Arya v Kone Elevators Pty Ltd and Anor (No.2)
[2020] FCCA 3028
•11 November 2020
FEDERAL CIRCUIT COURT OF AUSTRALIA
| ARYA v KONE ELEVATORS PTY LTD & ANOR (No.2) | [2020] FCCA 3028 |
| Catchwords: COSTS – Respondents seeks costs on party/party basis and on an indemnity basis – applicant opposes orders as to costs – multiple Calderbank offer made to the applicant – Calderbank offers refused – unreasonable counter-offers made by applicant – repudiation of Calderbank offers unreasonable – costs awarded in part on a party/party basis and in part on an indemnity basis – respondent to provide schedule of costs of how costs were calculated. |
| Legislation: Australian Human Rights Commission Act 1986 (Cth), s.46PSA. Fair Work Act 2009 (Cth), s.570. Federal Circuit Court of Australia Act 1999 (Cth), s.79. Federal Circuit Court Rules 2001 (Cth), r. 21.02. |
| Cases cited: Abdi v Equitable Financial Solutions Pty Ltd & Anor [2020] FCCA 252 Arya v KONE Elevators Pty Ltd & Anor [2020] FCCA 2693 Bashour v Australia and New Zealand Banking Group Limited [2017] FCA 183 Beach Petroleum NL v Johnson (No. 2) (1995) 57 FCR 119 Calderbank v Calderbank [1975] 3 All ER 333 Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No. 2) (2005) 13 VR 43 Idoport Pty Ltd v the National Australia Bank Ltd [2007] NSWSC 23 Thompson & Finch & Ors [2020] FamCAFC 230 |
| Applicant: | SUDHA ARYA |
| First Respondent: | KONE ELEVATORS PTY LTD |
| Second Respondent: | KATHLYN DANG |
| File Number: | MLG 3897 of 2018 |
| Judgment of: | Judge McNab |
| Hearing date: | On the Papers |
| Date of Last Submission: | 26 October 2020 |
| Delivered at: | Melbourne |
| Delivered on: | 11 November 2020 |
REPRESENTATION
| Counsel for the Applicant: | Ms S Aufgang |
| Counsel for the Respondents: | J D'Abaco |
| Solicitors for the Respondents: | Bartier Perry Pty Ltd |
ORDERS
The Applicant pay the Respondents’ costs up to and including 31 May 2019 on a party/party basis.
Thereafter, the Applicant pay the Respondents’ costs, including the costs of the Respondent’s application for costs, on an indemnity basis.
The Respondents prepare, file and serve a schedule of costs setting out the method by which the Respondents’ costs were calculated within 14 days of the date of these orders.
Pursuant to Rule 21.02 of the Federal Circuit Court Rules 2001 (Cth), the proceeding be referred to a Registrar or Senior Registrar of the Federal Circuit Court of Australia for the determination of fixing a lump sum of costs.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLG 3897 of 2018
| SUDHA ARYA |
Applicant
And
| KONE ELEVATORS PTY LTD |
First Respondent
| KATHLYN DANG |
Second Respondent
REASONS FOR JUDGMENT
On 29 September 2020 the Court entered judgment under the media neutral citation ‘Arya v KONE Elevators Pty Ltd & Anor [2020] FCCA 2693’ and made orders in favour of the Respondents by dismissing the Applicant’s application filed on 20 December 2018. In doing so, the Court invited parties to make an application for costs as follows:
“(2)By 4.00pm on 14 October 2020 the Respondents file and serve submissions, limited to 4 A4 pages, and a supporting affidavit in support of an application for costs.
(3)By 4.00pm on 28 October 2020 the Applicant file and serve any submissions, limited to 4 A4 pages, and a supporting affidavit in response to the Respondents’ application for costs.
(4)The question of costs be determined on the papers.”
On 14 October 2020, the Respondents filed a joint application for costs in the form of submissions. The Applicant filed submissions in reply to the Respondents’ application on 28 October 2020.
Judgment on the question of costs was then reserved to be determined on the papers.
Court’s Jurisdiction as to Costs
Subsection 79(2) and subsection 79(3) of Federal Circuit Court of Australia Act 1999 (Cth) (“the Federal Circuit Court Act”) provides that:
“…
(2) The Federal Circuit Court of Australia or a Judge has jurisdiction to award costs in all proceedings before the Federal Circuit Court of Australia (including proceedings dismissed for want of jurisdiction) other than proceedings in respect of which any other Act provides that costs must not be awarded.
(3) Except as provided by the Rules of Court or any other Act, the award of costs is in the discretion of the Federal Circuit Court of Australia or Judge.”
Rule 21.02 of the Federal Circuit Court Rules 2001 (Cth) (“the Federal Circuit Court Rules”) provide as follows:
(1) An application for an order for costs may be made:
(a) at any stage in a proceeding; or
(b) within 28 days after a final decree or order is made; or
(c) within any further time allowed by the Court.
(2) In making an order for costs in a proceeding, the Court may:
(a) set the amount of the costs; or
(b) set the method by which the costs are to be calculated; or
(c) refer the costs for taxation under Part 40 of the Federal Court Rules or under Chapter 19 of the Family Law Rules; or
(d) set a time for payment of the costs, which may be before the proceeding is concluded.
Further, s46PSA of the Australian Human Rights Commission Act 1986 (Cth) (“the AHRC Act”), provides that:
If:
(a) proceedings have been instituted under section 46PO against a respondent to a terminated complaint; and
(b) an applicant or respondent has made or makes an offer to settle the matter the subject of the complaint; and
(c) the offer was or is rejected;
The court or a judge of the court in deciding whether to award costs in the proceedings, may have regard to the offer.
…
Note: 2 The Federal circuit Court, or a judge of that court, may award costs in proceedings under section 46PO – see section 79 of the Federal Circuit Court of Australia Act 1999.”
The Respondent’s and Applicant’s Submissions
The Respondents seek orders that:
a)the Applicant pay the Respondents’ costs, incurred due to the application filed on 20 December 2019, up to and including 31 May 2019 on a party/party basis; and
b)thereafter, the Applicant pay the Respondents’ costs incurred due to the application, including the costs of the Respondent’s application for costs, on an indemnity basis.
The Respondents rely upon an affidavit sworn by Mr James Mattson on 14 October 2020 and an outline of submissions filed on the same day. The Applicant relies upon submissions in reply filed on 28 October 2020.
The Respondent’s submit at [8] of their submissions that a Court may order costs on an indemnity basis in circumstances where a party makes a Calderbank offer and where the Court determines that a rejection of such an offer is unreasonable: see Calderbank v Calderbank [1975] 3 All ER 333 (“Calderbank”); Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority(No. 2) (2005) 13 VR 435 (“Hazeldene’s Chicken Farm Pty Ltd”).
Mr Mattson’s affidavit refers to eight written offers of settlement made to the Applicant from 18 October 2018 to 20 December 2019 and one oral offer made on 29 November 2019: see Mr Mattson’s affidavit at [4], [6] – [7], [9] – [24]. In relation to those offers, the Respondents submit at [11] that the Court should be minded to make orders as to costs on an indemnity basis, due to “the fact that the respondents made numerous Calderbank offers of settlement to the applicant during the court of the proceeding”. The Respondent’s submissions at [11(a)] – [11(c)] refer in particular to the following offers:
“(a) On 18 February 2019, at a very early juncture in the proceeding after the filing of their Defence, the respondents made a Calderbank offer of $5,000.00 (about a month’s pay) to the applicant. The offer set out in some detail the weaknesses in the applicant’s case and was for a realistic amount at that juncture;
(b) On 22 May 2019, the respondents made a Calderbank offer of $31,250.00 to the applicant. This was a substantial sum, representing 6 months of the applicant’s salary. Further, as the Calderbank offer stated, it was made after a directions hearing on 24 April 2019 at which the Court noted that it would carefully consider any application for costs by the respondents if the applicant rejected a Calderbank offer and achieved a lesser result at trial;
(c) After this offer, the applicant made outlandish and excessive counter offers of settlement for greater amounts, commencing at $450,000.00. Regardless, the respondents endeavoured to resolve the matter, repeating their Calderbank offers of $31,250.00 on 4 June 2019, 12 August 2019 and 5 November 2019, culminating in a Calderbank offer of $60,000.00 on 9 December 2020. By 5 November 2019, the applicant had received the affidavits of the respondents’ evidence in chief and could have no doubt of the respondents’ case at trial. Further, the respondents note that in their letter of 5 November 2019, they quantified the amount of their costs incurred to date, noted that costs would increase if the matter proceeded to hearing, and foreshadowed an application for indemnity costs in the event the applicant achieved a lesser result at trial.”
(References omitted)
The Respondents’ submissions also note that the Applicant declined each of those offers and made various counter-offers. In relation to those counter offers, the Respondents submit at [10(d)] that:
“(d) The applicant’s unreasonable conduct was particularly evident in her responses to the respondents’ settlement offers. In 2019, her first settlement offer made on 31 May 2019 was for the amount of $450,000.00, with no explanation as to how this figure was arrived at. Further offers made by the applicant sought higher amounts, revealing an intransigent and obdurate attitude on her part. In circumstances where the applicant was only employed with the first respondent for a duration of approximately 9 months (until her resignation) and her annual salary was $62,500.00, the quantum of the offers were excessive in the extreme.”
(Citations omitted)
The Applicant opposes the application for cost on the basis that:
a)s570 of the Fair Work Act 2009 (Cth) (“the Fair Work Act”) is enlivened and therefore there should no order as to costs pursuant to s79 of the Federal Circuit Court Act; or alternatively
b)the Court should exercise its discretion pursuant to s79(3) of the Circuit Court Act to not award costs effectively on the basis that no offer from the Respondents was reasonable.
The Applicant submits at [2] of their submissions that:
“Ms Arya’s application was made under section 46PO of the Australian Human Rights Commission Act 1986 (“AHRC Act”) and referred to sections 7, 8, 14 and 105-107 of the Sex Discrimination Act 1984 (“SD Act”) and sections 340 (1)(a)(iii), 341(1)(a) and (b), 342(1) (b) to (d), 351 and 361 of the Fair Work Act 2009 (“FW Act”). It is submitted that the application therefore enlivens section 570 of the FW Act with respect to costs. In that case section 79 of the FCCA Act would not apply.”
(Citations omitted)
In the alternative, the Applicant effectively submits that the Court should not make cost orders on the basis that :
a)she has not worked in two years and continues to be unable to work; and
b)it was not unreasonable to reject the offers of settlement.
The Applicant submits at [6] – [7] that she has not been employed since 2 August 2018, and that there was medical evidence before the Court that “she is not currently employable and would not be for some unknown period of time”.
The Applicant further submits that it was not unreasonable to reject all of the Calderbank offers that were received from the Respondents. The Applicant makes various submissions effectively characterising the offers as:
a)unrealistically low offers in the context of the statement of claim;
b)left open for an insufficient amount of time;
c)made at a stage of the proceeding that did not make unreasonable for the offer to be rejected; and/or
d)not a Calderbank offer, or an offer of compromise.
The Applicant’s submissions at [11] – [18] refer to the Respondent’s offers as follows:
11. The offer on 18 October 2018, made prior to the original application to the Court on 20 December 2018, was unrealistically low at $5,208.33 and was only open for 7 days. It was not a Calderbank offer. At that time, Ms Arya thought her chances of success were quite good.
12. The offer on 18 February 2019, which was left open for 10 days, referred to Ms Arya’s application as being vexatious. There has been no finding in this regard. Further, the offer of $5,000.00 was unrealistically low as no evidence had been provided by the Respondents at that stage. […]
13. The offers on 22 May 2019, 4 June 2019 and 12 August 2019 of $31,250.00, which were left open for 9, 8 and 14 days respectively, were also made prior to the Respondents’ evidence being made known to Ms Arya. Hence it was not unreasonable for her to reject them. The offer on 12 August 2019 noted that the Respondents’ costs to date were in excess of $10,000.00 (ex GST).
14. Ms Arya had no legal representation from 6 June 2019, although she was able to obtain legal representation in or about early December 2019.
15. The Respondents’ evidence was provided via three affidavits on 16 September 2019.
16. The offer of $31,250.00 was repeated on 5 November 2019. It was left open for 8 days, which it is submitted was too short a period in the circumstances. Ms Arya was still of the view that her chances of success were quite good but was still without legal representation. It was therefore not unreasonable for her to reject the offer. The offer noted that costs to date were in excess of $49,000.00 (ex GST).
17. At 5:45 pm on 9 December 2019, an offer of $60,000.00 was made but it was only left open until 3:00 pm on 10 December 2019, ie. less than 24 hours. The offer noted that costs to date were in excess of $56,000.00 (ex GST). This offer may well have been a final attempt to settle the matter prior to the commencement of the hearing on 18 December 2019, but it is submitted that there was insufficient time for it to be considered properly.
18. At 5:48 on Friday, 20 December 2019, an offer that the parties walk away from the proceedings with no order as to costs was made. The offer was open until 6 January 2020. It was not a Calderbank offer, nor even an offer of compromise. By this stage, Ms Arya had gone through the trauma of giving her oral evidence and had already rejected the offer verbally via her counsel on 19 December 2019. It is submitted that it was not unreasonable of her to reject this offer.”
The Applicant also opposes orders as to costs on a party/party basis or indemnity basis, due to a failure on behalf of the Respondents to provide a breakdown of the costs claimed as well as that the costs claimed appear to be excessive. The Applicant submits at [20] – [24] that:
“20. Up until judgment the Respondents are claiming costs as follows: solicitors’ fees of $72,650.28, counsel’s fees of $57,611.37 and disbursements of $5,745.00 (for airfares and accommodation), giving a total of $136,008.65 (all ex GST). No breakdown of these costs has been provided.
21. It is not known how much relates to party-party costs, nor how much to indemnity costs. It is submitted that the claim by the Respondents that party-party costs should be paid to 31 May 2019 and indemnity costs thereafter is unwarranted for the reasons referred to above.
22. It is not known whether the solicitors’ fees relate to one solicitor or two (or more). It is not known whether the costs claimed are excessive or reasonable or whether they have been calculated according to scale. No receipts or figures have been provided for the airfares and accommodation costs.
23. One would have expected that a breakdown of the costs claim would have been provided as part of the Respondents’ costs submissions or Mr Mattson’s affidavit but it was not.
24. On 9 December 2019, it was claimed that costs were in excess of $56,000. However, the costs had escalated to around $136,000 by the time of judgment, an increase of $80,000. It is submitted that, on its face, this appears excessive.”
Principles in relation Calderbank Offer
In relation to the Calderbank offers, the Court will ordinarily have regard to at least the following matters:
a)the stage of the proceeding at which the offer was received;
b)the time allowed to the offeree to consider the offer;
c)the extent of the compromise offered;
d)the offeree’s prospects of success, assessed as at the date of the offer;
e)the clarity with which the terms of the offer were expressed; and
f)whether the offer foreshadowed an application for indemnity costs in the event of the offeree’s rejecting it: see Hazeldene’s Chicken Farm Pty Ltd at [25].
Further, as was stated by Tracey J in Bashour v Australia and New Zealand Banking Group Limited [2017] FCA 183 at [147]:
“The costs consequences of a Calderbank offer lie in the discretion of the court. It will be exercised having regard to the particular circumstances of the case.”
Consideration
In relation to the Applicant’s claim that no order as to costs should be made pursuant to s570 of the Fair Work Act, the Applicant abandoned the elements of her claim made pursuant to the Fair Work Act at the hearing and had led no evidence in relation to the claim prior to hearing. On that basis, s570 of the Fair Work Act is not enlivened.
Further, the Court is of the view that the failure on the part of the Applicant to accept the offers of settlement was an unreasonable act and the Respondents are entitled to costs.
The Court is mindful that the consequences of this finding for the Applicant are significant, however, the Respondents have acted reasonably in making offers throughout the Course of the proceeding. To fail to give effect to the cost consequences of the offers that were made would tend to act as a disincentive to parties making reasonable offers to resolve contested litigation.
The Applicant was making a very substantial claim of $750,000 against the Respondents, which they were required to respond to. The Applicant was aware of the risk of exposure to costs and the comment made by the Court in relation to the Court taking into account Calderbank offers when the matter was before the Court on 24 April 2019 was directed at both parties.
I do not accept the Applicant’s submissions that the Applicant was given insufficient time to consider offers of settlement. Further, the evidence establishes that when an offer of $31,250 was made on 22 May 2019, the Applicant made a counter offer of $450,000 without explanation of how that sum was calculated. The repetition of the offer of settlement, and subsequent increase of the offer to $60,000 on 9 December 2019 was met with higher unexplained counter offers. The effect of the Respondent’s offers were clearly explained to the Applicant, in particular that indemnity costs would be sought if the offers were not accepted.
For these reasons, the Court makes the orders sought out by the Respondents.
The Court has a discretion to award a lump sum amount for costs without formal assessment or taxation: see Beach Petroleum NL v Johnson (No. 2) (1995) 57 FCR 119 at [120]. In fixing that sum, although the Court must act judicially in awarding a lump sum amount, the Court is not required to do so in any "scientific or formulaic manner": see Idoport Pty Ltd v the National Australia Bank Ltd [2007] NSWSC 23 at [10]; see also Thompson & Finch & Ors [2020] FamCAFC 230 at [52] – [53].
In Abdi v Equitable Financial Solutions Pty Ltd & Anor [2020] FCCA 2521, Judge Kelly stated at [56] – [57] that:
“56. Part 21 of the Rules, which concerns the issue Costs provides, in Div 21.02, that an application to costs may be made at any stage in a proceeding and that in making an order for costs, the Court may set the amount of those costs, set the method by which they are to be calculated, refer the issue for taxation or set a time for their payment: r 21.02(1)-(2). Where the Court determines that the power to order costs is engaged and that it should exercise its discretion to do so, it is the invariable practice of the Court to fix costs: Alrjoob v Minister for Home Affairs [2018] FCA 1144 [20] (Collier J). There is no requirement, in either the Act or the Rules, that as a condition to the exercise of its discretion to award costs there should first be production of an itemised bill: AOJ15 v Minister for Immigration and Border Protection [2017] FCA 675, [44] (Burley J).
57. In fixing a lump sum for costs, the Court is to approach the task as one of estimation and assessment and not of arithmetic calculation or precision and is of a more broad brush approach than that which is to be taken upon taxation. Accepting those principles to be settled, the approach must be logical, fair and reasonable: Zaghoul v Jewellery & Gift Buying Service Pty Ltd [2020] FCA 1045, [172] (Banks-Smith J); see also BEL17 v Minister for Immigration and Border Protection [2020] FCA 1045, [26].”
At [29] of their submissions, the Respondents set out their costs incurred since January 2019, up to and including judgment (but not including the costs application) as follows:
Item
Cost (excl GST)
Legal fees of Bartier Perry
$72,650.28
Counsel Fees
$57,611.37
Disbursements (includes airfares and accommodation costs)
$5,745.00
Total
$136,006.65
The information presented by the Respondents in their submissions as to costs incurred does not distinguish between costs incurred prior to 31 May 2019 and following that date.
A schedule of costs should be prepared which makes clear the method by which the Respondents’ costs are calculated and the question of fixing a lump sum of costs should be referred to a Registrar of the Court.
I certify that the preceding thirty-one (31) paragraphs are a true copy of the reasons for judgment of Judge McNab
Associate:
Date: 11 November 2020
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