Industrial Court of New South Wales CITATION: Powerlan Limited & Anor v Squires (No 2) [2007] NSWIRComm 68 APPELLANTS: Powerlan Limited PARTIES: Powerlan Resources Pty Limited RESPONDENT: Steven Squires FILE NUMBER(S): IRC 5635 of 2005 CORAM: Wright J President; Walton J Vice-President; Schmidt J CATCHWORDS: Appeal - unfair contract - costs - offers of compromise - appellants partially successful on appeal - whether each party should bear own costs of entire appeal proceedings or whether there should be an order in favour of the respondent in part and the appellant in part - orders made. LEGISLATION CITED: Industrial Relations Commission Rules r 216 CASES CITED: Powerlan Limited & anor v Squires [2006] NSWIRComm 390 Squires v Powerlan Ltd and Anor [2005] NSWIRComm 354 HEARING DATES: Written submissions DATE OF JUDGMENT: 30 March 2007 APPELLANTS: Mr I Taylor of counsel SOLICITORS: Agnew D'Arcy Legal LEGAL REPRESENTATIVES: RESPONDENT: Mr IM Neil SC with Mr DWM Chin of counsel SOLICITORS: Phillips Fox JUDGMENT: INDUSTRIAL COURT OF NEW SOUTH WALES FULL BENCH CORAM: WRIGHT J, President WALTON J, Vice-President SCHMIDT J Friday 30 March 2007 Matter No IRC 5635 of 2005 POWERLAN LIMITED AND ANOTHER v STEVEN SQUIRES Application by Powerlan Limited and another for leave to appeal and appeal against the judgment of Justice Haylen given on 5 October 2005 and orders given on or after the 24 October 2005 in Matter No IRC 5580 of 2002 JUDGMENT OF THE PRESIDENT [2007] NSWIRComm 68 1 I have had the benefit of reading in draft form the joint judgment about to be delivered by their Honours, the Vice-President and Schmidt J, but regret that I differ from their Honours approach in one respect. Nevertheless, their Honours' detailed exposition of the background to the matter and of the submissions of the parties enables me to deal with the particular matter shortly. 2 As is observed in the joint judgment (see para [12]) the respondent submitted in his reply submissions that he should have an order in his favour as to the costs of the appeal up to 3 May 2006 because he was successful in upholding the orders of the trial judge "in respect of the most substantial questions on appeal". Although this submission is quite different to the initial approach taken by the respondent, I agree with it. As the respondent submitted in his initial submissions he was successful in having affirmed on appeal the orders of Haylen J in respect of: (a) the timing and manner of the Respondent's termination of employment; (b) whether the Respondent's actions after 2 August 2002 amounted to serious misconduct; (c) severance pay; and (d) payment for accrued long service leave. 3 I consider the respondent correctly contends that these were discrete issues and, taken together, were the most substantial questions on appeal; and although the appellant succeeded in one respect concerning payment in lieu of notice, the respondent was substantially successful in the appeal overall. The approach I propose also involves a more faithful application of the whole of the precise terms of r 216(6) of the Court's Rules. 4 Therefore, although I agree with the other orders proposed in the majority judgment, I would propose the following order 2(i) instead of that proposed by the majority: 2(i) The appellants shall pay the respondent's costs incurred up to and including 3 May 2006; JUDGMENT OF THE VICE-PRESIDENT AND SCHMIDT J 5 Judgment was given in this matter on 13 December 2006 (Powerlan Limited & anor v Squires [2006] NSWIRComm 390). By majority (Wright J President, Walton J Vice-President, Schmidt J dissenting in part) the orders made were: (1) Leave to appeal is granted. (2) The appeal is allowed in part and orders 1(b) and 2(b) made by Haylen J are set aside and consequent amendments are made to the calculation of interest in order 3. (3) The appeal is dismissed to the extent that it sought to set aside orders 1(a), (c), (d) and 2(a) and (c) as made by his Honour. (4) The respondent shall bring in short minutes of order within seven days reflecting the above orders, including the necessary amendment to the calculation of interest. 6 The orders which Haylen J had made at first instance (Squires v Powerlan Ltd and Anor [2005] NSWIRComm 354) were: 1. That the employment arrangement between the Applicant and the Respondents is declared to be unfair and is varied as follows: (a) That the Applicant's prior service with Phase Shift Technology Pty Ltd will be recognised and taken into account when calculating notice, severance and long service leave entitlements under the employment agreement. (b) That on termination of the employment arrangement between the Applicant and the Respondents by reason of redundancy, the Applicant is entitled to six months' notice, or payment in lieu of such notice, payable on the Applicant's total remuneration package. (c) That on termination of the employment arrangement between the Applicant and the Respondents for reason of redundancy, the Respondents will pay the Applicant a severance payment of 17.5 weeks' pay payable on the Applicant's total remuneration package. (d) That if the Applicant is made redundant he is entitled to pro rata long service leave payable on his total remuneration package. 2 That judgment is given in favour of the Applicant against the First Respondent and the Second Respondent in the amount of $101,369.88 ( Judgment Sum ), such sum being comprised of the following amounts: (a) The sum of $50,750.00 which represents a severance payment of 17.5 weeks of the Applicant's total gross remuneration of $150,800.00 per annum; (b) The sum of $50,257.00 which represents a notice payment of 4 months' of the Applicant's total gross remuneration of $150,800.00, less the amount of $5,269.35 already paid to the Applicant by the Second Respondent in respect of notice on 18 September 2002; and (c) The sum of $11,600.00 representing the pro rata long service leave payment owing to the Applicant based on the Applicant's total remuneration of $150,800.00, less the amount of $5,967.77 already paid to the Applicant by the Second Respondent on 20 August 2003. 3 Interest to the Applicant on the whole of the Judgment Sum, at the prescribed rate as set out in Schedule 5 of the Uniform Civil Procedure Rules 2005, in the amount of: 3.1 Interest on paragraph 2(a) above from 1/10/2002 to 5/10/2005 $13,777.58 3.2 Interest on paragraph 2(b) above from 1/10/2002 to 5/10/2005 on $44,987.65 $12,213.22 3.3 Interest on paragraph 2(c) above from 1/10/2002 to 19/08/2003 on $11,600.00 $475.30 3.4 Interest on paragraph 2(c) above from 20/08/2002 to 5/10/2003 on $5,632.23 $1,080.46 Total $27,546.56 4 Costs in favour of the Applicant on a part/party basis for the period commencing 1 October 2002 up to 2 June 2003, being the date on which the Applicant's offer of compromise was made on 2 June 2003. 5. Costs in favour of the Applicant on an indemnity basis from 3 June 2003 onwards. 6. That the judgment given in Order 2, and the orders for interest and costs in Orders 3, 4 and 5 are made against each of the First Respondent and the Second Respondent, such that they are liable to the Applicant thereunder on a joint and several basis. 7 That the Judgment Sum is payable by 2 November 2005. If it is not paid in full by that date, the Applicant is entitled to interest under s101 of the Civil Procedure Act 2005 for any unpaid balance from that date. 7 The appellants thus succeeded in having the judgment at first instance set aside in relation to six months' notice of termination, but failed to have the judgment set aside as to redundancy pay and long service leave. The parties were unable to agree on the question of costs and a programme was fixed for the filing of written submissions. The respondent's submissions of 2 February 2007 8 The respondent submitted that the general rule was that costs should follow the event. He relied on an offer of compromise he had made on 2 June 2003, in these terms: The Applicant offers to compromise and settle his claim in these proceedings against the First and Second Respondents in the following manner 1 The Respondents pay to the Applicant the sum of $60,000 gross; and 2 The Respondents pay to the Applicant the Applicant's costs as agreed or assessed. This offer is open for a period of 28 days from the date below. This offer is made in accordance with the provisions of Part 23 of the Industrial Relations Commission Rules 1996. It will be relied on in respect of the issue of costs. 9 The result of the appeal was that the orders made by Haylen J were varied to $73,399.95, a sum greater than the 2 June offer. It followed that orders 4 and 5 made by Haylen J as to costs of the first instance proceedings, should be confirmed. 10 Otherwise, it was argued that the respondent was successful in upholding the orders of Haylen J in relation to the most substantial questions raised on appeal. The appellants succeeded in only one respect, concerning payment in lieu of notice. It followed that the respondent was substantially successful on appeal and that the most appropriate order was that each party pay their own costs of the appeal. The appellants' submissions of 7 February 2007 11 The appellants accepted that orders 4 and 5 made by Haylen J ought to be confirmed in light of the respondent's offer of compromise of 2 June 2003. Their case was otherwise that the respondent had failed to take into account the offer of compromise they had made on 3 May 2006 because the result of the appeal was that "the respondent obtained a result that was no more favourable then was offered in paragraph 1 of the offer of compromise". The appropriate costs order was that each party should pay their own costs of the appeal up to and including 3 May 2006 and that thereafter there should be a costs order in favour of the appellants on a party/party basis. Their offer was: 1. The first and second Appellants offer to compromise and settle the appeal on the basis that the Appellants pay to the Respondent the following amounts: (a) the sum of $50,750.00 (before tax) which represents a severance payment of 17.5 weeks of the Respondent's total gross remuneration of $150,800.00; and (b) the sum of $5,632.23 (before tax) representing the Respondent's pro rata long service leave of $11,600 less the amount of $5,967.77 paid to the Respondent on 20 August 2003; and (c) interest under section 100 of the Civil Procedure Act 2005 on (a) above of $13,777.58; and (d) interest under section 100 of the Civil Procedure Act 2005 on (b) above of $1,555.76; and (e) interest under section 101 of the Civil Procedure Act 2005 on the total of the above amounts (being $71,715.57) from 2 November 2005 until 9 December 2005 (when he(sic) sum of $70,000 was paid pursuant to the Stay decision); and (f) interest under section 101 of the Civil Procedure Act on $1,715.57 from 10 December 2005 until the date of this offer (noting that the payment is to take into account (and any further payment reduced by) the sum of $70,000 that was paid by the Appellants to the Plaintiff(sic) on 8 December 2002, pursuant to the Stay judgment). 2. The first and second Appellants pay the Respondent's costs at first instance on the following basis: (a) On a party and party basis for the period commencing 1 October 2002 up to 2 June 2003; and (b) On an indemnity basis from 3 June 2003. 3. The first and second Appellants pay the Respondent's costs of and incidental to the appeal on a party and party basis until the date of this offer. 4. This offer is open for acceptance for a period of 28 days from the date of this offer. 5. This offer is made in accordance with the provisions set out in Part 23 of the Industrial Relations Commission Rules 1996 . The respondent's submissions of 16 February 2007 12 In reply, the respondent submitted that if an order was to be made in favour of the appellants after 3 May, they should be entitled to an order in their favour, up to that date, because the respondent was successful in upholding the orders of Haylen J in respect of the most substantial questions on appeal. 13 Both parties relied on Rule 216 of the Court's Rules, which provides: 216 Offer of compromise (1) Upon the making of an order under Rule 168(9), a party entitled to costs may, unless the Commission otherwise orders, have those costs assessed up to and including the day the offer was accepted. (2) If a notice of offer contains a term which purports to negative or limit the entitlement to costs, that term shall, unless the Commission otherwise orders, be of no effect for any purpose under Part 23 or this Rule. (3) Subrules (4)–(7) apply to an offer which has not been accepted at the time prescribed by Rule 168(8). (4) Where an offer is made by an applicant and not accepted by the respondent, and the applicant obtains an order on the claim to which the offer relates no less favourable than the terms of the offer, then, unless the Commission otherwise orders, the applicant shall be entitled to an order against the respondent for costs in respect of the claim from the day on which the offer was made, assessed on an indemnity basis in addition to costs incurred before and on that day, assessed on a party and party basis. (5) For the purpose of subrule (4), where the offer was made on the first or a later day of the hearing of the proceedings, then, unless the Commission otherwise orders, the applicant shall be entitled to costs in respect of the claim from 11 am on the day following the day on which the offer was made, assessed on an indemnity basis, in addition to costs incurred before that time, assessed on a party and party basis. (6) Where an offer is made by a respondent and not accepted by the applicant, and the applicant obtains an order on the claim to which the offer relates not more favourable than the terms of the offer, then, unless the Commission otherwise orders, the applicant shall be entitled to an order against the respondent for costs in respect of the claim up to and including the day the offer was made, assessed on a party and party basis, and the respondent shall be entitled to an order against the applicant for costs in respect of the claim thereafter, assessed on a party and party basis. (7) For the purpose of subrule (6), where the offer was made on the first or a later day of the hearing of the proceedings, then, unless the Commission otherwise orders, the applicant shall be entitled to costs in respect of the claim up to 11 am on the day following the day on which the offer was made, assessed on a party and party basis, and the respondent shall be entitled to costs in respect of the claim thereafter, assessed on a party and party basis. (8) Where an applicant obtains an order for the payment of a remuneration, compensation or damages and: (a) the amount payable under the order includes interest or damages in the nature of interest, or (b) by or under any Act the Commission awards the applicant interest or damages in the nature of interest in respect of the amount, then, for the purpose of determining the consequences as to costs referred to in subrules (4) and (6), the Commission shall disregard so much of the interest as relates to the period after the day the offer was made. (9) For the purpose only of subrule (8), the Commission may be informed of the fact that the offer was made, and of the date on which it was made, but shall not be informed of its terms. (10) Subrules (4) and (6) shall not apply unless the Commission is satisfied by the party making the offer that the party was at all material times willing and able to carry out what the party offered. Consideration 14 In this case the question of costs arises in a context where the appellants were partially successful on appeal and also made an offer of compromise, which, given the orders made on appeal, had the result that the provisions of Rule 216(6) were engaged, as the respondent accepted and indeed, relied on. It was, accordingly, common ground that orders 4 and 5 made by Haylen J should be upheld and that there should be an order for costs in favour of the appellants for costs of the appeal after 3 May. 15 The parties disagreed on the question of the costs order up to and including 3 May. Initially the respondent submitted that each party should bear their own costs of the entire appeal proceedings, given the outcome of the appeal. It was only when the appellants relied on their offer of compromise, a reliance which the respondent accepted was appropriate, that it was suggested that a proper costs order for the earlier period was an order in favour of the respondent for costs to 3 May. 16 We are satisfied that to so approach the question of costs would be to disregard the appellants' success on the appeal. The just way in which to determine the question of costs, is to consider what costs order is appropriate to be made, in the circumstances of this case, absent of any offer of compromise and then to consider what impact, if any, the offer should have. 17 As the respondent first submitted, the appellants succeeded on some aspects of the appeal and he succeeded on others. Given the outcome achieved by the parties on appeal, it must be accepted that there should be a departure from the ordinary rule, that costs should follow the event and that the departure should be that originally proposed by the respondent, namely an order that each party should bear its own costs of the appeal. That reflects a fair disposition of the costs, given the results of the appeal. 18 What next requires consideration is whether there should be any departure from that order, given the offer of comprise. Rule 216 is concerned with offers of compromise and the money amounts offered, by way of comparison to what flows from the orders later made in the particular case. In this case, the offer of compromise was directed to the aspects of the appeal on which the respondent ultimately succeeded. It was clear that he would have been better off, had he accepted the offer, given what ultimately flowed from the Court's decision. 19 Given that circumstance, we accept the parties' agreement, as to the costs of the appeal after 3 May. Consistently with Rule 216(6), the costs order which would otherwise be made in the absence of the offer, should be altered to reflect the making of that offer and its rejection. Orders 20 For those reasons, we make the following orders: 1. In respect of costs at first instance, orders 4 and 5 made by Haylen J are confirmed; 2. In respect of costs on appeal: (i) Each party pay their own costs incurred up to and including 3 May 2006; (ii) The Respondent to pay the Appellants' costs as agreed or as assessed from 4 May 2006. 21 PRESIDENT: The orders of the Court are accordingly those set out in para [20] above. ____________ 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.