration of the proceedings. An offer to settle the appeal was made conditional upon the appellant agreeing to cover the cost of all appeal proceedings. This offer was rejected by the appellant. (c) In relation to the decision of Commissioner Ritchie in Kaplan v Health Support Service [2009] NSWIRComm 1097, Ritchie C declined to make a costs order in favour of Ms Kaplan in relation to her application for relief from unfair dismissal. (d) The most recent settlement offer, the 'Heads of Agreement', was unreasonable, for the following reasons: At that point in the proceedings the Respondents costs were approximately $95,000; the settlement offered was made up of a $45,000 voluntary redundancy package plus a $45,000 contribution towards the respondent's cost; which is less than the Respondents legal costs at that point. In addition the voluntary redundancy package must be returned should the Respondent gain employment within any government department within 12 months of redundancy paid, as previously noted. Thus the offer made, was unreasonable in nature. (e) The appellant unreasonably refused the offers of settlement made by Ms Kaplan, resulting in significant costs being accrued in the proceedings that could not be fully recovered by any subsequent settlement offers made by the appellant. (f) Ms Kaplan listed various settlement offers in the proceedings as follows:
Appellant's submissions on costs 13By its original and supplementary submissions, the appellant made, in summary, the following submissions regarding Ms Kaplan's application for costs: (a) The 'Heads of Agreement' was binding on Ms Kaplan and thereby precluded her from making an application for costs of the appeal. No further submissions were made in this respect because of the decision of the Full Bench in Kaplan No 2. (b) The appeal proceedings were governed by s 181(2)(c) of the Act, and not, as contended by Ms Kaplan, s 181(2)(a). The discretion to award costs was only available where one or more specified criteria are met. The appellant can only be ordered to pay costs if "in the opinion of the Commission, [it] unreasonably failed to agree to the settlement of the claim". (c) Neither of the preconditions for the award of costs in unfair dismissal proceedings stated in Bankstown City Council v Paris (1999) 93 IR 209 ( 'Bankstown City Council ') is applicable to the application for costs made against the appellant. (d) The decision by Commissioner Ritchie to refuse costs at first instance had regard to offers made by the appellant and Ms Kaplan on or about September 2009 and was based upon a conclusion that the gateway conditions of s 181(2)(c) had not been open. That decision was not appealed. (e) Ms Kaplan's application for costs were based upon a false premise that the appellant failed in its appeal. (f) None of the purported offers of settlement described by Ms Kaplan in her application for costs were reasonable offers for the purposes of s 181(2)(c). (g) The appeal was not frivolous or vexatious. 14In its original and supplementary submissions, the appellant made, in summary, the following submissions in support of its application for costs: (a) The appellant repeated it's submissions regarding the binding effect of the 'Heads of Agreement'. (b) Whilst an applicant may choose to consistently seek reinstatement during unfair dismissal proceedings "once they abandon reinstatement as the primary remedy the Commission's focus shifts to the offers advanced by both parties and the conduct of the parties during these exchanges". By June 2010, Ms Kaplan had abandoned reinstatement as the primary remedy. (c) Ms Kaplan unreasonably failed to agree to a settlement of her application in September 2009 when she rejected the appellant's offer to pay her a redundancy payment that equated to 51 weeks pay. (d) Ms Kaplan unreasonably failed to agree to a settlement of her application in June 2010 "when she purported to resile from the Heads of Agreement between the parties". This submission does not depend upon the enforcement of the 'Heads of Agreement' but proceeds upon the basis that Ms Kaplan was prepared to settle the proceedings in June based on the terms of the 'Heads of Agreement'. (e) Ms Kaplan's reliance upon the potentially refundable nature of redundancy payments under the Government's redundancy scheme was misguided. The appellant's offer in September 2009 was substantial and amounted to almost twice the maximum compensation available taxed at concessional rate. The offer in June 2010 was even higher. In any event, only Ms Kaplan was able to take an action leading to a refund and the back-pay figure decreased incrementally "as the gap between termination and the next government job increases". (f) Ms Kaplan's apparent reliance upon the amount of costs she had incurred in the proceedings in order to demonstrate that offers made by the appellant were not reasonable should not be accepted in the light of the Full Bench decision in Orange Community Accommodation Service Incorporated v Roddenby [2004] NSWIRComm 333. (g) The reasonableness of a particular offer must be considered by reference to likely or potential outcomes of the proceedings. "This consideration should not be contaminated by costs considerations in a prima-facie no-costs jurisdiction". Parties must necessarily assume in unfair dismissal proceedings that final orders will not include an order for costs, otherwise the effective purpose of s 181(2) would be defeated. (h) In any event, Ms Kaplan's claim as to the amount of costs incurred was exaggerated. (i) The Full Bench, in considering the objective reasonableness of the appellant's June 2010 offer "can also note that the June offer/agreement has resulted in [Ms Kaplan] receiving over $130,000 in 2009 - a sum that equates to almost 145 weeks pay at [Ms Kaplan's] stated weekly rate of pay".
Evidence of the appellant on costs 15The affidavit of Mr Cook filed on 8 December 2010 deposed to the following matters: (a) On 7 June 2010, an offer of settlement was conveyed to Ms Kaplan. On 8 June 2010, Ms Kaplan made a counter-offer in the following terms: a. HSS was to pay backpay from the date of Ms Kaplan's dismissal (8 December 2008) to 8 June 2010 - less the amounts already paid to Ms Kaplan; b. Ms Kaplan was to be formally reinstated as at 8 June 2010; c. Ms Kaplan would immediately accept voluntary redundancy and be paid accordingly; and d. Ms Kaplan would be paid all of her leave accruals as if she had been employed between 8 December 2008 and 8 June 2010. (b) Ms Kaplan's offer was accepted and written terms of settlement began to be formulated. (c) However, shortly after Ms Kaplan was no longer prepared to settle the proceedings and a conciliation was undertaken by Haylen J. (d) Mr Cook spoke to Ms Kaplan about certain settlement possibilities and explained the voluntary redundancy package of $45,000 and, in addition, offered back pay of $45,000. Ms Kaplan then accepted the offer and signed the 'Heads of Agreement' document. (e) On 8 June 2010 at 4:13 pm, Mr Cook received a text message from Ms Kaplan stating she could not afford to cover the appeal costs with $45,000 and asked if Mr Cook would contribute. (f) On that same day at approximately 6:10 pm, Mr Cook emailed Mr Easton of counsel, and attached a signed copy of the 'Heads of Agreement'. (g) On 16 June 2010, the appellant paid Ms Kaplan all of the monetary entitlements owing to her, amounting to a gross payment of $103,905.63. This payment included: a. $58,905.63 less tax as a payment under the voluntary redundancy policy; and b. $45,000 as contribution towards legal costs. (h) The above amounts are in addition to the $26,500 in wages the appellant paid to Ms Kaplan since the proceedings commenced.
CONSIDERATION 16Two aspects of the costs applications presently before us may be disposed of shortly. 17First, we do not consider that there was any basis to grant the appellant's application for costs of proceedings before Ritchie C. An application for costs was unsuccessfully made by Ms Kaplan at first instance: Kaplan v Health Support Service [2009] NSWIRComm 1097. No appeal was brought from that decision. No issue of costs was raised in the appellant's appeal in this matter. Whilst the Act permits a Full Bench on appeal to deal with a costs application in relation to first instance proceedings ( Youssef v Western Sydney Area Health Service (No 3) (2004) 133 IR 210 at [25] ( 'Youssef ')), we consider that the failure to bring any issue on appeal by the appellant, in that respect, and our conclusion not to disturb the foundational finding of Ritchie C as to the unfairness of Ms Kaplan's dismissal, results in there being no proper basis for the appellant's application for costs at first instance. In the case of Ms Kaplan's application for first instance costs, it is sufficient to observe that no appeal was brought from the decision of Ritchie C. We see nothing in the conclusions we have earlier reached in this matter in Kaplan No 1 and Kaplan No 3 that would warrant any disturbance of the Commissioner's findings and ultimate conclusion on costs at first instance. 18The second matter concerns Ms Kaplan's application under s 181(2)(a) of the Act. This is one of three provisions available to a party to unfair dismissal proceedings to seek costs: Bankstown City Council at [218]. That provision, however, only operates with respect to an applicant under Pt 6 of Ch 2 of the Act and is not available against the appellant employer in this case. In any event, we do not consider that the appeal for the purposes of s 181(2)(c) was frivolous and vexatious given the conclusion we reached in Kaplan No 3 . 19Those conclusions leave for consideration the respective applications of the parties for costs of the appeal, having regard to the first part of the provisions of s 181(2)(c). The relevant tests to be applied, in that respect, were stated in Youssef at [24] as follows: 24 The applicable principles as to the awarding of costs in proceedings such as the present were laid down in Bankstown City Council v Paris where the Full Bench stated that an affirmative conclusion on costs may be reached in either of the following two circumstances. The first is where there was a proposal put by a party which could be described as a reasonable settlement of the claim and that was not agreed by the other party. The second situation is where the course of conduct of the party over a relevant period could be said to amount to conduct inconsistent with an intention to settle the proceedings on any basis that could be considered reasonable. It is also clear from the decision of the Full Bench that notwithstanding the finding that the test in s 181(2)(c) has been satisfied the exercise of the power to actually award costs remains throughout discretionary. 20The application of those principles brings squarely into focus the parties' negotiations regarding the 'Heads of Agreement' document. Ms Kaplan contended that that document did not address the question of costs of the proceedings, per se, and should play no part in our deliberations on costs. We accept Ms Kaplan's case (even with the caution expressed by the appellant's counsel) that costs of the proceedings were substantial and may, depending upon their quantification (which is not presently relevant), have substantially diminished the monies she received from any settlement (in net). However, we do not accept that the 'Heads of Agreement' did not concern costs as, clearly, cl 3 specified that there was a contribution to 'legal costs', (even though an examination of the history of the parties' transactions would suggest that this amount originated from a sum associated with redundancy payments). Nor do we accept that the document has no part to play in our deliberations as to the costs application made by Ms Kaplan. It clearly bears upon the settlement discussions between the parties to the appeal and is, therefore, relevant to the determination of costs. 21The real difficulty with Ms Kaplan's case, in this respect, is that the decision of the Full Bench of this Commission in Orange Community Accommodation Service stands squarely against the utilisation of costs to support an argument under s 181(2)(c) of the Act in the manner (at least implicitly) proposed in Ms Kaplan's submissions. The relevant passage from that judgment, with which we agree, is as follows (at [32] and [33]): 32 Secondly, the Commissioner made an assessment of whether the six months offer of settlement was reasonable by comparison to the legal costs of the respondent in preparation for the case. The Commissioner said (at 27): 27. Subsequently the evidence revealed that the employer ultimately agreed to the settlement figure of six months remuneration. However the costs that had been incurred in respect of preparation of the matter for trial exceeded the six months remuneration figure by more then two fold. Consequently the applicant would be substantially out of pocket by accepting the employer's offer of six months remuneration which was made at a time after which the applicant had been compelled, by virtue of the correspondence from Baldock Stacey & Niven of 17 September 2002, to incur the substantial costs associated with the preparation of the matter for trial. 33 In our view, the test of whether a party has unreasonably failed to agree to a settlement of a claim should not be made by reference to the extent of costs expended by the other party. If that was so, a party could incur substantial legal expenses, and simply argue that any offer of settlement which failed to go close to meeting such expenses, demonstrated an unreasonable failure to agree to a settlement. That is not the appropriate test under s181(2)(c) of the Act. By focusing on such a comparison the Commissioner was deflected from the correct statutory instruction to determine whether a party had unreasonably failed to agree to a settlement of the claim. 22Nor do we consider that the appellant's approach to settlement, as illustrated by the 'Heads of Agreement', and having regard to the state of the proceedings as at the time it was reached (or afterwards), is one that would attract either of the gateway conditions as described in Bankstown City Council and Youssef. The sums offered, independent of costs, were substantial and appear reasonable in the circumstances. 23It follows, in our view, that Ms Kaplan has satisfied neither of the jurisdictional gateway conditions for the award of costs and her application is dismissed. 24There remains to be considered the appellant's application for costs of the appeal. Notwithstanding the above considerations, it seems to us that there are two real difficulties with the appellant's application. The first is that it proceeds upon the assumption that costs should be evaluated in the light of an abandonment of claims for reinstatement in favour of compensation, when the context of the appeal proceedings constituted for the most part a continued contest in that respect. 25The more significant and foundational second reason was that the appellant's case was predicated upon the condition that it maintained its contention as to the binding effect of the 'Heads of Agreement'. We do not consider that the costs application of the appellant, in this respect, creates any less difficulties than that referred to in Kaplan No 2. At the end of the day, the appellant's submissions can only get traction if we enter into the resolution of questions of interpretation or enforcement associated with the 'Heads of Agreement'. There is no better or appropriate proposal for doing so now than at the time of deciding Kaplan No 2. The assessment of Ms Kaplan's conduct, in this respect, remains, in our view, elusive and one best resolved in legal proceedings as to rights under the 'Heads of Agreement'. In short, the appellant seeks that we find Ms Kaplan has unreasonably refused to settle proceedings at the same time that it contends that the proceedings should be determined by the 'Heads of Agreement'. There is a plain inconsistency between the two propositions which we consider should be resolved in favour of the latter. 26Thus, the application by the appellant raises the highly unusual circumstance in which the nature of the uncertainties associated with the parties' transactions require a conclusion that the applicant has not proven, in fact, there is a proper basis to open the jurisdictional gate. 27We have decided, therefore, to refuse the appellant's application for costs of the appeal. 28In the final analysis, we reject all applications for costs in relation to both the appeal and the first instance proceedings.
ORDERS 29We order that the applications for costs by the appellant and the respondent, Ms Kaplan, are dismissed. The proceedings are thereby concluded.
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 10 June 2011
Department of Health
Perihan Kaplan
(1999) 93 IR 209
(2004) 133 IR 210