James v Secretary, NSW Department of Communities and Justice

NCAT Administrative and Equal Opportunity|2021-12-21

REASONS FOR DECISION

Following a five-day hearing we dismissed the complaint referred by the President of Anti-Discrimination NSW made by Corrective Services employee, Ms Rita James: James v NSW Department of Communities and Justice [2021] NSWCATAD 118 (the James 2021 Decision).
In that complaint, Ms James alleged she had been discriminated against on the ground of disability and victimised by her employer, the Secretary of the NSW Department of Communities and Justice (the Secretary).
The Secretary now applies for an order for costs. We decided to determine that application "on the papers" because both parties consented to that course and we were satisfied that the issues could be adequately determined by considering the parties' written submissions: s 50 of the Civil and Administrative Tribunal Act 2013 (NSW) (NCAT Act).
These reasons are provided in answer to the Secretary's request made under s 62 of the NCAT Act, for written reasons for our decision to refuse the application for costs.

Principles governing the power to award costs

Section 60 of the NCAT Act creates the general rule that each party to proceedings is to pay their own costs: s 60(1). We may only order costs "if satisfied that there are special circumstances warranting an award of costs (emphasis added)": s 60(2). Section 60(3) sets out a non-exhaustive list of factors that may be taken into account in deciding whether there are special circumstances warranting an award of costs: 60 Costs (1) Each party to proceedings in the Tribunal is to pay the party's own costs. (2) The Tribunal may award costs in relation to proceedings before it only if it is satisfied that there are special circumstances warranting an award of costs. (3) In determining whether there are special circumstances warranting an award of costs, the Tribunal may have regard to the following-- (a) whether a party has conducted the proceedings in a way that unnecessarily disadvantaged another party to the proceedings, (b) whether a party has been responsible for prolonging unreasonably the time taken to complete the proceedings, (c) the relative strengths of the claims made by each of the parties, including whether a party has made a claim that has no tenable basis in fact or law, (d) the nature and complexity of the proceedings, (e) whether the proceedings were frivolous or vexatious or otherwise misconceived or lacking in substance, (f) whether a party has refused or failed to comply with the duty imposed by section 36(3), (g) any other matter that the Tribunal considers relevant.

First application or costs

The application the subject of these reasons is the second application for costs made by the Secretary in these proceedings.
In final oral submissions made at the close of the hearing of the complaint, the Secretary made an application for the costs incurred in responding to two of the 11 allegations made by Ms James which Ms James had abandoned in final submissions. At [178]-[181] of the James 2021 Decision, we dismissed the Secretary's application: "As a consequence of Ms James' actions in abandoning Allegations 4 and 10 at the eleventh hour, significant preparation and hearing time was thrown away. The Secretary was put to the unnecessary expense of defending those allegations. In our view, special circumstances are established. Therefore, the discretion to award costs can be exercised. Ms James perceives that she has been the subject of a series of injustices meted out by various managers within Corrective Services. Throughout these proceedings she focused on what she considered to be the shortcomings of, and mistakes made by, her managers and appeared unable to focus on the elements necessary to establish an allegation of victimisation or discrimination. This is not a case where an applicant pursued a case they knew to be unmeritorious. We accept that Ms James held the genuine belief that the Complaint had merit. She attempted to comply with directions made by the Tribunal and to assist the Tribunal to use the allocated hearing time efficiently. While the Secretary's application is not unmeritorious, the balance of considerations does not favour the exercise the discretion to award costs in relation to Allegations 4 and 10."

Second application for costs

In the application for costs that is the subject of these reasons (the second costs application), the Secretary contended that the following factors constitute special circumstances warranting an award of costs: 1. that Ms James was responsible for prolonging unreasonably the time taken to complete the proceedings: s 60(3)(b) of the NCAT Act; 2. that Ms James made a claim that had no tenable basis in fact or law: s 60(3)(c)of the NCAT Act; 3. the proceedings were frivolous or otherwise misconceived or lacking in substance: s 60(3)(e) of the NCAT Act; 4. that it is appropriate to award costs on account of Ms James' "unreasonable act or omission in rejecting repeated reasonable settlement offer which caused [the Respondent] to incur the costs": s 60(3)(g) of the NCAT Act.

Settlement offers

In support of the second costs application, the Secretary relied on an affidavit prepared by its solicitor. In that affidavit, the solicitor detailed the offers of settlement made by the Secretary to Ms James throughout the course of the proceedings: 1. Following a mediation held on 7 August 2019 at the direction of the Tribunal, the Secretary made a written offer to Ms James to settle the proceedings. The terms of that offer included that Corrective Services NSW (Corrective Services) would be required to pay Ms James $60,000 and Ms James would be required to resign from Corrective Services (the first settlement offer). 2. Ms James declined that offer stating that she was open to further negotiation providing that the requirement to resign was "taken off the table". 3. In a letter dated 27 August 2019, the Secretary revised the original offer, increasing the amount offered to Ms James from $60,000 to $100,000 and requiring that Ms James' employment "cease" (the second settlement offer). 4. Ms James responded that if she resigned she would not be employable because of the "treatment I have received from [Corrective Services]". Ms James made a counter offer of $1,000,000 to settle all claims against Corrective Services, including her claim for workers compensation which was then on foot. 5. In a letter dated 14 May 2020, the Secretary made a further offer which was broadly in the same terms as the second settlement offer. In that offer the Secretary gave Ms James the option of "communicating her departure from Corrective Services as a resignation or a redundancy" (the third settlement offer). 6. In a letter dated 2 October 2020, the Secretary increased the amount offered from $100,000 to $110,000 (the fourth settlement offer). 7. On the third day of the hearing, the solicitor wrote to Ms James stating that it "would be in the best interests of all parties" to settle the proceedings noting that "the level of animosity and distrust that you continue to display for the organisation and staff within it … appears to render your ongoing employment untenable". In that letter the solicitor stated that Corrective Services offered to settle the matter on the same basis as proposed in the fourth settlement offer, except for a reduction in the amount payable to Ms James from $110,000 to $50,000. The solicitor explained that the amount offered had been reduced because since making the fourth settlement offer, Corrective Services had incurred legal costs in excess of $50,000.

Consideration

The Secretary asserts that each offer made to Ms James represented a genuine offer of compromise and Ms James' rejection of those offers was unreasonable and resulted in Corrective Services unnecessarily incurring costs. Ms James disagrees with the proposition that her actions in refusing the offers were unreasonable. She contends that the Secretary's "continued insistence that she relinquish her position" was unreasonable.
The list of factors that the Tribunal may take into account in deciding whether "there are special circumstances warranting an award of costs", do not include the refusal of a reasonable offer of settlement. Nonetheless, given the breadth of s 60(3)(g) - "any other matter that the Tribunal considers relevant" - we accept the proposition that it is permissible for the Tribunal to have regard to the rejection of an offer of settlement in determining whether "there are special circumstances warranting an award of costs".
However, if it is asserted by the Secretary that the refusal of a reasonable offer of settlement in proceedings brought under the Anti-Discrimination Act 1977 (NSW) by an unsuccessful applicant will necessarily constitute "special circumstances warranting an award of costs", we cannot agree. As stated above, in proceedings under the Anti-Discrimination Act, the general rule is that each party is to pay their own costs: s 60 of the NCAT Act. Whether the refusal of a reasonable offer of settlement will amount to "special circumstances warranting an award of costs" will turn on the facts of each particular case. The costs provisions contained in the Uniform Civil Procedure Rules 2005 (NSW) (UCPR), which include that the Court has a discretion to award costs on an indemnity basis where a party has refused a genuine offer of compromise and the judgement is less favourable to that party than the offer of compromise, do not apply to proceedings brought under the Anti-Discrimination Act. [1]
Whether the rejection of an offer of settlement was unreasonable requires an evaluative judgment to be made by reference to the terms of the offer and all the relevant surrounding circumstances: King Network Group Pty Ltd v Club of the Clubs Pty Ltd (No 2) [2009] NSWCA 204 at [11].
Implicit in the submission that Ms James' rejection of the Secretary's offers of settlement was unreasonable is the suggestion that having been entirely unsuccessful in prosecuting her complaints of unlawful discrimination and victimisation, Ms James is now in a worse position than she would have been had she accepted those offers. Central to this contention is the assertion made by the Secretary that the employment relationship is now untenable. The Secretary asserts that it is untenable that Ms James remain employed in circumstances where the "relationship of trust and confidence had broken down".
The history of the settlement offers made by the Secretary reveals that the sticking point, as far as Ms James was concerned, was the requirement that she agree to the termination of her employment.
As the Secretary points out, Ms James was entirely unsuccessful in prosecuting her complaint. Nonetheless, it does not follow that it was unreasonable to refuse the offers of settlement made. Subjectively, Ms James would have been worse off had she accepted any of the offers of settlement. As she saw it, acceptance of those offers would render her both unemployed and unemployable.
Whether objectively assessed Ms James is now in a less favourable position than she would have been had she accepted the offer of settlement probably turns on whether, as the Secretary asserts, that the employment relationship is now untenable. Plainly the relationship between Ms James and the Secretary is strained. It is further complicated by the dispute concerning Ms James' claim for workers compensation. However, without considered argument we are unable to accept the assertion that the relationship is now untenable.
We accept, as argued, that the Secretary has made a genuine attempt to settle the complaint. Nonetheless, we are not satisfied that it was unreasonable for Ms James not to accept the offers made.
We are not satisfied that Ms James' rejections of the offers of settlement amount to special circumstances warranting an award of costs

Remaining grounds

As noted at [9], in the initiating application for costs, the Secretary cited three grounds in addition to Ms James' rejection of the offers of settlement which he argued amounted to special circumstances warranting an award for costs: prolonging unreasonably the time taken to complete the proceedings; making a claim that had no tenable basis in fact or law, and, "the proceedings were frivolous or otherwise misconceived or lacking in substance".
In the initiating application the Secretary provided no evidence or argument in support of those three grounds. That application focused entirely on Ms James' rejection of the offers of settlement.
In submissions opposing the Secretary's application for costs, Ms James wrote "it was not clear to [me] under what circumstances the Respondent was making the claims as listed in 1(a) through to 1(d)". Nonetheless, she went on to make submissions claiming among other things that she had not been responsible for prolonging proceedings, had not made a claim that had no tenable basis in fact or law, and, that the complaint was not frivolous or otherwise misconceived or lacking in substance.
In submissions in reply, the Secretary, for the first time, particularised the basis for the contention that Ms James was responsible for prolonging proceedings, had made a complaint that had no tenable basis in fact or law and was frivolous, misconceived or lacking in substance.
It would be procedurally unfair to now address matters raised for the first time by the Secretary in its submissions in reply and we decline to do so. Those matters ought to have been squarely raised by the Secretary in its initiating submissions.

Orders 1. The application for costs made by the Secretary, NSW Department of Communities and Justice, is refused.

I hereby certify that this is a true and accurate record of the reasons for decision of the New South Wales Civil and Administrative Tribunal. Registrar

Endnote

Under the UPCR, the "ordinary rule" is that costs follow the event and the unsuccessful party will generally be required to pay the costs of the successful party, assessed on an ordinary basis: r 42.1, r 42.2 of the UCPR. The making of a valid Calderbank offer (Calderbank v Calderbank [1975] 3 All ER 333), that is, an offer made to a party as favourable or more favourable than the result ultimately obtained by that party, does not automatically result in an indemnity costs order (Commonwealth v Gretton [2008] NSWCA 117 at [43]) but is a circumstance the Court may take into account in exercising its discretion to award indemnity costs. I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar

Amendments 05 April 2022 - Pursuant to s 63 Civil and Administrative Tribunal Act 2013 the name of the Respondent's representative firm is amended. 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: 05 April 2022

At a glance

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Judgment (11 paragraphs)

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Legislation Cited (3)

Cases Cited (6)

Cited By (1)