Terry v Huge Lights Pty Limited and Others

CATCHWORDS: Costs - respondents seek indemnity costs order - opposed by applicants - usual costs order - respondents' offer of compromise - parties' respective misconduct in the proceedings - no indemnity costs order in favour of respondents - respondents' abuse of Court's process - consideration of any costs order in favour of respondents stayed, pending further order of the Court

LEGISLATION CITED: Evidence Act 1995 Industrial Relations Act 1996

Barataud v Chipperfield (No 3) [2006] NSWIRComm 249 Leckie v Crockett & Ors (No 3) [2007] NSWIRComm 143 CASES CITED: Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 Terry v Huge Lights Pty Ltd & Ors (No 3) [2007] NSWIRComm 155 Martin Terry v Huge Lights Pty Limited and Others (No 2) [2006] NSWIRComm 335 Martin Terry v Huge Lights Pty Limited and Others [2005] NSWIRComm 448

APPLICANT: Mr BKB Cross of counsel SOLICITORS: Ronald M Fluit, Solicitor LEGAL REPRESENTATIVES:

RESPONDENTS: Mr RD Newell of counsel SOLICITORS: LC Muriniti & Associates

Application under s.106 of the Industrial Relations Act 1996

1 Judgment in this matter was given on 22 June 2007 (Terry v Huge Lights Pty Ltd & Ors (No 3) [2007] NSWIRComm 155). The application was dismissed, with the parties given leave to approach as to costs. This judgment deals with that question. 2 The respondents sought a costs order in their favour, relying both on the usual costs order and on an offer which they made in December 2005, that the matter be settled by the payment of $2,000 to the applicant, without admission, each party to pay its own costs of the proceedings. It was argued that an indemnity costs order in favour of the respondents would flow from the refusal of that offer. 3 The applicant's case was that the Court would decline to make such orders and would, instead, order each party to bear their own costs of the proceedings. In the alternative, it was argued that the applicant would be ordered to pay 25% of the respondents' costs, as agreed or assessed, other than in relation to the costs associated with two issues. Firstly, a motion in relation to the calling of evidence from overseas witnesses, who were not eventually called. Secondly, costs associated with mis-sworn documents produced in respect to the Department of Transport, which costs should be awarded in favour of the applicant. Consideration

4 The usual order as to costs is that costs follow the event, with the loser having to bear the winner's costs, as agreed or assessed. Section 181 of the Industrial Relations Act 1996 ('the Act') gives the Court a wide discretion to depart from the usual order, in an appropriate case. Here, the issues between the parties were firstly, whether or not any order would be made in favour of the respondents, given what was claimed to be misconduct in the proceedings on their part. (See Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72.) Secondly, if an order was to be made, whether there would be any departure from the usual costs order, in the particular circumstances. 5 The first argument arose because, while the respondents succeeded in resisting the applicant's claims, various conclusions adverse to the respondents were also arrived at in the judgment. They included the rejection of the respondents' denial of the existence of any relationship with the applicant (at [64] and [241] - [250]); the various problems in the conduct of the respondents' case, including their inadequate production of documents and the pursuit of an allegation of conspiracy, not made out on the evidence (at [66] and [246]); the time wasted in cross examination of the applicant in relation to matters such as Mr Hughes' problems with alcohol and his NSW driver's licence (at [67]); and the various problems with Mr Hughes' evidence (at [81]). 6 In this case, it seems to me, those difficulties have to be weighed against the problems with the applicant's case. Not only were his claims rejected, as not having been made out on the evidence, the judgment identified the serious difficulties with his evidence (at [69] - [80]). The case which he advanced failed. I was unable to accept Mr Terry as a truthful witness and thus the judgment had to analyse in detail, how both his claims and his evidence altered over the course of the hearing. That approach undoubtedly also unnecessarily prolonged these proceedings. 7 Until submissions were put for Mr Terry, the claim he advanced in the proceedings was that he had been an employee of Huge Lights Pty Ltd. At [2] - [3], I explained how the claim then came to be amended:

[2] In the amended summons on which Mr Terry proceeded when the hearing commenced, he claimed that he was employed by Huge Lights and that his contract of employment was unfair in various respects. Jonathon Hughes and Michelle Hughes were said to be directors of the company. The respondents denied that Mrs Hughes was ever a director; that Mr Terry was ever employed by the company; that there was ever any legal relationship between the parties; that the Court had jurisdiction to entertain the claims advanced; or that even if it did, that there was any basis for the orders sought being made.

[3] In closing submissions, Mr Terry was granted leave to amend his summons to claim in the alternative, that there was some other kind of relationship in existence, other than that of employment. That leave was granted with the respondents' consent.

8 At [247] - [250] I concluded: 247 On the evidence, the conclusion that Mr Hughes and Mr Terry were in business together was unavoidable. That conclusion is different to the case which the parties respectively advanced. While an uncommon outcome, that is not a surprising outcome of this evidentiary contest. Regrettably, neither Mr Terry nor Mr Hughes were entirely truthful in the evidence which they gave in these proceedings, as to what they had done together. 248 While the business had been established, its final form had not. Mr Terry and Mr Hughes discussed various possible structures. They also discussed how any earnings would be shared. Mr Maine's advice was sought about that question. Nothing was ever resolved. The business, in fact, never traded and so there were never any earnings to share. 249 While both Mr Maine and Mr Davies each spoke to Mr Terry about the termination of the agreement after it had occurred, neither was aware of the claims he advanced in these proceedings, namely that he had not contributed financially to the business at all and that all that he claimed to have spent in the UK, had to be repaid by the respondents, because all those expenses had been incurred for Huge Lights and Mr Hughes. Those claims were entirely at odds with the reality of the arrangement which Mr Terry had made with Mr Hughes. 250 In truth, both Mr Terry and Mr Hughes had contributed equipment and labour as well as making financial contributions. In these proceedings, Mr Terry claimed that he had made no such contribution and that all he had undertaken and all he had spent had been on behalf of Mr Hughes and Huge Lights. That claim was not made out. 9 The problems with the applicant's case led me to conclude at [275] and [282] - [283]:

275 I have dealt in some considerable detail with the difficulties in much of Mr Terry's case. I have come to the view that Mr Terry's approach to his evidence, including in relation to various of the documents relied upon, was of such a kind that a discretion could not be exercised to make any money orders in his favour, even if the contract was found unfair.

282 Given all of the conclusions I have reached, I am firmly of the view, that had I concluded that the contract ought to have been varied to provide, for example, for the giving of notice of termination, and that any money orders could have been made in respect of that notice period, the Court's discretion could still not have been exercised in favour of Mr Terry. It would not be consistent with the public interest for the Court to lend its aid to this applicant, given his conduct in these proceedings. That is a matter to which attention must be paid, when the exercise of any discretion is considered under s 106, consistently with the requirements of s 146(2) of the Act. As Macken J observed in Saliba v John Hearder Pty Ltd (1986) 15 IR 36 at 38:

'There is a wealth of authority that one should not sleep on one's rights and that one should come before the Industrial Commission under s 88F with clean hands'.

283 Problems created when both parties to proceedings are less than truthful when giving their evidence, also arose to be dealt with in Gilmore v Allied Express Transport Pty Ltd [2006] NSWIRComm 16. There the contract in question was varied to address the unfairness demonstrated, but no money orders were made in favour of the applicant. That is not the appropriate outcome in this case, given Mr Terry's failure to establish his case. 10 In Oshlack, McHugh J discussed the approach Courts usually adopt in relation to costs orders at [67] - [70]:

67 The expression the "usual order as to costs" embodies the important principle that, subject to certain limited exceptions, a successful party in litigation is entitled to an award of costs in its favour. The principle is grounded in reasons of fairness and policy and operates whether the successful party is the plaintiff or the defendant. Costs are not awarded to punish an unsuccessful party. The primary purpose of an award of costs is to indemnify the successful party [ Latoudis [1990] HCA 59; (1990) 170 CLR 534 at 543 per Mason CJ, at 562-563 per Toohey J, at 566-567 per McHugh J; Cachia v Hanes [1994] HCA 14; (1994) 179 CLR 403 at 410 per Mason CJ, Brennan, Deane, Dawson and McHugh JJ. If the litigation had not been brought, or defended, by the unsuccessful party the successful party would not have incurred the expense which it did. As between the parties, fairness dictates that the unsuccessful party typically bears the liability for the costs of the unsuccessful litigation.

68 As a matter of policy, one beneficial by-product of this compensatory purpose may well be to instil in a party contemplating commencing, or defending, litigation a sober realisation of the potential financial expense involved. Large scale disregard of the principle of the usual order as to costs would inevitably lead to an increase in litigation with an increased, and often unnecessary, burden on the scarce resources of the publicly funded system of justice.

69 The traditional exceptions to the usual order as to costs focus on the conduct of the successful party which disentitles it to the beneficial exercise of the discretion. In Anglo-Cyprian Trade Agencies Ltd v Paphos Wine Industries Ltd [1951] 1 All ER 873 at 874, Devlin J formulated the relevant principle as follows: "No doubt, the ordinary rule is that, where a plaintiff has been successful, he ought not to be deprived of his costs, or, at any rate, made to pay the costs of the other side, unless he has been guilty of some sort of misconduct." "Misconduct" in this context means misconduct relating to the litigation King & Co v Gillard & Co [1905] 2 Ch 7; Donald Campbell & Co Ltd v Pollak [1927] AC 732 at 812, or the circumstances leading up to the litigation [ Bostock v Ramsey Urban District Council [1900] 2 QB 616]. Thus, the court may properly depart from the usual order as to costs when the successful party by its lax conduct effectively invites the litigation [ Jones v McKie [1964] 1 WLR 960; [1964] 2 All ER 842; Bostock [1900] 2 QB 616 at 622, 625, 627.]; unnecessarily protracts the proceedings [ Forbes v Samuel [1913] 3 KB 706]; succeeds on a point not argued before a lower court [ Armstrong v Boulton [1990] VR 215 at 223]; prosecutes the matter solely for the purpose of increasing the costs recoverable [ Hobbs v Marlowe [1978] AC 16]; or obtains relief which the unsuccessful party had already offered in settlement of the dispute [ Jenkins v Hope [1896] 1 Ch 278].

70 Apart from anomalous examples in the equity jurisdiction[105], there are very few, if any, exceptions to the usual order as to costs outside the area of disentitling conduct. The Court may award costs in favour of a defendant where the plaintiff has obtained only nominal damages[106]. However, this practice can be justified on the basis that, in reality, the successful party lost the litigation and the unsuccessful party won[107]. For present purposes it is not necessary to attempt to list any further exceptions to the principle of the usual order as to costs..... 11 Here, in truth, both parties engaged in 'misconduct' in these proceedings, which had the result that they were unnecessarily prolonged. The conclusions reached were contrary to the cases which all parties advanced in the proceedings. So far as the applicant was concerned, he only succeeded on one aspect of a claim first advanced by way of an amendment to his summons, made in submissions, after I had raised the difficulty of concluding that an employment relationship had existed, on the evidence. Even despite that amendment, the applicant failed to make out his case and I concluded that even if he had made it out, no discretion could have been exercised in his favour, consistently with the public interest, given his conduct in the proceedings. 12 In all of those circumstances, the question of whether the respondents should be deprived of the usual costs order, given their own undoubted 'misconduct', was not an easy one to resolve. 13 That question was complicated by the applicant's rejection of the December 2005 offer. It is well settled that such offers may be considered when the question of the costs of the proceedings arises to be determined. That offer was made after the parties had put on their affidavit evidence and long before the applicant amended his claim in March 2007. At the time of the offer, he was claiming to have been an employee of the first and second respondents. He did not go on to establish that claim. Plainly, but for the late amendment of his summons, he would have failed entirely. The applicant did not establish any aspect of the case which he was advancing in December 2005. 14 It follows that, even though the 2005 offer was a modest one, only $2,000 in excess of a walk away offer, the applicant would have been significantly better off, had he accepted it, rather than pursuing this unmeritorious case. It is well settled that even a 'walk away' offer may be a genuine offer of compromise, in particular circumstances. (See my recent discussion of the applicable authorities in Leckie v Crockett & Ors (No 3) [2007] NSWIRComm 143.) This was such a case. The Court's Rules as to offers of compromise do not detract from that position. 15 Having given careful thought to these difficult questions, I have concluded that, but for their misconduct in the proceedings and one further matter to which I will turn below, the proper order in this case would have been to make an indemnity costs order in favour of the respondents, flowing from the applicant's rejection of their December 2005 offer. There can be no doubt that the 2005 offer was a genuine compromise of the claim, given the applicant's failure to demonstrate any proper foundation for the claim then being advanced, or indeed, even for the claim, as finally advanced. 16 I am not, in all of the circumstances, able to conclude that given that the applicant brought such an unmeritorious claim; his conduct in the proceedings and his rejection of the respondents' December 2005 offer, that justice would permit the respondents being entirely deprived of any costs order at all in their favour, notwithstanding the difficulties with their conduct of the case. In making that observation, it should be understood that I do not accept the submission that there was no foundation at all for the case advanced against the third respondent. On the evidence, she was involved in the termination of the arrangement between the applicant and the first and second respondents, which was terminated without any notice to the applicant; she was acting with the second respondent's power of attorney and held herself out to be a director of the first respondent, albeit that was due to a misunderstanding on her part. I do accept, however, that the applicant may not properly be ordered to pay the costs the respondents incurred in dealing with the falsified customs documents, given the way in which that evidence came forward in the proceedings. Of course, the applicant also relied on fabricated documents in his case. He will have to bear those costs. 17 I do not accept, however, that there should be any departure from the usual orders as to the motion in relation to overseas witnesses. At the hearing, the matter which brought the parties to Court was resolved by agreement. That the witnesses were not finally called does not, in this case, properly lead to the conclusion that costs should not follow the event. 18 As I said earlier, what cannot be overlooked in balancing justice between these unmeritorious parties, however, is the respondents' conduct. That conduct has been such that it is difficult to exercise the costs discretion in their favour. 19 Not only were there real difficulties in the case the respondents advanced to resist the applicant's claims, there is a further matter to be considered. In December 2005, I made a costs order against the respondents, in relation to a motion they had brought under s 67 of the Evidence Act 1995, which was dismissed. (Martin Terry v Huge Lights Pty Limited and Others [2005] NSWIRComm 448.) Those costs were payable forthwith, but were not paid. The costs were assessed, but were still not paid and the applicant then sought to enforce the order in the Local Court. The respondents, unsuccessfully, sought orders for payment by instalments in the Local Court. Some considerable time later, the respondents sought a stay of the order, which I refused in October 2006. (Martin Terry v Huge Lights Pty Limited and Others (No 2) [2006] NSWIRComm 335.) 20 On the evidence, despite that judgment, those costs still remain unpaid. It was suggested for the respondents, that further steps had been taken in the Local Court, which had the result that this Court's order had been stayed by the Local Court. There was no evidentiary foundation for that very surprising submission. Such an order would appear to be entirely precluded by the express provisions of s 179 of the Act. 21 That the Court's orders have still not been complied with, despite the refusal of the stay sought in 2006, was disturbing. In the 2006 judgment, I observed: 13 Contrary to the submissions advanced, it does not appear that the Court has power to grant the stay sought pursuant to the provisions of the Civil Procedure Act , given the provisions made in ss 4 and 5 of that Act. This Court is not one of those appearing in Schedule 1 to the Act, as a Court to whom that legislation applies. 14 It follows that if there be a power to grant a stay of a costs order such as that here in question, it can only flow from an implied power, permitting the Court to ensure that there may be a proper exercise of the jurisdiction and powers conferred upon it by the Act. I am of the view that such a power may exist, as a part of an implied power to prevent abuse of the Court's process. (See Jackson at 614, where Deane J referred to the judgment of Bowen CJ in the Federal Court, where his Honour discussed the implied powers necessary for a statutory court to exercise the jurisdiction and powers expressly conferred upon it and to prevent abuse of its process). 15 That such a power would be exercised in favour of the respondents in this case, when they have neither appealed the costs order in question, nor sought that it be stayed, but have simply ignored it, if not since December 2005, at least since the costs were assessed in April 2006, is a course which justice could not favour. The approach of Full Benches of the Court in Nutshack and Barataud, clearly militate against such a conclusion. 16 As to the arguments advanced in relation to the likely outcome of the proceedings and the applicant's ability to meet any order made against him, I am of the view that the conclusions invited may not be safely reached at this stage of the proceedings. 22 The reference to Nutshack and Barataud, was a reference to what I had observed at [11]:

Such a situation was discussed recently by a Full Bench of the Court in Barataud v Chipperfield (No 3) [2006] NSWIRComm 249, where it was observed: 42 Those conclusions are reinforced by yet a further consideration. Staff J's orders were made on 9 February 2006. The decision was not appealed within the time fixed by s 189, nor were the orders made complied with. The applications for an extension of time to appeal and stay of the decision were filed on 10 March. The applications were dismissed by Boland J on 20 April. The application for leave to appeal and appeal from Boland J's decision and the stay of Staff J's orders, were filed on 10 May and on 19 May, the application for stay was refused by this Full Bench. 43 Even at the hearing of the application for leave to appeal and appeal on 24 July, the orders made by Staff J had not been complied with. As we noted in Barataud (No 2) , those orders are protected by s 179 of the Act. Mr Barataud has, nevertheless, proceeded as if, pending consideration of his various applications, those orders have been stayed. The Act does not so provide. 44 A similar situation arose for consideration in Nutshack Franchise Pty Ltd and Others v Smith and Another (1999) 90 IR 355. There the Full Court was dealing with s 106 proceedings where the trial judge had made various orders, including orders in relation to the payment of money. The orders had not been complied with; no stay had been sought and still the unsuccessful appellant sought to challenge the trial judge's orders on appeal. The Full Court took the view that given the provisions of the Act as to the finality of decisions made by the Court, subject to leave to appeal being sought and an appeal granted, or a stay of the orders made being sought and granted, that continued disobedience of the Court's orders at first instance amounted to an abuse of process. 45 Consequently in Nutshack , the application for leave to appeal and appeal were stayed, until further order of the Court. That left open the possibility that the abuse would cease. In that event, the Full Court noted that the abuse would become relevant to a consideration of the appellant's application for leave to appeal (see at 363).

23 It appears that like in Nutshack, in these proceedings, the costs orders made against the respondents in 2005 have still not been observed, even though the application for a stay of the orders was refused in October 2006. Despite that disobedience, the respondents nevertheless now seek that the Court make orders in their favour. Such continued disobedience of the Court's orders may not be countenanced. That conduct plainly amounts to an abuse of the Court's process. 24 I am satisfied that in these circumstances, the proper approach is to stay any further consideration of the costs order which the respondents seek, until further order of the Court. This approach leaves open the possibility that the respondents' abuse of the Court's process will cease. Were that to occur, I would contemplate making a costs order in favour of the respondents, as agreed or assessed, other than in relation to the costs incurred by the respondents in dealing with the falsified customs documents. I am satisfied that justice could not permit the applicant being ordered to bear such costs. 25 I am also satisfied however, that the applicant's costs in relation to those documents should not be borne by the respondents, given the conclusions reached in the judgment as to the applicant's conduct in relation to that matter. Orders 26 For the reasons given, further consideration of any costs order to be made in favour of the respondents is stayed, pending further order of the Court.

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