Industrial Relations Commission of New South Wales CITATION: Ross v A E R Pty Ltd (No 2) [2005] NSWIRComm 1190 APPLICANT Helen Miriam Ross PARTIES: RESPONDENT A E R Pty Ltd FILE NUMBER(S): 5817 of 2003 CORAM: McLeay C CATCHWORDS: Costs - unfair dismissal - decision as to credit of witnesses different to finding of CIM - found, application not frivolous or vexatious - found, not unreasonable failure to agree to settlement - no order as to costs LEGISLATION CITED: Industrial Relations Act 1996 Peden v Lake Macquarie Refrigeration Pty Limited [2004] NSWIRComm 66 CASES CITED: Youssef and Western Sydney Area Health Service (No 3) [2004] NSWIRComm 124 Dee Donovan and Tanya Sullivan t/as Blaze on Stage Pty Ltd [2005] NSWIRComm 362 DATE OF JUDGMENT: 11/18/2005 APPLICANT Mr J Law, agent John F Law & Associates LEGAL REPRESENTATIVES: RESPONDENT Mr T Fox, solicitor Fox & Associates Lawyers DECISION: INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES CORAM: McLEAY C 18 November 2005 Matter No IRC 5817 of 2003 Helen Miriam Ross and A E R Pty Ltd Application by Helen Miriam Ross re unfair dismissal pursuant to section 84 of the industrial Relations Act 1996 JUDGMENT [2005] NSWIRComm 1190 1 A decision regarding the applicant's claim for unfair dismissal was handed down on 30 August 2005 in [2005] NSWIRComm 1140, following which a claim for costs was made by the respondent, pursuant to s 181(2) of the Industrial Relations Act 1996. Written submissions were received from both parties. 2 The respondent submitted that the applicant should be required to pay the respondent's reasonable costs on a party/party basis until 31 May 2004 (the date when the respondent's offer of settlement was put in writing to the applicant) and on an indemnity basis from that date until conclusion of the proceedings. 3 The relevant section of the Act reads as follows: (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 Profession Act 1987 or on any other basis. (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 (c1) ... (d) ... .... (3) ... .... (4) In this section, costs includes: (a) costs of or incidental to proceedings in the Commission, and (b) in the case of an appeal to the Commission, the costs of or incidental to the proceedings giving rise to the appeal, as well as the costs of or incidental to the appeal. 4 Mr Fox for the respondent submitted that the application for unfair dismissal was frivolous or vexatious in so far as: a. it was made in circumstances where the respondent was clearly entitled to dismiss the applicant for gross misconduct and the Commission duly found that the respondent discharged the heavy onus on it to justify that dismissal; b. the applicant must be taken to have known, prior to the commencement of the proceedings, of those aspects of her conduct which would form a basis for the respondent's contentions in relation to the reasons for the dismissal, not least her illegal conduct in drawing and misappropriating business funds to her own use; c. the applicant had within her possession and introduced into her own evidence documents including the so called "cash ledger" which proved the extent of her misconduct; and d. the applicant, in the course of the proceedings, made clear and full admissions in relation to her dishonesty and her deliberate misleading of the Australian Taxation Office and Centrelink to the extent that she was found to be in blatant breach of the relevant laws. 5 In response, Mr Law for the applicant submitted that: a. in circumstances where the applicant was dismissed in the car park when arriving for work, given no reasons for termination then or on her later request, there was just reason for an application for unfair dismissal for being dismissed without reason and/or prior history of warnings; b. the applicant denies any misuse of business funds for her own benefit and testified that at all times she received funds at the respondent's initiative; c. the "cash ledger" maintained by the applicant was not in her possession but was maintained at the workplace, only being removed by her on termination when she was told to remove her personal possessions; and d. the applicant denies gaining any additional benefit from Centrelink, and submits that misleading the Australian Taxation Office has no bearing on the application for costs. 6 I agree with the respondent's submissions in reply that the first three of the applicant's submissions outlined above ignore my findings in the substantive case. Specifically, I found that the employment was terminated for reasons relating to Ms Ross' work performance. Although she was not told as much on the day of her termination, Ms Ross proceeded with her claim after having been informed of those reasons by the respondent. I also found that she had not acted on the respondent's initiative in withdrawing funds for her own use. I expressed serious concerns about the "cash ledger" and Ms Ross' claim that it was readily available to the respondent. I said, of the pages referred to as the "cash Ledger" that "They were never shown to Mr Rawnsley. They did not form part of the official business records." 7 Mr Law relied on the definitions of frivolous and vexatious in Peden v Lake Macquarie Refrigeration Pty Limited [2004] NSWIRComm 66. The application was made on time and within jurisdiction following termination at the initiative of the employer, in circumstances where there was conflicting evidence as to the events of the dismissal. The applicant was entitled to prosecute her claim, said Mr Law. He submitted that a case which does not succeed on the balance of probabilities does not equate with an absence of grounds, nor that the claim was frivolous. 8 The Full Bench in Youssef and Western Sydney Area Health Service (No 3) [2004] NSWIRComm 124 said at [24]: 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. 9 The first question outlined in Youssef and Western Sydney Area Health Service (No 3) goes to the reasonableness of the settlement offer, which I will discuss later. The second question goes to the conduct of the applicant during the period between the first conciliation before the Commission and the hearing of the matter. This period included proceedings before the Chief Industrial Magistrate in which it was found that His Honour preferred the evidence of the applicant where there was conflict. It is unsurprising that the applicant continued to press her claim for unfair dismissal in the light of His Honour's finding and unsurprising that she found the respondent's settlement offer unreasonable. 10 I note also that Ms Ross continued to press that she acted at all times on her employer's instruction and with his full knowledge. While I found this was not the case, it was necessary for me to determine whether to accept the evidence of the applicant or the evidence of the respondent. In addition, there were a range of associated issues between the parties which had the potential, at least in theory, to cause a finding in favour of either party. It was not a case that could be described as "manifestly groundless". 11 The applicant's honesty before the Chief Industrial Magistrate and before me in admitting earlier dishonesty was a factor which she apparently believed would mitigate in her favour. Although this was not the case in the proceedings before me, at least, it is not unreasonable that the applicant might have expected a different outcome. Her frankness during the proceedings in regard to certain aspects of her case did not overcome other evidence, or lack of evidence, to the contrary. 12 Overall, I am satisfied that the application was not frivolous or vexatious as defined in Peden. 13 Mr Fox for the respondent submitted that the applicant instituted proceedings without reasonable cause. Mr Law responded that there was no evidence that the applicant commenced proceedings with any intention other than to have her claim determined by the Commission, which was what occurred. 14 It is arguable that the grounds for an order of costs in an unfair dismissal claim are limited to those set out in s 181(2)(c) thereby excluding the ground of instituting proceedings without reasonable cause. Without commenting further on that argument, suffice to say that my consideration of those reasons is as set out above, the respondent's reasons being identical to those proposed in support of the claim on the ground of the claim being frivolous or vexatious. 15 The respondent further submitted that the applicant unreasonably failed to agree to a settlement of the claim in so far as the respondent made a without prejudice offer in writing on 31 May 2004, which offer was rejected by letter dated 7 June 2004. 16 The applicant submitted in response that the offer was contained in a without prejudice letter which did not use the words "save as to costs" and was not a Calderbank offer. Further, at no time during the proceedings was the applicant advised that the respondent believed that the application was frivolous or vexatious. The applicant was not warned that the respondent would be seeking costs if the applicant failed to accept a reasonable offer of settlement. 17 Again, I agree with the respondent's submission in reply, namely, that the omission of the words "save as to costs" has no bearing on the matter. Nor is it required that a party is put on notice of a potential costs application. The legislation carries that potential in regard to all claims for unfair dismissal. S 181(2)(c) does not limit the discretion of the Commission to order costs on the bases offered by the applicant. However, it is a usual courtesy to raise the issue of costs at an early stage, and may be done for the reason of adding some persuasive force to any offer that is made. Further, an explicit foreshadowing of a costs application may go some way towards determining whether a settlement offer was reasonable in all the circumstances. 18 It is necessary to consider the question of whether the offer to settle was a reasonable one. In hindsight, of course, both parties would have been better served if the applicant had settled the matter at that time. Such is often the case, and is not sufficient reason to consider an order for costs. In my view, there must also be circumstances that would lead the applicant to believe that the offer was a reasonable one. A similar issue was considered by a recent Full Bench in Dee Donovan and Tanya Sullivan t/as Blaze on Stage Pty Ltd [2005] NSWIRComm 362 where it was said at [56] - [57]: 56 An offer by an unrepresented litigant to accept $1200 in settlement of a claim which he strongly felt affected his livelihood and which was attended by complex and difficult legal questions, could not, in our view, be properly held to be an unreasonable refusal to settle the matter. 57 Moreover, it was really not the point that the respondent vehemently opposed such a settlement because it represented an acknowledgement the appellant was an employee. As discussed in Bankstown City Council v Paris , 93 IR 209 the emphasis in the Act is to encourage settlement of unfair dismissal claims. The settlement of unfair dismissal claims should not be viewed as an acknowledgement of any one party's view of the proceedings. The settlement of claims are a without prejudice endeavour to resolve litigation without any admissions and, are usually confidential. 19 In this case, I am satisfied on the submissions on behalf of the applicant that Ms Ross believed the offer was not a reasonable one. It was appropriate that she thought as much, particularly given that she was successful in her claim before the Chief Industrial Magistrate. 20 In summary, I am not satisfied that the proceedings were instituted without reasonable cause. Nor was it shown that the applicant unreasonably failed to agree to a settlement of her claim. I do not believe that the application was frivolous or vexatious. 21 I make no order as to costs. 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