Taylor v August and Pemberton Pty Ltd

1. Order 4 of the orders made on 31 October 2023 be varied by substituting an order in the following terms: The respondents pay the applicant's costs: (a) before 11 am on 26 November 2021 on a party and party basis; and (b) thereafter on an indemnity basis. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

KATZMANN J: 1 On 31 October 2023 I ordered that judgment be entered in favour of the applicant, Fiona Taylor, with costs and required the parties to provide short minutes of order giving effect to the judgment: Taylor v August and Pemberton Pty Ltd [2023] FCA 1313 (the principal judgment). On 21 November 2023, after receiving those minutes, I ordered, amongst other things, that the respondents pay damages to Ms Taylor in the sum of $235,719.03 for their contraventions of s 28B(2) of the Sex Discrimination Act 1984 (Cth) (SDA) and that the second respondent, Simon Grew, pay damages to Ms Taylor in the sum of $42,138.74 for his contravention of s 94 of that Act. This judgment relates to Ms Taylor's application to vary the costs order. In these reasons familiarity with the principal judgment is assumed. 2 The application is supported by an affidavit affirmed by Ms Taylor's solicitor, Mia Pantechis, on 30 November 2023. It is based on an offer of compromise served on the respondents on 24 November 2021 (the offer), 11 months before the trial commenced. 3 Rule 25.01 of the Federal Court Rules 2011 (Cth) (Rules) provides that a party may make an offer of compromise (strictly an offer "to" compromise) by serving a notice in accordance with Form 45 on another party. The notice must be signed by the offeror (r 25.02). Such an offer may be made at any time before judgment (r 25.05(1)) and is open to be accepted within the time stated in the notice, which must not be less than 14 days after the offer is made (rr 25.05(3), 25.08(1)). The content of an offer of compromise is prescribed by r 25.03 as follows: (1) The notice must state whether: (a) the offer is inclusive of costs; or (b) costs are in addition to the offer. (2) If the offer is of a sum of money, the notice may separately specify the amount that represents: (a) the offer in respect to the claim; and (b) interest (if any). 4 Rule 25.14 relevantly provides that: (3) If an offer is made by an applicant and not accepted by a respondent, and the applicant obtains a judgment that is more favourable than the terms of the offer, the applicant is entitled to an order that the respondent pay the applicant's costs: (a) before 11.00 am on the second business day after the offer was served - on a party and party basis; and (b) after the time mentioned in paragraph (a) - on an indemnity basis. Note 1: Costs on an indemnity basis is defined in the Dictionary. Note 2: The Court may make an order inconsistent with these rules-see rule 1.35. 5 Section 37M(3) of the Federal Court of Australia Act 1976 (Cth) imposes an obligation on the Court to exercise powers conferred by the civil practice and procedure provisions, which include the Rules, in the way that best promotes their overarching purpose. That purpose is defined in s 37M(1) as the facilitation of the just resolution of disputes according to law and as quickly, inexpensively and efficiently as possible. Section 37M(2) provides that the overarching purpose includes the following objectives: (a) the just determination of all proceedings before the Court; (b) the efficient use of the judicial and administrative resources available for the purposes of the Court; (c) the efficient disposal of the Court's overall caseload; (d) the disposal of all proceedings in a timely manner; (e) the resolution of disputes at a cost that is proportionate to the importance and complexity of the matters in dispute. 6 The offer, which was signed by Ms Pantechis, was in the following terms: The Applicant offers to compromise this proceeding. The offer is that the Respondents pay the Applicant the sum of $100,000. This offer is inclusive of costs. This offer of compromise is open to be accepted for 14 days after service of this offer of compromise. The amount of the offer will be paid within 28 days after acceptance of this offer. This offer is made without prejudice. 7 Accordingly, the order Ms Taylor seeks is that the respondents pay her costs before 11 am on 26 November 2021 on a party and party basis and thereafter on an indemnity basis. 8 "Costs as between party and party" is defined in the Dictionary contained in Sch 1 to the Rules to mean "only the costs that have been fairly and reasonably incurred by the party in the conduct of the litigation" and "costs on an indemnity basis" are "costs as a complete indemnity against the costs incurred by the party in the proceeding, provided that they do not include any amount shown by the party liable to pay them to have been incurred unreasonably in the interests of the party incurring them". 9 There is no dispute between the parties as to the legal principles. The respondents embraced the following summary appearing in Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 at [38], which appeared in Ms Taylor's submissions and which were in fact drawn from another judgment of the NSW Court of Appeal, Elite Protective Personnel Pty Ltd v Salmon (No 2) [2007] NSWCA 373. Insofar as they are relevant, and omitting the authorities cited in support of them, those principles were: • Where there are multiple issues in a case the Court generally does not attempt to differentiate between the issues on which a party was successful and those on which it failed. Unless a particular issue or group of issues is clearly dominant or separable it will ordinarily be appropriate to award the costs of the proceedings to the successful party without attempting to differentiate between those particular issues on which it was successful and those on which it failed … • … [I]t may be appropriate to deprive a successful party of costs or a portion of the costs if the matters upon which that party was unsuccessful took up a significant part of the trial, either by way of evidence or argument … … • Whether an order contrary to the general rule that costs follow the event should be made depends on the circumstances of the case viewed against the wide discretionary powers of the court, which powers should be liberally construed … • A separable issue can relate to "any disputed question of fact or law" before a court on which a party fails, notwithstanding that they are otherwise successful in terms of the ultimate outcome of the matter … • Where there is a mixed outcome in proceedings, the question of apportionment is very much a matter of discretion and mathematical precision is illusory. The exercise of the discretion depends upon matters of impression and evaluation … 10 The respondents accept that the offer is in accordance with r 25.01(1) and, in the ordinary course, the order Ms Taylor seeks would be made in accordance with the Rules. They do not suggest that it was reasonable for them not to accept the offer. Rather, they argue that the Court should exercise its discretion "to vary the presumptive order to allow for appropriate apportionment" because "vast aspects of the applicant's case were unsuccessful" and "a substantial amount of time was spent during the proceedings on claims made by the applicant on which she did not succeed". Accordingly, they propose costs incurred both before the offer of compromise takes effect and afterwards be reduced by 40% such that the Court should order that the respondents pay 60% of Ms Taylor's costs on a party and party basis before 11 am on 26 November 2021 and thereafter 60% of her costs on an indemnity basis. 11 They point to a number of cases in which courts have apportioned or sanctioned an apportionment of costs where the successful party did not prevail on all issues. So far as I can tell, however, none of those cases involved offers of compromise made in accordance with the rules of court where the result was more favourable than the offer and in which the respondent's refusal of the offer was not said to be reasonable. 12 Although the effect of r 25.14(3) in this case is that Ms Taylor is entitled to the order she seeks, as note 2 to the rule makes abundantly clear r 1.35 gives the Court the power to make an order that is inconsistent with r 25.14(3). As the Full Court put it in Lodestar Anstalt v Campari America LLC (No 2) [2016] FCAFC 118 at [23] (Allsop CJ, Greenwood, Besanko, Nicholas and Katzmann JJ), r 25.14(3) creates a rebuttable presumption in favour of indemnity costs. Moreover, the respondent bears the onus of proving that an inconsistent order should be made: JMC Pty Ltd v Commissioner of Taxation (Costs) [2023] FCAFC 95 at [9] (Bromwich, Thawley and Hespe JJ). In general, the power to make an order inconsistent with the Rules will only arise in exceptional circumstances and should only be exercised for proper reasons: Lodestar Anstalt at [27]. That approach accords with the observation made by McHugh J in Oshlack v Richmond River Council (1998) 193 CLR 72 at [66]: By far the most important factor which courts have viewed as guiding the exercise of the costs discretion is the result of the litigation. A successful litigant is generally entitled to an award of costs. ... To deprive him of his costs or to require him to pay a part of the costs of the other side is an exceptional measure. 13 In the present case I am not satisfied that the circumstances justify the taking of such an exceptional measure. 14 Ms Taylor's case was that she was sexually harassed by Mr Grew, who was the sole director of the first respondent and the principal of its jewellery business, and for whose conduct the first respondent was also liable. She also alleged that she had been victimised by Mr Grew as a result of complaining about his conduct. She succeeded on both these allegations. She also succeeded in establishing her claims for relief, including damages. 15 "Sexual harassment" is defined in s 28A of the SDA to mean the making "an unwelcome sexual advance" to, or "an unwelcome request for sexual favours" of a person or the engagement in "other unwelcome conduct of a sexual nature" in relation to the person. 16 Ms Taylor claimed that Mr Grew had contravened s 28B(2) of the SDA, which prohibits sexual harassment by an employee of another employee. The conduct upon which she relied included showering her with gifts; making flattering comments, including comments about her appearance; slapping her on the bottom; inviting her to enter into an intimate personal relationship with him; and reviving the subject with her after she had made it clear to him that she was not interested in such a relationship. 17 All these species of conduct were found to have occurred. Nevertheless, the respondents relied on the fact that none of the gift-giving and not all the flattering comments were found to amount to sexual harassment and one of the three foundations of the victimisation case was not made out. They submitted that "[s]ubstantial preparation time was taken in addressing the unsuccessful claims", picking apart various documents and tallying up the paragraphs or pages dealing with those matters. They contended, in effect, that three of the respondents' witnesses would not have been required to give evidence and the respondents would not have incurred the time and expense associated with their evidence if the unsuccessful aspects of the gift giving and comments claims had not been made. 18 The respondents also pointed to evidence Ms Taylor gave about her trip to the United States of America with Mr Grew and COVID-19 work arrangements which they submitted were not relevant. 19 It is convenient to deal with the last submission first. No objection was taken to the evidence so presumably the respondents considered it was relevant at the time. Some of that evidence was capable of assisting their case. In any case, the evidence was at least relevant background. 20 It is true that Ms Taylor did not prove that the gifts and most of the comments amounted to acts of sexual harassment. But she did prove that she was showered with gifts and that most of the comments were made. And while each of the gifts was said to be unwelcome conduct of a sexual nature, Ms Taylor also relied on the gift-giving as "context" for "the ultimate sexual harassment" or advances. The same is true of the comments. And both were unquestionably relevant contextual matters. Indeed, they were important contextual material. Thus, even if Ms Taylor had not pleaded that each gift and comment was an act of sexual harassment, it is inconceivable that Ms Taylor would not have given the evidence about them. Equally, it is inconceivable that she would not have been thoroughly cross-examined on that evidence. Similarly, and notwithstanding the submission to the contrary, I have no doubt that evidence would have been led from Mr Grew and from the respondents' lay witnesses to respond to such evidence or contextualise it. Consequently, I doubt that there would have been any significant costs savings if Ms Taylor had not alleged that each gift and comment was an act of sexual harassment. 21 I am fortified in that conclusion by the fact that the respondents did not seek to file any evidence on this application. There is therefore no evidence to indicate that witnesses they called would not have been called if the unsuccessful components of Ms Taylor's case were not advanced as acts of sexual harassment. Nor is there evidence of the costs incurred in contesting the aspects of the claims which were not made out. 22 Finally, as I observed earlier, the respondents do not contend that they acted reasonably in not accepting Ms Taylor offer. 23 The other matters upon which Ms Taylor did not succeed were trivial losses in the scheme of things. The first was the failure to prove that Mr Grew said to her: "Remember that day I hit you on the arse. That was a great day for me". The second was the failure to prove that Mr Grew's accusation that Ms Taylor had accessed and copied confidential documents was an act of victimisation. The first failed because no evidence was adduced that such a statement was made. The second failed because I found that it did not amount to an accusation of misconduct or support Ms Taylor's allegation that making the accusation "subjected [her] to the detriment of … insecurity in her employment; and … being embarrassed, offended, humiliated and/or distressed". A negligible amount of time was spent in litigating both those matters. 24 Nor am I satisfied that depriving Ms Taylor of 40% of her costs would be the best way to promote the overarching purpose of the civil procedure provisions. 25 The object or purpose of rules of court relating to 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] (Hunt AJA, Mason P and McColl JA agreeing). It is also to require parties to give serious thought to the risk involved in not accepting an offer of settlement on the basis that "litigation is inescapably chancy": IFTC Broking Services Ltd v Commissioner of Taxation [2010] FCAFC 31; 268 ALR 1 at [9] (Stone, Edmonds and Jagot JJ), citing Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 at 725. 26 Ms Taylor's offer was made at a relatively early stage of the proceeding - some three months after the defence was filed. It was also a generous one in that the amount she was prepared to take at the time was a small fraction of the true value of her case. In making the offer she acted consistently with the object of the relevant rules and the overarching purpose of the civil procedure provisions. Settling her case at that time would have spared all parties a considerable amount of costs and freed up the Court's time to hear and dispose of other cases. To deny her 40% of her costs would be antithetical to the overarching purpose. 27 Consequently, while some additional time was taken up in proving and refuting certain aspects of Ms Taylor's claims, I am not satisfied that this is an appropriate case to make an order inconsistent with r 25.14(3). 28 It follows that I reject the respondents' proposal and will make the order Ms Taylor seeks. In case it is unclear from the plain words of the order, that means that the costs of the costs dispute are payable on an indemnity basis. I certify that the preceding twenty-eight (28) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Katzmann.