Industrial Relations Commission of New South Wales CITATION: Walsh -v- Sangra Holdings Pty Ltd trading as Enterprise Marine (N0. 2) [2006] NSWIRComm 1161 APPLICANT John Owen Walsh PARTIES: RESPONDENT Sangra Holdings Pty Ltd trading as Enterprise Marine [ACN:003 502 752] FILE NUMBER(S): 5923 of 2005 CORAM: Cambridge C CATCHWORDS: Unfair dismissal - costs - unreasonable failure to agree to a settlement of the claim - genuine but mistaken basis for refusal to negotiate reasonable terms for settlement - limited costs granted. LEGISLATION CITED: Industrial Relations Act 1996 [NSW] CASES CITED: Bankstown City Council v Paris (1999) Full Commission of Industrial Relations Commission of NSW [Wright P, Peterson J & Bishop C], 93IR 209. Four Sons Pty Limited v Sakchai Limsiripothong (No 2), (2000) Full Commission of Industrial Relations Commission of NSW [Wright P, Hungerford J & Cambridge C] 100IR 400. HEARING DATES: 05/09/06 DATE OF JUDGMENT: 10/31/2006 APPLICANT Mr M Easton, barrister LEGAL REPRESENTATIVES: RESPONDENT Mr C Tocchini, self represented DECISION: INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES COMMISSIONER CAMBRIDGE 31 October 2006 Matter No IRC 5923 of 2005 John Owen Walsh -v- Sangra Holdings Pty Ltd trading as Enterprise Marine Application by J Walsh pursuant to section 84 of the Industrial Relations Act 1996 re unfair dismissal. DECISION ON COSTS [2006] NSWIRComm 1161 1 This Decision involves an application for Costs made on behalf of the successful applicant in this matter, John Owen Walsh, (the applicant). The applicant has sought Orders for Costs in respect of proceedings arising from his application for Relief from unfair dismissal which was made pursuant to section 84 of the Industrial Relations Act 1996 [NSW], (the Act). 2 The applicant was successful in obtaining Orders for compensation made pursuant to sections 89(5) and 89(6) of the Act against Sangra Holdings Pty Ltd trading as Enterprise Marine, (the employer). The Orders for compensation were made in the extempore Decision delivered in this matter on 2 June 2006. Subsequent to that Decision the applicant's representatives have formally requested that the Commission provide an opportunity for the applicant to be heard on the issues of Costs. 3 The issue of Costs was the subject of Mention and Directions proceedings held on 14 July 2006. The Commission was advised that the question of Costs was contested, and Directions were made for the filing of evidentiary and other material regarding the issue of Costs. Subsequently a Hearing regarding the question of Costs was conducted on 5 September 2006, at which time the Commission reserved Decision on the issue of Costs. THE CASE ADVANCED ON BEHALF OF THE APPLICANT SEEKING COSTS 4 Mr M Easton, barrister, appeared for the applicant during the Hearing on Costs. Mr Easton sought to rely on the statement of Mark Fletcher dated 4 August 2006. The statement of Mark Fletcher was admitted without objection and became Exhibit C1. Mr Fletcher was required to provide evidence as a witness and was cross-examined by Mr C Tocchini the proprietor of the employer business. Mr Easton also filed written submissions dated 3 August 2006, which he supplemented with detailed oral submissions. 5 Mr Easton submitted that the employer had unreasonably failed to agree to a settlement of the claim, and that this unreasonable conduct manifest firstly, by way of direct refusal to accept offers of settlement made by the applicant and further, by conduct that was in itself inconsistent with being prepared to settle the matter on any basis that could be considered reasonable. 6 Mr Easton submitted that the evidence revealed that the applicant made an initial settlement proposal of $30,000.00 which was subsequently reduced to $15,000.00. Mr Easton said that the offers of $15,000.00, and a subsequent offer of a lower figure of $12,000.00, represented reasonable propositions for settlement of the claim which were flatly rejected by the employer. Mr Easton submitted that there was an objective basis upon which to determine that these offers, $15,000.00 and $12,000.00, could be found to have been reasonable, particularly as compared with the Commission's Order of compensation of an amount of $18,450.00 Mr Easton submitted that the Commission should apply an objective analysis of the comparative positions, and determine that the employer had clearly rejected offers of settlement that were reasonable as considered against the amount ultimately Ordered as compensation. 7 Mr Easton further submitted that an analysis of the conduct of the Parties' pursuit of settlement demonstrated that the employer had taken a fixed view at an early stage that it would not make any offers to settle the claim. Mr Easton referred to various extracts from transcript of conciliation proceedings conducted before Commissioner Connor. Mr Easton said that the fixed position of the employer was identified at an early stage and represented conduct that was inconsistent with any intention to settle the matter on any reasonable basis. 8 Mr Easton further submitted that there was an obligation on the Parties to take all reasonable steps to endeavour to settle unfair dismissal claims. Mr Easton said that the applicant had discharged its duty by making various repeated offers, and that this conduct should be contrasted with the employer's position where it was identified that at no stage had the employer made any offer to settle the matter. 9 Mr Easton made further submissions which rejected the proposition that the employer was acting reasonably in circumstances where it was unrepresented and desired to have the unfair dismissal claim determined, rather than settle upon some agreed basis. Mr Easton submitted that the employer was aware of the risks that would be associated with rejection of any settlement proposition and an invitation for the applicant to take the matter through to Hearing and Determination. Mr Easton stressed that the employer had not made a proper assessment of the strengths and weaknesses of its case, and that this led the employer into adopting an unreasonable position. 10 Mr Easton referred the Commission to a variety of Full Bench Decisions and other Authorities said to be relevant to the determination of the question of Costs in an unfair dismissal matter. Mr Easton urged the Commission to find that the employer had acted unreasonably in the pursuit of settlement of the claim and therefore the applicant was entitled to have the Commission make Orders that his Costs be granted. THE CASE ADVANCED BY THE EMPLOYER AGAINST COSTS 11 Mr C Tocchini, the employer's proprietor, made submissions opposing the applicant's claim for Costs. Mr Tocchini attested to the veracity of documents that he had filed in accordance with the Directions made by the Commission regarding the prosecution of the issue of Costs. Mr Tocchini provided further evidence as a witness and he was cross-examined by Mr Easton. Mr Tocchini recounted both during his evidence and as part of the submissions that he made, that two particular factors operated so as to dissuade him from making any offers to settle the applicant's claim. 12 Firstly, Mr Tocchini advised that the process for negotiation was tainted by the applicant's initial claim for $30,000.00. Mr Tocchini said that this unrealistic figure was immediately halved by the applicant's representatives. However Mr Tocchini said that by initially adopting an unrealistic stance in the negotiation, the process had been discredited from the outset. 13 Secondly, Mr Tocchini stressed that an issue regarding a confidential price book had created significant concern as it became entwined in the settlement discussions. Apparently the confidential price book had gone missing from the employer's premises about two weeks before the applicant's dismissal. During the course of discussions regarding settlement of the applicant's claim, the matter of the missing confidential price book was raised. Mr Tocchini was greatly concerned that the applicant's representatives suggested that the return of the confidential price book might be included as part of some settlement proposition. 14 Although it was subsequently emphatically stated that the applicant did not at any time, have possession of the confidential price book, Mr Tocchini was left with the distinct impression that the return of the confidential price book may have been considered as part of a settlement package. Mr Tocchini said that the discussions involving the confidential price book left him with the impression that the return of what he perceived to be stolen property, might have been a part of suggested settlement. Mr Tocchini said that this had cemented his view about making no offers to settle the matter on anything like the amounts that had been made of the order of $15,000.00 to $12,000.00. 15 Mr Tocchini submitted that the fact that the employer made no offers to settle the matter should not entitle the applicant to obtain Orders for Costs. Mr Tocchini said that the issues that had discredited the negotiation process gave rise to his legitimate refusal to offer money to people that he saw as being discredited during the settlement discussions. 16 Mr Tocchini suggested that he had accepted the decision of the Commission to provide for Orders of compensation of an amount greater than had previously been offered for settlement. Mr Tocchini said that he believed that he acted properly in the circumstances where he had essentially lost confidence in the settlement discussions and those advancing prospects for settlement on behalf of the applicant. Mr Tocchini further submitted that as a small business he urged the Commission to reject the application for Costs made on behalf of the applicant. CONSIDERATION 17 The most notable feature of the evidence regarding the pursuit of Costs in this case involved the absence of any offer from the employer to settle the matter on any basis whatsoever. It became clear that the employer took a very firm and fixed view about settlement from an early stage. 18 It appeared that the employer's position had been galvanised primarily by a view that the applicant and/or his representatives, would be prepared to "barter" with stolen property as a basis for settlement. Although this issue was not clearly articulated by Mr Tocchini, the Commission has some sympathy and understanding for the employer adopting a view that it would not "deal with crooks". 19 Unfortunately Mr Tocchini misunderstood the comments made by Mr Fletcher during the discussions regarding settlement as they related to the confidential price book. Mr Fletcher appeared to have had no knowledge about the apparent theft of the confidential price book, and his suggestion that return of the confidential price book might have been included as part of the settlement package was a statement made without any understanding of the book apparently representing stolen property. 20 Although Mr Fletcher seemed to have subsequently confirmed that the applicant did not have possession of the confidential price book, in Mr Tocchini's eyes the damage had been done. That is to say that Mr Tocchini was understandably aggrieved by the prospect that the applicant and/or his representatives, might endeavour to trade in stolen property as part of the process for settlement of the unfair dismissal claim. Mr Tocchini then adopted as a matter of principle, that he would not make offers of money to people who might be prepared to trade in stolen goods. Unfortunately Mr Tocchini did not understand that at the time that Mr Fletcher made some broad remarks about the potential for return of the confidential price book, Mr Fletcher did not know that the document was considered to be stolen property. 21 Consequently the confidential price book became an issue which via some misunderstandings and inadequate communication, created a basis for the employer to adopt a firm and generally intransigent position in respect to offers of settlement of the unfair dismissal claim. In these circumstances then the Commission has been required to determine whether the employer's refusal to settle would represent an unreasonable failure to agree to a settlement of the claim. It would seem that in the ordinary course of one of these matters, to make no offers to settle at all and then subsequently fail at Hearing, might create strong prospects for the successful Party to obtain Costs Orders. 22 The Parties conduct concerning settlement must be considered in the context of the statutory provisions regarding any Orders for Costs in unfair dismissal matters. In this case the application for Costs was pursued under that part of section 181(2)(c) of the Act which requires the Commission to find that the employer had unreasonably failed to agree to a settlement of the claim. There can be no doubt that the employer failed to agree to a settlement of the claim on a basis that involved payment of an amount which ultimately could be objectively held to have been reasonable. However the basis upon which the employer refused to contemplate what would have been reasonable offers to settle, had some obvious legitimacy. 23 If the employer is found to have acted unreasonably in circumstances where the employer genuinely believed that the applicant and/or his representatives would trade in stolen goods as a basis for settlement, it would seem that the Commission might encourage, almost compel Parties to make settlement offers in a manner that might be seen to legitimise what a Party would genuinely believe to be criminal conduct. Unfortunately Mr Tocchini never formally engaged professional assistance in respect to the defence of the claim. Mr Tocchini had made an understandable, but incorrect assessment of the comments made by Mr Fletcher regarding the confidential price book and its potential for return. In the absence of any clarification that might have emerged if Mr Tocchini had sought professional assistance, the process for negotiated settlement would not advance beyond a simple but quite understandable refusal by the employer to "trade with crooks." 24 Consequently the Commission is required to determine whether the employer's mistaken but principled position to refuse to negotiate with the applicant and his representatives constitutes an unreasonable failure to agree to a settlement of the claim. The concept of an unreasonable failure to agree to a settlement of an unfair dismissal claim has been the subject of detailed consideration by various Full Benches of this Commission including the case of Bankstown City Council v. Peter John Paris Bankstown City Council v Paris (1999) Full Commission of Industrial Relations Commission of NSW [Wright P, Peterson J & Bishop C], 93IR 209. (Paris). There is further Authority established by another Full Bench Judgement in the case of Four Sons Pty Ltd v. Sakchai Limsiripothong (2) Four Sons Pty Limited v Sakchai Limsiripothong (No 2), (2000) Full Commission of Industrial Relations Commission of NSW [Wright P, Hungerford J & Cambridge C] 100IR 400. (Four Sons). The Judgements in Paris and Four Sons make clear that in any assessment as to whether a Party's conduct could be held to represent an unreasonable failure to agree to a settlement of the claim, it is necessary to analyse whether that Party made a careful and reasonable assessment of the prospect for success, or failure of their case. It would seem that if the Commission found that a Party significantly misjudged the strengths and weaknesses of their case whilst in possession of material relevant to such an appropriate determination at the time, such failure would likely provide proper basis for Costs Orders to be made against that Party. 25 Further, on balance, it must be recognised that the construction of the Costs provisions in the Act establishes that in the main, unfair dismissal matters do not attract Costs. However, the Costs provisions emphasise a requirement on Parties to conduct themselves in a manner which should promote conciliated settlement of unfair dismissal claims. 26 In this instance, although the Commission can understand and sympathise with the principled position taken by the employer, it has ultimately been revealed to be a position that was adopted in error, and therefore a significant misjudgement at the time. 27 It was highly regrettable that there had not been clearer communication and some clarification between the Parties regarding the issue of the confidential price book and its apparent theft at around the time of the applicant's dismissal. It is of course purely speculative to contemplate what may have happened had proper communication established that the applicant at no stage was in possession of the confidential price book. The difficulties with communication in respect to the confidential price book are similar to the communication difficulties that surrounded the dismissal of the applicant. In large part this entire matter has been beset with communication difficulties, which, with the benefit of hindsight, were highly regrettable given that such problems may have been avoided if a more careful approach had been adopted by the employer, perhaps including engaging professional assistance. CONCLUSIONS 28 Following careful consideration of the Parties pursuit of settlement, on balance, the Commission must find that the employer's failure to make any offers to settle the claim represents an unreasonable failure to agree to settlement as required by section 181(2)(c) of the Act. Therefore the applicant has established the necessary Legislative pre-requisite to obtaining an Order for Costs in this unfair dismissal proceeding. However the interests of justice would be best served if, because of the genuine, albeit mistaken, basis for the employer's unreasonable failure to agree to a settlement of the claim, some limitation to the amount of Costs was established. 29 Therefore the Commission is prepared to grant the Costs application but limits the Costs to be provided in respect to proceedings up to 2 June 2006 only. ORDERS Further to the extempore Decision and Orders of the Commission issued in this matter on 2 June 2006, the Commission hereby makes the following Orders in respect to Costs: ORDER 1 The employer is Ordered to pay the applicant's Costs in respect to these proceedings up to 2 June 2006, and of an amount as agreed or assessed. ORDER 2 Unless assessment of the amount of Costs as provided for in Order 1 above is required, the employer shall pay the Costs as Ordered in Order 1 above within 28 days from the date of this Decision. oooOOOooo 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.