Kaplan v Health Support Service

Industrial Relations Commission (NSW)|2009-12-24

CITATION: Kaplan v Health Support Service [2009] NSWIRComm 1097

APPLICANT PARTIES: Ms Perihan Kaplan RESPONDENT Director General of NSW Health Department, Health Support Services Division, Linen Services Parramatta Branch

Application for costs in unfair dismissal case. Applicant sought costs. Applicant claimed that respondent failed to accept reasonable offer and overall conduct inconsistent with an intention to settle. Applicant made offer during conciliation to settle. This first offer later modified. CATCHWORDS: Respondent rejected offer based on seriousness of allegations that led to termination,quantum sought and comments made by Commissioner during proceedings. On second day of hearing respondent made offer to applicant which was more beneficial to applicant then her first offer. This rejected by applicant who made an alternative counter offer quite different to her first offer. This rejected by respondent. Commission found that offer made by respondent to applicant reasonable. Also found that applicant second offer did not amount to an attempt to properly conciliate the matter. Applicant argued that costs incurred at the point of respondent's offer would have left applicant with limited amount. Application for costs dismissed.

LEGISLATION CITED: Industrial Relations Act,1996

CASES CITED: Bankstown City Council v Paris (1999)93IR209 Orange Community Accomodation Service Incorporated and Carloyn Vivienne Roddenby[2004]NSWIRCComm332

APPLICANT Mr R Reitano of Counsel Mr M Jaloussis Solicitor of W G Mc Nally Jones Staff LEGAL REPRESENTATIVES:

RESPONDENT Mr M Easton of Counsel

DECISION: INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES

IN THE MATTER OF: Perihan Kaplan and Director General of NSW Health Department, Health Support Services Division, Linen Services Branch Parramatta.

Application by Perihan Kaplan re unfair dismissal pursuant to section 84 of the Industrial Relations Act, 1996.

1 On 10 November 2009, the Commission as presently constituted handed down its Decision with respect to a claim by Ms Kaplan (the applicant) for unfair dismissal, against the Director General of NSW Health Department, Health Support Services Division, Linen Services Branch, Parramatta ( the respondent). 2 The Orders made in that Decision were:

In accordance with section 89(2) of the Act, I Order the Director General of NSW Health Department Health Services Division Linen Services Parramatta Branch to reemploy Ms Perihan Kaplan as a displaced person within 21 days of the date of this Decision. Ms Kaplan is required to provide a medical certificate clearing her to return to work.

In accordance with section 89 (3) of the Act, I direct the parties to confer and quantify the back pay taking into consideration the delay in the hearing of this case and any other relevant matters including if appropriate what is expressed in point 119 of this Decision. Such payments must be made to the applicant within 21 days of this Decision. I give leave to have this matter relisted at short notice if agreement is not reached.

In accordance with section 89(4) of the Act, I Order that the period of employment with the respondent is taken not to have been broken by the dismissal.

I Order that Ms Kaplan be given a first and final warning with respect to the incidents of 3 and 5 November 2008. 3 In correspondence from W. G. McNally Jones Staff, dated 11 November 2009 a request was made for a relisting of this matter in order to obtain a date to argue the question of costs. 4 A mention was held on 19 November 2009 and a hearing for costs was held on 3 December 2009. At the end of the hearing the Decision was reserved. 5 Both parties filed and served an outline of submissions. Applicant's Case

6 It was the applicant's submission that the respondent failed to agree to a settlement and therefore the Commission in accordance with section 181(2) (d) can award costs. 7 The respondent's unreasonableness in failing to agree to a settlement of the claim can be shown in taking consideration of the following factors.

Whilst the applicant sought reinstatement in employment the applicant indicated at an early stage that she was prepared to accept a monetary settlement. This was shown by correspondence dated 24 February 2009 from her then legal representatives to the respondent which stated in part: Ms Kaplan has advised us that the redundancy package which includes accrued leave amounts to approximately $60,000. Ms Kaplan advises us that she is prepared to settle her application if this payment is offered to her.

This offer was rejected by the respondent and at all relevant times up until after the hearing had commenced, the respondent steadfastly refused to make any offers of settlement.

The respondent knew at all relevant times the state that Ms Kaplan was in at the meeting on 1 December 2008. In this regard they relied upon the evidence of Ms Salmon, the findings of the Commission and the available medical evidence. The respondent could not reasonably have believed that what the applicant said at the meeting was true or reflected her intentions.

The respondent completely failed to comply with its own procedures in respect of the allegations arising out of the meeting on 1 December 2008. There was a complete denial of procedural fairness by the respondent should have led them to realise that the Commission would find that the termination would be found to be unfair. 8 In correspondence dated 18 September 2009 directed to the respondent, the applicant made a further offer that broadly accorded with the outcome of the proceedings, that is reinstatement in employment at another location with preservation of continuity and back pay.

After two days of the hearing the respondent made an offer to pay the applicant an amount the equivalent to her redundancy entitlement but not treated as a redundancy thereby not receiving the tax benefit. This was not any answer as measured against what the applicant was successful in obtaining reinstatement, the offer was paltry. This only offer by the respondent was made after significant cost had been incurred by the applicant. Also the offer made denied the fact that redundancy was the true reason for dismissal because the applicant should not have been dismissed for cause. 9 It was part of the applicant's submission that the respondent's offer in September 2009 amounted to a payment of some $45,000 except by this time the applicant had spent legal costs of some $35,000 which would have left her with only $10,000. 10 It was the applicant's submission that it was the whole of the respondent's conduct that it unreasonably failed to agree to a settlement of the claim. It's only offer was made after the applicant had incurred significant unrecoverable costs and did not acknowledge the reality of the applicant's redundancy such that would have entitled her to concessional taxation treatment on any monies paid to her. Respondent's Case

11 It was the respondent's submission that the discretion of the Commission to award costs in accordance with section 181(2)( c) of the Industrial Relations Act 1996 is only available where one or more of specified criteria are met. A respondent to an unfair dismissal claim can only be ordered to pay costs if in the opinion of the Commission it unreasonably failed to agree to a settlement of the claim. 12 It was the respondent's view that it was not unreasonable for them to reject the applicant's offer made in February 2009. It was not unreasonable to reject this offer that equated to almost twice the statutory maximum compensation. 13 It was also not unreasonable for the respondent to reject the applicant's offer in September 2009 because the offer amounted to, in essence, a full capitulation. The applicant's offer did not amount to an attempt to properly conciliate the matter. The respondent made a more than reasonable counter offer, which would have given the applicant more than she had sought in February 2009. In making such a reasonable offer there was no basis upon which it could be said that the respondent failed to take seriously its obligation to attempt to settle the proceedings. It also submitted that it did not fail to consider, in an objective way, the strengths or limits of its case, particularly so in light of the observations of a member of the Commission during the conciliation process. 14 The respondent also submitted that if the gateway to costs is opened for the applicant, then the applicant's misconduct in the proceedings disentitled her to a costs order in any event. The applicant gave false evidence and made false denials about the events on 3 and 5 November and 1 December 2009. This amounted to misconduct relating to the litigation such as to constitute an exception to the usual order as to costs. The false evidence and false denials protracted the proceedings such that costs were incurred unnecessarily by both parties, and such costs should not be visited upon the respondent. Consideration and Decision

15 The power for the Commission to be able to award costs in an unfair dismissal application can be found in section 181 COSTS of the Industrial Relations Act 1996(the Act). It is expressed in the following form:

181(1) [Costs] Subject to the rules of the Commission and any other Act or law:

(b) costs are in the discretion of the Commission, and

(d) the Commission may order costs to be assessed on the basis set out in Division 6 of Part 11 of the Legal Profession Act 1987 or on any other basis.

The relevant sub- section under section 181(2) ( c) is:

( c) 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, or 16 In Bankstown City Council v Paris 93 IR209 at 219 the Full Bench stated : Construing the relevant part of s 181(2)(c) in its overall statutory context, we conclude that the evident purpose of the provision is to encourage the settlement of proceedings to which it applies. The criterion set out in the provision is to be applied objectively and requires a 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. We also consider that on the proper construction of the provision, an affirmative conclusion may be reached on at least two bases. First, 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 in which the criterion could be satisfied 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.

We emphasise that, although the legislature has clearly intended that there be strict limits on the power of the Commission to award costs in unfair dismissal proceedings, the legislature has also evinced a clear intention that costs orders be available in circumstances where there has been a failure on the part of a party to properly conciliate proceedings to the extent that they have failed reasonably to facilitate a potential settlement of them. Further, the Commission is obliged to consider all relevant circumstances in deciding whether such failure has occurred. Once the statutory criterion has been met, the Commission's broad powers and discretions under s 181(1) are available for exercise. 17 Both parties raised and discussed the Paris case and the two gateways that exist for an applicant to be successful in a costs application. The first being that of a reasonable offer being made but not accepted and the second being a course of conduct by a party that was such as to allow the Commission to form an opinion that there was an unreasonable failure to settle the claim. 18 If a positive finding is made under this section (the jurisdictional "gateway"), the Commission may then move to the general discretionary powers to award costs. 19 During conciliation proceedings before McKenna C on 24 February 2009 when both parties appeared unrepresented, the applicant made an offer of settlement consisting of receiving her redundancy payment plus twelve months pay. McKenna C sought at that moment to urge the applicant to drop her claim for the payment for twelve months pay. McKenna C sought for the applicant to seek further instructions with respect to this. She advised the applicant to consider what had been said to her that day. McKenna C did comment on the difficulties that the applicant may face in an arbitrated case.

On the same day the applicant's then legal representative Brydens wrote to the respondent and advised that the applicant would be prepared to settle her application if "the redundancy package which includes accrued annual leave amounts to approximately $60000 " was paid to her.

This offer was rejected by the respondent and no counter offer was made at that time. It was the submission of the respondent that it was rejected because of the seriousness of the allegations made against the applicant, the quantum sought and the views of McKenna C (albeit without the benefit of evidence) during the conciliation proceedings. All were significant at the time in the respondent's consideration.

Part way through the second day of hearing on 15 September 2009 the parties through their legal representatives sought to settle the matter. In correspondence undated directed to the applicant's new legal representative, W G McNally Jones Staff Lawyers, the respondent offered access to the voluntary redundancy package that had been previously offered to the applicant. It also stated that the offer included certain arrangements would be made about the disciplinary investigations undertaken in 2008. It went on to state that this offer amounted to almost twice the maximum compensation available under the Industrial Relations Act, 1996.

The applicant via her lawyers responded to the offer received on 17 September 2009 in the following form. We are instructed to reject your offer and to make the following counter offer on behalf of our client. 1. That our client be reinstated at Parramatta Linen Service or any other organisation which is part of New South Wales Health, the location of such position to be within a reasonable distance to our client's residence at Baulkham Hills; 2. That such reinstatement to be on the same grade as our client occupied prior her dismissal; 3. That our client receive back-pay from 5 December, 2008 to the date of reinstatement; 4. Our client will sign a Deed of Release in relation to the settlement of these proceedings, such Deed to include a release in relation to any other complaints being made by our client either to the Human Rights and Equal Opportunity Commission or to the Anti Discrimination Board. Our client is also prepared to consent to a Non-Disclosure and confidentiality clause being included in the Deed of Release; 5. That the outcome of the allegations that were made against our client be sealed in an envelope and marked " Confidential Not To Be Opened'. 6. In relation to paragraph 1, we are instructed that our client is prepared to accept any position within New South Wales Health that is situated in Parramatta, Westmead, Fairfield, Blacktown, Mt Druitt and any other suburb in Western Sydney which is within a reasonable distance from her home. 20 It was the respondent's submission that the applicant's first offer made in February 2009 amounted to a payment of approximately $45,000 which equated to approximately 51 weeks pay. This would have been nearly twice what the applicant could have received taking into consideration the 26 week maximum allowed in the ordering of compensation. Therefore the offer of the applicant was unreasonable.

The second offer of 17 September 2009 amounted in the respondent's submission to a capitulation of the case. 21 The consideration of the offers in this case show that the applicant made an offer on 24 February 2009 during conciliation proceedings of the "redundancy package" plus twelve months pay. This offer was modified latter that day to request only the "redundancy package". These offers showed some flexibility on the part of the applicant in seeking something other than reinstatement or re employment.

This offer was rejected by the respondent for reasons, as expressed earlier in this decision.

The second offer by the respondent took place during the arbitration proceedings on 15 September 2009 an amounted to the applicant having access to the voluntary redundancy package plus arrangements would be made about the disciplinary investigations undertaken in 2008. This offer by the respondent was therefore better than what was sought by the applicant in February 2009.

The counter offer by the applicant as expressed by correspondence dated 17 September 2009 was significantly different to what was on offer back in February 2009. The applicant now sought reinstatement, back pay and an isolation (in a sealed confidentially marked not to be opened envelope of the outcome) of the allegations made against her. 22 I accept the submission of the respondent that what was offered in September 2009 by the applicant amounted to, in essence, a full capitulation and such an offer did not amount to an attempt by the applicant to "properly conciliate the matter". 23 I note the comments made in a Full Bench appeal Hearing Orange Community Accommodation Service Incorporated and Carolyn Vivienne Roddenby[2004]NSWIRComm333 at point 24 : While it might be said that the final offer was made somewhat late in the proceedings, it would seem to us that the appellant's overall conduct could hardly be said to be one of intransigence or inflexibility. We would observe that offers and counter offers are commonplace in the lead up to the hearing of unfair dismissal matters. Such a process represents an unremarkable dynamic to litigation of this type. 24 Whilst the respondent in this matter may have considered the seriousness of the allegations made against the applicant, the quantum sought and the comments made by McKenna C during conciliation proceedings as a reason for not making a response to the applicant's first offer of settlement, it did not represent the respondent's ongoing position. Their offer made in September 2009 represented a substantial payment to the applicant of some 51 weeks pay plus an arrangement with respect to the findings of the allegations made against the applicant. This offer represented a significant shift in the respondent's position. 25 It was expressed in the costs hearing that acceptance of the respondent's offer in September 2009 by the applicant would have left her with approximately $10,000 as her legal costs at that point amounted to some $35,000. 26 I again note the comments made in Orange Community Accommodation Services Incorporated and Carolyn Vivienne Roddenby at point 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. 27 Taking into consideration what is expressed above, it is my finding that this was a reasonable offer made by the respondent to the applicant. It is also my finding that it represented a genuine attempt by the respondent to settle this matter. 28 Clearly each case rises or falls on it's own merits and this case is no different. It is my finding and conclusion that based on the facts of this case, I can not conclude that the applicant has made out a case to satisfy the jurisdictional gateway of s181(2)( c) and therefore be entitled to costs. 29 As a consequence of my finding, I do not believe it is necessary to consider the respondent's submission with respect to their claim that the applicant's alleged misconduct during the proceedings disentitled her to a costs order. 30 I find in favour of the respondent and therefore dismiss this application by for costs.

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Judgment (39 paragraphs)

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