Industrial Relations Commission of New South Wales in Court Session CITATION : Simon Richard Lane v The Commonwealth Bank of Australia [2001] NSWIRComm 57 APPLICANT: Simon Richard Lane PARTIES : RESPONDENT: The Commonwealth Bank of Australia (ACN 123 123 124) FILE NUMBER: 2392 of 1999 CORAM: Schmidt J CATCHWORDS : Costs - s106 application - agreed departure from usual rule accepted - assessment of conduct of case relevant to costs order - respondent to bear 60% of applicant's costs on party/party basis LEGISLATION CITED : Industrial Relations Act 1996 Arian v Nguyen [2001] NSWCA 5 Barclays Australia Investment Services Ltd and Others v Nordby (1995) 99 IR 258 Cretazzo v Lombardi (1975) 13 SASR 4 CASES CITED : Hayle Holdings Pty Ltd v Australian Technology Group Ltd [2000] FCA 1699 Hughes v Western Australian Cricket Association (Inc) & Ors (1986) ATPR 40-748 Mannix v Loumbos [2000] NSWCA 32 Oshlack v Richmond River Council (1998) 193 CLR 72 Re Elgindata Ltd (No2) [1993] 1 ALL ER 232 HEARING DATES: 03/26/2001 DATE OF JUDGMENT: 04/03/2001 APPLICANT: Mr D Knoll of counsel SOLICITORS: Haywards Solicitors LEGAL REPRESENTATIVES: RESPONDENT: Mr R Goot SC SOLICITORS: LE Taylor Solicitor JUDGMENT: - 14 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES IN COURT SESSION CORAM: Schmidt J DATE: 3 April 2001 MATTER NUMBER IRC 2392 OF 1999 SIMON RICHARD LANE v THE COMMONWEALTH BANK OF AUSTRALIA Application under s106 of the Industrial Relations Act 1996 JUDGMENT 1 Judgment was given in this matter on 15 December 2000. The parties were unable to agree on the question of costs, which was raised by the applicant in a notice of motion filed on 23 March 2001. 2 The applicant sought an order that the respondent pay 75% of his costs of $100,331.99, as to 75%. In the alternative, it was proposed that the respondent pay the applicant 75% of his costs assessed on a party/party basis. The costs of the motion were also sought, as well as the costs of an assessment, if that were ordered. 3 The position of the respondent was that the applicant's position properly recognised that there should be a departure from the usual costs order in this case. However, that departure should in the circumstances be that each party should be ordered to bear their own costs. 4 The costs application arose in circumstances where the applicant was successful, but only as to part of the s106 application brought. The orders sought by the applicant had been: '1. The contract of employment (which includes the written employment agreement entered into in July 1996) between the Applicant and the Respondent is varied from inception as follows: 1.1 Clause 6 of the written agreement entered into in July 1996 is to be varied so that: (a) the words: "misconduct or unsatisfactory performance" are replaced by the words: "serious and wilful misconduct (which means conduct that indicates an intention no longer to be bound by the contract according to its terms, but which does not include conduct that could be disciplined effectively without resort to summary dismissal)" ; and (b) the words: "0.50 time s" are deleted. 1.2 A new clause 6A is to be added as follows: "Where CBA intends to terminate the employment, the Employee's manager or that manager's manager are the CBA officers who may make the decision to terminate employment under this Contract. He or she must have taken into account all material presented by the employee under Clause 15A(b); and must be satisfied either (A) that CBA has complied with clause 15A or (B) that such compliance is impracticable or (C) that the employee has admitted to serious and wilful misconduct." 1.3 Clause 15 is replaced by the following: "The parties shall attempt to settle by the process of mediation any dispute arising out of this Agreement or arising out of any action taken or purported to be taken under or in relation to this Agreement, if the dispute is not resolved either: (i) within fourteen days or' (ii) if clause 15A applies then within the time limits in clause 15A or (iii) within such further period as the parties may agree is appropriate. The time limit for resolution within the mediation process is 4 weeks from the date that either party makes a written request for a mediation. If the parties to the dispute cannot agree within that time limit then subject to clause 15A having been complied with they may take whatever action they see fit in the circumstances. CBA will bear the cost of the mediation process. For the avoidance of doubt, the only disputes to which also 15 does not apply are disputes arising after CBA has terminated the employee for serious and wilful misconduct." 1.4 A new clause 15A is to be added as follows: "15A. If CBA proposes to take disciplinary action against an employee, including by way of termination of the employment or demotion, then: (a) any action proposed to be taken and all grounds supporting the proposed action together with all material facts will be presented in writing to the employee so that the employee is fully and frankly informed of the case he or she must meet; (b) the employee and his immediate manager shall meet within 14 days thereafter, and at that meeting (I) the employee shall be entitled to respond to the allegations and (II) the employee and his immediate manager shall in good faith attempt to resolve all matters relating to the allegations; (c) if the allegations and the action proposed are not fully resolved to the satisfaction of both the employee and his immediate manger, the employee and his manager's immediate manger shall meet within a further 14 days and in good faith attempt to resolve all unresolved matters relating to the allegations; and (d) CBA will accord the Employee substantive and procedural due process and in particular the Agreement with Commonwealth Bank Officers Association in relation to Professional Practice, Promotions and Related Matters or any successor agreement, regardless of whether the Employee is covered by any such Agreement. 2. The Respondent is to reinstate the Applicant forthwith to his position as Chief Manager, Human Resources, TOP Division, and pay to the Applicant the sum of $325,503.97 (calculated as set out in the Appendix hereto) within 30 days. 3. The respondent shall pay interest on that amount at the Supreme Court scale from the date of filing the application until the date of judgment. 4. The Respondent shall pay the Applicant's costs on a basis to be assessed in light of the judgment. Appendix PARTICULAR AMOUNT Gross Remuneration from 27 May 1999 to the date of judgment. $277,260.27 Damages for the breaches of clause 15A and of the duty of mutual trust and confidence, including for psychological trauma, distress, anxiety and injured feelings. $15,562.40 This consists of medical expenses incurred of $2,486, and prescribed pharmaceuticals $295.20 which totals $2,781.20, an allowance for continuing expenses and pharmaceuticals for one year of $2,781.20, and for trauma caused by unfair, harsh investigative and decision processes, say $10,000. Damages resulting from breaches of clause 15 (being legal costs incurred flowing directly from refusal to mediate and to pay for mediation) $54,282.97 Less payments made to date -$21,601.67 Total $325,503.97 5 At paragraphs 124 to 126 of the judgment, I observed: 'This case, despite its complexity, was concerned with essentially two issues. The first related to the failure of the applicant's employment contract to ensure the applicant a fair investigation and consideration of the allegations made against him. The second whether the evidence demonstrated a proper basis for the summary dismissal of the applicant's employment. While the applicant denied that there had been such misconduct, on his case, the defects in the investigation process were such that significant orders of money compensation would be made in his favour, even if such misconduct was found. The respondent, for its part, took the approach that these proceedings could not be conducted as if they concerned an unfair dismissal. Having in mind the applicant's own conduct, any defects in the procedures which the Bank had pursued in investigating the allegations were not such as to lead the Court to exercise any discretion in the applicant's favour. As will become apparent from what follows, I take the view that there was strength in both cases. There were in my view, serious deficiencies in the investigation conducted by the applicant, which highlighted a relevant unfairness in the contract in question. The evidence however, also demonstrated that misconduct warranting the applicant's summary dismissal had taken place. These conclusions have led to a real difficulty in the determination of what, if any, relief should flow to the applicant as a matter of discretion. I will return to this later.' 6 The orders made were: 1. I declare that the contract of employment between the parties was an unfair contract, within the meaning of s105 of the Act. 2 I vary the contract of employment ab initio, to require the Bank: (i) in investigating any allegations of misconduct made against Mr Lane, to give him a fair opportunity to understand the allegations and what they are based on; to respond to them and to have his response and other relevant information gathered by the Bank in its investigation taken into account in any decision which is made in relation to those allegations; and (ii) in determining what step to take in relation to the continuation or termination of his employment, to consider what Mr Lane advances on his own behalf in respect of that matter. 2. I order the Bank to pay Mr Lane a sum calculated as: (i) six weeks' pay reflecting the total value of his salary package and a money sum reflecting any other benefits accruing during that period, had the employment continued, plus (ii) the outstanding amount of his annual leave entitlement, calculated on the total value of his salary package, plus (iii) interest on the amounts in (i) and (ii) from the date of the termination of his employment to the date of judgment, at Supreme Court rates, plus (iv) costs, as agreed or assessed, in the s213 proceedings up to the giving of the decision by Sams DP in that matter in August 1999, plus (v) interest on the amount in (iv) from the date of payment of those costs, to the date of judgment, at Supreme Court rates. 7 The money order was quantified by the parties as $95,913.80. This was subject to the sum of $54,287.97 being assessed, that sum reflecting the costs in the s213 proceedings and they not having been agreed. 8 The applicant relied upon the respondent's conduct of the proceedings, particularly in relation to the procedural fairness aspects of the case. Two offers of compromise had been made by the applicant prior to the hearing. The first was in accordance with Part 23 of the Rules in the amount of $96,689.12, shortly after the unsuccessful conciliation of the proceedings. At that point both preparation costs and costs of the hearing would have been saved. The second was in the amount of $92,000, offered on a Calderbank basis, shortly before the hearing. At that point the costs of the hearing would have been saved. 9 The respondent's position was that this case had always been advanced on the footing that the applicant had been wrongly dismissed for misconduct and that having lost that point, the order as to costs which justice would demand was that each party bear its own costs. Consideration 10 The usual order as to costs made in proceedings brought under s106 is undoubtedly that a costs order should be made in favour of the successful party. Section 181 of the Industrial Relations Act 1996 ('the Act') relevantly provides: '(1) Subject to the rules of the Commission and any other Act or law: (a) the Commission may award costs, and (b) costs are in the discretion of the Commission, and (c) the Commission may determine by whom and to what extent costs are to be paid, and (d) the Commission may order costs to be assessed on the basis set out in Division 6 of Part 11 of the Legal Profession Act 1987 or on any other basis. (2) ... (3) … (4) In this section, "costs" includes: (a) costs of or incidental to proceedings in the Commission, and (b) in the case of an appeal to the Commission, the costs of or incidental to the proceedings giving rise to the appeal, as well as the costs of or incidental to the appeal.' 11 There have been a number of cases in this Court in which the usual order as to costs has been departed from in particular circumstances. Such circumstances include, as here, where a party has been successful only as to part of the claim advanced. Other Courts have similar discretions as to costs. It is convenient therefore to refer to the law as to when such a departure is appropriate. In Oshlack v Richmond River Council (1998) 193 CLR 72, the High Court was dealing with costs orders made by the Land and Environment Court. Gaudron and Gummow JJ said at 81: "The provisions of s 69 of the Court Act which confer upon the Court the discretion exercised by the primary judge attract the application of a general proposition that it is inappropriate to read a provision conferring jurisdiction or granting powers to a court by making conditions or imposing limitations which are not found in the words used ... The terms of s 69(2) contain no positive indication of the considerations upon which the Court is to determine by whom and to what extent costs are to be paid. The power conferred by the section is to be exercised judicially, that is to say not arbitrarily, capriciously or so as to frustrate the legislative intent. However, subject to such considerations, the discretion conferred is, to adapt the words of Dixon J, unconfined except in so far as 'the subject matter and the scope and purpose' of the legislation may enable an appellate court to pronounce the reasons given by the primary judge to be 'definitely extraneous to any objects the legislature could have had in view' ( Water Conservation and Irrigation Commission (NSW) v Browning (1947) 74 CLR 492 at 505)." 12 McHugh J (while in dissent as to the outcome), dealt with the principles upon which the ordinary rule would be departed from. Those principles have been applied in other cases (See Mannix v Loumbos [2000] NSWCA 32; Arian v Nguyen [2001] NSWCA 5; Hayle Holdings Pty Ltd v Australian Technology Group Ltd [2000] FCA 1699.) McHugh J said at 97: "The traditional exceptions to the usual order as to costs focus on the conduct of the successful party which disentitles it to the beneficial exercise of the discretion. In Anglo-Cyprian Trade Agencies Ltd v Paphos Wine Industries Ltd [1951] 1 All ER 873 at 874, Devlin J formulated the relevant principle as follows: 'No doubt, the ordinary rule is that, where a plaintiff has been successful, he ought not to be deprived of his costs, or, at any rate, made to pay the costs of the other side, unless he has been guilty of some sort of misconduct.' 'Misconduct' in this context means misconduct relating to the litigation, 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. 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." 13 These approaches are consistent with the approach of the Court of Appeal in England, where in Re Elgindata Ltd (No2) [1993] 1 ALL ER 232, Nourse LJ, with whom Stocker LJ agreed, discussed the principles to be applied at 237: 'In order to show that the judge erred I must state the principles which ought to have been applied. They are mainly recognised or provided for (it matters not which) by s51 of the Supreme Court Act 1981 and the relevant provisions of RSC Ord 62, in this case rr2(4), 3(3) and 10. They do not in their entirety depend on the express recognition or provision of the rules. In part they depend upon established practice or implication from the rules. The principles are these. (1) Costs are in the discretion of the court. (2) They should follow the event, except when it appears to the court that in the circumstances of the case some other order should be made. (3) The general rule does not cease to apply simply because the successful party raises issues or makes allegations on which he fails, but where there has caused a significant increase in the length or cost of the proceedings he may be deprived of the whole or a part of his costs. (4) Where the successful party raises issues or makes allegations improperly or unreasonably, the court may not only deprive him of his costs but order him to pay the whole or a part of the unsuccessful party's costs. Of these principles the first, second and fourth are expressly recognised or provided for by rr2(4), (3(3) and 10 respectively. The third depends on well-established practice. Moreover, the fourth implies that a successful party who neither improperly or unreasonably raises issued or make allegations on which he fails ought not to be ordered to pay any part of the unsuccessful party's costs. It was because of his disregard of that principle that the judged erred in this case.' 14 In Hughes v Western Australian Cricket Association (Inc) & Ors (1986) ATPR 40-748 Toohey J applied the observations of Jacobs J in Cretazzo v Lombardi (1975) 13 SASR 4 at 12: 'But trials occur daily in which the party, who in the end is wholly or substantially successful, nevertheless fails along the way on particular issues of fact or law. The ultimate ends of justice may not be served if a party is dissuaded by the risk of costs from canvassing all issues, however doubtful, which might be material to the decision of the case. There are, of course, many factors affecting the exercise of the discretion as to costs in each case, including in particular, the severability of the issues, and no two cases are alike. I wish merely to lend no encouragement to any suggestion that a party against whom the judgment goes ought nevertheless to anticipate a favourable exercise of the judicial discretion as to costs in respect of issues upon which he may have succeeded, based merely on his success in those particular issues.' 15 Toohey J also noted at 48,136: 'It is relevant, but not conclusive, to consider how much time of the hearing was taken up with evidence and submissions relating to those issues on which the applicant failed. This is not an easy task because much of the evidence bore upon more than one cause of action. Counsel for the applicant did offer some dissection of time spent, by reference to the evidence of particular witnesses and to addresses and noted what he contended was the relatively little time taken up in addresses on those issues on which the applicant failed.' 16 Here, a departure from the ordinary costs order is the subject of agreement between the parties, even if little else in the proceedings is, or has been, agreed. Having in mind the judgment given in this matter, there is a sound basis for that approach, with which I agree. 17 The applicant in the amended summons upon which he ultimately proceeded raised the two issues earlier outlined. They were each hotly contested and the applicant was successful as to but one of them. Nevertheless, it cannot be overlooked that these proceedings were commenced at a time when the applicant was still in employment, when he was seeking the benefit of an express provision of his contract which required mediation and where he was protesting that the Bank was proceeding on the basis of a seriously flawed investigation into the allegations which had been made against him. 18 The applicant was dismissed for misconduct, despite the fact that he plainly had a proper basis for the initiation of the proceedings on that basis. The evidence eventually given in these proceedings demonstrated that the applicant had engaged in conduct which warranted his dismissal for misconduct, particularly his failure to properly delineate between where his obligations to the Bank lay, as opposed to his interest in Offsite Human Resources Pty Ltd. It was in those circumstances that much of the relief sought was not granted. 19 At paragraph 252 of the earlier judgment, I observed: 'It was submitted, for the Bank, that no payment of any kind was warranted in this case, given Mr Lane's misconduct as revealed on the evidence; that he had not suffered any compensable loss and that no contract of employment promised freedom from distress on termination. I have, however, concluded that certain money orders are just in the circumstances revealed here. In coming to that conclusion, I have had regard to the nature of the obligations which employers and employees have to each other under employment contracts, as discussed by Hungerford J in Day v Lumley Life (1999) 90 IR 70. That approach does not, however, permit the Court to overlook the applicant's misconduct, nor the respondent's failures. Each must be given its appropriate weight.' 20 A Full Bench of the Court in Barclays Australia Investment Services Ltd and Others v Nordby (1995) 99 IR 258 at 279, observed that: 'The task of assessing a "just" monetary amount is one which, not infrequently, involves the exercise of a broad judgment without the assistance of defined and identifiable parameters or heads of loss or damage.' 21 Here, the applicant sought orders in the alternative in the amended summons. A number of variations to the contract were sought. Either, reinstatement plus monetary relief of some $325,503.79 or even greater monetary relief if no order of reinstatement were made. While the contract was found unfair, the variations made were in significantly different terms to those sought, reinstatement was refused and money relief of, a maximum $95,913.80, if all of the costs incurred in the s213 proceedings were assessed in favour of the applicant. On the other hand, it cannot be overlooked that the applicant made two significant offers of compromise, in the sums of $96,689.12 and $92,000. If either had been accepted given the undoubtedly significant costs in the proceedings, there would have been a saving in overall costs for both parties. 22 It follows that the applicant recognised that he was vulnerable as to part of the case advanced, but the respondent, advancing no offers at all, and rejecting the offers made, seemingly recognised no vulnerability on its part. 23 I take the view that in assessing costs in all of these circumstances, the public interest in encouraging the settlement of claims should not be overlooked. On any view, the position advanced by the Bank as to its conduct of the investigation against the applicant and its refusal to mediate in accordance with the express terms of the contract was untenable and its failure in the case which it advanced as to those matters, should lead to some costs order being made in favour of the applicant. This approach also recognises that an order for costs is not made in order to punish an unsuccessful party, but rather to compensate the successful party for the costs incurred in the litigation. 24 Notwithstanding that general position, the failure of the applicant to make out his case on misconduct, a significant part of the case here advanced, should not be overlooked and must lead to a departure from the usual rule as to costs, as has been agreed. 25 As to the argument that regard should be had to the amount of time that the parties respective evidentiary cases took, I take the view that the dissection advanced, namely that the evidence called for the applicant took a little over one day and that of the respondent the balance of the five hearing days, did not much assist the consideration of the costs order properly to be made. Both parties addressed the two issues raised in the evidence called and their witnesses were cross examined as to their affidavits. Most of the witnesses gave evidence about both issues. The issue in relation to misconduct was advanced by the applicant in support of the reinstatement claim, as well as money orders. It did not simply arise as a defence raised by the Bank to the applicant's complaints about procedural matters. The Bank was entitled to put on evidence to meet that aspect of the case as it did and indeed its defence was successful. While the applicant succeeded on the case made as to procedural matters, the Bank's evidence about misconduct and how that issue arose cannot be overlooked. 26 In the light of these competing considerations, I have concluded that it would be just to require the Bank to meet 60% of the applicant's costs, as agreed or assessed. In making that assessment, I have noted the way in which the respective parties' cases were conducted, but have also sought to balance the other matters referred to. 27 I also take the view that it would be inappropriate to make the first order sought by the applicant, which involves a consideration of actual costs incurred by the applicant. While that might be available as a matter of jurisdiction and undoubtedly desirable from the applicant's point of view, given the Bank's apparent continuing attitude to reaching an agreement with the applicant on costs, I do not regard this case as one appropriate for that approach. I have reached that view having in mind the magnitude of the costs incurred and the undoubted expertise of the assessors in relation to the assessment of party/party costs, in accordance with the requirements of Rule 204. 28 I also take the view that no order should be made in favour of the applicant in relation to further costs incurred in any necessary assessment of costs. Such costs are covered by the order which I propose to make and will be dealt with by the assessor in the usual way. That is not to say that the parties ought not to endeavour to agree on the question of costs. Indeed, I encourage them to do so. Order 29 For all of these reasons, I order that the respondent bear 60% of the applicant's costs, as agreed or assessed, on a party/party basis. ------------------------ DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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