Dr Michael Kennedy v Northern Sydney Area Health Service [2003] NSWIRComm 75 | Case summary

1 The background to the competing claims for costs now being considered is as set out in the judgment of the Commission (Glynn J) published on 9 August 2002: 1 Dr Michael Kennedy (the applicant) on 2 August 2000 filed a Summons for Relief under s 106 of the Industrial Relations Act 1996 (the Act) against the Northern Sydney Area Health Service (the respondent/NSAHS). He alleges that the contract, arrangements, conditions or collateral arrangement (the contract) under which he performs work for the respondent is unfair, harsh or unconscionable and contrary to the public interest. 2 The applicant has provided services to the respondent since 1978 at Manly Hospital, in the first place as an Honorary Medical Officer and, later, as a Visiting Medical Officer (VMO). The impugned contract relates to his latest quinquennial reappointment as a VMO, that being the applicant's Visiting Medical Officer (VMO) Sessional Service Contract dated 20 August 1997 and expiring on 30 June 2002 (the contract). The parties to that contract of appointment to the position of VMO Internal Medicine at Manly Hospital and Community Health Services, are the applicant and the Northern Sydney Area Health Service. The terms and conditions of the appointment are in accordance with the Public Hospitals (Visiting Medical Officers - Sessional Contracts) Determination 1994. 2 In that judgment, the Commission decided that 255 The Commission finds that the contract between the applicant and the respondent was unfair in terms of s 105(1) in that it did not provide for a period of notice to be given when major and continuing changes to the on-call roster were to be made. 256 In relation to adverse effects on the practice of the applicant by the change from the 1:4 to a 1:5 roster, with the resulting 20% loss of patients flowing from the on-call work, I have found that an appropriate approach to ameliorate that loss was the provision of a period of six months notice. The applicant, at the very least, had close to that period. He was certainly aware even earlier of the decision of the DIM to seek the appointment of a fifth physician. He engaged in correspondence seeking to have that decision aborted by Mr Bazik. 257 Furthermore, the evidence does not assist the Commission to determine what, if any, effect the change from the 1:4 to the 1:5 roster in November 2000 has had on the number of patients admitted to the Hospital during the applicant's on-call time who were later followed up in his private rooms. Nor does the evidence allow the Commission to determine what proportion of any change in numbers, if any, has been caused by the change in roster, or for other reasons eg no bulk billing. 258 In the light of that fact, and of the matters set out earlier, I make no orders for the payment of moneys to the applicant. 259 I may say, that even if I had decided that moneys should be paid to the applicant, I would not, on the material before the Commission, have been able to quantify an amount. I accept the criticisms, but do not repeat them, made by counsel for the respondent as to the material tendered by the applicant in support of his claim for damages. 260 The parties are to consult as to costs. If agreement cannot be reached the Commission is to be advised within 21 days and further short submissions may be made. 3 Agreement as to costs was not reached. The matter was relisted on 17 October 2002 for further submissions on the point. 4 Mr J Shaw QC with Mr A Searle of counsel appeared on behalf of the applicant. Mr R Dubler of counsel continued his appearance for the respondent. 5 Written submissions were supplied by both parties, those submissions being supplemented orally on 17 October 2002. 6 Tendered in support of the competing submissions of the parties were two affidavits, those of Ms Vesna Vinski, solicitor in the employ of the solicitor on the record for the applicant and of Ms Megan Emelie Wood, employed as a solicitor by the solicitors for the respondent. Attached to those affidavits were copies of correspondence between the respective solicitors relating to earlier offers of settlement and to the later exploration of attempts to settle the issue of costs arising from the Commission's judgment of 9 August 2002. 7 Neither deponent was required for cross-examination. Submissions - Applicant 8 There were essentially two points of unfairness relied upon by the applicant, namely the change of roster or the change in the number of physicians to be employed which had impact upon the applicant's roster and the lack of adequate notice in that arrangement provided for in any contract or arrangement, and secondly the question of whether it was fair that a locum should be used. 9 The mere fact that the evidence of one side was preferred to that of the other does not lead to any negative inferences appropriately being drawn. There is no finding that the case brought by the applicant was dishonest or hopeless, merely that it was not correct, and there was a vast difference between a Court rejecting a proposition of fact or law as incorrect and finding that it was in some way tainted or hopeless. 10 The fact that the Court was prepared to order the variation of the contract to provide for notice indicates that the variation cannot be described as insubstantial or of no consequence. 11 Indeed one might say that the finding of the Court that there needs to be a period of notice in the contract dealing with the Visiting Medical Officer is of some general significance to the administration of the public health system in New South Wales because it's a finding that although determined in the context of the concrete facts and circumstances of one particular case must have implications generally for the contracts of VMOs. That was a discretionary decision that the Court made and it vindicates the applicant in his bringing of the action. 12 Although it is true that the Court used the term "misconceived" there is no suggestion by the Court that the arguments were so lacking in merit as to result in a misconduct of the kind averted to by Sheppard J in the case of Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225. 13 The applicant canvassed the general rule as to costs, referring in the first instance to s 181 of Industrial Relations Act 1996. I do not set out the submissions as to principles in detail, simply noting particular points from them: 13 As McHugh J put it in Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 at 624: In most jurisdictions today, the power to order costs is a discretionary power. Ordinarily, the power is exercised after a hearing on the merits and as a general rule the successful party is entitled to his or her costs: Latoudis v Casey (1990) 170 CLR 534. Success in the action or on particular issues is the fact that usually controls the exercise of the discretion. A successful party is prima facie entitled to a costs order: Latoudis v Casey (1990) 170 CLR 534 at 543, 566-568. 19 Although there is no absolute rule to this effect (per Gaudron and Gummow JJ in Oshlack [ v Richmond River Council (Oshlack) (1998) 193 CLR 72] at 88) the expression "the usual rule as to costs" embodies an important principle that subject to certain limited exceptions a successful party in litigation is entitled to an award of costs in its favour unless he or she has been guilty of some sort of misconduct relating to the litigation: per McHugh J in Oshlack at 97 and the cases cited therein and also at 102. 21 The importance of Oshlack is that it deals with the application of a costs provision (s 69 of the Land and Environment Court Act 1979) that is substantially the same as section 181 of the Industrial Relations Act (NSW) here under consideration. 22 There is no suggestion in this case that the applicant has conducted the matter in a manner that is unreasonable or has acted in a manner that could reasonably be described as misconduct. The general rule as to costs should be followed here. 14 Having dealt with the principles, the applicant submitted that on a party/party basis the respondent should pay all the applicant's costs. That oral submission replaced the applicant's earlier written submission that, having regard to the principles, their correct application to this case would result in an order that the respondent pay half of the applicant's costs of the proceedings. That course was put as an alternative in the event that the Commission did not accept the applicant's primary submission. 15 It was further submitted: 39 The applicant brought the case and was successful in obtaining a decision of the court that the contract as pleaded was unfair. There is no suggestion of impropriety or of any special circumstances that would justify departure from the "usual order as to costs". Still less is there any justification for an order for indemnity costs in favour of the respondent. 40 The mere fact the applicant did not achieve a more favourable outcome in relation to the issue of the money order sought than the offer of the respondent does not of itself, without more, lead to either result: Anderson v Boner (1993) 52 IR 114 at 121. See also SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 at [37] per Giles J. 41 Should the applicant's primary and alternative submissions not find favour with the court, then it is submitted that an appropriate order in all of the circumstances would be for each of the parties to bear their own costs of these proceedings. 42 Such an order would be justifiable in light of the principle in Greeves v Freshwater as set out by McHugh J in Latoudis at page 568. 16 In relation to indemnity costs, the principles relating to the awarding of indemnity costs are discussed in the judgment of Sheppard J in Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 and the distillation of authorities set out at 232-234. The approach in Colgate-Palmolive has been accepted in this jurisdiction by the Full Bench of this Commission (not in Court Session) in Bankstown City Council v Paris (1999) 93 IR 209 at 225. The substance of the reasoning in Colgate-Palmolive has also been accepted by the predecessor to this court in Anderson v Boner (1993) 52 IR 114 at 118. Costs on an indemnity basis are exceptions to the general rule and are justified only in a case where there are special or unusual features of an unmeritorious or improper nature making it unreasonable or unfair that the successful party should be awarded costs. There is nothing in this case satisfying any of these criteria. 17 The findings of the Court do not justify an order for costs on an indemnity basis being awarded against the applicant. 18 The reason why the respondent says that it ought to have its costs of the proceedings is that a compromise offer was made by the respondent to the effect that they would pay $40,000 in settlement of the claim plus costs and that the applicant rejected that offer, put a counter offer of $120,000. The authorities indicate that the making and refusal of such an offer is but one factor in the decision as to whether costs should be awarded against a party. 19 Although it has been suggested that there is a prima facie presumption in favour of indemnity costs in the event of an offer not being accepted and the recipient of the offer not receiving a result more favourable (see Rolfe J in Multicon Engineering Pty Ltd v Federal Airports Corporation (1996) 138 ALR 425 at 451) such a suggestion cannot now be supported in New South Wales in the face of the decision in SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323: Grynberg v Muller, Re Estate of Bilfeld (dec'd) [2002] NSWCA 350 at [35] per Hamilton J. 20 A Calderbank offer "should influence but not govern the exercise of discretion" (see McDonnell v McDonnell [1977] 1 All ER 766 at 770), a concept adopted in New South Wales in the case of Messiter v Hutchinson (Messiter) ( (1987) 10 NSWLR 525). Messiter stands for the proposition that a Calderbank letter is a relevant course for consideration for the Court on costs but is not determinative of the matter. The proposition in Messiter was recently reinforced in Grynberg v Muller; Estate late M Bilfeld [2002] NSWSC 350 (Hamilton J; 24/4/02). 21 There is also authority for the proposition that an offer of the kind made by the respondent here, of a money amount "plus costs" should not be a relevant consideration on the question of costs and does not fall to be considered in the same way as a Calderbank letter: Smallcombe v Lockyer Investment Co (1993) 42 FCR 97 at 102 per Spender J. 22 The fact that the applicant was willing to compromise some aspects of the claim does not assist the respondent. That is the whole point of the offer of compromise. A without prejudice to compromise part or even all of the case does not reflect on the validity or genuineness with which a matter is brought. The applicant's offer of compromise does not indicate that money was the real purpose of the case, given the public policy in support of settlement negotiations between parties the Court would be reluctant to lead to any conclusion which is not supported by any evidence. 23 Reliance was also placed by the applicant on the recent judgment of the Federal Court (Weinberg J), Alpine Hardwood (Aust) Pty Ltd v Hardys Pty Ltd (No 2) [2002] FCA 224 (8 March 2002) where it was stated: 28 The Full Court in Black v Lipovic emphasised that the mere refusal of a Calderbank offer does not of itself warrant an order for indemnity costs. The offeror needs to show that the conduct of the offeree was unreasonable. Moreover, the reasonableness of that conduct must be viewed in light of the circumstances which existed at the time the offer was rejected. The fact that the applicants ultimately failed to make good their case does not mean that they acted unreasonably in rejecting the initial offer. Nor does the fact that that initial offer was itself reasonable mean that it was unreasonable to reject it. 24 While the Court found no unfair disproportionate or unfair treatment of the applicant as against other VMOs this does not mean that there was no unfair treatment of the applicant per se. 25 The Court found that there was material unfairness in relation to the contract and made declarations or orders to that effect and as an exercise of discretion made orders as to variation and that denies the respondent's proposition as to costs. 26 There was support for the applicant's case by his insurer to the extent of $150,000 and thereafter the applicant needed to sustain his own costs. 27 The applicant is no longer subsidised or supported by any body. He is an individual medical practitioner seeking to maintain a claim which in substance has been vindicated. If any order for costs were made against the applicant he would have to personally bear those costs. The applicant, is not an impecunious litigant, he is a specialist physician, but nonetheless it is obvious that the costs of the proceedings, if awarded against him, would be onerous and indeed ruinous compared to the position of what is, in effect, the State Government, the respondent in these proceedings which obviously can bear the costs. The Court could properly take account of the fact that the figure of $150,000 quoted as to the respondent's legal fees is one which would be onerous and burdensome to the applicant but really a drop in the ocean in terms of the State budget. 28 In this case it would be a bizarre result, quite an irrational result, if the respondent's submissions were to be acceded to; namely, the party who in substance wins an important victory has to pay indemnity costs to the party who resisted the making of those orders or declarations at trial. 29 In short the applicant submits that one of the positive alternatives in relation to the payment of costs for the applicant ought to be granted by the Court in the exercise of its judicial discretion and that the application for indemnity costs by the respondent is hopeless. Submissions - Respondent 30 The respondent accepted the principles of law as enunciated on behalf of the applicant. However, it was stressed that the respondent was obviously the successful party, not the applicant as was the submission made by his counsel. 31 The respondent seeks indemnity costs on two bases: (a) The findings of the Court that the claims propounded by the applicant were misconceived in two respects: (i) his calculation of damages; and (ii) his case in respect of the appointment of a locum; and (b) It was unreasonable for the applicant to reject the respondent's offer of compromise dated 30 March 2001 to pay the applicant $40,000 plus the applicant's costs. This independently supports an order for indemnity costs in favour of the respondent on and from 30 March 2001. 32 There were two main issues before the Commission: the on-call roster and locum issues. 33 The applicant did not succeed as to either of those issues and in every single contentious issue submitted to the Court by the applicant was unsuccessful. 34 A further point as to why the respondent was obviously the successful party was that the finding on the bare contract of unfairness with notice, was never the real issue between the parties. It is now sought to be created as the issue for the purpose of costs and it misses the entire thrust of the case, the thrust of the judgment, the way the trial ran and all of the Court's findings. The Court's finding was on the bare contract as such. It did not go on to make a finding generally of unfairness as to conduct and did not go on to make any corrective orders under s 106. 35 The applicant never submitted that there was unfair notice in terms of time in fact. The applicant led no evidence as to shortness of notice. That gives the context that every single live issue about which the respondent had to give evidence about and put forward submissions about it succeeded. What flows from that is that the ordinary rule the Court followed that the respondent should have its costs on a party/party basis. However, as already stated costs were sought on an indemnity basis. 36 The respondent contends that the Court's findings justify an order for indemnity costs against the applicant in respect of the locum issue for persisting with a case that was "misconceived" or otherwise unmeritorious: see for example Fountain Selected Meats (Sales) Pty Limited v International Produce Merchants Pty Ltd (1988) 81 ALR 397; Boner v Anderson (No 2) [1993] 50 IR 470 at 475; WorkCover v Plastachem [2001] NSWIRComm 244 at [57]. 37 The correct character of the failure of the applicant's case on the locum issue and remedy, but not for the on-call roster, was such as to enliven principles involving indemnity costs. There was some ability to argue as to the appropriateness of a fifth physician but the character of the failure of the applicant's case on the locum issue and the remedy issue or compensation falls into the category of unmeritorious or hopeless or doomed to fail. 38 As to the question of being properly being advised, Dr Kennedy at all times has been well advised by counsel and solicitors who are well experienced in this jurisdiction, and the Court can readily infer that the applicant and his insurer at times had been receiving advice as to the prospects of success of the case. When it comes to the issue of locum and probably, a fortiori, damages the Court can infer or at least be satisfied that Dr Kennedy was or should have been advised that his claim in that regard was unmeritorious and so lacking in merit that it was doomed to fail. 39 The Court noted that the evidence did not assist it to determine what, if any, effect the roster change of one to four or one to five has had on the number of patients who were admitted to the hospital and who were later followed up in rooms, nor did it allow the Court to determine what proportion of the changes in numbers, if any, has been caused by the change in roster or for other reasons, for example, no bulk billing. The material led did not allow the Court to know that the applicant had suffered in any way in a monetary sense, yet the case was persisted. The Court can find that the applicant either was advised or should have been advised that he had real difficulties to the level that his case was either doomed or being highly unlikely to succeed on damages just because the material presented did not show it. 40 It is not improper for Dr Kennedy to ignore the advice, but if he and his insurers backing him pursue such a case it should not be where the respondent is out-of-pocket. The difference between party/party costs and actual costs should not be visited upon the State Government arm here when Dr Kennedy and his insurers pursued a case even though it is so flawed. 41 By offer of compromise dated 30 March 2001 the respondent offered to settle the proceedings by a payment to the applicant of $40,000 plus costs. This was an extremely generous offer in light of the matters referred to above and the fact that the applicant's case at its highest was of the order of $37,000 on its evidence on the on-call roster issue. The on-call roster issue was not strong but it was sufficiently arguable to come under the heading of an arguable case, but the locum issue was always misconceived. 42 It was plainly unreasonable or imprudent of the applicant in light of the weakness at least of its case to just reject out of hand an offer of $40,000 plus all of the applicant's costs up to that date. 43 Where a party to litigation engages in conduct which can be said to be "unreasonable" in rejecting an offer in light of all of the circumstances known at the time which have not altered at trial, it is appropriate for an indemnity costs order to be visited upon that party: Nobrega v Trustees for the Roman Catholic Church for the Archdiocese of Sydney [1999] NSWCA 133. 44 The respondent does not ask the Court to award indemnity costs on the basis merely of the rejection of the offer of compromise, but because it ought to have been known to the applicant that it was unreasonable to spurn that offer. 45 Now it may be that Dr Kennedy was honest. The respondent does not make a submission otherwise particularly where the Court makes no findings. If Dr Kennedy has a belief as to the locum issue that is not reasonably founded, the indemnity principle ought to apply so that Dr Kennedy is entitled to pursue his case, in the face of it being misconceived and doomed to fail but it ought not mean that the public hospital system is out-of-pocket. 46 The respondent is a public hospital with limited funds. The factual background to these proceedings was a step taken by the respondent, after (it has been found) due consultation, to improve patient care by the appointment of an additional physician. These proceedings have been expensive for the respondent to defend. Mr Bazik and the entire department virtually was here giving evidence at various stages. The inconvenience of all of that, the inconvenience of the department in having to run this sort of litigation, organise and divert clerical staff giving evidence, evidence put forward. The statistical evidence put was a burden. It has incurred in excess of $150,000 in legal fees. These are funds that may otherwise have been dedicated to a public purpose, that is, the care of hospital patients. Contrary to the respondent's position, the applicant's funds are his own to spend as he chooses. 47 The applicant has had his legal costs paid (although the extent to which is unknown) by UMP, a medical defence insurer. 48 The respondent's fall back position is that if the Court is against the respondent on all its submissions thus far, the principle underlying r 216(6) would ground an order from the Court that the applicant pay the respondent's costs on a party party basis. Submissions - Applicant - In Reply 49 First of all, it was at all material times claimed by the applicant at first instance that he should have been given adequate notice of change of arrangements. That claim was before the Commission at all material times and the applicant succeeded in getting a variation of a contract and determination that unless he received six months notice of such a change, than the contract was unfair. This was an important decision with some repercussive effects for other visiting medical officers, and touches and affects the public interest but the result of the case can and should not be trivialised. 50 Secondly, a finding on the bare contract is none the worse for that. The gist on an action under s 106 focuses on the contract or arrangement. It is permissible to look at conduct the way the transaction has worked out in practice. That does not change the fundamental focus of the section as requiring the Court to look at what are the terms of the contract or arrangement. 51 The outcome of the case led to, and the respondent concedes, declarations in favour of the applicant, and orders as well. It is a very odd situation where a respondent says it won when the Court determined in favour of the applicant to make orders and/or declarations pursuant to s 106(1), the very heart of a proceeding taken under the unfair contracts provisions. 52 Thirdly, the test in Boner v Anderson ([1993] 50 IR 470 at 475) is a tough test and a high bar before indemnity costs are granted, involving wilful disregard of known facts or clearly established law. That is in the area of misconduct. None of this is seriously alleged and none of those adjectivals should apply. 53 The fourth point is that the tough test is further illustrated in the judgment of Woodward J in Fountain Selected Meats (Sales) Pty Limited v International Produce Merchants Pty Ltd [81 ALR 397]. It is one thing to lose the case but it is another thing to say he had no chance, literally no chance of success. That is not a criteria which applies to this litigation. 54 Fifthly, there was some discussion about patient replacement with a lack of evidence in that regard. The Court's judgment (para 243) acknowledged the loss of work in relevant respects. Presumably, if there had been some patient replacement, that could have been done in cross-examination. In any event, all this goes to is mitigation of damages. It is something the Commission can have regard to, but it is not an absolute principle to be applied in unfair contracts cases (see Westfield Holdings v Adams [2001] NSWIRComm 293 [ [2002] 114 IR 241 at [202] ). Assuming there is an evidentiary gap, it means the applicant loses on that point. It does not show there was some misconduct or inappropriate conduct which warrants indemnity costs. 55 Sixthly, in relation to the offer of compromise. One does not test the reasonableness of not accepting an offer of compromise ex post facto. One has to assess the offer at the relevant time. In this case, the applicant could reasonably have had some hopes or expectations, not irrational ones, that he might have succeeded in getting some payment. The mere fact in that he did not succeed does not show ipso facto that the rejection was in some way unreasonable of the offer being irrational. But the principle counsel for the respondent fairly accepts, is that the mere rejection of the offer is merely one factor to be taken into account. 56 Finally, in relation to r 216(6) the respondent accepts that that rule would seem not to literally apply to the facts and circumstances of this case. That would appear to be because there is a dichotomy between the nature of the offer that is sounding in damages, and the result to the award or declaration that the Court determined. There is a lack of synchronisation of what was offered and what was actually determined by the Commission. Therefore one cannot say on the text of the rule that there was an order which was not more favourable than the terms of the offer. There is, in any event, a preservation of general discretion. The rule contains the words or the subrule contains "Unless the Commission otherwise orders" so the subrule is only indicative. Furthermore the spirit and intention of the rule is antithetical to the respondent's submissions about indemnity costs because it expressly talks about costs assessed on a party party basis. Legislation 57 Sections 105 and 106 provide as follows: 105 Definitions In this Part: contract means any contract or arrangement, or any related condition or collateral arrangement, but does not include an industrial instrument. unfair contract means a contract: (a) that is unfair, harsh or unconscionable, or (b) that is against the public interest, or (c) that provides a total remuneration that is less than a person performing the work would receive as an employee performing the work, or (d) that is designed to, or does, avoid the provisions of an industrial instrument. Note. The jurisdiction of the Commission under this Part is exercisable only by the Commission in Court Session. Division 2 Unfair contracts may be declared void or varied 106 Power of the Commission to declare contracts void or varied (1) The Commission may make an order declaring wholly or partly void, or varying, any contract whereby a person performs work in any industry if the Commission finds that the contract is an unfair contract. (2) The Commission may find that it was an unfair contract at the time it was entered into or that it subsequently became an unfair contract because of any conduct of the parties, any variation of the contract or any other reason. (3) A contract may be declared wholly or partly void, or varied, either from the commencement of the contract or from some other time. (4) In considering whether a contract is unfair because it is against the public interest, the matters to which the Commission is to have regard must include the effect that the contract, or a series of such contracts, has had, or may have, on any system of apprenticeship and other methods of providing a sufficient and trained labour force. (5) In making an order under this section, the Commission may make such order as to the payment of money in connection with any contract declared wholly or partly void, or varied, as the Commission considers just in the circumstances of the case. Consideration 58 The applicant made an application under s 106 of the Act for relief in respect of a contract alleged to be unfair in terms of s 105 of the Act. 59 In the substantive proceedings, Dr Michael Kennedy (the applicant), sought orders against the Northern Sydney Area Health Service that his contract with it was unfair and it should be varied to include a period of 12 months notice of changes to the on-call roster. It was also claimed that the appointment of a locum to cover the absence of a colleague for twelve months, instead of offering the applicant an additional position on the on-call roster for that period, was unfair. He sought payment of money in respect of the alleged adverse effects on his practice of the change to the on-call roster and the appointment of a locum for 12 months. 60 The Court decided that the contract was unfair in terms of s 105 and so it was necessary for the Court to consider what, if any, orders ought to be made pursuant to s 106. 61 The Court, for instance, accepted that the volume of work performed by a VMO on-call had a flow on effect to the doctor's private practice and his remuneration, and that the roster change did result in a 20 percent reduction in work from Manly Hospital, a 10 percent drop in his practice overall. 62 Although the Court found the unilateral change to the roster was not unfair, it found that the contract itself was unfair because there was no requirement of notice. The Court ordered the discretionary remedy of a contract variation to provide for a six months notice period to ameliorate the unfairness. No monetary orders were made. 63 The respondent's submission that the facts that the applicant succeeded "on the bare contract as such" and that the Court made no findings generally of unfairness as to conduct, went to supporting its claim that it was the successful party, does not take sufficient account of the fact that s 105 and s 106 is directed at unfairness of the contract itself (my emphasis). Lack of a finding of unfairness of conduct does not lead to the situation that the contract was not unfair. There does not need to be unfairness of conduct, viewed either objectively or subjectively, to render a contract unfair, harsh or unconscionable in terms of s 105. 64 The Court found that the applicant's belief as to the effect of the "protocol" was "misconceived". That term simply meant, as defined in The Macquarie Dictionary (2nd ed., 1991) "to conceive wrongly, to misunderstand". In my view, on the basis of his understanding of earlier events, the applicant genuinely misunderstood the effect of the so called "protocol" dated 5 March 1999 as going beyond that specific situation to apply generally. His misunderstanding had, in effect, earlier advantaged the Hospital, in that, on the basis of that misunderstanding, the applicant had accepted that a dispute between the Hospital and himself had been settled to his satisfaction. 65 In his submissions, counsel for the respondent emphasized that it did not make a submission that Dr Kennedy was not honest. The respondent did not raise questions of misconduct or impropriety. That was, in my view, a proper approach as there was no foundation, in any event, for such a submission to be put. 66 The case run by the applicant was not one that could have been labeled "hopeless" at the outset, nor was it characterized as such by the Commission. Indeed, it took a close analysis of the evidence for the Commission to come to its ultimate decision. I am not of the view that, at the time it was made, it was unreasonable of the applicant not to accept the respondent's offer of settlement. That refusal does not support the respondent's claim for costs on an indemnity basis. On that point, examination of r 216(6) shows that, as was accepted by counsel for the respondent, it would not literally apply in the facts and circumstances of this case. I do not consider its application further. 67 Submissions were also made on behalf of the respondent that the applicant's costs had to some extent been covered by his insurance company and that the public hospital system ought not to be out of pocket because of the applicant's pursuit of a misconceived case. The fact that the respondent is of the view that it could have put the costs incurred in relation to this case to what it would regard as more productive use, while it is a view many litigants would share, is not, in the circumstances of this case, one that would displace any of the principles as to costs put to the Court by counsel for both the applicant and the respondent. 68 The principles governing the awarding of indemnity costs have been considered in a number of recent decisions of the Commission, and, without setting those principles out, I refer only to some of those authorities: Boner v Anderson (No 2) [(1993) 50 IR 475]; Bankstown City Council v Paris [(1999) 92 IR 209]; Tuholi Pty Ltd v Caltex Petroleum Pty Limited [(2001) 103 IR 329]; Van Huisstede v Commissioner of Police (No 2) [(2001) 106 IR 56]; and Burgess v Mount Thorley Operations Pty Limited [2003] NSWIRComm22. 69 I refer in particular to the following decisions referred to in the above cases. In Boner (at 475), it was said by Hill J that: 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. 70 No such features apply in this case. 71 In Lolomanaia v Roads and Traffic Authority [2000] NSWSC 780 at [22], Greg James J more generally stated that: … costs should not be seen as a punishment of an unsuccessful party, either when they are awarded or in the extent to which they [are] awarded, regard must be had to the principle that costs operate by way of compensation to the successful party for what has had to be incurred in successfully asserting that party's rights in court. … 72 As was said by McHugh J in Re Minister for Immigration and Ethnic Affairs; ex parte Lai Qin [(1997) 186 CLR 622 at 624]: Success in the action or on particular issues is the fact that usually controls the exercise of the discretion [to order costs]. 73 I do not accept the respondent's contention that the applicant was unsuccessful in relation to every single contentious issue submitted to the Court. The applicant succeeded in his claim that the contract was unfair in terms of s 105. The applicant partly succeeded in his claim as to a period of notice prior to the change in the on-call roster and the contract was varied to encompass a period of notice of six months. 74 In all the circumstances I decide that the applicant shall have fifty per cent of his costs on a party/party basis.

Dr Michael Kennedy v Northern Sydney Area Health Service

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Judgment (7 paragraphs)

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Cases Cited (23)