Emily Kathleen Dawson v ACN 065089269 Pty Ltd (Industrial)

[2015] VMC 30

IN THE MAGISTRATES' COURT OF VICTORIA

AT MELBOURNE

INDUSTRIAL DIVISION           E11082499

BETWEEN

Emily Kathleen Dawson           Applicant

-and-

ACN 065089269 Pty Ltd

T/as Associated Administrative Services           Respondent

MAGISTRATE:  GINNANE

WHERE HEARD:   MELBOURNE

DATE OF DECISION:   24 SEPTEMBER 2015

MEDIUM NEUTRAL CITATION:    [2015] VMC 30

APPEARANCES:COUNSEL  SOLICITOR

For the Applicant   In Person

For the Respondent  Mr. Davison  A.C.N. 065089269 Pty Ltd

Catchwords: Industrial Division – Small Claim procedure – applicant’s primary relief for classification under modern award unsuccessful – respondent’s application for costs – consideration of application of Magistrates Court General Civil Procedure Rules 2010 – offers of compromise – made under the rule – application for costs resulting from applicant’s failure to accept letters of offers – discussion of Calderbank offers in the context of a dispute regarding award classification – Fair Work Act 2009 ss 548 and 570 – application for costs refused – variation in rates of pay relied on by applicant and respondent for award classification– discussion of transitional arrangements for phasing in from pre modern awards to modern awards

REASONS FOR DECISION

HIS HONOUR:

Introduction

1. This decision involves two matters. The first matter requires the amounts owed to the applicant arising from the conclusion of her employment with the respondent to be finalised. The second matter is to decide an application for costs brought by the respondent.  A brief mention of matters that have arisen to date is necessary.
2. I dismissed the applicant’s claim by reason that I accepted the respondent’s submission as to the applicant’s award classification and that payments applicable to her employment during various periods and referable to her award classification level had been paid to the applicant but I reserved liberty in the event that any adjustment to the precise calculations required to give effect to her classification was required. I concluded that:

If as a result of my decision, there remain any further orders required to perfect the amounts that have otherwise been paid to the applicant, I will reserve liberty to the parties to raise the matter within 7 days of the date of this judgement.

3. In my written reasons I recorded that there would be no order for costs. No argument had been foreshadowed before me for costs and furthermore the matter was one governed by the provisions of the Fair Work Act 2009 (Cth) (“the FWA”). In addition, I reserved liberty to the parties.
4. Following the publication of my decision the applicant wrote to the registry seeking to have the matter listed.
5. On the further listing the applicant pointed out that no money had been paid to her by the respondent and that although a cheque for amounts calculated by the respondent for a level 1 employee had been forwarded to her at an earlier stage, the payment was subsequently cancelled by the respondent as a result of an error in the figures used by it and a further amount was then offered to the applicant which offer the applicant declined.  Hence my written reasons contain an error in that the applicant had received the monies due to her under what I concluded amounted to her correct classification.
6. Separately the respondent made an oral application for an award of costs of the proceeding. Because the proceeding not having been finally disposed of and liberty having been reserved on the matter of the calculations of amounts due and payable to the applicant, I considered it was proper to entertain an application for costs if one wished to be pursued by the respondent. In order to ensure the applicant was not disadvantaged in being able to respond to any such application, I directed the respondent to file and serve an affidavit and that submissions in support of and in opposition to a costs order be filed and exchanged between the parties and as well that the parties were file and serve a statement of calculation of amounts due. I expressed the hope that it would not be necessary to convene a further mention.
7. The respondent has filed submissions and affidavit material in support of an application for costs and in relation to the amounts due to the applicant. The applicant has also responded with written material opposing the application for costs and disputing the correct rates of pay applicable to her level 1 classification.

Costs

8. I have decided that this is not an appropriate case in which to make an award of costs in favour of the respondent. There are number of reasons why I have decided to reject the respondent’s application for costs. In no particular order my reasons follow.
9. First it is trite to observe that an award of costs is ultimately a matter involving an exercise of discretion. Discretion even if unfettered must be exercised judicially and if not it may constitute an error of law: House v King[1].

[1] (1936) 55 CLR 499

10. The respondent argued that it should be entitled to an award of costs because of the making of two Offers of Compromise served on the applicant in accordance with the Magistrates’ Court General Civil Procedure Rules 2010.
11. By letter dated 15 December 2014 the respondent made what it described as a “formal Offer of Compromise” in the sum of $4,050.00. The applicant did not respond to the offer and the respondent argued that this failure to respond by acceptance of the offer of compromise was an unreasonable omission which caused it to incur legal costs up to the date of decision on 29 May 2015. As a result of the applicant’s failure the respondent argued that it is entitled to an order against the applicant under Rule 26.08(4) of the Magistrates’ Court General Civil Procedure Rules 2010 for costs.
12. The respondent refers as well in support of its application for costs to a second offer of compromise made in accordance with the rules of court by letter dated 12 January 2015 in the sum of $4,500. The applicant did not accept the offer and as a result the respondent argued that this failure to respond by acceptance of the offer of compromise was an unreasonable omission which caused it to incur legal costs up to the date of decision on 29 May 2015.
13.  As to the offer of compromise dated 15 December 2014 the applicant in her written response said it “was not responded to as I did not receive this office [sic] until the date of expiry”. That itself is an uncertain statement and if it is intended to convey that it was not received until after the time for acceptance had expired, it fails to say so. The applicant made no submission about the second offer of compromise.
14. The applicant commenced her proceeding for relief in Industrial Division of the Magistrates’ Court of Victoria. This court exercises a limited jurisdiction in relation to matters arising under the FWA. The FWA makes allowance and provision for the recovery of small amounts by way of a Small Claims Procedure. A Small Claim is one that seeks an amount less than $20,000. A Small Claims procedure is expressly provided for by the FWA Regulations 2009. Chapter 4, Division 3 of the regulations provides:

4.01Plaintiffs may choose small claims procedure

(1)For paragraph 548(1)(c) of the Act, the manner in which a person must indicate that he or she wants a small claims procedure to apply to an action that the person has commenced is:

(a)by:

(i)endorsing the papers initiating the action with a statement that the person wants a small claims procedure to apply to the action; or

(ii)lodging with the magistrates court or the Federal Circuit Court a paper that identifies the action and states that the person wants a small claims procedure to apply to the action; and

(b)by serving a copy of the papers initiating the action, together with a copy of the paper (if any) mentioned in subparagraph (a)(ii), on every other party to the action.

(2)Subregulation (1) does not apply to an action that a person starts in a magistrates court or the Federal Circuit Court if rules of court relating to that court prescribe the manner in which the person indicates that he or she wants a small claims procedure to apply to the action.

(3)For subsection 548(8) of the Act, a party to small claims proceedings in the Federal Circuit Court may be represented by an official of an industrial association if the party is granted leave to do so by the Federal Circuit Court.

(4)For subsection 548(8) of the Act, a party to small claims proceedings heard in a magistrates court may be represented by an official of an industrial association if:

(a)the party is granted leave to do so by that court; and

(b)the law of the State allows a party to be represented in that court, in the circumstances mentioned in paragraph (a), by officials of bodies representing interests related to the matters in dispute.

15. Section 548 of the FWA is contained in Division 3 and headed—Small Claims Procedure and provides as follows:

548 Plaintiffs may choose small claims procedure

(1)       Proceedings are to be dealt with as small claims proceedings under this section if:

(a)       a person applies for an order (other than a pecuniary penalty order) under Division 2 from a magistrates court or the Federal Circuit Court; and

(b)       the order relates to an amount referred to in subsection (1A); and

(c)       the person indicates, in a manner prescribed by the regulations or by the rules of the court, that he or she wants the small claims procedure to apply to the proceedings.

(1A)     The amounts are as follows:

(a)       an amount that an employer was required to pay to, or on behalf of, an employee:

(i)        under this Act or a fair work instrument; or

(ii)       because of a safety net contractual entitlement; or

(iii)      because of an entitlement of the employee arising under subsection 542(1);

(b)       an amount that an outworker entity was required to pay to, or on behalf of, an outworker under a modern award.

Limits on award

(2)       In small claims proceedings, the court may not award more than:

(a)       $20,000; or

(b)       if a higher amount is prescribed by the regulations—that higher amount.

Procedure

(3)       In small claims proceedings, the court is not bound by any rules of evidence and procedure and may act:

(a)       in an informal manner; and

(b)       without regard to legal forms and technicalities.

(4)       At any stage of the small claims proceedings, the court may amend the papers commencing the proceedings if sufficient notice is given to any party adversely affected by the amendment.

Legal representation

(5)       A party to small claims proceedings may be represented in the proceedings by a lawyer only with the leave of the court.

(6)       If the court grants leave for a party to the proceedings to be represented by a lawyer, the court may, if it considers appropriate, do so subject to conditions designed to ensure that no other party is unfairly disadvantaged.

(7)       For the purposes of this section, a person is taken not to be represented by a lawyer if the lawyer is an employee or officer of the person.

Representation by an industrial association

(8)       The regulations may provide for a party to small claims proceedings to be represented in the proceedings, in specified circumstances, by an official of an industrial association.

(9)       However, if small claims proceedings are heard in a court of a State, the regulations may so provide only if the law of the State allows a party to be represented in that court in those circumstances by officials of bodies representing interests related to the matters in dispute.

16. The statutory and regulatory provisions extracted above strike me as good reason why the rules of ordinary civil procedure of the Court do not apply to Small Claims and, in my view, to import the panoply of civil litigation such as is involved with offers of compromise would confound the imperative underpinning the legislation establishing and regulating a Small Claims procedure.
17. Although I have decided that the Magistrates’ Court General Civil Procedure Rules 2010 in relation to Offers of Compromise do not apply to the hearing and determination of Small Claims in the Industrial Division nonetheless, there is still to be determined the respondent’s application for costs based on s 570 (2) of the FWA and for which the respondent relies on the provision of two Calderbank letters of offer. The respondent submits that a failure by the applicant to accept a reasonable offer of settlement contained in each letter of offer constituted an unreasonable act or omission for the purposes of s 570 (2) of the FWA.
18. Section 570 of the FWA provides:

(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.

Note:The Commonwealth might be ordered to pay costs under section 569. A State or Territory might be ordered to pay costs under section 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

(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.

19. A Calderbank letter is so named because of the English Court of Appeal decision in Calderbank v Calderbank [1975] 3 All ER which approved the practice of making offers of compromise expressed to be “without prejudice” but reserving a right to refer to the document on the question of costs. Although initially thought to be confined to matrimonial proceedings where no payment into court procedure was available, following on the English Court of Appeal decision in Cutts v Head[1984] 1 All ER 597 the practice was formally approved for all manner of cases—but only where the option of making a payment into court was inappropriate. The use of Calderbank offers is a common occurrence.

The applicable legislation and rules relating to costs

20. Section 131 of the Magistrates’ Court Act 1989 relevantly provides -

(1)       The costs of, and incidental to, all proceedings in the Court are in the discretion of the Court and the Court has full power to determine by whom, to whom and to what extent the costs are to be paid.

(2)       Subsection (1) applies unless it is otherwise expressly provided by this or any other Act or by the Rules or the regulations.

(2A)     In exercising its discretion under subsection (1) in a proceeding, the Court may take into account any unreasonable act or omission by, or on behalf of, a party to the proceeding that the Court is satisfied resulted in prolonging the proceeding.

21. Rule 63.02 of the Magistrates’ Court General Civil Procedure Rules provides that:

The power and discretion of the Court as to costs under section 131 of the Act must be exercised subject to and in accordance with this Order.

Calderbank Offers

22. In MT Associates Pty Ltd v Aqua-max Pty Ltd (No 3)[2] Gillard J adopted the following passage from the judgment of Rolfe J in Multicon Engineering Pty Ltd v Federal Airports Corporation[3]:

…the evidence of a Calderbank letter, the rejection of the offer contained therein and the failure to obtain a result better than the offer, places the offeror in the position that a court should approach an application by that party for indemnity costs with a predisposition to holding that it is entitled to indemnity costs.

The respondent’s offer

[2] [2000] VSC 163

[3] (1996) 138 ALR 425 at 446

23. As events transpired the respondent’s offer to settle proved better than the result the applicant has achieved. There is no contest about that fact. Therefore, in accordance with the principles distilled by authority, I need to consider whether in light of the circumstances prevailing at the time the offer was rejected, the rejection was reasonable. In Colgate Palmolive Company v Cussons Pty Ltd.[4] Sheppard, J. listed amongst the circumstances he considered as warranting the exercise of the discretion to award indemnity costs –

an imprudent refusal of an offer to compromise.[5]

[4] (1993) 46 FCR 225

[5]         At 233

24. I am aware that in Aljade and MKIC v OCBC,[6] Redlich, J. (as he then was) rejected the notion of any the existence of presumptions, holding that the weight of authority –

strongly points to an approach that involves no preconceptions about when the rejection of a Calderbank offer should lead to the making of a special costs order. It will do so where it is concluded that the rejection of the offer was unreasonable.

[6] [2004] VSC 351 (Redlich, J., 22 September 2004)

25. I think it would be wrong to elevate any particular discretionary consideration applied in one case to inform a particular result in another case. I am satisfied that the weight of authority is to the effect that there is in fact no presumption that the party rejecting the offer and who does not best it at trial should pay the offeror’s costs on an indemnity basis if the offeree receives a less favourable result.[7] Furthermore as Redlich J said, an approach predicated on such a presumption is not justified and has been rejected in decisions of the New South Wales Court of Appeal, by the Federal Court and by the Queensland Court of Appeal as identified by his Honour.

[7]         See, for example, Multicon Engineering Pty Ltd v Federal Airports Corporation (1996) 138 ALR 425.

26. In SMEC Testing Services Pty Ltd v Campbelltown City Council[8] Gyles, J.A expressed a similar approach as applied in Aljad but in these terms:

In the end the question is whether the offeree’s failure to accept the offer, in all the circumstances, warrants departure from the ordinary rules as to costs...

[8] [2000] NSWCA 323 at [37]

27. The Court of Appeal in Hazeldene’s Chicken Farm v The Victorian WorkCover Authority (No.2)[9] approved the approach of Redlich J in Aljad as correct and therefore the rejection of a Calderbank offer should be treated as a matter to have regard to when considering whether to order indemnity costs but not as determinative of the application. I have adopted this approach in reasoning in my consideration of and determination of the matter.

The principles underpinning settlement procedures - encouraging settlement

[9] [2005] VSCA 298

28. The decision in Grbavac v Hart,[10] is a relevant decision. Hayne, J.A. cited with approval what had been said by the New South Wales Court of Appeal in Maitland Hospital v Fisher (No.2)[11] about the policy rationale underlying the availability of special orders for costs where offers of compromise are rejected. As the Court of Appeal in Hazeldene pointed out, although what was said in Grbavac v Hart was expressed in relation to offers of compromise, the exposition of reasoning is relevant to the exercise of the costs discretion where a Calderbank offer has been made. The policy objectives were said to be:

(1)To encourage the saving of private costs and the avoidance of the inherent risks, delays and uncertainties of litigation by promoting early offers of compromise by defendants which amount to a realistic assessment of the plaintiff’s real claim which can be placed before its opponent without risk that its ‘bottom line’ will be revealed to the court;

(2)To save the public costs which are necessarily incurred in litigation which events demonstrate to have been unnecessary, having regard to an earlier (and, as found, reasonable) offer of compromise made by a plaintiff to a defendant;  and

(3)To indemnify the plaintiff who has made the offer of compromise, later found to have been reasonable, against the costs thereafter incurred.  This is deemed appropriate because, from the time of the rejection or deemed rejection of the compromise offer, notionally the real cause and occasion of the litigation is the attitude adopted by the defendant which has rejected the compromise. In such circumstances that party should ordinarily bear the costs of litigation.

[10]        At 164-165.

[11] (1992) 27 NSWLR 721 at 724

29. These policy underpinnings however were tempered by the Redlich, J’s recognition in Aljade,[12] that there are other competing objectives of equal importance.

Potential litigants should not be discouraged from bringing their disputes to the Courts. It is such considerations which underlie the general rule that an order for special costs should only be made in special circumstances.

[12]        (supra) at [60]

30. In Hazeldene, the Court of Appeal said that in its view these competing considerations can be sufficiently accommodated by applying a test of (un)reasonableness.  The critical question becomes whether the rejection of the offer was unreasonable in the circumstances. The Court of Appeal said that it saw no justification for a more stringent test such as “manifestly” or “plainly” unreasonable.
31. There is no ready answer to deciding whether conduct is “reasonable” or “unreasonable” as it will always involve matters of judgment and impression.  These are questions about which different judicial officers might properly arrive at different conclusions. As Gleeson, C.J. has said, “Unreasonableness is a protean concept”.[13] Nonetheless, the test of reasonableness is the yardstick against which I have considered the exercise of my discretion. 

[13]        ReMinister for Immigration and Multicultural Affairs; ex parte Applicant S20/2002 (2003) 77 ALJR 1165 at 1170 [20]

Factors relevant to assessing reasonableness

32.The exercise of the discretion with respect to costs must, like every other discretion, be exercised taking into account all relevant considerations and ignoring all irrelevant considerations.[14]  It must be exercised according to law. Therefore, it is not sensible to compile an exhaustive checklist of relevant circumstances but in considering a submission that the rejection of a Calderbank offer was unreasonable I should at least have regard to the following matters identified in Hazeldene:[15]

[14]        See House v R (1936) 55 CLR 499 at 505.

[15]        (supra) at [25]

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;

f.whether the offer foreshadowed an application for an indemnity costs in the event of the offeree’s rejecting it.

33.The matters adumbrated in Hazeldene are not expressed as, or intended to, amount to an exhaustive list of considerations or be applied prescriptively.

34.Because the unreasonable refusal of an offer of compromise is, by itself, a proper ground for the award of indemnity costs it seems that it is unnecessary that the respondent make out facts that might be relevant to other, well-recognised, grounds for indemnity costs.  This was explained by Redlich, J. in Aljade, as follows:

It is not necessary to establish misconduct by the offeree before the rejection of the offer can be viewed as unreasonable.  Lack of merit in the way a party has conducted its case is not a pre-requisite for the making of an indemnity costs order [on this ground].[16]

[16]        At [93]

35.It is also unnecessary for the plaintiff offeror to show that the defendant offeree acted with “wilful disregard of known facts or clearly established law”, or that it acted with “high-handed presumption”.[17]

[17]        cf. Colgate Palmolive (supra) loc cit.

36.An example of a case in which some of the principles I have discussed have been applied is Rosselli v Rosselli (No. 2)[18].  Forrest J. had before him an application for indemnity costs predicated on two discrete matters. The first was that there was an entitlement to costs thrown away on a solicitor/client basis by reason of the plaintiff’s conduct of the proceeding, and, second that a Calderbank offer made by the defendant should result in an order for solicitor/client costs in consequence of the rejection from the date the offer was made. His Honour made some pertinent comments in regard to the utility of hindsight in dealing with an application for indemnity costs. He said:

[18] [2007] VSC 438 at [27] – [34]

Turning to the first ground, I think that a court should be wary of making indemnity or solicitor/client orders on the basis of the conduct of a party, either prior to a trail or in the course of the trial. For such a special cost order to be made a party must be shown to have acted unreasonably and hindsight must be eschewed. In this case it is suggested by the defendant that the plaintiff engaged in the pursuit of futile claims. I do not think that the plaintiff’s claims could necessarily be described as futile, although I regard them at best, in the main, as ambit with the exception of the Tooborac claim.

37.In the application before me the respondent did not press its claim for an award for indemnity costs by reason of the conduct of the proceeding by the applicant but by reference to and reliance on the contention that the Calderbank offer of 2 August 2012 should result in a special costs order because its rejection was unreasonable. To the suggestion that the respondent also argues for an award of costs on the basis that the proceeding conducted by the applicant was futile because the claim for a level 3 classification was doomed to fail, I reject such a submission.

38.The first Calderbank letter was dated 16 April 2014 in which the respondent offered the applicant the sum of $1,300 in full and final settlement of the matter. The applicant did not respond to the Calderbank offer. The respondent says the applicant’s failure to respond to it by acceptance of it was an unreasonable omission which caused the respondent to incur legal costs up to the date of decision on 29 May 2015.

39.As regards the effect of the Calderbank correspondence the applicant submitted that:

“As Mr. Davison is well aware, I am self-represented in these proceedings, and I am not a lawyer myself. I am not familiar with the “Calderbank” precedent, and what it entails”

40.I must say I am not swayed by the applicant’s recourse to a lack of understanding of the effect of a Calderbank letter of offer because, after all, a good part of the controversy in the proceeding centred around the applicant prosecuting her skill and experience in running ligation files including the family law partner’s files. Furthermore, the letter is expressed in a manner that makes it apparent as to the potential effect of acceptance or rejection. Thus I find the applicant’s recourse to ignorance as a ground of response rings hollow.

41.The letter satisfies most of the considerations identified in Hazeldene. One consideration however that cannot be so decidedly resolved in the respondent’s favour in my judgment concerns the applicant’s prospects of success assessed as at the date of the offer. The respondent submitted that on an objective view of the proceeding the applicant she should not have commenced the proceeding because of the opinion contained in the outcome notification of the office of the Fair Work Ombudsman. The respondent submits that the applicant should have been aware that her proceeding was unmeritorious. I reject that submission. The respondent relies on a written outcome of notification from the Office of the Fair Work Ombudsman. That office provides useful assistance to employees but it is a not a Court and its opinions are not derived from judicial reasoning and the outcome notification is equivocally expressed. A person should not be placed at a jeopardy of costs should they elect to proceed to Court in the face of an opinion expressed by an administrative body even one as estimable as the Office of the Fair Work Ombudsman. Indeed, although I concluded less favourably to the applicant than the recommendation of the ombudsman’s office, its conclusion that the applicant had at some pint progressed to a level 2 classification was not adopted by the respondent.

42.The applicant’s claim was a proceeding brought under the FWA and alleged a failure by the employer to comply with obligations in relation to payments due under a different but more allegedly more appropriate award level classification. This in my view elevates the nature of the claim as one having a utility and value merely beyond the applicant’s mere personal or monetary interest. The determination of work to the appropriate classification within an industrial instrument is an important exercise and the correctness of a classification has a function in recognizing a worker’s skills and competencies in employment that is either being performed with an employer or has been performed with an employer and cannot be as readily adjudged as amenable to compromise by way of settlement as may general civil litigation or other types of industrial litigation.

43.The applicant’s claim is readily distinguishable from for example Mifsud v Veolia Transport Sydney Pty Ltd[19] relied on by the respondent which was neither and an award classification question or proceeding commenced as a Small Claim. In Muzzicato v New Cleaning Services Pty Ltd[20] another authority relied on by the respondent the applicant’s claim was determined summarily and that is certainly not the case here.

44.Next and also a relevant distinguishing feature of this proceeding is that the respondent has always acknowledged that it underpaid the applicant in the calculations made of her entitlements on termination. It says further that it provided the Applicant with a cheque in the sum of $1,256.04 which was an erroneous amount but was of course subsequently corrected on a predication that the applicant’s employment classification was level 1.

45.Next it is submitted by the respondent that the applicant claimed $7,701.01 in entitlements based on a level 3 classification. The fact of the applicant having failed in establishing that her employment was a level 3 classification was arrived at after a hearing in which much evidence was given. Although the applicant was unsuccessful I certainly did not conclude that her contention was unmeritorious and indeed I noted that there were areas in which the applicant did perform work commensurate to a Level 3 classification. Indeed at [109] of my reasons, I found:

I am satisfied that the some aspects of the applicant’s work would objectively be capable of meeting certain limited indicia provided for in a Level 2 and a Level 3 employee

46.That the applicant contended for such a classification outcome but was unsuccessful is not the touchstone against which the reasonableness or otherwise of having commenced the proceeding or not having accepted the offers of settlement should be judged. The view I took of the case satisfies me that the applicant’s case was not commenced or continued without reasonable cause or unreasonably.

47.Of course the fact that the applicant was unsuccessful in the classification argument is a relevant matter and I am not suggesting that it is the case that an unsuccessful or largely unsuccessful party can inoculate themselves against the risk of an order for costs in having rejected an offer in the hope that a court howsoever constituted might prefer her or his evidence in preference to the opposing party. Rather the issue is whether an applicant knowing what was known of the case at the time the offer was made reasonably rejected it. After all if an outcome rests on nothing more than a hope that a court might make a finding favourable to a party and adverse to another then litigation is reduced to nothing better than a roll of the dice at a gaming house or a wager placed at the track. Moreover, such an attitude would usurp the policy imperatives underpinning the promotion of settlement in accordance with established authorities, court rules and legislative directives expressed for instance in s 19 of the Civil Procedure Act 2010. The object of making an offer is to bring the litigation to an end and to put on notice to the other side that if she he or it refuses the offer and subsequently the offerer recovers more in the proceeding, then justice and fairness requires that a special order for costs be made.

[19] [2012] FMCA 167

[20] [2011] FMCA 1044

48. In Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd[21], McDougal J said:

Where the question to be considered is whether an offer was reasonable, or whether its rejection was unreasonable, the analysis and answer require attention to the objective rather than subjective circumstances. It is for the party asserting reasonableness to show, by reference to the relevant circumstances objectively considered, that the offer was reasonable. Equally, if there is a persuasive burden cast on an offeree to show that its rejection was not unreasonable, that must be shown by an objective analysis of the relevant circumstances.

[21] (2004) 188 FLR 278 (appealed but not on grounds affecting the above statement)

49. In my judgment the applicant’s refusal of the respondent’s offers at the time they were rejected should not on balance be objectively assessed as unreasonable based on an assessment of the fundamental merits of the applicant’s case or the fundamental deficiencies in the respondent’s case at that juncture.

50. Another matter that causes me disquiet is the claim for professional legal costs itself. The respondent was represented by an employee solicitor of the respondent. The proceeding, consisting as it did of a Small Claim, a party to a small claim is not allowed legal representation otherwise than by the grant of leave. Leave was granted for the respondent to be represented by Mr. Davison because a company may ordinarily only be represented by an Australian lawyer. The respondent is an incorporated entity in the business of the profession of a firm of solicitors and hence it was a fait accompli that representation by an officer of the company would result in representation by a person legally qualified. This was a benefit that fell to the respondent because of its incorporation not a right. This benefit should not necessarily result in an order for legal professional costs and is further reason that confirms my view that an award of legal professional costs is not warranted.

51. I am not willing to conclude that the applicant engaged in an unreasonable act or omission in the refusal to accept the compromise of the proceedings and hence the application for costs predicated on s 570 of the FWA and/ or by reason of the failure to accept the Calderbank offers fails.

The matter of calculations
Underpayment

52. Even at this late stage of the matter the parties were still at loggerheads over the correct calculations applicable during periods of her employment.  In an affidavit filed and served by the respondent the figures exhibited by it and relied on are identified as taken from the “Fair Work Ombudsman Paycheck Plus online calculator” for a level 1 employee and these figures are different from the figures produced and relied on by the applicant and derived from the Annual Wage Review Determinations of Fair Work Australia in relation to the Legal Services Award 2010. Indeed the apparent discrepancy in the applicant’s figures and those of her former employer it was one of the concerns and misapprehensions the applicant harboured.

53. I accept the rates produced by the respondent but in order to make sense of them and to explain in particular for the benefit of the applicant why the respondent’s figures are correct when she has understandably relied on rates made by Fair Work Australia in annual wage determinations, it is necessary for me to explain the operation and transitional arrangements that were put in place for employees and employers moving into the modern award system and which explains the difference in the rates relied on by the parties.

Resolving the discrepancy in pay rates by reference to the transitional arrangements applicable to Modern Awards

54. At the date required for the purpose of the calculations to account for the conclusion of the plaintiff’s employment her terms and conditions were governed by the Legal Services Award 2010 [MA000116] (“modern award”). The Victorian Legal Professional, Clerical and Administrative Employees Award 2004 [AP831581] (”pre-modern award”) formerly applied. Modern Awards commenced operation on 1 January 2010. However, minimum wage, loading and penalty entitlements commenced from 1 July 2010. The modern award, like almost all modern awards, include provisions to “transition” employers and employees from their pre-modern award to the modern award system. This modern award includes transitional provisions that provide for the “phasing in” of increases or decreases in minimum wages, penalties and loadings in the modern award in 5 increments of 20% over a period of 4 years commencing from the first full pay period on or after 1 July 2010 and ending at the first full pay period on or after 1 July 2014. As a result the position that prevailed until 1 July 2014 was that wage, loading and penalty entitlements under modern awards needed to be changed on or after 1 July each year and were hence recalculated from the published annual wage review determinations of Fair Work Australia.

55. The applicant’s identified figures derived from the annual determinations of Fair Work Australia are moderated in the periods covered by the transitional arrangements applicable to the modern award and thus accounts for the disparity between the amounts she has used and the rates identified and relied on by the respondent which have taken account of proportional transitional amount and in this case subtracted from the modern award rate.

56. The applicant commenced her employment with the respondent on 5 March 2012 and it ended on 9 August 2013. The parties agree that there are 4 distinct periods in issue. They are:

(i)5 March 2012 to 30 June 2012;

(ii)1 July 2012 to 15 December 2012

(iii)16 December 2012 to 30 June 2013

(iv)1 July 2013 to 9 August 2013

57. Within the above periods of employment the applicant’s rate of pay altered.

58. For example the applicant refers to Period 1. Because of her age she was paid 90% of the base weekly rate of pay of $657.60 which equates to $591.84 or $15.57 per hour. The respondent agrees that the applicant was paid $15.57 per hour but that the rate applicable under the Award was only $14.87 per hour which would equate to $565.06 weekly rate of pay. Hence during Period 1 the applicant was in fact paid over the award rate for her appropriate classification.

59. For Period 2 the applicant says she should have been paid 90% of the base rate of pay of $676.70 which would amount to $609.03 or $16.03 per hour but that she was only paid $591.84 per week or $15.57 per hour. On her figures this calculates to an underpayment of $17.19 per week or $412.56 over a period of the 24 weeks. The respondent says however that the applicant was paid $15.56 per hour.  There is no underpayment for this period.

60. For Period 3 the applicant says she was paid the applicable base rate of $676.70 or $17.81 per hour. The respondent agrees that the applicant was paid $17.81 per hour but in its material it relies on a base rate of $17.29 per hour which would equate to $657.02 per week. Again it seems the applicant received the benefit of an overpayment.

61. For Period 4 the applicant says the base rate is $694.30 per week or an hourly rate of $18.27. The respondent says it paid the applicant only $17.81 per hour but says the base rate was $18.01 per hour which would equate to $684.38 per week. Hence the respondent agreed there was an underpayment and it amounted to $45.60 and accords with my reasons for decision published on 29 May 2015.

Annual leave - unpaid

62. The applicant claimed 5 days of annual leave. This assessment accords with the Fair Work Ombudsman review outcome notification correspondence dated 5 December 2013 that:

“Records provided indicate you are owed approximately 38 hours of accrued annual leave.”

63. The respondent acknowledged an omission to pay 38 hours of accrued annual leave. The applicant based her claim on 5 days annual leave being unpaid at the rate of $18.27 this equates to $ 694.26. However, the respondent relies on the hourly rate of $ 684.38 or $18.01. It admits that leave loading of 17.5% is required. The respondent says that the applicant used 13 days of annual leave during her employment, a fact I accept on the evidence, and over the period that the 13 days leave was taken but loading not paid, one day fell within the hourly rate applicable for Period 1, that is, an hourly rate of $14.87. To derive the ordinary hours of work under the modern award an average of 38 hours is divided equally over a 5 day week resulting in average hours of work of 7.6. Leave loading of 17.5 % is required to be added to the daily rate which is the multiple of 7.6 hours x the hourly rate of $14.87.  Hence the applicant should have been paid $19.78 inclusive of 17.5 % leave loading.

64. For the remainder of the annual leave days the rate applicable was for Period 3 or $17.29 per hour which, when the same modeling and formula is applied, results in leave loading for 12 days in the amount of $275.95.

65. Therefore, I am satisfied that the discrepancies raised by the applicant in the calculations relied on must be resolved in favour of the respondent. These amounts correlate to the amounts I settled on in my earlier published reasons for decision.  However, I cannot fail to stress how understandable has been the applicant’s reliance on the published wage rate determinations by Fair Work Australia.  The discrepancy in rates exists because of the existence of specialized provisions that were put in place to bed down and ameliorate the immediate impact of transition from a pre modern award to a modern award based system. The transitional arrangements are extremely complicated, as is the formulae in obtaining the transitional rate and applying the same, and without an explanation and understanding of the operative effect of the system, means it is not surprising that an employee such as the applicant may feel aggrieved by their former employer having recourse to, recitation of and reliance on an alternative rate without explanation. Fortunately the transitional arrangements concluded in 2014 and the problems that beset this case are not likely to have future relevance.

Conclusion

A.    I declare that the applicant was throughout the period of her employment with the respondent a Level 1 employee

B.   I declare that the applicant was underpaid in accordance with her entitlements pursuant to the modern award

THE COURT ORDERS:

1.The applicant’s claim for reclassification and underpayment of wages and benefits based on a different classification is dismissed for the reasons expressed in the decision of the court dated 29 May 2015

2.The respondent to pay to the applicant the sum of $1,093.24 comprising:

(a).Unpaid wages of $45.60

(b).Accrued annual leave of $684.38

(c).Unpaid leave loading totaling $295.73

(d).Superannuation in the amount of $ 67.53 ( such sum to be paid forthwith into the appropriate superannuation scheme)

3.No order for costs.