Industrial Relations Commission of New South Wales in Court Session CITATION : Shane Mitchell-Calvert v Yahoo Inc No. 2 [2001] NSWIRComm 162 APPLICANT: PARTIES : Shane Mitchell-Calvert RESPONDENT Yahoo Inc FILE NUMBER: IRC4135 of 1999 CORAM: Kavanagh J CATCHWORDS : As to costs - application by respondent for indemnity costs - consideration of the effect of Calderbank letter - costs within the discretion of the court in accordance with s181 - previous offer of compromise filed in accordance with IR Rules Part 23 r168 - question as to whether applicant's refusal to accept the offer was unreasonable - guidance from IR Rules Part 27 r216 - Order given in the interest of justice for applicant's costs up to the date of Calderbank letter on party/party basis LEGISLATION CITED : Industrial Relations Act 1996 Multicon Engineering Pty Ltd v Federal Airports Corporation 138 ALR 425 CASES CITED : Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 Messiter v Hutchinson (1987) 10 NSWLR 525 HEARING DATES: 07/10/2001 EXTEMPORE JUDGMENT DATE : 07/13/2001 APPLICANT: Mr I.M. Neil of counsel SOLICITORS: Haywards Ms P. Costigan LEGAL REPRESENTATIVES: RESPONDENT: Mr R.A. Dick of counsel SOLICITORS: Phillips Fox Ms D.M. Healy JUDGMENT: - 9 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES IN COURT SESSION CORAM: KAVANAGH J Date: Friday 13 July 2001 IRC4135 of 1999 SHANE MITCHELL-CALVERT v YAHOO INC Application under s106 of the Industrial Relations Act 1996 EX TEMPORE JUDGMENT (No 2) [2001] NSWIRComm162 1 HER HONOUR: In handing down judgment in the matter of Shane Mitchell-Calvert v Yahoo Inc [2001] NSWIRComm136 on 22 June 2001, a costs application was made to the Court in relation to Order No. 7 and I deferred Order No. 7 of my judgment as to costs. 2 The matter comes back before me for the hearing of the application by the respondent for an Order: The applicant pay indemnity costs of the respondent from 27 February 2001. 3 An interpretation of some of the Orders in Judgment also canvassed but the only outstanding issue is the issue as to Costs. 4 Mr I.M. Neil of counsel represented the applicant and Mr R.A. Dick of counsel represented the respondent in relation to this application. 5 The respondent, in support of its application, relies upon a letter of settlement offer known as a "Calderbank" letter and also an Offer of Compromise filed in the Industrial Relations Commission in accordance with its Rules. The respondent also relies upon an affidavit of Ms Judith Mary Healy, solicitor, sworn 9 July 2001, an affidavit of Mr Carl Statkiewicz sworn 3 July 2001, and an affidavit of Mr Darren Gocher sworn 9 July 2001. 6 The applicant in opposing any costs order against it and making an application for its costs on a party/party basis relies upon three affidavits of Ms Petrine Costigan, solicitor, two sworn 10 July 2001 and one sworn 6 July 2001. 7 It is agreed between the parties an Order for Costs is within the Court's discretion (see s181 of the Industrial Relations Act 1996). 8 The Offers of Settlement in this matter are relevant: - On 24 January 2001 the respondent gave notice of an Offer of Compromise filed in the Industrial Relations Commission in accordance with Part 23 of the Commission's Rules. That notice states it: . . . will be relied on in respect of the question of costs. - On 27 February 2001, a Calderbank letter was written to the applicant in the following terms: 1. The Respondent pays to the Applicant the following sums: (a) the sum of $US . . . representing 2 months options for the 'original stock grant' and calculated by using the figures appearing in the schedule forwarded to us by facsimile by you on 22 February 2001; (b) the gross sum of $ . . . representing 2 months' remuneration; (c) interest on the amount referred on the amount referred to in 1(a) and (b) in accordance with the Supreme Court Act . 2. The Respondent to pay the Applicant's costs as assessed or as agreed. 3. This offer is open for acceptance until close of business on 5 March 2001. This is a Calderbank offer. The Respondent intends to rely upon this offer in respect of an application for indemnity costs from the date of the offer. (emphasis added) - On 23 February 2001, the applicant sent a letter of Offer to the respondent. - On 28 February 2001, the applicant sent a further Offer of Settlement. This was sent one day after the Calderbank letter from the respondent. It does not acknowledge the receipt of the Calderbank letter from the respondent. The offer of the applicant to the respondent of 28 February 2001 also notes: This is a Calderbank offer. The applicant intends to rely upon this offer in respect of the application for indemnity costs from the date of the offer. (Emphasis added) The Submissions 9 The respondent submits the offer of settlement contained in the Calderbank letter was more favourable to the applicant than the Orders of the Court in Judgment in that: (a) the offered amount of two months' worth of stock options is higher than the amount awarded under the judgment; (b) the offer of two months' salary was in an amount higher than: (i) that claimed by the applicant (judgment, para2); (ii) that which is payable based on a salary of $50,000 p.a. (judgment, para 9); (c) if he had accepted the offer the applicant would not have incurred further legal costs including inter alia costs of the hearing. 10 The respondent further submits that the court should order costs to the respondent on an indemnity basis as the applicant's refusal to accept the offer was unreasonable. 11 The respondent submits the last offer of settlement made on behalf of the applicant to the respondent, one day after the Calderbank letter, indicates the applicant was seeking a payment greater than that achieved in the litigation. Such, the respondent submits, is a demonstration of the unreasonableness of the applicant's refusal. 12 The applicant submits he was successful in every material respect of his claim and in accordance with the general rule he is entitled to an order that the respondent pay his costs on a party/party basis. 13 As to the Calderbank offer, the applicant submits: (a) the respondent did not utilise the procedure in accordance with r 168 of the Industrial Relations Commission; (b) the respondent waited until a few weeks before the hearing and then made an offer which was only open for four working days, which is against the spirit of r 168(3) which requires in accordance with the Rules, that offers be open for twenty-eight days; (c) it cannot be held to be unreasonable to fail to accept an offer where the matter in issue depends entirely on discretionary considerations. 14 In general, the applicant submits the Court should not depart from the general rules, which rules would allow an order for the applicant to receive his costs on a party/party basis. Consideration 15 Relevant to this consideration are the Rules of the Industrial Relations Commission, especially, Part 23 Rule168(1) to (9) and Part 27 Rule 216(1) to (6). RULE 168 TIME FOR MAKING OR ACCEPTING OFFER 168(1) [Time] An offer may be made at any time before the rime prescribed by subrule (8) in respect of the claim to which it relates. 168(2) [Multiple offers] A party may make more than one offer. 168(3) [Time limited] An offer may be expressed to be limited as to the time it is open to be accepted but the time expressed must not be less than 28 days after it is made. 168(4) [Written acknowledgment of receipt] An offeree must, within 3 days after service, serve a written acknowledgment of receipt on the offeror. 168(5) [Notice of acceptance] An offeree may accept the offer by serving notice of acceptance in writing on the offeror before: (a) the expiration of the time specified in accordance with subrule (3) or, if not time is specified, the expiration of 28 days after the offer is made; or (b) the time prescribed by subrule (8) in respect of the claim to which the offer relates, whichever is sooner. 168(6) [Withdrawal of offer] An offer must not be withdrawn during the time it is open to be accepted, unless the Commission otherwise orders. 168(7) [Reciprocal offer] An offer is open to be accepted within the period referred to in subrule (5) notwithstanding that during that period the party to whom the offer (the 'first offer') is made makes an offer (the 'second offer') to the party who made the first offer whether or not the second offer is made in accordance with this Part. 168(8) [Prescribed time] The time prescribed for the purposes of subrules (1) and (5) and Rule 216(3) is after the Commission or Registrar gives a decision or begins to give reasons for a judgment (except an interlocutory judgment). 168(9) [Order in accordance with compromise] Where an offer is accepted under this Rule, a party to the compromise may request the Commission or Registrar to order in accordance with the compromise. 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 orders otherwise, be of no effect for any purpose under Part 23 of this Rule. 216(3) [Offer not accepted] Subrules (4)-(7) apply to an offer which has not been accepted at the time prescribed by Rule 168(8). 216(4) [Offer made by applicant] 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. 216(5) [Applicant's entitlement] 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 11am 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. 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. 16 I am further guided in my consideration by some authorities. Rolfe J in Multicon Engineering Pty Ltd v Federal Airports Corporation 138 ALR 425 canvassed many of the significant authorities as to orders for costs in similar circumstances. However, he added an addendum to his judgment which was quite significant (at 455): Since preparing these reasons the decision of the Court of Appeal in Ettinghausen v Australian Consolidated Press Ltd (1995) 38 NSWLR 404 has come to my attention. The majority decision supports the view that Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 sets forth the policy underlying the relevant rules. . . . 17 Rolfe J, who ordered indemnity costs, relied upon the view of Giles CJCommD in RT Thomas & Family Pty Ltd v Jeffries Industries Ltd (SC(NSW), 2 February 1996, unreported at 3) who referred to the "prima facie entitlement to indemnity costs" (see Multicon at 444). In Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 the Court of Appeal held (at 724): It is the obvious intention of the rule to oblige a defendant, which has received an offer of compromise, to give serious thought to the risk which it may run of losing the proceedings and then being ordered to pay costs on an indemnity basis. The objects of the rule include: (1) to encourage the saving of private costs and the avoidance of the inherent risks, delays and uncertainties of litigation by promoting early offers of compromise by defendants which amount to a realistic assessment of the plaintiff's real claim which can be placed before its opponent without risk that its 'bottom line' will be revealed to the court; (2) to save the public costs which are necessarily incurred in litigation which events demonstrate to have been unnecessary, having regard to an earlier (and, as found, reasonable) offer of compromise made by a plaintiff to a defendant; and (3) to indemnify the plaintiff who has made the offer of compromise, later found to have been reasonable, against the costs thereafter incurred. This is deemed appropriate because, from the time of rejection or deemed rejection of the compromise offer, notionally the real cause and occasion of the litigation is the attitude adopted by the defendant which has rejected the compromise. In such circumstances, that party should ordinarily bear the costs of litigation. These comments were made in a reading of the NSW Supreme Court Rules. 18 It has further been held in the matter of Pendergast v Tony Blain Pty Ltd [2000] NSWIRComm107 that the making of an offer of compromise under the Rules or an offer in a Calderbank letter should be taken into account by this Commission in the exercise of its discretion. 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) (Tab A); 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 (Tab B); Colgate-Palmolive Co v Cussons Pty Limited (1993) 46 FCR 225 at 232-234 (Tab C); Bankstown City Council v Paris (1999) 93 IR 209. 20 The latter general rule is reflected in s216(6) of the Industrial Relations 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 NSWLR 525 (at 258), 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. 23 The Calderbank offer, putting aside the figures referred to, was, in its terms almost a mirror image of the Orders of the court. The reason I say "putting aside the figures referred to" is this Court, in the hearing, was inundated with a mass of possible alternative values to the claim. Values were calculated in Australian dollars, US dollars and at different conversion rates. They were also different dates canvassed for the calculations such as the date of the offer or the date of termination or the date the summons issued, etc. The court found two months was a just measure for an award of compensation through salary and other payments. The Calderbank offer reflected the two month time frame. However, the Calderbank letter provided only a four-day opportunity for its consideration by the applicant. The evidence as it stands does not persuade me the applicant's offer sent the day after the Calderbank letter was sent indicates the applicant had any knowledge of the Calderbank offer so I reject the submission this Offer of Settlement should be taken into account in assessing the reasonableness. 24 The Court, in the use of its discretion, must determine that the applicant's refusal to accept the offer was unreasonable. 25 I find the time limit term contained in the Calderbank letter was unreasonable. I make this finding in the context of the respondent, prior to this Offer, having filed a formal Offer of Compromise under the Rules. It can be concluded the respondent was aware of the "not less than 28 days" standard set in the Rules of this court allowed for the consideration of an offer. I am also guided by R216(6) which rule in its terms indicates an appropriate order for costs, if there be an Order no less favourable than the Offer, should be made on a party/party basis. 26 I reject the application of the respondent for an order for indemnity costs. I reject the alternate application that there be an order of party/party costs for the respondent. However, I find the Calderbank offer, in its terms, reflects the findings of the court and, had the applicant had sufficient time to consider the offer, quite lengthy litigation may not have proceeded. 27 I believe justice will be done by the following Order: The defendant pay the plaintiff's costs up to and including 27 February 2001 on a party/party basis. 28 The order I have given will read as Order No. 7 in the general orders of Judgment [2001] NSWIRComm 136 delivered on 22 June 2001. 29 I set the above date of 27 February 2001 acknowledging the authorities vary on whether it is appropriate to give such an order at the date of the offer or the date the offer expires. In this case, as it is only a margin of four working days, I intend to give it at the date the offer was made. 30 I use the slip rule in relation to paras 48 and 63 to insert the words "as indexed" after $62,200 and in relation to para 85 to alter the year mentioned from 2000 to 1999 (see L. Shaddock & Associates Pty Ltd v Parramatta City Council (No 2) (1983) 151 CLR 590; Sakr v Mercantile Mutual Insurance [2000] NSWCA 266; Vincent v Merrill Lynch (Australia) Pty Ltd [2000] NSWIRComm254; Rules of the Industrial Relations Commission of NSW, particularly r 151). DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.