Plaintiff v Defendant

2 By written submissions filed 5 September 2014, the defendant sought an order that the plaintiff pay the defendant's costs of and incidental to the proceeding on an indemnity basis after 16 July 2014, and on the standard basis up to and including to that date; and that there is no basis for ordering him to pay any portion of the plaintiff's costs. The defendant also sought that any order in his favour also be made in favour of the Secretary of the Department, who was initially joined. The appropriateness of that order was not resisted.

3 By written submissions filed 12 September, the plaintiff sought:

(a) An order that the defendant pay the plaintiff's costs up to 28 March 2014 (or in the alternative, that there be no order as to costs up to that date);

(b) An order that there be no order as to costs for the period from 29 March 2014 to 16 July 2014, save that the defendant pay the plaintiff's costs of and incidental to the appearance on 9 April 2014 (or in the alternative, that there be no costs order in respect of that appearance); and

(c) An order that there be no order as to costs from the period from 16 July 2014 onwards (or in the alternative, that the plaintiff pay the defendant's costs on the standard basis from that date onwards).

4 For the following reasons, I have determined that the defendant should pay the plaintiff's costs of and incidental to the proceeding, on the standard basis, up to 28 March 2014; that the plaintiff should pay the defendant's costs on the standard basis from 29 March 2014 to 16 July 2014; and that the plaintiff should pay the defendant's costs on an indemnity basis after 16 July 2014.

5 Although the procedural history of this matter was set out in short form in my reasons for decision,[1] it is necessary to explain that procedural history in some detail to resolve the dispute between the parties in respect of costs. Following a dispute about the plaintiff's conduct as a member of the Committee, the Department began an investigation that led ultimately to the plaintiff's removal:

On 9 August 2013, a complaint was lodged with the Department, which facilitated an investigation. In early October 2013, the plaintiff learned of rumours circulating in the community about the investigation, and wrote to the Department about his right to be heard in the investigation. On 22 October 2013, the plaintiff met with the investigator. A significant aspect of the plaintiff's concern was to be allowed access to both the complaint and the ultimate report produced, to which he claimed to be entitled. The Department refused that access, although indicated in that meeting that the plaintiff was on notice as to the nature of the complaints.[2]

6 On 22 October 2013, following that interview, the plaintiff e-mailed the investigator with further relevant material, and asked the following:

During our discussion this morning you suggested that the purpose of your investigation was to determine what would be a fair proportion of the costs involved in the job the subject of the investigation that I should pay.

My response was to query what I am being accused of - am I being accused of misconduct?

I believe the answers I have provided to your questions and the follow-up material below will evidence that I am not guilty of any misconduct.

7 The plaintiff then wrote to the Minister on 24 October 2013, complaining about the conduct of the investigation. The essence of the complaint, in the plaintiff's own words, was that the investigator had not spoken with him earlier in the investigative process to seek information.

8 On 11 December 2013, the investigator advised the plaintiff that he had found him to be an unreliable witness and that his findings were that he had acted improperly. That report was an internal report that was intended to operate as the basis on which the Department could decide the matter.

9 That day, the plaintiff wrote to the Department, stating:

In essence it would seem to me that I am at risk of a decision made that is adverse to me on the basis of [the investigator]'s report without me being given the opportunity to respond to statements made by others that are relied by [the investigator] in coming to his conclusions.

This does not constitute procedural fairness and I would contend that if any action is to be taken against me that I be provided with a fair opportunity to respond in detail to the so-termed evidence being used against me.

10 Later that day, he again wrote to the Department to reiterate his concern at the investigator's 'refusal to detail particular actions that he contends I have taken that form the basis of his adverse recommendations against me' and requesting that he be given the details of the 'specific actions cited in the Report that I am accused of taking that are in breach [of] the Act'. That e-mail went on:

My question in essence is - what actions does the DEPI Report contend that I have taken that are in breach of the Act or Regulations under which I am appointed?

Also, on the basis that you advised me this morning that you will now be considering follow-up action on the Report which may include advising others of the adverse findings against me, I believe that procedural fairness requires that I be advised of such findings and have the opportunity to respond to them before any further action is taken to broadcast such adverse findings to others.

...

If DEPI takes any further action that adds to this reputational damage by advising others of outcomes of Andrew's report that are not proven to be true, I will take whatever action is available to me to remedy damage caused to me by such action.

11 On 17 December 2013, the plaintiff wrote to the Public Sector Standards Commissioner. In that letter, he detailed the nature of his complaints against the Department, including that the Department had 'failed to adhere to the rule of natural justice'. He concluded:

I do not believe that I have received fair treatment, or that the rules of natural justice have been adhered to, or that I have been afforded procedural fairness in addressing issues raised in the Report from the investigation.

12 On 23 December 2013, the Public Sector Standards Commissioner wrote to the Secretary of the Department, requesting a written response to the complaints alleged by the plaintiff by 13 January 2014. The plaintiff also wrote to the Secretary of the Department on 3 January 2014, again repeating his central allegation that by being refused access to 'details of the complaint made, or with a copy of the report, or with an opportunity to respond to conclusions of the report' he was being denied 'natural justice and procedural fairness'.

13 The Department responded to the plaintiff on 3 January 2014, advising that the report was being considered, and that further information would be provided to him. The Department also responded to the Public Sector Standards Commissioner on 9 January 2014. The plaintiff responded to the Secretary on 14 January 2014, seeking a copy of the complaint lodged against him, and a copy of the report or the detail of the specific actions that he was accused of taking.

14 On 23 January 2014, the Secretary of the Department wrote to the plaintiff, and refused to provide the plaintiff with a copy of the complaint or the report:

However, I note that details of the allegations against you have already been communicated to you verbally by Andrew Collins, of this Department, on 13 September 2013 and further on 22 October 2013. In addition, an audio copy of the interview of 22 October 2013 has been provided to you. Further details and the findings of the investigation were explained to you at [the] meeting on 11 December 2013 with Andrew Collins, Mike Timpano and Rob Stewart.

15 After summarising the allegations put against him, the Secretary went on:

The department considers that your behaviour may be in breach of the Directors' Code of Conduct, issued by the Public Sector Standards Commissioner.

...

On this basis, we propose to remove you as a committee member for the Seaspray Committee of Management.

We now provide you with a further opportunity to make any additional submissions regarding the above proposal. Any submission should be provided in writing, within 14 days of this letter, and will be considered by the department before a final decision is made.

16 Also on 23 January 2014, the Public Sector Standards Commissioner provided to the plaintiff a copy of the materials provided by the Department to the Commissioner. On 28 January 2014, the plaintiff then wrote again to the Secretary of the Department complaining that material provided to the Commissioner was 'not true'. On 30 January 2014, the plaintiff again wrote to the Secretary of the Department, advising that he had only received the Secretary's letter of 23 January 2014 on 29 January 2014, and requesting an extension of the time provided to reply.

17 On 6 February 2014, the Public Sector Standards Commissioner wrote to the Secretary of the Department and provided a copy of that letter to the plaintiff. In that letter, the Commissioner recommended that a copy of the complaint and the report be provided to the plaintiff, and that any sanction proposed and the reasons for it be put in writing to the plaintiff to respond to before any final decision was taken. That day, the plaintiff also wrote to the Secretary of the Department, proposing that an independent mediator be appointed, that the plaintiff be provided with a redacted copy of the complaint and report, and that the plaintiff be given an opportunity to reply in writing to those documents prior to the mediation.

18 On 14 February 2014, the plaintiff's solicitor then wrote to the Secretary of the Department, noting that no response had been received, before going on:

Our client has little option but to issue proceedings in the Supreme Court of Victoria to prevent his removal under such prejudicial circumstances.

We hereby give notice of our client's intention to issue proceedings during the next week and request that the Department withhold further action pending the outcome of those proceedings.

19 On 19 February 2014, the plaintiff filed a summons and originating motion in this Court. The summons sought an interlocutory injunction prevent his removal from the Committee, and was returnable in the Practice Court before Kyrou J on 6 March 2014. The originating motion sought orders that the Department:

lawfully conduct any investigation into the plaintiff's conduct, including without limitation giving the plaintiff an adequate opportunity to respond by providing him with procedural information, together with copies of all relevant complaints reports and evidence in relation to the allegations against him.

20 The grounds, as against the Department, included an allegation that the plaintiff had been denied procedural fairness by the Department:

failing to give the plaintiff adequate opportunity to respond by not interviewing him prior to launching a formal investigation, making vague verbal allegations, not providing written allegations in a timely manner, by refusing to disclose details of the complaint, the investigation report, any supporting evidence taken into account, and any applicable resolution and appeal procedure, and by failing to respond to the plaintiff's legitimate concerns.

21 The Secretary of the Department wrote to the plaintiff's solicitor on 20 February 2014.[3] It is apparent from that letter that he was aware that these proceedings had been commenced the previous day. In that letter, he attached a copy of the original complaint made, and a copy of the investigation report, with 'some personal details redacted'. He also indicated that if the plaintiff wished to provide further information, he should do so in writing by 7 March 2014.

22 On the return date, Kyrou J made orders by consent on the papers adjourning the hearing of the interlocutory summons to 2 April 2014. In the intervening period, the plaintiff took the opportunity to comment on the material provided, and on 28 March 2014 the defendant removed the plaintiff from the Committee, effective from 11 April 2014. The plaintiff sought reasons for that decision on 31 March 2014.

23 On 2 April 2014, Cavanough J further adjourned the matter to 9 April 2014. On 3 April 2014, the defendant provided reasons for the decision to remove the plaintiff. Finally on 9 April 2014, the interlocutory application was heard by Ginnane J, amended (pursuant to a further summons filed 7 April 2014) to seek to prohibit the defendant from giving effect to the decision.

24 On 9 April 2014, the plaintiff sought leave to amend the originating motion, and that leave was granted by Ginnane J by consent. The amended originating motion entirely removed the relief seeking procedural fairness, and the grounds that procedural fairness had not been provided. The plaintiff confirmed at trial that he no longer relied on allegations of a lack of procedural fairness.

Who should pay the costs of the proceeding to 28 March 2014?

25 The plaintiff submitted that in substance, he succeeded in the claim filed on 19 February 2014 where he sought and was given the procedural fairness that had previously been denied to him by the defendant. The plaintiff submitted that at 19 February 2014, there was a powerful argument that the requirements of natural justice were such as to require that the plaintiff be provided with copies of the complaint and the investigation report, and also at 19 February 2014, it was reasonable for the plaintiff to consider that the Department was not intending to provide him with copies of either. In support of this, the plaintiff noted:

(a) On 23 January 2014, the Department indicated that it would not provide the plaintiff with a copy of the complaint or the investigation report, and that it intended to remove him from the Committee;

(b) Between 24 January 2014[4] and 20 February 2014, the plaintiff did not receive any communication from the Department as to their intentions with respect to the provision of copies of the complaint and the investigation report;

(c) On 6 February 2014 the plaintiff again requested copies of the complaint and investigation report, and an opportunity to respond;

(d) On 14 February 2014, the plaintiff's solicitors indicated that they would bring legal action that week, and no response having been received, the proceeding was filed on 19 February 2014; and

(e) It was only after the proceeding was initiated that the complaint and investigation report, and an opportunity to reply, were provided.

26 The defendant submitted that it was entirely premature for the plaintiff to commence proceedings at that stage. The plaintiff's complaint to the Public Sector Standards Commissioner set in train a procedure whereby, on 6 February 2014, the Commissioner wrote to the Secretary of the Department making recommendations. Under s 66(8) of the Public Administration Act 2004,[5] the Secretary had 14 days to decide whether to adopt those recommendations, and a further period of 7 days to provide reasons if those recommendations were not adopted. The plaintiff did not wait until that procedure was complete, but commenced proceedings. The Secretary then accepted the Commissioner's recommendations. The plaintiff, in reply, submitted that the procedure in the Public Administration Act 2004 regulates how the Department must handle and respond to recommendations by the Commissioner, but says nothing about the obligations of the Department vis-à-vis the plaintiff.

27 The defendant also submitted that it was the decision of the plaintiff not to press the complaints about procedural fairness, and it was the decision of the plaintiff not to discontinue the proceeding but to amend the originating motion and in effect advance a different claim, about which he was unsuccessful. The plaintiff in reply submitted that the parties consent to amending the claim, thus obviating the need to commence fresh proceedings, and that the plaintiff should not be punished for utilising, by agreement, a more efficient procedural path to seek the new relief.

28 I consider the plaintiff's submissions correct in characterising the claim up to and including the making of the decision on 28 March 2014 as a claim in which he was successful. In substance, he had sought, from October 2013 (and possibly earlier) the complaints put against him, and after it was compiled, the investigative report of those complaints. He sought that material expressly so that he could be given an opportunity to reply to the allegations contained therein. Whether he would have been successful in establishing that claim became irrelevant when the defendant, following the issuing of proceedings, agreed to provide that material. Given the extensive correspondence engaged in by the plaintiff, there is no evidence that the material would have been provided without his commencing legal proceedings.

29 It is no answer that the Commissioner had, by writing to the defendant, initiated a procedure under which the Department was obliged to review the case and the procedures for handling such complaints, and adopt the recommendations of the Commissioner or provide reasons why they would not. Those obligations are beneficial for the public as a whole, but do not offer any protection to the plaintiff in this instance. They are also not procedures he was able to control, engage in, or enforce, save that he was aware that the Commissioner had asked the defendant to review the matter. The Department told him in the 23 January 2014 letter that he would not be provided with the material he sought, and that the Department proposed to remove him. As far as he knew, that is what would occur.

30 I also do not accept that the proper procedure having established the procedural fairness he initially sought was necessarily to discontinue the proceeding and commence fresh proceedings. Had the plaintiff discontinued his proceeding, filed a fresh proceeding and a summons returnable in the Practice Court seeking the relief he sought in the amended originating motion and the summons filed 7 April 2014, there would be no difference, in substance, to the procedure he instead chose to adopt. It may be cleaner, and perhaps administratively more elegant, to put different numbers on different claims, but that is not a difference I consider relevant in determining how costs of legal proceedings should be borne.

31 I therefore consider that the plaintiff was substantially successful in the claim filed 19 February 2014 in that he was provided with the documents that he sought, and an opportunity to respond to those documents. The usual order that costs should follow the event applies, and the plaintiff is entitled to his costs of and incidental to the proceeding incurred up to and including 28 March 2014.

Who should pay the costs between 29 March 2014 and 15 July 2014?

32 The plaintiff submitted that in this period there should be no order as to costs, as the matter raised novel issues about the construction of unconventional legal instruments in relation to which there was no authority. I disagree. Although there was no authority on the provisions in question, the matter raised uncontroversial questions of statutory construction. I do not consider that is a reason to depart from the usual order as to costs, and consider that for this period, the defendant is entitled to his costs of an incidental to the proceeding.

33 In relation to the costs of the appearance on 9 April 2014, the plaintiff produced a letter, dated 7 April 2014, in which he proposed terms for consent orders to be made at the hearing scheduled on 9 April 2014. He submitted that the costs of the appearance were only incurred because the defendant did not consent until the morning of 9 April 2014, when it would have be reasonable to consent to being enjoined by the evening on 8 April 2014. However, it is more than likely that if consent were obtained on the evening of 8 April 2014, an appearance would be required by the Court in any case. Accordingly, I do not consider that the usual order should be departed from in relation to the costs of that appearance.

Who should pay the costs from 16 July 2014 onwards?

34 The defendant sought costs on an indemnity basis after 16 July 2014. In support of that submission, the defendant produced a Calderbank letter dated 1 July 2014. That letter proposed that the matter be settled on the basis that the proceeding be dismissed with no order as to costs, and each party bears their own costs of the proceeding. The offer was expressed to remain open until 16 July 2014. The plaintiff rejected the offer on that day.

35 Whether the rejection of a Calderbank letter (containing terms more favourable than the result achieved) is sufficient to establish indemnity costs depends upon whether the rejection of the offer was unreasonable in the circumstances, by reference to the six matters to which the Court should have regard that were set out in Hazeldene's Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2).[6] The defendant submitted that each of those factors weighed in his favour:

(a) The stage of the proceeding at which the offer was received. The offer was made on 1 July 2014. The hearing was on 30 July 2014. At the time the offer was made, the parties were ready for hearing in that evidence had been filed and written submissions exchanged. Accordingly, the plaintiff was in the best possible position to know the defendant's case and for his legal advisers to provide him with advice about the merits of his case and that of the defendant.

(b) Time allowed to the plaintiff to consider the offer. The plaintiff was given 15 days to consider the offer. This was more than sufficient time to consider the offer.

(c) Extent of the compromise offered. The defendant made a 'walk away' offer to the plaintiff. In circumstances where the defendant's legal costs at that stage were estimated to be $49,000, and where the defendant considered the plaintiff's claim to have low prospects of success, this was a real compromise.

(d) Plaintiff's prospects of success. In the defendant's submission, the plaintiff's prospects of success were low. The plaintiff's term on the Committee had expired. Even if that fact was not determinative, the plaintiff's arguments as to the six grounds of relief were weak. This was ultimately borne out in the reasons for judgment delivered by the Court.

(e) Clarity of the terms of the offer. In the defendant's submission, the terms of the offer were very clearly expressed to the plaintiff. Moreover, the letter invited the plaintiff to contact the defendant's solicitor if any aspect of the offer was unclear or ambiguous.

(f) Foreshadowing of an application for indemnity costs. The letter expressly foreshadowed such an application.

36 The plaintiff resisted this application, and submitted that the prospects of success were unclear, and defendant's assessment of the extent of the compromise offered was inaccurate:

(a) Plaintiff's prospects of success. The matter raised novel issues about the construction of unconventional legal instruments in relation to which there was no authority. It was not possible for the plaintiff to accurately predict the prospects of success, because the case involved competing principles of statutory interpretation about which it was unclear which should be given primacy. The fact that the plaintiff was no longer on the Committee could not be decisive of the question of whether he was entitled to the declaration sought.

(b) Extent of the compromise offered. Although the defendant asserted that costs to that point in time amounted to over $49,000, that does not represent the true extent of the compromise offered because that amount should be reduced by the costs incurred up to 28 March 2014, and would be offset by any award of costs in the plaintiff's favour up until that date.

37 As noted earlier, I disagree with the plaintiff's submission that this case involved novel propositions. Although there was no prior authority on the provisions in question, the case was determined by applying standard principles of statutory construction. I also disagree with the plaintiff's submission that the expiry of the plaintiff's term on the Committee was not likely to be decisive as to the issues in dispute. The defendant's Calderbank letter accurately summarised the reasons that were ultimately determinative of the dispute, where the letter stated:

The principal hurdle facing your client is the fact that his membership of the Committee expired on 26 May 2014. We consider there to be no real doubt that, as a result of the High Court's decision in Wingfoot, this means that the principal relief he seeks is not available to him. With respect to the declaratory relief sought, the expiration of his Committee membership also provides the Court with a sound reason to decline to exercise its discretion to grant such relief. Thus, your client cannot be assured that the relief he seeks is open to him, in view of the fact his Committee membership has now expired.

38 I accept that the defendant's summation of the extent of the compromise overstates the position, as the costs up to 28 March 2014 will be dealt with somewhat differently. However, in circumstances where the plaintiff was wholly unsuccessful in the amended claim, where the substantial work for the preparation of the matter for trial had been completed after that date (in the filing of affidavit material and submissions), and where the usual order would be that costs would follow the event, a walk away offer still represents a considerable compromise on the part of the defendant.

39 It was the plaintiff's decision to prosecute a new claim after he was granted the procedural fairness he initially sought. He was offered the opportunity, by the defendant, to walk away from his new claim bearing only his own costs, when he had chosen to put the defendant to the cost of defending that new claim and that new claim was wholly unsuccessful. In those circumstances, and for the reasons advanced by the defendant, the plaintiff was unreasonable in rejecting the offer and should pay the defendant's costs on an indemnity basis after 16 July 2014.

[1] Nolan v Department of Environment & Primary Industries [2014] VSC 412 (29 August 2014) [8]-[12].

[3] That letter was possibly received by e-mail on 21 February 2014, according to an unsworn copy e-mail attached to the plaintiff's written submissions on costs.

[4] I note that in his correspondence, the plaintiff indicated that he did not receive the 23 January 2014 letter from the Department until 29 January 2014. Claiming that he received no correspondence from 24 January 2014 overstates the position. However, in the context of a submission that the defendant did not reply for an extended period, that difference is most likely immaterial.

[5] Now s 65(3) of the Act, following the Public Administration Amendment (Public Sector Improvement) Act 2014.

[6] (2005) 13 VR 425, [20], [23], [25].