Industrial Relations Commission of New South Wales in Court Session CITATION : Michael John Pym v Oracle Corporation & 2 Ors [2003] NSWIRComm 299 APPLICANT Michael John Pym PARTIES : RESPONDENT Oracle Corporation & 2 Ors FILE NUMBER: IRC 1993 of 1998 CORAM: Glynn J CATCHWORDS : Costs - unfair contract - offer of compromise and/or Calderbank letter by respondent - whether effective - non acceptance by applicant not unreasonable - applicant failed as to major part of claim both as to substantive issues and to amount claimed - applicant granted percentage of costs on party and party basis - indemnity costs claim by respondent refused. Industrial Relations Act 1996 s 105 LEGISLATION CITED : Industrial Relations Commission Rules 1996 r 216 Part 23 Evidence Act 1995 s 131 Australian Mutual Provident Society v Avis unreported, IRC96/5473 and 5941, 18/12/97 Ballard v Incoll Management (No 2) [2001] NSWIRComm 217 Burgess v Mount Thorley Operations Pty Ltd [2003] NSWIRComm 22 Calderbank v Calderbank 1976 Fam 93 Dodds Family Investments Pty Ltd (formerly Solar Tint Pty Ltd v Lane Industries Pty Ltd 26 IPR 261 Fox v GIO Australia Limited [2002] NSWIRComm 318 Gambotto v John Fairfax Publications Pty Ltd [2001] NSWIRComm 249 Grbavac v Hart (1997) 1 VR 154 Grynberg v Muller, Estate late M Bilfeld [2002] NSWSC 350 CASES CITED : Macivor v Hilton Nursing Home Pty Ltd [2001] NSWIRComm 56 Mitchell-Calvert v Yahoo Inc No 2 [2001] NSWIRComm 162 MT Associates Pty Ltd v Aqua-Max Pty Ltd (No 3) (2000) VSC 163 Multicon Engineering Pty Ltd v Federal Airports Corporation (1996) 138 ALR 425 Oshlack v Richmond River Council (1998) 193 CLR 72 Smarzak v Grimes Management Services Pty Ltd [2000] NSWIRComm 73 SMEC Testing Services P/L v Campbelltown CC (2000) NSWCA 323 Tuholi Pty Ltd v Caltex Petroeum Pty Limited (2001) 103 IR 392 Waters v P C Henderson (Australia) Pty Ltd, unreported, NSWCA, 6/7/94 White v Director of Housing unreported, 29 April 2003, VSC No 4824 of 2003 WorkCover Authority of New South Wales (Inspector Dawson) v Plastachem Pty Ltd (2001) 110 IR 351 HEARING DATES: 07/21/2003 DATE OF JUDGMENT: 10/17/2003 APPLICANT: Mr S Burchett of counsel SOLICITORS: Mr J Catanzariti Clayton Utz Lawyers LEGAL REPRESENTATIVES: RESPONDENT: Mr G J Hatcher SC SOLICITORS: Mr C McArdle KPMG Legal JUDGMENT: - 20 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES IN COURT SESSION CORAM: GLYNN J 17 OCTOBER 2003 MATTER NO IRC 1993 OF 1998 MICHAEL JOHN PYM v ORACLE CORPORATION & 2 ORS Application under section 106 of the Industrial Relations Act 1996. JUDGMENT [2003] NSWIRComm 299 1 On 30 April 2003, the Commission published its decision in the matter of Michael John Pym v Oracle Corporation and ors [2003] NSWIRComm 127. There was unfairness found, in terms of s 105(a) of the Industrial Relations Act 1996, in relation to one term as to bonus of the contract of employment between Mr Pym and Oracle. The parties were directed to confer both as to the amount of bonus with interest and as to costs. They were unable to agree and this judgment deals with those issues. 2 Mr S Burchett of counsel continued his appearance for the applicant. Mr G Hatcher SC continued his appearance for the respondents. Calculation of Bonus 3 The parties had agreed during the proceedings that if the applicant were to be found entitled to bonus during the notice period, that bonus would be calculated on company performance of 110-115%. Such an entitlement was found to exist and the parties were directed to consult and come to an agreed figure as to the initial amount of the bonus and any consequential additional amounts. Interest was to be paid at Supreme Court rates as from 9 February 2001. 4 The parties were unable to agree as to the percentage that should be taken into account for the personal performance component. 5 The applicant claimed that that component should be rated at 100%. The respondent, in their calculations as to bonus, adopted the same personal performance rating the Court had found to be appropriate for the applicant's performance for the quartiles Q1 and Q2. 6 The difference between them on that point meant that the bonus prorated for the relevant period would be allocated at either 200% (the applicant) or 150% (the respondent). 7 There were other differences between them as to the overall calculations which I note but do not discuss further. 8 In money terms, allocation at 200% (based on the applicant's calculations) would result in an entitlement, including interest, of $32,069. On the other hand allocation at 150%, (based on the respondent's calculations) would result in an entitlement of $20,682.60. 9 In relation to the calculation of the personal performance component of the contested bonus, the applicant claims that during the three months notice period the applicant was essentially on "garden leave" and did all of the little that was required of him during that time. However, apart from whether or not the applicant did complete the handing over procedures originally envisaged, a matter not clear from the evidence, the fact is that the applicant departed from Australia, influenced by personal reasons, (the effect of his wife's pregnancy as to travel plans), prior to the actual termination date of 18 March 1996. 10 That early departure was not at the instigation of Oracle and it was not its fault that the applicant was not available during part of the bonus period to provide services if required to do so by Oracle. That very absence precludes a finding that the applicant's personal performance was 100% for the relevant period. 11 I find that the applicant's bonus entitlement is that advanced by the respondents, that being the amount, including interest, of $20,682.60. Order 12 The Court orders that the sum of $20,682.60 be paid to the applicant by the respondent. Costs - Submissions - Respondent Offer of Compromise 13 On 22 August 2001, the third respondent made an offer of compromise to the applicant pursuant to Part 23 of the Rules ("the Offer"). The terms of the Offer provided that, inter alia, the third respondent offered to settle the matter with the applicant for payment of $55,000 (inclusive of interest) by the third respondent to the applicant. 14 The applicant did not accept this Offer. 15 The applicant's bonus entitlement is $20,682.60 as calculated above. This sum is inclusive of interest. There is no doubt that well before the hearing of the proceedings, an offer of compromise was made by the third respondent to the applicant in an amount greater than that eventually ordered in favour of the applicant at judgment. 16 It is alleged by the applicant that the offer of compromise on which the respondent relies is not an offer of compromise for the purpose of the Rules (see White v Director of Housing (White) unreported, 29 April 2003, VSC No 4824 of 2003). The respondents accepted that that judgment is authority for the purpose alleged on behalf of the applicant: that is in that case Gillard J finds that an offer of compromise that contains a condition within it that there be a suitable deed of release executed, is not an offer of compromise for the purpose of the Victorian Supreme Court Rules. The respondents sought to distinguish that in this Commission. His Honour also says if it is not an offer of compromise it cannot have the effect of a Calderbank letter. The respondent says that is simply wrong. As to the first point, that is whether the inclusion of a requirement that a deed of settlement be executed necessitates that the offer of compromise is not an effective offer of compromise, the respondent relied upon at least two judgments of this Commission, single judge judgments, which do not appear to have been considered at the appellate level, those being Fox v GIO Australia Limited (Fox), unreported judgment of the Vice-President [2002] NSWIRComm 318 (19 December 2002), and a judgment therein referred to, that of Smarzak v Grimes Management Services Pty Ltd (Smarzak) [2000] NSWIRComm 73 in which it was decided by Maidment J that there was an agreement on the terms of the deed of release but not the final execution of it. 17 In this jurisdiction there is a term "Execution of the deed of release" which is well understood by the Commission in settling matters. Hungerford J in Fox v GIO indeed issued a certificate of settlement where the deed was still to be executed and that was not perceived later by his Honour the Vice-President to be a difficulty in enforcing the settlement. At the very least it would have to constitute an offer of compromise of the type considered in Calderbank v Calderbank (Calderbank) (1976 Fam 93). 18 Gillard J in White points to the fact there is no express waiver of privilege on the question of costs on an offer properly certified in accordance with the Rule and his Honour says for that reason it could not be a Calderbank letter or treated under the terms of a Calderbank letter. However, reliance upon the relevant Rule makes it perfectly obvious to either party that what is intended to be done is to call that document in aid of the question of costs. There is no other purpose in relying successfully or unsuccessfully on the Rules. If that be the position no party can complain when that document is relied on in relation to the question of costs. There are nuances in the different way in which a Calderbank letter will be treated to the way in which the Rules compel that offer in accordance with the Rules be treated but it is to set at naught the purpose of the compromise to suggest that if one has a technical failing in that offer of compromise, then it is not an offer at all. The respondent invited the Court to distinguish the judgment in White v The Director of Housing or if necessary to simply not follow it. 19 The offer that was put is an offer of compromise for the purpose of the legislation. If the respondent were wrong as to that, it says it would at least be an offer in the form of Calderbank v Calderbank, because it was clearly put with the intention of relying on it on the question of costs. 20 It is suggested against the respondent that the offer of compromise ought not be given effect because it was only an offer from the third respondent but the Court found that the only claim available was a claim against the third respondent. 21 In relation to the National Insurance contributions, one of the points put against the respondent on the offer of compromise is that when the offer was made, there was some complaint made that the offer made was $17,288, whereas the Court found that the respondent's conduct was fair in placing an amount in trust of $25,000. What is not disclosed in the applicant's submission is the fact $17,288 was not the respondent's quantification of the lump sum amount. 22 The appropriate order is an order that the applicant pay the party-party costs of the respondents up to the date of the offer of compromise and on an indemnity basis thereafter. Indemnity Costs - Submissions - Respondent 23 The applicant's submissions by and large are non-contentious. The prima facie position would be the Court would grant the applicant party and party costs up to the offer of settlement, the respondent party and party costs thereafter. The prime position is displaced by the way in which the applicant has conducted these proceedings. As a result of that conduct, the Court could make an order for the applicant to pay the respondent's costs on a party/party basis up to the offer of compromise and on an indemnity basis thereafter. The respondent accepts that the order it sought was not the usual order as to costs. 24 On the question of discretion as to costs, generally costs follow the event. That is the starting point. The successful client will be entitled to the benefits of the success. What would excite the discretion is if the Court found there was unreasonable conduct on the part of one party or the other. The respondent says that the applicant has conducted himself unreasonably in this case and an appropriate analysis of the judgment leads inevitably to that conclusion. 25 The only element in a claim totalling $790,000 that the Court found favour with was one that was not specifically pleaded and where the Court found the circumstances were such that the action the respondent took was not unfair. Rather it was circumstances endemic to that form of bonus scheme and in circumstances where none of the evidence that was led was necessary to deal with the Court's finding. In the conduct of the proceedings, very little evidence was directed to that issue from either the applicant's point of view or the respondent's. 26 The Court found that the applicant could not rely upon the earlier relocation/bonus arrangement with Oracle Asia Pacific to support his claims as to unfairness to him in the Oracle Australia bonus system. That is a finding that the respondents ought not to have been put to the considerable expense of bringing all these witnesses out to Australia to defend that claim. 27 The one claim that succeeded was not clearly enunciated in the pleadings. Given the subsequent offer of compromise, there is every reason to think that if the claim had been properly enunciated, and the proceedings had been pared of the more extravagant claims therein, the matter would have been settled at conciliation without either party being put to the significant expense involved in the conduct of the proceedings or the Court having its processes utilised with the consequent cost impost on the public purse. 28 There was an issue that arose where in the payment of redundancy the applicant complained that there had been a deduction from the payments that he allegedly received to repay the amount he agreed to repay and the complaint was there was unfairness in that. At paragraph 75 the Court noted that the respondent said, "There was no complaint in the summons for relief in relation to that deduction". 29 The Court found that the applicant was not treated unfairly in relation to the redundancy payments made to him on his termination. The claim for additional redundancy payments was rejected. To meet the applicant's claim as to redundancy, the respondent had to bring Ms Sibree from Singapore. Mr Davis had to be called to give evidence and Mr Weston also gave relevant evidence on that. 30 Further claims as to additional notice and equality of remuneration with Mr Davis were also rejected by the Court. 31 The Court dealt with claims by the applicant as to the unfair conduct by the respondent in terms of its dealings with the applicant. Those claims went to a number of matters, none of which were accepted by the Court: the applicant's expressed interest in the new CFO position; his residency position in Australia upon being made redundant; non-appointment as a member of the Board of Oracle Australia; reasonableness of the reimbursement of relocation expenses; an MBA study offer; non-payment of National Insurance contributions and correct calculation of on target earnings (OTE). 32 The Court found (at pars 85 and 86) that the matter had been resolved and because of a disagreement that occurred after termination, the applicant decided to embark upon litigation with a view to achieving some other benefit. If one is looking for a finding of unreasonable conduct, that is such a finding. One has the exact circumstances under which respondents ought to be protected from the costs incurred in litigation. Particularly so when the applicant's only success is on a matter not expressly pleaded, not expressly dealt with in the evidence, a matter not the subject of which there was no need for evidence. The parties' positions were quite clear as to the bonus payment. 33 There appears to be in the applicant's written submissions, some complaint about costs incurred in the conduct of the proceedings as to the length of time for the proceedings going on. The Court did not find favour with the repondent's application that the proceedings be dismissed for want of prosecution. Clearly there had been substantial delay. Of course at that time the Court was not aware as it became aware in the principal proceedings that the proceedings were only on foot as a result of a disagreement between Mr Williams and Mr Pym post-termination. Had the Court been aware of that, these proceedings may have been disposed of differently. 34 The next complaint is in the actual days of hearing, the time lost through those days. 35 It was conceded that the respondent's counsel asked for an indulgence on the Wednesday, in the context that counsel believed it would not extend the hearing time. But certainly that did occur. Friday was not used because Mr Grinberg was ill. Mr Grinberg was a witness for the respondents in the middle of the respondent's evidence at the time of the trial and no one took any issue but that he was ill. If there be a doctrine that that tells against a party on the law of costs senior counsel knew of no authority for it. Even if Mr Grinberg had been available, he was, contrary to the experience in cross-examination up to that point of time, in cross-examination for the full day on the next day. The day that was vacated to meet senior counsel's convenience would have been utilised though perhaps not seen the case through to conclusion. 36 The other criticism, if it be that, of the respondent's conduct in the proceedings was the question of bonus. It was, as recorded in an unedifying passage of transcript, suggested that the respondent was somehow responsible for some miscarriage as a result of not producing documents in relation to the bonus. In any event, once the suggestion that the respondent had failed in its obligations as to discovery was removed, the respondent made it clear it was not standing in the way of the Court making an order if the Court was so minded. Nor was it standing in the way of putting the applicant in a most generous situation as it possibly could. There was a difference of 30 per cent in what Mr Pym actually earned in Q1/Q2. The respondent was content to consent to Q3/Q4 rather than embark on this difficult and wasteful process of trying to locate some computer records from about seven years ago. It is now somehow sought to make difficulties against the respondent on the question of costs. With respect, that borders on the absurd. Costs - Submissions - Applicant Offer of Compromise 37 The purported offer of compromise by the third respondent of 22 August 2001 is invalid, of no effect and cannot give rise to any consequential rights under the Rules: (a) the notice of offer fails to specify the terms of the compromise as required by Rule 167, in that: (i) in respect of the applicant's UK pension [clause 2(b)] it offers to pay 'the shortfall (up to a maximum of $17,288) and interest' without identifying the amount to be paid or the 'third party confirmation', which is 'appropriate' or 'verifies' the claim. (ii) in respect of the Deed of Release [clause 2(d)] the matters, against which the applicant is required to release the respondents are not defined. The applicant does not know what they are. Neither does the Court. As to the UK pension entitlement, the applicant does not know whether the respondents have failed to pay the pension in the UK in other years. If they have there is an entitlement there. 38 The offer was contingent upon a number of matters eg production of "appropriate third party confirmation": Thus it would fail to bring proceedings to an end on acceptance, as is 'ordinarily' required for a valid offer of compromise [ SMEC Testing Services P/L v Campbelltown CC (2000) NSWCA 323, Priestley JA at [29]. An offer, which requires further negotiation between the parties is thus invalid [ MT v Aqua-max (No 3) (2000) VSC 163 at para 56]. (c) the offer is expressly made only by the third respondent, although all three respondents were alleged by the applicant in his Summons to be jointly or jointly and severally liable to the applicant. (d) The offer was not capable of proper assessment, acceptance or implementation by the applicant without extracting a further agreement/compromise from the third respondent in respect of his UK pension shortfall and the terms of any Deed of Release. 39 In view of other steps needing to be taken, the offer could not be properly assessed by the applicant within the 28 days specified for its acceptance. The respondent was not willing or able to comply with its offer without "appropriate third party confirmation" as to the shortfall in the UK pension payments. (g) For a respondent's unaccepted offer to give rise to a cost entitlement, the applicant must have received an order not more favourable than the terms of the offer on the claim, to which the offer relates [r 216(6)]. Consequently the offer must relate to the claim made by the applicant against the respondent offeror. The whole idea of an offer of compromise is that it be directed specifically to the relief that is being sought by the applicant and that it provide a clear, concise response to it such that this Court can see in the circumstances whether or not the offer has been defeated or not. 40 Only the third respondent was party to the offer, which included an apparently all-embracing release. (h) A valid offer of compromise must be unambiguously clear in its terms [ Grbavac v Hart (1997) 1VR 154 at 154 ( Winneke P) and 160-2 ( Tadgell JA). Indemnity Costs - Submissions - Applicant 41 In relation to costs the respondent has failed to identify the principle of law that he seeks to apply to disturb the usual order. 42 The respondent has suggested that what should activate the Court's discretion to disturb the usual order is the unreasonableness, as he puts it, of the conduct of the applicant. Conduct unrelated to the determination of the legal issues which one might criticise in the applicant would not lead to penalising him in some way by an order for costs. 43 The only way in which the conduct of a party outside of the proceedings, that is his dealings with the respondent prior to the commencement of the proceedings, could have any influence is if he has initiated proceedings without any foundation. Clearly that is not the case here. The applicant had the foundation to initiate the proceedings. He succeeded in obtaining an order for variation of the contract and the payment of money. 44 The only other way judicial consideration activating the discretion to award indemnity costs in the way the respondent seeks to have it, is unreasonableness in refusing an offer of compromise or an offer of settlement. That either has to fall within the well recognised principles of Calderbank or the Rules concerning an offer of compromise or it has to amount to misconduct of the nature that McHugh J referred to in Oshlack v Richmond River Council (1998) 193 CLR 72. 45 The size of the initial claim in the summons is not what one looks at. What one looks at is the factual and legal issues that are before the Commission and whether factually and legally the applicant has succeeded. The applicant came to this Commission claiming that in the circumstances of the termination of his employment with the respondent that the contract was manifestly unfair and that is what has been found. One does not go through the pleading with a score sheet, working out a win for one side and a win for the other and dotting them up to see who won (see Dodds Family Investments Pty Ltd (formerly Solar Tint Pty Ltd v Lane Industries Pty Ltd (Dodds) (26 IPR 261 at 271-272); Gambotto v John Fairfax Publications Pty Ltd (Gambotto) [2001] NSWIRComm 249 at [6]). 46 The respondent on a number of occasions in submissions in writing and orally, complained that the bonus issue was something not apparent on the pleadings as an initial approach and indeed it was suggested that it was somehow late in the proceedings it came to light. It was certainly clearly spelt out at paragraph A4(d) of the summons. In D(6) the specific claim is made as far as is relevant to the summons, as to the appropriate bonuses with respect to 1995/96 financial year. Of course that is a larger amount than ultimately found due to the findings concerning the starting point of calculation of the bonus, and the salary reference point. But nonetheless it is quite clear that issue was available and well known from the start. The bonus point is referred to in Mr Grinberg's affidavit, as far ago as November 1999 and in Mr Pym's and in Ms Sibree's evidence on 16 March 2000. 47 Of course it is only a particular issue manifested in the contract, and just because there is one specific item that refers to it, does not mean the whole case does not require consideration in order to deal with that point. It is a question of how unfairness in that contract is manifested by the conduct of the respondents on the termination of the applicant and that requires a consideration of all the circumstances. The evidence presented is evidence that would have been required in large part even if the case had been truncated. 48 Before the hearing even commenced the applicant had to assess his position on the available material and that available material was various statements of evidence from various persons to be dealt with and each one of those statements gives a version of the events leading up to the termination of his employment. They are not discrete on particular issues. It was not the case where one could point to a particular issue and say well, it is only this witness required. 49 Even though an order was not made in relation to the UK pension, that is also a live issue that needed to be ventilated in the proceedings and the finding the Court has made in relation to it, did give some relief in the form of issue estoppels to the applicants even though they are not reflected in the orders for payment. 50 The phrase "without merit" in the judgment does not mean that prior to the commencement of the hearing that there was no foundation at all for the applicant to bring his claim on any particular point. It simply means after a hearing of the evidence, examination of those persons put forward, the evidence from each side and analysis by the Court, that it was found against the applicant on those points. Those are benefits that the respondent has and has now with hindsight. 51 The hearing went quickly in terms of the evidence once it actually got on. There were two days lost in that week due to the respondent's application which was admittedly not contested. It would be quite unfair to label those days as being days for which the applicant was responsible. 52 Furthermore, there was a notice of motion which was unsuccessful in the proceedings and costs have not been dealt with in relation to that. The fact is again the usual rules should apply. The respondent was unsuccessful in his application which was not just an application to strike out for want of prosecution. It was also an application to have evidence heard on commission in relation to various witnesses. A compromise of teleconferencing was put forward by the applicant to enable that evidence to be dealt with and it was never taken up. One wonders from the way the evidence was led why the need for that application at all. Costs - Submissions - Respondent - In Reply 53 The evidence the respondents said from the outset would be called was exactly the evidence that was called to the extent then stated. 54 The applicant put the specific submission that Gillard J's judgment in White as part of the ratio decidendi, found that an offer of compromise in terms including a deed of release, could not be taken into account as a Calderbank letter. What his Honour said was obiter dicta in the classic sense. A deed of release is an acceptable term in an offer of compromise. 55 The respondent seeks the variation from the standard orders because firstly the proceedings were commenced as a result of a post termination disagreement, that is the finding of the Commission in the proceedings. The matter had been resolved. Costs of the litigation were substantial costs, and had no or negligible value on the outcome. The respondent was required to incur specific and substantial expenses meeting a claim that the Commission found to be without merit. The one matter the Commission found to have merit was at the very best disguised in the summons. It was a matter that took up no time whatever in the proceedings. 56 There was some criticism about the decision by the respondent not to proceed with video evidence. That is one of the forensic decisions counsel made. Ms Sibree, Mr Williams, Mr Weston and Mr Grinberg were critical witnesses. It was counsel's assessment of the case that the most efficient way of taking their evidence would be to have their evidence taken overseas rather than bring them all here, particularly because the majority of them, or most particularly Mr Weston, at the time were not in the employ of the respondents. 57 The amount awarded in the face of this litigation, which made a claim for $790,000, was exactly that, nominal. 58 The appropriate order would be an order for costs in favour of the respondent on a party to party basis to the time of the offer of compromise and an indemnity basis thereafter. Legislation 59 Insofar as is relevant, rule 216, of the Industrial Relations Commission Rules 1996 provides: RULE 216 OFFER OF COMPROMISE 216(1) [Assessment of costs] 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. 216(2) [Term re costs in notice of offer] 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. … 216(6) [Offer made by respondent] 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. Offer of Compromise/Calderbank Letter - Consideration 60 In Mitchell-Calvert v Yahoo Inc No 2 (Yahoo) [2001] NSWIRComm 162, Kavanagh J considered a respondent's application for indemnity costs in the light of making an offer in a Calderbank letter. She first set out some general rules: 19 Some general rules do apply, namely: it is generally conceded costs follow the event (see Latoudis v Casey (1990) 170 CLR 534 (at 543, 561, 568); Moamba Bowling Club Limited v Armstrong (No 2) (1995) 64 IR 264 (at 267); Boland v SAS Trustee Corporation (1999) 97 IR 127 (at 164) per Hungerford, Marks and Schmidt JJ; McEwen v AISC Limited [2000] NSWIRC 68, at 7. Costs should be on a party and party basis. Only special or unusual features will justify an order on any other basis: Anderson v Boner (1993) 52 IR 114 at 199; Colgate-Palmolive Co v Cussons Pty Limited (1993) 46 FCR 225 at 232-234; Bankstown City Council v Paris (1999) 93 IR 209. 20 The latter general rule is reflected in s 216(6) of the Industrial Relation Commission Rules which refers to an offer made by the respondent and refers to an order of costs on a party/party basis. 21 In Messiter v Hutchinson (1987) 10 NSLWR 525 (at 528), Rogers J commented a Calderbank offer "should influence but not govern the exercise of the discretion." 22 It was generally conceded the decision of the Court must be made on the facts before it. 61 In that case Kavanagh J found that the time limit contained in the Calderbank letter was unreasonable and refused the application for an order for indemnity costs. 62 In Burgess, Schmidt J considered the requirement for a deed of release and stated: 65 I am not satisfied that a requirement for the terms of the settlement to be included in a deed of release is to impose a condition of a kind which made the applicants' rejection of the offer a reasonable one. This is such a commonplace incidence of settlement arrangements in modern litigation, that the fact of such a requirement alone, in my view, is not a proper basis for disposal of an indemnity costs argument. It may well be in a particular case, for example where there was a dispute as to particular terms proposed in a deed, that a view would be taken that the rejection of the offer was a reasonable one in the circumstances. In this case, however, the only problem averted to was the requirement for confidentiality of the settlement to be maintained. 63 I adopt the views expressed by Schmidt J. 64 I did not find the decisions in Fox or Smarzak of direct assistance on this point. 65 In Macivor v Hilton Nursing Home Pty Ltd [2001] NSWIRComm 56 (unreported, Schmidt J; IRC97/513 and 1788; 10/5/01), Schmidt J dealt with a respondent's offer of compromise considered on a Calderbank basis in a matter where the unsuccessful respondent sought, and was awarded, costs against the applicant. She said: 27 … Similarly in a Calderbank letter, the consequences of refusal of the offer, in the context of costs in the proceedings, is usually explicitly dealt with. (see Calderbank v Calderbank [1976] Fam 93). … 32 Under s 181 of the Act, the Court plainly has the power to order costs on other than on the usual basis as a matter of discretion. I have recently outlined the authorities which deal with this point in Lane v Commonwealth Bank [2001] NSWIRComm 57. That power might be exercised in the context of a 'Calderbank' letter, for example, it being undoubted that there is a general public interest in the encouragement of settlements and there being a general discretion as to costs in the Court. … 34 The Court has a discretion to award costs on the basis sought, as a departure from the usual rule. Section 131 of the Evidence Act 1995 now expressly deals with such offers being received in evidence in relation to the question of costs. The position of a Calderbank letter is rather different to that of an offer of compromise made in accordance with Part 23 of the Rules, which gives the party who made the offer certain rights as to costs, which the recipient of the offer may seek to dislodge. A Calderbank letter, on the other hand, provides but a basis for the maker of the offer to ask the Corut to exercise a discretion in its favour as to costs. 66 One exception in the Evidence Act 1995 to the exclusion of evidence of settlement negotiations is that in s 131(2)(h): the communication or document is relevant to determining liability for costs. 67 As described by Boland J in Ballard v Incoll Management (No 2) [2001] NSWIRComm 217 at [9]: A Calderbank offer is a formal offer to settle the case, together with a warning that, in the circumstances of such an offer by the respondent, if the applicant does not achieve a result in the proceedings which is more favourable to the applicant than the offer made, the offer will be disclosed to the court in the context of the question of costs. … A Calderbank offer may be taken into account in the exercise of the court's discretion in determining whether a special order displacing that which generally obtains of costs following the event should be made: Messiter v Hutchinson ( Messiter ) (1987) 10 NSWLR 525. The qualification placed on this in Messiter by Rogers J was that a Calderbank offer "should influence but not govern the exercise of discretion". … The applicant was aware of the offer of compromise from 3 November 1999 but the offer did not take the form of a Calderbank offer until 6 November 1999. The offer remained open until 5.00 pm on 12 November 1999. … I note that the period prescribed by r 168(3) of the Commission's Rules for acceptance of an offer of compromise is not less than 28 days. The authorities, however, are clear that Court Rules in relation to offers of compromise do not constitute a code so that if a party wishes to obtain a cost advantage from an offer of compromise its only course is to invoke the provisions of Pt 23 so as to attract the provision of Pt 27 r 216 of the Industrial Relations Commission Rules : see for example Macquarie Bank Ltd v National Mutual Life Association of Australia Ltd (SC(NSW), 27 July 1994, Cole J, unreported, at 3-4). 68 In Burgess v Mount Thorley Operations Pty Ltd (Burgess) [2003] NSWIRComm 22, Schmidt J considered the position of a Calderbank letter: 58 As was explained by Rolfe J in Multicon Engineering Pty Ltd v Federal Airports Corporation ( Multicon ) (1996) 138 ALR 425 at p 441 and followed by Boland J in Ballard v Incoll Management (No 2) ( Ballard ) [2001] NSWIRComm 217: In my opinion the proper approach to take to an Offer of Compromise, whether made under the Rules or pursuant to a Calderbank letter, is that there should be a prima facie presumption in the event of the offer not being accepted and in the event of the recipient of the offer not receiving a result more favourable than the offer, that the party rejecting the offer should pay the costs of the other party on an indemnity basis from the date of the making of the offer. I proceed on the basis that the unreasonableness was the failure by the offeree to accept the offer, which unreasonableness is demonstrated, prima facie, by the ultimate result. … My understanding is that the Court is required to proceed on the basis that it should make the order provided for by the Rules, unless the party rejecting the offer is able to establish good reason for having done so. … 62 The making of an offer in the form of a Calderbank letter does not mean that the Court has no discretion to decline to make the indemnity costs order sought, indeed, to the contrary, the making of such an order is a discretionary matter, as I have discussed in Bell & Berg v Macquarie Bank & Anor [2003] NSWIRComm 21. I do not repeat that discussion here but adhere to the views there expressed. Nevertheless, it falls upon the applicants to establish that it was not unreasonable for them to have rejected the offer. 69 Multicon Engineering Pty Ltd v Federal Airports Corporation (1996) 138 ALR 425 was referred to by Hamilton J in Grynberg v Muller; Estate late M Bilfeld [2002] NSWSC 350 at [35] where he said: 35 It is wrong to say, as stated in the second defendant's written submissions, that "it is now trite law that [there is] a presumption that an order for indemnity costs should be made if an offer of settlement was made, rejected and not bettered." There was a suggestion to that effect in Rolfe J's decision in Multicon Engineering Pty Ltd v Federal Airports Corporation (1996) 138 ALR 425 at 451. Whilst that decision was not specifically mentioned in SMEC Testing , any suggestion that there is such a presumption cannot now be supported in New South Wales in the face of that decision. The proposition had already been rejected in the Federal Court by Hill J in John S Hayes & Associates Pty Ltd v Kimberley-Clarke Australia Pty Ltd (1994) 52 FCR 201 and by Lindgren J in MGICA (1992) Pty Ltd v Kenny & Good Pty Ltd (1996) 70 FCR 235. Those decisions appear to be approved by the Court of Appeal in SMEC Testing . … 70 On the other hand, the observations of Rolfe J in Multicon were agreed with by Gillard J in MT Associates Pty Ltd v Aqua-Max Pty Ltd (No 3) (2000) VSC 163 94/8017; 3/5/00, his reasons for doing so including the following: [72] Courts should encourage litigants and that means litigants on both sides of the record to make offers to compromise the litigation. … … [73] In this day and age litigation in this court is expensive. … They [lawyers] should be encouraged to reduce costs. … [74] In my opinion any form of offer assuming it can be adduced into evidence should be considered by the court on the question of costs and overly technical reasons given by the other party for not seriously considering an offer should be rejected. … [75] … Some proposals will involve discussions and negotiations between the parties. But any litigant and his adviser who takes the view that the proposal or offer can be ignored on some technical ground does so at their own risk. 71 While I sympathise with the sentiments expressed by Gillard J, the refusal of the offer by the applicant in this case was not based on merely "some technical ground" but was, for reasons I set out later, reasonable. Offer of Compromise/Calderbank Letter - Conclusions 72 I do not propose to consider the issue of the offer of compromise in any detail because overall I accept the applicant's submission that an effective offer of compromise was not made to the applicant. As was stated by Gillard J in White at [17] "the terms of the offer must be clear, precise, certain and capable of acceptance". The terms of the respondent's offer could not be so described. 73 The sum of $17,288 in the offer of compromise was not an acceptance of an amount up to the total of the claim by the applicant as was submitted by senior counsel for the respondent. The offer was hedged with conditions. 74 The term in the Offer of Compromise that the applicant should provide third party verification of the shortfall in the UK pension contributions was one, in my view, that, in the circumstances, vitiated the offer. Certainly the applicant's claim was for $17,288. However, my understanding of the evidence is that he had earlier experienced difficulties in ascertaining the precise amount of the shortfall and had relied on the figures provided by one of the respondent's financial officers in making his claim. 75 To be a reasonable offer to the applicant that term would have had to be unconditional. It was not unreasonable of him to refuse the offer. 76 However, in my view, the Offer of Compromise/Calderbank offer each suffers from another fatal defect. 77 The very fact that it was made only by the third respondent is sufficient to reach that conclusion. At the time the offer was made, the decision by the Court that the third respondent was in fact the applicant's employer and that neither the first or second respondent was, was far into the future. Claims for costs could have been made against the applicant by those other respondents. 78 The Court finds: 1 The offer of compromise dated 22 August 2001 by the third respondent was ineffective as an offer of compromise; 2 The offer of compromise dated 22 August 2001 by the third respondent was ineffective in terms of being a Calderbank letter. Indemnity Costs - Consideration 79 Although dealing with the issue of indemnity costs on appeal, a Full Bench of the Commission (Bauer, Peterson and Marks JJ) in Australian Mutual Provident Society v Avis (AMP) (unreported; IRC96/5473 and 5941; 18/12/97), provided, at p 72, assistance as to general principles: Despite certain decisions (referred to by Hill J in Boner v Anderson (No 2) to the effect that there should be an increased tendency towards the awarding of indemnity costs, we consider that there is still in existence and operation a general approach to the effect that costs will be normally awarded on a party-party basis with indemnity costs to be awarded in the more exceptional case where conduct of a party justifies it. … The view of Morling J in the Tobacco Industry Case , consistently with our thinking, was that fierce opposition to the claim was insufficient to ground indemnity costs; something more is needed. It seems to us that findings that the applicant should succeed under s 106 with respect to conduct which is unfair, harsh or unconscionable would be insufficient to meet that test. Further, the fact that the respondent has acted in a way which justifies the application of the section would equally be insufficient. 80 Seven principles were set out by Wright J, President in Tuholi Pty Ltd v Caltex Petroleum Pty Limited [(2001) 103 IR 392 at [40] ], to be applied in the consideration of claims for indemnity costs. Those principles were agreed to by the Full Bench (Wright J, President, Walton J, Vice-President, Hungerford J) in WorkCover Authority of New South Wales (Inspector Dawson) v Plastachem Pty Ltd [(2001) 110 IR 351 at [56] ]. I do not set them out but apply them. 81 The respondent relied upon the minority decision of McHugh J in Oshlack v Richmond River Council (1998) 193 CLR 72 at [69]: 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 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, or the circumstances leading up to the litigation. 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; unnecessarily protracts the proceedings; succeeds on a point not argued before a lower court; prosecutes the matter solely for the purpose of increasing the costs recoverable; or obtains relief which the unsuccessful party had already offered in settlement of the dispute. 82 In the context of "misconduct" in the terms used by McHugh J at [69] those of any relevance to the present consideration are "succeeds on a point not argued" and "obtains relief which the unsuccessful party had already offered in settlement of the dispute". 83 Of particular relevance, also, is his statement that: 70 Apart from anomalous examples in the equity jurisdiction, 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. However, this practice can be justified on the basis that, in reality, the successful party lost the litigation and the unsuccessful party won …" 84 For all practical purposes it appeared to be common ground, as was stated by senior counsel, that if the offer of compromise that is relied on by the respondent is an offer of compromise, then prima facie the position that the Court would adopt would be that the respondents would pay the applicant's costs up to the date of offer of compromise on a party and party basis and thereafter the applicant would pay the respondent's costs on a party and party basis. Both parties would agree it is a matter within the discretion of the Court that it is a prerogative rule not an absolute rule, and it is a matter for the Court what order it will make as to costs. 85 I have held that it was not unreasonable for the applicant to refuse the respondent's offer of compromise/Calderbank letter. 86 The applicant submitted that in determining the issue of costs, the Court would not go through the pleadings with a score sheet, totting up wins and losses for each party. 87 In Dodds at p 271 the Federal Full Court noted that: In Trade Practices Commission v Nicholas Enterprises Pty Ltd (No 3) (1979) 42 FLR 213; 28 ALR 201, Fisher J regarded the discretion to apportion costs as one to be exercised only in the most exceptional circumstances. Nevertheless he accepted that where a considerable part of the trial is taken up in determining issues upon which a party fails, it is a proper exercise of the discretion to reduce the costs allowed to that party. … Where there is a mixed outcome in proceedings, the question of apportionment is very much a matter of discretion for the trial judge. Mathematical precision is illusory and the exercise of the discretion will often depend upon matters of impression and evaluation. His Honour's determination that in this case [at first instance] there should be no order as to costs was explicitly based upon his rough assessment of the time occupied at trial by the various issues in dispute. No reason for overturning the exercise of that discretion has been demonstrated and the court is satisfied that the appeal fails on this ground also. 88 In Waters v P C Henderson (Australia) Pty Limited (Waters) (unreported; BC9404952; NSWCA; 6/7/94) at p 5, Mahoney JA said: I do not think that it would have been appropriate for his Honour to attempt to determine which issues were won by particular parties, to what extent they were won, and what was the amount of time spent on each of the issues so as to apportion costs accordingly. I think that would have been contrary to the trend of decision in relation to the exercise of discretion as to costs. 89 Although he agreed with the conclusions reached by Mahoney JA, Priestley JA at p 6 expressed some hesitation in one area: The reason for this is that, in light of the analysis of the issues which were fought before the referee which was made in this Court, I thought there was considerable force in the submissions for the appellant that it would have been not a particularly difficult task to make a quick evaluation of distinct issues that were before the referee and to make a somewhat more particular costs order than the trial judge thought appropriate. … In the present case the trial judge took what might be called the global view as against the more particular view which the appellant contended was the correct approach to take. Had the more particular view been taken by the trial judge and analysis made of the three principal issues which were before the referee, then somewhat different costs orders may have been made. … In circumstances where a trial judge has to make a choice between the global approach, which was followed by the trial judge here, and the more particular approach, one consideration to be taken into account is whether the exercise of going into the issues with more particularity than the global approach requires is going to be worthwhile, in the sense of the amount of time effort and general lawyer hours spent, when compared to the possible difference in result. 90 In Gambotto at [12] Peterson J concluded: I find it impossible to view the applicant's partial success in defending the motion as one which ought be treated as full success in the sense that she should have her costs of defending the motion paid by the respondent. The fact of the matter is that the respondent has been, according to my view of things, successful to a significant degree using the test of "impression and evaluation" (per R D Nicholson J in Gabor Martin Nagy and Anor v Master Dairy Ltd [1988] FCA 104). I consider that a just result would be that the applicant should have 70 per cent of her costs on the motion as agreed or assessed. 91 In relation to the offer of compromise/Calderbank issue, the applicant has added into its calculations an amount in relation to the UK national insurance payments in order to sustain its submission that the money orders it achieved were comparable with the offer of compromise. 92 The applicant's claim for loss of United Kingdom national insurance benefits was quantified in the particulars in its Amended Summons as being $17,288.00. According to Mr Burchett, the $17,288 claim was an amount which found its way to the summons and had come from a calculation made by the UK officer of the respondent. There has not been an acceptance by the applicant of that amount. The applicant has put forward proof that may well prove its calculations viable to come to that figure of $17,000-odd, which was rejected after all by the respondents and the applicant still does not know the amount. 93 It was stated in the substantive judgment at [203] that it was common ground that KPMG Legal had the sum of $25,000 in its trust account for the applicant's benefit in the event that independent verification is provided of the shortfall, if any, in the applicant's UK pension fund. 94 In the light of the facts that the applicant's claim was for $17,288, that that figure had not been amended nor any shortfall identified, and the availability of $25,000 in the solicitor's trust account, the Court found no unfairness. The requirements of s 105 not having been satisfied, no order could be made pursuant to s 106. 95 I find that neither the amount of $17,288 nor that of $25,000 is available to be taken into account as an amount ordered by the Court to be paid to the applicant. 96 In the present proceedings, the applicant failed on all the substantive issues raised. The one issue upon which he succeeded required more of the Court's time during consideration of its decision to determine that the issue had actually been raised, and thus had to be decided, than the time taken in relation to it during the proceedings themselves. However, in relation to that issue, the respondent overlooks the fact that unfair conduct was alleged in that the respondent could have waived certain requirements. Contrary to the respondent's submission evidence was necessary to be led for the Court to come to its finding. What the Court said was: The applicant submitted the bonus scheme was unfair in that the applicant had to be still employed by Oracle at the trigger date for the payment of bonus. I do not see that such a requirement is inherently unfair. However, in circumstances where an employee leaves before that trigger date, other than by his own volition or for cause, that requirement can be the indicator of an unfair contract. That is particularly so in the present case where the services of the applicant were terminated because of redundancy. 97 For all practical purposes, in relation to the claim made, the applicant failed, whether or not that failure is referred back either to the substantive issues themselves or to the monetary amount claimed. That failure is one of the factors to be taken into account by the Court in the exercise of its discretion as to costs. 98 The issue of the costs of the respondent's Notice of Motion which was the subject of a judgment of the Commission dated 8 June 2001, was raised briefly by counsel for the applicant, but as to costs was not further taken up by the respondents. The judgment of 8 June 2001 made no reference to costs. 99 In the absence of submissions I make no decision in relation to costs as to that Motion, but I would expect, despite the experience that has led to the need for thus judgment, that the parties would be able to resolve that matter between them. Further Findings 3 The refusal by the applicant of the offer of compromise dated 22 August 2001, either as an offer or in the alternative guise of a Calderbank letter was reasonable and does not provide grounds for departing from the usual order as to costs; 4 Indemnity costs as sought by the respondent are refused. 5 The two days vacated become costs in the cause. Order 100 The Court orders that the third respondent shall pay 30% of the applicant's costs on a party and party basis such costs to be assessed under the Legal Profession Act 1987 in default of agreement. ************************** 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. 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