Industrial Relations Commission of New South Wales CITATION: Wilson v The Bathers' Pavilion Pty Limited [2006] NSWIRComm 1132 APPLICANT Lori Wilson PARTIES: RESPONDENT The Bathers' Pavilion Pty Limited FILE NUMBER(S): 6819 of 2005 CORAM: Ritchie C Application for costs by respondent in unfair dismissal case. Whether unreasonable refusal to settle claim by applicant. CATCHWORDS: Respondent argued original offer reasonable. Prior to arbitration both applicant and respondent made offers and counter offers to settle claim. Commission found that applicant had not unreasonably failed to settle claim. Application for costs dismissed. LEGISLATION CITED: Industrial Relations Act 1996 Bankstown City Council v Paris (1999) 93IR 209 CASES CITED: Phillips v Industrial Relations Commission of NSW & Anor [2006] NSWCA 183 Luke v Handicapped Children's Centre IRC2586 of 1994 Orange Community Accommodation Service Incorporated and Carolyn Vivienne Roddenby [2004] NSWIRComm333 HEARING DATES: 15/08/06 DATE OF JUDGMENT: 09/05/2006 APPLICANT Mr R McPherson of counsel Solicitor: Ms Mardon Parry Carroll Lawyers LEGAL REPRESENTATIVES: RESPONDENT Mr M Easton of counsel Solicitor: Mr V Dominello Etheringtons Solicitors DECISION: INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES CORAM: RITCHIE C. 5 September 2006 Matter No IRC 6819 of 2005 IN THE MATTER OF: Lori Wilson and The Bathers' Pavilion Pty Limited Application by Lori Wilson re unfair dismissal pursuant to section 84 of the Industrial Relations Act 1996 DECISION [2006] NSWIRComm 1132 1 On 6 April 2006, the Commission as presently constituted handed down a decision in the above matter in favour of the respondent. On 27 April 2006 a mention was held as a consequence of the respondent making an application for costs. A timetable for the filing and serving of evidentiary material/submissions was provided to the parties and the Hearing of the costs application was held on 15 August 2006. After the completion of proceedings, the Commission reserved its decision. 2 At the costs hearing Mr M Easton of Counsel appeared with Mr. Dominello for the respondent and Mr R McPherson of Counsel with Ms Mardon appeared for the applicant. 3 Attached to the affidavit of Victor Michael Dominello (Ex.1 annex.F as amended) was a chronology of events, that included offers and counter offers that occurred between the parties. Mr Dominello was not required for cross-examination. ANNEXURE "F" CHRONOLOGY DATEEVENTANNEXURE 23-Dec-05Applicant files application seeking reinstatement and compensation for unfair dismissal 18-Jan-06Conciliation before Commissioner Connor a) Applicant indicates that she would accept a further 12 weeks salary totalling $13,846.15 b) Respondent makes offer of a further 6 weeks salary totalling $6,923.08 23-Jan-06a) Respondent's solicitor confirms offer of a further 6 weeks in writingA Offer open for 28 days b) Applicant's solicitor confirms offer of 12 weeks in writingB Offer open until 4.00pm 25th January 2006 25-Jan-06Applicant's solicitor calls Respondent's solicitor regarding their client's threat to go to the media if matter not settled 30-Jan-06Applicant's solicitor makes offer of 10 weeks salary (inclusive of costs) $11,538.50C Offer open until 4.00pm 31st January 2006 31-Jan-06Respondent's solicitor writes to Applicant's solicitor reciting media threat and offer of $5,000.00 to settle (for full and final settlement)D Offer open until 4.00pm 3rd February 2006 1-Feb-06Applicant makes verbal offer of 8 weeks pay - $9,230.77 2-Feb-06Respondent rejects that offer 3-Feb-06Applicant's solicitor responds to Respondent's solicitor's letter that Applicant is entitled to explore all options including going to the mediaE 10-Feb-06Applicant's solicitor files notice of ceasing to act 16-Mar-06Hearing before Commissioner Ritchie a) Respondent makes offer of $3,000 (inclusive of legal costs) b) Applicant rejects offer and matter proceeds to arbitration 6-Apr-06Decision of Commissioner Ritchie 4 It was Mr Easton's submission that he relied only on s.181(2)( c) of the Industrial Relations Act 1996 (the Act), to the extent that the applicant unreasonably failed to agree to a settlement of her claim. He did not argue that the claim was frivolous or vexatious. 5 Mr Easton relied on that particular section of the Act that is designed to encourage parties to settle unfair dismissal proceedings and that costs orders be available in circumstances where a party fails to properly conciliate to the extent that they have failed to reasonably facilitate a potential settlement of the matter. 6 It was the respondents case that the Full Bench in Bankstown City Council v Paris (1999) 93IR 209 identified that there are at least two reasonable bases upon which the Commission might find that a party unreasonably fails to settle a matter, viz: a. 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; and b. the course of the 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 was his view that both applied to this case. 7 It was argued that the applicant's conduct was inconsistent with an intention to settle the proceedings on any reasonable basis and that she did not consider in an objective way the strengths or limits of her case. Also the same obstinacy that the Commission found in the applicant in the original proceedings decision, was applied by her in the conciliation process. He also stated that at the time the settlement offers were made by the respondent, the applicant would have been aware of the case she had to meet via the written warnings provided to her by the respondent. The applicant had for a period of time, the benefit of advice and representation from an experienced industrial law firm. The applicant disengaged the services of this firm prior to the hearing. Mr Easton brought to the Commission's attention through evidence, the financial position of the applicant at the time she disengaged the services of the law firm. The applicant by her conduct during the conciliation process, failed to facilitate a potential settlement by failing to undertake a responsible and careful assessment of the prospects of the litigation. 8 At the initial conciliation the respondent offered the applicant a settlement of, in essence, six weeks pay which was rejected. Subsequent settlement offers by the respondent were less in quantum as the respondent progressively incurred costs. 9 The respondent sought an Order for the payment of the respondent's costs of an incidental to the proceedings as agreed or assessed within 28 days of the date of the Order. 10 Mr McPherson argued that a reading of Bankstown CC v Paris showed that the Commission should consider the whole of the conduct of the applicant in that there was a history of offer and counter offer by each party during the conciliation process. He stated that it would be contrary to Bankstown CC v Paris to consider in isolation the respondent's original offer of six weeks and for the Commission to determine the costs application as a consequence of the rejection of that offer by the applicant. The history of offer and counter offer showed that the applicant was actively seeking to conciliate her application and could not be accused of unreasonably failing to agree to a settlement. 11 As Mr McPherson stated that whilst the applicant was reducing the quantum of her subsequent claims so was the respondent as they progressively incurred costs. Consideration and Decision. 12 Section 181(2) of the Industrial Relations Act 1996 is expressed in the following form. However, the Commission when it is not in Court Session may award costs only in the following cases: (a) ……………… (b) ………………… (c) the Commission may award costs against a party to proceedings under Part 6 of the 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. If a positive finding is made under this section (the jurisdictional "gateway"), the Commission may then move to the general discretionary powers to award costs. I refer, in this respect, to the provisions of s.181(1) which are set out below: (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 Professional Act 1987 or on any other basis. 13 This two stage process was explained by the Full Bench in Bankstown City Council v Paris: "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 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 Section 181(1) are available for exercise." and " 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." 14 I note also the comments in Phillips v Industrial Relations Commission of NSW & Anor : "The reference to the opinion of the Commission emphasises, if emphasis were required, that the criterion is to be decided by the Commission applying its own perception of what was unreasonable, as distinct from the perception (if any) of the party. This does not permit the Commission to ignore the standpoint or standards of the party concerned, but the Commission must not be captive to those matters." and the comments of Connor C in Luke v Handicapped Children's Centre: " an order for costs on the grounds of an unreasonable failure to settle the 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…" and the Full Bench comments in Orange Community Accommodation Service Incorporated and Carolyn Vivienne Roddenby : " 30. It is clear that each application as to costs under s 181(2) (c ) must be determined on its own facts and circumstances. In this case the Commissioner regarded " the most important time relevant " to his conclusions, as the time of the initial offer of four weeks. However, we consider that the Commissioner placed undue emphasis upon this initial transaction and that this skewed his ultimate evaluation away from an overall assessment of the respective positions of the parties. This was an error. 31. While the Commissioner's assessment of the initial transaction may have been correct for that particular exchange, it obviously did not represent the appellant's ongoing position, or its last offer of 18 March 2003. On any view of it, a 26 week offer in comparison to an initial offer of four weeks, must represent a significant shift in the appellant's position. In our view, the Commissioner's focus on the initial offer, without paying sufficient regard for the later offers made by the appellant, represented an error requiring appellant intervention." 15 The applicant made four offers to settle her claim prior to arbitration actually commencing. The original claim of 26 weeks was varied to 12 weeks, then to 10 weeks and finally to 8 weeks. The respondent offered 6 weeks, then $5000 and finally $3000. 16 It was Mr Easton's submission that the applicant's first offer of 6 weeks was reasonable and it was unreasonable of the applicant not to accept the offer thereby providing the opportunity for the respondent to be successful in a costs application. It was Mr McPherson's submission that the Commission had to consider the whole of the conduct of the applicant. 17 It is my finding that in the consideration of an application for costs in this unfair dismissal claim, the Commission has to consider the whole of the conduct of the applicant. I have not been persuaded by Mr Easton that the applicant's conduct over the entire course of the litigation, from the date of the notice of termination, was inconsistent with an intention to settle the proceedings on any basis that could be considered reasonable. 18 In my view considering the history of the offers and counter offers that were made, both parties sought to try and successfully conciliate the matter. Whilst the applicant's offers were reducing in quantum, so were the respondent's which clearly did not attract and engage the applicant in reaching an agreement. 19 For the reasons as expressed above, it is my finding that the applicant did not unreasonably fail to agree to a settlement of the claim and therefore this application for costs is rejected. 20 This matter is now concluded. D. RITCHIE COMMISSIONER 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.