Swiegers v Commonwealth Scientific and Industrial Research Organisation

The defendant's submissions

1. The defendant filed and served their submissions in reply and the affidavit of Jason Randall Noakes sworn 22 February 2016.
2. The defendant rejected the plaintiff's submission that the defendant's unsuccessful defences added significant costs by way of evidence and argument and increased the length of the trial. The defendant submitted that the vast majority of the evidence was directed towards the allegation of mala fides made by the plaintiff against several of the defendant's witnesses. The unsuccessful defences pleaded by the defendant were justifiable and, by contrast, minor points in the context of the proceedings as a whole. The defendant estimated that these issues would have occupied no more than 2-3% of the proceedings.
3. The defendant submitted that, on its face, the plaintiff did appear to accept the early cessation payment in exchange for not challenging the redundancy and thereafter had done the opposite by bringing the proceedings. That construction was primarily rejected because of reliance on an extrinsic document which was only considered by the plaintiff's counsel in closing submissions.
4. The defendant cited Griffith v Australian Broadcasting Corporation (No 2) [2011] NSWCA 145 ("Griffith"), Hodgson JA (Basten JA and McClelland CJ at CL agreeing) at [19]-[20] and argued that the principles favouring apportionment may be more readily applied in the case of a successful plaintiff rather than a successful defendant.
5. It was the defendant's contention that the Court should not apportion costs because the plaintiff's successes in relation to these issues did not ultimately sound liability in his favour.
6. The defendant argued that there was no basis for apportioning the costs of Mr McRae's expert evidence. The defendant only engaged an expert on this issue because of the plaintiff's unfounded assertion that he would work for the defendant until the age of 65. Mr McRae's evidence involved a reasonable degree of mathematical complexity and the defendant contended it should not be punished because Mr McRae ultimately accepted the assumptions in the plaintiff's expert evidence in accordance with his duty to the Court to make concessions where appropriate. No case management orders were sought nor made for the experts to confer prior to the hearing. The defendant submitted that no further costs order was required to do justice between the parties, particularly due to the costs order made by the Court on 23 April 2015.

Further submissions by the plaintiff

1. The plaintiff emphasised in reply that apportionment was a matter of discretion for the Court and that the Court should do what was fair in all the circumstances of the proceedings.
2. The plaintiff claimed that it should have been apparent to the defendant that it had no grounds to successfully plead the early cessation, estoppel, waiver and/or election issues. The plaintiff rejected the defendant's submission that the issues upon which it was unsuccessful would have occupied no more 2-3% of the case and argued that the issues involved complex considerations of fact and law and required significant preparation of written and oral submissions, especially concerning the secondment issue.
3. As to the Court's judgment that the plaintiff had not established future loss, it was put that this should not be characterised as the plaintiff knowing that he would not suffer any loss.

Consideration

1. The general rule is that costs follow the event unless it appears to the court that some other order should be made as to the whole or other part of the costs: Uniform Civil Procedure Rules 2005 (NSW) (UCPR), r 42.1.
2. I accept that where a successful party fails on particular issues it may be reasonable in the circumstances that the successful party not only be deprived of its costs on those issues, but be ordered to pay the other party's costs on that portion of the case on which it failed. Such an order may be appropriate where the issue lost by the unsuccessful party took up a significant part of the proceedings by way of evidence or argument, and was severable. Generally, the court will take a relatively broad brush approach - largely as a matter of impression and evaluation where there is a mixed outcome in the proceedings - and costs should be apportioned as between different issues: Elite Protective Personnel Pty Ltd v Salmon (No 2) [2007] NSWCA 373 at [11]. As Harrison J observed in King v Benecke [2014] NSWSC 957 at [37]: "The principles are not in dispute and the decisions in the cases are generally fact specific. They support the notion that except in special circumstances, a court should not attempt to differentiate between issues on which a party succeeded and those on which it failed in substitution for application of the usual rule. A differential costs order is more likely to follow in the exercise of the costs discretion where the issue or issues on which the otherwise successful party lost was "clearly dominant" or "separable". However, a differential costs order does not automatically follow if the exception is available. The exercise of the Court's discretion as to costs requires an assessment of what is fair and reasonable in all of the circumstances…"
3. In Firebird Global Master Fund II Ltd v Republic of Nauru (No 2) (2015) 327 ALR 192; [2015] HCA 53 ("Firebird Global Master Fund II Ltd"), the High Court (French CJ, Kiefel, Nettle and Gordon JJ) said at [6]: "In any event, the preferable approach in this case is the one usually taken, that costs should follow the outcome of the appeal. This is not a case where it may be said that the event of success is contestable, by reference to how separate issues have been determined. There are no special circumstances to warrant a departure from the general rule, and good reasons not to encourage applications regarding costs on an issue-by-issue basis, involving apportionments based on degrees of difficulty of issues, time taken to argue them and the like. The fact that Firebird retains its registration is immaterial to the overall outcome of this appeal."
4. There was some discussion in oral argument as to whether the High Court in Firebird Global Master Fund II Ltd had enunciated a new test for departure from the general rule that costs follow the event, but I do not consider that the High Court has. Harrison J, in the passage quoted at [20] above, refers to special circumstances. In any event, I do not think that it is necessary to further consider this issue.
5. In the present case, the plaintiff succeeded on the four issues enumerated in [4] above. All of those issues were severable. None of those issues was raised unreasonably, but that does not determine a separate costs issue: Permanent Trustee Australia Ltd. However, not one of those issues can be described as dominant; not one occupied a significant amount of time in the trial, either in argument or evidence.
6. The focus of the case was whether the defendant's decision to terminate the plaintiff's employment was genuine. This was the dominant issue both in evidence and in argument. An assessment of what is fair and reasonable does not warrant a departure from the general rule as to costs.
7. My opinion that a differential costs order should not be made is strengthened by the total rejection of the plaintiff's claim. I concluded in Swiegers (No 2) that even if the plaintiff had succeeded on liability, no damages would have been awarded as he failed to establish any future loss. These circumstances provide additional support for the view that it would be appropriate for the defendant to have its costs associated with reasonable defences, although four of them were unsuccessful. Simply put, the plaintiff should not have commenced these proceedings. They were principally founded upon an unwarranted belief that his termination by the CSIRO was the product of ill will towards him by the CSIRO officers who were the subject of the Whistleblower Complaint.
8. In my view, this answers the plaintiff's argument that it should not bear the costs of the preparation of their expert evidence concerning superannuation and the defendant's costs on this issue, including Mr McRae's reports. True it is that Mr McRae's position changed and was not ultimately relied upon. On 23 April 2015, I made an order that any additional costs incurred by the plaintiff as a result of Mr McRae having to prepare the report (Ex 19), being required for further cross-examination and the plaintiff to consult Mr Beames was to be borne by the defendant. However, an assessment of what is fair and reasonable does not require further differential costs orders being made on this issue. After all, the defendant should not have been placed in the position that it was obliged to defend the plaintiff's claim for future loss of superannuation.
9. I conclude that this is not an appropriate case to depart from the general rule that costs follow the event. The plaintiff is to pay the defendant's costs. However, the orders for costs that have been previously made are confirmed and not changed in any way by this order.

The defendant's submissions

1. The defendant sought orders for its costs on an indemnity basis, including any reserve costs, on a number of alternate bases: 1. In reliance on one or more offers of compromise made under UCPR, r 20.26 and the consequential operation of UCPR, r 42.15A. 2. By reason of the plaintiff's unreasonable rejection of other offers of settlement (Calderbank offers). 3. By reason of the plaintiff's unreasonable conduct in the proceeding and his allegations of mala fides and conspiracy, which he must have known, or reasonably ought to have known, were false and/or unsustainable.
2. Four separate offers were made to the plaintiff: 1. 17 September 2013: judgment for the defendant; and no order for the payment of costs. 2. 15 July 2014: payment to the plaintiff of $20,000; proceedings dismissed; and the defendant to pay the plaintiff's costs as agreed or assessed up to 15 July 2014. 3. 19 August 2014: payment to the plaintiff of $40,000; proceedings dismissed; and the defendant to pay the plaintiff's costs as agreed or assessed up to 15 July 2014. 4. 21 November 2014: payment to the plaintiff of $100,000; proceedings dismissed; and the defendant to pay the plaintiff's party/party costs as agreed or assessed up to 15 July 2014 (with certain carve outs).
3. These offers were annexed to the affidavit of Mr Noakes. Each offer contained an offer of compromise stated to be made in accordance with UCPR, r 20.26 and an accompanying Calderbank style letter, to be considered if the offer of compromise was held not to comply with the UCPR. None of these offers were accepted.
4. The defendant submitted that the following was relevant to the offers: 1. At the time that all but the last offer was made, the plaintiff's entire case rested upon the 'Sting' allegation within the broader allegation that the defendant acted mala fides in terminating his employment by way of purported redundancy. 2. At all times the plaintiff knew that he had created the 'Sting' evidence himself, and altered at least one other document to hide this fact. 3. The plaintiff knew or ought to have known that he would not have worked for the defendant past January 2010.
5. The defendant contended that the 17 September 2013 offer contained a genuine element of compromise in that it offered to forego substantial costs incurred by that point of the litigation. The affidavit of Mr Noakes set out the 'significant' amount of work the defendant had undertaken to progress the proceeding prior to this offer being made.
6. Another submission was that the 2014 offers were all genuine offers of compromise which included a payment of a not-insignificant monetary sum to the plaintiff in circumstances where he would not have been entitled to an award of damages.
7. The defendant submitted that they were entitled to indemnity costs under UCPR, r 42.15A unless the plaintiff satisfied the Court that "exceptional circumstances" existed, which the defendant said did not exist.
8. In the alternative, the defendant submitted that the offers were offers of settlement made by way of Calderbank letter.
9. The defendant argued that the case was not simply a contract case but a conspiracy case, and that all roads led to the 'Sting' meeting. The defendant pointed to the statements of claim and the continued reference to the key players subject to the Whistleblower Complaint having a meeting via the subject line of 'Sting'. The defendant put to the Court that the plaintiff's claim was fundamentally based on a falsified document which strengthened the defendant's argument for indemnity costs from the date of the first offer.

The plaintiff's submissions

1. The plaintiff submitted that the defendant's offer dated 17 September 2013 could not be considered a real and genuine offer of compromise for the following reasons: 1. The offer was made at a very early point in the proceedings, involved the dismissal of proceedings without payment to the plaintiff and could be characterised as an attempt to establish a costs position rather than an actual offer of compromise. 2. The basis upon which it was alleged that the plaintiff would not succeed at the time of the offer was the employment contract. The basis was subsequently abandoned and not pressed at trial. 3. When the offer was made, the defendant had not put forward any evidence in relation to the decision to make the plaintiff redundant and its staffing requirements, and the plaintiff's case depended substantially on this evidence. 4. Significant costs had not been incurred at that point in the litigation, having regard to the affidavit of Mr Noakes. 5. The defendant mischaracterised the plaintiff's case in its assertion that the plaintiff's case rested entirely upon the 'Sting' allegation. The plaintiff's case always involved the assertion that the plaintiff was not excess to the staffing requirements of the defendant. The plaintiff also relied upon an assertion that the defendant had breached an implied term of its contract with the plaintiff to the effect that the defendant would not conduct itself in a manner calculated or likely to destroy the relationship of trust and confidence between the parties.
2. During oral argument, when attention was directed by the Court to UCPR, r 20.26(4) the plaintiff submitted that the genuineness of the decision to make him redundant was dependent upon the evidence to be put forward by the defendant. It was said that it was difficult to see how a request for particulars or documents would have been sufficient to form the view that the defendant's first offer was a genuine attempt to compromise rather than an attempt to trigger a cost consequence.
3. As to Mr Noake's affidavit concerning the work that had been done by that time, the plaintiff said that whilst there was a long list, no evidence had been put forward as to what costs were actually incurred in that period. There was also the trust and confidence claim which a year later was found not to be sustainable as a matter of law.
4. The plaintiff submitted that the offers dated 15 July 2014 and 19 August 2014 could not be calculated for the same reasons. The plaintiff put to the Court that it could be readily inferred that the plaintiff would be left out of pocket if he accepted any of these offers. This would likely give rise to a negative outcome in the proceedings in the manner discussed in Commonwealth of Australia v Gretton [2008] NSWCA 117 ("Gretton") at [104]-[105]. Another issue was that because of the exclusions, it was not possible to know the true value of the offer. In particular, the plaintiff did not know what costs were claimed by the defendant in relation to the amendment offer.
5. The plaintiff conceded that the offer dated 21 November 2014 was more substantial on its face; however, the defendant was not entitled to indemnity costs because the offer's terms did not comply with the requirements of UCPR, r 20.26 because the offer included a provision that the defendant pay the plaintiff's costs as agreed or assessed up to 21 November 2014, but excluded the plaintiff's costs of its application to further amend the Statement of Claim which would have been deducted from the final amount. The plaintiff explained that by the defendant excluding some of the plaintiff's costs already incurred and requiring the plaintiff to agree to pay an unquantified amount of the defendant's costs, this offer did not provide for the payment of the costs of the plaintiff up to the date of the offer. Therefore, the offer did not satisfy r 20.26 and was not an offer of compromise for the purposes of the UCPR.
6. The plaintiff rejected the defendant's submission that the offers amounted to Calderbank letters, in the alternative to offers of compromise. The 17 September 2013, 15 July 2014 and 19 August 2014 offers did not involve a degree of compromise and the rejection of these offers was not unreasonable.
7. The plaintiff argued that he should not have to pay the defendant's costs on an indemnity basis because nothing put forward by the defendant put this case into the category of "clearly exceptional cases" or "extremely unusual."
8. The plaintiff submitted that he did not bring proceedings on the basis of the 'Sting' calendar entry but to enforce his contractual rights. The plaintiff argued that the allegations of mala fides were in fact provoked by the defendant's senior counsel in cross-examination, and that the defendant cannot now complain about matters introduced into the proceedings solely by reason of its cross-examination of the plaintiff. The plaintiff further argued that the defendant did not make him redundant due to excess staffing issues, and pointed to the engagement of new employees at the same time and other staff being aware that the plaintiff was likely to be made redundant for in excess of 12 months. The plaintiff rejected the defendant's submission that the plaintiff knew or ought to have known that he suffered no loss and that any claim for loss based on a claim or working until age 65 would be unsustainable.
9. A further submission was that, if the offer is treated as a Calderbank offer, no presumption in favour of indemnity costs arose, and something more than a refusal of the offer must be shown.
10. Another contention was that the fact that a party ultimately achieved a worse result than he or she would have achieved if he or she had accepted a Calderbank offer does not itself establish that the other party should be awarded indemnity costs, unless it can be said that it was unreasonable for the first party not to accept that offer so as to warrant a departure from the general rule as to costs, citing Nu Line Construction Group Pty Ltd v Fowler (aka Grippaudo) [2012] NSWSC 816 at [9]-[15] and other authorities.

Consideration

1. The general rule that costs follow the event may be displaced where an offer of compromise made by the defendant pursuant to UCPR, r 20.26 has not been accepted, and the defendant obtains a judgment no less favourable than the terms of the offer: UCPR, r 42.15A.
2. UCPR, r 20.26 provides that an offer of compromise must comply with its terms: "20.26 Making of offer (1) In any proceedings, any party may, by notice in writing, make an offer to any other party to compromise any claim in the proceedings, either in whole or in part, on specified terms. (2) An offer under this rule: (a) must identify: (i) the claim or part of the claim to which it relates, and (ii) the proposed orders for disposal of the claim or part of the claim, including, if a monetary judgment is proposed, the amount of that monetary judgment, and (b) if the offer relates only to part of a claim in the proceedings, must include a statement: (i) in the case of an offer by the plaintiff, as to whether the balance of the proceedings is to be abandoned or pursued, or (ii) in the case of an offer by a defendant, as to whether the balance of the proceedings will be defended or conceded, and (c) must not include an amount for costs and must not be expressed to be inclusive of costs, and (d) must bear a statement to the effect that the offer is made in accordance with these rules, and (e) if the offeror has made or been ordered to make an interim payment to the offeree, must state whether or not the offer is in addition to that interim payment, and (f) must specify the period of time within which the offer is open for acceptance. (3) An offer under this rule may propose: (a) a judgment in favour of the defendant: (i) with no order as to costs, or (ii) despite subrule (2) (c), with a term of the offer that the defendant will pay to the plaintiff a specified sum in respect of the plaintiff's costs, or (b) that the costs as agreed or assessed up to the time the offer was made will be paid by the offeror, or (c) that the costs as agreed or assessed on the ordinary basis or on the indemnity basis will be met out of a specified estate, notional estate or fund identified in the offer. (4) If the offeror makes an offer before the offeree has been given such particulars of the offeror's claim, and copies or originals of such documents available to the offeror, as are necessary to enable the offeree to fully consider the offer, the offeree may, within 14 days of receiving the offer, give notice to the offeror that: (a) the offeree is unable to assess the reasonableness of the offer because of the lack of particulars or documents, and (b) in the event that rule 42.14 applies to the proceedings, the offeree will seek an order of the court under rule 42.14 (2). (5) The closing date for acceptance of an offer: (a) in the case of an offer made two months or more before the date set down for commencement of the trial-is to be no less than 28 days after the date on which the offer is made, and (b) in any other case-is to be such date as is reasonable in the circumstances. (8) Unless the notice of offer otherwise provides, an offer providing for the payment of money, or the doing of any other act, is taken to provide for the payment of that money, or the doing of that act, within 28 days after acceptance of the offer. (9) An offer is taken to have been made without prejudice, unless the notice of offer otherwise provides. (10) A party may make more than one offer in relation to the same claim. (11) Unless the court orders otherwise, an offer may not be withdrawn during the period of acceptance for the offer."
3. The plaintiff commenced proceedings by filing a Statement of Claim on 3 May 2013. On 17 September 2013, Mr Noakes, the legal representative for the defendant, sent an email to the plaintiff's solicitors containing: 1. a letter stated to be in the Calderbank style dated 17 September 2013; and 2. an offer of compromise dated 17 September 2013 stated to be in accordance with the UCPR, r 20.26.
4. The defendant offered to compromise the plaintiff's claim in the following manner: "(a) Judgment in favour of the defendant; and (b) There be no order for the payment of costs."
5. The offer was open for 28 days from 18 September 2013.
6. The offer of compromise was accompanied by a six page letter from Mr Noakes which included a statement that, "In the unlikely event that Rule 20.26 of the Uniform Civil Procedure Rules 2005 (NSW) is held not to apply to this offer, it is to be treated as an offer on the same terms and conditions, made in accordance with the principles in Calderbank v Calderbank [1975] 3 All ER 333 and Cutts v Head [1984] Ch 290."
7. In the letter, Mr Noakes, in some detail, supplied reasons as to why the offer involved a real and genuine element of compromise and there were no reasonable prospects of the plaintiff's claim succeeding at trial. Further reasons were provided for the opinion expressed by Mr Noakes that even if the Court were to accept that the defendant engaged in the alleged conduct, it was not clear that the plaintiff had suffered any loss. The plaintiff rejected the offer.
8. In his affidavit, Mr Noakes provided details of the "significant amount of work [that] had been undertaken to progress the proceeding" [Emphasis added] (par 9) prior to sending the first Calderbank style letter and first offer of compromise.
9. One of the criticisms made by the plaintiff was that whilst a long list had been supplied, there was no evidence as to what costs were actually incurred in that period. However, the plaintiff did not require Mr Noakes for cross-examination and there is no reason, given the work particularised in the affidavit, not to accept Mr Noakes' assessment that a significant amount of work had been undertaken. In any event, there is no requirement in UCPR, r 20.26 for the offeror to quantify the quantum of the costs foregone by the compromise.
10. It is well established that an offer with no real element of compromise in it, being merely designed to trigger costs sanctions, will not constitute a genuine offer of compromise: Leichhardt Municipal Council v Green [2004] NSWCA 341 at [23]. But this is not the case here. Although the offer of compromise was made some 6 months after the commencement of proceedings, the defendant had incurred significant costs by the time the offer was made. It involved an element of compromise: Bailey v Director-General, Department of Natural Resources NSW [2015] NSWCA 318 at [116]. The offer was not merely a tactic designed to place the defendant in a favourable costs position. Detailed reasons accompanied the offer as to why it had been made.
11. Although a significant basis for the assertion in Mr Noakes' letter that the plaintiff's action had no reasonable prospects of success as the employment contract was not in place, was subsequently abandoned, this does not mean that the offer did not comply with UCPR, r 20.26. The requirements of UCPR, r 20.26 neither oblige reasons being advanced by the offeror to the offeree as to the genuineness of the offer of compromise nor is there any pre-condition that those reasons are ultimately successful at trial. The matters raised in Mr Noakes' letter support the conclusion that this was not a frivolous offer but one made after due consideration. It is appropriate to mention that ten paragraphs were devoted to the contention that the plaintiff was in excess to the defendant's staffing requirements (paras 3.4(2)(a)(i)-(x)), which was an issue upon which the defendant succeeded at trial.
12. In all versions of the statements of claim, the plaintiff pleaded in paragraph 23: "On about 3 December 2008, Mr Graham Black, Dr Gerry Wilson and Dr Peter Osvarth arranged a meeting via email, which had a subject line of 'Sting'."
13. In Swiegers (No 1) at [52] - [75], I considered the 'Sting' email and did not accept the plaintiff's evidence that his conduct in adding, "From: Gerry Wilson To: Peter Osvarth, Graham Black" to the top of GS73 was not intended to be deceptive. From the outset of the proceedings until reliance on the 'Sting' email was abandoned on the first day of the hearing, the email was an important plank in the plaintiff's case that his termination was not genuine. Speaking plainly, the plaintiff dishonestly created the 'Sting' email to provide a sinister background for the matters pleaded in paragraphs 25 and 26 of the Statement of Claim.
14. These circumstances existed at the time the first offer of compromise was made. It is another factor which weighs in favour of an indemnity costs order.
15. The first offer of compromise complied with the terms of UCPR, r 20.26. There is no good reason to make costs orders otherwise than in accordance with UCPR, r 42.15A(2). These orders will not apply to costs orders previously made in favour of the defendant, as they were made by judges other than myself and I do not know in what circumstances these orders were made.
16. It is unnecessary to consider the arguments concerning the other offers of compromise and Calderbank style letters.
17. Before making the orders, there is another matter that should be mentioned. The plaintiff suggested that the allegations of mala fides were provoked in cross-examination. This is not correct. Although the plaintiff was questioned by senior counsel for the defendant on this issue during the hearing, it was his case that the decision to terminate him was not a genuine decision, that those involved in the decision were aggrieved at the plaintiff making the Whistleblower Complaint and held and expressed extremely negative views about him. In other words, that they had acted with mala fides towards him.

Orders

1. I make the following orders: 1. the plaintiff is to pay the defendant's costs assessed on an ordinary basis up to 18 September 2013, and 2. the plaintiff is to pay the defendant's costs assessed on an indemnity basis from 19 September 2013.
2. I confirm that these orders do not apply to the costs orders previously made in the proceedings. **********' DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 26 July 2016