Russo v Westpac Banking Corporation (No.2)
[2015] FCCA 1668
•19 June 2015
FEDERAL CIRCUIT COURT OF AUSTRALIA
| RUSSO v WESTPAC BANKING CORPORATION (No.2) | [2015] FCCA 1668 |
| Catchwords: COSTS – Application for costs – whether indemnity costs should be awarded – offer of compromise not accepted – whether presumption in favour of indemnity costs should be departed from in the circumstances – indemnity costs awarded. |
| Legislation: Federal Circuit Court Rules 2001 (Cth), r.1.05(3)(b), Schedule 3 Part 2 Federal Court Rules 2011 (Cth), rr.25.14, 25.14(3) |
| Merost Pty Ltd v CPT Custodian Pty Ltd (No.2) [2014] FCA 594 Vassallo v Jetswan Pty Ltd & Anor (No.2) [2010] FMCA 1018 |
| Applicant: | GIULIO RUSSO |
| Respondent: | WESTPAC BANKING CORPORATION |
| File Number: | SYG 799 of 2012 |
| Judgment of: | Judge Manousaridis |
| Hearing date: | 11 June 2015 |
| Date of Last Submission: | 11 June 2015 |
| Delivered at: | Sydney |
| Delivered on: | 19 June 2015 |
REPRESENTATION
| Counsel for the Applicant: | Mr T Kane |
| Solicitors for the Applicant: | Gillis Delaney Lawyers |
| Counsel for the Respondent: | Mr M Seck |
| Solicitors for the Respondent: | Henry Davis York |
ORDERS
The respondent pay the applicant’s costs it was ordered to pay on 12 May 2015 as follows:
(a)as to the costs the applicant incurred before 11 am on 21 November 2012 – on a party and party basis; and
(b)as to the costs the applicant incurred after the time mentioned in (a), on an indemnity basis.
The respondent pay the applicant’s costs of and incidental to the application in a case filed on 26 May 2015.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 799 of 2012
| GIULIO RUSSO |
Applicant
And
| WESTPAC BANKING CORPORATION |
Respondent
REASONS FOR JUDGMENT
On 12 May 2015 Judge Lloyd Jones ordered that the respondent pay to the applicant the sum of $70,000.[1] His Honour also ordered that the respondent pay the applicant’s costs of the proceedings.
[1] Russo v Westpac Banking Corporation [2015] FCCA 1086
On 26 May 2015 the applicant filed an application in a case in which he sought an order that the respondent pay the costs the applicant incurred after 11 am on 21 November 2012 on an indemnity basis. The ground of that application is the respondent’s not having accepted an offer of compromise dated 19 November 2014. By that offer the applicant offered to compromise the proceedings on the basis that the respondent pay to the applicant $50,000, and that the respondent pay the applicant’s costs as agreed or taxed.
The respondent does not dispute it did not accept the offer of compromise. Nor does it dispute that the consequences of its not having accepted the offer of compromise is to be determined by the application of r.25.14(3) of the Federal Court Rules 2011 (Cth) (FCR). That sub rule provides:
If an offer is made by an applicant and not accepted by a respondent, and the applicant obtains a judgment that is more favourable than the terms of the offer, the applicant is entitled to an order that the respondent pay the applicant's costs:
(a)before 11.00 am on the second business day after the offer was served--on a party and party basis; and
(b) after the time mentioned in paragraph (a) - on an indemnity basis.
Sub rule 25.14(3) of the FCR applies to proceedings in this Court because of r.1.05(3)(b) of the Federal Circuit Court Rules 2001 (Cth) (FCC Rules). That paragraph provides that the provisions of the FCR set out in Part 2 of Schedule 3 apply with necessary changes, to general federal law proceedings.[2] One of the provisions listed in Part 2 of Schedule 3 to the FCC Rules is r.25.14 of the FCR.[3]
[2] Vassallo v Jetswan Pty Ltd & Anor (No.2) [2010] FMCA 1018, at [25]
[3] Item 16
There is no dispute between the parties that, notwithstanding r.25.14(3) of the FCR, “when an offer is made and a judgment no less favourable is obtained, a rebuttable presumption in favour of indemnity costs is created”, and that the “prima facie position should only be departed from for proper reasons, which generally only arise in an exceptional case”.[4] Nor is there any dispute that the presumption in favour of indemnity costs has arisen against the respondent because it did not accept the applicant’s offer of compromise. The respondent submits, however, that the presumption in favour of indemnity costs should be departed from in the circumstances of this case. To understand the grounds on which the respondent submits the presumption should be departed from, it will be necessary to briefly describe the claim the applicant made, and the grounds on which Judge-Lloyd Jones accepted those claims and ordered the respondent pay $70,000 to the applicant.
[4] Merost Pty Ltd v CPT Custodian Pty Ltd (No.2) [2014] FCA 594 at [11]
The applicant was an employee of the respondent who was made redundant. The applicant alleged that, under his contract of employment, the respondent was bound to properly apply to the applicant that part of the respondent’s policies and procedures that dealt with the payment of bonuses (bonus policy); and that the respondent failed to properly apply those policies to the applicant, resulting in the applicant not being paid a bonus which he would have been paid, had the respondent properly applied the bonus policy. Judge Lloyd-Jones found that, in breach of the applicant’s employment contract, the respondent did not properly apply the bonus policy to the applicant.
His Honour held that the applicant “should receive a sum equal to the incentive payment paid the previous year”.[5] The incentive payment the applicant received “for the previous year” was $70,000.[6] His Honour, however, also held that there was strong evidence before the Court that the applicant would have received a payment, “but not strong enough for it to be satisfied such a payment should have been made in the full amount”.[7] His Honour, nevertheless, awarded the applicant $70,000 damages. That amount includes the full amount the applicant would have received had the respondent properly applied the bonus policy to him and interest on that amount from the date on which the bonus should have been paid.
[5] Russo v Westpac Banking Corporation [2015] FCCA 1086 at [281]
[6] Russo v Westpac Banking Corporation [2015] FCCA 1086 at [41]
[7] Russo v Westpac Banking Corporation [2015] FCCA 1086 at [281]
It is his Honour’s method for assessing the amount of $70,000 on which the applicant relies for submitting the Court should exercise its discretion against ordering the respondent to pay the applicant’s costs on an indemnity basis. The respondent submits that the calculation of the incentive payment, as required by the bonus policy, required the applicant’s performance to have been ranked against the performance of other employees. That, in turn, meant there was a high degree of potential variability in the amount of the bonus that would have become payable to the applicant had the respondent properly applied the bonus policy. Further, the respondent submits the applicant did not put on any evidence that would have enabled the respondent to estimate with any degree of accuracy the amount of bonus that would have been paid had the respondent properly applied the bonus policy to the applicant. In short, the respondent submits that the Court should exercise its discretion against making an order that the respondent pay the applicant’s costs on an indemnity basis because it was inherently difficult for the respondent to accurately assess the extent of the damages to which the applicant would have been entitled had he succeeded on his claim.
In my opinion, the matters on which the respondent relies do not justify the displacement of the presumption of indemnity costs. First, I do not accept the assumed factual premises on which the respondent relies, namely, that it was inherently difficult for the respondent to estimate the likely bonus the applicant would have obtained had the respondent properly applied to the applicant the bonus policy. There is no evidence to support the assumption. Further, from the approach Judge Lloyd-Jones took to the assessment of the applicant’s damages, I cannot conclude it was not reasonably foreseeable that one practical approach to reasonably estimating the amount the applicant would have been entitled to recover would have been to take as the starting point the previous bonus that was paid to the applicant.
Second, even if I were to accept the assumed premises on which the respondent relies, difficulty in estimating the amount of damages the applicant would recover if successful can hardly count as a proper reason for departing from the presumption in favour of indemnity costs. There is great uncertainty in the outcome of most, if not all, genuinely contested cases. To allow uncertainty in the outcome of litigation as a reason for displacing the presumption in favour of indemnity costs would remove from most genuinely contested cases the incentive that r.25.14 of the FCR provides to parties to seriously consider and attempt to compromise their disputes.
I propose, therefore, to order that the respondent pay the costs Judge Lloyd-Jones has ordered the respondent pay in the manner provided for by r.25.14(3) of the FCR, namely:
a)as to the costs the applicant incurred before 11 am on the second business day after the applicant served the offer of compromise on the respondent – on a party and party basis; and
b)as to the costs the applicant incurred after the time mentioned in (a), on an indemnity basis.
It appears from the evidence that the applicant’s solicitor served the offer of compromise on the respondent’s solicitors by email on 19 November 2012. That was a Monday. It follows, therefore, that the costs of the applicant the respondent will be required to pay on an indemnity basis are costs the applicant incurred after 11 am on the second business day after 19 November 2012, namely, 21 November 2012.
Finally, I should note that the applicant initially applied for an order that the respondent should pay the applicant’s costs of the application in a case on an indemnity basis. The basis of that claim was the assertion that the respondent did not attempt to discuss with the applicant his claim for indemnity costs. During the hearing, however, I was informed “without prejudice” communications passed between the parties in relation to costs. The applicant, therefore, did not press his contention that there had been no attempt by the applicant to discuss the applicant’s claims for indemnity costs.
In those circumstances, I am not satisfied there is any basis for me ordering that the respondent pay the applicant’s costs of this application in a case on an indemnity basis. I do propose, however, to order the respondent pay the applicant’s costs of the application in a case on an ordinary basis.
I certify that the preceding fourteen (14) paragraphs are a true copy of the reasons for judgment of Judge Manousaridis
Associate:
Date: 19 June 2015
3
3