Industrial Relations Commission of New South Wales CITATION: Wilkinson v Birdon Group (No 2) [2005] NSWIRComm 224 Amy Wilkinson PARTIES: Birdon Group FILE NUMBER(S): IRC 2917 of 2004 CORAM: Harrison DP Application for costs - Failure by respondent to objectively consider strengths and limits of case - minimal offers by respondent unrealistic and unreasonable CATCHWORDS: Held - minimal offers of settlement intimidating, inconsistent with intention to settle on any reasonable basis - costs ordered against respondent LEGISLATION CITED: Industrial Relations Act 1996 Luke v Handicapped Children's Centre (IRC 2586 of 1993, 4 May 1994, Connor C unreported) Whitmore v Woolworths Australia Ltd [2004] NSWIRComm 1099 Copperart Pty Ltd v Martin (1996) 68 IR 58 CASES CITED: Bankstown City Council v Paris (1999) 93 IR 209 Youssef v Western Sydney Health Service (No 3) (2004) 133 IR 210 Weisser v Spur Group Pty Limited [2003] NSWIRComm 79 HEARING DATES: 02/16/2005 DATE OF JUDGMENT: 06/30/2005 APPLICANT Mr K Byrnes Byrnes Lawyers LEGAL REPRESENTATIVES: RESPONDENT Mr J Kay Stacks The Law Firm JUDGMENT: - 2 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES CORAM: HARRISON DP Thursday, 30 June 2005 Matter No IRC 2917 of 2004 AMY WILKINSON AND BIRDON GROUP Application re unfair dismissal pursuant to section 84 of Industrial Relations Act 1996 DECISION RE COSTS [2005] NSWIRComm 224 1 A decision issued in respect to this matter on 4 April 2005 awarding compensation of 26 weeks pay to the applicant. 2 Mr Byrnes, Solicitor acting on behalf of the applicant, subsequently made application for an order of costs which was subject to teleconference proceedings from which directions issued for the filing of written submissions with an opportunity for the parties to speak to those submissions should they so require. 3 The written submissions are now received and neither party wishes to be heard further. 4 Costs are available pursuant to s 181(2) of Industrial Relations Act 1996 ("the Act") which states: (2) However, the Commission when it is not in court session may award costs only in the following cases: (a) the Commission may award costs against an applicant if it considers that the application to it was frivolous or vexatious, or (b) the Commission may award costs against a party to proceedings who, in the opinion of the commission, instituted proceedings without reasonable cause, or (c) the Commission may award costs against a party to proceedings under Part 6 of Chapter 2 (unfair dismissals) who, in the opinion of the Commission, unreasonably failed to agree to a settlement of the claim or whose application was frivolous or vexatious, or (d) the Commission may award costs in proceedings for a breach of an industrial instrument or the recovery of money under Chapter 7, as provided by sections 357 and 373. 5 In their written submissions both parties acknowledged that costs are discretionary and do not follow the event in matters pursuant to s 84 of the Act. 6 The submissions of both parties describe the events of conciliation before Mr Commissioner Redman on 8 July 2004. Prior to the conciliation proceedings, discussions took place between the respective solicitors in which the respondent's solicitor put that the respondent would be prepared to resolve the matter by payment of $1,000. This was refused. The applicant pressed for the maximum compensation of 26 weeks pay. 7 Subsequent to consideration of the material filed and submissions of the legal representatives, Redman C. suggested that the parties consider settlement at 10 weeks pay (approximately $6,000, inclusive of costs). The applicant advised that she was prepared to accept this suggestion and the respondent's solicitor undertook to seek instructions. 8 On seeking instructions the respondent's solicitor reiterated the offer of $1,000 inclusive of costs. This was not accepted and directions issued for the filing of evidence to bring the matter to arbitration. 9 Subsequent to receipt of the applicant's affidavit an offer of settlement in the amount of $2,000 inclusive of costs was made to the applicant by correspondence from the respondent's solicitor. These events are not in issue between the parties 10 In his written submission Mr Byrnes relies upon the following portion of the correspondence from the respondent: "We confirm it is our view that your client is unlikely to succeed in her claim against our client on the evidence contained in your client's Affidavit, and that her Application is frivolous and vexatious ….. …. Our client hereby offers to settle all matters in dispute between our respective clients without admission of liability, on the basis that it pays to your client the sum of $2,000 inclusive of costs …. We believe this is a most reasonable offer in the circumstances …. If your client does not accept this offer and our client is successful at arbitration, then we will make an Application to the Commission for costs pursuant to Section 181(2)(c) of the Industrial Relations Act 1996 and will tender a copy of this letter in support of our Application." 11 A further attempt at resolution took place prior to the commencement of the arbitration proceedings which established that the respondent would not make any offer in excess of $2,000 inclusive of costs. Mr Brynes put that the applicant maintained her preparedness to settle for 10 weeks pay, but would not and could not be expected to bid against herself in the negotiations. 12 Mr Byrnes advanced his argument in support of costs on the basis of the weight of the findings against the respondent founded primarily on the conduct of the respondent during and in the conclusion of the employment relationship. 13 Mr Byrnes submitted that the respondent was quick to raise the question of costs against the applicant and sought to intimidate the applicant into accepting an unreasonable settlement, relying on the unequal bargaining position of the parties given that the applicant was unemployed and drawing no income at the time compared to the respondent's much more substantial resources. 14 Mr Byrnes further submitted that without an order of costs the remedy to the applicant will be significantly diminished by events which resulted from the stubborn attitude of the respondent. 15 Mr Kay, on behalf of the respondent, relied upon a finding of Mr Commissioner Connor in Luke v Handicapped Children's Centre (IRC 2586 of 1993, 4 May 1994 unreported) where Connor C said: "… …an order for costs on the grounds of an unreasonable failure to settle a matter should be contemplated only where there is such an obdurate refusal to participate in the discussions that there has been a total frustration of the conciliation process". 16 Mr Kay relied upon correspondence from the applicant's solicitor of 15 July 2004 (Attach. B to his submissions) which states: "We refer to your letter of 12 July 2004. We note that your client has not changed its proposal from the proposal communicated to us prior to the matter coming before Commissioner Redman on 8 July. In our view your client has not made any genuine attempt to resolve the matter. Needless to say, at the conclusion of these proceedings we will be drawing that to the attention of the Commission with a view to seeking an order for costs. We note with interest your comment that it is your client's view that "events which occurred some six months prior to your client returning to work on 27 April 2004 have no relevance to these proceedings ". In our view your client's actions constituted some of the most boorish, arrogant and inappropriate conduct the writer has ever heard of in an employer. We believe that the Commission will be appalled by the way our client was treated." 17 Mr Kay submitted that the "tone" of this correspondence indicated that the applicant had no intention of entering into meaningful settlement negotiations, adding that there was no counter offer from the applicant. 18 Mr Kay submitted that the applicant failed to make a counter offer to the offer of $2,000, putting that the only occasion that the applicant expressed any willingness to settle the claim was her agreement through her solicitor to accept the 10 weeks' pay suggested by Redman C. 19 Mr Kay defended the respondent's position in not taking up the Commissioner's suggestion by reference to comments of Connor CC in Luke, where he said: "an employer's refusal to [accept] the settlement of a claim, permitting his views to be subsequently tested in an arbitrated hearing, must be accepted as something that he has every right to do." 20 Mr Kay further defended the respondent's action on the basis that at the time of the suggested settlement by Redman C. no evidence had been filed and the respondent was entitled to have his views on the matter subsequently tested at hearing. 21 Mr Kay submitted that the fact that the applicant was ultimately awarded a higher amount of compensation does not render the respondent's refusal to accept the suggestion of the Commissioner, effectively an offer from the applicant, an unreasonable failure to settle. 22 Mr Kay relied upon the decision of Macdonald C. in Whitmore v Woolworths Australia Ltd [2004] NSWIRComm 1099 (8 October 2004) where the Commissioner said: 21. The Commission relies on the following extract of a decision of Deputy President Sams in Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union, on behalf of Mark Harrison and Keith Donaldson, and Australian Co-operative Foods Limited [2001] NSWIRComm 29 on this point. 15. The Union submitted that the offers of settlement were unreasonable when tested against the orders made by the Commission. In considering this submission, I have had regard to the comments of the Full Court of the Federal Court in Blagojevch v Australian Industrial Relations Commission , 98 IR 32 at 42-43, where Marshall and Lehane JJ said: Certainly there is no reason to give primacy to the result of a mechanical comparison between an amount offered and the amount of compensation ultimately awarded; although, if an applicant offers to settle for a particular amount and the arbitration results in the award of a substantially lesser amount by way of compensation, it would no doubt be only in unusual circumstances that the respondent would be held to have acted unreasonably in rejecting the offer. 16. I have also had regard for the conclusions of Stanley J of the Industrial Commission of South Australia in Krajewska and University of Adelaide , 50 IR 63, where his Honour said: The question of whether a person clearly acts unreasonably in failing to discontinue or settle the matter before trial must be judged in the light of all the circumstances known, or which reasonably should have been known, before the trial commences." 22. It follows then that the amount of any offers of settlement when compared to the amount of compensation ultimately awarded by the Commission, should not be given primacy in deciding whether the offers made during settlement negotiations were reasonable and accordingly as to whether or not a costs order should be made against a party. It also follows that in determining what was a reasonable offer of settlement, the position of the parties at the time the offer was made should be examined rather than a mechanical comparison of the offers of settlement and the amount of compensation awarded by the Commission. 23 Mr Kay submitted that the respondent had made two offers of settlement without counter offer or attempt by the applicant to engage the respondent in discussion with a view to settlement except in the formal conciliation proceedings before Redman C. where his suggestion of 10 weeks pay was accepted by the applicant. Mr Kay submitted that accordingly the respondent could not be regarded as having unreasonably failed to facilitate a potential settlement. 24 Mr Kay relied upon the following passage from the decision of a Full Bench of the Commission in Copperart Pty Ltd v Martin (1996) 68 IR 58: "settlement is a dynamic question which must be pressed on the opposing party if the submission that there has been an unreasonable failure to settle is to be used to ground an application for costs. We do not consider that the making of one offer of settlement which was not pursued can, in the circumstances set out in this case, establish an 'unreasonable failure to agree to a settlement'." 25 Mr Byrnes put that the offer by the applicant to settle for the $6,000 suggested in conciliation proceedings was a significant compromise on her part, putting that the decision in Copperart does not require a party to continually reduce offers of settlement until one is finally accepted. CONSIDERATION 26 The principles to apply to the application of s 181(2) are found in Bankstown City Council v Paris (1999) 93 IR 209, considered and endorsed by a Full Bench of the Commission (Wright P, Walton VP, Harrison DP and Connor C) in Youssef v Western Sydney Health Service (No 3) (2004) 133 IR 210 where at 216 the Bench said: "The applicable principles as to the awarding of costs in proceedings such as the present were laid down in Bankstown City Council v Paris where the Full Bench stated that an affirmative conclusion on costs may be reached in either of the following two circumstances. The first is where there was a proposal put by a party which could be described as a reasonable settlement of the claim and that was not agreed by the other party. The second situation is where the course of conduct of the party over a relevant period could be said to amount to conduct inconsistent with an intention to settle the proceedings on any basis that could be considered reasonable. It is also clear from the decision of the Full Bench that notwithstanding the finding that the test in s 181(2)(c) has been satisfied the exercise of the power to actually award costs remains throughout discretionary." and in Weisser v Spur Group Pty Limited [2003] NSWIRComm 79 (Wright J, President, Walton J, VP and Ritchie C): 36 It is now well established that the approach to be adopted in s 181(2)(c) cases is for the Commission to determine whether the statutory criteria has been met or, using the terminology in Four Sons v Sakchai Limsiripothong (No 2) , the jurisdictional gateway has been satisfied, before the exercise of the Commission's discretion powers under s 181(1) is considered: see Bankstown City Council v Paris at 219. The approach to be adopted to the construction and application of s 181(2)(c) was explained by the Full Bench in the latter case as follows: Construing the relevant part of s 181(2)(c) in its overall statutory context, we conclude that the evident purpose of the provision is to encourage the settlement of proceedings to which it applies. The criterion set out in the provision is to be applied objectively and requires a consideration of the whole of the conduct of the party against whom the order is sought, or some discrete part of that party's conduct, with a view to ascertaining whether it unreasonably failed to agree to a settlement of the claim. We also consider that on the proper construction of the provision, an affirmative conclusion may be reached on at least two bases. First, where there was a proposal put by a party which could be described as a reasonable settlement of the claim and that was not agreed by the other party. The second situation in which the criterion could be satisfied is where the course of conduct of the party over a relevant period could be said to amount to conduct inconsistent with an intention to settle the proceedings on any basis that could be considered reasonable. We emphasise that, although the legislature has clearly intended that there be strict limits on the power of the Commission to award costs in unfair dismissal proceedings, the legislature has also evinced a clear intention that costs orders be available in circumstances where there has been a failure on the part of a party to properly conciliate proceedings to the extent that they have failed reasonably to facilitate a potential settlement of them. Further, the Commission is obliged to consider all relevant circumstances in deciding whether such failure has occurred. Once the statutory criterion has been met, the Commission's broad powers and discretions under s 181(1) are available for exercise. 37 The Full Bench emphasised the risks which a party runs if it adopts a firm position or inflexible approach towards the settlement of the case, observing at 220: Far from indicating any retreat from the inflexible approach adopted by the appellant, its approach in relation to settlement on this occasion, served only to emphasise the consistent position that had been adopted. We emphasise that there will be many circumstances in which parties to litigation, including unfair dismissal proceedings, may appropriately take a firm position generally, including on the question of conciliation or settlement. Nevertheless, such a position runs significant risks in terms of the exercise of the power and discretion under s 181(2)(c). This is particularly so where such a position is assumed without due regard to the policy of the Act which requires parties to take seriously their obligation to attempt to settle the proceedings. That in turn involves an obligation to consider in an objective way the strengths or limits upon the case that they will be propounding should the matter proceed to arbitration. On the material before us, we consider that the appellant failed to give appropriate consideration to such matters before it adopted its inflexible position. We consider that, in the circumstances of this matter, the criterion in the relevant provision has been made out. It has been met as to the proceedings both at first instance and on appeal. 38 In Four Sons Pty Limited v Sakchai Limsiripothong (No 2) the Full Bench considered the issue of 'nominal offers' of settlement and observed at 403 - 404: The obligations imposed on parties to proceedings under s 84 of the Act, as identified in the Full Bench judgment in Bankstown City Council v Paris , require parties to such proceedings to undertake a responsible and careful assessment of the prospects of the litigation, in the absence of which an unsuccessful party may realistically face the prospects of a costs order being made against it. In those circumstances, it may often be appropriate for a party to consider making an offer to settle, even if the offer could be seen, either with the benefit of hindsight or otherwise, to be at a rather low level. However, the making of such an offer on "the low side" does not exhaust the responsibilities of a party to reasonably attempt to settle the claim. It is conceivable that if the respondent had responded to those offers in a more timely way, the proceedings may have settled. We doubt, however, that that is the appropriate finding on the evidence before us. Rather, the evidence as to further negotiations makes plain that the appellant had no realistic intention to make an offer which was likely to settle the proceedings before McKenna C. However, it would be inappropriate not to take into account the lack of a timely response from the respondent to the nominal offers of settlement which were made by the appellant in August and September 1999. 27 In the substantive proceedings it was found that the applicant had been harshly, unjustly and unreasonably treated by the employer to such a degree that the maximum compensation was awarded. 28 As directed by the judgment in Bankstown City Council v Paris the Commission is required to consider all relevant circumstances when considering whether there has been a failure on the part of a party to properly conciliate proceedings. 29 The relevant circumstances in this matter are the offer by the respondent of settlement in the amount of $1,000 and reaffirmation of the offer following conciliation. 30 The offer from the respondent was an amount previously rejected by the applicant and made no apparent consideration of the Commissioner's suggestion and the applicant's willingness to settle at that amount, which was a significant compromise on her part. The respondent made a subsequent offer of $2,000 (being approximately one third of the amount suggested by the Commissioner) at a much later time following the filing of the applicant's affidavit when it must be accepted that the applicant's costs had increased. 31 The ultimate disposition of the case went heavily against the respondent on facts largely uncontested which leads to a conclusion that the offers by the respondent were unrealistic and unreasonable. The offers were no more than nominal as cautioned against in Four Sons. 32 These circumstances lead to a conclusion that the respondent failed to take seriously its obligation to attempt to settle proceedings, which, as was said in Bankstown City Council v Paris and endorsed by Weisser v Spur Group Pty Limited, involves an obligation to consider in an objective way the strengths and limits upon the case that they will be propounding. 33 The offers made by the respondent and the manner in which they were made reveal no such objective assessment. On the evidence the offers by the respondent were at an unrealistic level, put in a way designed to intimidate the applicant, leading to the conclusion that the respondent's conduct is inconsistent with an intention to settle the proceedings on any basis that could be considered reasonable. 34 In the circumstances of this matter I consider the jurisdictional gateway is opened and an order of costs should be made. In the exercise of discretion to order costs I conclude that in all of the circumstances such order should be made. 35 I order payment of costs by the respondent as agreed or as taxed by the Registrar. oo0oo INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES CORAM: HARRISON DP Thursday, 30 June 2005 Matter No IRC 2917 of 2004 AMY WILKINSON AND BIRDON GROUP Application re unfair dismissal pursuant to section 84 of Industrial Relations Act 1996 ORDER Pursuant to s 181 of the Industrial Relations Act 1996 ("the Act") Birdon Group is ordered to pay to Ms Amy Wilkinson costs as agreed or as taxed by the Registrar within 21 days of the date of this decision. I so order. The Hon. R W Harrison Deputy President 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.