Industrial Relations Commission New South Wales Medium Neutral Citation: Elias v Commissioner of Police (No 2) [2019] NSWIRComm 1049 Hearing dates: 23 July 2019 Date of orders: 30 July 2019 Decision date: 30 July 2019 Jurisdiction: Industrial Relations Commission Before: Chief Commissioner Kite SC Decision: Application dismissed Catchwords: COSTS – review of removal of police officer – reinstatement awarded – applicant seeks costs – whether unreasonable failure to agree to settlement Legislation Cited: Industrial Relations Act 1996 (NSW) s 181 Cases Cited: Bankstown City Council v Paris (1999) 93 IR 209 Elias v Commissioner of Police [2019] NSWIRComm 1026 Four Sons Pty Ltd v Sackhai Limsiripothong (No 2) [2000] NSWIRComm 131, 100 IR 400 Harrison v Commissioner of Police [2007] NSWIRComm 93 Phillips v Industrial Relations Commission of NSW (2006) NSWCA 183, 154 IR 96 van Huisstede v Commissioner of Police (No 2) (2001) 106 IR 56 Category: Costs Parties: Stefan Elias (Applicant) Commissioner of Police (Respondent) Representation: Counsel: D Nagle (Applicant) J Darams (Respondent) Solicitors: Greg Willis (Applicant) Maddocks Lawyers (Respondent) File Number(s): 2017/00230184 Judgment 1. By notice of motion filed 30 April 2019 the applicant, who was successful in his reinstatement application, seeks an order for costs. The second prayer in the motion was not pressed. 2. He relies upon an offer, which he submitted represented a genuine compromise, made on 17 November 2017 to settle the proceedings ("the offer") on the basis that: 1. The Applicant be reinstated to NSWP immediately at his rank as at the date of the of his removal, with continuity of service from the date of removal 2. The Applicant to be paid one half of his entitlement to wages from the date he was first suspended to the date of reinstatement within fourteen (14) days from any acceptance of this offer. 1. In support of the offer it was expressed to be based on "the Respondent's own evidence that external contamination of the hair cannot be excluded". 2. There is no evidence of any response to the offer and it was taken to have been rejected. 3. In my decision, Elias v Commissioner of Police [2019] NSWIRComm 1026, in addition to the order for reinstatement, I made orders that the applicant be paid the relevant rates from the date of removal to the date of reinstatement less any sums earned from personal exertion in that period and that his service with the NSW Police Force be taken not to be broken. Legislation 1. The Commission is, generally speaking, a no costs jurisdiction. It is however authorised to award costs in certain limited circumstances. Relevantly s 181 of the Industrial Relations Act 1996 (NSW) provides: 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 ... (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. Submissions 1. The applicant relies in particular on section 181(2)(c) of the Act. He says that the failure to: 1. accept the offer; 2. reject the offer; and/or 3. make a counteroffer shows a failure to engage in the settlement process. He submits such conduct is unreasonable within the meaning of the paragraph (2)(c). 1. Counsel referred to the decision of the Full Bench of the Commission in Four Sons Pty Ltd v Sackhai Limsiripothong (No 2) [2000] NSWIRComm 131, 100 IR 400 (Four Sons). Mr Nagle drew particular attention to the following paragraph, at 404 [11]: The obligations imposed on parties to proceedings under s 84 of the Act, as identified in the Full Bench judgment in Bankstown City Council v Paris , require parties to such proceedings to undertake a responsible and careful assessment of the prospects of the litigation, in the absence of which an unsuccessful party may realistically face the prospects of a costs order being made against it. In those circumstances, it may often be appropriate for a party to consider making an offer to settle, even if the offer could be seen, either with the benefit of hindsight or otherwise, to be at a rather low level. However, the making of such an offer on "the low side" does not exhaust the responsibilities of a party to reasonably attempt to settle the claim. It is conceivable that if the respondent had responded to those offers in a more timely way, the proceedings may have settled. 1. The passage of Bankstown City Council v Paris (1999) 93 IR 209 to which the Full Bench referred, at 219 of the reported decision, is: 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. We emphasise that, although the legislature has clearly intended that there be strict limits on the power of the Commission to award costs in unfair dismissal proceedings, the legislature has also evinced a clear intention that costs orders be available in circumstances where there has been a failure on the part of a party to properly conciliate proceedings to the extent that they have failed reasonably to facilitate a potential settlement of them. Further, the Commission is obliged to consider all relevant circumstances in deciding whether such failure has occurred. Once the statutory criterion has been met, the Commission's broad powers and discretions under s 181(1) are available for exercise. (Emphasis added) 1. Mr Nagle, in his written submissions, identified a number of factors which he submitted were relevant to a consideration of whether the respondent failed to "undertake a responsible and careful assessment of the prospects of the litigation" as required by Four Sons. He submitted: 1. The initial opinion of Dr Lewis that external contamination cannot be ruled out and that failure to identify metabolites was a relevant matter; 2. The failure to disclose the second test results at 51 pg/mg and that the concentration was higher on the surface of the hair; 3. The failure to apply any proper standard to the determination of whether the applicant actually consumed cocaine; 4. The failure by the respondent to have regard to his own investigator's views that they were not satisfied the applicant had consumed cocaine 5. The expert evidence filed by the applicant which demonstrated that external contamination could not be ruled out as the reason for the presence of cocaine in the hair sample. 1. While drawing a distinction between the circumstances applicable to Calderbank offers and offers of compromise, counsel submitted that the outcome awarded was better, from the applicant's perspective, than the offer he made to settle the proceedings. That was at least a relevant consideration. 2. The applicant submitted these factors together with the considerations listed at [7] supported and justified the making of an order for costs of and incidental to the proceedings as agreed or assessed on a party/party basis. In the alternative the applicant seeks such an order from the date of the offer. 3. Mr Darams submitted that the principles to be applied were established in Bankstown City Council v Paris. He drew attention also to the decision of the Full Bench in van Huisstede v Commissioner of Police (No 2) (2001) 106 IR 56 at [4] (van Huisstede). He noted that, even if the statutory criteria evident in s 181 (2)(c) are met, the Commission retains a discretion to award costs referring to Bankstown City Council v Paris at 219 and Four Sons at [13]. He relied also on the decision of the Court of Appeal in Phillips v Industrial Relations Commission of NSW (2006) NSWCA 183, 154 IR 96. He submitted that in that case: "Mason P (with whom Spigelman CJ and Beazley JA agreed) held that the "objective" assessment - spoken of by the Full Bench in Bankstown - is to be undertaken in regards to the context of the party against whom the order is sought and the Commission is not to "ignore the standpoint or standards of [that] party" (at [19] - [20])." 1. In Phillips Mason P said at [19] – [20]: "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." 1. Mr Darams concluded in the context of Phillips; "… the Chief Commissioner observed (Decision at [61), having regard to the various obligations on sworn police officers (Decision at [51) that it is "not surprising" that the Commissioner would decide to remove a police officer who had consumed cocaine. Further, the Chief Commissioner observed that "I have no doubt that the Commissioner's order was motivated by a desire to maintain the integrity of the Police Force and was intended to convey a message of zero tolerance to the use of illicit substances. The propriety of that approach cannot be gainsaid." (Decision at [202]). The Chief Commissioner's observation echoes the views of other members of the Commission (see Morris v Commissioner of Police [2016] NSWIRComm 1034 (Morris) at[18] per Newall C)." (Original emphasis) 1. Counsel submitted: 1. The offer amounted to an invitation to the respondent to capitulate and therefore was not an offer to "compromise" at all; 2. In support of that proposition he added that the offer to accept one half of his wages from the first date of suspension to the date of making the offer was a claim for income during a period when he was suspended on pay – acceptance of it would have resulted in a "windfall" to the applicant; 3. The evidence available to the respondent at the date of the offer did not indicate that the respondent was not likely to succeed; 4. Related to (3), the respondent had evidence in the form of an opinion from an expert that Mr Elias' positive test resulted from his active consumption of cocaine; 5. The applicant's case turned, in significant part, on a consideration of expert evidence in an area which the Chief Commissioner found the scientific evidence was evolving or developing; 6. Many of the matters relied upon by the applicant, being findings of the Commission in his favour, fell into the category of being "hindsight error" and 7. The circumstances in this case are in stark contrast to cases such as van Huisstede and Harrison v Commissioner of Police [2007] NSWIRComm 93 in which there were obvious issues with the procedure adopted by the respondent in deciding to remove those officers. 1. Both counsel developed their written submissions orally. Mr Nagle also replied orally to the respondent's submissions. He said; 1. The use of the word "entitlement" in the offer was important because one does not have an entitlement to wages if one has already been paid them. If the respondent thought otherwise, that emphasised the importance of engaging in the settlement process. 2. The evidence of Dr Lewis and Mr Farrar that was before the respondent did not rule out the possibility of environmental exposure. A proper application of the necessary standard of evidence indicated that the respondent's position was not "rock solid" and he should have engaged in the settlement process. 3. The respondent, as an emanation of the State government, had obligations as a model litigant and should have engaged in the settlement process. 4. The applicant did not rely on hindsight – the investigators did not think there was sufficient evidence to sustain the finding of consumption nor did they suggest the applicant was lying – yet the respondent concluded both matters in the affirmative. Consideration 1. I accept the submission of the respondent that this case must be decided on its own merits. It is inapt to compare it with other cases and conclude that if costs were awarded in those matters they should be awarded here. I did not understand the applicant to suggest otherwise. The references to van Huisstede and Harrison made by the applicant were to support the conclusion that the Commission had the power to award costs in matters of this kind. 2. The authorities make clear that the legislative scheme is structured to encourage parties to consider the possibilities of settlement. Whether their actions are reasonable in the circumstances is to be assessed objectively having regard to the context of the party in question. 3. I have highlighted in the extract from Bankstown City Council v Paris at [9] the two ways in which the necessary affirmative conclusion may be reached. I deal with them in turn. Failure to agree to a reasonable settlement offer 1. This requires a consideration of the offer. 2. My conclusions in favour of the applicant's case were made, as the respondent submitted, as a consequence of a number of matters which, taken cumulatively, led me to find that I could not conclude that Mr Elias deliberately ingested cocaine. I also described the relevant field of science as evolving or developing. I came to a conclusion as to the balance of the scientific evidence. It favoured the applicant. There was, however, no single or obvious decisive element in the reasoning process. It follows that I accept the submission that the respondent was not obliged to come to the conclusion that he was not likely to succeed and therefore should have settled on the terms offered by the applicant. 3. The respondent has the responsibility to maintain public confidence in the Police Force. The zero tolerance policy in relation to the voluntary ingestion of illicit substances is one means by which the Commissioner of Police seeks to maintain that confidence. Given these circumstances, and the views expressed in [22], I do not consider there was such a weight of evidence before the respondent as to require him to consider reinstatement as having such probability that he should have agreed to it as part of a settlement. 4. The respondent's obligation to maintain public confidence in the Police Force requires him to demonstrate a willingness to act on his convictions. That is not to justify an attitude of defending all decisions to the bitter end. The conclusion I have reached, however, that the respondent was not obliged to conclude that his case was unlikely to succeed, supports the conclusion that his decision not to accept the offer was not unreasonable. 5. I do not find it necessary to determine the meaning of the second part of the offer. It is sufficient to say that the ambiguity in its terms adds to the weight of the conclusion that the respondent's failure to agree to the offer was not unreasonable. Course of conduct evidencing unwillingness to settle 1. The applicant in this regard submits that the respondent's failure to reply to the offer demonstrated a lack of willingness to engage. I note the applicant did not, on the evidence, further pursue the offer. Part of the context, also, is that there is a conciliation conducted by the Commission before these matters are listed for arbitration. Neither party said anything about that process. An offer such as that evidenced in this case, made a fortnight before the hearing is due to commence, is not to be seen in isolation from that process. 2. I have come to the conclusion that the respondent's failure to reply to the offer is not sufficient in this case to require an order for costs. The evidence does not support a finding that the respondent engaged in a "course of conduct" over "a relevant period" which demonstrated an unwillingness to settle on a basis which was reasonable. Discretion 1. Even if I were to accept that the failure to reply was sufficient by itself to amount to such conduct, I would not exercise my discretion to award costs. That is so because of the conclusions already expressed at [19] – [24] and because, as I have noted, the Commission is, generally speaking, a no costs jurisdiction. A party's success in proceedings, by itself, does not lead to costs following the event. The failure to reply to an offer made shortly before hearing does not justify a departure from that evident policy. Order 1. The application is dismissed. ********** 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: 31 July 2019