Stockwell International Pty Ltd v Solyali [2008] FMCA 152 | Case summary

Consideration 33I shall deal with each of the grounds of appeal. The first ground asserted that her Honour erred in finding the respondent's illness, diagnosed as an adjustment disorder, was the real and motivating factor for the respondent terminating his employment. 34The Acting CIM observed in her judgment that the appellant did not challenge the content of the medical evidence including the evidence of Mr Fitzpatrick. Mr Fitzpatrick had said in a report that was in evidence that: Given the nature of a diagnosis of Adjustment Disorder, once the stressor leading to the maladjustment is removed or resolved, a person is expected to improve in a timely manner. It became apparent given Mr Solyali's reporting of the deterioration of the relationship with his employer that resolution may not be realistic and removing the stressor by seeking alternative employment would be the most durable and appropriate path to recovery. I wrote to Mr Solyali's GP, Dr Ktenas on 16/07/2013 outlining these concerns and recommended he not return to his pre-injury employment. 35Her Honour was alive to the arguments of the appellant that the real reason for the respondent's resignation was so that he could take up employment with another company of which he was a director. Her Honour referred to the appellant's contention that an inference was available that the respondent had been making plans to leave the appellant before he took sick leave and before he resigned. 36The Acting CIM also took into account the respondent's evidence that he did not agree to employment with his new employer until after he had resigned, that he earns less with his new employer, that he agreed to employment with his new employer because he needed the income and that his new employer was a smaller operation involving less stress. Her Honour accepted there was evidence of another reason why the respondent resigned but that there was no dispute that he was suffering from an illness that the medical reports said could not be resolved while the respondent continued working for the appellant. Her Honour was satisfied on the balance of probabilities that the motivating reason for the resignation was the respondent's illness. 37There is no doubt that an issue arises regarding the respondent's motivation for resigning. He was disappointed in not gaining a promotion with the appellant, which caused him to look for other employment. He became a director of S W Australian Transport on 4 July 2013, a little over a month after missing out on a promotion. A suspicion arises that the directorship was part of an agreement between the respondent and S W Australian Transport that once the respondent resigned his employment with the appellant he would take up employment with S W Australian Transport. 38What fuels the need to consider the respondent's real motive for resigning is the lack of satisfactory explanation as to why the respondent suddenly left his place of employment on 4 June 2013, the vagueness of his initial medical certificates from his GP that simply stated he was unfit to work because of "medical reasons", the fact that the respondent did not make a claim for workers' compensation, his failure to advise his employer he was suffering stress from excessive workload, his urgent need for cash (was that connected with obtaining a directorship with S W Australian Transport?) and his taking up employment with S W Australian Transport on 13 August 2013 and being paid salary on his first day of employment with that firm. 39There is also the fact that in his statement tendered in the first instance proceedings the respondent said he had indicated to the appellant's management at the time he handed in his resignation on 17 July 2013 that he was prepared to work out his two weeks' notice period. This was notwithstanding he had a medical certificate stating he was unfit for work until 31 July 2013. In cross-examination the respondent said, in effect, that what he said in his statement was incorrect and that he could not work because he had been certified unfit. The respondent's letter of resignation made no mention of being prepared to work out the period of notice. The respondent's evidence on this point was, therefore, conflicted 40The foregoing issues, which raise the question of whether there was a motive other than illness for resigning, are somewhat troubling. Nevertheless, they are matters that were drawn to the Acting CIM's attention by the appellant and her Honour recognised that there was evidence of another reason for resigning. Her Honour was satisfied on the balance of probabilities that the respondent's motivating reason for resigning was illness 41One must, however, weigh up the factors in the respondent's favour as the Acting CIM properly did. In that respect one cannot escape the fact that Mr Solyali was concerned about his workload prior to May 2013 and although he did not mention stress, nothing was done by the appellant about the respondent's concern with his excessive workload despite it being drawn to the appellant's attention. The appellant brought no evidence to say the concern was not raised with it or that steps had been taken to deal with the concern. The diagnosis of adjustment disorder was, according to Mr Fitzpatrick, caused in part by "a chronic highly responsible, fast-paced work role which has reached a critical point and affected his emotional functioning." Moreover, Mr Solyali complained that his anxiety and depression had been further exacerbated due to abusive phone calls from the Managing Director of the appellant and its Transport Manager. There was no contradictory evidence from the appellant. Mr Solyali's evidence was that he agreed to work for S W Australian Transport because it was a smaller firm and involved a less stressful workload. 42The appellant submitted that Mr Fitzpatrick's report should only have been used as evidence that the respondent was suffering an illness and not whether the illness caused the termination. It was the psychologist's opinion, however, that it was necessary for the respondent to remove himself from a stressful workplace environment if his illness was to be resolved. The Acting CIM was entitled to rely on that evidence. It was not challenged in the proceedings by the appellant in any way. 43For her Honour to have found otherwise than that the real reason for the respondent's resignation was illness, her Honour would need to reject the unchallenged evidence of the opinions of Mr Fitzpatrick and Dr Ktenas and the evidence of Mr Solyali and opt to draw an inference that the dominant reason was to take up other employment. Such a course would not have been reasonably open to her Honour. 44It was open to the Acting CIM to find that the respondent's illness caused him to terminate his employment even though a factor other than his illness was taken into account by the respondent in making his decision: see British Motor Corporation v Chance [1965] AR (NSW) 364 at 382 per Beattie and Perrignon JJ. 45The first ground of appeal fails. 46The second ground of appeal was that her Honour erred in giving weight to evidence that the appellant did not question the medical certificates and psychologist reports. Her Honour was not referring to the occasions when the respondent presented medical certificates and Mr Fitzpatrick's report to the appellant and the appellant's failure to reject the validity of those certificates and the report. It may be accepted that when an employee presents to the employer a medical certificate from a qualified medical practitioner certifying illness or injury, prima facie the certificate is to be accepted: Anderson v Crown Melbourne Ltd [2008] FMCA 152; (2008) 216 FLR 164 at [80]-[81]. However, I note in that case the Court found there were exceptional circumstances justifying the employer's decision to refuse to accept the validity of the certificate. 47In giving weight to the medical evidence the Acting CIM observed that it was unchallenged. By that her Honour meant that in the proceedings before her that evidence was not challenged. There was no attempt by the appellant to exclude the medical certificates and reports in the absence of the practitioners being called, no attempt to call contradictory medical evidence and no cross-examination challenging the validity of the certificates and reports other than to make the point that on at least two occasions the respondent's consultation with Mr Fitzpatrick was over the telephone. 48The second ground of appeal fails. 49The third and fourth grounds of appeal were that the Acting CIM erred in making findings of fact in relation to the respondent's workload and erred in not giving proper or any weight to the evidence that up until resignation the appellant had no knowledge that the respondent regarded his workload as causing stress or that the respondent was undergoing medical treatment for stress. 50Firstly, her Honour made no findings of fact, and was not required to make any findings of fact, regarding excessive workload and could not, therefore, have erred in that respect. In her reasons for decision, in referring to excessive workload, her Honour was merely recording the respondent's evidence. Secondly, the weight of the evidence was that the respondent had made requests for additional staff to assist him in his role. That was the respondent's evidence and it was not contradicted by any evidence adduced by the appellant. Thirdly, although the employer was not aware that the respondent's excessive workload was causing him stress, it was not relevant to the question of whether or not the reason for resigning was genuinely on account of illness. That the employer was not aware and, therefore, unable to take remedial steps to address the cause of the stress does not, of itself, negative the fact, established on the evidence, that the respondent was ill and the illness constituted a genuine reason for resigning his employment. 51The third and fourth grounds of appeal fail. 52The fifth and eighth grounds of appeal were that the Acting CIM erred in not giving any or any proper weight to evidence that the respondent's claimed illness had not been diagnosed until just prior to his resignation and that Mr Fitzpatrick assessed the illness over the telephone. 53The respondent's illness was diagnosed initially by Dr Ktenas in early June 2013, some six weeks before he tendered his resignation. Dr Ktenas had diagnosed "Adjustment Disorder with Mixed Depressed and Anxious mood consistent with DSM-V". Mr Fitzpatrick later agreed with that diagnosis. Thus, it is not correct to contend the diagnosis was made just prior to the respondent's resignation. 54As for the contention that Mr Fitzpatrick's diagnoses were made over the telephone and, therefore, should have carried no weight in her Honour's consideration, Mr Fitzpatrick saw Mr Solyali in face to face consultations on two occasions, namely, 27 June 2013 and 3 July 2013. Furthermore, any challenge to the veracity of the medical evidence and validity of Mr Fitzpatrick's report was not undertaken. If the appellant wished to challenge, for example, Mr Fitzpatrick's opinions gathered through a telephone conversation with the respondent, or how Mr Fitzpatrick arrived at the opinion that the employer did not appear to be offering any resolution to the respondent's problems, the appropriate course was to either object to the reports being tendered into evidence in the absence of the author of the reports being available for cross-examination and/or call its own expert evidence. That was not done. 55The task of the Court on appeal is to determine whether the Acting CIM erred, including in her Honour's treatment of the evidence. There was no evidence, for example, that Mr Fitzpatrick could not have formed valid opinions about the respondent's psychological health over the telephone or that it was "glaringly improbable" he could do so. There was no error. 56Grounds 5 and 8 of the appeal fail. 57Ground 6 of the appeal asserted that the Acting CIM erred in not giving any or any proper weight to evidence that just prior to his resignation the respondent had unsuccessfully sought a promotion; that he was disappointed in not being promoted and began applying for any job. It was submitted that her Honour failed to take into account that there was a strong inference that prior to commencing sick leave the respondent had already set himself on a path to seeking alternative employment. 58Perhaps the reason why the Acting CIM did not give any weight to evidence that just prior to his resignation the respondent had unsuccessfully sought a promotion, was because the appellant did not rely on this fact in its submissions. The appellant submitted the "sole reason" why the respondent resigned was in order for him to take up employment with S W Australian Transport in respect of which he was a director. Not having run the argument at first instance, the appellant cannot put a different case on appeal: Coulton v Holcombe [1986] HCA 33; (1986) 162 CLR 1 at 8. 59In any event, it may have been that a reason for taking up employment with S W Australian Transport was the respondent's disappointment with failing to win a promotion. However, the Acting CIM found on the balance of probabilities that illness was a genuine reason for resigning. That finding was open to her Honour. 60Ground 6 of the appeal fails. 61Grounds 9 and 10 of the appeal relate to the question of costs. The appellant submitted there was a significant body of case law that provides costs orders will not be granted in matters dealt with in the small claims jurisdiction of the Chief Industrial Magistrate's Court: Fiona Canham v 002y Wood Films Pty Ltd T/As Segers Realty [2004] NSWCIMC 47; Pamela Rowles v Combined Packaging Co Pty Ltd [2005] NSWCIMC 82; Roma Marshall v Havenwax Pty Ltd Trading As Sos Visiting Nursing Service Home Help and Cleaning Agency [2005] NSWCIMC 116; Lisa Maree De Costa v Rhonda Wark T/a: Earth Works Real Estate [2006] NSWCIMC 7; Colin Mooney v Northern Group (Aust) Pty Ltd [2006] NSWCIMC 33. 62The appellant submitted that a departure from the position to not award legal costs in the small claims jurisdiction would have adverse consequences for the quick, cheap, informal and effective resolution of small claims disputes. Further, that had the respondent wished to recover his legal costs he could have, from the outset, elected to proceed with the matter under s 365 of the Act and not under s 379. This was somewhat inconsistent with the appellant's indication in its letter rejecting an offer of compromise (which I will come to shortly) that the appellant would be seeking costs before the Acting CIM. 63The appellant also submitted cl 43B of the Industrial Relations (General) Regulation 2001 (the Regulation) provides that for the purposes of s 379(3)(b) of the Act, the maximum amount payable on a small claims application is $20,000.00. In her decision, the Acting CIM ordered the appellant to pay the respondent the amount of $10,139.23. Subsequently, the respondent's counsel made an application seeking indemnity costs in the amount of $10,400.00 which, it was submitted, was beyond the jurisdiction of the Court. It was submitted that: The Magistrate ultimately made an order that indemnity costs are to be paid by the appellant to the respondent as agreed or assessed. It should be noted that the decision on costs was an ex tempore decision made without the benefit of proper and considered submissions. The respondent's solicitor subsequently furnished a bill of costs in the amount of $16,195.34 for professional costs and disbursements. The claim for costs is unreasonable as it is disproportionate to the small quantum of the respondent's claim and the fact that the issues in dispute were fairly straightforward. Importantly, the order had the effect of requiring the appellant to pay a total amount of $26,334.57, which is prima facie in excess of the maximum amount that an employer can be ordered to pay under section 379 of the Act. By electing to proceed in accordance with the small claims procedure, the respondent had waived any entitlement to be awarded an amount in excess of $20,000.00 and there was no jurisdictional basis for any order which exceeded that amount. 64The respondent submitted the Act permitted the Chief Industrial Magistrates Court to make an order for costs: s 373; cl 15.7(1) of the Industrial Relations Commission Rules 2009 (the Commission Rules). It was further submitted: The costs were sought by the legal representatives for the respondent on the day Her Honour delivered the reasons for judgment and made the orders, such an application being made orally. The appellant addressed the court on costs, and did not seek that the costs application be adjourned (on the basis that it was not ready to meet the application or on any other basis) nor that it be permitted to make further submissions on the issue. The issue of the Court's jurisdiction was not raised below. The order made by Her Honour was for "Indemnity costs to be paid by the respondent to the applicant as agreed or assessed". Such an order must be understood within the jurisdiction of the court, and cannot be said to be an order exceeding the jurisdiction. The order sought by the respondent was for payment of $10,400, an order which was not made. It can only be implied that the amount of costs which the court ordered would therefore be assessed or agreed as being below $10,400, and indeed within the Court's jurisdiction. ... An order for payment of an amount exceeding the jurisdiction of the Court cannot be made. However, the order made by the learned Magistrate did not exceed such jurisdiction. 65It would appear that the Acting CIM decided to deal with the respondent's long service leave claim as a small claims application under s 379 of the Act. Section 379, which is in Pt 2 of Ch 7 of the Act, provides: 379 Small claims procedure (1) A person who makes an application to an industrial court for an order under this Part may request that the application be dealt with under this section. (2) An application that the industrial court decides to deal with under this section is called a small claims application. (3) The maximum amount that the industrial court may order an employer to pay on a small claims application in respect of any one employee is: (a) except as provided by paragraph (b)-$10,000, or (b) if some other amount is prescribed by the regulations for the purposes of this section-that other amount. (4) The industrial court is not bound by the rules of evidence when dealing with a small claims application, but may inform itself of any matter in such manner as the court thinks fit. (5) A party to proceedings on a small claims application may be represented by an agent, but is not entitled to be represented by an agent who is an Australian legal practitioner unless the industrial court so approves. That approval is not to be given unless: (a) all parties to the proceedings agree, and (b) the industrial court is satisfied that the parties (other than the party who applies for approval) or any of them will not be disadvantaged. (6) The approval of the industrial court to be represented by an Australian legal practitioner is not required if the practitioner: (a) represents a corporation and is an officer of the corporation within the meaning of the Corporations Act 2001 of the Commonwealth, or (b) represents an owners corporation constituted under the Strata Schemes Management Act 1996 and is one of the proprietors or lessees constituting the owners corporation, or (c) represents a member of an industrial organisation and is an officer or employee of the organisation, or (d) represents a member of a State peak council and is an officer or employee of that council. (7) The approval of the industrial court to be represented by an Australian legal practitioner may be given subject to such conditions as the court considers reasonable to ensure that any other party to the proceedings is not disadvantaged by the practitioner appearing in the proceedings. (8) A contravention of subsections (5)-(7) does not invalidate the proceedings or any order made in those proceedings. 66An "industrial court" is defined in s 364 (in Pt 2 of Ch 7) of the Act to include "the Local Court constituted specially for the purposes of this Part by an Industrial Magistrate sitting alone." 67For the purposes of s 379(3)(b) the maximum amount that the Industrial Court may order an employer to pay on a small claims application in respect of any one employee is $20,000.00 according to cl 43B of the Regulation. 68Section 383 of the Act, which is to be found in Pt 3 of Ch 7, provides: 383 Procedure (1) The Criminal Procedure Act 1986 and other Acts regulating the procedure before the Local Court (but not the Civil Procedure Act 2005) apply to the exercise of any jurisdiction by the Chief Industrial Magistrate or other Industrial Magistrate, except as provided by the regulations under this section. (2) The regulations may make provision for or with respect to procedure and other matters relating to the exercise of any such jurisdiction of the Chief Industrial Magistrate or other Industrial Magistrate that does not concern proceedings for an offence. 69Clause 43 of the Regulation provides: 43 Industrial Magistrate-civil procedure (1) For the purposes of section 383 of the Act, the provisions of the Act, the regulations and rules of the Commission as to the practice and procedure of the Industrial Court (except in criminal proceedings) apply, with all necessary modifications, to proceedings before the Chief Industrial Magistrate or other Industrial Magistrate. (2) Without limiting subclause (1), the Chief Industrial Magistrate or other Industrial Magistrate may hear evidence orally or by affidavit and may hear evidence whether or not notice to call the evidence has been given. However, if the interests of justice so require, a witness is to be called to give oral evidence instead of evidence by affidavit. (3) This clause does not apply to proceedings for an offence or to proceedings under section 357 of the Act for a civil penalty for a contravention of an industrial instrument. 70It follows from cl 43 of the Regulation that, in relation to costs, it is the Act, Regulation and the Commission Rules that apply. The Civil Procedure Act 2005 and the Uniform Civil Procedure Rules 2005 do not apply. 71Section 181 of the Act deals with the Commission's powers relating to costs: 181 Costs (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 11 of Part 3.2 of the Legal Profession Act 2004 or on any other basis. (2) However, the Commission when it is not in Court Session may award costs only in the following cases: (a) the Commission may award costs against an applicant if it considers that the application to it was frivolous or vexatious, or (b) the Commission may award costs against a party to proceedings who, in the opinion of the Commission, instituted proceedings without reasonable cause, or (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 (c1) the Commission may award costs against an industrial agent representing an applicant or employer in proceedings under Part 6 of Chapter 2 if: (i) the industrial agent fails to file a certificate as required by section 90A, or (ii) the Commission finds that the industrial agent has filed a certificate under that section certifying that the agent has reasonable grounds for believing, on the basis of provable facts, that the applicant's claim or employer's response to the claim had reasonable prospects of success when the agent did not have reasonable grounds for believing, on the basis of provable facts, that it had reasonable prospects of success, or (d) the Commission may award costs in proceedings for a breach of an industrial instrument or the recovery of money under Chapter 7, as provided by sections 357 and 373. (3) The Commission in Court Session may not award costs in proceedings for a contravention of a dispute order or in proceedings under Division 2 of Part 4 of Chapter 5 (Rules of industrial organisations). (3A) Despite subsection (1), the Commission may not award costs in proceedings under Part 7 of Chapter 2. Note. This subsection does not prevent the award of costs in appeals relating to questions of law in relation to public sector promotional and disciplinary matters under section 197B. (4) In this section, costs includes: (a) costs of or incidental to proceedings in the Commission, and (b) in the case of an appeal to the Commission, the costs of or incidental to the proceedings giving rise to the appeal, as well as the costs of or incidental to the appeal. 72Part 15 - Small Claims Applications, of the Commission Rules applies to proceedings on an application for the recovery of money under Pt 2 of Ch 7 of the Act in respect of which a request has been made for the application to be dealt with under s 379 of the Act as a small claims application. Rule 15.7 provides: 15.7 Costs (1) The Industrial Court may make orders for the payment of costs in any proceedings, including proceedings that are adjourned, discontinued or dismissed. (2) The amounts that the Industrial Court may award for such costs include not only the fixed costs prescribed under the Legal Profession Act 2004 but also any disbursements properly incurred in relation to the matters for which those costs are prescribed. (3) Despite subrules (1) and (2), the maximum costs that may be awarded to a party: (a) if proceedings are discontinued or dismissed, whether at a conciliation or at a hearing, or (b) if proceedings are adjourned as a consequence of a party's default or neglect, including a party's failure to comply with a direction of the Industrial Court, or (c) if proceedings on a motion are heard by the Industrial Court, or (d) if judgment is given after a hearing of proceedings, are the costs allowable in accordance with the regulations under the Legal Profession Act 2004. 73It is clear that the Acting CIM had power to award costs and there is nothing in the legislation precluding her Honour from awarding costs on an indemnity basis. Indeed, costs are entirely within the discretion of the Commission: see 181(1) of the Act. As I noted earlier, the respondent's offer of compromise was purportedly made pursuant to the Uniform Civil Procedure Rules. Those Rules have no application. In the alternative, counsel for the respondent submitted on appeal the offer should be regarded as a Calderbank offer (Calderbank v Calderbank [1976] Fam Law 93; [1975] All ER 333). Whether it was a Calderbank offer or not nothing in the Act, Regulation or Commission Rules requires an offer of compromise to be in any particular form. When the Court is asked to exercise its discretion as to costs it is entitled to look at the conduct of the parties throughout the proceedings including conduct relating to settlement offers. In Old v McInnes and Hodgkinson [2011] NSWCA 410, Beazley JA stated at [28]-[34]: [28] The court encourages the settlement of matters for reasons both of public policy and private interest. [29] In Computer Machinery Co Ltd v Drescher [1983] 1 WLR 1379; [1983] 3 All ER 153, Megarry VC stated at 1383: "Whether an offer is made 'without prejudice' or 'without prejudice save as to costs,' the courts ought to enforce the terms on which the offer is made so as to encourage compromises and shorten litigation. The latter form of offer has the added advantage of preventing the offer from being inadmissible on costs, thereby assisting the court towards justice in making the order as to costs." [30] This approach has been judicially endorsed by this Court on innumerable occasions. In Leichhardt Municipal Council v Green [2004] NSWCA 341 in referring to Calderbank offers, Santow JA stated, at [17]: "... the practice of Calderbank letters is allowed because it is thought to facilitate the public policy objective of providing an incentive for the disputants to end their litigation as soon as possible. Furthermore, however, it can be seen as also influenced by the related public policy of discouraging wasteful and unreasonable behaviour by litigants." [31] See also South Eastern Sydney Area Health Service v King [2006] NSWCA 2 where Hunt AJA (Mason P and McColl JA agreeing) stated, at [83], that the purpose of offers of compromise was: "... to encourage the proper compromise of litigation, in the private interests of the litigants and in the public interest of the prompt and economical disposal of litigation." See also Elite Protective Personnel Pty Ltd v Salmon [2007] NSWCA 373; Monie v Commonwealth of Australia (No 2) [2008] NSWCA 15. [32] The significance of a Calderbank offer is that it provides a readily recognisable basis for the court to exercise its costs discretion in a form which may result in a more favourable costs outcome than would have been the case had UCPR, r 42.1 applied: see SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 at [37]; Jones v Bradley (No 2); Commonwealth of Australia v Gretton [2008] NSWCA 117 at [40]; [114]. However, the Court's discretion is not confined to cases which are 'strictly' characterised or expressly stated to be Calderbank offers. [33] In Commonwealth of Australia v Gretton Hodgson JA stated, at [121]: "In my opinion, underlying both the general rule that costs follow the event, and the qualifications to that rule, is the idea that costs should be paid in a way that is fair, having regard to what the court considers to be the responsibility of each party for the incurring of the costs. Costs follow the event generally because, if a plaintiff wins, the incurring of costs was the defendant's responsibility because the plaintiff was caused to incur costs by the defendant's failure otherwise to accord to the plaintiff that to which the plaintiff was entitled; while if a defendant wins, the defendant was caused to incur costs in resisting a claim for something to which the plaintiff was not entitled: cf Ohn v Walton (1995) 36 NSWLR 77 at 79 per Gleeson CJ. Departures from the general rule that costs follow the event are broadly based on a similar approach." (emphasis added) [34] Given the court's discretionary power as to costs and the important public policy considerations and the private interests of parties in settling litigation, the fact that a failed Rules offer of compromise is not strictly conformable with the usual Calderbank offer, does not preclude the court from considering whether it should exercise its discretion as to costs so as to make some other order than costs follow the event, in accordance with UCPR, r 42.1. Rather, when the court is asked to exercise its discretion as to costs, it is entitled to look at the conduct of the parties throughout the proceedings, including attempts made at settlement and the terms of the failed UCPR offer. 74Apparently the offer of compromise was made on 5 March 2014 in the sum of $8,500.00, which was less than the amount ordered to be paid by the Acting CIM ($10,139.23). The Appellant's agent rejected the offer of compromise. 75The only basis upon which the indemnity costs order was opposed at first instance was that the respondent had withdrawn its claim for payment in lieu of notice. Her Honour found that was not a basis upon which to refuse indemnity costs. 76On appeal the appellant relied on what it contended was a "significant body of case law" that it submitted showed costs orders will not be granted in matters dealt with in the small claims jurisdiction of the Chief Industrial Magistrate's Court. The appellant also relied on the proposition that there was prohibition on legal representation of parties in small claims applications. Reference was made to s 379(5) of the Act, which precludes a party to a small claims application being represented by an agent who is an Australian legal practitioner without leave of the court. Section 379(5) provides: (5) A party to proceedings on a small claims application may be represented by an agent, but is not entitled to be represented by an agent who is an Australian legal practitioner unless the industrial court so approves. That approval is not to be given unless: (a) all parties to the proceedings agree, and (b) the industrial court is satisfied that the parties (other than the party who applies for approval) or any of them will not be disadvantaged. 77I presume the appellant's point regarding legal representation was that "the small claims jurisdiction was established in the industrial jurisdiction to provide an expeditious way of allowing persons to bring small industrial claims before this court without the need for legal representation": Bronwyn Aileen Loudon v Keith Matheson Proprietary Limited [2002] NSWCIMC 87. Further, that in limiting representation by counsel the legislature's intention in having a small claims jurisdiction was to keep costs to a minimum. Therefore, as I understand the appellant's submission, the Acting CIM should not have allowed the respondent to have legal representation, but having done so should not have awarded legal costs against the appellant. 78I cannot see, in the record of proceedings before the Acting CIM, any objection taken by the appellant to the appearance of counsel for the respondent. It could be argued that in acquiescing to counsel's appearance, the appellant constructively consented to such appearance. I also notice the issue of legal representation was not taken up, as it should have been, by the Acting CIM, perhaps because the issue was not drawn to her Honour's attention. In any event, s 379(8) of the Act provides that a contravention of s 379(5) does not invalidate the proceedings or any order made in those proceedings. 79I am satisfied that the appellant has established on the appeal that the practice of the Chief Industrial Magistrate's Court has been to refrain from awarding professional legal costs except in exceptional cases. Her Honour was acting in the position of CIM and it would not be surprising that her Honour may not have been aware of the practice. The Acting CIM certainly did not receive any assistance from the parties in that respect. 80However, whilst comity is important it cannot prevail where the legislation provides a wide discretion to the Court to deal with costs and the Court has a reasonable and proper basis to make a costs order, even an order for indemnity costs. 81That raises the question of the basis for making the costs order. The purpose of offers of compromise is "to encourage the proper compromise of litigation, in the private interests of the litigants and in the public interest of the prompt and economical disposal of litigation": South Eastern Sydney Area Health Service v King [2006] NSWCA 2 at [83]. The respondent made what could only be regarded as a genuine attempt to compromise by seeking agreement to an amount of $8,500.00 when what was owed to the respondent for pro rata long service leave was calculated to be $10,139.23. The appellant declined to accept the offer in circumstances where its case for resisting an order was not strong, particularly given that the appellant chose not to challenge the medical and psychological evidence. 82On the other hand, the respondent was represented by counsel and the appellant was not. Notwithstanding the fact that the issue of legal representation was not raised before her Honour, s 379 required her Honour to consider whether the respondent should be allowed legal representation and in doing so to consider whether any disadvantage would arise if approval was given for counsel to appear. I note that the agent representing the appellant has many years' experience in industrial relations generally. However, he is not an Australian legal practitioner and the appellant's handling of the question of costs revealed to me a lack of knowledge or understanding of the relevant issues. To that extent it might be concluded the appellant was at a disadvantage. 83Additionally, in my view the reason why legal representation is discouraged under the legislation is that it adds significantly to costs in a jurisdiction that is designed to deal with small claims in a quick and cheap way. 84Thus, my concern in this appeal is that if I do not disturb the Acting CIM's orders regarding costs, it may be seen as an endorsement of the award of costs becoming the norm when for many years successive CIM's have resisted awarding legal professional costs other than in exceptional circumstances. On the other hand, if I did disturb her Honour's orders, it might be seen as undermining the purpose of offers of compromise. 85I propose to implement my own compromise and that is to order costs on a party/party basis in relation to the proceedings at first instance. I only do that because I think it would be unfair to order indemnity costs where the appellant was at some disadvantage given the respondent was represented by counsel and in light of the Acting CIM's error in failing to address the question of legal representation. However, the respondent should be entitled to some indemnification of costs, especially given there was a genuine attempt by the respondent to compromise and an unreasonable rejection by the appellant of the compromise offer. 86The appellant made another submission regarding costs noting that the maximum amount payable on a small claims application is $20,000. The appellant submitted (footnotes omitted): In her decision, Magistrate Wahlquist ordered the appellant to pay the respondent the amount of $10,139.23. Magistrate Wahlquist did not initially make an order as to costs. Subsequently, the respondent's barrister made an application seeking indemnity costs in the amount of $10,400.00, which was outside the jurisdiction of the Court. The Magistrate ultimately made an order that indemnity costs are to be paid by the appellant to the respondent as agreed or assessed. It should be noted that the decision on costs was an ex tempore decision made without the benefit of proper and considered submissions. The respondent's solicitor subsequently furnished a bill of costs in the amount of $16,195.34 for professional costs and disbursements. The claim for costs is unreasonable as it is disproportionate to the small quantum of the respondent's claim and the fact that the issues in dispute were fairly straightforward. Importantly, the order had the effect of requiring the appellant to pay a total amount of $26,334.57, which is prima facie in excess of the maximum amount that an employer can be ordered to pay under section 379 of the Act. By electing to proceed in accordance with the small claims procedure, the respondent had waived any entitlement to be awarded an amount in excess of $20,000.00 and there was no jurisdictional basis for any order which exceeded that amount. 87If costs were to be assessed at an amount of $16,195.34, as the respondent claimed, the question arises whether costs are to be added to the amount of $10,139.23 in determining whether the jurisdictional limit of $20,000 has been exceeded. If costs are to be included, the effect of an order that costs are to be as agreed or assessed would be to exceed the maximum amount payable under cl 43B of the Regulation and it is arguable the orders would be ultra vires. 88The respondent submitted that costs are not subject to the jurisdictional limit. No authority was cited and the respondent relied on the construction of s 179(1)(2) and (3) of the Act: (1) A person who makes an application to an industrial court for an order under this Part may request that the application be dealt with under this section. (2) An application that the industrial court decides to deal with under this section is called a small claims application. (3) The maximum amount that the industrial court may order an employer to pay on a small claims application in respect of any one employee is: (a) except as provided by paragraph (b)-$10,000, or (b) if some other amount is prescribed by the regulations for the purposes of this section-that other amount. 89It was submitted that an order to pay "on a small claims application" was not an order in relation to costs, which was a separate matter to the application. 90My opinion is that costs are not subject to the jurisdictional limit. The reference in s 379(1) to an "application to an industrial court for an order under this Part" requires consideration of ss 364, 365 and 369 of the Act, which are in the following terms: 364 Definitions (1) In this Part: amount payable under an industrial instrument, includes: (a) remuneration payable to an employee for work done where the industrial instrument fixes the rate or amount of the remuneration, or (b) commission or other amount payable to a person in the circumstances specified in the industrial instrument (other than remuneration for work done), or (c) an amount for which an employee is required under the industrial instrument to be re-imbursed or compensated for an expense incurred or loss sustained by the employee. ... (2) In this Part, a reference to an industrial instrument and to an amount payable under the industrial instrument includes a reference to: (a) a permit under section 125 and the amount that may be paid to the employee in accordance with the permit, and (b) section 13 of the Annual Holidays Act 1944, section 12 of the Long Service Leave Act 1955 and section 12 of the Long Service Leave (Metalliferous Mining Industry) Act 1963 and an amount payable to the employee under any such provision. 365 Order for recovery of remuneration and other amounts payable under industrial instrument An industrial court may, on application, order an employer to pay any amount payable under an industrial instrument that remains unpaid to the person to whom it is payable. ... 369 Application for order (1) An application for an order under this Part for the payment of money may be made: (a) by the person to whom the money is payable, or (b) with the written consent and on behalf of that person-by an inspector, by an officer of a Government Department or by an officer of an industrial organisation concerned in the industry to which the proceedings relate. (2) A single application may be made by a person for 2 or more orders against the employer. A single application may also be made by an officer of an industrial organisation for orders against an employer on behalf of 2 or more persons. (3) An application for an order may only be made if the money became due within the period of 6 years immediately before the application was made. 91Section 364(2), it will be noted, defines a reference to an industrial instrument and to an amount payable under the industrial instrument as including a reference to s 12 of the Long Service Leave Act. Section 12(1) of that Act provides: 12 Recovery of long service leave pay (1) Any worker may apply to the Local Court, or to the Industrial Relations Commission in Court Session, for an order directing the employer to pay to the worker the full amount of any payment which has become due to the worker under this Act at any time during the period of 6 years immediately preceding the date of the application but not earlier than 2 years before the date of assent to the Long Service Leave (Amendment) Act 1980. The Local Court or Industrial Relations Commission in Court Session may make any order it thinks just in the matter and may award costs to either party, and assess the amount of such costs. (I do not understand the application for recovery of the pro rata long service leave to have been made under s 12 of the Long Service Leave Act, but rather under Pt 2 of Ch 7 of the Act and, in particular, s 379.) 92Thus, an application for an order under Pt 2 of Ch 7 of the Act is, relevantly, an application for an "amount payable" which includes "remuneration payable to an employee for work done where the industrial instrument fixes the rate or amount of the remuneration", which in turn includes "the full amount of any payment which has become due to the worker under..." the Long Service Leave Act: s 364(2). The Court may order "an employer to pay any amount payable": s365. An application for an order for an "amount payable" may be made as a small claims application: s 379(1) and (2). The maximum amount that the industrial court may order an employer to pay on a small claims application, which is for an "amount payable", is $20,000: s379(3) and cl 43B of the Regulation. 93The "amount payable" that may be ordered in this case was the amount of payment that had become due to the respondent under s 4(2)(a)(iii) of the Long Service Leave Act. The "amount payable" is not defined in the Act as including costs: it is, in this case, limited to the amount of pro rata long service leave. Accordingly, the maximum amount that may be ordered to be paid on the respondent's application does not require costs to be taken into account in determining the maximum amount. Costs are a separate consideration. This construction is reinforced by the second paragraph in s 12 of the Long Service Leave Act, which provides: The Local Court or Industrial Relations Commission in Court Session may make any order it thinks just in the matter and may award costs to either party, and assess the amount of such costs.

Stockwell International Pty Ltd v Solyali

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