Adamczak v Alsco Pty Ltd (No.4)
[2019] FCCA 7
•9 January 2019
FEDERAL CIRCUIT COURT OF AUSTRALIA
| ADAMCZAK v ALSCO PTY LTD (No.4) | [2019] FCCA 7 |
| Catchwords: INDUSTRIAL LAW – Application for costs following dismissal of proceedings alleging adverse action in employment – application instituted against corporate employer and members of its management team – application against nominated managers ultimately withdrawn – was institution of proceedings against managers unreasonable – failure to accept Calderbank offer – whether refusal to accept offer amounts to an unreasonable act or omission – whether applicant’s conduct of the proceedings was unreasonable – matters to be considered. |
| Legislation: Federal Circuit Court of Australia Act 1999, s.3(2) Federal Circuit Court of Australia Rules 2000, r.21.10 |
| Cases cited: Adamczak v Alsco Pty Ltd (No2) [2018] FCCA 1252 Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd (No 2) [2011] FCAFC 141 |
| Applicant: | GEORGE ADAMCZAK |
| Respondent: | ALSCO PTY LTD |
| File Number: | ADG 379 of 2014 |
| Judgment of: | Judge Brown |
| Hearing date: | 24 July 2018 |
| Date of Last Submission: | 24 July 2018 |
| Delivered at: | Adelaide |
| Delivered on: | 9 January 2019 |
REPRESENTATION
| Counsel for the Applicant: | In Person |
| Solicitors for the Applicant: | Not Applicable |
| Counsel for the Respondent: | Ms Stewart |
| Solicitors for the Respondent: | Alsco Pty Ltd |
ORDERS
The applicant pay the respondent’s fees fixed in an amount of $35,000.00 (thirty five thousand dollars).
All outstanding applications be dismissed.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT ADELAIDE |
ADG 379 of 2014
| GEORGE ADAMCZAK |
Applicant
And
| ALSCO PTY LTD |
Respondent
REASONS FOR JUDGMENT
Introduction
In October of 2014, the applicant, Mr Adamczak commenced proceedings, in this court, pursuant to the provisions of the Fair Work Act 2009,[1] against his former employer, Alsco Pty Ltd[2] and four of its employees, who held managerial positions with the firm.
[1] Hereinafter referred to as “the FWA” or “the Act”
[2] Hereinafter referred to as “Alsco”
In these roles, each of the managers concerned was required, both individually and collectively, to make decisions affecting how Mr Adamczak had performed aspects of his work at Alsco’s Adelaide industrial laundry facility. In general terms, Mr Adamczak asserted that each of the managers concerned had bullied and harassed him.
As a consequence, Mr Adamczak alleged that he had been the subject of adverse action, during his employment with Alsco, in contravention of the general protections provided by the Act. He also alleged that Alsco had breached its contract of employment with him by failing to pay him bonuses to which he was entitled.
On 25 May 2018, I dismissed each aspect of Mr Adamczak’s application.[3] At an earlier stage of the proceedings, on 31 August 2016, with the consent of all parties concerned, I dismissed Mr Adamczak’s claim against the four relevant employees of Alsco – Mr Lemon; Mr Taras; Ms Whitelaw; and Mr Carlile. The costs of each of these individuals were reserved to the trial, which was then scheduled for October 2016.
[3] See Adamczak v Alsco Pty Ltd (No2) [2018] FCCA 1252
The judgment delivered on 25 May 2018 is a lengthy document. It stands on its own terms. However, in order to provide some context for these proceedings, its main implications can be summarised as follows:
·The termination of Mr Adamczak’s employment by Alsco did constitute adverse action under the FWA; however,
·The substantive and operative reason for Mr Adamczak’s termination was that Alsco had determined that he had breached the confidentiality provisions of its electronic mail policy;
·This was not a protected ground under the Act;
·The decision-maker in respect of the decision to terminate Mr Adamczak’s employment was Alsco’s Chief Financial Officer, Mr Hickin;
·Mr Lemon, Mr Taras and Mr Carlile were not involved in this decision making process and any involvement of Ms Whitelaw was tangential;
·Mr Hickin had no knowledge of any allegations raised by Mr Adamczak that he had been subject to workplace bullying or had a pre-existing psychological condition;
·Alsco, through the calculations provided by Mr Taras, had provided evidence indicating that it had properly acquitted its contractual obligation to pay bonuses to Mr Adamczak;
·On the other hand, although Mr Adamczak had consistently alleged he had not been paid the bonuses said to be due to him had provided no evidence to support his assertions.
On 27 June 2018, Alsco filed an application in a case, in which it sought the following orders:
· Costs pursuant to section 570(2)(a) against Mr Adamczak on the basis that he had instituted the proceedings against Mr Lemon; Mr Taras; Ms Whitelaw; and Mr Carlile without reasonable cause;
· In the alternative, an order for costs pursuant to section 570(2)(b) of the Act on the basis that the institution and maintenance of the proceeding against the nominated employees, until 31 August 2016, when they were dismissed, was an unreasonable act or omission, which caused Alsco to incur costs;
· An order for costs, on Alsco’s behalf, pursuant to section 570(2)(b) on the basis that Mr Adamczak’s failure to settle the proceedings after 12 August 2016 represented an unreasonable act or omission, on his part, which caused Alsco to incur costs;
· Costs in respect of its application for costs.
In summary, Alsco asserts that it was not reasonable for Mr Adamczak to have commenced the proceedings against its employees and further that it made a reasonable offer to compromise the proceedings, which Mr Adamczak declined.
Given that it was wholly successful, in the proceedings, it is also Alsco’s position that it has been put to significant cost by reason of Mr Adamczak’s unreasonable act in declining to accept its offer to settle the case, which compelled it to engage in costly and protracted litigation, concluded with a judgment following trial in its favour.
Background
Proceedings pursuant to the Act are not ones in which costs generally follow the event. Pursuant to section 570(1) of the FWA, the court has a discretion to order the payments of a party’s costs, in respect of proceedings under the Act, but only if satisfied of the matters contained in section 570(2), which reads as follows:
“(2) The party may be ordered to pay the costs only if:
(a) the court is satisfied that the party instituted the proceedings vexatiously or without reasonable cause; or
(b) the court is satisfied that the party’s unreasonable act or omission caused the other party to incur the costs; or
(c) the court is satisfied of both of the following:
(i) the party unreasonably refused to participate in a matter before the FWC;
(ii) the matter arose from the same facts as the proceedings.”
In the written submissions of its counsel, Ms Stewart, Alsco seeks the following orders:
“The respondent seeks:
· An order pursuant to s570(2)(a) of the FW Act that the Applicant pay the Respondent’s costs of these proceedings in relation to the claim against the Second to Fifth Respondents on an indemnity basis as the proceedings were instituted against the Second to Fifth Respondents without reasonable cause;
· Alternatively, an order pursuant to s570(2)(b) of the FW Act that the Applicant pay the Respondent’s costs of these proceedings in relation to the claim against the Second to Fifth Respondents on an indemnity basis as the institution and maintenance of the proceedings against the Second to Fifth Respondents until 31 August 2016 was an unreasonable act or omission which caused the Respondent to incur costs; and;
· An order pursuant to s570(2)(b) of the FW Act that the Applicant pay the Respondent’s costs of these proceedings from 29 August 2016 on an indemnity basis as the Applicant’s failure to settle the proceedings by 28 August 2016 was an unreasonable act or omission which caused the Respondent to incur costs’
· An order for the costs of this application on an indemnity basis.”
The application is supported by the following affidavit evidence:
· An affidavit of Alsco’s general counsel, Mr Ingui filed on 27 June 2018;
· A further affidavit of Mr Ingui, filed on 20 July 2018.
The proceedings between the parties concerned have been protracted. Up until the dismissal of the claim against each of them, Mr Lemon; Mr Taras; Ms Whitelaw; and Mr Carlile; have been represented by the same solicitors and counsel as Alsco.
During the proceedings, Alsco was represented by both senior and junior counsel. Mr Ingui has calculated the costs incurred by Alsco, in respect of providing advice and representation to its four employees, Mr Lemon, Mr Taras, Ms Whitelaw and Mr Carlile, up to August of 2016.
The major component of this amount is the fees of senior counsel, which comprised $25,059.38. In these circumstances, Mr Ingui has calculated the costs incurred in respect of defending the claim against the second to fifth respondents, on an indemnity basis, as being $27,823.75.
For obvious reasons, each of the individual employees concerned was uneasy at the prospect of being potentially made personally liable for costs and possibly also penalties able to be imposed against each of them pursuant to the provisions of the FWA. They did not personally have the financial resources of their employer, a large corporate entity trading throughout Australia.
In a response shared with Alsco, filed on 21 November 2014, each of the named employees denied having bullied and harassed Mr Adamczak. In addition, each of the employees concerned provided affidavit evidence refuting Mr Adamczak’s claims against each of them. These affidavits were filed on 15 June 2016.
On 11 December 2015, Alsco’s solicitor wrote to Mr Adamczak’s then solicitor, informing him of Alsco’s view that none of its employees, as nominated by Mr Adamczak in his amended statement of claim, could be personally liable for any wrong doing alleged by Mr Adamczak under the nominated provisions of the FWA.
Against this background, on 14 April 2016, Mr Lemon; Mr Taras; Ms Whitelaw; and Mr Carlile; sought the dismissal of the application against them pursuant to the provisions of Rule 13.10 of the Federal Circuit Court Rules. This rule permits the court to dismiss any aspect of a claim, which is considered by the court to have no reasonable prospect of being successfully prosecuted.
This application was listed for determination on 31 August 2016. It was not argued. On this date, then counsel for Mr Adamczak, Mr Manuel conceded the application. On this basis, with the consent of all concerned, the proceedings were dismissed against each of the employees nominated by Mr Adamczak. In addition, the court ordered that the employee’s costs be reserved.
Alsco complain that the concession was made at a late stage, after its legal representatives had travelled from Sydney to Adelaide for the hearing. In these circumstances, it is argued that the actions of Mr Adamczak are unreasonable. On this basis, it seeks indemnity costs on the basis of the authority provided by Colgate-Palmolive v Cussons Pty Ltd.[4]
[4] See Colgate-Palmolive v Cussons Pty Ltd (1993) 46 FCR 225
In the case, it was held that indemnity costs are not commonly ordered and will only be ordered if the court is satisfied that there is “some special or unusual feature of the case to justify the Court in departing from the ordinary practice” of ordering the costs be paid on a party and party basis.
There is no closed category of cases in which indemnity costs might appropriately be ordered, but in Colgate Palmolive v Cussons Pty Ltd, the Full Court indicated that the kinds of situation in which indemnity costs might be considered were where a litigant had:
·commenced or continued an action knowing it to have no chance of success;
·made false or irrelevant allegations of fraud;
·made groundless allegations which prolong a case; and
·imprudently refused an offer to compromise.
Ms Stewart contends that the lateness of the concession made by Mr Manuel, after Alsco’s counsel and solicitor had travelled to Adelaide for the strike out hearing justify indemnity costs. It is also her position, as will become clear as these reasons unfold, that indemnity costs are appropriate because Mr Adamczak imprudently refused an offer to settle the case.
In addition, the court has a wide discretion as to the calculation of costs. Pursuant to rule 21.10 of the Federal Circuit Court Rules, it may award costs calculated pursuant to a schedule fixed in Part 1 of the Rules. Applying this schedule, in the alternative, Mr Ingui calculates the costs due in respect of defending the proceedings against the second to fifth respondents, up to August 2016, as being $14,456.65.
Between 12 August 2016 and June of 2018, correspondence passed between the respective solicitors for Mr Adamczak and Alsco, in which offers were made to settle the proceedings. Significantly, on 12 August 2016, Alsco offered to settle the proceedings in an amount of $60,000.00 inclusive of costs, which sum was increased to $80,000.00, in a letter dated 22 September 2016.
Each of these offers was rejected and counter offers were made in larger terms, which were unacceptable to Alsco. Given Mr Adamczak was entirely unsuccessful, in his application, it is Alsco’s position that it was unreasonable for Mr Adamczak to have rejected these offers.
Once again, Mr Ingui has calculated Alsco’s costs incurred after 29 August 2016 on both an indemnity basis and pursuant to the scale. Again, the major component of the costs sought is the fees of senior counsel. On an indemnity basis, Mr Ingui calculates the costs to be $114,491.71; and pursuant to the scale to be $36,276.17.
It is Mr Adamczak’s position that no order for costs should be made against him. In particular, it is his position that he acted on legal advice in joining Mr Lemon, Mr Taras, Ms Whitelaw and Mr Carlile to the proceedings. As such, his counsel, Ms Eaton submits it cannot be said that it was his unreasonable act or admission, which caused Alsco to incur costs. In addition, Ms Eaton asserts that there is no evidence in any event, arising from Mr Ingui’s affidavits, to indicate that any of the second to fifth respondents personally incurred costs in the case.
In addition, it is Mr Adamczak’s position that it cannot be said that it was unreasonable for him to have failed to accept the offer to settle the proceedings made in 2016 as, at this stage, it was impossible for either him or those advising him to have any reliable capacity to ascertain whether he had reasonable prospects of succeeding in his application against Alsco.
In this context, Mr Adamczak relies on the discretionary nature of the court’s power to award costs, which is directed to prevent the award of costs unless they have been instituted vexatiously or without reasonable cause. He contends that it is the intention of the legislature that parties be freed from the risk of having to pay the costs of an opposing party, in the industrial law context, merely because they have failed in their action.
Although Mr Adamczak has experience in managing the legal aspects of worker’s compensation claims in South Australia, he is not legally qualified. He has deposed an affidavit in support of his application opposing any award of costs being made against him.[5]
[5] See affidavit of George Adamczak filed 23 July 2018
In this affidavit, he deposes that he engaged a solicitor, Mr Johns to advise him in respect of his prospects of instituting proceedings against Alsco, following the termination of his employment, with that company, on 30 July 2014. In his affidavit, Mr Adamczak deposes as follows:
“Mr Johns engaged a barrister with expertise in employment law, Mr Manuel, to advise and represent me. I met with Mr Manuel and Mr Johns on 13 August 2014 to discuss my potential claims against the respondent, Alsco, and against the individuals who I believed had bullied me in the period prior to my dismissal.
The instructions that I provided to Mr Johns and to Mr Manuel were consistent with the evidence that I subsequently gave in these proceedings, and I accepted their advice based on those instructions.
…
The decision to include the second to fifth respondents were made on their legal advice, and the application was drafted and filed on my behalf by Mr Johns.”[6]
[6] Ibid at [3], [4] & [6]
Mr Adamczak subsequently terminated his instructions to Mr Johns and engaged Mr Starke to represent him in the proceedings, which included the stage at which Alsco offered to compromise the proceedings. Mr Starke continued to instruct Mr Manuel to provide advice and represent Mr Adamczak in the case. In this context, Mr Adamczak deposes as follows:
“I then engaged David Starke at Starke Lawyers to represent me in these proceedings. Starke Lawyers engaged Mr Manuel as counsel to advise and represent me.
In the subsequent settlement negotiations I acted on their advice.”
It is highly regrettable that these proceedings have taken slightly in excess of three years to come on for final hearing. I have explained the reasons for the delay in an earlier judgment.[7] On two occasions, the proceedings were adjourned for reasons not attributable to any omission on Alsco’s part but rather because Mr Manuel, for legitimate personal reasons, was not in a position to proceed, which necessitated two adjournments of the case. Most recently, the case was listed for final hearing on 19 December 2017.
[7] See Adamczak v Alsco Pty Ltd [2017] FCCA 3550
On 27 November 2017, Mr Starke filed an application, on Mr Adamczak’s behalf, to vacate this hearing. Ostensibly, the basis of this application was that Mr Manuel was unwell. The application was listed expeditiously for determination on 29 November 2017 given the imminence of the trial date.
For reasons provided at the time, I was not prepared to adjourn the trial for a fourth time in these circumstances, particularly given that Alsco had made arrangements to transport two of its witnesses from Sydney and Singapore respectively, for the hearing.
On 7 December 2017, Mr Starke wrote to Alsco’s solicitors, in the following terms:
“It is inappropriate to summarise the strengths and weakens [sic] of either party’s case as it takes us nowhere. Litigation is a possible risk as one does not know how witnesses on both sides will present on the day and with a third party making a decision being His Honour Judge Brown.
The litigation confronting the party’s places issues in the public arena, not just short term, but long term as a judgement will be delivered.
Our respective offices have negotiated with the parties being at a stalemate; ALSCO Pty Limited being at $80,000.00 and Mr Adamczak being at $179,500.00. Those offers being inclusive of costs and interest, with each party bearing their own legal costs and to be paid in the most effective way to the Applicant, representing full and final settlement of this matter and all claims arising out of this matter between the parties.
The purpose of this without prejudice letter is to ascertain if there is a middle of the road figure that can be agreed upon with the aim of resolving the impasse. If there was to be a settlement it should be recorded in a deed with mutual releases provided by the parties.”[8]
[8] See affidavit of Sam Ingui filed 22 June 2018 at annexure SAI-20
Alsco’s solicitors responded to this letter the following day. They declined the overture to find a middle way. They wrote as follows:
“We have outlined in previous correspondence the factors we consider to be the strengths and merits of our case, along with our views of the perceived difficulties with your client's case.
Despite our opinion of your client's poor prospects for success in this matter, we have engaged in settlement negotiations with a view to reaching a commercially viable outcome, in the interests of both parties. To this end, we have made Offers we consider to be quite generous, noting our views on your client's prospects, purely in the interests of reachi.ng a commercial resolution.
Your client however has rejected these offers and maintained what we consider to be an unrealistic attitude towards these proceedings and the likely outcome.
At this point in time, we have incurred not insignificant costs in preparing for the Hearing, not to mention preparation on two previous occasions when the matter was adjourned on application by your client, for reasons we understand to be out of his control.
Nonetheless, at this stage, the legal costs we have incurred in preparing for the Hearing of this matter far exceed any settlement sum we consider reasonable and we therefore consider that all attempts to commercially resolve this matter have now been exhausted.
We had previously made clear that the longer the proceedings remained on foot, the more-so the legal costs would escalate, to such an extent that those costs would continue to erode any sum we had offered in the form of a proposed settlement sum. Unfortunately, at this stage, the legal costs have completely eroded the capital sum we had set aside in the event that the matter was able to be resolved in the commercial interests of both parties.
In those circumstances, we are prepared to run the matter to full hearing as presently set down, commencing on 19 December 2017.”[9]
[9] Ibid at annexure SAI-21
On 13 December 2017, Mr Starke filed a notice in court that he was withdrawing as Mr Adamczak’s lawyer. The notice in question indicated that it had been provided to Mr Adamczak, by pre-paid post, on 6 December 2017.
On 14 December 2017, Mr Adamczak personally brought a further application to adjourn the proceedings. In support of his application, he deposed as follows:
“I understood from discussion with Mr Starke that he considers that there has been a breakdown in the requisite trust and confidence as between solicitor and client for him to continue to represent me and I too no longer have the trust and confidence in either Mr Starke or Mr Manuel to properly represent me in these proceedings at trial.
In the circumstances, I do not oppose the expressed intention of Mr Starke to withdraw as my lawyer.[10]
[10] See affidavit of George Adamczak filed 13 December 2017 at [5] & [6]
For reasons, which were provided orally on 14 December 2017 and subsequently transcribed, I was not prepared to adjourn the proceedings notwithstanding Mr Adamczak was no longer legally represented. In short, I maintained my view that Alsco was entitled to have the case against it resolved given the length of time it had been on foot.
Correspondence prior to 31 August 2016
On 27 November 2014, Mr Ingui wrote to Mr Johns requesting particulars of the actions alleged to have been taken by any of the employees of Alsco nominated by Mr Adamczak, in his application, constituted adverse action within the definition provided by section 342(1) of the FWA.
In particular, Mr Ingui indicated that it appeared to be Mr Adamczak’s case that Alsco had taken adverse action, in its dismissal of him, because he had made a complaint of bullying against its nominated employees. In this context, Mr Ingui pointed out that none of these employees had actually been responsible for the decision to dismiss Mr Adamczak.
Mr Johns responded to Alsco’s letter on 12 January 2015 and made reference to the provisions contained in section 550 of the FWA describing it as being apposite but providing no particulars as to why it was so. This provision provides that a person who is involved in a contravention of a civil remedy provision, under the Act, is taken to have contravened that provision. Such a person is involved in such a contravention if he/she has aided, abetted, counselled or procured the contravention.
The concept of adverse action is defined in section 342(1) of the Act. It includes the dismissal of an employee; the injury of the employee’s employment; the alteration of the employee’s position to his/her prejudice; or discrimination between the employee and other employees.
In this context, on 11 December 2015, Mr Ingui again wrote to Mr Johns indicating his view that none of the nominated individual respondents could be liable for taking adverse action against Mr Adamczak on the basis of any workplace right attributable to Mr Adamczak or because of any form of discrimination against him.
Mr Adamczak filed his affidavit of evidence, in respect of the trial, which was then scheduled to take place on 10-14 October 2016, on 23 December 2015. In conjunction with this affidavit, he filed an amended statement of claim.
In the contents of these documents, Alsco’s solicitor again wrote to Mr Johns on 24 March 2016 indicating its view that only Alsco could have taken adverse action against Mr Adamczak, by terminating his employment with the firm. As such, Alsco contended that, at the highest, it was only possible for Mr Lemon, Mr Taras, Ms Whitelaw and Mr Carlile to be liable as accessories.
In this context, it was asserted that the pleadings did not address how each of these individuals was personally aware of any workplace rights allegedly being exercised by Mr Adamczak; and how each of them was involved in the adverse action taken by Alsco.
Essentially, it was argued that Mr Adamczak had not expressly pleaded the application of section 550 to his case and had not provided any particularly of how any of the nominated employees had been involved in the contravention of the FWA alleged by him.
It was against this background that Alsco commenced the proceedings to strike out the application against Mr Lemon; Mr Taras; Ms Whitelaw; and Mr Carlile; which was ultimately conceded by Mr Manuel on 31 August 2016.
In these circumstances, Alsco contends that it consistently indicated its position regarding the lack of legal responsibility for any of its employees in the action instituted by Mr Adamczak, which view was subsequently vindicated by the concession made by Mr Manuel and the resulting consent order reserving costs to trial.
Offers to settle
Prior to the consensual dismissal of Mr Adamczak’s application against the nominated employees of Alsco, on 12 August 2016, the firm’s solicitor wrote to Mr Johns offering to compromise the proceedings by way of a net payment to Mr Adamczak in the sum of $60,000.00.
The letter followed an informal settlement conference, which had taken place on 8 August 2016. On the basis of six propositions, Alsco asserted that it was of the view that Mr Adamczak’s claim would be unsuccessful in the form then pleaded, given the evidence filed.
These propositions can be summarised as follows:
· Mr Adamczak’s complaints of bullying and harassment by the various named managers, amounted to nothing more than reasonable performance management;[11]
· It was Mr Hickin, Alsco’s Chief Financial Officer, who had made the decision to dismiss Mr Adamczak. Mr Hickin’s evidence was that he had no knowledge of Mr Adamczak having made any complaints of bullying and was not aware of any medical condition suffered by Mr Adamczak;
· The evidence filed on behalf of Alsco indicated that the decision to terminate Mr Adamczak’s employment was solely as a result of Mr Adamczak having admitted to having breached the firm’s policy in respect of his use of its electronic mail system by sending confidential information, pertaining to Alsco, to sources outside the company;
· It was only in the days prior to his termination that Mr Adamczak had informed his relevant manager at Alsco of having suffered a psychological condition during the previous years of his employment with Alsco;
· The evidence of the various employees concerned, apart from Ms Whitelaw, indicated that they had not been part of the decision making process to terminate Mr Adamczak’s employment. In these circumstances, it could not be said that Mr Adamczak had established any degree of accessorial liability against them under the FWA;
· Mr Adamczak had not provided any mathematical calculations to support his assertion that his bonus payment entitlements had not been paid in full. To the contrary, Alsco had provided its own calculations, supported by documentary evidence, which supported its position that Mr Adamczak’s entitlements, under the bonus scheme, had been properly acquitted.
[11] See affidavit of Sam Ingui filed 26 June 2018 at Annexure SAI 12
It is the submission of Ms Stewart, counsel for Alsco in its application for costs, that each of these assertions was subsequently vindicated in the judgment delivered on 28 May 2018, which provides justification for costs to be awarded in its favour.
On the other hand, Ms Eaton contends that it would be fundamentally unfair to Mr Adamczak to penalise him in this way on the basis that he and his legal advisors took a different view of the evidence available in August of 2016, which was necessarily untested.
On 22 September 2016, Alsco’s solicitor wrote to Mr Johns again, in the following terms:
“Should the matter proceed to a full Hearing, there is a strong likelihood that the Respondent is in a position to recover the costs associated with the strike out Application which was before the court on 31 August 2016, those costs being in the vicinity of $10,000.00.
Purely in the interests of commerciality and resolution of the matter prior to incurring further costs associated with Junior and Senior Counsels’ preparation and attendance at the Hearing, Alsco offer payment to the Applicant of the sum of $80,000 (inclusive of any taxes, costs and interest) in full and final resolution of the matter. This Offer will remain open for acceptance for a period of 7days from the date of this letter. Should the Offer not be accepted and senior and junior counsel commence preparation for the Hearing, the Respondent will not be in a position to further engaged in settlement negotiations.”[12]
[12] Ibid at SAI 13
In respect of both the offer to settle made on 12 August 2016 and on 22 September 2016, Alsco invoked the principle contained in Calderbank v Calderbank.[13] Essentially, Alsco reserved the right to rely on its correspondence in respect of any prospective application for costs if ultimately the outcome of the proceedings was less favourable, for Mr Adamczak, than what had been offered to him.
[13] See Calderbank v Calderbank [1975] 3WLR 586
Mr Starke responded to Alsco’s correspondence on 28 September 2016. He wrote as follows:
“… it is arguable that our client has a good case despite your comments. However, we both know that with litigation risk is involved as one does not know how witnesses will present on the day, performance of counsel and a third party making a decision.”
Mr Starke did not present any additional material to support his contention that Mr Adamczak had a good case. He did however indicate that recent advice, given to Mr Adamczak, by Mr Manuel, had spurred Mr Adamczak on. What was the nature of this advice was not specified.
In addition, Mr Starke alluded to the undesirability of issues relating to Alsco and its management being ventilated “in the public arena”. In these circumstances, Mr Starke indicated that his client would be prepared to compromise the action on the basis of a payment to him of $185,000.00 inclusive of costs.[14]
[14] Ibid at annexure SAI 14
Subsequently, Alsco requested detail of how this sum was calculated. In a letter dated 9 December 2016, Mr Starke indicated as follows:[15]
[15] Ibid at annexure SAI 15
General damages:
12 month’s pay rounded down to $50,000.00
Loss of chance:
$262,500.00 rounded down to $100,000.00
Non-economic loss:
$10,000.00 rounded down to $5,000.00
Unpaid bonuses:
Estimated $150,000.00 but rounded down to $30,000.00
Penalties:
$106,000.00 but rounded down for commercial purposes to nil
On 23 May 2017, approximately ten weeks prior to the then scheduling of the final hearing, Mr Starke sent a further letter to Alsco seeking a commercial resolution of the case. The proposal being a settlement on the basis of the payment of $179,500.00 to Mr Adamczak.
Again, Mr Starke alluded to potential prejudice, arising to Alsco, if issues pertaining to its business operations and management team were ventilated in public.[16] Alsco responded to this offer by reinstating the previous settlement offer of $80,000.00 made on 22 September 2016.[17]
[16] See annexure SAI 16
[17] See annexure SAI 17
On 26 July 2017, Alsco’s solicitor forwarded a further Calderbank letter offering to resolve the proceedings by way of a payment of $70,000.00. It indicated that it had reduced its earlier offer because of further costs incurred by it in anticipation of the trial.
In the letter Alsco reiterated its position that it was its view that Mr Adamczak’s own actions had caused his termination. The letter also canvassed Alsco’s perception that Mr Adamczak was neither reasonable nor insightful in respect of the litigation instigated by him. In particular, Alsco raised its concerns that:
· Mr Adamczak’s claim was not properly pleaded;
· He had requested Alsco provide him with voluminous documentation, including statements from witnesses whom Alsco did not consider were relevant to the proceedings;
· He had failed to respond to the early offer of settlement made in June of 2017;
· Mr Adamczak had failed to explain adequately the basis of the calculation on which his offer to compromise the proceedings was based;
· The expressed threat that Mr Adamczak would be able to cause commercial harm to Alsco in the public arena of the litigation;
· In this context, it found Mr Adamczak’s assertion that he had no substantial financial resources to be concerning.
As a consequence of these matters, Alsco’s solicitor indicated its concern that Mr Adamczak was not bona fide in any attempt to resolve the matter but was intent on causing Alsco maximum inconvenience and harm. In these circumstances, it raised the prospect of it bringing an application to seek costs against Mr Adamczak’s then legal representatives.[18]
[18] Ibid at annexure SAI 19
This was the context in which Mr Starke wrote to Alsco, apparently the day after he had indicated to Mr Adamczak he had withdrawn from the proceedings, making an overture to find a middle of the road figure.
The legal principles applicable
Section 570 is a piece of beneficial legislation, which recognises there may be, in the context of litigation arising from workplace disputes, a great disparity between the financial resources of any employer and employee concerned.
The former may be a large publicly listed company generating a large economic return with a payroll of thousands with ready access to highly skilled legal advice. The latter may be either a modest salary earner or someone between positions, who necessarily has extremely limited financial resources and so limited access to legal advice and for whom any order for costs may be financially crippling. For such a person, the prospect of being made liable for costs is likely to be a powerful disincentive to bring proceedings, in the industrial law context, although otherwise the claim mooted is one of moment for the individual concerned.
The provision, which renders the fair work jurisdiction a cost free jurisdiction, other than in closely circumscribed circumstances, must be considered within the overall objectives of the legislation, which are directed to securing the public good, through the preservation of a minimum standard of industrial conditions and a system to preserve the rights of workers within the workplace [see FWA at section 3].
It is in the public interest that the rights of employees be protected and that any properly aggrieved worker is able to have ready access to justice to this end without fear of being crushed by an order for costs. On the other hand, the authority to award costs, in appropriate cases, may be the only instrument to protect employers, regardless of their size and resources, from being the subject of vexatious litigation brought by either misguided or vindictive former employees. Such employers are entitled to redress, in these circumstances, notwithstanding their financial resources.
The Full Court of the Federal Court expressed the factors informing the discretion, arising under section 570(2) in Australian Workers Union v Leighton Contractors Pty Ltd & Ors (No2):[19]
[19] See Australian Workers Union v Leighton Contractors Pty Ltd & Ors(No2) [2013] FCAFC 23 at [7]-[8]
“… in our view the authorities establish the following principles:
1. The purpose or policy of the sections to free parties from the risk of having to pay their opponent’s costs in matters arising under the Act, while at the same time protecting those parties who are forced to defend proceedings that have been instituted vexatiously or without reasonable course.
2. It follows from the protection offered by section 570(2) that a person will rarely be ordered to pay the costs of a proceedings but it is not necessary to prove that there are exceptional circumstances warranting the making of an order …
3. The relevant question is whether the proceeding had reasonable prospects of success at the time it was instituted, not whether it ultimately failed …
We would emphasise however, that these principles relate to the question of whether the jurisdiction to award costs is enlivened. Even if the court has jurisdiction to make a costs order, it retains the discretion to refrain from exercising it in an appropriate case.”
Accordingly, given the beneficial nature of the FWA, I accept that it will be more often than not the exception than the rule that costs are awarded, in respect of general protection applications arising under the FWA.
Public policy considerations also support the early settlement of cases which leads to the avoidance of unnecessary litigation. It is in the public interest that courts not be clogged with unmeritorious claims, which potentially deny more deserving litigants of having their cases adjudicated expeditiously. One tool, which is directed to this end, is the Calderbank offer.
The case of Calderbank v Calderbank[20] instituted the procedure known as a Calderbank letter or offer, which has general application within Australia. This procedure was described in Cross on Evidence as follows:
“This procedure, known as the Calderbank letter or offer, was first used in matrimonial cases, but is now recognised to be of general application. The consequence of marking an offer “without prejudice save as to costs” is that the document and its contents are treated as being without prejudice for the determination of the substantial issues between the parties – they are privileged. But they may be used after these issues are determined, for the purpose of deciding the incidence of costs. Where the payment into court procedure is available, it is prudent that it be used.”[21]
[20] Calderbank v Calderbank [1975] 2 All ER 333
[21] Cross on Evidence (1996 Australian Edition) at paragraph 25,360
As Mr Starke pointed out, in several pieces of his correspondence to Alsco’s solicitors, the ultimate outcome of any piece of litigation may be uncertain at the time of its instigation. As the old saw has it, nothing is certain in life but death and taxes.[22] So far as litigation is concerned, there is many a slip between the cuff and the lip.
[22] Usually attributed to Benjamin Franklin
In this context, the provisions contained in section 570(2) require the court, in the exercise of its discretion, to consider the reasonableness of the actions of a party to fair work litigation in a retrospective sense, by reference to either the stage when the litigation was instituted or when the unreasonable act complained of occurred.
At this prospective stage, the ultimate outcome of the case concerned must be unknown to the actors involved. The implicit danger arising for the court, being called upon to judge the unreasonableness of that earlier action retrospectively being of judging that action through the potentially distorting prism of hindsight.
In Brown v DS & MJ Batten (No 2) Raphael FM summarised the application of the section 570(2) in the following terms, particularly noting the temporal distinction arising from the section as follows:
“The court accepts that the purpose of section 570 is to make the court’s jurisdiction under the Fair Work Act a no costs jurisdiction except in special circumstances. These circumstances can have temporal differences so that those falling under sub-section2(a) are limited to the institution of the proceedings and those falling under sub-section2(b) can continue through the proceedings so that whilst a party may not have instituted the proceedings without reasonable cause it may become clear during the course of those proceedings that the action was untenable so that by not withdrawing the whole of part of the proceedings the party acted or omitted to act unreasonably thus causing the other party to incur costs.”[23]
[23] Brown v DS & MJ Batten (No 2) [2012] FMCA 436 at [3]
Conclusions
Alsco relies on both the provisions contained in both section 570(2)(a) & (b) in support of its submission that the institution and continuation of proceedings by Mr Adamczak against Mr Lemon; Mr Taras; Ms Whitelaw; and Mr Carlile was unreasonable and justify an award of costs.
Firstly, it contends that the proceedings should not have been commenced against these individuals in the first place and secondly, it was unreasonable for Mr Adamczak to have maintained them, after it had been pointed out to him the lack of any effective pleading of accessorial liability against the individuals named and what it asserts is the axiomatic fact that none of these persons actually took the adverse action complained of against him.
In addition, in the context of the late concession made by Mr Adamczak’s counsel, regarding the issue of the joinder of Mr Lemon, Mr Taras, Ms Whitelaw and Mr Carlile, it is submitted that an award of indemnity costs is justified.
Accordingly, in large part, I must assess Mr Adamczak’s conduct both at the date of his institution of these proceedings and the stage at which, with his acquiescence, this aspect of the proceedings was discontinued.
This period is one of approximately 22 months between October 2014 and August 2016. During this period of time, the major events were the filing of Mr Adamczak’s trial affidavit (23 December 2015) and the filing of Alsco’s evidence, including the employee respondents (15 June 2015).
It is the submission of Ms Stewart, counsel for Alsco, that Mr Adamczak’s statement of claim, as amended, and his affidavit, demonstrate a fundamental misunderstanding of the FWA. It was Mr Adamczak’s complaint that he had been subject to bullying and harassment by the various members of the Alsco management team named in his application, with whom he worked.
Alsco contend that such conduct is not adverse action per se, as it does not fall within the definition provided by section 342(1) and if Mr Adamczak wished to rely on the accessorial provisions of section 550 he should have pleaded his action in this way and provided particulars regarding the manner in which each of the individuals nominated by him was involved in the contravention of the civil remedy provision agitated by him in his application.
In this context Ms Stewart relies on the various pieces of correspondence, between Alsco and Mr Adamczak’s legal advisors, which commenced in November of 2014 and which culminated in the concession being made by Mr Adamczak’s counsel in late August of 2016, at the door of the court, to support Alsco’s assertion that this aspect of the proceedings was unreasonable from the outset.
Ms Eaton would characterise Mr Adamczak as an unsophisticated litigant, who relied on the advice of his solicitor and counsel. From his perspective, the individuals whose conduct had caused him to become aggrieved were Mr Lemon; Mr Taras; Ms Whitelaw; and Mr Carlile.
He outlined his various complaints about their behaviour in the affidavit deposed by him. In these circumstances, Ms Eaton contends, it would be unreasonable to expect him to be aware of the intricacies of civil accessorial liability and unfair to penalise him personally by means of a costs order, either at the time he commenced his action or indeed thereafter.
Ms Stewart concedes that there is no evidence to indicate that Mr Adamczak commenced the proceedings against the nominated employees vexatiously. The remaining issue is whether he did so without reasonable cause. I accept Mr Adamczak’s evidence that he acted on the advice of his various legal advisors in the preparation of his case and the relevant pleadings, which were beyond his expertise to prepare.
It is also apparent to me that, when he commenced the proceedings, Mr Adamczak had significant complaints against the various management team members named by him in his statement of claim. As such, he personally would not have had cause to consider that it was not inappropriate that they be joined as parties. Essentially, it is his case that it was these people with whom he had interacted, whilst employed by Alsco and he had been unfairly dismissed from the firm.
Accordingly, given the general import of section 570 that the fair work jurisdiction be a no costs one, I accept Ms Eaton’s submissions regarding the imposition of a costs order against Mr Adamczak in favour of Mr Lemon; Mr Taras; Ms Whitelaw and Mr Carlile for the following reasons.
There is no evidence to indicate that any of these individuals has personally incurred costs. Rather, it is apparent that Alsco indemnified each of them, and their evidence was, in any event, required to defend the proceedings brought by Mr Adamczak, which remained on foot against it, after the dismissal of the aspect of the case involving the Adelaide management team.
In Australian & International Pilots Association v Qantas Airways Limited (No3)[24] Tracey J indicated that whether a party had engaged in an unreasonable act or omission, particularly in respect of how it had chosen to plead its case depended upon an objective analysis of the case concerned. His Honour said as follows:
“A pleading which discloses no reasonable cause of action may be struck-out. It does not, necessarily, follow that the party whose pleading has been struck-out acted unreasonably by seeking to rely on the deficient pleading. An objective analysis of the particular party’s conduct will be necessary in each case.”
[24] See Australian & International Pilots Association v Qantas Airways Limited (No3) (2007) 162 FCR 392 at 402 [32]
In CFMEU v Clarke the Full Court outlined circumstances, in litigation, which might not amount to an unreasonable act or omission. They include the following:
·a party, who does not conduct litigation efficiently;
·A party, who makes an appropriate concession late;
·The party concerned might have acted in a different or timelier fashion.
In the case the Full Court said as follows:
… There is a distinction between a party who pursues arguments which are ultimately abandoned or rejected by the court and a party who commences a proceedings which is misconceived in the sense of being incompetent or unsupportable … simply because a party does not conduct its litigation in the most efficient way does not mean that the court should not exercise its discretion … to make a costs order. … Although it is arguable that the lateness of the concession may have put the appellants to some extra cost, we are of the view that it cannot be characterised as ‘unreasonable’ … Indeed, whilst courts should use the discretion … to ensure that parties to litigation arising from the … Act do not engage in unreasonable acts and omissions which put the other party to undue expense, they should also be careful not to exercise the discretion with too much haste, given that such haste may discourage parties, for fear of an adverse costs order, from pursuing litigation under the … Act in the manner in which they deem best.”[25]
[25] CFMEU v Clarke [2008] FCAFC 143 at 582 [29]
This passage was subject to comment by Bromberg J in Saxena v PPF Asset Management Ltd [26] in which His Honour said as follows:
“With great respect to the observations made in CFMEU v Clark, I wholeheartedly agree that this Court ought be very careful indeed to exercise the discretion provided by section 570(2) and should not do so other than in a clear case. The limited discretion conferred on the Court by that subsection ought not become the basis for arguments about costs in relation to any and every transgression in the conduct of a case.”
[26] Saxena v PPF Asset Management Ltd [2011] FCA 395at [6]
In all the circumstances of this case, I do not consider that the conduct of Mr Adamczak, in continuing his action against Mr Lemon and the other managers concerned, was sufficiently unreasonable to attract the operation of section 570(2)(b) of the FWA and justify the making of an award of costs against him, notwithstanding Alsco’s consistent advocacy, to his legal advisors, that his claim, against its nominated managers, was entirely without merit.
I have no reason to believe anything other than, up until the concession was made on his behalf, by Mr Manuel, Mr Adamczak believed that he had a reasonable action against the management team members nominated by him in his application. In this context, I accept that Mr Adamczak believed that he had an arguable case, against these individuals, on the basis of the legal advice, which he had obtained.[27]
[27] See re Commonwealth: Ex parte Marks (2000) 177 ALR 491 at [27] per McHugh J
In this context, I have no reason to attribute the lateness of the concession being made by Mr Manuel to any omission attributable to Mr Adamczak personally. It is, of course, highly regrettable, that counsel for Alsco had to fly from Sydney to Adelaide for the aborted hearing. It did nothing to engender any trust between the parties concerned.
With the benefit of hindsight, it was not prudent for Mr Adamczak to have refused the offer to compromise the proceedings, which was made to him on 12 August 2016. The offer was $60,000.00 inclusive of costs. The question, which arises for the court’s determination is whether, within the parameters fixed by section 570(2)(b), it was unreasonable for Mr Adamczak to have refused the offer and whether his action has occasioned costs to Alsco.
Although the issue must be decided retrospectively, it is to be determined by reference to the situation of each of the parties concerned assessed prospectively, when the relevant offer was made, not judged by the ultimate outcome of the case itself. The danger arises from applying the wisdom of hindsight to assess the reasonableness of a refusal of an offer to settle, after all the evidence available, in a general protection application, has been considered and canvassed at final hearing. Clearly, this full panoply of evidence is not accessible by an offeree of a Calderbank letter, when such an offer is first received.
Necessarily, what may appear to a litigant to be a reasonable course of action, when the evidence in a case is highly controversial and untested, prior to final hearing, may be readily converted into something unreasonable, in the minds of both a judicial officer and indeed the litigant concerned, after events have run their course. There is, however, no doubt, that a refusal to accept an offer to settle can constitute an unreasonable act for the purposes of the section.[28]
[28] See McDonald v Parnell Laboratories (Australia) (No 2) (2007) 164 FCR 591 at 598
Issues of this type were germane to the majority decision of the Full Court in Celand v Skycity Adelaide Pty Ltd[29] a case of which I have some knowledge, as I was the trial judge concerned. It too was a general protection case, arising under the Fair Work legislation. In it, an offer to settle was made of $7,000.00. There were many issues of fact in dispute between the parties, including whether adverse action had been taken by the employer concerned and who specifically, within the employer’s organisation, had taken it and for what reason.
[29] Celand v Skycity Adelaide Pty Ltd [2017] FCAFC 222
In particular, prior to the hearing, Ms Celand’s solicitors issued subpoenae to two employees of Skycity, who had conveyed information to Ms Celand about some aspects of her work roster, which were controversial. These employees were purportedly unwilling to provide affidavits to Ms Celand’s solicitor because they were apprehensive that they might be penalised for doing so.
Ms Celand hoped that their evidence would demonstrate that relevant management team members, at Skycity, had a prejudicial view of her, which led them to penalise her illegally in the workplace. She was highly suspicious of Skycity and believed the evidence of the subpoenaed witnesses would support her view that her work situation had been altered to her personal detriment.
Ms Celand was not aware, as a consequence of this situation, precisely how each witness would testify, in their respective evidence, when she rejected Skycity’s offer to settle. In addition the offer in question was made at a stage at of the proceedings, when the offer concerned would not have provided her with any financial incentive to settle. Ultimately, I accepted that the relevant letter offering to allow Ms Celand to withdraw justified an order for costs, given she was ultimately unsuccessful in every aspect of her case against Skycity.
Logan J characterised the evidence of the subpoenaed witnesses, which ultimately I found did not assist Ms Celand’s case, in the following terms:
“Their inability to assist in the painting of that picture has a clarity in hindsight which it did not, with respect, necessarily have in prospect. And that clarity emerged after each had given oral evidence and that evidence was measured against the whole of the other evidence, not at the time the offer was made.”
Accordingly, Logan J found that, in awarding costs, I had failed to appreciate the inherent tension between what was regarded as an implicit concession that it was reasonable for Ms Celand to have commenced the proceedings, given the uncertainty surrounding these witnesses and her refusal of what was characterised as a derisory offer, given the stage at which it was made. It was determined that the order for costs made by me could not stand.
His Honour went on to indicate as follows:
“None of this is to say that an unreasonable refusal of an offer of compromise can never engage s 570(2)(b) of the FWA such that it is reasonable to make an order for costs. Trite though the observation may be, whether there exists occasion to make such an order must turn on the circumstances of a given case.”[30]
[30] See Celand v Skycity Adelaide Pty LtdIbid at [86] – [89]
In my view, significant distinctions arise between the situation confronting Ms Celand, on the one hand and Mr Adamczak, on the other, although there are also significant similarities. First the similarities. In both cases, the solicitor for the employer concerned had written a detailed letter in which he had endeavoured to summarise what were perceived to be the inherent weaknesses in the case of the relevant applicant. In each case, that summary was subsequently vindicated on judgment.
Secondly, the dissimilarities. The offer made to Mr Adamczak involved a significant sum of money, which had the potential to defray a significant component of his legal costs and perhaps leave him with some level of surplus. It cannot therefore be described as a derisory offer. In addition, Mr Adamczak’s case was not one from which significant aspects of the evidence remained uncertain to him, as was the case with Ms Celand. Alsco had indicated to him the witnesses it proposed to call and had provided Mr Adamczak with their respective affidavits.
Although, it does seem to be the case, from Mr Adamczak’s perspective, that, after Mr Starke’s firm had ceased to act for him and to some degree beforehand, he had wished to call all manner of other witnesses, the identity of these witnesses and what their evidence would be has never coalesced.
Accordingly, at the time of the offer of 12 August 2016, Mr Adamczak had had the evidence in chief of each of Alsco’s witnesses for a period of around two months. In addition, up until Mr Starke and Mr Manuel withdrew from the proceedings, forensic decisions had been ostensibly made by them as to what Mr Adamczak’s case would be and how it would be mounted. This did not include any other witnesses apart from Mr Adamczak; his wife; and his doctor.
In these circumstances, it must be the case that Mr Adamczak and those advising him were fully aware of the case, which they would have to meet. This is particularly important in respect of the issue of the alleged breach of contract. In addition, in contradistinction to Ms Celand, this was not a case where it was asserted there was evidence, from other employees, who were fearful about coming forward because of her concerns about how Alsco management would treat them.
The timing of the offer is also significant. It was some two months prior to the then date of hearing. The sum involved was also such that it was calculated to cause Mr Adamczak to pause and consider his position. In Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd (No 2)[31] the Full Court said as follows:
“… The purpose of the principles governing Calderbank offers and offers of compromise in accordance with court rules is to ensure that, when one party makes another an offer that contains a genuine element of compromise, the recipient of the offer is compelled to give real consideration to the costs and benefits of prosecuting its claim by reason of the prospect of suffering an indemnity costs order should its failure to accept the offer prove unreasonable.”
[31] Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd (No 2)[2011] FCAFC 141 at [19]
Section 570(2)(b) potentially opens up a party to the penalisation of a costs order for an unreasonable action. In Skycity Bromberg J indicated a view that, in the context of a Calderbank offer, the word unreasonable might be used synonymously with the imprudent. Such offers, when properly made, are intended to place a litigant under pressure and in such a situation, a prudent litigant must carefully weigh up the pros and cons – risks and possible benefits which may accrue – of continuing with the litigation in the face of what has been offered.
In this particular case, what was asserted by Alsco’s solicitor, in its letter of 12 August 2016, turned out to be prescient. It was accepted, by the court, that the ultimate decision maker concerned was Mr Hickin, who had had scant previous involvement with Mr Adamczak. The reason proffered, at that stage, and supported by the affidavit material provided, was that the reason for Mr Adamczak’s termination was his contravention of the firm’s electronic mail policy. This conclusion too was reached by the court.
Most significantly, in the form of Mr Taras’ evidence, Mr Adamczak was provided with his calculations regarding the amount of the bonuses due to him. Apart from asserting that he disagreed with these calculations, up until and during the trial, Mr Adamczak has not provided any alternative calculations or been able to propose any alternative mode of calculation. In my view, to persist with his claim, in the face of an offer of this quantum, demonstrates a significant level of imprudence on his part.
In my view, the offer made to Mr Adamczak required his careful and commercial consideration, particularly regarding the risks identified for him of proceeding with the case in the manner which was then proposed by his legal advisers. In all the circumstances of the case as outlined in August of 2016, by Alsco, it cannot be said that the ultimate outcome was one that could not have been reasonably anticipated.
Mr Adamczak did not immediately respond to the offer as he was in the process of changing solicitors. This precipitated a further letter, from Alsco, in which the offer was increased to the sum of $80,000.00. It was predicated on the basis that it would be open for a period of seven days, during which Alsco’s counsel would hold their preparation for the trial in abeyance. The clear import of the letter was that the costs of preparation for the trial would be significant, as both senior and junior counsel were involved.
Mr Adamczak’s forensic response to the letter was to indicate that his counsel was of the view, that he (Mr Adamczak) had a good case. Why this was so was not specified. Rather he expressed a desire to receive a greater settlement sum than that offered. A strategy maintained until shortly prior to Mr Starke’s withdrawal from the case and the date scheduled for its final hearing.
In addition, Mr Adamczak’s proposal to settle the matter included a veiled threat that he would reveal information regarding Alsco’s business operations into the public arena. What was the nature of this information was not the subject of elaboration. More significantly, what was its relationship to the cause of action pleaded by him under the FWA was entirely unspecified. In my view, at best, the letter represented an inept attempt to tickle up the offer or, at worst, an attempt at extortion.
In my view, the response does not represent an attempt to give real commercial consideration to the offer made, when compared to the risks identified in Alsco’s letter. In addition, when asked by Alsco’s solicitor to provide some analysis of how the sum sought was made up, Mr Adamczak’s solicitor provided a list of brief unsubstantiated claims, under various headings, which added up to the sum sought.
Two things arise. Firstly, Calderbank letters are a legitimate tool of civil litigation and have an important public interest purpose, including in public interest areas of litigation, such as the Fair Work jurisdiction. As such, a prudent litigant is required to give them careful consideration and courts, such as this one, must be careful not to water down their effectiveness inadvertently.
Secondly, in this context, it is also not the actions of a reasonable litigant to make allegations without a firm basis on which to make them. Such actions have the potential to aggravate relations between litigants and so retard settlement negotiations, which is not in the public interest.
Notwithstanding its concern that Mr Adamczak’s motives for bringing the proceedings were not entirely without rancour, Alsco’s response of 26 July 2017 was measured. It reduced the offer to $70,000.00 on the basis of costs incurred. In this context, it also explicitly warned Mr Adamczak of its intention to rely on the provisions of section 570(2)(b) of the FWA, as it has ultimately done.
Again, Mr Adamczak’s response was a suggestion to split the difference, in the context of the bland assertion that all litigation carries with it a possible risk as one does not know how witnesses on both sides will present on the day. Although he was not required to rebut specifically the matters raised by Alsco, Mr Adamczak was required to give them careful consideration. There is, in my view, no evidence to indicate that he did so with any sense of prudence or circumspection.
The authorities make it plain that the Fair Work jurisdiction is primarily a no costs jurisdiction. In Clarke the Full Court indicated that the discretion, arising under section 570(2), was to be exercised carefully and not invoked merely because a party had not conducted its litigation efficiently or made an inevitable concession late. Bromberg J, in Saxena, indicated the discretion was a limited one to be exercised very carefully and, as such, was not one to be engaged in each and every case involving some transgression by a party.
I bear these considerations in mind, particularly the risk that individuals, including unrepresented ones, may be deterred from bringing proceedings to protect their workplace rights, if there is a perception that the fair work area is only nominally a no costs jurisdiction, as the court will penalise, through an order for costs, each and every transgression committed by a litigant, even in the case of those who are unwary or ill-informed about the application of the jurisdiction to their situation.
Mr Adamczak was represented throughout the process of negotiation which led to the withdrawal of his action against Mr Lemon, Mr Taras, Ms Whitelaw and Mr Carlile and also in the period during which the offers to settle were exchanged. Alsco indicated to him why it did not consider his claim had merit and provided details as to why that was so, which were ultimately accepted at trial. Significantly, Alsco informed Mr Adamczak that its various offers were being made for commercial reasons only and put him on notice that it would seek costs.
Mr Adamczak made no concessions in respect of those matters. In my view, the offers themselves were closely calibrated and considered. They cannot be described as derisory. Their timing was also strategically informed. The offers were constructed to give Mr Adamczak and those advising him cause to pause and consider. As such, Alsco attempted to inform Mr Adamczak in respect of what it considered were the irredeemable and fatal defects in his case. Alsco’s view of the case was subsequently entirely vindicated.
The mechanism of the Calderbank offer is a long standing one. It is informed by matters of public policy, which encourage settlement of litigation consensually without recourse to adjudication, if at all possible. In those circumstances, in my view, the court must also be careful to avoid reducing such offers to mere shibboleths, including in the Fair Work jurisdiction.
I appreciate, however, it does not follow, that merely because a litigant fails to better an offer, made to him or her prior to trial, costs must ensue. It is a question of determining what was reasonable, by reference to all the circumstances prevailing, at the time the offer was made and rejected. I also appreciate that there are dangers in assessing such offers with the benefit of hindsight.
In the correspondence of his solicitor prior to trial, Mr Adamczak was silent about how he saw the strengths of his case. His solicitor withdrew days before the case in circumstances which remain controversial. Mr Adamczak’s response to Alsco’s systematic critique of his case was to respond with threat and innuendo. These were not the actions of a prudent person faced with a not insignificant offer of settlement. There can be no doubt that Alsco has been put to significant expense as a consequence of Mr Adamczak’s refusal of its various offers.
In these circumstances, I am satisfied that Mr Adamczak’s rejection of the offers in question does amount to an unreasonable act or omission on his part. To conclude otherwise would reduce the import of the Calderbank offer, made by Alsco, to nought and justify Mr Adamczak’s unreasonable and imprudent behaviour.
In all the circumstances, I am persuaded that exceptional circumstances exist, which justify the making of an award of costs against Mr Adamczak pursuant to the provisions of section 570(2)(b) of the Act.
Calculation of costs
A further difficult aspect of the case is calculating the quantum of costs which should be awarded. The case occupied two complete hearing days with a further day reserved for submissions. Alsco, as is its entitlement, retained both senior and junior counsel for the matter. Counsels’ fees are the major component of its costs sought on an indemnity basis.
The court retains its discretion regarding the calculation of costs. The distinction between costs on an indemnity and those as calculated by reference to the court’s scale is significant. I propose to adopt the schedule and impose costs, as calculated by Mr Ingui, in the sum of $36,276.17, which I will round down to $35,000.00.
For all these reasons, the orders of the court will be as set out at the commencement of these reasons for judgment.
I certify that the preceding one hundred and forty two (142) paragraphs are a true copy of the reasons for judgment of Judge Brown
Date: 9 January 2019
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