Sutton v Be Australia WD Pty Ltd (No 5)

[2017] NSWSC 1636

Supreme Court

New South Wales

Medium Neutral Citation:	Sutton v BE Australia WD Pty Ltd (No 5) [2017] NSWSC 1636
Hearing dates:	25 November 2016; 9 and 27 February 2017; 29 June and 22 September 2017 (further written submissions)
Date of orders:	28 November 2017
Decision date:	28 November 2017
Jurisdiction:	Common Law
Before:	Walton J
Decision:	The plaintiff shall file within 7 days of the publication of this judgment short minutes of order reflecting this judgment which shall be dealt with administratively in Chambers by the Court.
Catchwords:	UNFAIR CONTRACT – ex parte proceedings – implications of settlement with second defendant – costs – indemnity basis – gross sum order – directions for final orders
Legislation Cited:	Civil Procedure Act 2005 (NSW) Industrial Relations Act 1996 (NSW) Industrial Relations Commission Rules 1996 (NSW) Uniform Civil Procedure Rules 2005 (NSW)
Cases Cited:	Hamod v New South Wales [2011] NSWCA 375 Harrison v Schipp (2003) 54 NSWLR 738 Sutton v BE Australia WD Pty Ltd (No 3) [2017] NSWSC 689 Sutton v BE Australia WD Pty Ltd (No 4) [2017] NSWSC 1123
Category:	Costs
Parties:	Mary Sutton (plaintiff) BE Australia WD Pty Ltd (first defendant)
Representation:	Counsel: M Gibian (plaintiff) (ex parte)   Solicitors: Gilbert + Tobin (plaintiff)
File Number(s):	2016/26450

Judgment

1. HIS HONOUR: By a second further amended summons Mary Sutton (“the plaintiff”) sought declaratory relief and monetary payments, pursuant to s 106(1) and (5) of the Industrial Relations Act 1996 (NSW) (hereafter referred to as “the Act”), against BE Australia WD Pty Ltd (“the first defendant”) and Phillip James Davidson (“the second defendant”) regarding work performed by the plaintiff for the first defendant. The proceedings against the second defendant were dismissed upon the basis of consent orders, without admission of liability, for the payment of a sum of $350,000 inclusive of costs.

2. The balance of the matter concerning the first defendant proceeded before the Court, ex parte.

RELIEF SOUGHT

3. The plaintiff sought the following relief:

1. An order declaring void (except for monies already paid) the arrangement between the plaintiff and the first defendant whereby [the plaintiff] performed work in the taxation consulting industry for [the first defendant] (“the contract”).

2. An order declaring that the contract or arrangement was unfair, harsh or unconscionable or against the public interest.

3. An order that the contract be varied from its commencement in the terms set out in Schedule A.

4. An order that [the first defendant] pay [the plaintiff] such sum of money in connection with the contract or arrangement as the Court considers just in the circumstances of the case.

5. An order that the [first defendant] pay [the plaintiff’s] interest on the sums of money ordered to be paid by the Court, from 7 October 2005 being the date of the termination of the contract at the rates set by the Uniform Civil Procedure Rules 2005 (NSW).

6. An order that the [first defendant] pay the costs of the proceedings.

4. On 1 June 2017, the Court delivered judgment with respect to the second further amended summons: Sutton v BE Australia WD Pty Ltd (No 3) [2017] NSWSC 689 (“Sutton No 3”).

5. In Sutton No 3, the Court made various findings as to the merits of the application which are summarised in the further judgment of the Court Sutton v BE Australia WD Pty Ltd (No 4) [2017] NSWSC 1123 (“Sutton No 4”) at [7]-[10]:

[7] In Sutton No 3 the Court identified that the plaintiff had relied upon the following grounds of unfairness (at [94]):

[94] The grounds of unfairness may be summarised under three broad categories:

(1) Termination

The grounds essentially consisted of the following:

(a) the arrangement resulted in the plaintiff being in a position of unequal and inferior bargaining power such that the plaintiff had no protection from arbitrary and immediate termination of her engagement at any time and without reason;

(b) the arrangement permitted for the termination of the plaintiff’s services essentially without any notice and failed to ensure a reasonable period of notice of payment in lieu of notice upon termination of the arrangement; and

(c) the arrangement permitted the first defendant to terminate the arrangement without proper reason, without providing any form of procedural fairness and in a manner that was likely to and did cause the plaintiff to suffer hurt, distress and humiliation.

(2) Bullying and Harassment

The ground consisted of:

(a) the arrangement failed to contain any reasonable provisions to protect the plaintiff from bullying and harassment or to ensure the appropriate and timely resolution of any complaint or grievance that the plaintiff might have occasion to raise in the course of her work; and

(3) Disparagement

The ground consisted of:

(a) the arrangement failed to include any provision to protect the plaintiff from future disparagement and from conduct that was likely to and did undermine her prospects of securing future employment and successfully continuing her career.

[8] As the first ground of unfairness the Court made the following findings (at [101]-[103]):

[101] In these circumstances, I am satisfied that the arrangement constituted an unfair contract pursuant to s 105(1) of the Act. The obligation upon the first defendant to ensure that adequate protective provisions were in place in relation to termination was not diminished by the plaintiff’s status as a contractor or engagement under labour hire type arrangements: see, for example, AHI Healthcare Systems v Clinical Associates of Australia [2001] NSWIRComm 38 at [230]. (Nor did her engagement through RJ Group diminish that obligation). I do not consider the arrangement was “temporary” as pleaded at the time by the first defendant. The plaintiff was working in a very senior position and used specialist skills. The first agreement applied to both temporary engagements and contractors, the plaintiff falling under the latter category. It is clear on the evidence the plaintiff was not engaged merely as a replacement during Ms Mora’s leave, because her engagement continued unabated upon Ms Mora’s return. Clear representations were made about her role being ongoing (which were primarily interrupted due to the unreasonable conduct of the second defendant and in the absence of a proper response by the first defendant). The RJ Group, Link and the first defendant formed part of a contractual matrix by which the plaintiff performed work for the first defendant in a senior capacity akin to a full-time employee at an Associate Director level.

[102] The arrangement, established by the first and second agreements, failed to provide any adequate protection against arbitrary termination (see, Lavings v Barclay Mowlem Construction (NSW) Ltd (1994) 99 IR 247 at 253-254) and provided for a period of notice which, as the contract was performed over time, was unfair.

[103] Overall, I find that by virtue of the factors discussed under this heading that the contract constituted an unfair contract for the purposes of s 105(1)(a) of the Act and, in particular, I find the contract was unfair and harsh.

[9] As to the second ground relating to bullying and harassment the Court made the following findings (at [104], [110]-[112]):

[104] I also accept the submission of the plaintiff that the unfairness of the arrangement was further exacerbated by the failure of the arrangement to make any provision to adequately protect the plaintiff from bullying or harassment or the resultant distress and harm. Further, the first defendant failed to provide for any appropriate mechanism for the investigation of complaints or protection from retribution.

…

[110] I agree with the submissions advanced by the plaintiff that the evidence in the proceedings supports the inference that the plaintiff’s engagement with the first defendant was terminated as a result of her complaints about the second defendant’s conduct in his dealings with her and Ms Mora. This supports the conclusion that the termination was based upon an unfair contract in the sense that the contract was unfair and harsh.

[111] The arrangement failed to contain adequate protective provisions to protect the plaintiff from bullying and harassment or to ensure adequate action was taken in the event the plaintiff had occasion to make a complaint or grievance particularly issues concerning the propriety of the second defendant professional conduct in the first defendant. The arrangement further became unfair because of the conduct of the first defendant in failing to address the behaviour of the second defendant or protect the plaintiff from its consequence.

[112] In respect of the ground of bullying and harassment, I conclude that the arrangement was unfair and harsh pursuant to s 105(1)(a) of the Act and, in particular, I find the contract was unfair and harsh.

[10] The Court rejected the third ground concerning disparagement.

6. Arising from the judgment in Sutton No 3, the Court made declarations in the following terms on 22 June 2017:

1. Declares void (except for monies already paid) the arrangement between the Plaintiff and the Defendant whereby the Plaintiff performed work in the taxation consultancy industry for the Defendant ("the contract").

2. Declares that the contract was unfair and harsh.

3. Orders that the contract be varied from its commencement in the terms set out in Schedule A.

SCHEDULE A

1. The First Defendant and Second Defendant will not conduct themselves in a manner which:

(a) is contrary to the legitimate expectations and understandings of the Plaintiff particularly in circumstances where any such actions of the First and Second Defendant have the potential to, or do in actual fact, damage or detrimentally impact on the terms and conditions whereby the Plaintiff performed work for the First Defendant;

(b) is contrary to the representations made to the Plaintiff;

(c) is likely to, or does in fact, cause the Plaintiff to suffer distress and/or anxiety, humiliation and/or damage to her good name and character.

2. The First Defendant shall not terminate the contract without a proper reason and without providing the Plaintiff procedural fairness, including informing the Plaintiff of the precise nature of the allegations made against her and providing her an opportunity to answer those allegations and to be heard before a decision is made in relation to the termination of the contract.

3. The First Defendant will take all reasonable steps to prevent any of its employees or agents from bullying and/or harassing the Plaintiff.

4. The exercise of any discretion permitted under the contract shall be exercised by the First Defendant towards the Plaintiff in a manner that is at all times fair, just and conscionable, and in this regard the Defendant will afford to the Plaintiff natural justice and procedural fairness.

5. The First Defendant shall investigate any allegations made by the Plaintiff concerning the conduct of the Defendants.

6. The First Defendant will inform the Plaintiff of its findings of any complaint made by the Plaintiff concerning the conduct of the Defendants.

7. In Sutton No 4, the Court made determinations as to the appropriate money orders. Those findings are adequately summarised by the extraction of [30], [31], [48]-[50] and [52]:

Money Orders: Assessment

Termination of Employment

[30] The money orders made by the Court must ultimately reflect an assessment by the Court as to which is just in the circumstances of the particular case.

[31] In the circumstances described in Sutton No 3 and in particular [96]-[103] thereof, I consider that the arrangement should be varied to provide for 5 months notice at the remuneration of $140,000 per annum (see reflected in [44] of this judgment). The ultimate money order made in the matter will take into account a sum reflecting the non-payment of such a period of months by the first defendant together with the sums arising out of the bullying and harassment ground and interest, adjusted for the settlement with the second defendant.

Bullying and Harassment

…

[48] The balancing of all those considerations results, in my view, in a finding that a money order of $20,000 would be appropriate under this ground. That amount will be taken into account for the purposes of assessing final money orders after allowance is made for the settlement with the second defendant.

Interest

[49] I accept the plaintiff’s submission as to interest, save that the assessment of interest should be calculated from 1 November 2005. A just assessment of interest will have interest calculated upon the loss occasioned by reason of the arrangement being an unfair contract and, accordingly, should be assessed against money amounts referrable to the termination of employment and bullying and harassment grounds, before deduction of any amount corresponding to settlement with the second defendant.

Settlement with the Second Defendant

[50] Having regard to the further submissions of the plaintiff, in this respect, and the earlier discussion by this Court in Sutton No 3, I consider that it is appropriate to take into account the settlement with the second defendant in this matter in relation to the assessment of money orders in favour of the plaintiff, with respect to declarations and findings made against the first defendant. This course is necessary in order to prevent double recovery as there are overlapping elements of the declarations and the findings of unfairness by the Court as to the first and second defendants.

…

[52] I will not quantify the impact of the settlement with the second defendant at this stage, but rather, I will adopt the following procedure before making a final assessment in that respect.

8. The Court thereupon made the following directions:

1. The plaintiff shall file in the form of short minutes of order or a schedule reflecting the following:

1. The quantification of compensation payable by the first defendant under the termination and bullying and harassment grounds in accordance with the terms of this judgment;

2. The application of interest to that amount in accordance with the determination as to the approach to interest set out under the corresponding heading of this judgment;

2. The plaintiff has liberty to file any final submissions as to the implications of the settlement with the second defendant. Those submissions shall be limited to the question of any deduction arising from the settlement with the second defendant and may address the issue of apportionment between the first the second defendants (after the deduction of costs referable to the proceedings against the second defendant).

3. The plaintiff shall file any application as to costs against the first defendant and any submissions in support thereof.

9. In accordance with those directions, the plaintiff filed written submissions on 22 September 2017; a “plaintiff’s schedule of compensation and interest” (“the Schedule”) and an affidavit of Andrew Attilio Floro affirmed 21 September 2017.

10. It follows that the judgment concerns:

1. The quantification of compensation and interest.

2. The resolution of the proportion of settlement with the second defendant to be deducted from the money orders made (noting the qualifications in [51] of Sutton No 4).

3. Costs.

11. I shall deal with each issue in turn.

Quantification of Compensation and Interest

12. The plaintiff made the following submissions in this respect:

[2] In Sutton No 4, the Court found (at [31]) that the arrangement whereby the plaintiff performed work should be varied to provide for 5 months notice at the remuneration level of $140,000 per annum and that a monetary order should be made reflecting non-payment of such a period, found (at [48]) a monetary order of $20,000 should be made with respect to the bullying and harassment claim and found (at [49]) that interest should be calculated on those sums from 1 November 2005.

[3] The quantification of the orders and interest are set out in [the] Schedule of Compensation and Interest filed by the plaintiff and, in summary, is as follows:

(a) Termination (5 months at $140,000 per annum) $58,333.00

(b) Bullying and harassment claim $20,0000.00 [sic]

Subtotal: $78,333.00

(c) Interest $73,925.97

Total: $152,258.97

13. Having regard to the formula and calculations used in the Schedule, I accept this submission.

Settlement with the Second Defendant

14. The plaintiff made the following submissions in this respect:

[4] The plaintiff addressed the settlement as against the second defendant at paragraphs 71 to 73 of her submissions dated 24 February 2017 and paragraph 9 to 16 of her submissions dated 29 June 2017. In Sutton No 4, the Court indicated (at [50]) that it considered it was appropriate to take into account the settlement with the second defendant in relation to the assessment of the monetary orders.

[5] That finding was subject to two matters referred to in paragraph [51] of Sutton No 4 being: (1) account is to be taken of the costs incurred in pursuing the claim against the second defendant in the amount of $230,000 meaning a deduction of the full amount would be $120,000; and (2) that the settlement against the second defendant should be approached on the basis that the contribution of the first defendant to the unfairness found was greater than that of the second defendant. It is necessary for the plaintiff to briefly address the second issue.

[6] The proportion of any reduction in the deduction is, of course, a matter for the Court to be assessed on the basis of the relative contribution of the parties to the unfairness found and is not susceptible to precise mathematical calculation. It is submitted that, in the circumstances, it is appropriate for any deduction to be reduced to reflect the fact that the unfairness found by the Court primarily resulted from the actions of the first defendant. Any deduction can only reflect the degree to which there is overlap in the contribution of the first and second defendant to the unfairness found.

[7] In Sutton No 3, the Court found (at [102]-[103] and [111]-[112]) the arrangement whereby the plaintiff performed work was unfair as a result the failure of the arrangement to provide adequate protection against arbitrary termination or provide a fair period of notice and by failing to contain adequate protection from bullying and harassment. The monetary orders contemplated in Sutton No 4 are attributable to a greater degree to the unfairness arising from the termination ground rather than the bullying and harassment ground.

[8] The arrangement was put in place by the first defendant and it is not clear that the second defendant played any role in determining the terms of the arrangement itself. The second defendant did contribute to the arrangement becoming unfair as a result of the plaintiff experiencing conduct amounting to bullying and harassment. The first defendant also bears responsibility for that unfairness as a result of establishing the arrangement and by reason of failing to address the behaviour of the second defendant.

[9] In those circumstances, the deduction which should be made as a result of the settlement against the second defendant must reflect the fact that the unfairness attributable to the second defendant was a small part of the unfairness found. It is submitted that a deduction of say 10%-15% would be appropriate to reflect the contribution of the second defendant. If the Court would otherwise make a deduction of $120,000 to the money order on account of the settlement against the second defendant, it should rather apply a deduction of $12,000-$18,000 from the monetary order that would otherwise be made.

[10] Another way of approaching the question would be to make no deduction with respect to the payment of $58,333 attributable to the termination ground and a reduction of say 50% of the payment of $20,000 attributable to the bullying and harassment ground or $10,000. On either approach, a reduction in the monetary order the Court would otherwise make in the range of $10,000 to $20,000 is appropriate having regard to the settlement against the second defendant to reflect the overlapping elements of the findings of unfairness by the Court.

15. I consider the defendant’s submissions, in this respect, are reasonable although submitting the second defendant played only a “small part” in the unfairness may be, to some degree, overstated.

16. Overall, I consider an appropriate deduction for the settlement against the second defendant should be $20,000.

Costs

17. In the light of the judgment of this Court in Sutton No 3 and Sutton No 4, and the substantial success of the plaintiff, an order should be made that the defendant pay the plaintiff’s costs of the proceedings: see r 42.1 of the Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”).

18. The plaintiff seeks, however, that an order should be made that the defendant pay the plaintiff’s costs on an indemnity basis as a result of an offer of settlement made on 1 November 2006.

19. This contention is based upon the fact that the plaintiff made an offer of settlement addressed to the first defendant on that date in the amount of $40,000 plus costs. The offer was not accepted by the first defendant.

20. That submission was developed as follows:

[12] The offer was made pursuant to what was then Part 23 of the Industrial Relations Rules 1996. Rule 216(4) of the Rules provided that, if an offer was not accepted and the applicant obtained an order on the claim to which the offer related which was no less favourable than the terms of the offer, the applicant was entitled to an order for costs assessed on an indemnity basis. Rule 42.14(2)(b) of the [Uniform] Civil Procedure Rules 2005 now provides, to the same effect, that a plaintiff is entitled to an order for indemnity costs if the plaintiff obtains an order or judgment on the claim no less favourable than the terms of the offer.

[13] In assessing whether the order or judgment obtained by the plaintiff is no less favourable than the offer, the effect of any deduction made having regard to the settlement with the second defendant must be disregarded. The settlement against the second defendant is proposed to be taken into account as a result of the overlap in the relief sought against both defendants. In those circumstances, the effective outcome of the [sic] any order made on the claim is the total of the order against the first defendant and the amount of the settlement received from the second defendant attributable to the claim. On that approach, the monetary order the Court will make is, on any view, no less favourable than the offer made on 1 November 2006.

21. Having regard to my earlier decision as to money orders against the first defendant and my observations as to an award of costs above, the monetary order made by the Court in the matter is, in my view, no less favourable than the offer made on 1 November 2006, even if the settlement with the second defendant is excluded.

22. It follows that, pursuant to r 42.14(2)(b) of the UCPR (and having regard to the Industrial Relations Commission Rules 1996 (NSW)), the Court should make an order for costs on an indemnity basis.

23. Finally, the plaintiff sought a gross sum order under s 98(4) of the Civil Procedure Act 2005 (NSW). After referring to Hamod v New South Wales [2011] NSWCA 375 at [816]-[819], the plaintiff submitted, it was appropriate for the Court to make a gross sum costs order for the following reasons:

1. The proceedings have involved extraordinary delays in concluding the proceedings which arose through no fault on the part of the plaintiff and resulted in very considerable costs being incurred in bringing the proceedings to their conclusion;

2. The delays in resolving the proceedings arose primarily as a result of the first defendant being placed into voluntary administration which frustrated the hearing of the proceeding in 2009 and the fact other parties litigated interlocutory points to the Court of Appeal and High Court;

3. From the middle of 2015, the first defendant ceased instructing solicitors and has not participated in the proceedings and, if a gross costs order is not made, it is inevitable that the plaintiff will be forced to incur significant additional costs in having the costs assessed;

4. The evidence as to the costs incurred in the proceedings demonstrate a lack of proportion between the costs incurred in the proceedings and the issues at stake in the proceedings and the costs should not, in the circumstances, be further increased by a costs assessment; and

5. There is material before the Court which would enable the Court to make an appropriate assessment of the costs incurred by the plaintiff in prosecuting the proceedings.

24. The plaintiff further submitted:

[16] In assessing the amount of a gross sum costs order, the Court is not required to be involved in the same kind of detailed examination that would be appropriate on taxation or formal costs assessment: Harrison v Schipp (2002) 54 NSWLR 738 at [22]. The rule contemplates a much broader brush approach than would be applied on taxation: Hadid v Lenfest Communications Inc [2000] FCA 628 at [35]; Penson v Titan National Pty Ltd (No 3) [2015] NSWCA 121 at [7].

25. In my view, a gross sum costs order should not be made in the present matter for the following reasons:

1. The material before the Court to make an assessment as to costs at an appropriate sum which is fair to the respective parties is, in my view, insufficient, even if the kind of detailed examination that would be appropriate on taxation or a formal assessment of costs is not required: Harrison v Schipp (2003) 54 NSWLR 738 at [22].

2. It is true that the first defendant ceased to participate in the proceedings from mid-2015, but there is insufficient evidence to suggest that any assessment process would be unduly protracted or result in significant unrecoverable costs. Nor do I consider experience should dictate that a conclusion of that kind should be made.

3. Further, there is no submission made that the plaintiff would be disadvantaged because of a potential inability of the plaintiff to pay the costs.

4. It is unclear what the plaintiff means by the submission that there is a lack of proportion between the costs incurred in the proceedings and the issues at stake in the proceedings. Just how such measurement or assessment might be undertaken was not specified in the plaintiff’s submissions. It might be noted that the conduct of the ex parte proceedings was, by its nature, a product of the case was advanced for the plaintiff.

5. I accept the submission that there has been lengthy delays in the proceedings which this Court has earlier commented do not lie at the feet of the plaintiff. Whilst I am sympathetic to the plaintiff’s difficulties, in that respect, I do not consider the weight of that factor may overcome the difficulties occasioned by an inadequate basis upon which to assess the gross sum costs order.

26. Accordingly, costs will be as agreed or, in default of agreement, as assessed in either case on an indemnity basis.

CONCLUSION

27. The making of orders in conformity with this judgment, in conjunction with earlier orders made by the Court, will dispose of the remaining issues arising out of the second further amended summons brought by the plaintiff.

DIRECTIONS

28. The plaintiff shall file within 7 days of the publication of this judgment short minutes of order reflecting this judgment which shall be dealt with administratively in Chambers by the Court.

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Decision last updated: 28 November 2017