Industrial Relations Commission of New South Wales in Court Session CITATION: Montresor v Astra Prestige Vehicle Service and Detailing Pty Ltd and Anor (No 2) [2005] NSWIRComm 343 APPLICANT Lorenzo Montresor FIRST RESPONDENT PARTIES: Astra Prestige Vehicle Service and Detailing Pty Ltd SECOND RESPONDENT Alfio Merlino FILE NUMBER(S): IRC 5995 of 2004 CORAM: Boland J CATCHWORDS: Costs - Unfair Contract - Application for costs against defaulting parties - Failure to file reply to summons - Alleged failure of respondents being properly represented in conciliation proceedings - Costs awarded on limited basis Industrial Relations Act 1996 LEGISLATION CITED: Industrial Relations Commission Rules 1996 Uniform Civil Procedure Rules 2005 Brasington v Overton Investments Pty Ltd [2001] FCA 571 CASES CITED: Montresor v Astra Prestige Vehicle Service and Detailing Pty Ltd and Anor [2004] NSWIRComm 312 HEARING DATES: 07/18/2005; 08/31/2005 DATE OF JUDGMENT: 09/23/2005 APPLICANT Mr M Walsh of counsel Solicitor: Mr D Carbone Carbone Lawyers LEGAL REPRESENTATIVES: RESPONDENT Mr De Meyrick of counsel JUDGMENT: INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES IN COURT SESSION CORAM: Boland J Friday 23 September 2005 Matter No IRC 5995 of 2004 LORENZO MONTRESOR v ASTRA PRESTIGE VEHICLE SERVICE AND DETAILING PTY LTD AND ANOR (NO 2) Application under section 106 of the Industrial Relations Act 1996 INTERLOCUTORY JUDGMENT (No 2) [2005] NSWIRComm 343 1 This judgment concerns an application by Lorenzo Montresor for costs. Mr Montresor, a Motor Mechanic by trade, has filed for relief in respect of what he has alleged is an unfair contract arising out of a relationship between himself and Astra Prestige Vehicle Service and Detailing Pty Ltd ("first respondent") and Alfio Merlino ("second respondent") whereby the applicant performed mechanical repair and servicing work for the respondents at a workshop in O'Riordan Street, Mascot. 2 The summons for relief filed pursuant to s 106 of the Industrial Relations Act 1996 alleged, amongst other things, that the applicant was underpaid wages over a two-year period. It appears from the summons that the applicant was a director of the first respondent. The second respondent, it seems, was also a director and secretary of the first respondent and held the main interest in that business. 3 In an interlocutory judgment given on 20 October 2004 (Montresor v Astra Prestige Vehicle Service and Detailing Pty Ltd and Anor [2004] NSWIRComm 312) the Court dealt with a notice of motion by the applicant seeking orders restraining the first and second respondents from disposing of or removing tools allegedly owned by the applicant from the workshop in Mascot along with certain personal effects. In an affidavit of urgency in support of the motion the applicant expressed concern that the tools and personal belongings, some of which were of great sentimental value, would be "dissipated". The tools were said to be worth $67,616 and the personal belongings $8,150. However, there were other items also being held by the respondents, including a rare photo of a 1956 Lancia-Ferrari that was of great sentimental value, the worth of which was inestimable. The Court made the following orders: 1 That the first respondent by its employees, agents, attorneys or otherwise are restrained from disposing of, or removing from Unit 5, 221 O'Riordan Street, Mascot NSW 2020 the items identified in Annexure "C" to the applicant's affidavit marked Exhibit "A" in the proceedings. 2 Order 1 shall apply until 4.00 pm on 12 November 2004 or until further order. 3 The applicant's notice of motion is relisted for hearing inter partes at 10.00 am on 11 November 2004. At that time the Court will hear any application for the order to continue to apply against the first respondent and whether it should be extended to the second respondent, provided the necessary service has been effected. 4 The applicant is to serve the respondents with copies of these orders by 4.00 pm Friday 15 October 2004. 5 Costs are reserved. 4 On 11 November 2004 the Court agreed to an adjournment of proceedings in order to allow the parties to undertake a stock take of the Mascot premises. Order 2 of the orders made on 20 October 2004 was extended to 26 November. On 30 November the Court was advised that the parties had reached an agreement on the terms of an order restraining the respondents from removing certain identified items from the Mascot premises. The parties also agreed to a timetable whereby the respondents were to file their Reply to the applicant's claim on or before 24 December and the applicant was to file his Response by 28 January. 5 The matter returned to the Court on 31 March 2005 at the request of the applicant. The respondents had defaulted on the order requiring them to file their Reply by 24 December 2004. The respondents were ordered to file and serve their Reply by 4.00 pm on 7 April 2005. Costs were awarded to the applicant in an amount of $1,660 payable within 14 days. Liberty was granted to the applicant to apply to proceed on an ex parte basis against the respondents if they did not comply with the order to file and serve their Reply. 6 The respondents again failed to comply with the orders requiring them to file a Reply by 7 April 2005. What was filed and served on that day were two affidavits, one by Mr Alfio Merlino and the other by Mr Phillip Andronicus Joannou, chartered accountant. Mr Merlino's affidavit had many pages of annexures, their relevance to a significant degree being unexplained. 7 The two affidavits fell well short of what is required to be filed as a Reply pursuant to r 18A of the Industrial Relations Commission Rules 1996. On 27 April the applicant's solicitor, Dominic Carbone, wrote to the second respondent seeking payment of the costs ordered by the Court on 31 March 2005. He received no reply. Mr Carbone again wrote to the second respondent on 10 May 2005 noting that the costs had not been paid and seeking the respondents' Reply by 5.00 pm 13 May 2005, otherwise the applicant would file a motion alleging contempt of court. 8 Mr Carbone's letter of 10 May was followed up by a phone call to Mr Renato Merlino an employee of the second respondent in which Mr Carbone sought payment of the costs. Having not received the payment promised in the phone call by 16 May Mr Carbone instructed counsel for the applicant to draft a Charge of Contempt together with the necessary motion and affidavit in support. On 17 May, Mr Carbone received a cheque for the sum of $1,660. On 19 May the applicant filed a notice of motion seeking the following orders: (i) The Second Respondent show cause why he should not be sighted (sic) for contempt of the Commission; (ii) That the First and Second Respondent abide by Rule 18A of the Commission's Rules and file a reply to the Summons for Relief pursuant to Section 106 within 7 days. (iii) That the costs incurred by the Applicant in bringing this Motion be paid on an indemnity basis. (iv) That such payment be made within 14 days. 9 On 24 May the applicant's motion came before the Court. As it happened, on that day the respondent's Reply was filed. The motion was stood over and costs reserved. The matter was listed for conciliation pursuant to s 109 on 18 July 2005. 10 In his affidavit in support of an application for costs, an affidavit which I must observe took on the form of a submission, Mr Carbone stated: On 18 July 2005, the matter came before his Honour Justice Boland for a Conciliation Conference pursuant to Section 109 of the Industrial Relations Act. The Second Respondent Alfio Merlino was not present at the Conciliation Conference. Counsel for the Respondents, Mr De Merrick (sic - De Meyrick), informed his Honour that Alfio Merlino was unable to attend as he was in Queensland on business. At a later point during the Conciliation, Mr De Merrick informed his Honour Justice Boland that Alfio Merlino was just outside Sydney, about an hour away, heading back to Sydney. The Respondents were represented by Mr Renato Merlino, an employee of the "Merlino Group". Alfio Merlino had notice of the date for the Conciliation Conference for a period of some 8 weeks. At no time prior to the Conciliation Conference did Alfio Merlino write to the Applicant or his solicitor informing him that he would be unavailable to attend the Conciliation Conference. Had Alfio Merlino informed the Applicant or his solicitor that he was unable to attend the Conciliation Conference on 18 July 2005, the Applicant would have consented to an adjournment of the Conciliation Conference to a date on which the Second Respondent was able to attend. The Conciliation Conference achieved very little as Alfio Merlino was not present to deal with any questions or comments his Honour Justice Boland may have wanted to make to Alfio Merlino either individually or jointly. The absence of Alfio Merlino demonstrates bad faith on his part in these proceedings given that Alfio Merlino had a period of 8 weeks to arrange his business affairs so as to ensure he was able to attend the Conciliation Conference. Mr De Merrick informed his Honour Justice Boland that Renato Merlino represented the Respondents and had authority to negotiate on their behalf. During the course of the Conciliation, Mr De Merrick requested a short adjournment to enable him to contact Alfio Merlino by telephone to obtain instructions. Renato Merlino was neither a shareholder nor director of the First Respondent, nor did he have a power of attorney for the Second Respondent. He clearly had no authority to negotiate on behalf of the Respondents and hence the reason for the need for Renato Merlino to contact Alfio Merlino during the course of the Conciliation Conference on several occasions. ... Whilst it may be unnecessary for a Respondent to attend in person at a Conciliation pursuant to s. 109, it is a matter of common sense observation that on this occasion the person who did attend was not satisfactorily instructed. The Applicant incurred significant costs in preparing for the Conciliation Conference and instructing both Counsel and I to appear at the Conciliation Conference. These costs have been thrown away by the Applicant as a result of the Second Respondent's failure to either attend the Conference or send a person with full authority to negotiate on behalf of the Respondents In regard to the matters raised at paragraph 8 of this Affidavit, the Applicant has incurred expense brought about by the continuing tardiness of the Respondents. At the time the Motion was drawn up the Respondent was in default and the Applicant needed a mechanism to resolve that default in order to progress his matter. 11 Mr Carbone deposed that "The total fees and disbursements incurred by the Applicant in respect to the Conciliation Conference are $4,180.00." The costs relating to the contempt motion were claimed to be $4,012.35. Supporting documentation was annexed to the affidavit. 12 In response to the affidavit and submissions of Mr Carbone, Mr Alfio Merlino filed an affidavit on 31 August 2005. Mr Merlino stated: (1) He had been unrepresented up to the time of the conciliation conference. The affidavits filed on 7 April 2005 were filed in good faith with the deponents believing they complied with the Court's orders in relation to the filing of a Reply. (2) He was not aware that it was improper for him not to have been present at the conciliation conference; he had "fully and properly instructed Renato Merlino" and was contactable at all times. Further, Mr De Meyrick had been instructed to appear. (3) Mr Renato Merlino had authority to negotiate a settlement. During the conference Mr Alfio Merlino had telephone contact with Mr Renato Merlino and Mr De Meyrick regarding the negotiations and he gave certain further instructions. It may be noted the conciliation of Mr Montresor's claim was unsuccessful. Consideration 13 There can be no issue about the Court's power to award costs. The existence of that power is clear from s 181 of the Act. There also can be no issue the Court may exercise its power as to costs "at any stage of the proceedings or after the conclusion of the proceedings" (r 203(1) of the Industrial Relations Commission Rules 1996) and may require that the costs the subject of an order for costs be "paid forthwith notwithstanding that the proceedings are not concluded": r 203(2) of the Rules. 14 The Rules also provide that the costs of a motion that are "reserved" by the Court are to be included in the final order for costs unless the Court "otherwise orders": r 210. Further, the costs of any application or other steps in the proceedings are, unless the Court "otherwise orders", 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 Part 27 of the Rules: r 211. 15 The applicant in this case contended that it should be given costs at this stage of the proceedings on three bases: Firstly, because the respondents did not file their Reply in accordance with the Court's orders of 31 March 2005 and consequently the applicant was put to further expense in having to file a motion for contempt; and, secondly because the applicant had prepared for the conciliation conference at which the second respondent did not attend and his representatives who did attend were not satisfactorily instructed and did not have full authority to negotiate on behalf of the respondents. 16 The second respondent, however, contended that the respondents were unrepresented and did not understand the requirements of r 18A and simply filed extensive affidavits in seeking to meet their obligations in respect of filing a Reply. As to the conciliation conference the second respondent contended that whilst he was unable to attend the conference, those who did on his behalf had full authority to negotiate and, in any event, he was contactable at all times and was, in fact, contacted by his representatives seeking further instructions. 17 Unless the interests of justice or some other compelling reason requires a costs order to be made before proceedings are concluded, the normal rule is the payment of costs is to await the conclusion of the overall proceeding. The rationale for the rule is that since an interlocutory proceeding does not resolve the final issues between the parties, it would, in ordinary circumstances, be inappropriate that an unsuccessful party in an interlocutory proceeding be required to pay costs immediately, since that party might ultimately be entitled to an order for costs in the substantive proceeding: Brasington v Overton Investments Pty Ltd [2001] FCA 571 at [13] per Emmett J. 18 In this case, it is not strictly a question of whether costs of interlocutory proceedings should be paid but rather whether costs should be paid at this stage of the proceedings because of the alleged defaults of the respondents. Where a party defaults by, for instance, failing to comply with any order or judgment of the Court it would not be unusual for the Court to order the party to pay such of the other parties' costs as are occasioned by the failure (see also r 42.10 of the Uniform Civil Procedure Rules 2005). 19 There is no proper basis for awarding costs against the respondents because the second respondent did not attend the conciliation conference. He was contactable by telephone and, indeed, was contacted by his representatives at the conference in order for them to obtain further instructions. That the second respondent's instructions did not lead to a settlement of the matter is no basis for awarding costs against him. 20 As to the respondents' failure to file their Reply in the required form within the time specified in the Court's order of 31 March 2005 I consider that the applicant should be paid his costs as were occasioned by the failure to do so. I have come to that view for the following reasons: (1) The applicant is a 66 year old man who, I have the impression, does not have unlimited resources to pursue his claim for relief. Any unnecessary additional expense caused by the respondents would impose an unfair additional burden on him; (2) The awarding of costs against the respondents for defaulting on the filing of their Reply is not done for the purposes of punishment. That they were unrepresented and unaware of the requirements of r 18A is no reason why the applicant should not have any unnecessary costs incurred by the respondents' default. The respondents had more than adequate opportunity to obtain advice. I consider it is in the interests of justice that the applicant should have these costs. 21 The question arises, however, whether the applicant is entitled to the costs associated with the preparation and filing of the contempt notice and motion. The sequence of events was that on 31 March the Court ordered the respondents to file their Reply by 7 April 2005. Material was filed by that date but not in the proper form. On 10 May 2005 the applicant's solicitor wrote to the second respondent bringing to his attention the failure of the respondents to file a Reply in the proper form and requesting that a Reply be filed by 13 May 2005. On 19 May 2005 the applicant filed his contempt motion. On 24 May the respondent filed their Reply to the summons. 22 The applicant contended the respondents only filed their Reply in the proper form because the applicant had filed for contempt. I do not know whether that is so or not but I do consider that, in the circumstances, resort to a contempt motion was a heavy-handed response. I would have been a far simpler and less costly course of action to have the respondent's default relisted before the Court and to have the Court deal with it as it considered fit. If the applicant had taken that course, it is most likely costs would have been given to the applicant. I am not inclined, however, to award costs to the applicant in relation to the preparation and filing of the motion and notice of charge of contempt. 23 I am prepared to make orders against the respondents that they pay the applicant's costs occasioned by the respondents' failure to file a Reply in accordance with the Court's orders made on 31 March 2005. However, such costs would not include costs associated with the motion and notice of charge for contempt filed by the applicant on 19 May 2005. I expect in the absence of costs relating to the contempt motion, the amount of costs payable by the respondents would only be small. Nevertheless, I will make the order. 24 I want to make this observation however: The Court has not been impressed by the respondents' approach to these proceedings and if it is shown at some later stage of the proceedings that the respondents have sought to hinder the proceedings or to delay or procrastinate to the disadvantage of the applicant the Court has at its disposal appropriate remedies and will use them. 25 Finally, unless the Court is advised by the applicant or the respondents within 14 days of the date of this decision that either of them wish to make a further attempt to resolve the matter by conciliation, the Court will issue a certificate of unsuccessful conciliation and make the standard directions set out in paragraph 6 of Practice Direction No. 14. Orders 26 The Court orders that the respondents, jointly and severally, shall pay the applicant's costs occasioned by the respondents' failure to file a Reply in accordance with the Court's orders made on 31 March 2005. Such costs shall not include costs associated with the preparation of the motion, affidavit in support and notice of charge of contempt filed by the applicant on 19 May 2005. Costs shall be as agreed or, failing agreement, as assessed. ________________________ 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.