Industrial Relations Commission New South Wales Medium Neutral Citation: Colefax v Secretary, Department of Education; (No. 2) [2018] NSWIRComm 1043 Hearing dates: Determined on the papers Decision date: 16 July 2018 Jurisdiction: Industrial Relations Commission Before: Murphy C Decision: Application by respondent for a costs order is dismissed Catchwords: UNFAIR DISMISSAL – application dismissed – respondent applied for order for costs – unfair dismissal application not instituted without reasonable cause – applicant did not unreasonably fail to agree to a settlement of the claim – application for costs order refused Legislation Cited: Industrial Relations Act 1996 Cases Cited: Colefax v Secretary, Department of Education [2018] NSWIRComm 1033 Kanan v Australian Postal and Telecommunications Union [1992] 43 IR 257 Category: Costs Parties: Margaritte Joanne Colefax (Applicant) Secretary, Department of Education (Respondent) Representation: Counsel: Ms K Nomchong SC (Respondent) Solicitors: Ms J Burton, Crown Solicitors Office (Respondent) File Number(s): 2017/00116629 DECISION 1. On 11 May 2018 I handed down my decision in the matter of Colefax v Secretary, Department of Education ([2018] NSWIRComm 1033). In that decision, I dismissed the applicant's unfair dismissal application on the grounds that the decision by the respondent to terminate the applicant's employment by way of medical retirement on 29 March 2017 was neither harsh nor unreasonable nor unjust. The respondent now seeks an order for costs. The legislative scheme 1. Section 181 of the Industrial Relations Act 1996 ("the Act") is in the following terms: 181 COSTS (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 the legal costs legislation (as defined in section 3A of the Legal Profession Uniform Law Application Act 2014 ) or on any other basis. (2) However, the Commission may award costs only in the following cases: (a) the Commission may award costs against an applicant if it considers that the application to it was frivolous or vexatious, or (b) the Commission may award costs against a party to proceedings who, in the opinion of the Commission, instituted proceedings without reasonable cause, or (c) the Commission may award costs against a party to proceedings under Part 6 of Chapter 2 (Unfair dismissals) who, in the opinion of the Commission, unreasonably failed to agree to a settlement of the claim or whose application was frivolous or vexatious, or (c1) the Commission may award costs against an industrial agent representing an applicant or employer in proceedings under Part 6 of Chapter 2 if: (i) the industrial agent fails to file a certificate as required by section 90A, or (ii) the Commission finds that the industrial agent has filed a certificate under that section certifying that the agent has reasonable grounds for believing, on the basis of provable facts, that the applicant's claim or employer's response to the claim had reasonable prospects of success when the agent did not have reasonable grounds for believing, on the basis of provable facts, that it had reasonable prospects of success, or (d) the Commission may award costs in proceedings for a breach of an industrial instrument or the recovery of money under Chapter 7, as provided by sections 357 and 373. (3A) Despite subsection (1), the Commission may not award costs in proceedings under Part 7 of Chapter 2. Note: This subsection does not prevent the award of costs in appeals relating to questions of law in relation to public sector promotional and disciplinary matters under section 197B. (4) In this section, costs includes: (a) costs of or incidental to proceedings in the Commission, and (b) in the case of an appeal to the Commission, the costs of or incidental to the proceedings giving rise to the appeal, as well as the costs of or incidental to the appeal. 1. The terms of section 181 of the Act make it clear that the Commission's power to award costs is discretionary. It is a discretionary power which is rarely exercised in unfair dismissal cases. 2. The respondent relies upon subsection 181(2)(b) and submits that the applicant's unfair dismissal application was instituted without reasonable cause. 3. The respondent also relies upon subsection 181(2)(c). As is apparent from the terms of subsection 181(2)(c), costs may be awarded against an unsuccessful applicant in an unfair dismissal case if the Commission is of the opinion that the applicant unreasonably failed to agree to a settlement of the claim or the application was frivolous or vexatious. The respondent does not assert that the applicant's unfair dismissal application was frivolous or vexatious. 4. On 23 May 2018, the respondent filed a statement of Ms Pearl Badajos, solicitor employed at the Crown Solicitor's Office, which had annexed to it a copy of a letter from that office to the applicant dated 13 June 2017 which contained a "without prejudice save as to costs" offer to settle the application by way of payment to the applicant of the sum of $5,000 upon the execution by the applicant of a Deed of Release. By letter dated 21 June 2017, the applicant returned to the Crown Solicitor's Office the "without prejudice" letter and Deed of Release unsigned. The respondent relies upon the applicant's rejection of this offer in support of the assertion that the applicant unreasonably failed to agree to a settlement of the claim (ss. 181(2)(c)). Submissions on behalf of the respondent in support of a costs order 1. In support of the assertion that the applicant instituted the proceedings without reasonable cause, the respondent put the following submissions (with footnotes omitted): 11. In Re Operational Ambulance Officers (State) Award (No 2} [2011] NSWIRComm 85 at [31]­[32], the Full Bench referred with approval to the decision of Wilcox J said in Kanan v Australian Postal & Telecommunications Union [1992] FCA 366; (1992) 43 IR 257 at 264-265 in respect of the phrase "without reasonable cause": [29] It seems to me that one way of testing whether a proceeding is instituted "without reasonable cause" is to ask whether, upon the facts apparent to the applicant at the time of instituting the proceedings, there was no substantial prospect of success. If success depends upon the resolution in the applicant's favour of one or more arguable points of law, it is inappropriate to stigmatise the proceeding as being "without reasonable cause". But where it appears that, on the applicant's own version of the facts, it is clear that the proceedings must fail, it may properly be said that the proceedings lack a reasonable cause. 12. The Respondent contends that the proceedings were commenced without reasonable cause because, at the time of instituting the proceedings, there was no substantial prospect of success because: 12.1 The Commission never had jurisdiction to deal with the workers compensation claim which was the primary ground for the Applicant's claim; and/or 12.2 On the Applicant's own case, she was unable to carry out the duties of her substantive position and was only able to undertake "suitable duties". There was therefore no viable basis to challenge a medical retirement; and/or 12.3 Further, in relation to remedy, the Applicant only sought re-instatement when there were no positive factors available to support that claim. WCC Determination 13. The primary basis of the Applicant's claim was an alleged failure of the Respondent to comply with a Determination of the Workers Compensation Commission dated 9 August 2012 (WCC Determination). The argument had no merit and was always doomed to fail because: 13.1 The Commission has no jurisdiction to entertain, make findings about or enforce the WCC Determination; 13.2 The Applicant herself had taken no procedural steps to enforce the WCC Determination in the correct jurisdiction; 13.3 The Applicant's entitlements to benefits under the Workers Compensation legislation had expired in 2015, two years before her medical retirement, a fact which had been brought to the Applicant's attention on several occasions in 2015 and early 2016, by Allianz, the Workers Compensation insurer; and 13.4 In conformity with this view, the WCC determined that it had no jurisdiction to make orders for weekly payments after 2013 (with the last such retrospective payment being made in 2015). 14. The Applicant was clearly advised of the lack of jurisdiction and the futility of the argument well prior to the hearing by the: 14.1 Employer's Reply to the Application filed 7 June 2017; 14.2 Correspondence sent to the Applicant on 13 June 2017; and 14.3 Respondent's Outline of Submissions filed 4 August 2017. 15. Despite this advice, the Applicant persisted with her claim and it was disingenuous of the Applicant to advance her case on that basis. 16. The Applicant further alleged that the Respondent was in contempt of the WCC Determination both in her opening submissions and in Written Submissions. That contention was a serious allegation which lacked any foundation and was embarrassing. 17. The Commission held: [29] "I agree with the submission of the respondent to the effect that this Commission has no jurisdiction to deal with an alleged contravention of, or failure to comply with, such a determination (see section 105 of the Workplace Injury Management and Workers Compensation Act). Any finding by this Commission that the respondent acted unfairly in medically retiring the applicant on 29 March 2017, in part, because it failed to comply with the determination made by the WCC in August 2012, would necessarily require an impermissible trespass by this Commission into the exclusive jurisdiction of the WCC." "[30] There is no evidence before this Commission that the applicant has, since 2012, taken any steps in the appropriate jurisdiction to enforce the determination of the WCC or to have contempt proceedings instituted as a result of the alleged failure by the respondent to comply with the determination of the WCC." (Emphasis added). 18. These findings are underscored by the fact that over the past ten years, the Applicant engaged in 16 separate proceedings against the Respondent - 7 of which were within the jurisdiction of the WCC. Five of those proceedings post-dated the WCC Determination. The Applicant was well familiar with the WCC and the legislation, a matter which was illustrated in the lengthy submissions in this matter. 19. Further, the Applicant is not impecunious, having substantial assets including a $610,000.00 term deposit and deriving income from a rental property. The Applicant has retained legal representation in prior litigation but chose not to in these proceedings. 20. Accordingly, the Applicant not only had the wherewithal about the workers compensation scheme herself but she also had the experience of, and the financial resources to obtain legal advice as to whether this Commission had any jurisdiction to entertain her claim on the basis of the WCC Determination (including the contempt claim). Applicant only fit for modified duties 21. In the Decision, the Commission noted: "The Applicant has requested re-instatement, to enable to return to work in accordance with the decision of the WCC. (emphasis added) 22. The Applicant's entire case was thus entirely misconceived because she contended that the assessment as to whether or not she was able to carry out the duties of her position, for the purposes of s.76 of the Teaching Service Act, was referrable to the "suitable duties" that were directed to be provided under the WCC Determination. That approach was wrong at law. Such an assessment is to be made in relation to the employee's substantive duties: J Boag & Son Brewing Pty. Limited v Alan John Button [2011] FWA FB1166 at [24]. Claim for re-instatement only 23. The Applicant only ever sought re-instatement. This was evidenced in the Application form and the opening submissions. 24. For reasons that are set out more fully below, the likelihood of the Applicant being re-instated was close to nil. 1. The respondent put the following submissions in support of the application for a costs order due to the applicant's unreasonable failure to agree to settle her claim on the basis of the respondent's offer to pay her $5,000 (with footnotes omitted): 25. By way of letter sent to the Applicant on 13 June 2017, the Respondent made an offer to the Applicant, on a without admission of liability basis, to settle the claim on the basis of: payment of $5,000 characterised as a lump sum for general damages; execution of a Deed of Release; and the offer was open for 14 days. 26. The letter put the Applicant on unequivocal notice that the Respondent would rely on the offer in an application for costs pursuant to s181 of the IR Act should the Applicant be unsuccessful in bettering the offer. 27. The test under s. 181(2)(c) is an objective one. 28. The Full Bench in Bankstown City Council v Paris (1999) 93 IR 209 at 219 expressed the relevant test in these terms: "Construing the relevant part of s 181(2)(c) in its overall statutory context, we conclude that the evident purpose of the provision is to encourage the settlement of proceedings to which it applies. The criterion set out in the provision is to be applied objectively and requires a consideration of the whole of the conduct of the party against whom the order is sought, or some discrete part of that party's conduct, with a view to ascertaining whether it unreasonably failed to agree to a settlement of the claim. 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." (Emphasis added). 29. In Four Sons Pty Ltd v Sakchai Limsiripothong (No 2) [2000] NSWIRComm 131at [4], the above test was described as a "jurisdictional gateway". Rejection of the Respondent's reasonable offer 30. The Respondent's offer was reasonable taking into account the following: 30.1 The prospects of success of the Applicant's case were extremely poor, if not nil; 30.2 The offer was equivalent to about 4.4 weeks' pay as at 2017 (noting the Applicant was a part-time employee) but as it was a lump sum, the Applicant would not have been subject to tax; 30.3 The Applicant had received $8,000 on 14 December 2015 in respect of her discrimination claim whereby she complained that she had not been reinstated to suitable duties at one of the 35 schools on the Applicant's List. As such, any compensatory orders would have taken that payment into account; 30.4 At the time of the offer, the Applicant had already surpassed retirement age and had not been entitled to any weekly payments of workers compensation for over two years; 30.5 At the time of the offer, the Applicant had not mitigated her economic loss in any meaningful way; 30.6 The parties had engaged in litigation throughout several jurisdictions since 2008 to date. These proceedings involved a huge expenditure of Court time and costs, time and costs to the Respondent as well as the Applicant. The Offer represented a genuine offer to cease such expenditure. 31. Further, the prospects of obtaining an order for reinstatement were close to nil because: 31.1 The Applicant had provided no evidence of any position to which she could be re­instated or re-deployed, noting that the Applicant had the burden of establishing all elements of her claim, including remedy. 31.2 The Applicant was not able to perform her substantive duties; 31.3 The Respondent had obtained independent advice from Ms Smith that any return to work would represent an unacceptable WHS risk; 31.4 The Teaching Service Act required that paramount consideration be given to the welfare of children in its care (s. 5A); 30.1 31.5 The Applicant had not engaged in any work for the Respondent for 6 years and had only done home tutoring and volunteer work in that period; 31.6 Re-instatement would only place the Applicant back in the position of being on leave without pay waiting for a vacant position at 0.6 FTE at one of her 35 schools; 31.7 The Applicant had not taught for more than 5 years and would need to apply to NSW Education and Standards Authority (NESA) for accreditation and successfully complete about 3 months of further training in relation to the new syllabus and new teaching techniques; 31.8 the Commission would take note of the high level of antipathy that the Applicant holds for the Department of Education. The Applicant's conduct in the face of the Respondent's offer 32. The Applicant acted unreasonably in that not only did she reject the Respondent's offer but she made no counter offer nor did she seek to engage in any settlement discussions with the Respondent whatsoever. The Respondent confirmed that the Applicant was refusing the offer and still the Applicant maintained the position that re-instatement was the only remedy she sought. 33. In Phillips v Industrial Relations Commission of NSW & Anor [2006] NSWCA 183 at [17]-[21], the Court of Appeal considered a case in which the applicant had steadfastly refuse(d) to entertain anything except reinstatement. The Court of Appeal held that the proper test under s 181(2)(c) requires the Court to consider the response of the reasonable person. The Commission is to apply its own perception of what is reasonable as distinct from what the applicant thought was reasonable. 34. In the Full Bench decision in Phillips, it was held that that the applicant's "steadfast insistence on reinstatement to the exclusion of other negotiated outcomes disclosed a failure on his part to properly evaluate the strengths and limitations upon the case he was to propound and in such circumstances there can be little doubt on a proper application of the principles, that an order for costs against Mr Phillips was available and should have been made." 35. Similarly, in Bragg -v- NSW Department of Community Services [1999] NSWIRComm 55 at [43] it was held that a clear inflexibility demonstrating no preparedness to consider compromise despite reasonable and diligent attempts by the other side would logically establish an unreasonable failure to agree to a settlement of the claim. 36. In Imogen Pty Ltd v Sangwin (1996) 70 IR 254 at 261 it was submitted, the Court: ... emphasised the need for legal advisers to be constantly aware of the fact that claims in unfair dismissal proceedings were often very small and where avoidable costs are forced upon an opposing party the party bringing about that result must expect the Court to exercise its discretion in such a way as to allow recovery of costs. (Emphasis added). Determination of the respondent's application for a costs order 1. I have determined to exercise my discretion against the making of a costs order in favour of the respondent for the reasons set out below. 2. The respondent has correctly submitted that the primary basis of the applicant's unfair dismissal application was the alleged failure of the respondent to comply with the Determination of the Workers Compensation Commission made on 9 August 2012. The respondent has also correctly observed that, in dismissing the applicant's unfair dismissal application, I held "that this Commission has no jurisdiction to deal with an alleged contravention of, or failure to comply with, such a determination... Any finding by this Commission that the respondent acted unfairly in medically retiring the applicant on 29 March 2017, in part, because it failed to comply with the determination made by the WCC in August 2012, would necessarily require an impermissible trespass by this Commission into the exclusive jurisdiction of the WCC." 3. However, I accept that the applicant genuinely believed that the respondent had failed to comply with the terms of the Determination of the Workers Compensation Commission and, as a consequence of that failure, the decision of the respondent to medically retire her constituted an unfair dismissal. 4. Applying the approach of Wilcox J in Kanan v Australian Postal and Telecommunications Union ([1992] 43 IR 257 at 264-265) it was at least an arguable point of law that failure to comply with the Determination of the Workers Compensation Commission rendered the termination of the applicant's employment harsh, unreasonable or unjust. I rejected that argument. However, it does not follow that the applicant's unfair dismissal application should be stigmatised as having been instituted without reasonable cause. On the applicant's own version of the facts it was not clear that her application was doomed to fail. 5. The respondent also relies upon the applicant's failure to agree to settle her claim on the basis of the respondent's offer to pay her the sum of $5,000. Whilst $5,000 is not an inconsiderable amount of money, in the context of the applicant attempting to regain her career as a teacher, which began in 1989, I do not regard her refusal to abandon that attempt in exchange for $5,000 as unreasonable. 6. The respondent's application for a costs order is refused. 7. I so order. John Murphy Commissioner ********** 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 July 2018