Industrial Relations Commission of New South Wales CITATION : 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 APPLICANTS PARTIES : Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union, on behalf of Mark Harrison and Keith Donaldson RESPONDENT Australian Co-Operative Foods Limited FILE NUMBER: 7056 and 7059 of 1999 CORAM: Sams DP Unfair dismissal - application for costs - whether respondent employer "unreasonably failed to agree to a settlement" - s181(2)(c) of the Act - conduct of parties - principles discussed. CATCHWORDS : Held, Commission's discretion to award costs against unsuccessful party not appropriate - application for costs dismissed. LEGISLATION CITED : Industrial Relations Act 1996 Bankstown City Council v Paris, 93 IR 209 Talbot v Rostcom Pty Ltd (unreported) Sams DP, Matter IRC1617 of 1999, 18 November 1999 CASES CITED : Copperart v Martin, 68 IR 58 Four Sons Pty Limited v Sakchai Lamsiripothong, 100 IR 400 Blagojevch v Australian Industrial Relations Commission, 98 IR 32 Krajewska and University of Adelaide, 50 IR 63 HEARING DATES: 11/23/2000; 12/04/2000; 12/15/2000; 12/21/2000 DATE OF JUDGMENT: 02/22/2001 APPLICANTS Mr S Penning, Solicitor Turner Freeman LEGAL REPRESENTATIVES: UNION Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union RESPONDENT Mr P Ludeke, Agent JUDGMENT: INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES CORAM: SAMS, DP 22 February 2001 Matter No. IRC99/7056 MARK HARRISON AND AUSTRALIAN CO-OPERATIVE FOODS LIMITED Application by the Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union re unfair dismissal pursuant to section 84 of the Industrial Relations Act 1996 Matter No. IRC99/7059 KEITH DONALDSON AND AUSTRALIAN CO-OPERATIVE FOODS LIMITED Application by the Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union re unfair dismissal pursuant to section 84 of the Industrial Relations Act 1996 DECISION (On Costs) 1 By decision of 18 October, 2000, the Commission, as presently constituted, made orders pursuant to s89(5) of the Industrial Relations Act, 1996 (the Act) in favour of two dismissed employees, formerly employed by Australian Co-operative Foods Ltd. The employees were dismissed for participating in a workplace prank, wherein another young employee was suspended in a harness above a workshop bench. The Commission's findings are recorded at para 101: FINDINGS 1) The dismissals of Mr Harrison and Mr Donaldson were unfair in accordance with Pt 6 ch 2 of the Act. 2) The dismissals were "harsh", having regard to the nature of the incident and associated circumstances. 3) The dismissals were "unreasonable" in that the action by the employer was disproportionate to the inaction taken in respect to other employees aware of, or who participated in the incident. 4) The dismissals were "unjust" in that the action by the employer was disproportionate to the inaction taken in respect to other employees aware of, or who participated in the incident. 5) The investigation of the incident was hasty, ill considered and flawed. As such, the applicants were not afforded procedural fairness. 6) The employer failed to take into account such mitigating factors as, each employee's length of service and record of employment. 7) Reinstatement is considered to be impractical. 8) Compensatory relief should be ordered taking into account s89(6) of the Act. 2 No application for costs was foreshadowed by either party in the substantive proceedings. However, the Commission was moved by letter from the Union's solicitor dated 8 November 2000, requesting the matters be re-listed for a hearing on costs, pursuant to s181(2)(c) of the Act, relying on the words the employer "unreasonably failed to agree to a settlement of the claim." 3 Before proceeding to the application presently before the Commission, it seems to me timely, to express some general observations in unfair dismissal matters. 4 It is patently obvious that the scheme of the Act, in respect to unfair dismissal applications, is to place particular emphasis on the settlement of an applicant's claim. So much so is evident by the express provisions in s86; that "the Commission must endeavour, by all means it considers proper and necessary, to settle the applicant's claim by conciliation." This statutory emphasis is continued in s87 which requires the Commission to only proceed to arbitration when it is satisfied that " all reasonable attempts to settle the applicant's claim by conciliation have been made, but have been unsuccessful ." Moreover, s87(2) allows the Commission to attempt conciliation at any time before an order is made. ie. during the arbitration itself. 5 Costs are not the usual regime as they are in other matters; such as those before the Commission in Court Session for example, where costs follow the event. 6 Rarely are costs applications, under Pt 6 ch 2 of the Act, pursued by way of detailed submissions in the substantive proceedings. Occasionally, a party will warn of a costs application in conciliation proceedings as a lever in settlement negotiations. On other occasions, a party will put the Commission on notice, during an arbitration, that costs will be pursued, if the party is successful. 7 It is plain from a perusal of both the Act, and the Commission's Rules, that there is no time limit for an application for costs to be made consequent upon a substantive decision being published. In effect, this means a costs application could be made many months, even years, after the published decision. I note however, that a failure to lodge a costs application in a timely fashion, might be a matter the Commission would take into account in the exercise of it's discretion to award costs under s181(2)(c) of the Act. 8 It seems eminently sensible to me that a party, or parties, to Pt 6 ch 2 proceedings should, at the very least, foreshadow an application for costs during the substantive proceedings. This would alert the Commission to the possibility of costs being pursued by a successful party. The Commission will then be able to indicate, in the substantive decision, that a notice of motion on costs should be filed within a reasonable period - say, 21 days. I turn then to the present application. 9 The Commission listed the application for mention and directions on 23 November 2000; Mr Penning (Solicitor) appeared for the Automotive, Food, Metals, Engineering Printing and Kindred Industries Union and the applicants and Mr Ludeke (Agent) continued his appearance on behalf of the respondent. The Commission proposed that the application proceed by way of written submissions and directed the filing and exchange of submissions. 10 The parties' submissions may be summarised as follows: For the applicants it was submitted: 1) The respondent employer was unreasonable in pursuing litigation in the light of the information it had available to it. 2) The respondent was unreasonable in failing to reach a settlement with the applicants. 3) The respondent's conduct was inconsistent with an intention to settle the proceedings on a reasonable basis. See Bankstown City Council v Paris , 93 IR 209. 4) The applicants were put to unnecessary and substantial legal expense in pursuing their claims. 5) The respondent was unwilling to, and failed to, respond to various offers of compromise to settle the claims. 6) While acknowledging that the discretion to order costs under s181(2)(c) should be exercised cautiously, it was a proper exercise of discretion to order costs in this case, in full or in part. In opposing the costs application, the respondent submitted that: 1) The respondent's failure to agree to a settlement was not unreasonable. 2) The Commission made certain adverse findings against the applicants. 3) The respondent willingly and openly participated in conciliation proceedings and made offers of settlement. This conduct is to be distinguished from the findings in Paris where the employer refused all offers of settlement. 4) Both parties failed to arrive at a settlement, and neither of them acted unreasonably. Mr Penning submitted in reply that: 1) there were no adverse findings against the applicants. 2) the respondent's offers of settlement were unreasonable and unacceptable when tested against the Commission's eventual orders. CONSIDERATION 11 One might usefully commence consideration of this application by reference to a recent Full Bench authority on costs applications in proceedings under Pt 6 ch 2 of the Act. I note this authority was relied upon by both parties. In Bankstown City Council v Paris (93 IR 209), the Commission said at p218: The relevant part of s 181(2)(c), on the other hand, does not require the Commission to focus upon the circumstances of the commencement of the proceedings, or to consider only the situation of the applicant. Instead the Commission is required to consider in a more general way, the conduct of the party in respect of which an application for costs is made; and, in that regard, to consider the conduct of the party in relation to the question of settlement of the claim. An understanding of the meaning and purpose of s 181(2)(c) is assisted by reference to the particular provisions in Pt 6, Unfair Dismissals, of Ch 2 of the Act, which relate to conciliation or settlement of unfair dismissal applications. Section 86 for example, provides: "The Commission must endeavour, by all means it considers properly necessary, to settle the applicant's claim by conciliation." Section 87(1) is also relevant. Its effect is to preclude the Commission from proceeding to determine the claim by arbitration until "all reasonable attempts to settle the applicant's claim by conciliation have been made but have been unsuccessful". Section 87(2) continues the statutory emphasis upon conciliation by specifying that the earlier provisions do not prevent further conciliation from being attempted at any time before the Commission makes an order in the proceeding. 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. 12 As observed in the above passage, the legislature intended that there be limitations to the powers of the Commission to award costs in unfair dismissal cases. In this regard, I also refer to my comments in Talbot v Rostcom Pty Ltd, Matter IRC99/1617, 18 November 1999, unreported, at p6, and which are entirely consistent with the later conclusions in Paris: It is trite to observe that the legislature intended that costs orders in unfair dismissal proceedings are the exception, rather than the rule. To this end, the Commission's power to order costs should be cautiously and carefully exercised. No doubt the legislature had in mind the likelihood that the accessibility and early informality of the unfair dismissal jurisdiction would be restricted, if unrepresented litigants faced the daunting prospect of general costs orders. I note, of course, in this case, the applicant was legally represented, ab initio . Notwithstanding this careful and cautious approach, the general power of courts and tribunals to award costs has always been accompanied by the time honoured tradition of ensuring justice is afforded to both parties. 13 The Commission has also taken cognisance of the Full Bench decision in Copperart v Martin, 68 IR 58, a decision referred to in Paris and which highlights the unusual nature of unfair dismissal proceedings in respect to costs: It is clear, that in a scheme where costs are not the usual regime, the part of the Act contemplates and apprehends two distinct propositions: · that costs are not the automatic outcome of a refusal to settle; · that under certain circumstances costs are appropriate. 14 Bankstown City Council v Paris is also authority for the proposition that while s181(2)(c) is a discrete provision directed towards unfair dismissal proceedings, the Commission's general discretionary powers under s181(1) are available where the express criterion has been met under s181(2)(c). The discrete provision was described by a Full Bench of the Commission in Four Sons Pty Limited v Sakchai Lamsiripthong, 100 IR 400, as the "jurisdictional gateway" to the Commission's general powers on costs. However, in view of my later findings, it is unnecessary for the Commission to look beyond s181(2)(c); as the "gateway" was not opened. 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". 17 The Commission has considered the relevant facts and circumstances disclosed in this case and had the opportunity to be involved in conciliation proceedings prior to arbitration. I have considered the conduct of the parties; particularly the conduct of the employer in respect to settlement of the claims. In doing so, I have come to the view that this case does not warrant the exercise of the Commission's discretion to award costs in the applicants' favour. I have arrived at this conclusion after taking into account, inter alia, the following matters: 1) Costs are not an automatic outcome of a refusal to settle. See Copperart v Martin . 2) Offers of settlement, albeit well short of the orders finally made by the Commission, were made by the respondent during conciliation. 3) There are no unusual circumstances which warrant a finding against the employer based on disparity between the employer's offers of settlement and the Commission orders. See Blagojevch v Australian Industrial Relations Commission . 4) The employer's conduct during conciliation was not belligerent, or dishonest. 5) The employer was entitled to take a dim view of the prank. It was convinced that it could not, and would not, condone behaviour of the kind displayed by the workplace prank. This view was reasonable. While some disciplinary action was appropriate, the Commission found dismissal of the applicants to be "harsh, unjust and unreasonable." 6) The Commission was critical of the employer's investigation of the incident and its failure to take account of the information it had available to it. However, the full extent and scope of the evidence, particularly that of another "willing participant" in the workplace prank, Mr Van Doorn, only became apparent during the course of the arbitration. He failed to tell the full story during the employer's investigation. For example he did not reveal that while suspended above the workplace he had a mobile phone and had used it to call the security guard (para 89). See Krajewska and University of Adelaide . 7) As disclosed by my comments at para 80 of the published decision, the applicants were not entirely without fault, having made certain admissions and concessions. 18 For the abovementioned reasons, the Commission dismisses the application for costs in matters 7056 and 7059 of 1999. PETER SAMS 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.