Sommerville v Open Arms Care Inc

Bankstown City Council v Paris(1999)93IR209 Four Sons Pty Limited v Sakchai Limsiripothong(no 2)(2000)100IR400 CASES CITED: House v The King(1936)55CLR499 Weisser v Spur Group Pty Limited (2003)121IR89 Orange Community Accommodation Service Incorporated and Vivienne Roddenby{2004}NSWIRComm333

APPLICANT Ms M Harding of Michelle Harding Lawyer LEGAL REPRESENTATIVES: RESPONDENT: Mr Michael Felle of Jobs Australia Limited

DECISION: INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES

IN THE MATTER OF: Andrew Jay Sommerville and Open Arms Care Inc

Application by Andrew Jay Sommerville re unfair dismissal pursuant to section 84 of the Industrial Relations Act 1996

Background 1 Mr Andrew Jay Sommerville (the applicant) filed a claim for unfair dismissal under section 84 of the Industrial Relations Act 1996 on 21 October 2009. The applicant had been employed by Open Arms Care Inc (the respondent) from 1 March 2002 until 28 September 2009. He had stated that his weekly rate of pay was $1471.74 per week. 2 A conciliation by teleconference was held on 9 November 2009 and on 18 November 2009. A hearing of the matter took place on 16 February 2010. On 2 March 2010 the Commission as presently constituted brought down a decision in favour of the applicant. 3 In the Decision an Order was made requiring the respondent to pay to the applicant the sum of $17660 within 21 days of the Decision. 4 In correspondence dated 14 May 2010 from Ms Michelle Harding (solicitor for the applicant), costs were now being pressed and information was being sought with respect to a breakdown of the compensation awarded to her client. 5 As a consequence a mention of this matter by teleconference was held on 18 May 2010. Ms Harding on behalf of her client was pressing for costs and Mr Felle on behalf of the respondent ,was opposing costs. As a consequence a timetable for the filing and serving of evidence was provided to the parties. The applicant was to file and serve by 28 May 2010 and the respondent by 11 June 2010. 6 A further mention of this matter was held on 15 June 2010. It was the submission of Mr Felle that the timetable had not been adhered to by Ms Harding in that she had filed on 2 June 2010 a Notice of Motion attached to it an annexure of the applicant. 7 On 9 June 2010 an affidavit of the applicant was also filed with an annexure of the applicant attached. Mr Felle was confused as to which set of documents he had to reply to. Ms Harding stated that the applicant only wished to rely on the documentation as filed on 9 June 2010. 8 With that clarification the filing date for the respondent was amended to 25 June 2010. 9 Another mention was held on 29 June 2010 when the applicant was offered the opportunity to reply to the respondent's submission by 8 July 2010 which took place. 10 Both parties sought that the Decision on costs be based "on the papers" in chambers. Applicant's Case

11 The applicant stated that on or about 9 November 2009 the legal representative of the respondent offered the sum of $25,000. This offer included a long service leave component of $9686.04 and annual leave of $10,857.31 and other entitlements. The actual offer for settlement was approximately $4500. 12 The applicant stated that he made an offer at the first conciliation, to settle his claim with the payment of twelve weeks pay on or around 9 November 2009. Mr Felle for the respondent did not have authority to accept or reject this offer of settlement. 13 On 16 November 2009 ( prior to the second conciliation held on 18 November 2009) that offer of twelve weeks was again pressed. The respondent refused to accept the offer and the matter was set down for Hearing. 14 An offer was received by email by the applicant from Mr Felle on 16 December 2009 to settle the matter for approximately $11664.80. This offer was rejected and the matter proceeded to arbitration. 15 The applicant stated that he had engaged a solicitor for the matter and had therefore incurred legal costs of $3025. If the matter had settled after the first conciliation then his legal costs would have been approximately $550. 16 The applicant sought an Order from the Commission such that the respondent pay legal costs of $3025 as well as the legal costs associated with this application which amounted to $723. He also sought compensation for the travel expenses incurred in travelling from Nambucca Heads for consultation with his solicitor and to the Industrial Relations Commission at Coffs Harbour which amounted to approximately $299.25 making a total of $4047.25 . 17 The applicant stated that he has been unable to pay his legal costs as the money received from him winning his case was used to discharge accumulated debts and the cost of living expenses which resulted from his unemployment at the time of the proceedings and his limited employment thereafter. 18 In submissions in reply the applicant stated details that had not been expressed in the original costs submission. In reply the applicant stated that he had originally sought from the respondent a payment of 16 weeks to be paid as a redundancy as he believed that his termination was due to money problems. This was rejected by the respondent. 19 The offer on 16 December 2009 of the payment of 12 weeks by the respondent was also rejected by the applicant because of the deduction of what the respondent stated was an overpayment of annual leave of 147.652 hours. This resulted in an offer of $11,664.80. 20 The applicant stated that on 16 February 2010 he at first made an offer of 14 weeks and then 12 weeks. The offer of 14 weeks was not mentioned in the original costs submission nor the stated counter offer made by the respondent of 6 weeks.

21 The respondent filed their submission and sought for the Commission to dismiss the applicant's claim for costs. 22 It was the respondent's view that the applicant only made one offer to settle his claim as opposed to the three offers as claimed by the applicant. The one offer of twelve weeks pay was made on three separate occasions. 23 The respondent stated that the applicant made an offer on 11 November 2009 (in addition to his calculated legal entitlements of outstanding accrued annual leave and his calculated annual leave loading and his calculated accrued long service leave). 24 On 27 November 2009 the applicant was advised that he was not owed outstanding annual leave but in fact had been overpaid annual leave to the order of 147.652 hours.

The basis for this calculation was provided to the applicant by the respondent prior to 16 February 2010. 25 On 16 December 2009 the respondent put an offer to settle the matter to the applicant. The offer was twelve weeks pay less the overpaid annual leave to be paid as a severance payment. 26 On 5 January 2010 the applicant rejected this offer stating by email that it was inadequate. 27 On 16 February 2010, the day of the Hearing, the applicant sought settlement again by offering twelve weeks with the respondent replying with what was offered on 16 December 2009 28 The responded refuted the applicant's claim that they had unreasonably failed to agree to a settlement of the claim.

The respondent stated that there was no evidence that it had conducted itself in a manner that could be seen as inconsistent with the intention to settle the claim. 29 The respondent stated that the sole reasoning advanced by the applicant was that because the Commission awarded an amount of compensation on 2 March 2010 that approximated twelve weeks pay, then the previous rejections as presented by the respondent were unreasonable.

30 The principles for determining an application for costs in unfair dismissal proceedings were considered in Bankstown City Council v Paris and Four Sons Pty Limited v Sakchai Limsiripothong and reaffirmed in Van Huisstede v Commissioner of Police (No 2) (2001) 106 IR 56, IGA Distribution Pty Ltd and Moses No. 3 [2003] NSWIRComm 230 and Weisser v Spur Group Pty Ltd [2003] NSWIRComm 79. 31 It will be readily seen from these decisions that determination of a costs application under Pt 6 Ch 2 of the Act requires a two staged process. Firstly, the Commission is required to make a finding under the discrete provisions of s181(2)(c) of the Act. Those provisions are relevantly as follows: However, the Commission when it is not in Court Session may award costs only in the following cases: (a) …

(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. 32 Secondly, 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. I refer, in this respect, to the provisions of s181(1) which are set out below: (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, 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. 33 This two stage process was explained by the Full Bench in Bankstown City Council v Paris: 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. 34 The power to award costs under s181(2) is a discretionary one. The relevant principles governing a review of discretionary decisions are well established and are set out in the majority decision in House v The King (1936) 55 CLR 499 at 504 - 505:

The manner in which an appeal against an exercise of discretion should be determined is governed by established principles. It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred. 35 Those principles were recently applied by a Full Bench of the Commission in Weisser v Spur Group Pty Limited (2003) 121 IR 89 at [34]:

It is well established that where the appeal is from a discretionary decision, the appellate court must not interfere with the decision unless "it reaches the clear conclusion that by reason of some error, whether of fact or of law, the primary judge not only has taken a different view but has failed properly to exercise the discretion conferred": Ace Business Brokers Pty Ltd v Phillips-Treby (2000) 100 IR 420 at 428. The locus classicus for the principle is the judgment of the High Court in House v King at 504 - 505. See also Mace v Murray (1955) 92 CLR 370 at 378; Port Macquarie Golf Club Ltd v Stead (1996) 64 IR 53 at 58 - 60; Drake Personnel Ltd t/as Drake Industrial v WorkCover Authority of New South Wales (Inspector Ch'ng) (1999) 90 IR 432 at 446 and Abboud v The State of New South Wales (Department of School Education) at 42 - 43. 36 The Full Bench in Paris emphasised the risks which a party runs if it adopts a firm position or inflexible approach towards the settlement of the case, observing (at 220): Far from indicating any retreat from the inflexible approach adopted by the appellant, its approach in relation to settlement on this occasion, served only to emphasise the consistent position that had been adopted. We emphasise that there will be many circumstances in which parties to litigation, including unfair dismissal proceedings, may appropriately take a firm position generally, including on the question of conciliation or settlement. Nevertheless, such a position runs significant risks in terms of the exercise of the power and discretion under s 181(2)(c). This is particularly so where such a position is assumed without due regard to the policy of the Act which requires parties to take seriously their obligation to attempt to settle the proceedings. That in turn involves an obligation to consider in an objective way the strengths or limits upon the case that they will be propounding should the matter proceed to arbitration. On the material before us, we consider that the appellant failed to give appropriate consideration to such matters before it adopted its inflexible position. We consider that, in the circumstances of this matter, the criterion in the relevant provision has been made out. It has been met as to the proceedings both at first instance and on appeal. 37

In Four Sons Pty Limited v Sakchai Limsiripothong (No 2) the Full Bench considered the issue of 'nominal offers' of settlement and observed (at 403- 404): The obligations imposed on parties to proceedings under s 84 of the Act, as identified in the Full Bench judgment in Bankstown City Council v Paris , require parties to such proceedings to undertake a responsible and careful assessment of the prospects of the litigation, in the absence of which an unsuccessful party may realistically face the prospects of a costs order being made against it. In those circumstances, it may often be appropriate for a party to consider making an offer to settle, even if the offer could be seen, either with the benefit of hindsight or otherwise, to be at a rather low level. However, the making of such an offer on "the low side" does not exhaust the responsibilities of a party to reasonably attempt to settle the claim. It is conceivable that if the respondent had responded to those offers in a more timely way, the proceedings may have settled. We doubt, however, that that is the appropriate finding on the evidence before us. Rather, the evidence as to further negotiations makes plain that the appellant had no realistic intention to make an offer which was likely to settle the proceedings before McKenna C. However, it would be inappropriate not to take into account the lack of a timely response from the respondent to the nominal offers of settlement which were made by the appellant in August and September 1999.

38 The email sent to the applicant on 16 December 2009 by the respondent's representative Mr Felle clearly outlined the offer to settle the matter. In this email Mr Felle stated that the documents sent to the applicant on 27 November 2009 included all the material relied upon for the calculations of the annual leave quantum in the spread sheet dated the same day. The applicant had sought twelve weeks pay to settle his claim.

By this email the respondent offered to settle the claim by paying twelve weeks pay less what was owed in the overpayment of the applicant with respect to annual leave amounting to 147.652 hours. This amounted to a severance payment of $11664.80 (less applicable tax) in full and final settlement of the matter.

On 5 January 2010 the applicant replied by email to Mr Felle and stated in part : I have considered your offer to settle this matter and feel it is inadequate and I am unable to accept. 39 Both parties were legally represented in the proceedings and therefore ought to have been aware, that due regard was to be had to the policy of the Act which requires parties to take seriously their obligation to attempt to settle the proceedings. 40 I do not accept that the offer made by the respondent on 16 December 2009 was unreasonable. It is my finding that a genuine attempt to settle this matter was made by the respondent and therefore they did not unreasonably fail to agree to a settlement. 41 In reaching my finding that the offer made by the respondent was reasonable I have taken into consideration the comments made by the applicant with respect to the legal expenses he incurred in running this case to arbitration.

In fact the legal costs incurred by a party in the running of a case should not be a consideration when determining an application for costs. I note the following comments from a Full Bench Decision in Orange Community Accommodation Service Incorporated and Carolyn Vivienne Roddenby [2004]NSWIRComm333 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 of the claim. 42 In conclusion it is my finding that the applicant has not proven that the respondent unreasonably failed to agree to a settlement which is a requirement to satisfy the jurisdictional gateway of s181(2)(c) in accordance with the principles in Bankstown City Council v Paris and Four Sons Pty Ltd v Sakchi Limsiripothong. 43 The application for costs is therefore rejected and the application dismissed.

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