Neeson v Amora Company Limited and ors

Industrial Relations Act 1996 s106 LEGISLATION CITED: Industrial Relations Amendment Act 2005 Legal Profession Act 2004

Elite Protective Personnel Pty Ltd v Salmon [2007] NSWCA 322 CASES CITED: Gretton v Commonwealth of Australia [2007] NSWSC 149 Jones v Bradley (no 2) [2003] NSWCA 258 Neeson v Amora Company Limited and ors No 3 (2007) NSWIRComm 166

APPLICANT: Mr J Murphy of counsel Solicitor: Mr C McArdle McArdle Legal

LEGAL REPRESENTATIVES: FIRST RESPONDENT: Unrepresented SECOND TO FOURTH RESPONDENTS: Mr S Prince of counsel Solicitor: Mr S Booth Coleman & Greig

Application under s 106 of the Industrial Relations Act 1996

1 The applicant in these proceedings, Linda Iris Neeson, sought certain relief under s 106 of the Industrial Relations Act 1996 ("the Act") against, ultimately, four named respondents. The proceedings arose out of the termination of the applicant's employment as general manager of the Phatara Beach Resort at Phuket, Thailand. By motion, the second to fourth respondents sought to have the proceedings struck out for lack of jurisdiction on the basis that any contract or arrangement by which the applicant performed work as general manager at that establishment lacked the necessary territorial nexus with New South Wales, as required to found jurisdiction in this Court under s 106. In a judgment given 5 July 2007 (Neeson v Amora Company Limited and ors No 3 (2007) NSWIRComm 166) I upheld the respondents' motion and dismissed the summons for want of jurisdiction. In doing so, I reserved costs. This judgement deals with an application for costs brought by the second to fourth respondents. 2 Essentially, the second to fourth respondents sought a costs order in their favour for the strike-out application and for the substantive proceedings on a party-party basis until 11 August 2005 and thereafter on an indemnity basis said to be justified by reason of a Calderbank type offer made that day. 3 In general terms, the applicant resisted the making of any costs order against her notwithstanding her acknowledgment that her further amended summons, by which the proceedings were constituted, had been struck out on jurisdictional grounds. 4 The reasons advanced by the applicant to resist any costs order on discretionary grounds were as follows: 1. There had been no examination by the Court of the merits of the applicant's claim against the respondents. 2. "The facts of this case surrounding the complex web of interrelationships between the various parties, which arose from the manner in which the Respondents, primarily the Third Respondent, chose to conduct their businesses, made the issue of identifying the applicant's real employer(s) and the related issue of territorial nexus extremely difficult to comprehend…." 3. The law concerning territorial nexus was "less than clear and straightforward". 4. The respondents are in a far stronger financial position than the applicant to bear costs. 5. The manner in which the respondents conducted the litigation unduly and unnecessarily increased costs and in particular the requirement that the applicant attend from her place of residence in Thailand for cross-examination added to her own costs. 5 I accept the response made by the respondents to each of these submissions in rejecting the applicant's contention that she should escape the detriment of a costs order against her. The nature of the interlocutory proceedings may be ascertained from my strike-out judgment. I reject any contention that the applicant's costs were unnecessarily or unreasonably increased by the respondents. Furthermore, whether or not the merits of the applicant's substantive claim were examined is irrelevant in circumstances where this Court has held that it lacks jurisdiction to deal with the proceedings. 6 The applicant having commenced the proceedings and having failed, I can see no reason why in the exercise of discretion the respondents should not be entitled to an order for costs against her. 7 This leaves, however, outstanding the question whether the applicant should be ordered to pay those costs on and after 11 August 2005 on an indemnity basis. 8 I should state for completeness that the offer to settle contained in the letter of 11 August 2005 did not purport to be made under the provisions of Part 23 of the Rules of this Court and accordingly Rule 216, which creates a prima facie entitlement to indemnity costs, does not apply. Neither party made any submissions contrary to these observations. Accordingly, this aspect of the controversy is to be determined by exercising the discretion that applies in relation to Calderbank type offers. 9 The respondents' solicitor's letter of 11 August 2005 offered settlement upon payment of the sum of AUD$21,086 and a further payment of AUD$6,000 "toward costs." The offer was said to be in full and final settlement of all litigation in both the New South Wales Court of Appeal and this Court. The letter asserted that having regard to other matters, the offer was an appropriate one and that if not accepted and judgment obtained in no more favourable terms than the offer, an application would be made for an indemnity costs order. 10 Affidavit evidence of the respondents' solicitor was to the effect that his clients had initiated a summons in the New South Wales Court of Appeal seeking, inter alia, a declaration that this Court did not have jurisdiction to deal with these proceedings. Subsequently, the Court of Appeal proceedings were discontinued following the amendment to the Act created by the Industrial Relations Amendment Act 2005. 11 There appears to be no mention made in the respondents' solicitor's affidavit as to whether there were any discussions, agreement or orders concerning the costs of the New South Wales Court of Appeal proceedings. The respondents' written submissions asserted that the applicant would not have been entitled to any costs of the New South Court of Appeal proceedings because she was not ultimately successful in the substantive proceedings in this Court. Whether or not this is so appears to me to be a matter that ultimately would need to be determined by the New South Wales Court of Appeal. I am not prepared to accept the respondents' assertion that under no circumstances would the applicant be entitled to any costs order of the proceedings commenced by the respondents in the New South Wales Court of Appeal, because in essence the respondents discontinued them. There is no evidence before this Court as to the quantum of the applicant's costs or the respondents' costs in those proceedings. 12 In these circumstances it is then necessary to address the application of the Calderbank principles to the offer made in the letter of 11 August 2005. Those principles were described succinctly in a recent judgment of the New South Court of Appeal in Elite Protective Personnel Pty Ltd v Salmon [2007] NSWCA 322 by both McColl JA and Basten JA. At [97] to [99] McColl JA said, "97 A Calderbank letter is the appellation given to a letter which conforms to the structure of that deployed in Calderbank v Calderbank , namely one which is marked "without prejudice", makes an offer of settlement, and warns that the letter will be relied upon on the question of costs if and when that issue arises: Messiter v Hutchinson (1987) 10 NSWLR 525. "Calderbank offers" are well recognised means of making offers of settlement in circumstances where the party making the offer ultimately seeks a costs advantage if the offer is not accepted: Jones v Bradley (No 2) [2003] NSWCA 258 (at [5]).

98 The general principles concerning Calderbank offers were set out in Jones v Bradley (No 2) where the Court approved Giles JA's statement in SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 (at [37]) that: 'The making of an offer of compromise in the form of a Calderbank letter ... where the offeree does not accept the offer but ends up worse off than if the offer had been accepted, is a matter to which the Court may have regard when deciding whether to otherwise order, but it does not automatically bring a different order as to costs. All the circumstances must be considered, and while the policy informing the regard had to a Calderbank letter is promotion of settlement of disputes an offeree can reasonably fail to accept an offer without suffering in costs. In the end the question is whether the offeree's failure to accept the offer, in all the circumstances, warrants departure from the ordinary rule as to costs, and that the offeree ends up worse off than if the offer had been accepted does not of itself warrant departure ...'

99 In Leichhardt Municipal Council v Green [2004] NSWCA 341 (at [46]) Santow JA (with whom Stein JA agreed) reviewed the authorities concerning Calderbank letters. His review demonstrated that such a letter would only justify an order for costs on an indemnity basis, rather than the ordinary basis, if it constituted a genuine offer of compromise, which it was unreasonable for the appellant not to accept: Herning v GWS Machinery Pty Ltd (No 2) [2005] NSWCA 375 (at [4]) per Handley, Beazley and Basten JJA. Among the issues germane to the question of the reasonableness of the offeree's conduct will be whether the offeree had an 'appropriate opportunity ... to consider and deal with the offer': Donnelly v Edelsten (1994) 49 FCR 384 (at 396) (Full Court of the Federal Court, Neaves, Ryan and Lee JJ)." 13 Furthermore, there is no prima facie presumption that if an offer of this kind is rejected that a party not receiving a result more favourable than the offer is required to pay indemnity costs. Any controversy in this State concerning the existence or otherwise of such a prima facie presumption was firmly resolved by the New South Court of Appeal in Jones v Bradley (no 2) [2003] NSWCA 258. The Court (Meagher, Beazley and Santow JJA) said at [7] to [9] "7 The other line of authority rejects the 'prima facie presumption' approach. In MGICA (1992) Pty Ltd v Kenny & Good Pty Ltd (1996) 70 FCR 236 Lindgren J said at page 239: 'It is important, however, to appreciate that the mere making of an offer by a Calderbank letter and its non-acceptance followed by a result more favourable will not automatically lead to the making of an order for payment of costs on an indemnity basis.'

His Honour said the manner of exercise of the discretion 'depends on all relevant circumstances of that case'. His Honour's view reflected the jurisprudence in the Federal Court at the time: see WCW Pty Ltd v Charthill Ltd (unreported, Federal Court, Olney J, 7 July 1992); John S Hayes & Associates Pty Ltd v Kimberly-Clark Australia Pty Ltd (1994) 52 FCR 201; and has continued to be applied in that Court: see The Sanko Steamship Co Ltd v Sumitomo Australia Ltd (unreported, Federal Court, Sheppard J, 7 February 1996) and NMFM Property v Citibank [2001] FCA 480; (2001) 109 FCR 77.

8 This principle has also been enunciated in this Court. In SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 Giles JA stated at para 37: 'The making of an offer of compromise in the form of a Calderbank Letter ... where the offeree does not accept the offer but ends up worse off than if the offer had been accepted, is a matter to which the court may have regard when deciding whether to otherwise order, but it does not automatically bring a different order as to costs. All the circumstances must be considered, and while the policy informing the regard had to a Calderbank letter is promotion of settlement of disputes an offeree can reasonably fail to accept an offer without suffering in costs. In the end the question is whether the offeree's failure to accept the offer, in all the circumstances, warrants departure from the ordinary rule as to costs, and that the offeree ends up worse off than if the offer had been accepted does not of itself warrant departure.'

It appears that Priestley JA, by his Orders in this case, would endorse this approval. But in any event, the principle has been applied in the Supreme Court both at first instance and on appeal: see Enron Australia Finance Pty Limited (in liquidation) v Integral Energy Australia [2002] NSWSC 819; Nobrega v The Trustees of the Roman Catholic Church for the Archdiocese of Sydney (No 2) [1999] NSWCA 133; LMI Australasia Pty Ltd v Baulderstone Hornibrook Pty Ltd [2003] NSWCA 74; and Cummings v Sands [2001] NSWSC 706.

9 It is worth pausing to note that the difference between the two lines of authority may be 'more apparent than real' as in either approach the Court must consider all the circumstances of the case: see CBA Investments Limited v Northern Star Limited (No 2) [2002] NSWCA 164. Be that as it may, we consider that the approach taken by the Court in SMEC Testing Services is correct and is the approach which should be consistently applied when dealing with Calderbank offers." 14 Accordingly, I approach this matter by considering whether the applicant acted reasonably in determining to reject the offer contained in the respondents' solicitor's letter of 11 August 2005. In doing so, it is necessary to have regard to the state of the proceedings as at that date. 15 The burden of demonstrating that the Court should exercise its discretion in favour of awarding indemnity costs is borne by the party so moving. 16 I accept that as at 11 August 2005 the applicant would have been aware of the respondents' position that this Court had no jurisdiction to deal with the proceedings because of the assertion that the relevant territorial nexus with New South Wales did not apply. However, at that stage, it is possible that the applicant may have been entitled to a costs order with respect to the Court of Appeal proceedings. There is simply no material before me to come to any concluded view about this, and such material as has been put forward by the respondents does not clarify the position. I should add for completeness that there is some suggestion in written submissions from counsel for the respondents concerning the quantum of costs incurred by the parties at a particular stage in the proceedings. I do not regard those submissions as constituting evidence of a kind that I can accept and deal with as a basis for determining the application for costs in these proceedings. 17 As I have said, the determination of the unreasonableness or otherwise of the applicant's failure to accept the offer made on 11 August 2005 must be made by reference to the circumstances of the proceedings as at that date including an assessment of the relative strengths and weaknesses of the applicant's case. 18 An examination of matters of this kind, albeit in completely different proceedings, was made by Studdert J in the Supreme Court of New South Wales in Gretton v Commonwealth of Australia [2007] NSWSC 149. His Honour was able to assess the potential range of verdict in a personal injuries' claim by reference to the various heads of damage claimed by the plaintiff and by reference also to the nature of his asserted injuries. His Honour also had the benefit of evidence concerning settlement negotiations that took place within a time period concurrent with the offer that had been made in those proceedings although his Honour did not have regard to that evidence in determining the matter. 19 The difficulty I have is that there is simply no evidence before the Court as to whether the applicant acted unreasonably in determining to refuse the offer made on 11 August 2005. Certainly, if one has regard to the allegations of unfairness which are contained in the original summons, it might be said that the applicant could reasonably anticipate receiving monetary compensation in excess of that offered, having regard to the allegations of unfairness made by her against the respondents, even allowing for the respondents' contention regarding jurisdiction. In essence, the applicant alleged that she encountered difficulties in fulfilling her role as general manager at the resort, meeting resistance from personnel whom she thought were inept and insubordinate and who attempted to undermine her authority by making false claims against her against the background of an asserted refusal by her employer to assist her. Furthermore, the applicant alleges that after encountering and overcoming a great deal of difficulties following devastating weather conditions in Phuket, her employment was arbitrarily and unreasonably terminated without any appropriate compensation being paid. In those circumstances, it might be argued that it was not unreasonable for the applicant to refuse an offer constituted by the payment of AUD$21,086 and AUD$6,000 towards her costs. The matter is further complicated by the inclusion within the sum of $6,000 of costs referable to the New South Wales Court of Appeal proceedings. Furthermore, as I have indicated, there is no evidence concerning the level of costs incurred as at 11 August 2005. 20 On balance, I conclude that the respondents have not demonstrated that the applicant acted so unreasonably in refusing the offer made on 11 August 2005 so as to justify an order for indemnity costs in their favour.

21 I conclude, therefore, that the respondents should be entitled to a costs order in their favour both with respect to the substantive proceedings and the interlocutory proceedings culminating in my judgment of 5 July 2007. Those costs should be in an amount assessed under the Legal Profession Act 2004 in default of agreement and I so order. 22 This leaves outstanding the costs of the motion for costs, which is the subject of this judgment. Having regard to the fact that the respondents were successful overall in obtaining a costs order in their favour, albeit not on a partial indemnity basis, it would seem to me that the applicant should meet the respondents' costs of this motion, save for one matter, which I shall now deal with. 23 The parties agreed that costs should be dealt with by way of written submissions. Following the filing of submissions, the respondents sought an opportunity to make oral submissions, which occurred on 7 February 2008. They did so because of concerns about some of the applicant's submissions. In my opinion those concerns were adequately covered in submissions in reply and I agree with the applicant's submissions that the hearing on 7 February 2008 was unnecessary, and that the 2nd to 4th respondents should pay the applicant's costs of that day in an amount assessed in default of agreement.

Orders 24 1) Subject to order 2, the applicant is to pay the 2nd to 4th respondents' costs of the proceedings. 2) The 2nd to 4th respondents are to pay the applicant's costs of the proceedings on 7 February 2008. 3) All costs are to be assessed in default of agreement.

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