Industrial Relations Commission of New South Wales CITATION: Ptolemy v St. Vincents Private Hospital [2005] NSWIRComm 1220 APPLICANT: Ms. L. Ptolemy PARTIES: RESPONDENT: St. Vincents Private Hospital FILE NUMBER(S): 1590 of 2005 CORAM: Ritchie C Application for costs by St Vincents Private Hospital after applicants claim for unfair dismissal dismissed. Respondent submitted that their offers to settle the matter were reasonable. Applicant believed her offers were reasonable. Applicant did not believe respondents offers were reasonable taking into consideration her increasing legal costs. CATCHWORDS: Respondent submitted that Commission should not consider her legal costs as a reason for her rejection of their offers. Respondent also stated that applicant recognised that she would loose her unfair dismissal claim if technical grounds accepted by Commission. Commission found that legal costs should not be considered . Also that applicant aware of the weakness of her case. Found that applicant had breached s.181(2)(c )of the Act. Costs ordered against the applicant. LEGISLATION CITED: Industrial Relations Act 1996 Bankstown City Council v Paris93IR209 Four Sons Pty Limited v Sakchai Limsiripothong 100IR 400 Van Huisstede v Commisioner of Police 106IR56 CASES CITED: IGA Distribution Pty Ltd and Moses [2003]NSWIRComm230 Weisser v Spur Group Pty Ltd[2003]NSWIRComm79 Orange Community Accommodation Service Incorporated and Carolyn Vivienne Roddenby[2004]NSWIRComm333 HEARING DATES: 10/17/2005 DATE OF JUDGMENT: 12/14/2005 Mr. V. Ptolemy LEGAL REPRESENTATIVES: Mr. W. Harvey,solicitor of Hannigans Solicitors DECISION: INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES CORAM: Ritchie C. 14 December 2005 Matter No IRC 1590 of 2005 IN THE MATTER OF: Lynette Ann Ptolemy and St. Vincent's Private Hospital (SVH) Application by Lynette Ann Ptolemy re unfair dismissal pursuant to section 84 of the Industrial Relations Act 1996. DECISION [2005] NSWIRComm1220 Background. 1 On 17 August 2005 I brought down my Decision in an application for unfair dismissal brought by Ms. L. Ptolemy against St. Vincent's Private Hospital(the Hospital) located at Lismore. In that Decision I found in favour of the respondent and dismissed Ms. Ptolemy's claim on the basis that there had been no termination of the Ms. Ptolemy by the Hospital, but the cessation of employment had occurred as a consequence of the passing of time to the end of the agreed training period. 2 On 6 September 2005, St. Vincent's Private Hospital filed a statement by Ms. Annie Schmidt and a Statement of Argument – Costs. 3 On 29 September 2005 Ms. Ptolemy filed a statement. 4 The hearing on costs was heard on 17 October 2005 in Lismore when at the completion of submissions I reserved my decision. Applicant's Case. 5 Annie Schmidt is the Human Resources Manager of the Hospital commencing on 14 March 2005. Attached to her witness statement was a chronology of the "costs history" in this matter. It showed that at the first Conciliation/Directions held in Lismore an offer of $5000 was made by Ms. Ptolemy to settle her claim. This was rejected by the Hospital. 6 On 9 May 2005 the Hospital offered $1000 to settle the claim. 7 On 17 May 2005 correspondence was received by the Hospital from Ms. Ptolemy's legal representative at the time rejecting the offer of $1000 and offering $4000 to settle. 8 On 20 May 2005 the Hospital rejected this offer and again offered $1000. 9 On 27 May 2005 the second Conciliation/Directions was held between the parties. No resolution was achieved so a timetable for the filing and serving of evidentiary material was provided to the parties. 10 After the applicant had filed her witness statement, the Hospital wrote to the applicant on 8 July 2005, rejecting her verbal offer of $6500 to settle her claim and made a counter offer of $2500. That offer of $2500 was to expire on 18 July 2005. 11 Ms. Schmidt stated that when she spoke with Ms. Ptolemy on or around 5 July 2005, Ms. Ptolemy made an offer to settle by increasing her claim from $4000 to $6500. Ms. Schmidt said she told Ms. Ptolemy that she was surprised by this action and that the case would not settle as the offer was so high and getting higher. She said that Ms. Ptolemy replied and said that "the Hospital may well win, in fact I think they will. I'm going to keep pushing as far as I have to, to get satisfaction. I want the Hospital to have to answer for what they've done" and " I want the Commissioner to decide." It was Ms. Schmidt's view that after that conversation the matter would never settle. In cross- examination Ms. Schmidt did advise that Ms. Ptolemy said that if the case was decided on the technicalities of the contract then Ms. Ptolemy felt the hospital would win. 12 Further evidence was filed and served and the hearing proceeded. 13 Ms. Schmidt stated that prior to the hearing she had spoken to the applicant between 10 and 15 occasions. During some of those conversations she sought to convince Ms. Ptolemy to accept the Hospital's offer to settle her claim because she may loose the case and end up with nothing. In rejecting the Hospital's offers she quoted Ms. Ptolemy as saying on a number of occasions: "it's a risk I'm prepared to take." 14 In both his written and verbal submissions Mr. Harvey for the applicant in these proceedings sought primarily, costs on an indemnity basis. If that was not granted then party/party costs. 15 He primarily relied on s.181(2)(c) of the Industrial Relations Act 1996 (the Act) and secondly on s.181(2)(b). His submission was Ms. Ptolemy unreasonably failed to agree to a settlement of her claim and that her conduct was inconsistent with an intention to settle proceedings. 16 Ms. Ptolemy was originally offered (on 9 May 2005) $1000 to settle her claim. Post the filing of the applicant's and respondent's evidentiary material the respondent offered (on 8 July 2005) a sum of $2500 to settle the matter. This offer was open until 18 July 2005. At the point of making that offer, the applicant would have been fully aware of the case that was to be run against her. That offer of $2500 was reasonable and the applicant's rejection of this offer was unreasonable. 17 On the other hand the actions of Ms. Ptolemy were also unreasonable. During negotiations Ms. Ptolemy originally offered to settle for $5000, decreased this to $4000 and then increased the settlement amount to $6500. In summary Ms. Ptolemy did not "undertake a reasonable and careful assessment of the prospects of the litigation." 18 The Commission should not allow Ms. Ptolemy to rely on her general legal costs as a defence to deny that the Hospital's offers were not reasonable. 19 The evidence of Ms. Schmidt recounting the various conversations she had with Ms. Ptolemy showed that notwithstanding the view of Ms. Ptolemy that " the Hospital may well win, in fact I think they will", Ms. Ptolemy wanted her day in Court. 20 Taking into consideration the comments in various cases brought to the attention of the Commission, the Commission should find in favour of the Hospital in its claim for costs in this matter starting from 18 July 2005 to the date of the hearing on costs being 17 October 2005. Respondent's Case. 21 It was the respondent's submission that the claim for costs should be dismissed. 22 It was the evidence of Ms. Ptolemy that she strongly denied that she had unreasonably failed to agree to a settlement or that she had engaged in conduct that was inconsistent with an intention to settle the matter. The Hospital never once made a reasonable offer. The offer of $1000 was not accepted because she had already paid $700 in legal fees. She reduced her claim to $4000 yet there was no movement by the Hospital. As at around 5 July she had legal bills of $3990 so her previous offer of $4000 would have in her view been an unreasonable result. If the Hospital had offered an amount in the vicinity of $2500 prior to incurring additional costs then she would have been prepared to settle her case. Even if the Hospital had agreed to settle for $6500, her net benefit would have been in the vicinity of $2510 which was less than her claim of original $5000. She stated that in her conversations with Ms. Schmidt: "that the Hospital probably would win if the decision were only based on the technicality of the contract. Then I went on to say that if the decision were based on the principle surrounding the rejection of my application to stay on at SVH after the contract than I believed that I had a good chance of success." 23 She did not believe the cases cited by Mr. Harvey had any relevant similarities with her case. 24 In final submissions Mr. Ptolemy stated that the applicant in preparing to forego her continuing employment should be recognised as a major concession. 25 He was critical of the Hospital that in their negotiations with Ms. Ptolemy they should have taken into consideration her legal debt. 26 During the Hearing the Commission asked Mr. Ptolemy whether the Commission should take into consideration the legal costs incurred by the parties in settling the matter. Mr. Ptolemy replied in the affirmative. Consideration and Decision. 27 The principles for determining an application for costs in unfair dismissal proceedings were considered in Bankstown City Council v Paris and Four Sons Pty Limited v Sakchai Limsiripothong and reaffirmed in Van Huisstede v Commissioner of Police (No 2) (2001)106 IR 56, IGA Distribution Pty Ltd and Moses No 3 [2003] NSWIRComm 230 and Weisser v Spur Group Pty Ltd [2003NSW IRComm79. 28 It will be readily seen from these decisions that determination of a costs application under Pt6 Ch 2 of the Act requires a two staged process. Firstly, the Commission is required to make a finding under the discrete provisions of s.181(2)(c ) of the Act. 29 Section 181(2) of the Industrial Relations Act is expressed in the following fashion: 181(2) [Commission not in Court Session] 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 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, 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. 30 Secondly, 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. 31 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 the. 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 18(1) are available for exercise. 32 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 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 section 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. 33 In Four Sons Pty Limited v Sakchai Limsiripothon (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 section 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. 34 It was Mr. Ptolemy's submission on behalf of his daughter that his daughter's offers to settle her claim had been reasonable. Her offers in turn were $5000 (3 May2005), $4000 (17 May 2005) and then $6500 (8 July 2005). It is clear from the evidence that Ms. Ptolemy did not accept the first offer of $1000 or the final offer made by the Hospital on 8 July 2005 of $2500 due to her growing legal bill. As she commented in her statement that she would have accepted an amount in that vicinity ($2500) in the absence of those additional costs. 35 I note the comments made by a Full Bench in Orange Community Accommodation Service Incorporated and Carolyn Vivienne Roddenby[2004]NSWIRComm333 when it stated the following : In our view, the test of whether a party has unreasonably failed to agree to a settlement of a claim should not be made by reference to the extent of costs expended by the other party. If that was so, a party could incur substantial legal expenses, and simply argue that any offer of settlement which failed to go close to meeting such expenses, demonstrated an unreasonable failure to agree to a settlement. That is not the appropriate test under s 181(2)(c ) of the Act. By focusing on such a comparison the Commissioner was deflected from the correct statutory instruction to determine whether a party had unreasonably failed to agree to a settlement of the claim. 36 It is my finding that Ms. Ptolemy, throughout the negotiation period took into account her mounting legal costs in rejecting the Hospital's reasonable offers of settlement. 37 I note also the evidence of Ms. Schmidt with respect to the comments made by Ms. Ptolemy with respect to her views on her success in her claim. It is clear that Ms. Ptolemy recognised that she did not have a strong case and that she will loose if a technical argument concerning her signed contract was run. Seeing the signed contract was pivotal to the case, it is my conclusion that Ms. Ptolemy did not undertake a responsible and careful assessment of the prospects of the litigation. 38 Taking into consideration all the facts in this case it is my finding that Ms. Ptolemy unreasonably failed to agree to a settlement of her claim and therefore breached s.181(2)( c) of the Act. 39 Mr. Harvey for the Hospital sought indemnity costs or in the alternative party and party costs. He stated that Ms. Ptolemy was offered $2500, a generous offer and its refusal invokes the powers or enlivens the opportunity to order costs against her for pursuing it past that point. 40 I have considered this submission of Mr. Harvey but in review of the facts of this case, I do not believe that special or unusual circumstances manifested themselves in improper or unmeritorious conduct by Ms. Ptolemy. 41 I do however order costs on a party/ party basis against Ms. Ptolemy as agreed or assessed to be payable to St. Vincent's Private Hospital within 28 days of this decision. 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. 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