Phillips v Industrial Relations Commission of NSW & Anor

LEGISLATION CITED: Industrial Relations Act 1996, ss 181, 191

Bankstown City Council v Paris (1999) 93 IR 209 Four Sons Pty Ltd v Sakchai Limsiripothong (No 2) [2000] NSW IRComm 131, (2000) 100 IR 400 Uniting Church of Australia Property Trust (NSW) v Industrial Relations Commission of New South Wales in Court Session & Anor (2004) 60 NSWLR 602 CASES CITED: Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 SAAP v Minister of Immigration and Multicultural and Indigenous Affairs [2005] HCA 24, 215 ALR 162 Rosenberg v Perceval (2001) 205 CLR 434 Craig v South Australia (1995) 184 CLR 163

Winston Churchill Phillips PARTIES: Industrial Relations Commission of NSW Cooma Rural Lands Protection Board

Claimant: M A Robinson/ J Keys COUNSEL: Opponent: Submitting appearance Second Opponent: K Nomchong

Claimant: Ebsworth & Ebsworth SOLICITORS: Opponent: Submitting appearance Second Opponent: Last & Maxwell

LOWER COURT JURISDICTION: Industrial Relations Commission of NSW

LOWER COURT FILE NUMBER(S): IRC 3685; 3986; 3963; 5823 of 2004

LOWER COURT DATE OF DECISION: 31 August 2005

LOWER COURT MEDIUM NEUTRAL CITATION: Cooma Rural Lands Protection Board v Phillips [2005] NSWIRComm 313

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL 40988/05

SPIGELMAN CJ MASON P BEAZLEY JA

Thursday 13 July 2006 PHILLIPS v INDUSTRIAL RELATIONS COMMISSION OF NSW & ANOR HEADNOTE

INDUSTRIAL LAW - Industrial Relations Commission - Discretion to award costs - When not in Court Session - Against party who unreasonably fails to accept settlement offer - Determination as to unreasonableness not jurisdictional - Industrial Relations Act 1996, ss 181, 191.

WORDS AND PHRASES - "objective" - "subjective" - "only if".

An employee seeking reinstatement following his dismissal rejected a settlement offer more generous than proved to be the outcome of unfair dismissal litigation. Section 181(2)(c) of the Industrial Relations Act 1996 gave the Commission when not in Court Session discretion to award costs "only in" the event, inter alia, that a party "unreasonably failed to agree to a settlement of the claim." When the employee was found at first instance to have acted reasonably in refusing an "in fact reasonable offer", the employer successfully appealed to the Full Bench. In the Court of Appeal, the employee alleged that the Full Bench misconstrued its review power under s 191 which provided that the principles applicable to appeals from discretionary decisions applied. Given that a reinstatement order was discretionary, it was submitted that the Full Bench had simply substituted its own decision in place of that challenged. By finding the claimant's rejection of settlement terms unreasonable when the Commissioner had found it reasonable, the Full Bench was said to have contravened s 191. Moreover, since its power to award costs was contingent "only in" the event specified in s 181(2)(c), the Full Bench committed a jurisdictional error by having wrongly characterised the event.

HELD: (1) (Per Mason P, Spigelman CJ and Beazley JA agreeing) The Full Bench was within its discretionary jurisdiction in finding that the claimant had, in refusing any reasonable but alternative outcome, been unreasonable. It was within its jurisdiction to conclude that the Commissioner had erred in law by giving controlling effect to the claimant's insistence upon vindication and reinstatement. ([29]-[31])

(2) It is not the case that every time "only if" or some equivalent expression is found in a statute that satisfaction of the stated criterion becomes a jurisdictional fact. For that to occur one must discern the Parliament expressed itself so as to condition the exercise of the relevant power upon the existence of the criterion. (at [14])

Uniting Church of Australia Property Trust (NSW) v Industrial Relations Commission in Court Session (2004) 60 NSWLR 602 at 617 [70], Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355, SAAP v Minister of Immigration and Multicultural and Indigenous Affairs (2005) 215 ALR 162 at [72], [205], applied.

Four Sons Pty Ltd v Sakchai Limsiripothong (No 2) (2000) 100 IR 400, considered.

(3) Errors of characterisation made under s 181(2)(c) are not necessarily jurisdictional. (at [14]-[15])

(4) The proper test under s 181(2)(c) requires the Court to consider the response of the reasonable person. The reference to the opinion of the Commission emphasises that it is to apply its own perception of what is reasonable as distinct from that of the subject party. While the standpoint and standards of the party are not ignored, the Commission must not be captive to them. (at [17]-[21]) Rosenberg v Percival (2001) 205 CLR 434 at 500 [210], referred to.

(5) The Full Bench did not itself commit jurisdictional error in concluding that the rejection of a reasonable offer was the objective basis upon which a costs order should have been made. (at [26])

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL 40988/05

SPIGELMAN CJ MASON P BEAZLEY JA

Thursday 13 July 2006 PHILLIPS v INDUSTRIAL RELATIONS COMMISSION OF NSW & ANOR JUDGMENT 1 SPIGELMAN CJ: I agree with Mason P. 2 MASON P: The claimant invoked the jurisdiction of the Industrial Relations Commission when he sought reinstatement following his dismissal as an employee of the second opponent (see Industrial Relations Act 1996, ss 84 and 89). After he rejected a settlement offer involving resignation and compensation made by the employer on Calderbank lines on 2 April 2003 the matter went to an eight day hearing. Commissioner Bishop determined that the dismissal was unfair but that reinstatement was not practicable. The employer was ordered to pay the claimant the equivalent of a further 12 weeks pay by way of compensation. 3 Because this outcome was significantly less than the employer had offered in the settlement letter, the employer made an application for costs pursuant to s181(2)(c) of the Act. Relevantly s181 provides: (1) Subject to the rules of the Commission and any other Act or law: (a) the Commission may award costs, and (b) costs are in the discretion of the Commission, and (c) the Commission may determine by whom and to what extent costs are to be paid… (2) However, the Commission when it is not in Court Session may award costs only in the following cases: … (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. 4 Bishop C found that the employer's offers were "in fact reasonable". However, the claimant was held to be reasonable in failing to accept them. In reaching the latter view, the Commissioner gave controlling weight to the consistency of the claimant's stance starting from well before his employment was terminated. Bishop C said: Mr Phillips was nothing if not consistent in that throughout the last 18 months of his employment, particularly from September 2001 through to his termination, throughout the proceedings of this matter, at no stage did he accept the original decision made by the Board to withdraw the supervision allowance from him. He also contested both during his employment and during the evidence the various disciplinary matters that were initiated against him, both as to procedure and substance. The counter offers put back by Mr Phillips in response to the Board offers quite clearly continue that theme of seeking to overturn what he regarded as the ongoing injustice that was visited upon him during his employment by way of the disciplinary proceedings, the decision to withdraw his supervision allowance and ultimately his termination. The very wording of the letter of 4 March, 2003 confirms that essentially he is seeking to have all allegations withdrawn against him, he sought the reinstatement of his supervision allowance, and he sought the payment of compensation to be based on a rate of pay that included supervision allowance. The offers that Mr Phillips put were consistent with the position that he sought in seeking both reinstatement and clearing his name.

Later in her costs reasons the Commissioner said that " the respondent's settlement offer was untenable to Mr Phillips because of his desire for reinstatement, and his desire to seek to have matters redressed ." 5 The claimant appealed to the Full Bench pressing for reinstatement. 6 The employer also appealed against, among other things, the costs order. 7 The Full Bench (Wright J, President, Grayson DP, McLeay C) gave leave to appeal in the various matters.

8 The claimant's appeal was dismissed. So too was the employer's appeal in relation to the substantive findings concerning the unfairness of the dismissal. 9 However, the employer's appeal in relation to the costs application was upheld (see Cooma Rural Lands Protection Board v Phillips [2005] NSWIRComm 313 at [39] ff). On 31 August 2005 the Full Bench set aside the Commissioner's costs order and ordered the claimant to pay the employer's costs from 30 April 2003 on a party/party basis. On 29 June 2006 the Full Bench clarified that this costs order relates only to the costs in the proceedings before Bishop C (see Cooma Rural Lands Protection Board v Phillips [2006] NSWIRComm 211). 10 The summons seeks orders quashing this decision and directing the Full Bench to reconsider the costs application according to law. The Commission has submitted to the order of this Court save as to costs. 11 The claimant submits that the Full Bench fell into jurisdictional error, constructively failed to exercise its jurisdiction and/or committed error of law on the face of the record. Detailed errors are assigned relating to the method whereby the Full Bench went about its appellate task in finding that Bishop C erred and in deciding to award costs against the claimant. 12 The claimant also challenges the prevailing caselaw in the Commission expounding s181(2)(c), particularly Bankstown City Council v Paris (1999) 93 IR 209 and Four Sons Pty Ltd v Sakchai Limsiripothong (No 2) [2000] NSW IRComm 131, (2000) 100 IR 400). 13 It is submitted that Paris inaptly glosses the provision in its emphasis that the statutory criterion is to be applied "objectively" and in the guidelines it offers (at 219-220) as to consideration of the reasonableness of any rejected settlement offer and the conduct of the offeree. This submission prompted the riposte (itself disputed) that the Commission had been invited to apply these guidelines by both parties. 14 Four Sons speaks (at 404 [12]) of a "jurisdictional 'gateway'" being created by s181. I wish to reserve the correctness of this description. It is not the case that every time "only if" or some equivalent expression is found in a statute that satisfaction of the stated criterion becomes a jurisdictional fact (Uniting Church of Australia Property Trust (NSW) v Industrial Relations Commission of New South Wales in Court Session & Anor (2004) 60 NSWLR 602 at 617 [70]). For that to occur one must discern the Parliament expressed itself so as to condition the exercise of the relevant power upon the existence of the criterion (see generally Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355, and more particularly SAAP v Minister of Immigration and Multicultural and Indigenous Affairs [2005] HCA 24, 215 ALR 162 at [72] (McHugh J) and [205] (Hayne J)). 15 Paris held (at 219) that s181(2)(c) imports a criterion: … to be applied objectively and requiring a consideration of the whole of the conduct of the party against whom the order is ought, 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. 16 On behalf of the claimant Mr Robinson submitted that this approach misconceived the scope of the provision, betraying an error of law of a jurisdictional nature. I disagree as to both of the latter counts. 17 In the medical negligence context, the distinction between an objective and a subjective test was described by Callinan J in Rosenberg v Perceval (2001) 205 CLR 434 at 500 [210] as one between: "…a universal test for an hypothetical reasonable person in the patient's position, and a test to be applied to the particular patient, even if, perhaps, she or he is an unreasonable one." 18 Philosophy and psychology use the terms "objective" and "subjective" to distinguish concepts and sensations that have an external cause from those that arise only in the mind. According to Sir Ernest Gowers (ed), Fowlers Modern English Usage, 2nd ed, the terms have become "popularised technicalities", treated as stylish substitutes for commoner and more precise words such as (un)biased, (dis)interested, (im)partial and (un)prejudiced. 19 When the Full Bench in Paris spoke of applying the statutory criterion "objectively" it was correctly discerning that the standard of unreasonable failure was to be applied by reference to the hypothetical yardstick of the fictional "man on the Clapham omnibus" or his Australian, gender-neutral counterpart. This does not mean that this hypothetical personage is placed anywhere other than in the context of the party in question (here the party against whom costs are sought). Nor does it mean the reasonableness assessment may commit hindsight error. But it does mean that the standards of the actor in question are not determinative. Thus, in the realm of negligence law, a person's conduct may be held unreasonable even though he or she was ignorant of the circumstances calling for a particular response or even if he or she lacked the capacity to discern or provide a correct response in the circumstances.

20 Under s181(2)(c) costs may be awarded against the employer or the employee, depending on who has failed to agree to a settlement and done so unreasonably. The reference to the opinion of the Commission emphasises, if emphasis were required, that the criterion is to be decided by the Commission applying its own perception of what was unreasonable, as distinct from the perception (if any) of the party. This does not permit the Commission to ignore the standpoint or standards of the party concerned, but the Commission must not be captive to those matters. Were it otherwise, the costs discretion could not be invoked against a pig-headed litigant blinded by self-absorbed stupidity or malice. 21 I therefore cannot read the "objective" aspect of Paris as embodying a jurisdictional or other error of law in regard to the application of s181(2)(c). 22 Beyond this we should confine ourselves to considering what happened in the present case in the Full Bench. This requires close attention to the reasoning of the Full Bench, not a general review of the outer limits of the Paris and Four Sons decisions. I say this, because the Full Bench's reference (at [41]) to a decision to award costs being "permissible" in certain circumstances demonstrates that the guidelines of Paris were neither misunderstood nor misapplied.

23 The claimant does not dispute the Full Bench's power to entertain and dispose of the employer's appeal against the costs order, subject to the grant of leave (see ss 187, 188(2)). The nature of the relevant appeal is stipulated in s191 which provides: (1) An appeal to a Full Bench of the Commission under this Part is not by way of a new hearing and is to be determined on the evidence and material adduced in relation to the decision appealed against. (2) However, the Full Bench may, by leave, receive further evidence if it considers that special grounds exist or if the evidence concerns matters occurring after the decision appealed against. (3) To avoid doubt, the Full Bench cannot merely substitute its decision on the matter, but must follow the principles applying to appeals from discretionary decisions, whether or not further evidence is received. Note: The above section generally follows the decision of the Full Industrial Relations Commission in Big W Discount Stores v Donato (1995) 58 IR 239 as to the nature of an appeal. The appeals in respect of which the section applies includes appeals in connection with awards, unfair dismissals, approvals of enterprise agreements, unfair contracts or contraventions of dispute orders. 24 The Full Bench had power to confirm, quash or vary the decision of the Commissioner concerned (see s192(1)(a)). 25 These provisions show that the Full Bench was exercising an appellate function in relation to the decision of Bishop C. It was not sitting as if it were the Supreme Court exercising judicial review. 26 The Full Bench's reasons show that it concluded that the Commissioner had failed properly to address the task of forming the requisite opinion referred to in s181(2)(c). It found (at [52]) that the employer had made out its case on appeal, a case earlier summarised in the following terms: In her decision the Commissioner found and expressly found that the offers made by the employer were reasonable. That being so, the rejection of the offer by Mr Phillips was the objective basis upon which a cost order should have been made. The employer argues that in failing to do so, the Commissioner fell into error, an error which was compounded by her adoption of a subjective test namely whether Mr Phillips rejection of the offer was unreasonable. In essence, the employer argues, the Commissioner held that because Mr Phillips sought reinstatement to the exclusion of any other outcome, then an offer contemplating any other outcome would not be reasonable to him and therefore, his rejection of the employer's offer was not reasonable. 27 The Full Bench said at [44]: We consider that Mr Phillips' steadfast insistence on reinstatement to the exclusion of other negotiated outcomes disclosed a failure on his part to properly evaluate the strengths and limitations upon the case he was to propound and in such circumstances there can be little doubt on a proper application of the principles, that an order for costs against Mr Phillips was available and should have been made. 28 The Full Bench found (at [54]) that "the relevant criterion in s181 of the Act has been established to provide the jurisdictional basis upon which to grant costs against Mr Phillips and Bishop C erred in that regard". 29 The claimant submits that the Full Bench contravened s191(3) by merely substituting its decision and not following the principles applying to appeals from discretionary decisions. The passages I have referred to show that this is a clearly incorrect characterisation of the reasoning in this particular costs appeal. The Full Bench found that the Commissioner committed an appealable error by her approach to the costs discretion because she assessed the reasonableness of the claimant's conduct solely by reference to the stance adopted and maintained by the claimant himself, giving controlling effect to his insistence upon vindication and reinstatement. It was well open to the Full Bench to conclude that this failed to recognise that the parameters of reasonableness in maintaining a claim (or defence) are not set by the litigant's own professed bottom line. Regard must be had to the range of possible outcomes having regard to the nature of the proceedings and the facts being advanced on both sides. 30 Section 89 of the Act sets out the range of orders the Commission may make in a reinstatement claim. A reinstatement order is discretionary and it may be withheld if impracticable. The former employee's claim for reinstatement does not fix the minimum remedy any more than a plaintiff's claim for $100,000 damages for personal injury can preclude consideration of a lesser quantum. Depending on the circumstances it may be quite unreasonable to maintain such a stance in settlement discussions. 31 The Full Bench was entitled to conclude that Bishop C had erred in law in paying no regard to the claimant's failure to contemplate that rejection of his pure reinstatement claim was at least on the cards and to give genuine consideration to a reasonable but alternative outcome as proposed by the employer. On this basis, the Full Bench exercised its jurisdiction in accordance with s191.

32 In my view, it is unnecessary to consider the impact of s179 upon the Court's jurisdiction in matters of this nature.

33 In written submissions the claimant also sought to agitate a complaint that the Full Bench contravened the prohibition in s181(2) ("may award costs only in the following cases…") because the claimant did not in truth unreasonably fail to agree on a settlement. This of course, ignores the reference to the opinion of the Commission on such matters. It was well open on the facts to the Full Bench to form the requisite opinion. 34 In so concluding, I do not overlook the fact that the Commission was not sitting as a court in the present matter (cf Craig v South Australia (1995) 184 CLR 163 at 179-180). Nevertheless, the particular functions exercised by the Commission in relation to unfair dismissal claims involve the resolution of a particular dispute by reference to defined statutory criteria not unlike those involved in a purely judicial context. This said, wherever the function is placed on some administrative - judicial spectrum, nothing in the statutory scheme indicates that any legal error, let alone an error of a jurisdictional nature, was committed in the present case. 35 The Act gave the Full Bench ample authority to exercise the type of appellate functions exercised here. The Full Bench fairly addressed the statutory gateways and brought down a decision within its statutory authority. 36 In truth, the claimant is asking this Court to sit as if it were a court of appeal over the Full Bench, checking to see if it has correctly carried out the appellate functions it purported to perform. We are asked to determine whether the Full Bench correctly applied House v The King principles; and whether it correctly interpreted and applied s181(2)(c) in the particular circumstances. Such a role is not conferred on this Court.

37 It is unnecessary to consider the effect of the claimant's substantial delay in launching these proceedings. It should not be thought that it would not have been fatal to his claim if it otherwise had legal merit. 38 The summons should be dismissed with costs. 39 BEAZLEY JA: I agree with Mason P. **********

10/08/2006 - Error in names of counsel - Paragraph(s) Cover sheet

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.