Bartlett v Australia & New Zealand Banking Group Ltd (No 2)

[2016] NSWCA 142

Court of Appeal

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:	Bartlett v Australia & New Zealand Banking Group Ltd (No 2) [2016] NSWCA 142
Hearing dates:	On the papers
Decision date:	22 June 2016
Before:	Macfarlan JA; Meagher JA; Simpson JA
Decision:	(1)   Set aside the costs orders made by Adamson J on 1 December 2014. (2)   Judgment for the Appellant in the sum of $135,925, that judgment to take effect from 7 March 2016.
Catchwords:	COSTS – offer of compromise – where offer to settle for amount also required releases and non-disparagement promises – whether Calderbank offer – whether reasonable to reject offer PRACTICE AND PROCEDURE – pre-judgment interest – whether offer of compromise ‘appropriate settlement sum’ for purpose of Civil Procedure Act 2005 (NSW), s 100(5) – whether special circumstances under s 100(4) to warrant making of order for pre-judgment interest for period after offer
Legislation Cited:	Civil Procedure Act 2005 (NSW), s 100 Uniform Civil Procedure Rules 2005 (NSW), rr 20.26, 36.15, 36.16
Cases Cited:	AT v Commissioner of Police (NSW) (No 2) [2010] NSWCA 337 Calderbank v Calderbank [1975] 3 All ER 333 County Securities Pty Ltd v Challenger Group Holdings Pty Ltd (No 2) [2008] NSWCA 273 Deputy Commissioner of Taxation v Meredith (No 2) [2008] NSWCA 133; 75 NSWLR 462 Habib v Nationwide News Pty Ltd (No 2) [2010] NSWCA 291 Hancock v Arnold; Dodd v Arnold (No 2) [2009] NSWCA 19 Herning v GWS Machinery Pty Ltd (No 2) [2005] NSWCA 375 Najdovski v Crnojlovic (No 2) [2008] NSWCA 281; 51 MVR 334 Roads and Traffic Authority of NSW v Palmer (No 2) [2005] NSWCA 140 Roads and Traffic Authority of NSW v Refrigerated Roadways Pty Ltd (No 2) [2009] NSWCA 336 Short v Crawley (No 45) [2013] NSWSC 1541 SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 The Anderson Group Pty Ltd v Tynan Motors Pty Ltd (No 2) [2006] NSWCA 120; 67 NSWLR 706
Category:	Costs
Parties:	Paul William Bartlett (Appellant) Australia & New Zealand Banking Group Ltd (Respondent)
Representation:	Counsel: A J Sullivan QC with T Brennan (Appellant) C J Murdoch (Respondent)   Solicitors: A R Conolly & Company (Appellant) Ashurst Australia (Respondent)
File Number(s):	CA 2014/370134
Decision under appeal	Court or tribunal: Supreme Court Jurisdiction: Common Law Division Citation: Bartlett v Australia and New Zealand Banking Group Limited [2014] NSWSC 1662 Date of Decision: 24 November 2014 Before: Adamson J File Number(s): SC 2012/351555

Judgment

1. THE COURT: On 7 March 2016, the Court allowed this appeal: Bartlett v Australia & New Zealand Banking Group Ltd [2016] NSWCA 30. It arose in the following circumstances.

2. The appellant, Mr Bartlett, is a former employee of Australian and New Zealand Banking Group Ltd (the Bank). On 15 August 2012, the Bank summarily dismissed him on the basis that he had engaged in serious misconduct. That misconduct was said to involve the doctoring of a confidential internal email relating to the Bank's lending policy, and the sending of that altered email to a journalist.

3. The appellant commenced proceedings in the Supreme Court for wrongful dismissal. The primary judge (Adamson J) found that the appellant had engaged in the misconduct alleged and that the summary dismissal was justified. The appellant challenged her Honour's findings as to liability and damages.

4. This Court held that the Bank had not established that he engaged in the alleged misconduct and that the investigation undertaken by the Bank was deficient. It also found that, if the Bank had not wrongfully dismissed the appellant in the manner in which it did, it nonetheless would have exercised its contractual right to terminate his employment with four months' pay in lieu of notice.

5. The Court made the following orders on 7 March 2016:

(1) Allow the appeal.

(2) Set aside the orders made by Adamson J on 24 November 2014.

(3) Note that the appellant will be entitled to a judgment in the sum of $110,000 together with interest under s 100 of the Civil Procedure Act 2005 (NSW) from 15 August 2012 to the date of judgment.

(4) Direct the parties to lodge with the Court within 14 days of the date of this judgment a form of consent order providing for the entry of a judgment inclusive of interest in accordance with (3) above.

(5) Order the respondent to pay the appellant’s costs of the proceedings at first instance.

(6) Order the respondent to pay 50% of the appellant’s costs of his appeal.

6. On 17 March 2016, the parties advised they could not reach agreement on a consent order. On 30 March 2016, they proposed directions by consent allowing for written submissions on the issues of interest and costs. Those directions were made on 1 April 2016 and the Court indicated that the appropriate form of order would be determined on the papers.

7. The dispute between the parties turns on the effect of an email sent by the Bank’s solicitors on 3 May 2013. (The Statement of Claim had been filed on 12 November 2012 and the hearing before the primary judge commenced on 10 November 2014.) By that email, the Bank offered, without prejudice, to “settle the Proceedings” on particular terms (the Offer). No response was received.

8. The terms upon which that Offer was made included:

1. ANZ will pay Mr Bartlett the amount of $110,000 (gross) (the “Payment”), being four months of Mr Bartlett’s Total Employment Compensation (“TEC”) as at 15 August 2012.

2. ANZ will pay Mr Bartlett the reasonable legal costs incurred by Mr Bartlett as a result of the termination of his employment with ANZ and the Proceedings, up to and including the date of this offer (the “Costs Payment”).

…

5. Mr Bartlett acknowledges that the Payment and Costs Payment fully satisfy any rights that Mr Bartlett has against ANZ or any of its related bodies corporate, or any of their officers, employees or agents, arising out of the Proceedings, his contract of employment with ANZ, the employment relationship or the termination of his employment.

6. In consideration of the Payment and the Costs Payment, Mr Bartlett:

(a) releases ANZ, its related bodies corporate, and their officers, employees and agents from any claims arising out of the Proceedings, his contract of employment with ANZ, the employment relationship or the termination of the employment;

(b) promises not to make, or assist or procure any other person to make, any further such claim;

(c) acknowledges that the settlement may be pleaded by ANZ, its related bodies corporate, and their officers, employees or agents, as a bar in relation to any such claim; and

(d) promises to do all things necessary to bring the Proceedings to an end, including by seeking orders by consent in terms that the Proceedings be dismissed with no order as to costs.

7. To the extent permitted by law, ANZ releases Mr Bartlett from all claims and liability in connection with matters which are within the knowledge of its senior management arising directly or indirectly out of the Proceedings, Mr Bartlett’s contract of employment with ANZ, the employment relationship or the termination of the employment.

8. Mr Bartlett will not make, cause to be made or be associated with, any statement, comment or conduct which disparages ANZ or any of its related bodies corporate or any of its current and former officers, employees or agents.

9. ANZ will use reasonable endeavours to ensure that its officers and employees will not make, cause to be made or be associated with any statement, comment or conduct which disparages Mr Bartlett.

…

This Offer is open until 5pm on 3 June 2013.

Our client reserves the right to rely on this letter on the question of costs should Mr Bartlett pursue this matter to judgment, and, in the event that our client’s offer is not accepted, our client will rely on this letter to submit that by reason of that non-acceptance our client is entitled to the benefit of an indemnity costs order pursuant to the principles established in Calderbank v Calderbank as developed in subsequent cases.

9. The Bank submits that in relation to interest and costs, two things should follow from the making of that Offer and its non-acceptance. First, it is submitted that the Offer, as an “appropriate settlement sum”, precludes an award of interest on the judgment amount under s 100 of the Civil Procedure Act 2005 (NSW) (the CPA) for any period following the making of the Offer. Secondly, the Bank contends that the appellant should be ordered to pay its costs of the proceedings at first instance on an indemnity basis from the close of the Offer in accordance with the principles in Calderbank v Calderbank [1975] 3 All ER 333. In this respect, the proposed orders sought by the Bank are:

3. Order 3 of the Orders made by this Court on 7 March 2016 be varied to provide as follows:

Judgment be entered for the appellant in the sum of $110,000 together with interest under s 100 of the Civil Procedure Act 2005 (NSW) from 15 August 2012 to 2 May 2013 in the sum of $5,705.45;

4. Order 5 of the Orders made by this Court on 7 March 2016 be varied as follows:

a. Order the respondent to pay the appellant’s costs of the proceedings at first instance on the ordinary basis to 3 June 2013;

b. Order the appellant to pay the respondent’s costs of the proceedings at first instance from 4 June 2013 on an indemnity basis.

10. The Bank does not seek any variation in respect of Order 6 made on 7 March 2016 whereby it was ordered to pay 50% of the appellant’s costs of the appeal.

11. As the terms of Order 3 in [5] above show, no final order as to interest was entered on 7 March 2016. As such, no ‘variation’ of an order is required to deal with the question of interest, as is contemplated by the Bank’s proposed order 3. However, proposed order 4 would require a variation of Order 5 as entered. That raises a separate question as to the source of this Court’s power to make that order. The issue of the costs of the proceedings at first instance was not one left to the parties’ agreement by Order 4. It has been more than 14 days since the Court ordered that the Bank pay the appellant’s costs of the proceedings at first instance. No notice of motion has been filed to vary that order. In those circumstances, this Court may not have power to vary Order 5. It will be necessary to return to this question.

Issue as to interest from 3 May 2013

12. The power to award pre-judgment interest is governed by s 100 of the CPA, which provides:

(1)  In proceedings for the recovery of money (including any debt or damages or the value of any goods), the court may include interest in the amount for which judgment is given, the interest to be calculated at such rate as the court thinks fit:

(a)  on the whole or any part of the money, and

(b)  for the whole or any part of the period from the time the cause of action arose until the time the judgment takes effect.

…

(4)  In any proceedings for damages, the court may not order the payment of interest under this section in respect of the period from when an appropriate settlement sum was offered (or first offered) by the defendant unless the special circumstances of the case warrant the making of such an order.

(5)  For the purposes of subsection (4), appropriate settlement sum means a sum offered in settlement of proceedings in which the amount for which judgment is given (including interest accrued up to and including the date of the offer) does not exceed the sum offered by more than 10 per cent.

13. In Najdovski v Crnojlovic (No 2) [2008] NSWCA 281; 51 MVR 334, Basten JA (with whom Allsop P and Windeyer J agreed) described s 100(4) as a provision which, “although subject to an exception based on a matter of evaluation and impression, depends upon a precisely identifiable criterion”: [7].

14. The Bank submits that the total amount for which judgment is proposed to be given, inclusive of $5,705 as interest calculated to the date of the Offer, is $115,705. That amount does not exceed the $110,000 offered by the Bank in May 2013 by more than 10%. Therefore, s 100(5) is satisfied. The Bank also says there are no “special circumstances” that would exclude the operation of s 100(4).

15. The appellant accepts that the amount to which he is entitled following this Court’s judgment does not exceed the amount offered by more than 10%. However, he contends that the words “a sum offered in settlement of proceedings” are limiting and that the collateral obligations required by the Offer in this case have the consequence that what was offered in settlement of the proceedings was not only the sum proffered, but also releases and promises, including that as to non-disparagement. That additional non-monetary consideration sought by the Bank for settlement of the appellant’s claim could not have been given or required if the matter proceeded to judgment.

16. This argument raises an issue as to the interpretation of s 100(5), which on the face of it imposes a criterion for determining whether the settlement is ‘appropriate’ that depends on a straight comparison of the sum given in judgment and the sum offered in settlement. In doing so, it appears to assume that there are no collateral benefits sought in return for the settlement which might otherwise be taken into account in assessing whether the settlement sum is ‘appropriate’. It is not necessary to resolve this question - particularly where we do not have the benefit of oral argument or submissions directed to it - because we are satisfied that there are special circumstances in this case which warrant the making of an order for interest up to judgment.

17. Those circumstances are that the appellant’s pursuit of the proceedings, despite the offer of an appropriate settlement sum, allowed him successfully to challenge the allegations of serious misconduct against him. This Court found that the Bank acted unreasonably in investigating those allegations and that it departed from the standard of conduct which could be expected of a reasonable corporate employer: [51]. In these circumstances, the appellant should not be exposed to the disadvantageous operation of s 100(4) because he chose to pursue proceedings against his employer to vindicate his reputation, notwithstanding that the amount he recovered did not exceed by more than 10% the amount offered.

18. The parties agree that interest on the sum of $110,000 up to the date of this Court’s orders on 7 March 2016 is $25,925. Accordingly, the appellant is entitled to judgment for $135,925, that judgment to take effect on 7 March 2016.

Issue as to costs of the proceedings at first instance

19. As has been noted, there is a question as to the basis on which this Court has power to vary Order 5 entered on 7 March 2016. The provisions of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) that allow for the variation of orders are as follows:

36.15 General power to set aside judgment or order

(1) A judgment or order of the court in any proceedings may, on sufficient cause being shown, be set aside by order of the court if the judgment was given or entered, or the order was made, irregularly, illegally or against good faith.

(2) A judgment or order of the court in any proceedings may be set aside by order of the court if the parties to the proceedings consent.

36.16 Further power to set aside or vary judgment or order

(1) The court may set aside or vary a judgment or order if notice of motion for the setting aside or variation is filed before entry of the judgment or order.

(2) The court may set aside or vary a judgment or order after it has been entered if:

(a) it is a default judgment (other than a default judgment given in open court), or

(b) it has been given or made in the absence of a party, whether or not the absent party had notice of the relevant hearing or of the application for the judgment or order, or

(c) in the case of proceedings for possession of land, it has been given or made in the absence of a person whom the court has ordered to be added as a defendant, whether or not the absent person had notice of the relevant hearing or of the application for the judgment or order.

(3) In addition to its powers under subrules (1) and (2), the court may set aside or vary any judgment or order except so far as it:

(a) determines any claim for relief, or determines any question (whether of fact or law or both) arising on any claim for relief, or

(b) dismisses proceedings, or dismisses proceedings so far as concerns the whole or any part of any claim for relief.

(3A) If notice of motion for the setting aside or variation of a judgment or order is filed within 14 days after the judgment or order is entered, the court may determine the matter, and (if appropriate) set aside or vary the judgment or order under subrule (1), as if the judgment or order had not been entered.

(3B) Within 14 days after a judgment or order is entered, the court may of its own motion set aside or vary the judgment or order as if the judgment or order had not been entered.

(3C) Despite rule 1.12, the court may not extend the time limited by subrule (3A) or (3B).

(4) Nothing in this rule affects any other power of the court to set aside or vary a judgment or order.

20. Within ten days of the orders being entered, the parties advised the Court they could not reach agreement on the terms of an order as directed. That direction did not provide the parties liberty to apply for a variation of the order entered in respect of the costs at first instance. When the consent orders and the parties’ written submissions were received, more than 14 days had passed since the entry of the Court’s judgment. Taking account of the lapse of time, and the lack of any suggestion that rr 36.15 or 36.16(2) apply, a question arises as to whether r 36.16(3) empowers this Court to vary now a costs order entered in March of this year. The relief sought by the appellant in his Notice of Appeal included by prayer 3(b) is that the Bank pay the costs of the proceedings.

21. The different views earlier expressed by members of this Court in relation to UCPR r 36.16(3) are referred to in Habib v Nationwide News Pty Ltd (No 2) [2010] NSWCA 291 at [34]-[39]. In Road and Traffic Authority of NSW v Palmer (No 2) [2005] NSWCA 140, the Court (Giles JA, Spigelman CJ and Handley JA agreeing) found that a costs order determines a claim “for relief, the relief claim being orders disposing of the costs of the trial and of the appeals”: [21]. However, in Hancock v Arnold; Dodd v Arnold (No 2) [2009] NSWCA 19, the Court (Ipp, McColl and Basten JJA), observed of UCPR, r 36.16(3) at [10]:

The precise scope of this provision is unclear. Read literally, it might be thought to operate only in respect of orders which were not sought by any party. That reading seems implausible. Given its context, it is more likely that the distinction intended to be drawn is between substantive relief, to which the power does not extend, and ancillary or consequential relief, to which it does extend. On that understanding, a costs order would clearly fall within the latter category. Such a distinction would make practical sense because appropriate orders as to costs frequently depend upon the existence of offers of compromise which are properly not known to the Court until after substantive relief has been determined. On that basis, a party seeking to vary a costs order would not need to rely upon sub-r (3A).

22. Notwithstanding the statement in Hancock, the weight of authority appears to support the position taken by Giles JA in Palmer: see AT v Commissioner of Police (NSW) (No 2) [2010] NSWCA 337 at [7]-[13] (per Basten JA, Beazley and Macfarlan JJA agreeing); Deputy Commissioner of Taxation v Meredith (No 2) [2008] NSWCA 133; 75 NSWLR 462; Roads and Traffic Authority of NSW v Refrigerated Roadways Pty Ltd (No 2) [2009] NSWCA 336 at [8], [10] (per Campbell JA, McColl JA and Sackville AJA agreeing); Short v Crawley (No 45) [2013] NSWSC 1541 at [21] (per White J). The effect of this line of authority is that the Court does not have power under r 36.16(3) to vary a costs order which determined a claim for relief where no issue as to that variation was raised within 14 days of the judgment having been entered.

22. It is unnecessary for this Court to express a final view as to the meaning of r 36.16(3) because no reason has been established to support a variation of the order in question.

23. The Bank submits that the refusal of its Offer justifies the making of a special order as to costs by reason of the principles associated with the making of a Calderbank offer. Those principles were explained by Giles JA in SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 at [37]:

The making of an offer of compromise in the form of a Calderbank letter (from Calderbank v Calderbank (1976) Fam 93), where the offeree does not accept the offer but ends up worse off than if the offer had been accepted, is a matter to which the court may have regard when deciding whether to [order costs other than in accordance with the general rule that costs follow the event], but it does not automatically bring a different order as to costs. All the circumstances must be considered, and while the policy informing the regard had to a Calderbank letter is promotion of settlement of disputes an offeree can reasonably fail to accept an offer without suffering in costs. In the end the question is whether the offeree’s failure to accept the offer, in all the circumstances, warrants departure from the ordinary rule as to costs, and that the offeree ends up worse off than if the offer had been accepted does not of itself warrant departure …

25. In our view, it was not unreasonable for the appellant to refuse the Bank’s Offer. That is so because acceptance of the Offer would have precluded the appellant from establishing that the Bank’s allegations of misconduct against him were unreasonable and unfounded. Taking account of the potential impact of those allegations on his professional reputation, it was not unreasonable for the appellant to refuse the Bank’s Offer that he discontinue his challenge to them. Similar reasons were given in support of Order 5 in this Court’s judgment (at [96]):

Turning to the costs of the proceedings at first instance, the appropriate order is in my view that the Bank pay Mr Bartlett’s costs. Mr Bartlett successfully challenged the Bank’s finding against him of serious misconduct and his summary dismissal, and has obtained a damages award of $110,000 plus interest. The failure of a plaintiff to obtain the full amount for which he or she sues is not ordinarily a reason for depriving the plaintiff of costs … Mr Bartlett’s recovery was not insignificant and there is no other reason for departure from that general rule.

26. In order to attract the consequences of a Calderbank offer, the offer must involve a real element of compromise, rather than an invitation to capitulate: Herning v GWS Machinery Pty Ltd (No 2) [2005] NSWCA 375 at [4]-[5]; The Anderson Group Pty Ltd v Tynan Motors Pty Ltd (No 2) [2006] NSWCA 120; 67 NSWLR 706 at [8]. The terms of the Offer required the appellant to release the Bank from any and all claims arising out of the employment relationship or the termination thereof, and to agree not to disparage the Bank or any of its officers or employees. Those conditions could be seen to require the appellant’s capitulation, at least to the extent that he would be required to abandon any challenge to the allegations of misconduct.

27. The Bank submits that its Offer was more favourable than the judgment because by the former, the appellant was able to recover his reasonably incurred legal costs (which remain unspecified) and to avoid the incurring of further costs. The appellant claims that he is better off having obtained judgment because he now has the benefit of having disproved the allegations of misconduct, that result having unspecified benefits to his professional reputation. While it may be accepted that the appellant would have been better off financially had he accepted the Offer, that is not determinative of the reasonableness of his conduct in this case. The factors which led the appellant to reject the Offer were relevant and material and reasonably justified that course. The Bank has not discharged its burden of satisfying the Court that there should be an exercise of the costs discretion in its favour: County Securities Pty Ltd v Challenger Group Holdings Pty Ltd (No 2) [2008] NSWCA 273 at [31] (McColl JA, Spigelman CJ and Beazley JA agreeing).

28. It should be noted for completeness that the Bank placed no reliance on UCPR, r 20.26. This may be because the letter of offer dated 3 May 2013 made no reference to its being made in accordance with those rules: cf UCPR, r 20.26(2)(d).

Conclusion

29. Accordingly, the Court makes the following orders:

1. Set aside the costs orders made by Adamson J on 1 December 2014.

2. Judgment for the Appellant in the sum of $135,925, that judgment to take effect from 7 March 2016.

**********

Amendments

22 November 2016 - Para [5](3) amended by substituting Civil Procedure Act 2005 (NSW) for Supreme Court Act 1970 (NSW).

Para [28] amended to read: cf UCPR, r 20.26(2)(d)

Decision last updated: 22 November 2016