Industrial Relations Commission of New South Wales in Court Session CITATION : Gallagher v Email Ltd and Ors [2003] NSWIRComm 428 WAYNE PATRICK GALLAGHER Applicant EMAIL LTD (ACN 000 029 407) First Respondent ELECTROLUX HOME PRODCUTS PTY LTD (ABN 51 004 762 341) Second Respondent PARTIES : EMAIL SUPERANNUATION LTD (ACN 065 263 603) Third Respondent AON CONSULTING PTY LTD (ABN 48 002 288 646) Fourth Respondent AON SUPERANNUATION PTY LTD (ACN 057 982 822) Fifth Respondent FILE NUMBER: IRC 6147 of 2002 CORAM: Schmidt J CATCHWORDS : Unfair contract - notice of motion - leave sought to discontinue proceedings against the fourth and fifth respondents - orders for costs of the proceedings, including the costs of the motion sought against respondents - reliance upon s108B of the Industrial Relations Act 1996 - orders for costs of the proceedings or costs of the motion sought against applicant - consideration of reasonableness of parties respective conduct - leave to discontinue granted - applicant and fourth and fifth respondents each to bear their own costs LEGISLATION CITED : Industrial Relations Act 1996 Australian Securities Commission v Aust-Home Investments Ltd & Ors (1993) 116 ALR 523 Bowker & Anor v Software Engineers Australia (NSW) Pty Limited & Ors [2003] NSWIRComm 213 Frost v Speaker Legislative Assembly (No 2) (2001) 103 IR 358 CASES CITED : Gorczynski v Perera & Anor [2003] NSWCA 211 (28 July 2003) Kennedy v Contract Transport Solutions Pty Ltd [2003] NSWIRComm 158 One.Tel Ltd & Ors v Deputy Commissioner of Taxation (2000) 171 ALR 227 Perera v Gorczynski (unreported, SC(NSW) 2134/00, 25 July 2002) Re Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia, Ex parte Lai Qin (1997) 186 CLR 622 HEARING DATES: 11/12/2003; 11/20/2003 DATE OF JUDGMENT: 12/03/2003 APPLICANT: Mr SF Hughes of counsel SOLICITORS: Firths, The Compensation Lawyers LEGAL REPRESENTATIVES: FOURTH AND FIFTH RESPONDENTS: Ms N Barnett, solicitor SOLICITORS: Henry Davis York JUDGMENT: - 12 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES IN COURT SESSION CORAM: Schmidt J DATE: 3 December 2003 Matter Number IRC 6147 of 2002 WAYNE PATRICK GALLAGHER v EMAIL LTD AND OTHERS Application under section 106 of the Industrial Relations Act 1996 JUDGMENT 1 This judgment deals with a motion filed by the applicant, seeking leave to discontinue the proceedings against the fourth and fifth respondents and seeking that they pay the applicant's costs of the proceedings, including the costs of the motion. 2 While those respondents consented to the dismissal of the proceedings, they sought that an order for their costs be made against the applicant, or in the alternative, that the applicant bear the costs of the motion. 3 Affidavit evidence was given and various documents tendered. The evidence showed that the applicant had earlier discontinued the proceedings against the other respondents. The proceedings had been commenced on 1 November 2002, after the termination of the applicant's employment by the first respondent on 2 November 2001. This had followed an injury sustained by the applicant at work in 1998, after which he returned to light duties, up until the sale of the first respondent. Thereafter he was employed by the second respondent, until the termination of his employment. 4 The applicant sought to pursue the disability benefits attaching to his superannuation fund. He approached the fifth respondent in March 2002 and was advised that he would have to pursue the third respondent. When he approached the third respondent, he was advised that he would have to pursue the fifth respondent. 5 He spoke to Mr Kumar of the fourth respondent, but did not receive a claim form from him. Mr Kumar again directed him to the third respondent, when the applicant rang again. The third respondent again advised him to pursue the fifth respondent. (I note that this evidence was disputed, although no evidence was called from Mr Kumar.) 6 In October 2002, the applicant sought legal advice. The advice was that he should commence proceedings against the various entities involved and leave identifying the correct superannuation fund until after the proceedings had been commenced, given the limitation period provided by the Industrial Relations Act 1996 ('the Act'). 7 The applicant came to discontinue the proceedings because he has recently been able to find full time work, despite his physical restrictions and thus accepted that he could not pursue his disability claims. He accordingly sought to discontinue the proceedings, but sought an order for costs. 8 Mr Mickels' evidence confirmed the advice which the applicant received as to the initiation of proceedings. The proceedings were commenced on 1 November 2002, one day before the limitation period expired. On 15 November the fourth respondent wrote to Mr Mickels advising that no claim had been made; that there was no record of any request to make a claim other than a telephone call in June, when "It appears that we asked Mr Gallagher to contact the Email Superannuation Fund, which is now administered by Smorgon Superannuation Services"; that the insurer for the two funds was the same and so an AMP claim form was provided and advice given as to the documents required to be lodged. It was also advised that the claim would be defended. 9 Correspondence between the parties ensued. Various of the respondents complained that they had been wrongly joined to the proceedings and sought their release. It was not until August 2003, that the fourth and fifth respondents conceded that they were the relevant respondents. Written confirmation of this was sought and finally supplied on 8 September, but the fourth and fifth respondents did not consent to the other respondents being released from the proceedings, given the terms of the applicant's summons. 10 On 11 September, the applicant's solicitors advised that he was prepared to discontinue against the fourth and fifth respondents, if they paid his costs of the proceedings. This was rejected. The respondents agreed to the discontinuance, on the basis that the applicant bear his own costs. This was rejected. Other correspondence ensued as to the nature of the claim and the circumstances in which it had come to be discontinued. No agreement was reached. 11 The evidence called by the respondents from Mr Argent, the fourth respondent's Director Legal and Compliance, was that there had been no approach from the applicant's solicitors, prior to the initiation of the proceedings. He investigated the matters raised in the summons, after the proceedings were initiated. The fourth respondent's normal procedure was to document all enquiries received from persons requesting action in relation to a superannuation or insurance matter. The only documented claim was in a note made by Mr Kumar to Mr Fernandez in June 2002, requesting that a form be sent to the applicant. There was, however, no evidence called from either of them. Mr Argent expressed the opinion that a form was sent to the applicant, given his knowledge of the two workers and the respondent's processes. (I observe that the applicant's evidence was that he never received any claim form.) 12 After the proceedings were commenced, Mr Argent sought discussions with Mr Mickels, pointing out in an email that the applicant's claim would be processed if lodged; that the applicant had the right to complain, without cost, to the trustee of the fund and the Superannuation Complaints Tribunal and warning that if an appearance had to be entered and the proceedings were later discontinued, costs would be sought against the applicant. This advice was followed by correspondence advising that no claims had been lodged against either Fund by the applicant, but confirming that advice had been given to him in June 2002, that the third respondent should be pursued. Mr Argent also advised that the underlying insurer of the two funds was identical and a claim form was provided. It was also advised that the summons would be defended, if pressed. 13 In response, Mr Mickels advised that the Court would be asked to stand the matter over, to permit the application for total and permanent disablement to be determined. He also explained that he would have attempted to obtain the forms, but for the limitation period imposed by the legislation. 14 A claim was made in December. AMP refused the claim in March 2003, given various medical reports it had received. The position was later confirmed by the Fund. 15 The applicant's evidence in reply was that he had spoken to Mr Kumar on a number of occasions. He was told that Mr Kumar would arrange for the other insurer to send forms, but none ever arrived. This was why he sought legal advice. He first received the forms after the proceedings were commenced. 16 The case put for the applicant by Mr Hughes of counsel, was that there were two links in the dilemma facing the applicant. The first was that the applicant did not receive a claim form. There was a dispute in the evidence as to this, but the applicant's evidence that he did not receive one, would be accepted. An inference would be drawn from the fact that no evidence was called by the defendant from Mr Fernandez, the employee who had been asked to send the form. The evidence also clearly showed that Mr Kumar had wrongly informed the applicant as to whom his claim should be brought against. 17 The second dilemma for the applicant was thus, that he did not know who his claim should be made against. Each fund was pointing the finger at the other. The solicitors had a short period of time in which to ascertain the identity of the correct respondent. They chose to preserve the applicant's rights by bringing the proceedings. Shortly after they were commenced, the fourth and fifth respondents provided a claim form, but there was no acknowledgement that they were the correct respondents until September 2003. The proceedings were then discontinued against the other respondents by consent and now the applicant sought his costs against the fourth and fifth respondents. 18 The case of the respondents put by Ms Barnett was that the initiating summons showed that the applicant did not commence the proceedings in order to obtain a claim form, but to seek certain benefits. It followed that the identity of the superannuation fund was irrelevant to the question of costs. 19 What was relevant was that the proceedings were commenced; a claim form was provided; a claim was made and denied and the applicant then decided not to press the claims made any further. The respondents relied upon the fact that the applicant was advised that the underlying insurer of the two funds was identical and was invited to make a claim, within days of the proceedings being commenced. If all that the proceedings were concerned with was the provision of the claim form, they could then have been discontinued. The summons showed that relief was claimed against the other respondents, particularly the first and second respondents, well outside the scope of anything the fourth and fifth respondents could have provided and which was outside their capacity to respond to. For example, 52 weeks severance pay was sought from the first and second respondents. 20 It was also submitted that no limitation period could have run until the claim had crystallised, that is, not until the claim for total and permanent disability was denied. Account would also be taken of the failure by the applicant's solicitors to take any of the steps available to them, to approach the respondents to ascertain the identity of the insurer, or to obtain a claim form, prior to the proceedings being initiated. In any event, the statutory limitation period did not apply to the applicant. It was also argued that it would be inequitable in a case where the applicant decided that he did not have a claim, or where the claim was ill conceived, in terms of the remedy sought, for costs now to be awarded against the respondents, when the proceedings were discontinued. 21 The proper order in the circumstances was that the applicant pay the respondents' costs of the proceedings, or at least the costs of the motion. Regard would be paid to the offers which the fourth and fifth respondents had made, they having proposed that the proceedings be discontinued, with the applicant bearing his own costs. 22 It was argued in reply that it was relevant that not only had the applicant not been provided with a form, the identity of the fund was in issue. While a claim form was provided after the proceedings commenced, it was not until September 2003 that the respondents had conceded that point. It was inequitable for these respondents to have given the applicant the wrong advice and to have refused to acknowledge this until September 2003. The entitlement to make a claim flowed from the termination of the employment and there was a refusal to deal with the claim until after proceedings commenced. The section provided no discretion to extend time. 23 As to the claims made in the summons, it was relevant that the proceedings were discontinued, properly, because of the change in the applicant's circumstances. The result was that the respondents had been put to expense only as the result of their own failures. As to the costs orders sought by the respondents, it was also relevant that one of the offers had as a term a requirement that a deed of release be provided, the terms of which were unknown. Consideration 24 Leave to discontinue is granted, there being no real disagreement between the parties as to that matter. 25 There is no reason to doubt the applicant's evidence as to his unsuccessful pursuit of claim forms. No evidence was called from those with whom he dealt. There were no documents tendered which showed that the forms had been sent. I accept that the applicant sought legal advice as a result of the approach adopted by the funds. I also accept that the forms were soon provided after the proceedings were commenced; the claim made was dealt with, albeit the applicant was unsuccessful. 26 If the proceedings had then been discontinued against the fourth and fifth respondents, an order for costs might perhaps have been available to be made in favour of the applicant, as to that part of the litigation which resulted from their actions. 27 The applicant does not, however, limit the costs order sought to what flowed from the fourth and fifth respondent's failures to provide those forms, or even their delay in acknowledging that they were the relevant respondents. The applicant seeks all of his costs of the proceedings. The initiating summons makes clear that the applicant was advancing other claims against his former employers and other respondents. Those claims were not confined to the difficulties which he experienced in pursuing his entitlements under the superannuation scheme of which he was a member, as a result of the actions of the fourth and fifth respondents. There was no real explanation as to why these other claims were pursued, especially those made against the former employers. They did not flow naturally from the problems which the approach adopted by the fourth and fifth respondents gave rise to. I am satisfied that justice could not permit an order in favour of the applicant for the costs incurred in their pursuit. 28 While the parties did not refer to it, there is a deal of case law in the area. As McHugh J observed in Re Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia; Ex parte Lai Qin (1997) 186 CLR 622 at 624-5, the discretion to award costs is usually exercised in favour of the successful party, after a hearing on the merits. In an appropriate case, however, a Court may award costs even if the moving party no longer wishes to proceed with the action. 'In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194 at 201. In administrative law matters, for example, it may appear that the defendant has acted unreasonable in exercising or refusing to exercise a power and that the plaintiff had no reasonable alternative but to commence a litigation. Thus, for example, in R v Gold Coast City Council; Ex parte Raysun Pty Ltd [1971] QWN 13, the Full Court of the Supreme Court of Queensland gave a prosecutor seeking mandamus the costs of the proceedings up to the date when the respondent Council notified the prosecutor that it would give the prosecutor the relief that it sought. The Full Court said that the prosecutor had reasonable ground for complaint in respect of the attitude taken by the respondent in failing to consider the application by the prosecutor for approval of road and drainage plans. Moreover, in some cases a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried. This is perhaps the best explanation of the unreported decision of Pincus J in South East Queensland Electricity Board v Australia Telecommunications Commission (unreported; Federal Court of Australia; 10 February 1989) where his Honour ordered the respondent to pay 80 per cent of the applicant's taxed costs even though his Honour found that both parties had acted reasonably in respect of the litigation. But such cases are likely to be rare. If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings. This approach has been adopted in a large number of cases. (See, eg, Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194; Seventh Mingcourt Pty Ltd v Lawrence (unreported; Federal Court of Australia; 1 August 1996), per Branson J; Coleman v City of Melville (unreported; Supreme Court of WA; 22 September 1994), per Scott J; Compardres Australia Pty Ltd v Waterfront Place No 2 Pty Ltd (unreported; Supreme Court of Q; 15 August 1995), per MacKenzie J; Inprint Ltd v K & D Media Pty Ltd (unreported; Federal Court of Australia; 22 December 1995), per Einfeld J; Australian Securities Commission v Berona Investments Pty Ltd (1995) 18 ACSR 772.)' 29 A similar approach was taken by Gzell J in Perera v Gorczynski (unreported, SC(NSW) 2134/00, 25 July 2002) affirmed by the Court of Appeal in Gorczynski v Perera & Anor [2003] NSWCA 211 (28 July 2003). It is the reasonableness of the parties' respective conduct which arises for consideration in an application such as this. 30 It is a rare case where the issues will be sufficiently clear in the absence of a hearing, for an order for costs to be made in favour of a party. The conduct of a party prior to the commencement of the proceedings may be relevant, where the conduct precipitated the litigation. See Australian Securities Commission v Aust Home Investments Ltd & Ors (1993) 116 ALR 523 at 530 per Hill J. 31 In One.Tel Ltd & Ors v Deputy Commissioner of Taxation (2000) 171 ALR 227, Burchett J drew a distinction at [6], between a case where a party merely surrenders mid litigation and cases: '…where some supervening event or settlement so removes or modifies the subject of the dispute that, although it could not be said that one side has simply won, no issue remains between the parties except that of costs.' 32 In Frost v Speaker Legislative Assembly (No 2) (2001) 103 IR 358, Hungerford J awarded costs against the discontinuing party, having regard to the reasonableness of the parties' respective conduct in those proceedings. 33 Here, there are aspects of the conduct of each of the parties, which might properly be regarded as not having been reasonable. The fourth and fifth respondents' failure to acknowledge liability for the claim and to provide a claim form to the applicant when it was sought, was plainly not reasonable. Launching these proceedings without the applicant's solicitor making any approach to these respondents, was however, also not reasonable. 34 The applicant relied upon the provisions of s108B of the Act. The proper construction of the section was dealt with in Kennedy v Contract Transport Solutions Pty Ltd [2003] NSWIRComm 158. It was concluded that the section operated prospectively from the date of assent, 24 June 2002 and substantive rights to commence actions under s106 were not affected by the enactment of the section. A similar view was reached in Bowker & Anor v Software Engineers Australia (NSW) Pty Limited & Ors [2003] NSWIRComm 213. Assuming that the relevant date was the date of the termination of the applicant's employment, it follows that s108B did not affect the applicant's right to initiate these proceedings. 35 I do take note of the fact that Kennedy was decided after these proceedings were initiated. Given the terms of the section and the arguments advanced in Kennedy and Bowker, it could not be concluded that the legal position was so clear that a prudent lawyer might not have ensured that the proceedings were commenced within 12 months of the date of termination. Nevertheless, that does not overcome the problems which flow from the nature of the proceedings which were, in fact, initiated and the applicant's solicitors' failure to make any approach to the fourth and fifth respondents, before the proceedings were initiated. 36 Given the nature of the relief sought in the summons, it is apparent that the applicant was also not only concerned as to the identity of the relevant fund. He was pursing other claims as well. 37 In those circumstances, it is relevant that once the proceedings were commenced, a claim form was provided by the fourth and fifth respondents, but their acknowledgement of their position did not emerge for a considerable period, during which the applicant incurred costs in pursuing the proceedings. Nevertheless, so far as the fourth and fifth respondents are concerned, it cannot be overlooked that the claim was for total and permanent disability; it was refused having regard to the medical reports the insurer received as to the applicant's condition, which suggested a fitness for work. The correctness of those reports was later confirmed by the fact that the applicant was able to find permanent employment and thereupon abandoned his pursuit of the claim for total and permanent disability. The applicant then sought to discontinue the proceedings. 38 I am satisfied in all of those circumstances, that the applicant's claim that the fourth and fifth respondents bear his costs of the proceedings cannot be accepted. The issues here were not so clear that in the absence of a hearing, the applicant can be found to be entitled to the costs order sought. 39 But for one matter, the order which would properly flow from these conclusions, is an order that the parties each bear their own costs. The respondents, however, rely upon the offer which they earlier made to agree to the proceedings being discontinued, on the basis that each party bear their own costs. 40 I am satisfied that in the circumstances revealed on the evidence, the applicant may not have acted reasonably in refusing that offer. The offer was, however, subject to execution of a 'deed on terms agreed to by our clients including granting our client's a full release'. There was no evidence as to what such a deed may have contained and what such a 'full release' may have encompassed. Whether or not what was being sought was reasonable, cannot be assessed. It follows that the proper consequence is that the applicant should not have to bear the respondents' costs of the motion. Orders 41 For all of the reasons given, I make the following orders: 1. Leave is granted to the applicant for the proceedings to be discontinued. 2. The applicant and the fourth and fifth respondents are each to bear their own costs of the proceedings. ------------------------ 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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