Industrial Relations Commission New South Wales Medium Neutral Citation: Anley v Department of Education and Training - Western Sydney Institute of TAFE [2011] NSWIRComm 60 Hearing dates: 4 November 2010 Decision date: 16 May 2011 Jurisdiction: Industrial Relations Commission Before: Sams DP Decision: 1. The applicant in matter IRC 2132 of 2008, Ms Bronwyn Helen Anley, shall pay the respondent's costs as agreed or assessed on a party/party basis. 2. The costs referred to above shall include costs of, and incidental to, the proceedings, including in relation to the application to re-open the applicant's case and in relation to this costs application. 3. The orders set out above shall be paid within 28 days of today. Catchwords: COSTS - unfair dismissal application - application for party/party costs - statutory framework - jurisdictional gateway - exercise of discretion - whether applicant unreasonably refused to agree to a settlement of her claim - whether conduct of applicant evinced an intention not to settle her claim on a reasonable basis - three offers of settlement - applicant maintained only acceptable offer was reinstatement/reemployment and compensation - lengthy litigation - prospects of success - conduct of both parties. COSTS - applicant's unlikely prospects of success - offers of settlement reasonable - applicant's refusal to settle her claim unreasonable - risk of not making alternative offers - conduct of respondent during the proceedings not relevant - applicant's own conduct in preparing her case - impercuniosity of applicant not relevant - jurisdictional gateway established - discretion to make orders - orders made for party/party costs in favour of respondent. Legislation Cited: Industrial Relations Act 1996 Cases Cited: Anley and Department of Education and Training [2009] NSWIRComm 39 Anley v Department of Education and Training - Western Sydney Institute of TAFE [2010] NSWIRComm 140 Bankstown City Council v Paris [1999] 93 IR 209 Carlton and United Beverages Limited v Brunt [2007] NSWIRComm 135 Council of Kangan Batman TAFE v AIRC (2006) 156 FCR 275 Four Sons Pty Ltd v Limsiripothong (No 2) [2000] 100 IR 400 Phillips v Industrial Relations Commission of New South Wales & another [2006] 154 IR 96 Category: Costs Parties: Bronwyn Helen Anley (Applicant) Department of Education and Training - Western Sydney Institute of TAFE (Respondent) Representation: Ms K Nomchong (Respondent) Andrea Wilson & Associates (Applicant) Mr C Miles for Department of Education and Training (Respondent) File Number(s): IRC 2132 of 2008 Judgment 1On 12 October 2010, I published a substantive decision in Anley v Department of Education and Training - Western Sydney Institute of TAFE [2010] NSWIRComm 140. In the final paragraph of the decision I found that the applicant's dismissal was neither substantively, nor procedurally, 'harsh, unreasonable or unjust' within the meaning of s 84 of the Industrial Relations Act 1996 ('the Act'). Further, I " noted that the respondent wishes to be heard on the question of costs. In this regard, I will list the matter for further hearing as to costs on 4 November 2010, commencing at 10:00am ." 2At the costs hearing, Ms K Nomchong, of Counsel for the respondent, sought orders from the Commission as follows: 1. The applicant shall, within 28 days, pay the respondent's costs as agreed or assessed on a party / party basis. 2. The costs include the costs of, and incidental to the proceedings, including in relation to this costs application. 3Unsurprisingly, the applicant's solicitor, Ms A Wilson, resisted the orders sought by the respondent. I shall return to the parties' evidence and submissions in respect to the application for costs shortly. Commission's power to award costs 4The Commission's power to award costs in unfair dismissal applications is a discrete power found in s 181(2)(c) of the Act. The provision is expressed as follows: (2) 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 5It is to be observed that the costs order sought in this matter does not rely on the test of whether the applicant's application was frivolous and/or vexatious. It was the respondent's case that the applicant had unreasonably failed to agree to a settlement of her claim, in circumstances where her chances of success were remote and various reasonable offers of settlement were made by the respondent and rejected by the applicant. 6While the power to award costs is an exercise of discretion, the authorities of this Commission make clear that there must be a preconditional 'jurisdictional gateway' established before the discretion is able to be exercised: see Bankstown City Council v Paris [1999] 93 IR 209 (' Paris' ) and Four Sons Pty Ltd v Limsiripothong (No 2) [2000] 100 IR 400. Both parties accepted that the principles determined in these Full Bench decisions are to be applied in this case. 7In Paris, the Full Bench identified two bases upon which a conclusion might be reached by the Commission 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." Paris also identified two objective bases upon which the 'jurisdictional gateway' might be satisfied: a) where a party acted unreasonably in failing to agree to a reasonable settlement offer; or b) where a party's conduct was inconsistent with an intention to settle the proceedings on any basis that could be considered reasonable. 8Obviously, establishing one or both of the above bases necessarily requires an examination and consideration of the various exchanges of settlement between the parties. In the present matter, this exercise was identified in the uncontested affidavit evidence of Mr Christopher Miles , the respondent's in-house solicitor. I shall come back to the exchanges of offers of settlement later. 9Throughout the earlier proceedings, the applicant maintained that the only remedy she sought for her alleged unfair dismissal was reinstatement. Of course, this is not an unexceptional position for an applicant to take. It follows that no financial offer of settlement, even an exceptionally generous one, would have been accepted by the applicant. However, in taking such a position, the applicant needed to understand the risk she may be taking as to costs. In this respect, I refer to the warning expressed by the Full Bench in Carlton and United Beverages Ltd v Brunt [2007] NSWIRComm 135 at par 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 s 181(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 s 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." 10It is pertinent to observe that the principles in Paris were considered and approved by the New South Wales Court of Appeal in Phillips v Industrial Relations Commission of New South Wales & another (2006) 154 IR 96. At paras [19] to [21] Mason P (with whom Spigelman CJ and Beazley JA agreed) said: "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. Under s 181(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. I therefore cannot read the "objective" aspect of Paris as embodying a jurisdictional or other error of law in regard to the application of s 181(2)(c)." 11The notion of what is reasonable invokes the standard of the reasonable person. This standard requires an objective assessment of the actions or inactions of the party against whom a costs order is sought. Authority for this proposition was outlined by the Full Court of the Federal Court in Council of Kangan Batman TAFE v AIRC (2006) 156 FCR 275, where the Court said: "The discretion to award costs is only available if the Commission is satisfied that the party in question acted unreasonably in failing to agree to terms of settlement. The requirement that the Commission be satisfied means that the Commission must make an assessment of the actions of the party in question. In undertaking this assessment it acts objectively, that is to say, it brings its own opinion to the circumstances which resulted in the failure to agree to the terms of settlement. Because the Commission must make its own judgment about whether the party acted unreasonably, the views of that party about the chances of success of the case cannot be determinative. But that is not to say that the views of that party on various issues relevant to the decision not to agree to the terms of settlement are necessarily irrelevant or cannot be taken into account. Indeed, as the Commission is investigating the action of that party, an obvious starting place for the investigation is to enquire why that party did not settle. A natural process of reasoning under the section would start by determining why the party failed to enter into the terms of settlement. The next step would be to assess whether that action was unreasonable. In other words, the views and motivations of the party will be the usual basis from which an assessment of reasonableness will be made." SUBMISSIONS For the respondent 12Ms Nomchong identified the three offers of settlement made by the respondent prior to, and during the proceedings; all of which were either rejected or not responded to: These were: * 13 November 2008, at the conciliation conference, an offer of 8 weeks pay ($11, 552.96); * 19 October 2009, at the first day of hearing, the above offer was reaffirmed; and * 26 October 2009, after the completion of the applicant's case and the cross-examination of three of the respondent's witnesses, an offer of 4 weeks pay ($5776.48). Ms Nomchong put that these offers, and the terms of the deed under which they would be made, were more than reasonable in the circumstances. 13Ms Nomchong referred to the three features of the applicant's employment which had contributed to her dismissal; namely, that she had: a) received unsatisfactory performance ratings at three successive annual performance reviews; b) failed a formal Performance Improvement Program (PIP); and c) unsuccessfully appealed each of the annual performance reviews and the PIP. Ms Nomchong then quoted par 230 of my decision in respect to these matters: "In looking at this case, from an ordinary bystander's perspective, one might think it extraordinary that an employee, no matter how gifted, skilled or experienced, would be surprised to be dismissed having been deemed to have been unsatisfactory in three successive annual performance reviews, a formal PIP and following unsuccessful appeals on each of those findings. It is even more surprising that the applicant would seek to challenge her dismissal in light of these undisputed factual circumstances." 14Ms Nomchong examined each of the major arguments of the applicant in support of her unfair dismissal claim and concluded that the respondent's case was very strong and the applicant's case was inherently weak from the outset. It should have been obvious to the applicant that no aspect of her dismissal was unfair (as the Commission had found). Her case did not improve during the proceedings and as it developed her prospects of success were extremely poor. Ms Nomchong submitted that, given the history of the applicant's interpersonal difficulties with everyone who managed or supervised her, and her blame of all of them for her difficulties, reinstatement was always highly unlikely. In relying on Paris, Ms Nomchong said that the applicant's insistence on reinstatement or re-employment had little regard for the reality that such an outcome was remote. 15Ms Nomchong noted the point in time at which each of the respondent's offers of settlement had been made. The first was 11 months before the commencement of the proceedings where costs were minimal and the applicant ought to have been aware of the weaknesses of her claim. The second offer was made when the applicant's evidentiary case was inadequate and the hearing was likely to take longer than three days. Reaffirmation of the first offer was more than reasonable at this point. The third offer was made after the applicant's cross-examination in which the Commission later found her to be an evasive and unreliable witness. The applicant failed to respond at all to this offer which was both discourteous and ultimately unfortunate for her in monetary terms. Ms Nomchong noted that the applicant was put on notice as to costs in the second and third letters of offers to settle. (See Annexures A and B to Mr Mile's affidavit). 16Ms Nomchong submitted that the applicant's conduct was clearly inconsistent with any intention to settle her claim on a reasonable basis. Indeed, it was unrealistic. Her insistence on reinstatement and full compensation represented no compromise at all. Ms Nomchong said the respondent was put to the time, trouble and expense of a lengthy hearing, including a late interlocutory application to re-open the applicant's case. 17In oral submissions, Ms Nomchong summarised the respondent's case and noted that the Court of Appeal decision in Phillips v Industrial Relations Commission of New South Wales and another was " on all fours " with the factual circumstances of this case. For the applicant 18In written submissions, Ms Wilson observed that the respondent made no offer to settle the matter in the 11 months between the first offer at conciliation and the offer made on the first day of the hearing. This was when the respondent requested an adjournment due to the unavailability of a witness. Ms Wilson said it was not unreasonable for the applicant to maintain her position of seeking only reinstatement or re-employment. Ms Wilson criticised the respondent's conduct prior to, and during the course of the proceedings, when requests were made for documents which were not provided, or provided late, and where witness statements were provided on three different dates from 9 October to 15 October 2009. This was not the conduct of a respondent cooperating to produce documentation in order for the applicant to be properly advised during the proceedings. 19Ms Wilson put that the applicant remains unemployed, despite having made numerous applications for employment since her dismissal (in excess of thirty). The applicant continues to apply for positions within the Department of Education. Ms Wilson described the applicant's current financial position and noted the fact that she has a dependent son, aged one and a half years. Her only income is a Centrelink benefit of $800.00 per fortnight. She owns a unit (mortgaged) and a car (value of $5,000.00) and her further liabilities include $13,000.00 owed to her solicitors. 20Finally, Ms Wilson submitted that the respondent's conduct was inconsistent with an intention to settle the proceedings and there was no proper basis for the Commission to exercise its discretion to order costs against the applicant. She believed each party should bear their own costs. In reply 21Ms Nomchong put that Ms Wilson's complaint about the respondent's conduct was irrelevant to the tests under s 181(2)(c) of the Act which is referrable to conduct in respect to offers of settlement. However, even if it was a relevant factor, the conduct of the applicant in preparing her case was very poor. She failed on four occasions to comply with the Commission's directions and came close to a self executing strike out order by Staff J in March 2009 ( Anley v Department of Education and Training [2009] NSWIRComm 39). 22Secondly, Ms Nomchong said that the criticism of the respondent for not making offers for 11 months must be seen in the light of the applicant making no offers at all. If she had accepted eight weeks at the commencement of the hearing, seven days of costs, written submissions and an application to re-open her case would have been avoided. CONSIDERATION 23Given the four major arguments in Ms Wilson's submissions, it must be steadily borne in mind what this costs application is not about. Firstly, in my opinion, it is irrelevant that a party was less than diligent in complying with the Commission's directions, producing documents or preparing its case. Of course, the extra costs these failures might occasion may figure in any calculation as to costs which might be ultimately ordered by the Commission. However, such complaints have no bearing on the objective tests associated with whether offers of settlement were reasonable and/or were unreasonably refused, in accordance with s 181(2)(c) of the Act. In any event, it was a 'little rich' for Ms Wilson to criticise the respondent in circumstances where the applicant had failed to comply with the Commission's directions on four occasions and came 'within a whisker' of having her application struck out by self executing orders of Staff J in March 2009. 24Secondly, it is of no moment that the respondent made no offers of settlement between the first conciliation and reaffirmed 11 months later at the commencement of the proceedings. This is particularly so in circumstances where the applicant made no counter offers at all; nor had she sought to engage in settlement negotiations with the respondent. To put it colloquially 'the ball was in her court.' There was no obligation on the respondent to reinitiate discussions when it had been made perfectly plain by the applicant that she would accept nothing less than reinstatement, re-employment and compensation. As Ms Nomchong correctly characterised it - " this represented no compromise at all ." Rather than a criticism of the respondent, I find that the applicant's conduct (or more correctly, 'non conduct') was such as to ground a finding that it was inconsistent with an intention to settle the claim on a reasonable basis. 25Thirdly, the fact that the applicant remains unemployed and has made numerous applications for employment, (including, curiously, to the very Department which dismissed her), is in my opinion, an irrelevant consideration to a costs application. Nowhere in s 181(2)(c) of the Act is there any matter, to be taken into account by the Commission, relative to mitigation of loss. If this issue had any relevance, it would have figured in any remedial orders which may have been made had the applicant been successful in her unfair dismissal application (see s 89 of the Act). 26Fourthly, an applicant's impecuniosity - unfortunate as it may be - is not a matter which is relevant to a costs application under s 181(2)(c) of the Act. If this were otherwise, the tests of whether an applicant had unreasonably failed to agree to a settlement of a claim would be undermined or rendered nugatory, simply by a losing applicant's pleas of difficult or dire financial circumstances, resulting in a defeat of a costs application which might otherwise succeed on the correct statutory basis. Nevertheless, sadly, it behoves me to observe that the applicant would have obviously been in a far better financial position than she is now had she accepted the respondent's reasonable offer made on the first and second occasions. Moreover, her prospects of re-employment would have been significantly enhanced without the odium attached as a result of the Commission's findings in its decision on her unfair dismissal claim. 27Regrettably, but perhaps not unexpectedly, Ms Wilson's primary submissions in this matter have little merit and certainly go nowhere near establishing a cogent case in opposition to the respondent's application. On the other hand, I found Ms Nomchong's well constructed submissions to be highly persuasive. In my view, the respondent has established, beyond doubt, that the respondent's offers of settlement, particularly the first and second offers of $11, 552.96, were reasonable. This is demonstrably clear given her prospects of success based on the uncontested evidence filed up to that point. 28The applicant is not an unintelligent woman. It should have been starkly apparent to her and her legal advisors, that the case against her was overwhelming, particularly following her own cross-examination and the evidence of three of the respondent's witnesses. The respondent's offers were objectively reasonable and her refusal to accept these offers was unreasonable. It is pertinent to note that the applicant was specifically warned, at an early stage, that the respondent was intending to seek costs if it was successful. 29In my view, the applicant's insistence on reinstatement or re-employment, plus compensation, and her rejection of the respondent's offers, represented an unreasonable refusal to settle her claim. This was particularly so, given my findings at par 230 of the earlier decision (see par 13 above). I find accordingly. In addition, as I have already noted, the applicant's conduct was inconsistent with an intention to settle her claim on any reasonable basis. It follows that the 'jurisdictional gateway' as referred to earlier, has been opened. In the exercise of my discretion, I consider it to be just and reasonable to grant the respondent's application. I will order accordingly. ORDERS 30Pursuant to s 181(2)(c) of the Industrial Relations Act 1996 I order that: 1. The applicant in matter IRC 2132 of 2008, Ms Bronwyn Helen Anley, shall pay the respondent's costs as agreed or assessed on a party/party basis. 2. The costs referred to above shall include costs of, and incidental to, the proceedings, including in relation to the application to re-open the applicant's case and in relation to this costs application. 3. The orders set out above shall be paid within 28 days of today. 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. Decision last updated: 16 May 2011