Zoltaszek v Downer EDI Engineering Pty Ltd (No.3)
[2011] FMCA 141
•22 February 2011
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| ZOLTASZEK v DOWNER EDI ENGINEERING PTY LTD (No.3) | [2011] FMCA 141 |
| HUMAN RIGHTS – Costs – whether respondent entitled to costs on an indemnity basis. |
| Disability Discrimination Act 1992 (Cth), ss.15, 17, 35 Federal Court Rules, O.23, r.11 |
| Alpine Hardwoods (Aust) Pty Ltd and Another v Hardys Pty Ltd and Another (No.2) (2002) 190 ALR 121; [2002] FCA 224 Black v Lipovac (by his next friend Lipovac) and Others (1998) 217 ALR 386; [1998] FCA 699 Calderbank v Calderbank [1975] 1 All ER 333; [1975] 3 WLR 586 Colgate-Palmolive Company and Another v Cussons Pty Ltd (1993) 46 FCR 225; (1993) 118 ALR 248 Fetherston v Peninsula Health and Others (2004) 137 FCR 262; [2004] FCA 594 Futuretronics.com.au Pty Ltd v Graphix Labels Pty Ltd [2009] FCAFC 40 Gluyas v Commonwealth of Australia (No.2) [2004] FMCA 359 IFTC Broking Services Ltd and Another v Commissioner of Taxation (2010) 268 ALR 1; [2010] FCAFC 31 Port Kembla Coal Terminal Ltd v Braverus Maritime Inc (No.2) (2004) 212 ALR 281; [2004] FCA 1437 Salfinger v Niugini Mining (Australia) Pty Ltd (No.4) [2007] FCA 1594 Spalla v St George Motor Finance Ltd (No.8) [2006] FCA 1537 Zoltaszek v Downer EDI Engineering Pty Ltd (No.2) [2010] FMCA 938 |
| Applicant: | ZENON ZOLTASZEK |
| Respondent: | DOWNER EDI ENGINEERING PTY LIMITED |
| File Number: | SYG 1569 of 2009 |
| Judgment of: | Barnes FM |
| Hearing date: | 22 February 2011 |
| Delivered at: | Sydney |
| Delivered on: | 22 February 2011 |
REPRESENTATION
| Applicant: | In person |
| Solicitors for the Respondent: | FCB Workplace Lawyers & Consultants |
ORDERS
The applicant pay the respondent’s costs up to 11 am on 27 August 2010 taxed on a party and party basis in accordance with the Federal Court Rules.
The applicant pay the respondent’s costs incurred after that time taxed on an indemnity basis in accordance with the Federal Court Rules.
THE COURT NOTES:
The undertaking given by the respondent not to take steps to enforce any costs order until the Federal Court appeal has been determined and the undertaking of the applicant not to dispose of any assets during the period of stay of execution of any costs order.
The costs of attendance of the respondent at the directions hearing on 17 December 2009 were fixed in the sum of $480.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 1569 of 2009
| ZENON ZOLTASZEK |
Applicant
And
| DOWNER EDI ENGINEERING PTY LIMITED |
Respondent
REASONS FOR JUDGMENT
(Revised from transcript)
On 1 July 2009 Mr Zoltaszek commenced proceedings in this court alleging discrimination and harassment under the Disability Discrimination Act 1992 (Cth) by the respondent, Downer EDI Engineering Pty Limited (Downer). He asserted that the conduct he complained of was discrimination in employment within s.15 of the Act or, in the alternative, that the conduct was within s.17 of the Act as discrimination against a contract worker. He also asserted that Downer engaged in harassment contrary to s.35 of the Act and raised issues about the validity of what he claimed was a contract between himself and Downer.
The matter was heard on 21 September 2010. On 3 December 2010 I delivered judgment in which the application was dismissed. The applicant was wholly unsuccessful in those proceedings.
On 3 December 2010 the respondent foreshadowed that it intended to seek costs, including a component on an indemnity basis. A supporting affidavit was filed in court on 3 December 2010. Bearing in mind that Mr Zoltaszek was self represented, the costs application was not dealt with on that day and he was given an opportunity to file and serve any affidavit evidence in relation to the application for costs. He did not file further evidence. The costs application was listed for hearing today, 22 February 2011.
The respondent now seeks costs on the basis that ordinary costs should follow the event and that in the particular circumstances of this case it is appropriate that indemnity costs be awarded from one of a number of possible dates.
It is convenient to consider first the general principles in relation to the respondent’s application for costs on a party and party basis and whether the normal principle that costs should follow the event is applicable in human rights proceedings in this court.
First, as discussed by Phipps FM in Gluyas v Commonwealth of Australia (No.2) [2004] FMCA 359, and as applied in many other cases in this court, this is not a no costs jurisdiction. The Federal Magistrates Court has power under s.79 of the Federal Magistrates Act 1999 (Cth) to award costs. Except as provided by any other Act or the Federal Magistrates Court Rules, the award of costs is in the discretion of the Federal Magistrates Court.
The approach to be taken to costs in human rights matters was considered by Heerey J in Fetherston v Peninsula Health and Others (2004) 137 FCR 262; [2004] FCA 594 at 529. His Honour stated in relation to proceedings of this nature that the general rule was that a wholly successful defendant should receive his or her costs, unless good reason was shown to the contrary and that the usual principles as to costs apply. As His Honour stated at [8]:
The general rule is that a wholly successful defendant should receive his or her costs unless good reason is shown to the contrary: Milne v Attorney-General (Tas) (1956) 95 CLR 460 at 477. As Dawson J said in Latoudis v Casey (1990) 170 CLR 534 at 557, the discretion as to costs remains absolute and unfettered but it is to be exercised judicially, that is to say:
… not by reference to irrelevant or extraneous considerations but upon facts connected with or leading up to the litigation.
Such principles apply in this case. The respondent, who has been wholly successful in defending these proceedings, should receive its costs. Good reason to the contrary has not been shown. Mr Zoltaszek did not file evidence in relation to the costs application. His asserted belief in the validity of his case, that he was “right” and that he should have succeeded, is not such as to warrant a departure from the normal principle that the unsuccessful applicant should meet the costs of the respondent. Nor, although he did not raise it as such, is the fact that the applicant was unrepresented sufficient to warrant a departure from the normal approach.
In addition, the fact that, on several occasions prior to the hearing, settlement offers were made by the respondent and that the applicant asserts that such offers were validation of his belief as to the likelihood of a greater success at the hearing (as otherwise there would have been no reason not to accept such offers) is not such as to warrant a departure from the normal principle that a successful party should recover its costs.
Hence, as a starting point, the respondent is entitled to an award of costs on a party and party basis to be paid as agreed. In the absence of agreement such costs should be taxed in accordance with the Federal Court Rules. Such an order is appropriate having regard to the other issue that arises in this case, which is whether any part of the respondent’s costs should be ordered to be paid on an indemnity basis, that is, to allow recovery of all costs incurred by the respondent except insofar as they are of an unreasonable amount or were unreasonably incurred so that, subject to any such exceptions, the respondent would be completely indemnified by the applicant for its costs from a particular time.
The respondent seeks indemnity costs from several possible times. First, it is contended that costs should be awarded on an indemnity basis from the time of what is said to be a Calderbank offer of 30 March 2010 (see Calderbank v Calderbank [1975] 1 All ER 333; [1975] 3 WLR 586). In the alternative, it is contended that costs should be awarded on an indemnity basis from the time of correspondence making offers to settle following mediation, on 29 April 2010 and 26 May 2010. Otherwise, costs on an indemnity basis are sought on the basis that an offer of compromise was made in accordance with O.23 of the Federal Court Rules on 26 August 2010.
In evidence before the court is an affidavit of Roxanne Tanner, affirmed on 3 December 2010, which describes and annexes copies of the correspondence between the solicitors for the respondent and Mr Zoltaszek relevant to the various offers that have been made, as well as to the issue of whether it was unreasonable for Mr Zoltaszek to reject the first offer or, indeed, the subsequent offers.
On 30 March 2010 the solicitors for the respondent wrote to Mr Zoltaszek, without prejudice save as to costs, making an offer to settle the matter on the basis that Mr Zoltaszek discontinue the proceedings and each party bear its own costs of the proceedings. The letter drew to Mr Zoltaszek’s attention that if he was unsuccessful the respondent proposed to tender the letter in support of an application for payment of costs on an indemnity basis, consistent with the principles in Calderbank v Calderbank. It provided an estimate of such costs.
A copy of the letter was sent by mail to the applicant’s address for service and a duplicate copy was sent by email. The respondent did not receive a response from the applicant.
The respondent contends that the failure to respond - which in effect was to be taken as a rejection of the offer – was unreasonable.
In Alpine Hardwoods (Aust) Pty Ltd and Another v Hardys Pty Ltd and Another (No.2) (2002) 190 ALR 121; [2002] FCA 224, Weinberg J considered the principles applicable where a Calderbank letter had been sent. As his Honour stated at [18]:
A Calderbank letter (offering an amount which exceeds that ultimately awarded) can be considered by the court in deciding whether to make an order displacing the usual order that costs follow the event…
RECORDED : NOT TRANSCRIBED
Weinberg J pointed out that the existence of O.23 of the Federal Court Rules (which applies in this court by virtue of the provisions of the Federal Magistrates Court Rules) does not prevent the court relying on principles in relation to Calderbank letters in exercising the discretion in relation to costs.
In this case the letter of 30 March 2010 did not offer payment of an amount, but rather proposed that the applicant discontinue the proceedings and that each party was to bear its own costs. This was said to involve a waiver of costs of $480 which Mr Zoltaszek had been ordered to pay the respondent as costs thrown away by reason of an adjournment on 17 December 2009. It was not otherwise an offer of any amount. The substantive proceedings were dismissed. No order was to be made in favour of Mr Zoltaszek.
The respondents put to the court that it was unreasonable for Mr Zoltaszek to have rejected this offer. I note the restricted nature of the offer made at that time and that as the Full Court of the Federal Court emphasised in Black v Lipovac (by his next friend Lipovac) and Others (1998) 217 ALR 386; [1998] FCA 699 at [217], “the mere refusal of a Calderbank offer does not of itself warrant an order for indemnity costs” (also see Alpine v Hardys at [28]). The offeror - in this case the respondent Downer, must show that the conduct of Mr Zoltaszek was unreasonable. The reasonableness of that conduct must be viewed in light of the circumstances which existed at the time the offer was rejected.
There has been no suggestion that the offer was not received by Mr Zoltaszek. His rejection must effectively have taken place after the 48 hours for acceptance expired. However, as Weinberg J said in Alpine v Hardys at [35], the fact that an applicant ultimately fails to make good his case does not mean he acted unreasonably in rejecting an initial offer. Indeed, even if the initial offer was itself reasonable, that does not mean it was unreasonable to reject it.
Mr Zoltaszek does not bear the onus, in this context, of showing why indemnity costs should not be ordered. The fact that he was ultimately unsuccessful in the litigation and could have accepted this offer of settlement at an earlier stage is not, in all the circumstances, such as to show that the course he adopted at that time was unreasonable or imprudent. I note that at the time at which the letter was sent there had been no points of claim filed. More relevantly there had been no affidavit evidence or points of defence filed by the respondent. I consider it “unlikely” that when Mr Zoltaszek failed to accept the offer he had “any real appreciation of the considerable difficulties” (as there were in Alpine v Hardys per Weinberg J at [37]) that his “case would ultimately have to overcome”. Similarly, he “could not have known, at that stage, the strength of the respondent[’s] case or precisely what the [evidence of its] witnesses” would be. The fact that his application had been through the Australian Human Rights Commission (a matter referred to in the submissions of the respondent) is not such as to satisfy me that his failure to accept such an offer was unreasonable in all the circumstances of this case.
I am not persuaded that costs should be awarded on an indemnity basis from 30 March 2010.
In the alternative, the respondent seeks costs on an indemnity basis from 29 April 2010. The parties attended mediation (as ordered by this court) on 23 April 2010, by which date the respondent’s evidence had been filed. The parties were said to have reached an agreement to settle the matter at mediation. By email of 29 April 2010, the respondent’s solicitor sent a Deed of Release reflecting the terms of settlement to Mr Zoltaszek for signature and a notice of discontinuance to be filed by him. The proposed settlement was to involve payment of $5,000 to Impowest Pty Ltd, the company operated by Mr Zoltaszek (as discussed in Zoltaszek v Downer EDI Engineering Pty Limited (No.2) [2010] FMCA 938).
According to the evidence of Ms Tanner, no response was received to the email of 29 April 2010 prior to the date the matter was next listed before the court (11 May 2010). The respondent’s solicitor wrote to Mr Zoltaszek on 10 May 2010 proposing, by consent, to stand the matter over for 28 days. Ms Tanner also attested to unsuccessful attempts to contact Mr Zoltaszek by telephone on 10 May 2010 and to his failure to respond. On 11 May 2010 the matter was stood over for 28 days.
On 26 May 2010 the solicitors for the respondent again wrote to Mr Zoltaszek setting out what was said to be the terms of the agreement reached at mediation and attaching a copy of a Deed of Release and notice of discontinuance. Unlike the letter of 29 April 2010, that letter specifically stated that it was an offer to settle all matters in accordance with the attached deed of release that would remain open until 5 pm on Monday, 7 June 2010. In addition, Mr Zoltaszek was provided with details for the Macquarie Legal Centre to assist him with interpreting the Deed of Release.
On 3 June 2010 Ms Tanner had a conversation with Mr Zoltaszek in which he said words to the effect that he had seen a lawyer at the Macquarie Legal Centre, considered the terms of the agreement reached at mediation and was not going to sign it and would continue the proceedings.
Mr Zoltaszek did not file any evidence in relation to the costs application. Insofar as it is open to the court to have regard to what he said from the bar table in relation to his state of mind, he seemed to be suggesting that the fact that he had received settlement offers confirmed that he was right and that the respondent’s affidavits had in fact confirmed his conviction that he should pursue his rights.
The respondent seeks costs on an indemnity basis from the date of either of these letters in accordance with the general discretion of the court.
In the normal course, only party/party costs would be ordered. In all cases it is for the discretion of the court as to whether the particular facts and circumstances of the case warrant the making of an order for the payment of costs on an indemnity basis (see the general discussion of principle in Colgate-Palmolive Company and Another v Cussons Pty Ltd (1993) 46 FCR 225; (1993) 118 ALR 248). Included in the circumstances to be considered are whether the party against whom indemnity costs is sought is a self-represented litigant and the extent to which such a self-represented litigant (as distinct from a represented party) ought to escape the consequences of indemnity costs. Another relevant issue is whether a party has imprudently refused an offer to compromise.
Courts are generally more reluctant to order a self-represented litigant to pay costs on an indemnity basis. In this case I am not satisfied that a self represented litigant such as Mr Zoltaszek should have known that there was no prospect of success or that he acted in a high-handed manner, proceeded vexatiously or made allegations which ought not to have been made, such that his rejection of the offer of settlement made at that time or any other circumstances warranted an award of indemnity costs. I have borne in mind that Mr Zoltaszek is a self-represented litigant lacking knowledge of the law, the practice of the court and, possibly, objectivity (see to similar effect Spalla v St George Motor Finance Ltd (No 8) [2006] FCA 1537 and Salfinger v Niugini Mining (Australia) Pty Ltd (No 4) [2007] FCA 1594).
On balance, having regard to all of the circumstances, I am not persuaded that it is appropriate to depart from the normal principle that party/party costs, not indemnity costs, should be awarded to the respondent in relation to the period in which the letters of 29 April 2010 and 26 May 2010 were sent to Mr Zoltaszek.
However, I am persuaded by the respondent’s submissions that it is appropriate to award indemnity costs in accordance with O.23 r.11(6) of the Federal Court Rules, having regard to the offer of compromise made on 26 August 2010.
Order 23 is applicable in proceedings in this court. Rule 11(6) provides:
If:
(a)an offer is made by a respondent and not accepted by the applicant; and
(b)the respondent obtains an order or judgment on the claim to which the offer relates as favourable to the respondent, or more favourable to the respondent, than the terms of the offer,
then, unless the court otherwise orders:
(c)the respondent is entitled to an order that the applicant pay the respondent’s costs in respect of the claim incurred up to 11 am on the day after the day the offer was made, taxed on a party and party basis; and
(b)the respondent is entitled to an order that the applicant pay the respondent’s costs in respect of the claim incurred after that time, taxed on an indemnity basis.
The operation of O.23 r.11(6) was considered by the Full Court of the Federal Court in Futuretronics.com.au Pty Ltd v Graphix Labels Pty Ltd [2009] FCAFC 40. In particular, the court addressed the meaning of the expression “unless the court otherwise orders” and applied the approach taken in relation to r.11(4) by Hely J in Port Kembla Coal Terminal Ltd v Braverus Maritime Inc (No 2) (2004) 212 ALR 281; [2004] FCA 1437 to rule 11(6) (see Futuretronics at [10]).
In Port Kembla, Hely J referred to an earlier observation that compelling and exceptional circumstances must exist before the court would otherwise order and stated (at [17]):
Once an offer is made, and a judgment no less favourable obtained, a rebuttable presumption in favour of indemnity costs is created.
RECORDED : NOT TRANSCRIBED
Similarly in this case as the requirements of O.23 r.11(6)(a) and (b) have been met, a presumption in favour of indemnity costs arises. It is for Mr Zoltaszek to show reason why such a presumption should not apply. Such an approach was taken in IFTC Broking Services Ltd and Another v Commissioner of Taxation (2010) 268 ALR 1; [2010] FCAFC 31 at [9]. The Full Court of the Federal Court made the point that it is for the applicant to satisfy the court that the prima facie position established by O.23 r.11(6) should be departed from in the award of costs.
Indeed the fact that an unsuccessful litigant acted reasonably in rejecting an offer of compromise would not of itself be a sufficient reason to displace the operation of the rule. A court may depart from the rule, but only for proper reasons which, in general, would only arise in an exceptional case (see Futuretronics at [10] and IFTC Broking Services at [9]). Mr Zoltaszek has not established a proper basis for departing from the ordinary consequence of his refusal to accept the offer of compromise under O.23 r.11(6).
I note that the offer that was made on 26 August 2010 was a more generous offer than those made earlier. It was that the respondent pay the applicant the amount of $10,000 and the proceedings be dismissed. It was open to be accepted for a period of 21 days, which gave the applicant time (prior to the hearing of 21 September 2010) to consider whether to accept the offer. Notwithstanding that it was a more attractive offer than earlier offers, the applicant did not respond. He failed to do so in the context of those earlier offers set out above and his admissions as to obtaining contrary legal advice, but nonetheless pressing on with his claim.
All the evidence, including the respondent’s affidavit evidence and points of defence, had been filed at this time. Mr Zoltaszek’s belief, which he appears to maintain, that the offer meant that he had a good case and should press on, is not such as to establish proper reasons for departing from the ordinary rule in O.23 r.11(6). Even if the applicant thought it was reasonable to refuse the offer, that is not sufficient to displace the application of O.23 r.11(6).
The respondent had to incur substantial costs in defending the proceedings and preparing for the hearing in the period after the offer was made and during the time it could have been accepted, having regard to the time at which the hearing was listed and the need for the filing and service of an outline of case and list of authorities.
The conclusions reached in the substantive judgment were based on facts in the affidavits filed and known to the applicant at the time he decided not to accept the offer. He has not met what was described in IFTC Broking Services as the “formidable task” of persuading the court that there is a proper reason to escape the ordinary consequences of O.23 r.11(6) (per Stone, Edmonds and Jagot JJ at [14]).
I am not persuaded that there is a proper basis for departing from O.23 r.11(6) in relation to the award of indemnity costs in accordance with and from the time provided for in that provision. Accordingly, orders should be made in accordance with the provisions of O.23 r.11(6). In relation to the costs on a party and party basis, the order should also be made in terms which reflect the wording of O.23 r.11(6).
I certify that the preceding forty-two (42) paragraphs are a true copy of the reasons for judgment of Barnes FM
Date: 10 March 2011
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