Howe v Qantas Airways Limited (No.2)
[2004] FMCA 934
•17 December 2004
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| HOWE v QANTAS AIRWAYS LIMITED (No.2) | [2004] FMCA 934 |
| HUMAN RIGHTS – DAMAGES – Assessment of damages based upon unpaid sick leave – whether the employer is entitled to set off the value of the sick leave that would have been used if sick leave had been granted, considered. COSTS – Competing applications for costs – applicant partially successful – whether outcome of the proceedings was more favourable than an offer of compromise made by the respondent – consideration of which party should pay costs, the basis on which costs should be awarded and the appropriated scale to apply. INTEREST – Consideration of interest up to judgment and interest on the judgment. TAXATION – Whether damages taxable considered. |
Federal Court Rules 1979 (Cth)
Federal Magistrates Act 1999 (Cth), s.79
Federal Magistrates Court Rules 2001 (Cth)
Legal Profession Act 1987 (NSW)
Sex Discrimination Act 1984 (Cth), ss.5, 7A, 14A, 40
Anglo-Cyprian Trade Agencies Limited v Paphos Wine Industries Limited [1951] 1 All ER 873
Australian Competition & Consumer Commission v Australian Safeway Stores Pty Ltd [2002] FCA 1293
BP Australia Pty Ltd v Nyran Pty Ltd [2003] FCA 1308
Colgate Palmolive v Cussons (1993) 118 ALR 248
Commissioner of Australian Federal Police v Razzi(No 2) (1991) 101 ALR 425
Cretazzo v Lombardi (1975) 13 SASR 4 at 12
Cummings v Lewis (1993) 113 ALR 285
Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd (1993) 26 IPR 261
Donald Campbell & Co v Pollack [1972] AC 732
Escobar v Rainbow Printing Pty Limited (No 3) [2002] FMCA 160
Fetherson v Peninsula Health (No 2) [2004] FCA 594
Hinchliffe v University of Sydney (No 2) [2004] FMCA 640
Ho v Regulator Australia Pty Ltd & Anor (No 2) [2004] FMCA 402
Hollingdale v NRAHS [2004] FMCA 721
Horman Distribution Group Limited [2001] FMCA 52
Howe v Qantas Limited [2004] FMCA 242
Hughes v Western Australian Cricket Association (Inc) (1986) ATPR 40-748
Ingui v Ostara & Anor (No 2) [2003] FMCA 531
Latoudis v Casey (1990) 170 CLR 534
McBride v State of Victoria (No 2) [2003] FMCA 31
North Australian Aboriginal Legal Aid Service Inc v Bradley(No 2) [2002] FCA 546
Oshlack v Richmond River Council (1998) 193 CLR 72
Queensland v J L Holdings [1997] 189 CLR 146
Queensland Wire Industries Pt Ltd v Broken Hill Pty Co Ltd (1987) 17 FCR 211
Rispoli v Merck Sharpe & Dohme & Ors (No 2) [2003] FMCA 516
Ruddock v Vadarlis (No 2) (2001) 115 FCR 229
Saitta Pty Ltd v Commonwealth [2001] FCA 8
Trade Practices Commission v Nicholas Enterprises Pty Ltd (No 3) (1979) 42 FLT 213; 29 ALR 201
Xiros v Fortis Life Assurance Limited [2001] FMCA 15
| Applicant: | LINDY HOWE |
| Respondent: | QANTAS AIRWAYS LIMITED |
| File No: | SYG1373 of 2002 |
| Delivered on: | 17 December 2004 |
| Delivered at: | Sydney |
| Decided on written submissions Date final submissions received: | 6 December 2004 |
| Judgment of: | Driver FM |
REPRESENTATION
| Counsel for the Applicant: | Ms K Nomchong |
| Solicitors for the Applicant: | Carroll & O’Dea Solicitors |
| Counsel for the Respondent: | Ms K Eastman |
| Solicitors for the Respondent: | Blake Dawson Waldron |
ORDERS
For the purposes of order 2 made on 15 October 2004, the Court declares that the amount of damages due to the applicant is $24,753.85.
In order 4 made on 15 October 2004 the date of 15 July 2001 is substituted for the date of 26 February 2001.
The respondent is to pay the applicant’s costs of and incidental to the principal proceedings in accordance with Schedule 1 to the Federal Magistrates Court Rules 2001 (Cth).
The Court certifies that it was reasonable for the applicant to employ an advocate to appear for her at each hearing conducted in the proceedings.
The respondent is to pay the applicant’s costs of the costs application, fixed in the sum of $2,000.
The parties have liberty to apply for further directions or orders in relation to the above orders on three days notice.
FEDERAL MAGISTRATES |
SYG1373 of 2002
| LINDY HOWE |
Applicant
And
| QANTAS AIRWAYS LIMITED |
Respondent
REASONS FOR JUDGMENT
On 15 October 2004 I gave judgment in the principal proceedings in this matter: Howe v Qantas Limited [2004] FMCA 242. I made orders in favour of Ms Howe in the form of a declaration of unlawful discrimination, an order for payment of special damages (not quantified in the order), an order for general damages in the sum of $3,000, and an order for interest up to judgment. I gave the parties liberty to apply for further orders and directions in relation to those orders.
At the conclusion of the judgment I stated that I would hear the parties and the Sex Discrimination Commissioner as to costs. At the time judgment was handed down, the parties indicated a wish to make written submissions as to costs.
Respondent’s submissions
The following written submissions were filed on behalf of Qantas on 18 November 2004:
1.Pursuant to the Reasons for Judgment delivered on 15 October 2004 in these proceedings (the Judgment), the Respondent seeks the following orders in respect of costs:
a)that the Respondent pay 25 percent of the Applicant's costs of and incidental to the proceedings on a party/party basis up to 11am on 16 March 2004 in accordance with the event based scale in Schedule 1 to the Federal Magistrates Court Rules 2001 (Cth) (“Federal Magistrates Court Rules”);
b)that the Applicant pay the Respondent's costs of and incidental to the proceedings on an indemnity basis on and from 11am on 16 March 2004;
c)that, for the purposes of Rule 21.15, it was reasonable for the Respondent to employ an advocate and a solicitor to represent it at each hearing conducted in the proceedings;
d)each party to bear their own costs in respect of the parties' applications for costs, submissions in respect of costs and any hearing on the issue of costs;
e)no order for costs with respect to the Sex Discrimination Commissioner;
f)that the Applicant pay the Respondent's costs within 28 days; and
g)that the time for an appeal be extended until the expiration of 21 days after the date of judgment in respect of the applications for costs.
Calculation of damages
2.In accordance with Order 2 of the Judgment, the Respondent has calculated the total gross value of 140 sick leave days from 26 February 2001 to 15 July 2001 (assuming the Applicant had taken it at the time) as $25,815.25. The gross value of sick leave which accrued during that period to be deducted in accordance with Order 2 is $1,061.40.
3.Instead of being paid for that sick leave in 2001 and having the equivalent amount of leave deducted from her accrued sick leave entitlements at that time, the Applicant retained the value of 140 accrued sick leave days in her sick leave bank. The Applicant has continued to have the benefit of accessing that sick leave from 20 May 2002 to the date of the Judgment.
4.By reason of the fact that the Applicant was not paid the 140 sick leave days in 2001, those entitlements (which would have ceased to exist on payment in 2001) remain available to the Applicant. The current gross value of those entitlements is $16,258.87.
5.As a result, the loss suffered by the Applicant is far less than the gross value of 140 sick leave days for the period 26 February 2001 to 15 July 2001.
6.Given that the purpose of a damages award is to place the Applicant in the position she would have been in had the discrimination not occurred and not create a windfall or enrichment, these circumstances must be taken into account in determining the total value of damages payable to the Applicant arising from the Judgment in respect of special damages, general damages and interest.
7.Based on the orders, the amount of damages payable to the Applicant is calculated as follows:
o Sick leave entitlements = $8,494.97
o General damages = $3000
o Sub-total =$11,494.97
o Interest =$1,206.97
o Total =12,701.94
Respondent's offer of compromise
8.The combined effect of Rule 1.05 and Schedule 3, Part 2 of the Rules is that Order 23 of the Federal Court Rules 1979 (Cth) (“the Federal Court Rules”), except Rules 14 and 15, apply.
9.The Respondent made an offer of compromise to the Applicant in accordance with Order 23 of the Federal Court Rules on 15 March 2004 (Exhibit 1) (the Offer). The Respondent offered to settle the proceedings on the basis that it paid the Applicant the gross sum of $15,000.00 plus the Applicant's costs of the proceedings as agreed or taxed. The Offer was not specified as inclusive of interest.
10.The Offer rejected by the Applicant was more favourable than the Judgment on the claim.
The Applicant's application for costs
11.We were advised by the Court on 3 November 2004 that the Applicant had made an application in respect of costs. No formal application for costs was served on the Respondent. In light of the application for costs made by the Respondent, the Respondent has agreed to file its submissions in respect of costs before receiving the Applicant's submissions. However, the Respondent reserves its right to reply to the Applicant's submissions in respect of costs.
12.In accordance with Order 23, Rule 11(5) of the FCR, where the Applicant has rejected an Offer which is more favourable than the Judgment on the claim, the Applicant is entitled to an order that the Respondent pay the Applicant's costs in respect of the claim up to 11am on 16 March 2004, unless the Court otherwise orders.
13.The Respondent submits that the Court should, as a matter of discretion, determine that only part of the Applicant's party/party costs up to 11am on 16 March 2004 be borne by the Respondent.
14.It is relevant in exercising the discretion of the Court as to costs to look at the substantial outcome and take into account the fact that the Applicant was unsuccessful in respect of significant aspects of her claim: McBride v State of Victoria (No 2) [2003] FMCA 31; Ho v Regulator Australia Pty Ltd & Anor(No 2) [2004] FMCA 402.
15.The Applicant succeeded on only one of the four issues before the Court (the issues are set out at paragraph 69 of the Judgment). In this regard, the Court should take into account the following:
a) The issue upon which the Applicant was successful, namely the Respondent's refusal to allow the Applicant to access her accrued sick leave prior to commencing maternity leave, was the subject of minimal pleadings, evidence and submissions on the part of the Applicant;
b) the only affidavit evidence adduced by the Applicant in respect of this aspect of her claim is in paragraphs 41 and 42 of the Affidavit of Lindy Howe dated 23 December 2002;
c) the only submissions made by the Applicant in respect of this aspect of her claim are at paras 4.45 to 4.51 and 10.15 to 10.18 of the Applicant's Written Submissions dated 28 May 2004. The submissions at paras 4.52 to 4.72 of the Applicant's Written Submissions deal with both the refusal to pay sick leave and the Respondent's practice of not paying flight attendants who cease flying duties because of their pregnancy at their base salary. At most the submissions represent around 6 pages of the Applicant's 50 pages of Written Submissions;
d) in our estimate, the Applicant's material directed to this aspect of the claim constitutes around 5 to 10 percent of the total material filed in the proceedings, and would make up far less than 25 percent of the costs incurred by the Applicant in the proceedings;
e) the issues upon which the Applicant was unsuccessful were responsible for approximately 95 percent of the legal costs incurred by the Respondent.
17.As such, the costs awarded to the Applicant should be reduced by reason of the limited nature of her success.
18.In exercising its discretion, the Court should also have regard to the Applicant's conduct of the proceedings including the following:
a) the costs thrown away by the Applicant, and the costs unnecessarily incurred by the Respondent, arising from numerous amendments to her claim during the course of the proceedings: see para [72] of the Judgment and paras 4 to 32 of the Respondent's submissions;
b) the costs incurred by the parties because the Applicant's claim had expanded beyond the complaint terminated by HREOC. The Respondent was sufficiently concerned to make a preliminary application to the Court under Rule 13.10 of the Rules on 18 March 2004 in respect of the Court's jurisdiction to hear certain aspects of the claim and the scope of the Applicant's claim: see Outline of the Respondent's Written Submissions dated 17 March 2004, Affidavit of Rachel Bernasconi dated 17 March 2004 and Transcript of Proceedings dated 18 March 2004; and
c) as a result of the interlocutory decision of the Court dated 18 March 2004, certain aspects of the Applicant's claim were not permitted to proceed. Not insubstantial parts of the Applicant's evidence were directed at those issues, resulting in costs thrown away by the Applicant.
18.The Respondent should not be required to bear the Applicant's costs in this regard.
19.Taking into account the limited success of the Applicant and the costs thrown away by the Applicant due to her conduct of the proceedings, in all the circumstances it would be more than reasonable for the Court to fix the amount of costs payable to the Applicant pursuant to rule 21.02(2)(a) of the Rules at 25 percent of the amount which the Applicant would have received by a strict application of the costs schedule up to 11am on 16 March 2004.
20.Any costs payable to the Applicant should be offset against any costs awarded to the Respondent.
The respondent's application for costs
21.The Respondent seeks an order for costs pursuant to section 79 of the Federal Magistrates Act 1999 (Cth) (“the Federal Magistrates Act”) and Rule 21.02(2) of the Rules.
22.The Offer rejected by the Applicant was more favourable than the Judgment on the claim.
23.Order 23, Rule 11(5) of the FCR provides that, in these circumstances, the Respondent is entitled to an order that the Applicant pay its indemnity costs in respect of the claim incurred since 11am on 16 March 2004, unless the Court otherwise orders.
24.The Applicant had legal representation at the time when the Offer was made and rejected and should have been aware of the potential cost implications of rejecting the Offer. There are no countervailing reasons why the Court should make orders against the Applicant for costs otherwise than in accordance with Order 23, Rule 11(5).
25.The Applicant should be ordered to pay the Respondent's costs within 28 days.
Costs of dealing with applications for costs
26.Each party has made an application for costs. As such, it would be reasonable for the Court to order each party to bear their own costs in respect of the parties' applications for costs, submissions in respect of costs and any hearing on the issue of costs.
Sex Discrimination Commissioner
27.We have been advised that the Sex Discrimination Commissioner is prepared to bear her own costs of the proceedings provided the parties do not seek an order for costs against her.
28.The Respondent makes no application for costs with respect to the Sex Discrimination Commissioner.
Extension of time for appeal
29.The parties were provided with the opportunity to consider the issue of costs after having read and considered the Judgment. As the amount of damages payable to the Applicant arising from the Judgment was left to the Respondent to calculate, the parties should not be disadvantaged in terms of their appeal rights by that situation.
30.Accordingly, the Court should extend the time for appeal from the principal Judgment delivered on 15 October 2004 for 21 days after the date of reasons for judgment on the issue of costs pursuant to Order 52 rule 15(1)(a)(iii) of the FCR: Escobar v Rainbow Printing Pty Limited (No 3) [2002] FMCA 160; Rispoli v Merck Sharpe & Dohme & Ors (No 2) [2003] FMCA 516.
Summary
31.The Respondent submits that at all times its conduct has been proper and its conduct of the proceedings has not served to unnecessarily increase the costs.
32. The Respondent does not seek a hearing on the issue of costs.
33.In light of the submissions made on behalf of the Respondent, the Court should make orders as set out in paragraph 1 of the Respondent’s submissions.
The following submissions were filed on behalf of Ms Howe on 29 November 2004:
General
1.1In its Written Submissions as to Costs, the Respondent is clearly attempting to cavil with the Orders made by the Court in respect of the damages payable to the Applicant.
1.2Before any submissions can be made as to the appropriate costs orders which should be made, the Court will be required to make orders in relation to the calculation and quantum of damages.
Calculation as to damages
2.1The Orders made by the Court were clear yet the Respondent attempts to manipulate those Orders so as to obtain a much reduced quantum, which thereafter serves its purpose as to the submissions on costs and an Offer of Compromise which was served by the Respondent.
2.2The Respondent ought not be permitted to go outside the terms of the Orders for this (or any purpose). The Applicant submits that the orders provide for an award of damages calculated as set out below.
Non-payment of sick leave
2.3The Court ordered that the Applicant was entitled to receive damages for sick leave of "140 days until 15 July 2001 at the rate of pay that would have applied to sick leave if clause 47.4.7 of EBA IV had applied in the circumstances".
2.4The Respondent has made this calculation to be (including SDTA) $25,815.25 (gross). The Applicant accepts that is the correct figure.
2.5The Court also ordered that the Respondent is entitled to set-off in the calculation of damages an amount equal to the Applicant's salary for each day's sick leave accrued during the period referred to in paragraph 2.3 above. The Applicant contends that such a set-off is inappropriate in the circumstances since, if the Respondent had permitted the Applicant to access her accrued sick leave at the time (for the said 140 days), the Applicant would still have accrued sick leave whilst being on sick leave. That is how the accrual of sick leave occurs in the normal course of employment. Sick leave accrues for all period of continuous service including normal working time and annual leave. It also accrues during those periods on which an employee is absent from work on sick leave.
2.6Nonetheless, the Applicant does not, in these submissions, cavil with that part of the Court's order.
2.7The Respondent has calculated that the Applicant would have accrued 5.75 sick days in the relevant period which would in money terms be equivalent to $1,061.40 (gross). The Applicant accepts that is the correct figure. That is the appropriate amount of set-off.
2.8Accordingly, the proper quantum for economic loss (by reference to paragraph 133 of the Judgment) is:
$25,815.25 - $1,061.40 = $24.753.85.
2.9The further deduction proposed by the Respondent in their calculations for the current value of accrued sick leave is mischievous. The Applicant accepts that by virtue of being paid the monies equivalent to 134.25 sick leave days (being 140 days - 5.75 days), that 134.25 sick leave days will need to be deducted from her current accrued sick leave entitlement. However, the Applicant says that the Respondent's calculations effectively amount to double-dipping and deprive the Applicant of the full value of the Court's award.
Deduction for applicable tax
2.10The payments for sick leave (if made at the time) would have been subjected to taxation. However, the Respondent's calculations stipulate that tax ought be deducted not only from the sick leave entitlement but also from the interest on the economic loss and the general damages sum. This is rejected. Court awarded interest does not fall into that category.
2.11The Respondent has calculated interest on the total award including general damages and then subjected it to tax and then somehow added in the general damages but stating that they are not taxed. The calculations are no more than mathematical gymnastics which confuse the nature of the Orders.
2.12 The calculation is simple.
2.13Averaging out the sick leave payments over the relevant period, the applicable tax rate (as at 2001) was 30%.
2.14Accordingly, the nett amount payable in lieu of the sick leave the Applicant would have been paid for 134.25 days up until July 2001 is
$24,753.85 less 30% tax = $17.327.70.
General damages
2.15The award for general damages was for $3,000. No taxation applies to that award.
Interest
2.16The total of the sums for economic loss (non payment of sick leave assessed on a nett basis) and general damages is $20,327.70.
2.17The Court awarded interest at the rate of 10.5% (see para 136 of Judgment).
2.18The interest should apply from 15 July 2001 (being the last date of the unpaid maternity leave period) to the date of judgment. Although the decision was handed down on 15 October 2004, no judgment has yet been given in relation to the precise award of damages. It is therefore submitted that interest ought run until the specific orders are made.
2.19The calculation of interest up to the date of these submissions is: $20,327.70 x 10.5% x 3 years and 134 days = $7,186.81. And continuing after 26 November 2004 at $5.85 per day
2.20Accordingly, as at 26 November 2004, the proper quantum of damages to be paid by the Respondent to the Applicant is:
Nett figure for economic loss $17,327.70
General Damages $3,000.00Interest $7.186.81
Total: $27,514.512.21This is the figure against which any Offer of Compromise ought be assessed.
General principles in relation to costs
3.1The Court has power to award costs pursuant to s.79 of the Federal Magistrates Act.
3.2The Court has a discretion to determine by whom and to what extent costs are to be paid under the Court's inherent powers. Whilst the rules provide that the parties entitled to costs in a proceeding in accordance with Schedule 1 to the Federal Magistrates Court Rules ("Schedule 1 costs"), it is open to the Court to order payment on any other basis including on a party/party or indemnity basis.
3.3 The Applicant was successful in its claim against the Respondent.
3.4The usual order as to costs is that costs follow the event: Ruddock v Vadarlis (No. 2) (2001) 115 FCR 229; Australian Competition & Consumer Commission v Australian Safeway Stores Pty Ltd [2002] FCA 1293. Although the Court's power to award costs is discretionary, the discretion "must be exercised judicially and not against the successful party except for some reason connected with the case": Ruddock v Vadarlis (No. 2).
3.6The policy basis for providing a Schedule of Costs which are considerably less than the normal party/party costs is provided so as not to discourage potential applicants from bringing their claim.
3.7In this matter, however, the Applicant contends that her costs ought not be awarded in accordance with Schedule 1 costs. The Applicant submits that the Court ought exercise its inherent discretion to award her costs on a party/party basis for the following reasons:
Public interest
3.8There was a genuine public interest character in the issues ventilated by the Applicant in this case.
3.9That public interest was to be found in both aspects of the Applicant's claim.
3.10First, the Applicant brought proceedings in relation to the failure of her employer to either pay wages to her or to allow her access to accrued sick leave for a period of time when she had been required to stand down from normal flying duties by reason of her pregnancy and in accordance with the terms of the EBA.
3.11The EBA was silent on what should occur in terms of payment to the Applicant (and other flight attendants) during that period where she was forced to stand down from flying duties but her contract of employment remained on foot.
3.12Further, it was in the public interest to redress a system whereby the Respondent had permitted a scheme whereby flight attendants (including the Applicant) returning to work from their maternity leave were allowed to access up to six weeks accrued sick leave, almost by way of an incentive payment, but where the Respondent refused to allow the flight attendants (including the Applicant) the ability to access that sick leave prior to or during the time she was off work on this forced maternity leave.
3.13The second public interest aspect examined in these proceedings concerned the manner in which the provisions of the Sex Discrimination Act 1984 (Cth) ("the Act') could be utilised in relation to claims of unlawful discrimination on the grounds of family responsibilities.
3.14What was clarified in these proceedings was that an applicant was not restricted to reliance on section 7A. The Applicant contended (and the Court accepted) that it was possible for an applicant to rely on the provisions of 8.5(2) of the Act arguing, amongst other things, that the responsibility for the care of young children was a characteristic which generally appertained to women and that the requirement to work fulltime was one which discriminated against women.
3.15Although the Applicant was unsuccessful in this part of her claim, the litigation has produced the benefit of allowing judicial consideration of that aspect of the legislation.
Ambit of s.40 defence
3.16The proceedings involved complex legal issues by reference to, amongst other things, the proper construction of the defence under s.40. That defence was heavily relied upon by the Respondent. The Court was asked to construe the section 40 defence such that it would operate to preclude the Applicant from bringing any part of her claim.
3.17In construing the operation of s. 40 in this matter, the Court was required to analyse the interaction of the contract of employment (including whether or not the Respondent's Personnel Manual for Flight Attendants, was incorporated into that contract, the terms of the relevant EBA's and the terms of s.40.
3.18When looking at whether the Respondent had unlawfully discriminated against the Applicant on the grounds of her pregnancy, the Court was also required to determine the proper construction of the sick leave entitlements under the various EBA's which operated at the relevant periods.
A determination of issues for the benefit of other persons
3.19The Applicant's claim determined issues which went beyond her own personal circumstances. The operation of the sick leave entitlements under the EBAs, the interaction with the contract and the determination of the manner in which the provisions of s. 5(2) of the Act may apply to claims of discrimination based on family responsibilities are all matters which will benefit others in the community.
Diminishing the value of the applicant's award of damages
3.20Given all of the above, the corollary to ordering Schedule 1 costs would be to deprive the Applicant of any benefit from the award of damages. The difference between the Applicant's party/party costs and the Schedule 1 costs would far exceed the quantum of damages awarded and leave the Applicant with no reward for her success in the claim.
3.21Accordingly, it is submitted that rather than restrict the Applicant to an award of costs referable to Schedule 1, the appropriate order ought be that the Respondent pay the Applicant's costs on a party/party basis, as agreed or assessed.
Response to the respondent's application for only partial payment of costs
4.1In its Written Submissions, the Respondent contends that it ought only be required to pay 25% of the Applicant's costs of and incidental to the proceedings on the Schedule 1 scale. The Applicant contends that such a submission ought be rejected. The Applicant brought her claim and was successful as against the Respondent.
4.2It is not an unusual circumstance where an applicant brings a claim on a number of bases but succeeds on only one or some of them. The Courts have been traditionally (and properly) reluctant to divide up costs in relation to individual allegations or particulars of breach of the Act, except in exceptional circumstances and where it is just to do so.
4.3Such an approach could lead the court into a quagmire of factors relevant to a consideration of costs for each separate allegation. For example:
(a)the amount of time spent in preparation on each of the allegations;
(b)the amount of time spent in court on each of the allegations;
(c)whether and to what extent the evidence (and cross‑examination) of witnesses assisted the parties in relation to each particular allegation;
(d)whether and to what extent the amount of time or indeed the number of words in written submissions (rather than the gravamen and strength of the argument) should be allocated as between the various allegations; and
(e)whether a party should be penalised by taking the Court to extraneous material such as ILO Conventions and the like and if so, to what extent deductions should be made in relation to the costs associated with such forensic strategies.
4.4How could the Court properly be expected to determine whether the time, effort and expense on various parts of a case were warranted or properly undertaken? It could not and accordingly, the Court's reluctance to award costs on a piecemeal basis is well reserved. How could the Court properly determine in percentage terms, how much should be allocated to each claim? If such a percentage were awarded, it would be at best a guess and as such, inappropriate.
4.5If such considerations were to be undertaken, parties could take advantage of such an approach by spending more time and effort on particular parts of a case in the hope that the costs orders which may flow would render the award of damages in relation to another aspect of the case nugatory. That would be the effect in this case. It is simply inappropriate in this matter.
4.6However, in the event that the Court is minded to separately consider each of the allegations made by the Applicant (which is denied by the Applicant as being an appropriate or proper course), the Applicant says that there were only ever two claims. The first in relation to economic loss after being grounded from flying duties ("the pregnancy discrimination claim"). The second in relation to her application for part-time work on return from maternity leave ("the family responsibilities claim").
4.7The Applicant should (at the very least) be entitled to part/party costs in relation to the pregnancy discrimination claim.
4.8Further, in relation to the family responsibilities claim, if the Court is not minded to award the Applicant's costs for the proceedings as a whole, it is submitted that there be no order for costs in relation to that part of the claim.
4.8.1Although the claim in respect of the discrimination on the grounds of sex and family responsibilities arising out of the Applicant's application for part-time work on her return from maternity leave was ultimately unsuccessful, it is submitted that it is an appropriate case in which costs ought not be awarded against the Applicant because the bringing of such claim was substantially and properly in the public interest.
4.9As became clear during the course of the proceedings, the Federal legislation only provides for unlawful conduct on the grounds of family responsibilities in circumstances where an employee is terminated on that basis. The Applicant contended that by reason of her demotion she had been constructively dismissed and could access the provisions of s.14A of the Act. In the alternative, the Applicant relied on the provisions of s.5(2) of the Act arguing, amongst other things, that the responsibility for the care of young children was a characteristic which generally appertained to women and that the requirement to work fulltime was one which discriminated against the Applicant.
4.10The Court was assisted in its analysis of the matter by the submissions made by the Sex Discrimination Commissioner, who supported the Applicant's case in this regard.
4.11Most importantly, the Court accepted the construction of s.5(2) of the Act as proposed by the Sex Discrimination Commissioner and the Applicant. However, the Court then went on to make certain factual findings in relation to the conduct of the Respondent which were used to deny the Applicant's claim pursuant to s. 5(2) of the Act.
4.12The Applicant submits that the ventilation of the family responsibilities claim was in the public interest and refers to the submissions above in that regard.
4.13This Court has held that costs ought not be awarded against an unsuccessful applicant where the matter was such that it was in the public interest: Xiros v Fortis Life Assurance Limited [2001] FMCA 15.
4.14 In Xiros Driver, FM stated at [20]:
Ordinarily, in this jurisdiction as in others, costs follow the event. There is a general principle that, in civil non jury trials, in the absence of special circumstances, a successful party has a reasonable expectation of obtaining an order for costs in its favour unless, for some reason connected with the case, a different order is specifically warranted: Donald Campbell & Co v Pollack [1972] AC 732 at 812, cited by McHugh J in Latoudis v Casey (1990) 170 CLR 534 at 569. A departure from that general principle cannot be arbitrary or idiosyncratic but there is no right to an order for costs, notwithstanding success in litigation: Donald Campbell & Co v Pollack
4.15 At paragraph [24], his Honour held:
A further circumstance that may warrant a departure from the general principle is where the proceedings contain a significant public interest element.
4.16In that matter, Driver FM determined that the proceedings contained a public interest element of substance so that there be no order as to costs.
4.17In Ingui v Ostara & Anor (No. 2) [2003] FMCA 531 (22 December 2003) Brown FM referred to some relevant case law:
In Horman v Distribution Group Limited [2001] FMCA 52 his Honour Federal Magistrate Raphael said "The general rule for discretion in awarding an apportionment of costs is that 'ordinarily, costs follow the event and a successful litigant receives his costs in the absence of special circumstances justifying some other order.
....In Newcrest Mining French J cites Cooper J in Cummings v Lewis (1993) 113 ALR 285 at 327." It is within the discretion of a trial Judge to award only a proportion of a successful party's costs if the conduct of that party in a trial was such as to unreasonably prolong the proceedings" In Colgate Palmolive v Cussons (1993) 118 ALR 248 at 257 Sheppard J notes some of the circumstances which would justify another order:
In the instance of the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud; evidence of particular misconduct that causes of loss of time to the court and to other parties; the fact that the proceedings were commenced or continued for some ulterior motive; or in wilful disregard of known facts or clearly established law; or in the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions.
In Oshlack v Richmond River Council (1998) 193 CLR 72 at 97 McHugh J says:-
"The traditional exceptions to the usual order as to costs focus on the conduct of the successful party which disentitles it to the beneficial exercise of the discretions. In Anglo-Cyprian Trade Agencies Limited v Paphos Wine Industries Limited [1951] 1 All ER 873 at 874 Devlin J formulated the relevant principal as follows: No doubt, the ordinary rule is that, where a plaintiff has been successful, he ought not to be deprived of his costs, or, at any rate, made to pay the costs of the other side, unless he has been guilty of some sort of misconduct. "Misconduct" in this context means misconduct relating to the litigation, or the circumstances leading up to the litigation. Thus the court may properly depart from the usual order as to costs when the successful party by its lax conduct effectively invites the litigation, unnecessarily protracts the proceedings, succeeds on a point not argued before a lower court, prosecutes the matter solely for the purposes of increasing the costs recoverable, or obtains relief which the unsuccessful party has already offered in settlement of the dispute."
4.18The Applicant's conduct in bringing her claim, including the family responsibilities allegation, does not fall into any of the categories outlined above. The claim was not made vexatiously. It was not made without a proper basis. It was not made so as to protract the proceedings. The Applicant in its running of the case did not conduct itself in a lax manner or in such a way as to attract any punitive measures from the Court. Indeed, on most occasions, it sought to reduce court time and restrict the expenditure of costs. The Respondent's criticisms of the Applicant's case are unfounded.
4.19The Respondent contends that the Applicant ought be punished because it amended its pleadings and because of the manner in which it conducted the proceedings. This should be rejected.
4.20First, a litigant is entitled to amend its pleadings in order that the true issues between the parties are the subject of determination by the Court: Queensland v J.L. Holdings [1997] 189 CLR 146. For this very proper reason, the Court in this matter permitted those amendments and they were made properly. There is no basis to "punish" the Applicant for those amendments.
4.21As to the manner in which the case was run, in order to substantiate a costs applications on that basis, the conduct complained of really has to fall so far outside the normal methods of litigation as to make it improper. If it did not, advocates would be unduly restrained in their strategic decisions about how to run their cases.
4.22Further, if the submissions on this are going to sink to the level to devolve into the minutiae of the way in which this case was run, similar criticisms could be made about the Respondent. It could be said that very few of the Respondent's witnesses had direct knowledge or involvement in the decisions the subject of the Applicant's complaints (see for example, the evidence of Sue Bussell). It might be said that large parts of their affidavits had little to say about the substantive issues in the case. Some witnesses were unable to answer even basic questions on the very topics that they had been brought to support. For example, Mr. Johnston, the witness brought by the Respondent to provide evidence as to the way in which wages and sick leave were calculated for flight attendants was unaware of how loadings were applied and did not know the practice and procedure applied by the Respondent in relation to the payment of ground duties because he was not involved in the day-to-day application of such payments.
4.23The only witness called who had anything to do with the decision to refuse the Applicant part-time work upon her return had little or no memory of the events and relied only on email and other notes that he had to refresh his memory: see evidence of Mr. Richard Moras.
4.24Further, if it is going to be said that unmeritorious allegations were made, the contention by the Respondent that sick leave was only payable in respect of circumstances where an employee was actually sick was not positively contradicted by the Respondent's own policies and procedures.
4.25It might be said that taking a further court day to make oral submissions when lengthy and detailed written submissions had been filed was an undue and unnecessary step in the proceedings.
4.26However, the Applicant says that such submissions are inappropriate and that advocates are properly given a wide discretion to conduct the litigation in the way in which they see fit. In this case, both the Applicant and the Respondent did so with the outcome of the Applicant being successful in her claim against the Respondent. No costs ought be awarded or refused on the basis of the conduct of the proceedings.
4.27The Applicant submits that she be awarded costs on a party/party basis for the whole of the claim.
The respondent’s application for indemnity costs
5.1The Respondent's submissions as to indemnity costs as a result of its Offer of Compromise is misconceived. It only becomes applicable if the Court accepts that the Respondent's interpretation of the Orders is correct (which is denied). There is no basis anywhere in the orders made by the Court in paragraph 133 for a deduction of the present value of 140 sick leave days and as such, the proper award for damages is as set out above.
5.2In any event, the Court retains to itself a discretion not to award indemnity costs even in the face of an Offer of Compromise. In this matter the Offer was served on 15 March 2004, only one month before the trial commenced. At that time, all of the substantial affidavit material had been filed and served, the costs incurred by the Applicant far exceeded the offer that was made.
Costs of the costs application
6.1The Applicant rejects the submissions of the Respondent that each party ought bear the costs associated with this costs application. The Respondent has squarely put costs in issue by reason of its assertions concerning the quantum of damages. It has also made submissions to the effect that the Application should be punished by an award of costs for a wide variety of reasons - all of which have required an answer.
6.2There should be no separate order in relation to the costs associated with this costs application. Such costs are properly costs of and incidental to the proceedings.
Extention of time for an appeal
7.1Although the Court has power in which to grant an extension of time in which to lodge an appeal, such an application ought properly have been made within the time required for lodging an appeal.
7.2 No explanation for not lodging an appeal has been given.
7.3 No argument or reason is provided for the extension of time.
7.4In circumstances where limitation periods for appeals are legislated by parliament, the Court will not readily extend time except for proper reason.
7.5 As such, this order ought be denied.
Orders sought
8.1 The Applicant contends that the following orders ought be made:
(a)The Respondent shall pay the Applicant's costs of and incidental to the proceedings on a party/party basis as agreed or, in the absence of agreement, assessed in accordance with the relevant provisions of the Legal Profession Act1987 (NSW);
(b)In the alternative, if the Court is of the view that costs ought be paid in accordance with Schedule 1 costs, the Respondent shall pay the Applicant's costs of and incidental to these proceedings in accordance with the event base scale and Schedule 1 to the Federal Magistrates Court Rules;
(c)That, for the purposes of Rule 21.5 (and otherwise) that it was reasonable for the Applicant to employ an advocate and a solicitor to represent her at each hearing conducted in the proceedings and in the preparation of all Written Submissions;
(d)That the Sex Discrimination Commissioner pay its own costs;
(e)That, in the absence of an agreement to pay costs within 28 days of the date of this Order, the costs be assessed.
The following written submissions in reply were filed on behalf of Qantas on 6 December 2004:
1.The Respondent relies on its written submissions as to costs dated 17 November 2004 (the Respondent's First Submissions) and these Written Submissions in Reply dated 1 December 2004 in respect of the issue of costs.
Calculation of damages
2.The Respondent submits that its calculation of damages is consistent with the orders of the Court made on 15 October 2004.
3.The Respondent is not seeking to "cavil" with the orders of the Court but rather to ensure that the calculation of damages reflects the loss actually suffered by the Applicant. The calculation of loss on this ground was not the subject of comprehensive written submissions by the Applicant at the conclusion of the hearing. As such, the Court did not, at that time, have the benefit of detailed submissions on the issue and the Respondent was not given the opportunity to reply to such submissions. The effect of the Court's orders should not be to create a windfall or enrichment to the Applicant.
4.However, if the Court determines that the Respondent's calculation of damages is not in accordance with the orders of the Court made on 15 October 2004, the Respondent seeks an additional order of the Court (in accordance with Order 5 of the Judgment) permitting the Respondent to deduct the gross amount of $16,258.87 from the payment of special damages, being the current gross value of the 140 days sick leave which remain available to the Applicant. This will ensure that the special damages payable to the Applicant reflect the loss actually suffered by her as a result of the unlawful discrimination found by the Court.
5.The parties both concede that the calculation of the amount payable to the Applicant has a significant impact on the issue of costs. However, the Court should not permit the Applicant to double-dip simply for that reason. This would be unfair to the Respondent and contrary to the principles of this Court regarding calculation of damages.
Taxation
6.The Applicant's calculation regarding taxation of damages is simplistic and is made without proper regard to the Respondent's taxation obligations under relevant Australian taxation legislation.
7.The responsibility for withholding tax from the payment of special damages, general damages and interest falls on the Respondent to ensure that it complies with its taxation obligations under relevant legislation. The Respondent will provide to the Applicant the basis for its calculation of tax proposed to be withheld from the payment.
8.The Respondent's position is that the Court should not make any order in respect of taxation.
9.However, if the Court is minded to make an order in this regard, the Court should order that the Respondent is to withhold from the payment all amounts necessary for the Respondent to comply with the Respondent's taxation obligations under Australian taxation legislation.
Interest
10.In respect of interest, Order 4 made on 15 October 2004 is clear that interest should be calculated up to 15 October 2004 only. The Applicant's submissions in relation to interest amount to an application for a variation to the orders given on 15 October 2004.
11.The fact that insufficient evidence was adduced on the part of the Applicant regarding the calculation of damages on this aspect of the claim to enable the Court to make an order on 15 October 2004 should not now be held against the Respondent.
12.No further order or variation should be made by the Court in respect of Order 4 made on 15 October 2004.
The applicant's application for costs
Apportionment of costs
13.The Applicant relies, at paragraph 3.4 of her submissions, on the decisions in Ruddock v Vadarlis (No.2) (2001) 115 FCR 229 and Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd [2002] FCA 1294 for the proposition that the usual order for costs is that costs follow the 'event'.
14.However, when referring to 'costs follow the event', the authorities in Australia are clear that the 'event' is not limited to the final result in the proceedings, but includes the fate of the individual issues litigated in the course of the proceedings. In awarding costs, the Court must have regard to framing a costs outcome that accords with the justice of the case.
15.In Ruddock v Vadarlis (No.2) (2001) 115 FCR 229 (Ruddock), the Full Court sets out the principles governing awards of costs at 234 as follows:
Within the general discretion of the courts to awards costs it is accepted by decisions in both Australian and English jurisdictions that:
(1) Ordinarily costs follow the event and a successful litigant receives costs in the absence of special circumstances justifying some other order.
(2) Where a litigant has succeeded only upon a portion of the claim, the circumstances may make it reasonable that the litigant bear the expense of litigating that portion upon which he or she has failed.
(3) A successful party who has failed on certain issues may not only be deprived of the costs of those issues but may be ordered as well to pay the other parties' costs of them. In this sense, "issue" does not mean a precise issue in the technical pleading sense but any disputed question of fact or of law.
See Hughes v Western Australian Cricket Association (Inc) (1986) ATPR 40-748 at 48,136; approved by the Full Court in Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd (1987) 17 FCR 211 at 222.
16.Point 2 above has been followed in numerous cases: for example, see BP Australia Pty Ltd v Nyran Pty Ltd [2003] FCA 1308, Saitta Pty Ltd v The Commonwealth [2001] FCA 8 and North Australian Aboriginal Legal Aid Service Inc v Bradley (No 2) [2002] FCA 546.
17.Further, it has been accepted by the Federal Magistrates Court that where each party has enjoyed a measure of success, it is open to the Court to apportion liability for costs: see McBride v State of Victoria (No 2) [2003] FMCA 31; Ho v Regulator Australia Pty Ltd & Anor (No 2) [2004] FMCA 402.
18.In Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd [2002] FCA 1294, Goldberg J at para 55 states that:
… a court should be less ready to apportion costs where a respondent in a proceedings has been successful in the outcome but has been unsuccessful on some issues than where a successful applicant has raised some issues on which it has failed. I consider that a court should look more benignly on the question of costs of a respondent who has been compelled to come to court and defend itself not on a ground of its own choosing than on an applicant who chooses to raise issues on a ground of its choosing.
19.Further, the Full Court in Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd (1993) 26 IPR 261 said at 271:
The propositions enunciated in [Hughes v Western Australian Cricket Association] are subject to the further consideration that justice may not be served if parties are dissuaded by the risk of costs from canvassing all issues which might be material to the decision in the case: Cretazzo v Lombardi (1975) 13 SASR 4 at 12. In Trade Practices Commission v Nicholas Enterprises Pty Ltd (No 3) (1979) 42 FLT 213; 29 ALR 201, Fisher J regarded the discretion to apportion costs as one to be exercised only in the most exceptional circumstances. Nevertheless he accepted that where a considerable part of the trial is taken up in determining issues upon which a party fails, it is a proper exercise of the discretion to reduce the costs allowed to that party. Generally speaking, and notwithstanding the considerations referred to by Toohey J and the other authorities mentioned above, the demands of the community for greater economy and efficiency in the conduct of litigation may properly be reflected in a qualification of the presumption that a successful party is entitled to all its costs. In Commissioner of Australian Federal Police v Razzi (No 2) (1991) 101 ALR 425 at 430, Wilcox J, after referring to the importance of the general principle enunciated by Toohey J, said:
But I do not think that courts should be reluctant to recognise the existence of exceptional cases. In these days of extensive court delays and high legal costs the courts should use all proper means to encourage parties to consider carefully what matters they will put in issue in their litigation. If parties come to realise that they will not necessarily recover the whole of their costs, even though they have unsuccessfully raised a discrete issue, they are likely better to consider whether the raising of that issue is a justifiable course to take.
20.The Applicant's submission that she was "successful" (see paras 4.1 and 4.2), overlooks the fact that the Applicant was not successful on 3 out of 4 claims in the proceedings.
21.In light of the Applicant's limited success, in accordance with the principles set out in the authorities referred to in paras 15 to 19 above and the reasons relied on the Respondent's First Submissions, it would be more than reasonable for the Court to apportion costs such that the Applicant bears part of her own costs. The Court should fix the amount of costs payable to the Applicant at 25 percent of the amount which the Applicant would have received by a strict application of the costs schedule up to 11am on 16 March 2004.
22.The Respondent presses for the orders sought in the Respondent's First Submissions in respect of the Applicant's application for costs. However, in the alternative, if the Court is not satisfied that the Offer of Compromise rejected by the Applicant was more favourable than the Judgment on the claim, then the Court should order the Respondent to pay 25 percent of the Applicant's costs of and incidental to the proceedings on a party/party basis in accordance with the event based scale in Schedule 1 to the Rules.
23.The Respondent rejects the submission that it seeks to "punish" the Applicant. Such a submission is misleading and does not properly characterise the submissions made by the Respondent. Based on the authorities referred to above, it is appropriate for the Court to take into account the degree of success of the Applicant in considering her application for costs.
24.In terms of apportionment, the Applicant asserts that the Court should regard her claim as consisting of only 2 claims (see para 4.6). The Applicant overlooks the constructive dismissal claim which was a specific and separate third claim. The Applicant's claims were based on separate complaints, arising out of different facts and raise different grounds. This is not a case where all had to be run together. We note the warning of Driver FM in Hollingdale v NRAHS [2004] FMCA 721 (18 November 2004) at para 19 on costs implications for the Applicant where mutually exclusive direct and indirect claims are run.
25.Even on the Applicant's approach, the Court should consider the Applicant only successful on 1 of 3 distinct issues in the proceedings and should apportion costs accordingly.
Public Interest
26.The Respondent rejects the Applicant's claim that there are public interest issues in this case. The Respondent cites no authority for the proposition. If the Court looks at decisions where the court has accepted that litigation was "public interest" litigation, the issues in those proceedings are of quite a different character to those in this case: see Ruddock and Oshlack v Richmond River Council.
27.The prime motivation for the Applicant's claim was personal and financial. The issues to be resolved were specific to the Applicant's circumstances and the conduct of the Respondent as her employer and do not amount to issues of public interest. The observations of Heerey J in Fetherson v Peninsula Health (No. 2) [2004] FCA 594 at para 13 in response to arguments that an application seeking relief under the Disability Discrimination Act 1992 was "public interest litigation" are equally applicable to this case:
The present case, like most cases, was important to the parties themselves. However it involved the construction of a statute and its application to facts found on the evidence presented by the parties. As such it is far removed from the rare case like Ruddock v Vadarlis, raising as it did questions of profound constitutional importance.
Applicant's claim for party/party costs
28.The Applicant claims that she should be awarded her party/party costs rather than costs in accordance with the event-based scale appearing in Schedule 1 to the Rules.
29.The Court has expressed great reluctance to depart from the event based costs scale, even in matters where both parties are represented by solicitors: for example, see Rispoli v Merck Sharpe & Dohme & Ors (No. 2) [2003] FMCA 516; Ho v Regulator Australia Pty Ltd & Anor.
30.In Hinchliffe v University of Sydney (No. 2) [2004] FMCA 640, the Court made the following observations regarding the reasons for and merits of the Court's event based costs scale:
10. Ordinarily, in human rights proceedings, costs are assessed in accordance with the event based scale appearing in schedule 1 to the Federal Magistrates Court Rules. That scale was adopted by the Court in order to provide simplicity and certainty in determining issues of costs. In some cases, as is likely to be the case here, a successful party will incur significantly more in costs than is recoverable pursuant to the Court scale. It does not follow that that is an unjust result, where it occurs. The Court scale is publicly known and parties to litigation should be aware that the scale is likely to determine their maximum recoverable costs should they succeed. If parties wish to incur significantly more costs in litigation in this Court than they could ever recover, that is a matter for them.
11. In any event, it should not be assumed that because substantial legal costs have been incurred by a party, their money has been well and wisely spent. The scale of costs ordinarily applicable in human rights proceedings reflects the Court’s assessment of what costs can be accepted as reasonable in ordinary proceedings. If proceedings are exceptionally long or complex there is the opportunity to ask for the proceedings to be transferred to the Federal Court, where a more appropriate scale of costs for long and complex proceedings would be available. That was not done in this case.
12. An additional factor is that there is commonly a disparity between an applicant and a respondent in human rights proceedings in their relative capacity to fund the legal proceedings. This applicant was legally aided but commonly applicants must depend upon their own limited financial resources. Commonly, a respondent will have access to significantly more funds than an applicant. This Court’s event based costs scale establishes a level playing field. I see no reason to depart from it in these proceedings."
31.There is nothing in these proceedings justifying a departure from the event based costs scale and any costs awarded to the Applicant should be made in accordance with that scale.
The Respondent's application for costs
32.The Respondent presses for the orders sought in the Respondent's First Submissions in respect of the Respondent's application for costs.
33.However, in the alternative, if the Court is not satisfied that the Offer of Compromise rejected by the Applicant was more favourable than the Judgment on the claim, then the Court should consider that costs follow the event; the event being the Respondent being 75 percent successful in its defence of the claim. As such, the Court should order the Applicant to pay 75 percent of the Respondent's party/party costs of and incidental to the entire proceedings in accordance with the event based costs scale in Schedule 1 of the Rules: see point 3 in Ruddock at para 15 above and the reasons set out in the Respondent's First Submissions.
Costs of dealing with applications for costs
34.Each party has made an application for costs. For the reasons set out in the Respondent's First Submissions, it would be reasonable for the Court to order each party to bear their own costs in respect of the parties' applications for costs, submissions in respect of costs and any hearing on the issue of costs.
35.Further, the Court should have regard to the fact that the Respondent agreed to file its submissions as to costs first, at the request of the Applicant, rather than have the parties exchange submissions on 17 November 2004 as originally envisaged by the Court's directions. This allowed the Applicant to see the Respondent's submissions first before filing her own submissions, thereby requiring the Applicant to file only one set of submissions on the issue of costs.
36.In the alternative, if the Applicant presses her claim for the costs of dealing with the Respondent's application for costs, the Respondent seeks its costs for dealing with the Applicant's application for costs which required detailed consideration and response.
Extension of time for appeal
37.The Respondent relies on the reasons and authorities referred to at paras 29-30 of the Respondent's First Submissions. Further, in circumstances where the outstanding issues of damages and costs are significant, the Court should extend the time for appeal from the principal Judgment delivered on 15 October 2004 for 21 days after the date of reasons for judgment on the issue of costs pursuant to Order 52 rule 15(1)(a)(iii) of the FCR.
Additional orders sought by the Respondent
38.The Respondent seeks that the orders set out in the Respondent's First Submissions be made, as well as the following additional orders if necessary.
a) The current gross value of 140 sick leave days in the amount of $16,258.87 is to be deducted by the Respondent from the special damages payable to the Applicant under Order 2 made on 15 October 2004;
b) The Respondent is to withhold from the payment to the Applicant of special damages, general damages and interest, all amounts necessary for the Respondent to comply with the Respondent's taxation obligations under Australian taxation legislation.
39.Although the Respondent presses for the orders originally sought in the Respondent's First Submissions and does not abandon its claim for those orders, in light of the Applicant's submissions as to costs dated 26 November 2004, the Respondent seeks the following orders in the alternative:
a) In the alternative to order 1(a) set out in the Respondent's First Submissions, the Respondent is to pay 25 percent of the Applicant's costs of and incidental to the proceedings on a party/party basis in accordance with the event based scale in Schedule 1 to the Rules;
b) In the alternative to order 1(b) set out in the Respondent's First Submissions, the Applicant is to pay 75 percent of the Respondent's costs of and incidental to the proceedings on a party/party basis in accordance with the event based scale in Schedule 1 to the Rules;
c) In the alternative to order 1(d) set out in the Respondent's First Submissions, the Applicant is to pay the Respondent's costs for dealing with the Applicant's application for costs.
Reasoning
The competing costs claims
The parties have dealt with the general principles relating to the award of costs and I do not need to repeat them. It is sufficient to say that the Court has a general discretion in relation to costs but it must be exercised judicially. Ms Howe seeks her costs on a party/party basis because she was successful in the proceedings. She seeks to depart from the event based costs scale normally applicable in human rights proceedings in this Court. Qantas seeks indemnity costs for the period following the rejection of an offer of compromise and 75 per cent of its costs otherwise assessed against this Court’s event based scale of costs, based upon the proposition that Ms Howe failed in three out of four of her claims. Qantas would pay Ms Howe 25 per cent of her scale costs, having regard to that part of her claim on which she succeeded.
The indemnity costs claim
Qantas seeks indemnity costs on and from 11.00am on 16 March 2004. That was when Ms Howe rejected an offer of compromise made the previous day. The Qantas claim is made pursuant to Order 23 of the Federal Court Rules (“the Federal Court Rules”), on the basis that Ms Howe did no better on the judgment than the offer of compromise. I am not required to apply the Federal Court Rules but I am entitled to do so. The relevant principles under the general law in relation to Calderbank offers would be the same.
The Qantas offer made on 15 March 2004 was for a gross sum of $15,000 (from which income tax liability would be deducted) plus costs as agreed or taxed. In my principal judgment in order 2 I awarded special damages in respect of 140 days sick leave that should have been paid by Qantas but was not paid. I left it to the parties to calculate the relevant sum. Qantas has calculated that sum as $25,815.25, less the value of sick leave which accrued during that 140 day period ($1,061.40). The resulting damages figure is $24,753.85. It should be noted, in that regard, that Ms Howe does not accept that Qantas should be permitted to deduct any amount from the damages award in respect of accrued sick leave but she accepts the calculation made by Qantas. I also awarded $3,000 in general damages and interest up to judgment at the rate of 10.5 per cent from 26 February 2001.
On the basis of those figures Ms Howe clearly did better on the judgment than she would have done if she had accepted the offer of compromise (leaving aside the issue of costs). However, Ms Eastman, for Qantas, submits that Qantas is entitled to set off against the damages award in order 2 made on 15 October 2004, the value of the 140 days sick leave credits which Ms Howe has retained. If the value of those sick leave credits were deducted from the damages award the damages and interest would fall below the settlement offer. Ms Nomchong, for Ms Howe, submits that Qantas is not entitled to any set off and that Qantas is free to deduct 140 days sick leave from Ms Howe’s accumulated sick leave credit balance.
In my view, Qantas’ claim for indemnity costs is based upon a false assumption that unused sick leave has the same value as used sick leave. One thing which is apparent from the wealth of evidence submitted in these proceedings in relation to Ms Howe’s terms and conditions of employment, is that in order to use sick leave, an applicant must satisfy the conditions necessary to qualify for it. Relevantly, those conditions are sickness or pregnancy. I see nothing in the available material to establish that unused sick leave has any value to a Qantas employee. Further, it cannot be assumed that circumstances will arise enabling Ms Howe to use the 140 days sick leave credits that she has retained. There is nothing before me that would enable me to make a reliable assessment of the likelihood of such circumstances arising.
I find that Qantas is not entitled to set off against the damages awarded pursuant to order 2 made on 15 October 2004, the value of the 140 days sick leave credits that Ms Howe has retained. It follows that the Qantas claim for indemnity costs fails.
Ms Nomchong may also be mistaken in her submissions which assume that Qantas is entitled to deduct 140 days sick leave from Ms Howe’s accumulated sick leave credit balance. Ms Howe was not permitted to access her sick leave entitlements by Qantas. She therefore retains those sick leave credits. She has received damages for the days that Qantas should have granted her sick leave but did not do so. It does not follow that Qantas is entitled to deduct sick leave credits that it should have allowed Ms Howe to use but did not do so. My principal judgment was intentionally silent on the point. Ms Howe may elect to instruct or permit Qantas to deduct 140 days sick leave from her accumulated sick leave balance. That is a matter for her. I regard it as beyond the scope of these proceedings.
The other costs issues
I accept Ms Eastman’s submission that Ms Howe was only partially successful in the principal proceedings. There were four elements to Ms Howe’s claims and she was successful in only one of them. However, viewed more generally, Ms Howe’s claim for damages had two limbs. The first was a claim for loss based upon asserted direct pregnancy discrimination which deprived Ms Howe of income. Ms Howe was successful on this part of her claim. The second limb was a claim for loss arising from the asserted refusal on the part of Qantas to permit Ms Howe to work part time in respect of a later time period. Ms Howe was unsuccessful in that part of her claim because the claim failed on the facts. However, I accepted a substantial part of the legal submissions put on behalf of Ms Howe in respect of that part of her claim. I also accepted submissions made on behalf of the Sex Discrimination Commissioner in relation to indirect sex discrimination which supported the submissions made on behalf of Ms Howe.
Ms Eastman points to authority establishing that it is open to the Court to reduce a costs award in circumstances where a party is only partially successful. I accept that that course is open to me. Indeed, as is pointed out by Ms Eastman in her submissions, I have on occasion followed that course myself. On this occasion, I consider that it would be unfair to the applicant to do so. Ms Howe has incurred significant costs in dealing with very detailed and complex response made on behalf of Qantas in respect of all elements of her claims. Although the claim based upon the refusal of part-time work failed on the facts Ms Howe was largely successful on the law.
Ms Nomchong submits that I should take account of the public interest element in these proceedings. I accept that there was a public interest element. In that regard, I note that the Sex Discrimination Commissioner was granted leave to appear as a friend of the Court. However, the public interest element was not as strong as it was in Xiros, cited in Ms Nomchong’s submissions. This was a claim for damages in which the predominant interests were private, not public. The additional element of public interest is not sufficient to displace the ordinary principle that costs should follow the event: Physical Disability Council of NSW v Sydney City Council [1999] FCA 815 per Madgwick J.
Costs should follow the event in this case. Ms Howe was substantially successful both in relation to the facts and the law as found in my principal judgment. I accept Ms Nomchong’s submissions that there was nothing about the conduct of Ms Howe’s proceedings that disentitles her to costs. She should receive her costs in respect of the whole proceedings. However, I reject Ms Nomchong’s submission that I should depart from the event based costs scale that ordinarily applies in human rights proceedings in this Court. I do so for the same reasons as I rejected a like submission in Hinchliffe. My reasons are reproduced in paragraph 30 of Ms Eastman’s written submissions in reply and I do not need to repeat them.
These were relatively long and complex proceedings. Ms Howe was properly represented by counsel. For the purposes of rule 21.15 of the Federal Magistrates Court Rules I will certify that it was reasonable for Ms Howe to employ an advocate to appear for her at all stages of the proceedings.
I note that no costs order is sought by or against the Sex Discrimination Commissioner. I will not make any order in relation the Commissioner’s costs.
Taxation issues
Ms Nomchong submits that the amount of damages awarded pursuant to order 2 made on 15 October 2004 should be reduced by 30 per cent to take account of Ms Howe’s income tax liability on the damages award. Ms Eastman submits that the Court should make no order in relation to taxation because, although the award of damages is taxable as income, Qantas, as the employer of Ms Howe, is obliged to deduct from the award and remit to the Australian Taxation Office the amount that Qantas determines is payable as income tax.
The general principle is that where an award of damages includes loss of income and the damages awarded are not liable to taxation, then the amount which is to be allowed as damages is the lost income after making a deduction for taxation: British Transport Commission v Gourley [1956] AC 185. This is to ensure that the successful party is placed in the same position as she would have been in if the wrong had not been committed. Where, however, the damages are subject to taxation an assessment will ordinarily be made of the amount which will be payable in tax and that amount allowed as part of the award: Gourley at page 212. In effect, the damages award is grossed up to ensure that the successful party is put in the same position as she would have been in if the wrong had not been committed. In this case the gross amount of income due to Ms Howe is already known and it is unnecessary to assess her income tax liability in advance.
The question that must be answered in the present case is whether the damages awarded to Ms Howe are taxable or not. The Australian Taxation Office issued taxation ruling IT24/24 concerning compensation payments in human rights cases on 2 July 1987. That ruling at paragraph 8 relevantly states:
A compensation payment to make up for lost earnings or in substitution for income which would otherwise have been earned is in the nature of income and is liable to income tax in the hands of the employee. On the other hand a payment to compensate for personal injury, injury to feelings, humiliation, embarrassment, depression, anxiety, etc is not liable to income tax. It is a payment of a capital nature.
I find that the damages awarded to Ms Howe, pursuant to order 2 made on 15 October 2004, is taxable income. So is interest payable on it. In contrast, the damages awarded pursuant to order 3 made on 15 October 2004 is not income and is not taxable. Neither is interest up to judgment on that amount although post judgment interest on all components of the damages is taxable: Whitaker v Commissioner of Taxation [1998] 262 FCA (26 March 1998).
A complicating factor is that it is not clear from the income tax ruling whether the damages that are taxable as income are assessable in the year in which they are received or in the year or years in which the loss was incurred. If the latter, there must come a point at which the ATO is unable to make a supplementary assessment where an assessment has already been made in respect of the relevant year of income. If the former, then it is simply a matter of the employer deducting and remitting to the ATO the appropriate amount of tax. There is a suggestion in paragraph 11 of the ruling that the damages are assessable as income in the year they are received. I proceed on that basis. It follows that Qantas must deduct the appropriate amount of tax from the damages payable pursuant to order 2 made on 15 October 2004 and remit it to the ATO in the ordinary way. No order is required and it is up to Qantas to determine the amount that it is liable to deduct. The amount due in damages is the gross amount of income lost, from which the income tax deduction must be made.
Interest
I awarded interest up to judgment pursuant to order 4 made on 15 October 2004. I accept Ms Nomchong’s submission that the commencing date should be 15 July 2001, not 26 February 2001 as stipulated in order 4 in my principal judgment. Interest must be calculated at the rate of 10.5 per cent on the gross amount of damages awarded between 15 July 2001 and 15 October 2004. In addition, Ms Howe is entitled to receive interest on the judgment from 15 October 2004 pursuant to s.77 of the Federal Magistrates Act 1999 (Cth) and rule 26.01 of the Federal Magistrates Court Rules 2001 (Cth) (“the Federal Magistrates Court Rules”). No order is required.
Costs of the costs application
Ms Howe has been predominantly successful in respect of the competing costs claims. She should receive her costs for making that costs application. No amount is prescribed in Schedule 1 to the Federal Magistrates Court Rules in respect of costs incurred following a hearing. It is open to the Court to fix a specific amount of costs pursuant to rule 21.02(2)(a) of the Federal Magistrates Court Rules. In this case, given that extensive submissions were prepared on costs and related issues, I will adopt that course. I am satisfied that costs of $2,000 would have been reasonably and properly incurred on behalf of Ms Howe in preparing her submissions. She will receive that amount as costs of the costs application.
Extension of time for appeal
Qantas seeks an extension of time to appeal to the Federal Court pursuant to Order 52, rule 15(1)(a)(iii) of the Federal Court Rules.
I have in some other proceedings granted an extension of time for an appeal pursuant to that rule where the request was made promptly and it was reasonable to grant an extension of time, in order to ensure that only one appeal was required. In this case the extension of time request made by Qantas was made a little over a month after the principal judgment.
Order 52, rule 15(1) provides:
Time for filing and serving notice of appeal
The notice of appeal shall be filed and served:
(a)within 21 days after –
(i)the date when the judgment appealed from was pronounced;
(ii)the date when leave to appeal was granted; or
(iii)any later date fixed for that purpose by the court appealed from; or
(b)within such further time as is allowed by the [Federal] Court or a judge upon application made by motion upon notice filed within the period of 21 days referred to in the last preceding paragraph.
The obvious policy underlying this rule is that appeals should be filed and served promptly and that a request for an extension of time should also be made promptly. I am not satisfied that the present request for an extension of time was made promptly. I note that a notice of appeal was filed on behalf of the applicant in the Federal Court on 3 November 2004. It is not clear, however, whether that notice has been served. I understand that it was not served within the 21 day appeal period. I do not wish to encourage unnecessary or tardy appeals in this matter. I decline the extension of time sought by Qantas and note that if Ms Howe’s notice of appeal has not been served she is no better position than Qantas.
I certify that the preceding twenty-eight (28) paragraphs are a true copy of the reasons for judgment of Driver FM
Associate:
Date: 17 December 2004
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