Windrum and Anor v Matrix Healthcare Pty Ltd t-as Combined Pathology and Anor

Industrial Relations Commission (NSW)|2009-07-01|Before: Boland J, Haylen J, Backman J, Mr P, Staff J

CITATION: Windrum and Anor v Matrix Healthcare Pty Ltd t-as Combined Pathology and Anor (No 3) [2009] NSWIRComm 78

FIRST APPELLANT: Graham Windrum

SECOND APPELLANT: Monkerai Pathology Services Pty Ltd PARTIES: FIRST RESPONDENT: Matrix Healthcare Pty Ltd t/as Combined Pathology

CORAM: Boland J President; Haylen J; Backman J

APPEAL - Unfair contract - Costs - Costs at first instance and on appeal - Multiple offers of compromise - Whether unreasonable for appellants to have rejected offers of compromise - Party/party costs - Indemnity costs - Whether offers of compromise made at first instance remain effective on appeal - Purpose of costs orders - Set off CATCHWORDS: COSTS - Appeal - Unfair contract - Costs at first instance and on appeal - Multiple offers of compromise - Whether unreasonable for appellants to have rejected offers of compromise - Party/party costs - Indemnity costs - Whether offers of compromise made at first instance remain effective on appeal - Purpose of costs orders - Set off

LEGISLATION CITED: Industrial Relations Act 1996

Bowman v Ricegrowers Ltd (formerly Ricegrowers' Co-operative Ltd) (No 2) [2007] NSWIRComm 267 Cilly v Abbott (1981) 53 FLR 108 Ettingshausen v Australian Consolidated Press Ltd (1995) 38 NSWLR 404 John Sheiles v TB Clarke (Overseas) Pty Ltd [2007] NSWIRComm 262 Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd (No 2) [2008] NSWCA 85 Latoudis v Casey (1990) 170 CLR 534 Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 CASES CITED: Moore v Woodforth (No 2) [2003] NSWCA 46 Oshlack v Richmond River Council (1998) 193 CLR 72 Pascale Bourot v New South Wales Department of Public Works and Services & Anor [2004] NSWIRComm 72 Rockcote Enterprises Pty Ltd v FS Architects Pty Ltd (No.2); Carelli v FS Architects Pty Ltd (No.2) [2008] NSWCA 205 South Eastern Sydney Area Health Service & Anor v King [2006] NSWCA 2 Thomas William Vale v Timothy David Eggins (No 2) [2007] NSWCA 12 Wheelahan v North Coast Area Health Service (No 2) [2008] NSWIRComm 244 Windrum and Anor v Matrix Healthcare Pty Ltd t-as Combined Pathology and Anor [2008] NSWIRComm 146 Windrum and Anor v Matrix Healthcare Pty Ltd t-as Combined Pathology and Anor (No 2) [2009] NSWIRComm 6

APPELLANTS: Mr P M Kite SC with Mr P Coleman of counsel Solicitor: Mr S Chapman TressCox Lawyers LEGAL REPRESENTATIVES: RESPONDENTS: Mr M J Kimber SC with Mr A Connelly of counsel Solicitors: Mr M Trisley Trisley Lawyers

GRAHAM WINDRUM AND ANOTHER v MATRIX HEALTHCARE PTY LTD T/AS COMBINED PATHOLOGY AND ANOTHER

Application by Graham Windrum and another for leave to appeal and appeal against a decision of Justice Staff given on 14 December 2007 in Matter No IRC 2739 of 2005

1 On 28 August 2008, leave to appeal was granted and the appeal upheld in Windrum and Anor v Matrix Healthcare Pty Ltd t-as Combined Pathology and Anor [2008] NSWIRComm 146. The appeal was from a decision of Staff J given on 14 December 2007, in which his Honour dismissed the summons filed by the first and second appellants seeking relief under s 106 of the Industrial Relations Act 1996 ("the Act"). The appellants sought an order that their contract made on or around January 2001 with the respondents, Matrix Healthcare Pty Ltd t/as Combined Pathology ("Matrix") and Peter Court, be declared void in whole or in part. Staff J found that the contract was unfair, but that no order should be made to void or vary the contract between the parties for reasons outlined in the first instance judgment at [115]. 2 The appellants, Dr Windrum and Monkerai Pathology Services Pty Ltd, were successful on appeal and the Full Bench found that the contract "permitted termination to be effected summarily without requiring proper and fair reasons to be provided, thereby giving rise to unfairness." The Court further found that the contract denied the appellants procedural fairness in that it failed to afford them an opportunity to address any of the respondents' concerns about the matters that led to the summary termination. The Full Bench outlined the appropriate relief at [104] of the appeal judgment, and directed the parties to file and serve written submissions as to the question of costs. The parties were unable to agree to the terms of the order for relief made under s 106(5) of the Act and were afforded the opportunity to make further written and oral submissions in this respect. Windrum and Anor v Matrix Healthcare Pty Ltd t-as Combined Pathology and Anor (No 2) [2009] NSWIRComm 6 dealt with the quantification of money orders made under s 106(5) and the parties were then invited to file and serve submissions on costs. This judgment is concerned with the question of costs at all stages in these proceedings. Background 3 The appellants filed their summons for relief in May 2005. At a conciliation conference on 21 November 2005 the respondents offered $50,000 inclusive of costs and interests ("respondents' first offer"), to which the appellants made a counter offer of $170,000 plus costs to settle the proceedings ("the appellants' first offer"). This amount was based on the appellants' calculation of three months' pay at the rate relied upon in their summons. The respondents made a further offer in writing on 25 November 2005 for $60,000 inclusive of costs and interest ("respondents' second offer"), based on their calculation of three months' pay at the rate set out in a letter from the respondents to the appellants on 24 February 2005. In rejecting this offer, the appellants made a counter offer of $150,000 plus costs ("appellants' second offer"). 4 On 6 March 2007, the respondents filed a motion seeking an order the appellants' summons be dismissed for want of jurisdiction. Staff J found that the contracts between the parties fell within the scope of s 106 of the Act. His Honour dismissed the motion and reserved costs on 27 April 2007. 5 On 31 August 2007, the respondents made an offer of compromise of $100,000 plus costs under Part 23 of the Industrial Relations Commissions Rules 1996 ("respondents' third offer"). The appellants made an offer of compromise under the Rules for $200,000 plus GST, interest and costs on 17 September 2007 ("appellants' third offer"). One week prior to the commencement of the substantive hearing, the respondents offered $130,000 plus costs ("respondents' fourth offer"), and on the same day the appellants made a counter offer of $195,000 plus GST, interest and costs ("appellants' fourth offer"). The parties engaged in further private conciliation at the commencement of the hearing on 29 October 2007, at which point the respondents again offered $130,000 plus costs and interest ("respondents' fifth offer"), and the appellants counter-offered with $185,000 plus GST, costs and interest ("appellants' fifth offer"). 6 Following the first instance judgment in December 2007 dismissing the summons and the appellants' subsequent application for leave to appeal and appeal in January 2008, counsel for the parties engaged in settlement negotiations via the telephone. Mr Kite SC, for the appellants, made an offer that both parties walk away and pay their own costs ("appellants' sixth offer"), to which Mr Kimber SC for the respondents responded to the effect that the appellants pay $200,000 as a contribution to the respondents' costs. This response was rejected by the appellants and the application for leave to appeal and appeal proceeded in June 2008. 7 The history of the various offers are summarised in the following table: 27/05/05 Filing of Summons Respondents' offers Appellants' offers 21/11/05 Respondents' first offer $50,000 incl costs & int 21/11/05 Appellants' first offer $170,000 + costs 25/11/05 Respondents' second offer $60,000 incl costs & int 08/12/05 Appellants' second offer $150,000 + costs 27/04/07 Respondents' Motion dismissed 31/08/07 Respondents' third offer $100,000 + costs 17/09/07 Appellants' third offer $200,000 + GST + costs + int 22/10/07 Respondents' fourth offer $130,000 + costs 22/10/07 Appellants' fourth offer $195,000 + GST + costs + int 29/10/07 Respondents' fifth offer $130,000 + costs + int 29/10/07 Appellants' fifth offer $185,000 + GST + costs + int 14/12/07 First instance judgment 11/01/08 Leave to appeal & appeal filed 20/03/08 Appellants' sixth offer Parties pay own costs & walk away 20/03/08 Respondents' response Apps pay to Resps $200,000 as contribution to their costs 10/08/08 Appeal judgment

Parties' submissions 8 The parties have taken diametrically different positions regarding costs. The appellants' approach has been to compartmentalise the proceedings into the substantive proceedings at first instance, the interlocutory proceedings at first instance and the appeal. In relation to the substantive first instance proceedings, the appellant lost, yet they contended costs should be awarded to them on a party/party basis. This, they submitted, should also be the outcome in relation to the interlocutory proceedings, which they won. In relation to the appeal, which they won, the appellants sought costs on an indemnity basis. 9 The appellants' reasoning underpinning their contentions may be summarised by the following propositions: (a) in relation to the cost of the interlocutory proceedings, pursuant to r 211, the appellants, in whose favour the application was determined are, prima facie , entitled to their costs of the motion. Costs of the motion should follow the event irrespective of the ultimate determination of costs in the cause; (b) in relation to the substantive proceedings at first instance, there were no exceptional circumstances that would justify granting to the respondents costs on an indemnity basis nor was there any proper basis to grant the respondents costs on a party/party basis. On the contrary, the Court should grant costs on a party/party basis to the appellants having regard, inter alia , to their ultimate success in the matter; (c) in relation to the costs of the appeal, the appellants should get their costs on an indemnity basis. This was because the respondents' offers at first instance were not renewed on appeal and the appellants had obtained an order on the appeal that was no less favourable than the terms of their sixth offer. Accordingly, costs should follow the event and from the date of the sixth offer the appellant should receive indemnity costs in accordance with r 216(4). 10 The respondents took a holistic approach to the question of costs, contending that in light of the offers they had made to settle the proceedings at first instance, the appellants should pay their costs of both the first instance proceedings and the appeal on an indemnity basis, at least from the time of their third offer in August 2007 or, if not on an indemnity basis, on a party/party basis. 11 The respondents' case may be summarised as follows: (a) the appellants unreasonably rejected the respondents' offers made in November 2005 and needlessly prolonged the litigation. In November 2005, it was reasonable for the appellants to foresee the risk that the quantum of any judgment in their favour would fall below the respondents' offers, which did in fact occur. It was, therefore, inappropriate for the appellants to have the benefit of a costs order for the period after those offers. The appellants' unreasonable rejection of the offers entitled the respondents to a costs order in their favour from that time or, if the Court was not minded to make such an order, at the very least neither side should have their costs in the period from 21 November 2005 to 31 August 2007; (b) the appellants' rejection of the substantially larger offer made under the Commission's Rules in August 2007 was even more unreasonable than the appellants' conduct in November 2005. The unreasonableness of the appellants' attitude was compounded by their rejection of substantially increased offers on 22 October and 29 October 2007. By virtue of r 216(6) the respondents are entitled to their party-party costs from the date of the third offer (including their costs on the appeal), unless the Court orders otherwise. This was an appropriate case for the Court to order otherwise by ordering the appellants to pay the respondents' costs both before and after the date of the offer on an indemnity basis;

(c) in relation to the appeal, the respondents' offers were made in the proceedings at first instance, but they were still effective with respect to the costs of the appeal proceedings ( Bowman v Ricegrowers Ltd (formerly Ricegrowers' Co-operative Ltd) (No 2) [2007] NSWIRComm 267 at [22]). Although the appellants were successful on the appeal, they failed to better the respondents' offers made in the proceedings below. The respondents were, therefore, entitled to costs orders in their favour in respect of both the proceedings at first instance and on appeal. Relevant legislation

12 The power of the Court to order costs is provided for in s 181 of the Act: 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. 13 Costs are also addressed in the Industrial Relations Commission Rules 1996. Particularly relevant are rr 211 and 216: 211 Costs of application or step within proceedings Subject to this Part, the costs of any application or other step in any proceedings shall, unless the Commission otherwise orders, be deemed to be part of the costs of the cause of the party in whose favour the application or other step is determined and shall be paid and otherwise dealt with in accordance with the provisions of this Part. … 216 Offer of compromise (1) Upon the making of an order under Rule 168 (9), a party entitled to costs may, unless the Commission otherwise orders, have those costs assessed up to and including the day the offer was accepted. (2) If a notice of offer contains a term which purports to negative or limit the entitlement to costs, that term shall, unless the Commission otherwise orders, be of no effect for any purpose under Part 23 or this Rule. (3) Subrules (4)-(7) apply to an offer which has not been accepted at the time prescribed by Rule 168 (8). (4) Where an offer is made by an applicant and not accepted by the respondent, and the applicant obtains an order on the claim to which the offer relates no less favourable than the terms of the offer, then, unless the Commission otherwise orders, the applicant shall be entitled to an order against the respondent for costs in respect of the claim from the day on which the offer was made, assessed on an indemnity basis in addition to costs incurred before and on that day, assessed on a party and party basis. (5) For the purpose of subrule (4), where the offer was made on the first or a later day of the hearing of the proceedings, then, unless the Commission otherwise orders, the applicant shall be entitled to costs in respect of the claim from 11 am. on the day following the day on which the offer was made, assessed on an indemnity basis, in addition to costs incurred before that time, assessed on a party and party basis. (6) Where an offer is made by a respondent and not accepted by the applicant, and the applicant obtains an order on the claim to which the offer relates not more favourable than the terms of the offer, then, unless the Commission otherwise orders, the applicant shall be entitled to an order against the respondent for costs in respect of the claim up to and including the day the offer was made, assessed on a party and party basis, and the respondent shall be entitled to an order against the applicant for costs in respect of the claim thereafter, assessed on a party and party basis. (7) For the purpose of subrule (6), where the offer was made on the first or a later day of the hearing of the proceedings, then, unless the Commission otherwise orders, the applicant shall be entitled to costs in respect of the claim up to 11 am on the day following the day on which the offer was made, assessed on a party and party basis, and the respondent shall be entitled to costs in respect of the claim thereafter, assessed on a party and party basis. Consideration 14 On 31 August 2007, after having made two reasonably significant Calderbank offers, neither of which could be regarded as designed merely to trigger costs sanctions, the respondents made a third offer in the form of an Offer of Compromise under the Commission's Rules: see Part 23. The Offer was $100,000 plus costs. 15 We consider this to be the critical offer by the respondents. We would not be prepared to adopt either of the earlier offers as the trigger for awarding costs to the respondent, as the first was made in circumstances where there was insufficient time for the appellants to properly consider the offer and where both the first and second offers were inclusive of costs. Although there is no rule that a Calderbank offer inclusive of costs is incapable of resulting in the court making an order for indemnity costs if the party to whom it is made fares worse at the trial (see Rockcote Enterprises Pty Ltd v FS Architects Pty Ltd (No.2); Carelli v FS Architects Pty Ltd (No.2) [2008] NSWCA 205 at [51]), we have reservations about whether the first two offers could be regarded as making sufficient allowance for costs. 16 The third offer, however, was at least double the respondents' previous offer of $60,000 inclusive of costs. The sum of $100,000 well exceeded a payment of three months' remuneration based on 250 cases per week, plus interest, without any discount for mitigation. The sum offered would have covered payment of Supervising Pathologist's fees, plus interest, in addition. This offer is to be viewed against the background of an original claim by the appellants in their summons for compensation of 12 months' remuneration ($795,000) in lieu of notice and their initial offer to settle of three months' remuneration ($170,000) plus costs. As the respondents submitted, given the high demand for pathologists in 2005 and the adequacy of three months' notice in the industry, there was also a substantial risk that any compensation awarded by the court would be based on three months' notice. 17 Because the first respondent in February 2005 had given three months' notice to the appellants, the effect of which was to give notice to terminate the appellants' existing contract and reduce the appellants' case load to 250 cases per week from about 23 May 2005, there was a substantial risk that the Court would find that any compensation for the period after the summary termination ought to be calculated on the basis of the reduced case load. Further, in view of the statutory requirement for the Court to consider mitigation (s 106(6)), there was also a real probability that the appellants' earnings from other sources would be deducted. We note that following the summary termination on 16 May 2005, the appellants earned $17,455 in the period from that date to the end of July 2005 after which time Dr Windrum took up full time employment with Mayne under a 30-month contract at the rate of $29,500 per month (exclusive of GST). 18 The appellants submitted that they should not be liable for the respondents' costs following rejection of the third offer by the respondents. It was submitted that the facts and circumstances of the case had characteristics and complexity that amounted to exceptional circumstances and should lead to a departure from the prima facie position set out in the relevant rule, in favour of the appellants. 19 It was contended that the complexity arose from the established relationship up to 24 February 2005, the unilateral change imposed on the appellants at that time, which was neither accepted nor expressly rejected by the appellants at the time of termination, and the arrangements put in place by the respondents in conjunction with the wrongful and unfair termination of the appellants in May 2005. It was submitted this was "far from the more normal termination scenario where the level of remuneration over any notice period is not in serious dispute". 20 The appellants noted that on the appeal, having found unfairness in the contract, the Full Bench determined that the appellants should be entitled to three months' notice or pay in lieu, which was reflected in a proposed order for 11 weeks' remuneration. That payment, it was submitted, could have been quantified in various ways ranging from $194,851 down to $38,251 (both including interest).

21 Ultimately, the appellants submitted, the 11 weeks' payment in lieu of notice was quantified by the Court by reference to events, facts and circumstances that occurred after the termination of the contract and after the departure of the appellants from the respondents' business. The appellants submitted that the evidence of this was not available to the appellants at the time of the offer (or at the time of any offer) and was not known to the appellants until after determination of the appeal when further evidence from the respondents was received by leave on special grounds.

22 The appellants contended that the factual position and consideration of the Court of Appeal decision in Thomas William Vale v Timothy David Eggins (No 2) [2007] NSWCA 12, as considered in Wheelahan v North Coast Area Health Service (No 2) [2008] NSWIRComm 244 at [29], was apposite to the present case. In Vale v Eggins (No 2), when the defendant offeror made his offer, it appeared to the plaintiff that the defendant had evidence of a rehabilitation expert and possibly evidence of an occupational therapist, which also related to rehabilitation, whereas in fact the defendant had the report of a neurologist and a psychologist. The defendant later relied on that material from the neurologist and psychologist. The majority in Vale v Eggins (No 2) (Beazley and McColl JJA) held (at [14], [26]) that it should be inferred that the offer was based on the unserved material of the neurologist and the psychologist. The majority accepted (at [22]) the following submissions of the appellant plaintiff (set out at [18]): The appellant contends, first, that as medical and other expert evidence on damages was served after the offers of compromise were made, it was not possible for the appellant to assess the merits of the respondent's offer when it did not have any significant evidence contrary to that which had already been obtained and served in his case. In this regard, it was submitted that the appellant, having regard to the strength of his own medical evidence, was entitled to take the view that his damages would be more than that offered by the respondent. In those circumstances, it was submitted that it would be unfair to penalise the appellant for rejecting an offer which appeared to be significantly at odds with his own case on damages. It was submitted that there was at that stage no good reason to doubt the strength of his own assessment of damages. 23 The respondents took issue with the relevance of Vale v Eggins (No 2) to the present proceedings. It was submitted that when the respondents made their offers, the appellants knew all the salient facts necessary to calculate compensation based on a reduced case load, whether it was calculated on the basis of 250 cases per week or a lower number. The appellants, it was submitted, were aware of the first respondent's usual total case numbers (the Supervising Pathologist fee was calculated by reference to the totals) and were aware of the usual case loads of Drs Krausz and Cortis-Jones. Counsel submitted that on the basis of the evidence available to the appellants at the time of the respondents' offers, the appellants were not 'entitled to take the view that [their] damages would be more than that offered by the respondent', nor could it have reasonably appeared to the appellants that the respondents' offers were "significantly at odds" with their own evidence on quantum. It was asserted that the appellants had good reason to doubt the strength of their own assessment of compensation they might be awarded. The approach taken by the majority in Vale v Eggins (No 2), it was submitted, had no application in this case. 24 We agree with the respondents that Vale v Eggins (No 2) has no application. In the present case, the fresh evidence admitted on the appeal for quantification purposes was known to the appellants - it was part of their business records. There existed the possibility that if the Court at first instance found unfairness and had decided to make orders for compensation, one option for the Court would have been to consider what Dr Windrum would have earned, at the rate that was applicable at the time of the summary termination of the contract, if he had worked out a three months' period of notice. 25 That is not to suggest this was the most obvious option, and to that extent we accept what the appellants contended regarding the complexity of the factual matrix. However, litigation is inescapably chancy: Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 at 725. In considering an offer of compromise the appellants were obliged to show they had given serious thought to the risk involved in non-acceptance of the offer, and that they had assessed the respondent's case properly: South Eastern Sydney Area Health Service & Anor v King [2006] NSWCA 2 at [83]. An offer of $100,000 plus costs, in circumstances where there was a significant contest in the evidence over whether there was a consent variation to the contract by Dr Windrum indicating he desired a reduction in his workload and understood and accepted that in doing so he would necessarily have to relinquish his supervising role, was a reasonable offer and one in respect of which it was unreasonable for the appellants to reject. By rejecting the offer the appellants needlessly prolonged the proceedings. 26 That the appellants also rejected the respondents' fourth and fifth offers of October 2007. The fourth offer, made a week before the hearing, constituted approximately a trebling of the respondents' offers of November 2005 (which were inclusive of costs). As the respondents submitted, it exceeded the value of a doubling of Dr Windrum's notional caseload to 500 cases per week for three months, less mitigation plus interest. It offered approximately four times the monetary compensation ultimately awarded by the Full Bench. The fifth offer was made on the morning of the first day of the hearing and as the respondents submitted, was equivalent to a caseload of 500 cases per week for three months without any deduction for mitigation, or four and a half times the final award from the Full Bench. 27 Whilst we would not have been prepared to award indemnity costs to the respondents on the basis of their third offer, there being nothing truly exceptional about it as required by r 216(6), we have seriously considered whether indemnity costs should be awarded from the fourth offer. It was completely unreasonable for the appellants to not accept that offer, one of a number made by the respondents in a genuine attempt to resolve the proceedings and avoid further costly litigation and inconvenience in respect of claims that the appellants could not have been assured of succeeding. Nevertheless, given the appellants were ultimately successful on appeal (but nowhere near their fourth offer of $195,000 plus interest plus GST plus costs), we have decided that indemnity costs against them are not appropriate. 28 We have, therefore, decided that the appellants shall be entitled to an order against the respondents for costs in respect of their claim up to and including the day the third offer was made (31 August 2007), assessed on a party and party basis, and the respondents shall be entitled to an order against the appellants for costs in respect of the claim thereafter, assessed on a party and party basis. 29 In relation to the costs of the appeal, it was the appellants' submission that they should get their costs on an indemnity basis because the respondents' offers at first instance were not renewed on appeal and the appellants had obtained an order on the appeal that was no less favourable than the terms of their sixth offer. Accordingly, costs should follow the event and from the date of the sixth offer the appellants should receive indemnity costs in accordance with r 216(4). 30 For their part, the respondents contended that their offers made in the proceedings at first instance were still effective with respect to the costs of the appeal proceedings: Ettingshausen v Australian Consolidated Press Ltd (1995) 38 NSWLR 404; Bowman v Ricegrowers Limited (formerly Ricegrowers' Co-operative Limited) (No 2) [2007] NSWIRComm 267 at [22]; Moore v Woodforth (No 2) [2003] NSWCA 46; Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd (No 2) [2008] NSWCA 85 at [35] per Basten JA. 31 The respondents also submitted it was not unreasonable for them to have rejected the appellants' sixth offer for reasons which included that: the respondents had the benefit of a judgment at first instance in their favour; the respondents had made genuine and generous pre-trial offers of compromise under the Commission's Rules which, given the decisions in Ettinghausen and Ricegrowers, were likely to remain applicable to the appeal; and the recognition in the judgment of Staff J that three months was a "fair" notice period, increased the likelihood that any reversal of the decision on liability on appeal would not result in compensation exceeding, or exceeding by a significant amount, the respondents' offers.

32 There is considerable merit in the respondents' case that they should be entitled to an order against the appellants for costs of the appeal. On the other hand, despite some uncertainty given the conflicting evidence about whether Dr Windrum had consented to a variation to the contract to reduce his workload, it was open to the appellants to believe their chances on the appeal were reasonable and that there was a realistic prospect of succeeding on a claim for three months' pay at the rate Dr Windrum was being paid at the time of his dismissal. Nevertheless, the appellants did make an offer of compromise (the sixth offer) to resolve the matter. In the result, the respondents did not accept the offer and the appellants were successful on appeal. 33 Despite the appellants' ultimate success, the respondents' claim that they should receive the costs of the appeal is not without merit given its earlier offers of compromise. There is no rule that there is no jurisdiction to order a successful party to bear the costs of the unsuccessful party: Oshlack v Richmond River Council (1998) 193 CLR 72 at 88 per Gaudron and Gummow JJ. However, it is important to keep in mind that the purpose of a costs order is to "indemnify the successful party in regard to expense to which it has been put by reasons of legal proceedings": Cilly v Abbott (1981) 53 FLR 108 at 111, cited with approval by McHugh J in Latoudis v Casey (1990) 170 CLR 534 at 567.

34 As it has been observed on a number of occasions, s 181 of the Industrial Relations Act confers a broad and unfettered discretion as to the awarding of costs, albeit, a discretion which must be exercised judicially. Further, as Haylen J observed in Pascale Bourot v New South Wales Department of Public Works and Services & Anor [2004] NSWIRComm 72 at [48]: The courts have recognised a wide range of factors relevant to the issue of whether or not the successful parties should obtain a costs order.

And at [56]: It can be seen from the above brief survey of cases that there may be a number of considerations relevant to the exercise of the discretion to award costs in matters before the Court. In many respects the repetition of standards and approaches in relation to the usual order for costs needs to be considered in the context of the jurisdiction exercised by the Commission and the fact that generally the industrial jurisdiction has operated with the parties bearing their own costs. This fact simply means that there may be considerations which arise as to the appropriateness of a costs order in proceedings before the Commission in Court Session which would not arise in litigation in the general courts, as discussed by McHugh J in his powerful but dissenting judgment in Oshlack .

35 In all of the circumstances, we consider that justice in this case would best be served by each party paying their own costs of the appeal and we propose to make an order to that effect. 36 The respondents, sought an order permitting them to set off their costs as agreed or assessed against any costs agreed or assessed payable by them to the appellants and against the judgment amount of $28,771 plus interest. 37 The Court may make orders providing for such set-off (John Sheiles v TB Clarke (Overseas) Pty Ltd [2007] NSWIRComm 262 at [33]-[35]). We think it is appropriate in this case that orders be made permitting the respondents to set off their costs if after the relevant calculations are made and agreed set-off is available.

38 The respondents, within 14 days and after consultation with the appellants, shall file and serve short minutes of order reflecting the following determinations. Unless there is any disagreement about the terms of the orders the Full Bench shall settle them in Chambers: (1) the respondents shall pay to the appellants their costs in respect of their claim up to and including 31 August 2007 as agreed or assessed on a party and party basis and the appellants shall pay to the respondents thereafter and up to 14 December 2007, the respondents' costs as agreed or assessed on a party and party basis; (2) each party shall pay their own costs of the appeal; and (3) if it is available to do so, the respondents shall be permitted to set off their costs as agreed or assessed against any costs agreed or assessed payable by them to the appellants and against the judgment amount of $28,771 plus interest. ___________________________________________

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At a glance

Court

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Before

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Judgment (23 paragraphs)

Parties

Cases Cited (16)