Industrial Relations Commission of New South Wales CITATION: Nicole Kathleen Young and others v Department of Juvenile Justice [2007] NSWIRComm 142 APPLICANTS Nicole Kathleen Young Justin Matthew Tom PARTIES: Marie Kuban Nathan Hoevers RESPONDENT Department of Juvenile Justice FILE NUMBER(S): IRC2833; 2834; 4102; 4103 of 2005 CORAM: Sams DP Notice of motion - application for costs - costs sought on an indemnity basis - no offers of settlement by respondent - reinstatement only offer proposed by applicants - four applicants dismissed for misconduct - obligation to attempt to settle claims - statutory framework - jurisdictional gateway- conduct of the parties - failure to consider strengths and weaknesses of case - flaws in the investigation - new evidence during proceedings - applicants reinstated - partial lost remuneration ordered. CATCHWORDS: Held; parties' positions understandable - respondent did not unreasonably refuse to settle claims - participation in conciliation proceedings - comparisons not relevant - difficulties in both parties evidentiary cases - applicants not totally vindicated - respondent's conduct did not evince an intention to unreasonably refuse to settle claims - costs application refused - proceedings not unusual or out of the ordinary - indemnity costs refused - notice of motion dismissed. LEGISLATION CITED: Industrial Relations Act 1996 Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union, on behalf of Mark Harrison and Keith Donaldson and Australian Co-Operative Foods Limited [2000] NSWIRComm 285 Bankstown City Council v Paris (1999) 93 IR 209 Carlton and United Beverages Limited & Phillip Brunt [2007] NSWIRComm 135 Four Sons Pty Ltd v Sakchai Limsiripothong (No 2) (2000) 100 IR 400 CASES CITED: IGA Distribution Pty Ltd v Moses (No 3) (2003) 130 IR 145 Nicole Kathleen Young and others v Department of Juvenile Justice [2006] NSWIRComm 337 Phillips v Industrial Relations Commission of NSW (2006) 154 IR 96 Staal and Tupene and Western Sydney Area Health Service [2004] NSWIRComm 325 Tuholi Pty Ltd v Caltex Australia Petroleum Pty Limited (2001) 103 IR 329 Van Huisstede v Commissioner of Police (No 2) (2001) 106 IR 56 HEARING DATES: 26 March 2007 DATE OF JUDGMENT: 7 June 2007 APPLICANTS Mr Booth (Agent) Employment Advocacy Solutions LEGAL REPRESENTATIVES: RESPONDENT Ms T Anderson of Counsel Instructed by: Mr P Houston Department of Juvenile Justice JUDGMENT: - 15 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES CORAM: SAMS DP 7 June, 2007 Matter IRC05/2833 NICOLE KATHLEEN YOUNG AND NEW SOUTH WALES DEPARTMENT OF JUVENILE JUSTICE Application by Nicole Kathleen Young re unfair dismissal pursuant to s84 of the Industrial Relations Act 1996 Matter IRC05/2834 JUSTINE MATHEW TOM AND NEW SOUTH WALES DEPARTMENT OF JUVENILE JUSTICE Application by Justin Mathew Tom re unfair dismissal pursuant to s84 of the Industrial Relations Act 1996 Matter IRC05/4102 MARIE KUBAN AND NEW SOUTH WALES DEPARTMENT OF JUVENILE JUSTICE Application by Marie Kuban re unfair dismissal pursuant to s84 of the Industrial Relations Act 1996 Matter IRC05/4103 NATHAN HOEVERS AND NEW SOUTH WALES DEPARTMENT OF JUVENILE JUSTICE Application by Nathan Hoevers re unfair dismissal pursuant to s84 of the Industrial Relations Act 1996 DECISION ON NOTICE OF MOTION [2007] NSWIRComm 142 1 On 20 November 2006, the Commission published a decision and orders in Nicole Kathleen Young and others v Department of Juvenile Justice [2006] NSWIRComm 337. Shortly stated, the Commission, pursuant to s 89 of the Industrial Relations Act 1996 ('the Act'), ordered the reinstatement of four employees of the Department of Juvenile Justice who had been formerly employed at Cobham Juvenile Justice Centre - Nicole Kathleen Young, Justin Mathew Tom, Marie Kuban and Nathan Hoevers. Related orders for continuity of service and partial lost remuneration were also made. The four employees had been dismissed for serious misconduct in May and November 2005 following an incident involving two detainees at the Centre on the night of 28 March 2005. The incident involved allegations of assault of the two detainees. 2 A notice of motion seeking costs on behalf of the applicants, was made on 30 January 2007 and an amended notice of motion was filed on 1 March 2007 seeking an order for costs on an indemnity basis pursuant to s 181(2)(c) of the Act. Two affidavits were filed in support of the motion from Michael John Booth and Colin John Dorber, both Industrial Advocates and agents employed by Employment Advocacy Solutions Pty Ltd who had acted on behalf of the applicants. 3 Mr Booth's affidavit was uncontroversial and largely dealt with problems associated with the implementation of the Commission's earlier orders. He also referred to an earlier affidavit in which the applicants had sought $16,000 in costs on the grounds that the respondent had refused to enter into any settlement negotiations prior to the hearing of the claims, save to advise that it was not prepared to reinstate the applicants. 4 Mr Dorber's affidavit dealt with the structure of Employment Advocacy Solutions Pty Ltd and the process by which the applicants had engaged the Company as agent for them following their dismissals. Mr Dorber said the total costs incurred by the Company in representing the four applicants as at 29 November 2006 was $32,650. 5 Mr Dorber deposed that in the early stage of the proceedings he had dealt with Mr Paul Houston from the Department of Juvenile Justice and the Department's Counsel, Ms T Anderson, in respect to conciliating a settlement of the claims. Mr Houston and Ms Anderson had advised that due to the seriousness of the alleged misconduct, it was the respondent's policy to have the matter determined by the Commission. He said that there was no meaningful or constructive conciliation of the applications and he had objected, at various times, to the absence of negotiations in the context of conciliation as required by the legislation. 6 In cross-examination, Mr Dorber agreed he had not been involved in the conciliation before the Commission in the Young and Tom matters (IRC 2833 and 2834 of 2005) on 23 June 2005 in that Mr Andrew Wilson from the Public Service Association and Professional Officers' Association Amalgamated Union of New South Wales (PSA) had represented them at the time. Mr Dorber said that when he later became involved he had spoken to Mr Houston and Ms Anderson about another unfair dismissal matter which was before Tabbaa C and which was eventually settled. 7 After Mr Dorber became involved in these matters around August 2005, he said he had had many conversations with Ms Anderson. He agreed Ms Anderson had said that if the assault had occurred, her client had no alternative but to dismiss the applicants. 8 Mr Dorber agreed that while the applicants' s 84 applications had only sought reinstatement, that wasn't the substance of the conversations. Ms Anderson had said that she could see no point in further conciliation. He insisted that he had been told that it was the policy of the Department that these matters are dealt with by the Commission. He was asked how the other proceedings could have settled in light of this position, as the other matter also involved an alleged assault of a detainee. However, Mr Dorber said the circumstances were very different to these matters. SUBMISSIONS For the applicants 9 Mr Booth outlined a chronology of events which involved the interviews of the applicants, the detainees and other persons by the independent investigator, Mr Pell, the report of Mr Pell, the review of his report and the proceedings before the Commission. Mr Booth submitted that this chronology demonstrated that there were no offers of settlement from the respondent and no negotiations from the outset. The respondent had taken the view that the matters were of such seriousness that conciliation was not an option. Mr Booth said that there could be no reasonable conciliation if the respondent refused to enter into any negotiations. This attitude was sufficient to open the jurisdictional gateway on costs as discussed in Bankstown City Council v Paris (1999) 93 IR 209. 10 Mr Booth put that the situation here was analogous to that discussed in Staal and Tupene and Western Sydney Area Health Service [2004] NSWIRComm 325 and IGA Distribution Pty Ltd v Moses (No 3) (2003) 130 IR 145, where no conciliation had occurred and the dismissed applicants were ultimately reinstated. Mr Booth relied on the decision in Paris to submit that a party runs a risk (of a costs application), if it adopts a firm and inflexible approach to settlement. 11 Mr Booth stressed that the applicants' stance of maintaining reinstatement was necessary because of the notification by the respondent to the Commission for Children and Young People of the alleged assault. Only complete vindication would overturn this notification. Thus, the applicants could not abandon their entrenched position. 12 Mr Booth said that from the start of the disciplinary process, and throughout the proceedings, the respondent had failed to objectively consider the strengths and weaknesses of its case and had simply "ploughed through hurdles of proof" which were never capable of being overcome. At various stages of the proceedings, the respondent should have requested conciliation: see Paris at para 219. 13 Mr Booth said that when Nurse Palmai reported to a senior officer, Mr Robinson, that the detainee "GB" had bruising to his eye the day before the alleged incident, this should have been made known to Mr Pell, but it wasn't. Mr Booth said that then Nurse Palmai's evidence emerged, the respondent then sought to discredit her by calling an expert, Professor Duflou. His evidence was not accepted. Another serious flaw in the investigation was Mr Pell's failure to view the Garvey Unit (where the detainees were housed). Such a viewing would have convinced him that certain eyewitness accounts of what had happened could not be sustained. At various stages of the proceedings, this failure was made known to the respondent, but ignored. 14 Mr Booth submitted that the respondent had preferred "compounded hearsay" to the direct evidence of the applicants and that the prolonged cross-examination of the applicants produced no more than what they had told Mr Pell during the investigation. Further, when the detainees were called and refused to give sworn evidence, their statements could no longer be relied upon. With the respondent's case collapsing, it did not conciliate, but shifted the allegations to matters the applicants were not dismissed for - failures to write up minor misbehaviours. These were not new matters, but were well known to the respondent at the time of the dismissals. 15 Mr Booth said that the delay in filing the application for costs was brought about by the respondent's failure to implement the Commission's orders as to reinstatement and back pay and it then sought to bring new charges against two of the applicants. 16 After referring to the authorities which have considered the relevant principles when an order for indemnity costs are sought; see Staal and Tupene at para 33 and Van Huisstede v Commissioner of Police (No 2) (2001) 106 IR 56, Mr Booth submitted that the following unusual features of this case justify an order for indemnity costs: § The complete disregard for the Applicants' account of events in favour of contradictory hearsay. § The failure to test the hearsay evidence by adequate investigation. § The failure initially to inspect the Garvey Unit and subsequently upon a number of occasions when the difficulties with "RK's" statement were brought to the Respondent's attention. § The failure by the Director General or Professional Conduct Unit to insist upon a re-investigation by Mr Pell when he had been requested to conduct one. § The failure to interview Nurse Palmai when a senior officer of the Respondent was told by her of a right eye injury to "GB" the day before the alleged misconduct. § The intransigence of the Respondent in the conduct of its case, particularly the introduction on the fifth day of hearing of performance issues to support a failing case, when those matters relied upon were known to the Respondent at dismissal and not notified to the Applicants at any prior time. 17 Mr Booth further relied on my comments in the primary decision in which I said that this was "not the usual run of the mill unfair dismissal case arising from misconduct" (see para 173). 18 In oral submissions, Mr Booth relied on a recent decision of the Court of Appeal in Phillips v Industrial Relations Commission of NSW (2006) 154 IR 96, which had approved the decision in Paris. For the respondent 19 In an outline of submissions, Ms Anderson rejected Mr Dorber's assertion that the respondent had refused to engage in conciliation of the applicants' claims. The only relief ever sought by the four applicants was an order for reinstatement. At all material times, the respondent's position was that if the allegations of assault were true, the respondent had no option but to dismiss the applicants. There was no evidence that the respondent had unreasonably refused to settle the claims as required by s 181(2)(c) of the Act. 20 In oral submissions, Ms Anderson said that it was amazing that the respondent's approach of presenting its case "warts and all" should then leave it open to a costs order. In any event, the claim for costs was absurd. The respondent had engaged an external investigator who had attempted to take evidence from the two detainees. It was farcical to suggest that the respondent should be required to check the rooms of the detainees when it had hired the investigator. 21 As to the failure to interview Nurse Palmai, Ms Anderson said that there was nothing to alert Mr Pell that the detainee had an injury the day before the incident. None of the four applicants had said there was such an injury. Further, there was no suggestion that the Commission had rejected the expert evidence of Professor Duflou. 22 Ms Anderson observed that at no time, had the applicants sought relief other than reinstatement. The submissions of Mr Booth and the evidence of the applicants went entirely to the proposition that no assault had occurred and the applicants wanted to "clear their names". There was no evidence that Mr Dorber or Mr Booth had even put a settlement offer, other than reinstatement. 23 Ms Anderson submitted that it was nonsense to suggest that the respondent had insisted on dismissal "by hook or by crook" in circumstances where assault allegations were involved. The settlement of the other unfair dismissal matter demonstrated it did not adopt an inflexible approach. 24 Ms Anderson added that the applicants had not been totally vindicated as the Commission's partial order of back pay demonstrated. CONSIDERATION Statutory Framework 25 The discrete provisions governing costs applications in unfair dismissal matters under Pt 6 Ch 2 of the Act are to be found at s 181(2)(c): (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. 26 Section 181(2)(c) has been described as the "jurisdictional gateway" which must be established before the Commission may move to the general discretionary provisions to award costs available in s 181(1): (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 11 of Part 3.2 of the Legal Profession Act 2004 or on any other basis. 27 The principles to be applied by the Commission in determining costs applications in unfair dismissal cases are now well established; see Bankstown City Council v Paris; Four Sons Pty Ltd v Sakchai Limsiripothong (No 2) (2000) 100 IR 400. In Paris the Full Bench identified two bases upon which a conclusion might be reached that a party had unreasonably failed to a settlement of the claim. At page 219 the Full Bench said: 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. 28 The conclusions in Paris were recently considered by the New South Wales Court of Appeal in Phillips where at paras [19] to [21] Mason P (with whom Spigelman CJ and Beazley JA agreed) said: 19 When the Full Bench in Paris spoke of applying the statutory criterion "objectively" it was correctly discerning that the standard of unreasonable failure was to be applied by reference to the hypothetical yardstick of the fictional "man on the Clapham omnibus" or his Australian, gender-neutral counterpart. This does not mean that this hypothetical personage is placed anywhere other than in the context of the party in question (here the party against whom costs are sought). Nor does it mean the reasonableness assessment may commit hindsight error. But it does mean that the standards of the actor in question are not determinative. Thus, in the realm of negligence law, a person's conduct may be held unreasonable even though he or she was ignorant of the circumstances calling for a particular response or even if he or she lacked the capacity to discern or provide a correct response in the circumstances. 20 Under s181(2)(c) costs may be awarded against the employer or the employee, depending on who has failed to agree to a settlement and done so unreasonably. 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. Were it otherwise, the costs discretion could not be invoked against a pig-headed litigant blinded by self-absorbed stupidity or malice. 21 I therefore cannot read the "objective" aspect of Paris as embodying a jurisdictional or other error of law in regard to the application of s181(2)(c). Indemnity Costs 29 In Tuholi Pty Ltd v Caltex Australia Petroleum Pty Limited (2001) 103 IR 329, Wright P undertook a detailed analysis of the relevant authorities on the principles to be applied when awarding indemnity costs and summarised the principles as follows: 1. It is only in exceptional cases where a court would make a costs order other than on the usual party/party basis. 2. The grant of indemnity costs is to be seen as an unusual and exceptional course and would only occur where there is some special or unusual feature of the case to justify the Court in departing from the usual practice. 3. Nevertheless, the grant of indemnity costs is, as with any exercise of judicial discretion, one to be exercised in all the circumstances of the case and, provided regard is had to the "exceptional" nature of such an order, the primary consideration with all such discretionary orders is that it will occur "as and when the justice of the case might so require". 4. Although most judges dealing with the problem have resolved the particular case before them by dealing with the circumstances of that case and finding in it the presence or absence of facts which would be capable, if they existed, of warranting a departure from the usual rule, nevertheless "the categories in which the discretion may be exercised are not closed". 5. Further, a too rigid or narrow approach may lead to error in the exercise of discretion. 6. Although there are a number of recent judgments to the effect that there should be an increased tendency towards the awarding of indemnity costs, such statements should be applied with great caution in the light of the existence and operation of the general approach as to the usual way in which costs orders will be made. 7. It is also important to ensure that considerations such as mere "fierce opposition to the claim" or the conduct of a respondent which might justify the grant of the substantive application are not matters which, in themselves, would lead to the grant the costs on an indemnity basis. 30 I turn now to the particular circumstances of this case. It was not in contest that the four applicants consistently sought reinstatement and would not entertain any settlement of their claims, unless it included reinstatement. In fact, the gravamen of Mr Booth's submissions in the proceedings was that the assault on the detainees had not taken place and the applicants had insisted on pursuing their claim of unfair dismissal in order to establish that proposition. This view was demonstrated particularly by Mr Tom who said repeatedly that he simply wanted to "clear his name". All of the applicants vigorously denied that an assault had taken place. 31 In these circumstances, it is difficult to arrive at a conclusion that the respondent had unreasonably refused to settle the claim. This is so because any offers of settlement - no matter how generous - weren't going to settle the claims. It was, on one view, a barren exercise to make financial offers that were going to fall on unreceptive ears. 32 In making these observations I am not unmindful of the risk associated with a party adopting a hard and inflexible position as to settlement when the Act clearly contemplates the adoption of an approach which requires parties to take seriously their obligation to settle the proceedings. In this respect I refer to a recent decision of the Full Bench of the Commission in Carlton and United Beverages Limited & Phillip Brunt [2007] NSWIRComm 135 at para [34]: 34 We would observe that in some unfair dismissal proceedings a dismissed employee will consistently seek reinstatement (or re-employment) as the primary remedy for the alleged unfair dismissal. In these circumstances, even an apparently generous financial offer of settlement will be rejected because the employee simply wants his/her job back. Of course, a dismissed employee is perfectly entitled to maintain a steadfast desire for reinstatement, without necessarily demonstrating an unwillingness to settle the claim as contemplated by s181(2)(c) of the Act. This is because of the scheme of Pt 6 of Ch 2 of the Act and the primacy given to the remedy of reinstatement. Similarly, an employer may be entitled in appropriate circumstances to maintain a firm position of refusing to make any offers of settlement. In both these circumstances however, there is an element of risk associated when any future costs application is considered within the statutory framework. That risk was considered in Paris at page 220 where the Full Bench said: We emphasise that there will be many circumstances in which parties to litigation, including unfair dismissal proceedings, may appropriately take a 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 s181(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. 33 Mr Booth sought to rely on my costs decision in Staal and Tupene and described the situation there as "closely analogous" to the circumstances in this case. With respect, I do not agree. While it is true that in both cases the dismissed applicants consistently sought reinstatement in the face of the employer's refusal to make any offers of settlement, the facts, circumstances and findings of the Commission in the cited decision were, in my opinion, very much different to those in evidence here. In Staal and Tupene the employer's steadfast stance was set against a backdrop of an investigation which was fundamentally flawed (if not illegal) and designed to entrap the employees into a minor infringement which was then elevated to allegations of misconduct of a most grievous kind. On the other hand, in the present case, despite some flaws in the investigation by Mr Pell, it was generally acknowledged that if the assault had taken place, then dismissal was the appropriate response. Viewed in this way, I do not consider that the facts and circumstances of the two cases lend themselves to the same outcome as to costs. 34 In some respects, the fact that reinstatement was the ultimate result of the Commission's hearing of the applicants' claims is really not the point. Most successful reinstatement cases do not result in costs applications and many others while successful, are often finely balanced or made on conditions. In other words, reinstatement is not a benchmark for a successful costs claim. 35 In any event, there were real difficulties attending both parties' evidentiary cases. The Commission said as much in respect to the applicant's evidence: see paras 212 to 214 of the decision. It is not as rosy or as clear-cut as Mr Booth had sought to paint when he highlighted Ms Anderson's admission of her case being presented "warts and all". As I observed at para 175 the "warts" were not confined to one side. 36 Notwithstanding that certain crucial evidence emerged during the course of the hearing, which may have weakened the respondent's evidentiary case, it most certainly didn't mean that the respondent's case was entirely hopeless or that it should have been abandoned at that point. This seems to be the thrust of Mr Booth's submission in that the respondent had not properly considered the relative strengths and weaknesses of its case, but more particularly failed to take such steps as might have altered its original decision to dismiss the applicants. 37 That being said, there was no evidence that the applicants, through Mr Booth or otherwise, had ever put a proposition to the respondent which did not include reinstatement. I consider this case to be one in which, as was said in Brunt, that "appropriate circumstances" justify the respondent not agreeing to make an offer of settlement where such an offer was always required by the applicants to include reinstatement. In one sense, the hard and steadfast stance taken by both parties, both of which seem perfectly understandable, cancel each other out. 38 I would wish to add that the suggestion that the respondent would not entertain any alternative to reinstatement in any circumstances, where the allegations concerned assault, does not sit comfortably with what had in fact happened during the course of proceedings involving Mr Booth and Mr Dorber and another dismissed employee of the Department. 39 It is also a relevant factor that the applicants were not without fault as my comments at paras 226 and 231 of the decision demonstrate and the fact that my orders as to back pay were not for full lost remuneration: see para 14 of Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union, on behalf of Mark Harrison and Keith Donaldson and Australian Co-Operative Foods Limited [2000] NSWIRComm 285. 40 It follows, that I am unable to be satisfied that the respondent unreasonably refused to settle the claims or that its conduct up to, and during the proceedings, evinced an unwillingness to settle the claims. 41 In addition, the proceedings do not display any of the characteristics of being 'unusual' or 'out of the ordinary' such as to justify an order for indemnity costs. Mr Booth's reliance on my comments at para 173 of the decision, were intended to demonstrate the serious results the applicants' dismissals had on their personal and professional lives. The comments were not intended to convey an impression that this was necessarily an "unusual" or "out of the ordinary" case, let alone serve as a green light to an application for indemnity costs. 42 The amended notice of motion filed on behalf of the applicants in matters IRC2833, 2834, 4102, 4103 of 2005 on 1 March 2007 is dismissed. Peter J Sams, AM 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.