Jenkins v Jayrow Helicopters Pty Ltd (no.2)

[2013] VCC 1863

IN THE COUNTY COURT OF VICTORIA
AT MELBOURNE Revised
(Not) Restricted

COMMERCIAL LIST
­­­­­EXPEDITED DIVISION

Case No. CI-13-00572

WAYNE JENKINS	Plaintiff
v.
JAYROW HELICOPTERS PTY LTD	Defendant

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JUDGE:	His Honour Judge Anderson
WHERE HELD:	Melbourne
DATE OF HEARING:	2 December 2013
DATE OF JUDGMENT:	2 December 2013 (revised 3 December 2013)
CASE MAY BE CITED AS:	Jenkins v. Jayrow Helicopters Pty Ltd (no.2)
MEDIUM NEUTRAL CITATION:	[2013] VCC 1863

REASONS FOR JUDGMENT

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Catchwords:              Practice and procedure – Interest – Overnight allowance claim – Whether “good cause…shown to the contrary” – S.542(2) Fair Work Act 2009 (Cth) – Annual leave claim – Claim introduced by amendment on last day of trial – Appropriate rate of interest in the circumstances – Two-thirds of Penalty Interest Rate applied.

Practice and procedure – Costs – Whether proceeding involved a “single justiciable matter” – Whether exception to statutory “no costs” regime established – Field leave claim not “incompetant or hopeless” – Rejection of offers of compromise not “unreasonable” – S.570 Fair Work Act 2009 (Cth)

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr M Champion	McDonald Murholme
For the Defendant	Ms S Bingham	Davies Lawyers

HIS HONOUR:

1On 12 November 2013, I delivered reasons for decision following the trial of this matter. There are certain further issues which have required determination today, before the question of costs can be dealt with. These include the quantification of the two claims in respect of which the plaintiff was successful, being the claim for overnight allowance and the claim for annual leave deducted at the termination of the plaintiff’s employment. The parties have agreed that the appropriate figures are:

a.$14,650, as the overnight allowance;

b.$47,115.39, as the annual leave deducted by the defendant.

2The remaining issues for determination at this stage are the appropriate orders for interest in respect of both these claims. Firstly, in relation to the overnight allowance, each payment of $50 became due for payment following the completion of work which involved the plaintiff being absent overnight from his home base. Rather than make a separate interest calculation in respect of each amount of $50, plaintiff’s counsel Mr Champion submitted that the calculation should be made in respect of half the period from the date the first payment became due until the date the last payment became due.

3I consider in the circumstances, where the amounts are numerous and they are reasonably evenly spread over the entire period, that this would not be an inappropriate method of calculating interest. Defendant’s counsel, Ms Bingham has submitted that no interest should be payable because essentially the claim is for damages for breach of contract and damages should be assessed as a lump sum, calculated as the total of the amounts which would otherwise have been due for payment. I do not accept this argument as I consider that each individual claim of $50 is a claim for a sum certain and, in the circumstances, the interest should be calculated using the shorthand method suggested by Mr Champion in respect of half the period during which the payments became due. This will lead to an order for interest in the total sum of $6,747.63.

4In relation to the claim for interest for the annual leave payments deducted, it is agreed that the claim was made pursuant to s90(2) of the Fair Work Act 2009 (“the Act”). By s.542(2) of the Act, the Court “must, on application, include an amount of interest in the sum ordered, unless good cause is shown to the contrary”. Ms Bingham submitted that interest should only be ordered from the date the claim was introduced by amendment on the final day of the trial, being 30 October 2013, and that I should accept that good cause has been shown as to why interest should not be payable from the date of termination of the employment when the annual leave was deducted by the defendant, being 20 January 2012.

5Mr Champion submitted that, in accordance with authority:

a.the plaintiff should be entitled to interest from 20 January 2012, because the defendant had kept the plaintiff out of his money since that time; and

b.the plaintiff should not be punished for the delay in instituting the claim, and that ordinarily, interest would be payable from the date the monies became due, or from the commencement of the proceeding, which in this case was 8 February 2013.

6Ms Bingham submitted that as a consequence of the late inclusion of the annual leave claim, as an alterative to the plaintiff’s primary claim for the payment of the value of his accrued field leave, the defendant has been deprived of the opportunity to properly assess the claim and to either resolve the claim or to protect itself by an offer of compromise.

7In my view, the plaintiff should not be deprived of interest because of the late inclusion of the claim by way of amendment. However, the plaintiff should not obtain more than fair compensation for his loss as a result of having been kept out of his money. Equally, the defendant should not obtain a windfall from having had the use of the plaintiff’s money. During the course of argument, I discussed with counsel the possibility of applying a lesser rate of interest than the Penalty Interest Rate.

8Having heard counsel’s submissions, I consider that the appropriate course is to take account of the fact that the prevailing penalty interest rate from almost the whole of the period from January 2013 had been 10.5 % and that I should reduce that by one third to 7%. This rate would, in my judgment, fairly compensate the plaintiff for him having been kept out of his entitlement and would not offer any benefit to the defendant for having had the use of the plaintiff’s money. Accordingly, I will allow interest in respect of this claim fixed at $6,171.47.

9There is one further issue which has been raised by counsel. The orders which I have foreshadowed will require the payment of certain sums by the defendant to the plaintiff. The overnight allowance was, pursuant to the employment agreement, to be paid “tax free”. This may give rise to an obligation, following payment, for the defendant to pay Fringe Benefits tax. In relation to the payment of the annual leave deducted, the defendant would ordinarily have a statutory obligation to deduct the taxation which would be payable in respect of that sum and to remit the sum to the Australian Taxation Office.

10It is appropriate in relation to both sums that I simply order the defendant to pay the total sum. This will have different consequences in relation to each sum. For the overnight allowance, the defendant will need to take account of its obligations in relation to Fringe Benefits. In respect of the annual leave entitlement, the defendant will need to calculate the tax payable and account for it as it would for the payment of entitlements to an employee.

11As a consequence of these reasons concerning matters of interest, it is appropriate that I enter judgment as follows:

a.in respect of the overnight allowance claim, judgment for the plaintiff that the defendant pay to the plaintiff the sum of $14,650 together with interest of $6,747.63, total $21,397.63;

b.in respect of the annual leave claim, $47,115.39 and interest of $6,171.47, total $53,286.86;

total judgment, $74,684.49.

12I have now heard extensive argument in respect to questions of costs. The primary matters submitted related to:

a.the requirements of s570 of the Act, which provides that proceedings under the Act are intended to be litigated without costs orders bring made, except in the limited circumstances set out in the section;

b.a series of offers of compromise made pursuant to the Rules of Court, or as Calderbank offers between the parties;

13The first matter for determination is whether the proceeding should be regarded as a “single justiciable matter”, or whether the overnight allowance claim should be treated separately. The original claims made in the proceeding were:

a.the overnight allowance claim;

b.a claim for the payment out of the plaintiff’s field leave entitlement. This latter claim was for a substantially greater sum than the first claim;

c.a claim for the payment of a civil penalty for breach of award.

The plaintiff introduced a further claim by amendment, foreshadowed on the second day of hearing and formalised by amendment on the third and final day of hearing, This introduced a claim for annual leave deducted at the termination of the plaintiff’s employment.

14The claim in respect of the overnight allowance was a claim in contract made pursuant to the clause in the employment agreement which provided for the payment of an overnight employment allowance of $50 per day. The remaining two claims were claims made pursuant to the Act; the field leave claim for breach of the award provisions and the annual leave claim for the recovery of annual leave entitlements said to have been wrongly deducted at termination

15There are a number of Federal Court decisions which consider the question of whether a “single justiciable matter” is raised in a proceeding which includes a number of claims. The issue was relevant for the purpose of determining whether the statutory provisions restricting the recovery of costs applied. I am satisfied in the present case that I should follow the authorities which would define the disputes presently included in the proceeding as a single justiciable matter, that matter being “the entitlements of the plaintiff upon termination of his employment”. I was referred to two lines of authority that might lead to different conclusions. In the present case, it is unnecessary for me to offer any opinion on that issue, although it is likely that the authorities are reconcilable.

16It is appropriate, however, that I briefly consider the position if I had accepted the plaintiff’s submission that the contract claim in respect of the overnight allowance should be treated separately, and as not covered by s570 of the Act.

17The plaintiff submitted that he should be entitled to a proportion of the costs of the proceeding, being the costs which apply to the contract claim. It was suggested that 20% of the costs of the proceeding would fairly represent the value of the legal work performed in relation to the issues raised by the contract claim. In my view, this is not an appropriate way to approach the matter, for the following reasons:

a.the amount of the claim was a lesser percentage than 20% of the overall claim;

b.the primary claim instituted by the plaintiff was unsuccessful;

c.if the Court were to approach the matter of costs on an issue by issue or claim by claim basis, it would not be appropriate to simply treat the contractual claim as a claim where the costs should be assessed without regard to the result which had been achieved in the primary claim in the proceeding.

18It is appropriate now to consider the matter having regard to my conclusion that s570 applies to the whole of the proceeding, including the contract claim.

19In that regard, the plaintiff relied upon a Calderbank offer dated 25 October 2013. The features of that offer were as follows:

a.the offer was made in respect of all the claims made by the plaintiff at that stage;

b.the plaintiff offered to accept payment of $37,500 plus “costs according to scale”;

c.the offer was made at 9.36am and remained open until 4.00pm that day;

d.the plaintiff foreshadowed that if the offer was rejected, the plaintiff would seek “an order that your client pay any costs incurred by our client after the date on which the offer expired”.

20Mr Champion submitted that if s570 of the Act applied, the offer of compromise should have the effect of taking the proceeding outside the general rule and within the exception in ss2(b). It was submitted that the defendant had acted unreasonably by failing to accept the offer made in circumstances where the total amount recovered in the proceeding was substantially more.

21I consider that this argument should fail because the offer that was made was not clear on its face as to what the liability of the defendant would be if the offer were to be accepted. The offer was to pay $37,500 plus “costs according to scale”. Ordinarily, if a plaintiff in the County Court recovers a sum of $37,500, which is less than half the Magistrates Court jurisdiction, by Rule 63A.24 the claim is regarded as having been made in the “wrong court” and the plaintiff only recovers costs on the appropriate Magistrates’ Court scale, less the increased costs to the defendant of having to defend the case in this Court rather than in the Magistrates’ Court. In the circumstances, there is no basis for a costs order to be made in the plaintiff’s favour on the basis that the offer had been “unreasonably” rejected..

22The defendant submitted that the circumstances of the case brought it within the exceptions to s570 of the Act. It was submitted that:

a.the proceeding had been issued without “reasonable cause”, as the plaintiff’s case was an “incompetent or hopeless” one;

b.further, it was submitted that the plaintiff had engaged in “unreasonable acts or omissions” by pursuing a case that was hopeless, or alternatively, by reason of his failure to accept an offer of compromise made by the defendant on 20 September 2013.

23Ms Bingham submitted that the appropriate test as to whether the proceeding had been issued without reasonable cause was whether there was “no substantial prospect for success”. I do not consider that this could be the appropriate test if the section were to have the operation that is obviously intended, and which was the foundation of the submissions made by both parties. I have approached this issue on the basis that I must determine whether the plaintiff’s case was “incompetent or hopeless”.

24It is not suggested that the plaintiff’s claim was “incompetent”. It was submitted that the plaintiff’s claim was “hopeless” because the plaintiff would never have succeeded in establishing that he was entitled to a payment in respect of accrued field leave at the time of the termination of his employment. Ms Bingham submitted that it was plain from the award that there was no express ability for the plaintiff to convert accrued field leave to an entitlement to be paid upon termination.

25Mr Champion submitted that this issue was not clear cut, particularly if a beneficial interpretation of the award was adopted. He submitted that it might have been concluded that the field leave entitlement, which was “earned” by the plaintiff, was the type of entitlement which, if not taken during the course of employment, should be paid out at the time the employment was terminated.

26This argument was the primary basis on which the plaintiff’s claim was ultimately unsuccessful. However, the argument should be evaluated in the context of other issues raised by the claim, in respect of which the plaintiff was successful. In the defendant’s solicitor’s letter dated 25 October 2013, five matters are set out in respect of which it was suggested that the plaintiff should not succeed on the field leave claim. In respect of four of those matters, the plaintiff was successful at trial but ultimately failed on the final question of his entitlement to be paid out for the accrued field leave.

27It is important to take account of the fact that the plaintiff’s claim was amended, albeit late, to include an alternative claim for payment of the annual leave deducted on the basis that the plaintiff was entitled to take field leave before his employment terminated. To succeed on this claim, and therefore to be successful in the proceeding and recover judgment for over $74,000, the plaintiff needed to establish the first four points of contention contained in the solicitor’s letter, said to be matters in respect of which the plaintiff could not succeed.

28In my judgment, therefore, it cannot be said that the plaintiff had a hopeless case. Further, as Mr Champion submitted, if the claim were to be regarded as involving a single justiciable matter, the overnight allowance claim was part of that single matter, and in respect of which, the plaintiff had been successful. Whether this matter was pursued as an exception based on ss2(a) or (b), in my view, the defendant’s argument must fail.

29The defendant further submitted that the plaintiff’s refusal to accept the offer of compromise made by the defendant on 20 September 2013 was an “unreasonable act or omission”, as a consequence of which the plaintiff should pay the defendant’s costs incurred after the offer was rejected.

30The features of the offer of compromise made 20 September 2013 were as follows:

a.it was made pursuant to the County Court Rules;

b.it was an offer to pay the plaintiff $44,650;

c.upon acceptance of the offer, the defendant would also pay 7.89% of the plaintiff’s party party costs “on the appropriate Court Scale”;

d.the offer of compromise was open for a period of 10 days.

31As an offer of compromise under the Court Rules, the offer was defective in two respects:

a.it was only open for acceptance for a period of 10 days, rather than the period of “not less than 14 days” required by Rule 26.03(3);

b.the offer purported to limit the plaintiff’s costs to 7.89% of costs on the appropriate Court Scale, whereas the consequence of an offer made under the Rules, if accepted, is that the plaintiff is entitled to appropriate costs, rather than a percentage of costs, unless the Court otherwise orders.

32Ms Bingham submitted that it was appropriate to regard the offer of compromise as an offer to resolve the matter which the plaintiff could have accepted at that time, even if it was not an offer that necessarily complied with the Court Rules. She supported her submission by reference to the decision of Barker J in ALAEA v IASA (No. 2) [2011] FCA 394 at paragraphs 30 to 33, where His Honour had regard to without prejudice settlement discussions between the parties.

33I consider, however, that in the circumstances of this case the offer of compromise falls short of constituting an “unreasonable act or omission” for the purposed of s570(2)(b). The offer was made pursuant to the Rules, and the fact that it did not comply with those rules in two important respects would make it difficult for the Court to conclude that in the circumstances, the plaintiff’s refusal to accept the offer was sufficient to displace the general rule in s570.

34It is not at all clear from the offer what was meant by the phrase “party party costs of the plaintiff’s claim on the appropriate Court scale” and whether the provisions of Rule 63A.24 would be enlivened. The general rule is that offers of compromise are to be assessed having regard to the claims that were extant at the time the offer was made. However, in determining whether the plaintiff had acted unreasonably in the circumstances of this case, I consider that I should take account of the fact that ultimately, the plaintiff was successful on the alternative claim introduced by amendment. That claim required the plaintiff to establish an entitlement to accrued field leave pursuant to the award. Ultimately, the plaintiff has recovered a total judgment substantially more than the amount offered on 20 September 2013. Accordingly, I have concluded that the defendant has not brought itself within the exceptions to the general rule contained in s570(1) of the Act.

35As a consequence, it follows that the general rule will apply and there is no basis for the Court to make any order as to the costs of the proceeding, I will therefore add to the orders that I have previously foreshadowed, an order that there be no order as to costs.

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Certificate

I certify that these 9 pages are a true copy of the reasons for decision of His Honour Judge Anderson delivered on 2 December 2013 and revised on 3 December 2013

Dated:       3 December 2013

Philippa Gilkes

Associate to His Honour Judge Anderson