Benyk v Mater Misericordiae Health Servi ces Brisbane Ltd & Anor - [2009] FMCA 544

FEDERAL MAGISTRATES COURT OF AUSTRALIA

BENYK v MATER MISERICORDIAE HEALTH SERVICES BRISBANE LTD & ANOR

[2009] FMCA 544

PRACTICE & PROCEDURE – Rules of Court – effect of importation of Federal Court Rules.

PRACTICE & PROCEDURE – Costs – where notice of offer of compromise accepted – appropriate order for costs.

Federal Magistrates Act 1999, s.79
Federal Court Rules, Order 23, Order 62, Schedule 2, Schedule 3
Federal Magistrates Court Rules, rr.1.05, 21.10, Division 21.3

45° North v The Promotions Factory [2004] FMCA 49

Applicant:

MONICA BENYK

First Respondent:

MATER MISERICORDIAE HEALTH SERVICES BRISBANE LTD

Second Respondent:

JOHN O'DONNELL

File Number:

BRG 903 of 2007

Judgment of:

Wilson FM

Hearing date:

19 December 2008

Date of Last Submission:

19 December 2008

Delivered at:

Brisbane

Delivered on:

12 June 2009

REPRESENTATION

Counsel for the Applicant:

Mr Pratt

Solicitors for the Applicant:

BCI Lawyers

Counsel for the Respondents:

Mr Horneman-Wren

Solicitors for the Respondents:

Blake Dawson

ORDERS

The respondents pay the applicant’s costs fixed in the sum of $18,827.44.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
BRISBANE

BRG 903 of 2007

MONICA BENYK

Applicant

And

MATER MISERICORDIAE HEALTH SERVICES BRISBANE LTD

First Respondent

JOHN O'DONNELL

Second Respondent

REASONS FOR JUDGMENT

On 26 October 2007 the applicant commenced proceedings in this Court alleging unlawful discrimination by the respondent in the course of the applicant’s employment. The applicant’s claim was subsequently expanded to include claims for damages for breaches of contract and for contraventions of ss.52 and 53B of Trade Practices Act 1974. The matter was listed for a three day hearing on 12, 13 and 14 May 2008. On the second day of the final hearing the matter was compromised and judgment was entered by consent in favour of the applicant against the respondent. No order was then made as to costs.
The parties agree that some costs are to be paid by the respondents to the applicant, but cannot agree as to how those costs are to be determined.
I note, at the outset, that the proceedings were commenced in this Court and remained in this court throughout. The jurisdiction of this Court to make an order for costs is conferred by s.79 Federal Magistrates Act 1999. That section provides:
(1)     ...
(2)     The Federal Magistrates Court or a Federal Magistrate has jurisdiction to award costs in all proceedings before the Federal Magistrates Court (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 Magistrates Court or Federal Magistrate.
The proceedings were compromised following the acceptance by the applicant of an offer made by the respondents. On 28 April 2008 the respondents’ solicitors forwarded a Notice of Offer of Compromise to the applicant’s solicitors. It was stated to be sent “in accordance with Order 23 of the Federal Court Rules”.
The offer provided, by paragraph 3:
“If a notice of acceptance of the offer is received by the Applicant’s solicitors within 14 days the parties will file the following terms of settlement:
By consent and without admission of liability:
a) Judgment be entered immediately for the Applicant against the Respondent in the sum of $44,882.57 (the “Settlement Sum”);
b) the Respondent will pay the Applicant’s party/party costs as agreed or assessed up to and including the date of acceptance of the offer;
c) …”
The offer concluded:
“This offer is made in accordance with the Federal Court Rules, Order 23”
On 13 May the applicant accepted the offer of compromise, in writing, in the following terms:
“The Applicant accepts the offer of compromise made by Respondents in accordance with the Federal Court Rules Order 23 and dated 28 April 2008”
By consent a judgment was entered against the first and second respondents, in favour of the applicant, for $44,882.57.
The applicant contends that she is entitled to have her costs assessed in accordance with Schedule 2 to the Federal Court Rules (“FCR”). The respondents contend that the applicant’s costs should be assessed pursuant to the scale applicable by Rule 21.10 Federal Magistrates Court Rules.
The Federal Magistrates Court Rules make no provision for exchange of offers of compromise, that have costs consequences if not accepted.
Rule 1.05(3)(b) Federal Magistrates Court Rules provides:
(b) the provisions of the Federal Court Rules set out in Part 2 of Schedule 3, apply, with necessary changes, to general federal law proceedings.
FCR Order 23 is contained within Part 2 of Schedule 3 except sub-rules 14 and 15 thereof. FCR Order 23 provides a regime for the making and acceptance of notice of offer of compromise.
It is relevant to also observe Rule 1.05(1) Federal Magistrates Court Rules which provides:
(1) It is intended that the practice and procedure of the Federal Magistrates Court be governed principally by these Rules.
In my view the effect of Rule 1.05(3)(b) is to import the text of FCR Order 23 and make it part of the Federal Magistrates Court Rules, with necessary changes. In other words, FCR Order 23 operates as part of the Federal Magistrates Court Rules governing the practice and procedure in this Court.
FCR Order 23 sets out a regime for the making and acceptance of offers of compromise. Order 23 rule 3(2)(b) stipulates that a notice of offer must bear a statement to the effect that the offer is made “under this order”.
Order 23 rule 11(1) provides:
(1) On the acceptance of an offer of compromise in accordance with sub-rule 5(4), the applicant may, unless the court otherwise orders, or the offer is inclusive of the costs of the proceeding:
a) tax costs on a party and party basis in respect of the claim against the respondent incurred up to and including the day the offer was accepted; and
b) …
Initially, the solicitors for the applicant argued that because FCR Order 23 rule 11 conferred an entitlement to tax costs, such taxation could only occur under FCR Order 62, in particular rules 2, 7, 8 and 12 thereof, which conferred an entitlement to the taxation of costs pursuant to the Second Schedule to the Federal Court Rules.
This would, in practical terms, give the applicant her costs of proceedings in this Court on the same basis as if the litigation was conducted in the Federal Court. Such a result is counter-intuitive. As Counsel for the respondents submitted it would be disadvantageous to respondents to make offers of compromise in this Court in circumstances where the offeror was exposed to having to pay costs on the Federal Court scale.
There was some debate in argument as to whether the offer would be valid if it specified that costs would be paid in accordance with the Federal Magistrates Court scale of costs, or whether that contravened FCR Order 23 Rule 11(2). In my view such a stipulation would not contravene that Rule, and to be clear offers ought include such a provision, to remove any doubt.
When pressed, counsel for the applicant did not maintain the submission that acceptance of an offer of compromise stated to be made pursuant to FCR Order 23 carried with it an automatic entitlement to costs in accordance with the Federal Court scale. Rather, the submission became that the court retains a discretion as to how costs are to be awarded, and that in the circumstances of this case costs should be taxed in accordance with the Federal Court scale.
As I have said, FCR Order 23 applies in this court by virtue of its inclusion in Schedule 3 Part 2 to the Federal Magistrates Court Rules, and by virtue of rule 1.05(3)(b) Federal Magistrates Court Rules. That rule contains the express words “with necessary changes”.
In my view, it would be a quite unintended consequence of the incorporation of FCR Order 23 to also incorporate FCR Order 62. That order is not included in Part 2 of Schedule 3 to the Rule and the Federal Magistrates Court Rules contain their own costs provisions. That leads me to the conclusion that where reference is made in Order 23 Rule 11(1)(a), as incorporated into the Federal Magistrates Court Rules, to taxing costs on a party and party basis, such provision should be interpreted as “shall pay costs in accordance with Division 21.3 Federal Magistrates Court Rules”. In my view that is a necessary change to the Federal Court Rule adopted as part of the Federal Magistrates Court Rules so as to align the provision with the costs regime in the Federal Magistrates Court. That cost regime is part of the practice and procedure of this Court which, as Rule 1.05(1) makes clear, is intended to govern these proceedings.
Nothing said by Phipps FM in 45° North v The Promotions Factory [2004] FMCA 49 affects that conclusion. His Honour was there dealing with an application for indemnity costs. His Honour recognised the different approach taken in this court to the assessment of costs at [17] and recognised that there was a discretion to determine the basis on which costs are to be assessed (at [18]). It was not argued that changes were necessary to FCR Order 23 for it to apply in this Court. His Honour’s remark at [17] relied upon by the applicant should be read against that background.
The applicant also relied upon the fact that the offer contained a notation that it was made pursuant to FCR Order 23. This, it was argued, carried with it the consequence that costs would be paid in accordance with the Federal Court scale. I disagree. By FCR Order 23 Rule 3(2)(b) it was a mandatory requirement that the offer contained the notation that it did. In my view the making of that statement conveyed no more than the offer was made pursuant to the regime laid down in FCR Order 23. It said nothing about the basis upon which costs would be paid.
In my view, to determine what costs should be paid is a matter of interpreting the words of the offer itself. Those are set out at paragraph 5 of these reasons. In the absence of agreement between the parties, or a representation by one party relied upon the other to its detriment that may give rise to an estoppel, the offer that a party would pay the other party’s costs ordinarily means costs in accordance with the practice and procedure of that Court in which the matter is being litigated.
Both solicitors for the respondent who had the conduct of these proceedings and the solicitor for the applicant who had conduct of the proceedings gave evidence before me. There was some divergence in their evidence as to whether the applicable scale of costs was discussed before the respondents’ offer was accepted. In my view it is not necessary to resolve that difference. It is plain from both solicitors’ evidence no agreement was reached prior to the offer being accepted as to the applicable scale of costs, nor was any unequivocal statement made by the solicitors for the respondent that would have lead the applicant to believe that the offer included an offer to pay costs on the Federal Court scale.
In those circumstances the offer must be construed according to its plain meaning. In my view, the plain meaning of the offer is that the respondent would pay the applicant’s costs determined in accordance with the Rules of this Court.
Division 21.3 Federal Magistrates Court Rules makes specific provision for the awarding and calculation of costs. Rule 21.10 provides:
Unless the Court otherwise orders, a party entitled to costs in a proceeding (other than a proceeding to which the Bankruptcy Act applies) is entitled to:
(a) costs in accordance with Part 1 of Schedule 1; and
(b) disbursements properly incurred.
The Rules also make the provision for the taxation of costs. To that extent there is no overt inconsistency between FCR Order 23, as incorporated into the Federal Magistrates Court Rules, and Division 21.3 Federal Magistrates Court Rules. Counsel for the applicant conceded that there was no evidence before the Court to make an order in terms of the introductory words of Rule 21.10. There was no argument that the amount of costs contended for by the respondents was the appropriate amount if costs were calculated in accordance with Part 1 of Schedule 1 to the Federal Magistrates Court Rules. Those are the costs to which a successful party is ordinarily entitled, subject to an order to the contrary.
The applicant submits that the Court should exercise its discretion to otherwise order and to direct taxation in accordance with the FCR:
a)The offer was made in accordance with the Federal Court Rules;
b)The applicant would suffer serious financial disadvantage if costs were not assessed in accordance with the Federal Court scale.
I have already dealt with the first matter. Simply because the offer was stated to be pursuant to FCR Order 23 did not carry with it the consequence that costs must be paid in accordance with the Federal Court scale.
The applicant’s actual legal costs significantly exceed the costs to which she would be entitled pursuant to Schedule 1 Part 1 Federal Magistrates Court Rules. However, that is not determinative of the matter. Whilst as a general proposition I accept that there is a general desirability that an award of costs in favour of the successful applicant in human rights proceedings is such as would avoid an award of damages being substantially if not totally diminished by the costs of litigation (as to which see, for example, Frith v The Exchange Hotel[No. 2] [2005] FMCA 1284) that consideration cannot outweigh all others. The respondents’ position must also be considered. In formulating the offer that was made the respondents had an expectation as to the costs they would be likely to pay. It is unfortunate that the parties did not explicitly clarify the basis upon which costs would be paid before their compromise was concluded.
In my view, on a plain reading of the offer of compromise, the respondents were offering to pay the applicant a sum of money together with her costs in accordance with the Federal Magistrates Court Rules. The default position under Rule 21.10 was that those costs would be calculated in accordance with Part 1 of Schedule 1. It was open to the applicant to argue that the Court should otherwise order, based on appropriate evidence. In view of the concession by Counsel for the applicant that course is not open.
Accordingly, I conclude that the costs that must be paid by the respondents in this case are $18,827.44 being the amount calculated pursuant to Part 1 Schedule 1 of the Federal Magistrates Court Rules.

I certify that the preceding thirty-four (34) paragraphs are a true copy of the reasons for judgment of Wilson FM

Associate: Lynnette Chin

Date: 12 June 2009