Carr v Ilsc (Brisbane) Pty Ltd and Anor, Pathik v Ilsc (Brisbane) Pty Ltd and Anor (No 2)
[2019] FCCA 1028
•18 April 2019
FEDERAL CIRCUIT COURT OF AUSTRALIA
| CARR v ILSC (BRISBANE) PTY LTD & ANOR, PATHIK v ILSC (BRISBANE) PTY LTD & ANOR (NO 2) | [2019] FCCA 1028 |
| Catchwords: COSTS – Calderbank offer at early stage of proceeding more favourable than result achieved by offeree applicant – whether unreasonably refused. |
| Legislation: Fair Work Act 2009, ss.342, 570 |
| Cases cited: Calderbank v Calderbank [1976] Fam 93 |
| Applicant: | PETER CARR |
| First Respondent: | ILSC (BRISBANE) PTY LTD |
| Second Respondent: | CHRIS KEITH |
| File Number: | SYG 3855 of 2017 |
| Applicant: | SANGEET PATHIK |
| First Respondent: | ILSC (BRISBANE) PTY LTD |
| Second Respondent: | CHRIS KEITH |
| File Number: | SYG 3878 of 2017 |
| Judgment of: | Judge Cameron |
| Hearing date: | On the papers |
| Date of Last Submission: | 29 March 2019 |
| Delivered at: | Sydney |
| Delivered on: | 18 April 2019 |
REPRESENTATION
| Counsel for the Applicants: | Mr D. O’Sullivan |
| Solicitors for the Applicants: | Sydun & Co |
| Counsel for the Respondents: | Mr N. Furlan |
| Solicitors for the Respondents: | Chadwick Workplace Law |
ORDERS
SYG 3855 of 2017
The applicant pay the respondents’ costs from 2 November 2018 on the indemnity basis taxed in accordance with Part 40 of the Federal Court Rules 2011.
SYG 3878 of 2017
The applicant pay the respondents’ costs from 2 November 2018 on the indemnity basis taxed in accordance with Part 40 of the Federal Court Rules 2011.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 3855 of 2017
| PETER CARR |
Applicant
And
| ILSC (BRISBANE) PTY LTD |
First Respondent
| CHRIS KEITH |
Second Respondent
SYG 3878 of 2017
| SANGEET PATHIK |
Applicant
And
| ILSC (BRISBANE) PTY LTD |
First Respondent
| CHRIS KEITH |
Second Respondent
REASONS FOR JUDGMENT
INTRODUCTION
On 28 February 2019 judgment in these matters was pronounced (“first judgment”). The applications were dismissed and the respondents have sought costs. The parties agreed that the question of costs was to be determined without an oral hearing and have filed written submissions.
EVIDENCE
In each proceeding the respondents adduced evidence of having made settlement offers to both applicants on 2 November 2018 which were expressed to have been made in accordance with the principle in Calderbank v Calderbank [1976] Fam 93. The respondents offered to settle each matter on the following terms:
a)payment of $10,000; and
b)entry into a deed of release which was relevantly to contain terms providing for:
i)no admission of liability;
ii)mutual non-disparagement; and
iii)strict confidentiality.
The offers were open for twenty-eight days but the applicants replied on 7 November 2018, agreeing to the proposal for deeds of release and the terms to be included in those deeds, but rejecting the amounts offered. Each applicant made a counter-offer; each offered to accept $95,000 to settle their respective cases.
LEGISLATION
Fair Work Act
Section 79(1) of the Federal Circuit Court of Australia Act 1999 (“FCCA Act”) gives the Court power to order costs in matters which come before it but that power is relevantly subject to an express exception in relation to matters “arising under the Fair Work Act 2009”. These proceedings were brought under the Fair Work Act 2009 (“FW Act”). As explained in Liu v Stephen Grubits and Associates [2019] FCAFC 24, the Court’s power to order costs in FW Act proceedings is not provided by the FCCA Act but by s.570 of the FW Act which states:
570 Costs only if proceedings instituted vexatiously etc.
(1)A party to proceedings (including an appeal) in a court (including a court of a State or Territory) in relation to a matter arising under this Act may be ordered by the court to pay costs incurred by another party to the proceedings only in accordance with subsection (2) or section 569 or 569A.
(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
…
Proceedings which are brought in this Court
Section 86 of the FCCA Act relevantly provides in relation to proceedings brought in this Court that:
The Rules of Court may make provision for or in relation to:
…
(b)the costs of proceedings in the Federal Circuit Court of Australia; and
(c)the fees to be charged by practitioners practising in the Federal Circuit Court of Australia for the work done by them in relation to proceedings in the Federal Circuit Court of Australia and the taxation of their bills of costs, either as between party and party or as between solicitor and client; and
…
Rules 21.09 and 21.10 of the Federal Circuit Court Rules 2001 (“Rules”) relevantly provide between them that the Court has power to order that costs be taxed on the indemnity basis.
Rule 1.03 of the Rules relevantly provides:
1.03 Objects
(1)The object of these Rules is to assist the just, efficient and economical resolution of proceedings.
(2)In accordance with the objects of the Act, the Rules aim to help the Court:
• to operate as informally as possible
• to use streamlined processes
• to encourage the use of appropriate dispute resolution procedures.
…
(4) To assist the Court, the parties must:
• avoid undue delay, expense and technicality
• consider options for primary dispute resolution as early as possible.
SUBMISSIONS
Respondents’ submissions
The respondents sought their costs of each proceeding from 2 November 2018 on the indemnity basis or, in the alternative, on the party and party basis.
The respondents submitted that their offers:
a)had been made after all their evidence had been filed and served;
b)had been expressed to be open for 28 days, which was sufficient time to permit their careful consideration and for the applicants to assess their prospects of success in the proceedings in light of the evidence that had been served;
c)offered sums which were substantial and reasonable; and
d)made clear the potential consequences of not accepting them.
The respondents argued that the applicants’ rejection of the offers by way of their counter-offers was imprudent on the basis that:
a)the applicants had allowed themselves little more than two business days to consider the offers; and
b)the counter-offers of $95,000 each involved a sum which was substantially more than either applicant claimed in their respective proceeding.
The respondents submitted that if the applicants had used the twenty- eight days during which the offers had been expressed to be open to consider the evidence and the relevant award provisions carefully, they ought to have come to the conclusion that their claims were without proper foundation, were very likely to fail and that the offers were a generous compromise. They noted the first judgment’s findings concerning the applicants’ lack of attention to the detail of their cases and the inaccuracies in their evidence. The respondents argued that the applicants had been precipitous in rejecting their offers and that that rejection had been an unreasonable act which caused the respondents to incur costs from 2 November 2018.
Applicants’ submissions
The applicants submitted that their rejections of the $10,000 offers did not justify the costs orders sought by the respondents and had been reasonable because:
a)the rejection of an offer which is subsequently bettered on judgment does not automatically give rise to a presumption in favour of the offeror, rather the rejection must be unreasonable;
b)the respondents failed to adduce any evidence that they incurred any costs and that any such costs were a result of an unreasonable act or omission on their part;
c)the offered amounts of $10,000 were not substantial and did not, at the time they were put, constitute reasonable offers;
d)the respondents’ submissions failed to take account of the compensation orders sought in relation to the contraventions of s.342(2) and any penalties that may have been ordered; and
e)at the time the offers were made, the evidence had not yet been tested.
The applicants also submitted that if the Court determined it to be appropriate to order costs on and from 2 November 2018, none of the factors identified by Mortimer J in Ryan v Primesafe (2015) 323 ALR 107 at 136 [114] were present and so indemnity costs would not be appropriate. Further, any costs ordered should be fixed in accordance with the Court’s event-based scale rather than taxed according to the Federal Court scale of costs.
CONSIDERATION
Facts
Turning first to the facts, I find that:
a)the matters were not exceptional in nature or in the fact that the evidence of some parties was considered more reliable than that of others and that legally advised parties took different views of the operation of an award, with the Court favouring one construction over the other;
b)the offers made to the applicants were real and not token ones, albeit they were not substantial. It should be kept in mind when the quantum of the offers is considered that the applicants had not instructed solicitors but had briefed counsel directly so it may be assumed that their costs were relatively light at the point the offers were made and remained so until the matters came close to hearing. Certainly it did not seem that counsel played a large part in the preparation of the applicants’ affidavits in chief;
c)the fact that the respondents’ witnesses had not been cross-examined at the time the offers were made is of little significance given that the respondents’ affidavits had already been filed by that point and, presumably, served. The applicants were therefore in no worse position at that time to consider settlement than the respondents were;
d)it cannot seriously be doubted that the respondents incurred costs after the Calderbank offers were served. I find that they did and that the only relevant, related issue is whether the applicants should be ordered to indemnify them for those costs; and
e)the applicants’ counter-offers were provocative, belligerent and gave no hint of a willingness to compromise. If the applicants thought it appropriate to factor into their considerations the potential civil penalties which might have been ordered if they had made out their cases, they were mistaken. Whatever may be the general practice in matters under the FW Act, a successful party has no enforceable right to be paid penalties and should not count on penalties being made payable to them in the exercise of the Court’s discretion. The offers should properly be understood to relate only to the compensation sought.
Section 570 of the FW Act
The next matter to consider is whether the applicants’ rejections of the respondents’ offers were unreasonable, thus engaging a right under s.570 to costs.
The discretion to order costs under s.570 of the FW Act must be exercised with caution because of the exceptional nature of the power in an otherwise no-costs jurisdiction and the case for its exercise should be clearly demonstrated: Trustee for The MTGI Trust v Johnston (No 2) [2016] FCAFC 190 at [8].
In Ryan v Primesafe Mortimer J discussed considerations which may be taken into account when, relevantly, an applicant is unsuccessful in a FW Act proceeding after having rejected a Calderbank offer and the Court is called on to determine:
a)whether costs should be ordered under the FW Act and, if so,
b)whether any such costs should be assessed on a basis other than the party and party basis.
Drawing on her Honour’s reasoning concerning the engagement of s.570(2)(b) (“the court is satisfied that the party’s unreasonable act or omission caused the other party to incur the costs”) and incorporating adjustments to reflect this Court’s statute and rules, considerations relevant to the present matters may be summarised as:
a)parties before the Court have an obligation to facilitate the just resolution of disputes by avoiding undue delay, expense and technicality (rule 1.03(4) of the Rules);
b)the legislative policy behind a provision such as s 570(1) is not inconsistent with requirements that proceedings be conducted reasonably, fairly and efficiently. As an access to justice provision, s.570 contemplates that parties and their legal representatives will access the Court responsibly;
c)when exercising its costs discretion, the Court must take into account failure by the relevant party to comply with the duty to avoid undue delay, expense and technicality;
d)the limitations and conditions which are respectively imposed on the Court’s general costs discretion by the exception in s.79(1) of the FCCA Act and by s.570 of the FW Act are not a licence to parties to ignore the requirements of r.1.03(4) or the Court’s power under rr.21.09 and 21.10 to order costs against parties who fail to comply with such obligations;
e)the content of r.1.03(4) and parties’ obligations under it must be reconciled with access to justice provisions such as s.570(1). Justice Mortimer described the process of reconciliation in the following terms:
That reconciliation occurs through a focus on the reasonableness of parties’ conduct, the appropriateness of the Court processes undertaken by them, the timeliness of their compliance with Court orders or steps in the proceeding, and the existence of a substantive legal and factual basis for the claims made and arguments put. (at 123 [66])
f)although s.570(1) of the FW Act constrains the Court’s power to order costs against a party and s.570(2) directs attention to the conduct of a party, neither purports to affect the Court’s power under rr.21.09 and 21.10 which is engaged once the Court has formed the view that there should be an order under s.570 that a party pay the costs of another; and
g)rr.21.09 and 21.10 enable the Court in an appropriate case to order that one party pay another’s costs on an indemnity basis.
The sums which were offered to the applicants, even if not large, were not tokenistic. That fact is significant given the applicants’ total failure in the proceedings, which I infer was not unrelated to their failure to attend to the detail of the litigation and its informed prosecution. For instance in that connection, at the trial Mr Carr conceded that he had not read Mr Keith’s analysis of his payments which summarised his hours worked and wages paid for October 2013 to April 2018 because, he said, he had not had the time and Mr Pathik conceded that although he had deposed that from May 2017 until about December 2017 he was not paid for marking assessments, he had in fact been paid his full rate for that work from January 2017. Further, although the applicants claimed that their work hours had been reduced because they sent the 14 November 2017 email to ILSC, this contention was contradicted by para.2 of that very email which said:
2.Furthermore, at our trainers meeting on 23rd of October, you said to us "if you don't provide us with a signed copy of the new contract by the 3rd of November (later changed to 23rd November [sic]), we will not be able to provide you with any teaching hours", i.e. effectively terminating our employment. That is not legal under the Fair Work Act.
If the applicants had tested their impressions and perceptions against the information which was available to them at the time the offers were made, they might not have rejected those offers or at least might not have shut the door on settlement quite so firmly.
In Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd (No 2) [2011] FCAFC 141 the Full Court of the Federal Court said:
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. (at [19])
It is apparent that the offers were rejected with little reflection. The speed with which the rejections were communicated and the terms in which they were made, by counter-offers to accept amounts which could not have been achieved in the compensation proceedings, bespeak a lack of willingness to consider settlement in a serious way. That behaviour was unreasonable given the parties’ obligation under r.1.03(4) to facilitate the just resolution of disputes by avoiding undue delay, expense and technicality.
The applicants will therefore be ordered to pay costs, the details of which will be discussed in the context of the application for indemnity costs.
Indemnity costs
The principles applicable to the situation where a party does not accept an offer made in a Calderbank letter but fails to achieve an outcome better than that offer are settled. They are that the offering party is not presumptively entitled to indemnity costs from the date of the offer or its expiry, as would be the case of a notice of offer of compromise served under rules of court, but must demonstrate that the rejection of the offer was unreasonable: Commonwealth of Australia v Gretton [2008] NSWCA 117 at [1], [44] and [117]; CGU Insurance Ltd v Corrections Corporation of Australia Staff Superannuation Pty Ltd [2008] FCAFC 173 at [75]; Taleb v GM Holden Ltd (2011) 286 ALR 309 at 318-319 [49]. Whether it was unreasonable of a party to not accept a Calderbank offer is to be determined prospectively, that is to say without the benefit of hindsight, by reference to the circumstances of the case at the time the offer was made or was rejected, those circumstances including whether the offer itself was reasonable: Australian Medic-Care Company Ltd v Hamilton Pharmaceutical Pty Ltd (No.2) [2009] FCA 1494 at [14]; Seven Network Ltd v News Ltd (2007) 244 ALR 374 at 389 [65]; Commonwealth vGretton at [1] and [78]; Taleb v GM Holden Ltd at 318-319 [49]; Facton Ltd v Seo (2011) 91 IPR 135 at 147 [55].
The respondents’ submissions did not address the s.570 question and the indemnity costs question separately, notwithstanding that they are at least ostensibly discrete. Their argument was that the imprudence manifested by the manner in which the offers had been rejected amounted to unreasonableness for the purposes of both questions.
In McDonald v Parnell Laboratories (Aust) (No 2) (2007) 164 FCR 591, Buchanan J held at 599 [31] that once the power to award costs under the FW Act is engaged because a party is found to have caused, by their unreasonable act or omission, another party to incur costs in connection with the proceeding, there was no reason not to apply ordinary principles. In that proceeding, the consequence of that circumstance was that the costs claimant was entitled to indemnity costs from a certain point. The same outcome was seen in Trustee for The MTGI Trust v Johnston (No 2). Indemnity costs were not ordered in Ryan v Primesafe but their availability was not considered by reference to an unaccepted Calderbank offer.
In this matter, the applicants’ failures to accept the offers were unreasonable on two bases. The first is that proper consideration was not, I conclude, given to the offers. The second is that it was unreasonable to not accept the offers given the weakness of the applicants’ cases, both as to substance and as to the care and attention given to their preparation. If the latter deficiency had been addressed the applicants might have understood the weaknesses in their cases and acted differently.
Consequently, I find that the applicants should pay costs on the indemnity basis from the date of the service of the Calderbank letters. In those circumstances, the Court’s event-based party and party costs scale cannot apply as a matter of logic and so it is appropriate that costs be taxed.
CONCLUSION
The applicants will be ordered to pay the respondents’ costs taxed on the indemnity basis from 2 November 2018.
I certify that the preceding twenty-eight (28) paragraphs are a true copy of the reasons for judgment of Judge Cameron
Date: 18 April 2019
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