Burgess & Ors v Mount Thorley Operations Pty Limited [2003] NSWIRComm 22 (13 February 2003)

Last Updated: 7 March 2003

NEW SOUTH WALES INDUSTRIAL RELATIONS COMMISSION

CITATION : Burgess & Ors v Mount Thorley Operations Pty Limited [2003] NSWIRComm 22

FILE NUMBER(S): 3614, 3615, 3616, 3617, 3618, 3619, 3620, 3621, 3622, 3623, 3624, 3625, 3626 and 3627

HEARING DATE(S): 13/12/2002

DECISION DATE: 13/02/2003

PARTIES:

APPLICANTS:

Michael John Burgess

Raymond Gordon Wills

Marvyn Smith

Rodney William Jones

Gregory Ian Bright

Charles Anthony Mitchell

Barry Fong

Leslie James Irvine

William Robert Hoye

Frederick George Veigel

Michael Bruce Sampson

Ross Allen Brown

Michael Mathew Phillips

John Douglas Cuddigan

RESPONDENT:

Mount Thorley Operations Pty Limited

JUDGMENT OF: Schmidt J

LEGAL REPRESENTATIVES

APPLICANTS:

Mr N Dawson of counsel

SOLICITORS:

RL Whyburn & Associates

RESPONDENTS:

Mr HJ Dixon SC with Mr BKB Cross of counsel

SOLICITORS:

Freehills

CASES CITED: Bailey v Meredith, 11 May 2001 NSWCA 149

Ballard v Incoll Management (No 2) [2001] NSWIRComm 217

Bell & Berg v Macquarie Bank & Anor [2003] NSWIRComm 21

Boner v Anderson (No 2) (1993) 50 IR 470

Bruinsma v Menczer (1995) 40 NSWLR 716

Construction, Forestry, Mining and Energy Union v Mount Thorley Operations Pty Limited (1997) 76 IR 364

Hairman v FileNET Corporation Pty Ltd [2002] NSWIRComm 76

Kelly v Foley (1993) 51 IR 331

Maciver v Hilton Nursing Home Pty Limited [2001] NSWIRComm 56

Maitland Hospital v Fisher (1992) 29 NSWLR 721

Mt Thorley Operations Pty Limited v Burgess & Ors (2001) 103 IR 184

Mt Thorley Operations Pty Limited v Raymond Gordon Wills & Ors (Unreported; Wright J President, Walton J Vice-President, Glynn J; 2 November 1999)

MGICA (1992) Ltd v Kenny & Good Pty Ltd and Another (No 4) 140 ALR 707

Multicon Engineering Pty Ltd v Federal Airports Corporation (1996) 138 ALR 425

NMFM Property Pty Ltd v Citibank Ltd (No 2) (2001) 109 FCR 77

Nobrega v Trustees of the Roman Catholic Church Sydney (No 2) [1999] NSWCA 133

RT Thomas & Family Pty Ltd v Jeffries Industries Ltd & Ors (unreported, Supreme Court of New South Wales, Giles J, 2 February 1996)

Sheffield v Brambles Australia Limited and Anor [2002] NSWIRComm 166

Van Huisstede v Commissioner of Police (No 2) (2001) 106 IR 56

LEGISLATION CITED: Evidence Act 1995

Industrial Relations Act 1991

Industrial Relations Act 1996

Police Service Act 1990

JUDGMENT:

- 26 -

INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES

IN COURT SESSION

CORAM: Schmidt J

DATE: 13 February 2003

Matter Number IRC 3614 of 1998

MICHAEL JOHN BURGESS v MOUNT THORLEY OPERATIONS PTY LIMITED

Application under section 106 of the Industrial Relations Act 1996

Matter Number IRC 3615 of 1998

RAYMOND GORDON WILLS v MOUNT THORLEY OPERATIONS PTY LIMITED

Application under section 106 of the Industrial Relations Act 1996

Matter Number IRC 3616 of 1998

MARVYN SMITH v MOUNT THORLEY OPERATIONS PTY LIMITED

Application under section 106 of the Industrial Relations Act 1996

Matter Number IRC 3617 of 1998

RODNEY WILLIAM JONES v MOUNT THORLEY OPERATIONS PTY LIMITED

Application under section 106 of the Industrial Relations Act 1996

Matter Number IRC 3618 of 1998

GEOFFREY IAN BRIGHT v MOUNT THORLEY OPERATIONS PTY LIMITED

Application under section 106 of the Industrial Relations Act 1996

Matter Number IRC 3619 of 1998

CHARLES ANTHONY MITCHELL v MOUNT THORLEY OPERATIONS PTY LIMITED

Application under section 106 of the Industrial Relations Act 1996

Matter Number IRC 3620 of 1998

BARRY FONG v MOUNT THORLEY OPERATIONS PTY LIMITED

Application under section 106 of the Industrial Relations Act 1996

Matter Number IRC 3621 of 1998

LESLIE JAMES IRVINE v MOUNT THORLEY OPERATIONS PTY LIMITED

Application under section 106 of the Industrial Relations Act 1996

Matter Number IRC 3622 of 1998

WILLIAM ROBERT HOYE v MOUNT THORLEY OPERATIONS PTY LIMITED

Application under section 106 of the Industrial Relations Act 1996

Matter Number IRC 3623 of 1998

FREDERICK GEORGE VEIGEL v MOUNT THORLEY OPERATIONS PTY LIMITED

Application under section 106 of the Industrial Relations Act 1996

Matter Number IRC 3624 of 1998

MICHAEL BRUCE SAMPSON v MOUNT THORLEY OPERATIONS PTY LIMITED

Application under section 106 of the Industrial Relations Act 1996

Matter Number IRC 3625 of 1998

ROSS ALLEN BROWN v MOUNT THORLEY OPERATIONS PTY LIMITED

Application under section 106 of the Industrial Relations Act 1996

Matter Number IRC 3626 of 1998

MICHAEL MATHEW PHILLIPS v MOUNT THORLEY OPERATIONS PTY LIMITED

Application under section 106 of the Industrial Relations Act 1996

Matter Number IRC 3627 of 1998

JOHN DOUGLAS CUDDIGAN v MOUNT THORLEY OPERATIONS PTY LIMITED

Application under section 106 of the Industrial Relations Act 1996

JUDGMENT ON COSTS

1 Judgment dismissing these applications under s106 of the Industrial Relations Act 1996 ('the Act') was given on 21 May 2002. This reflected the view reached that the basis upon which the applicants had advanced their claims had not been made out, so as to ground the relief sought, and that the Court had no jurisdiction to entertain the orders sought in any event. The parties were given liberty to approach if they could not agree on the appropriate costs order.

2 The respondent sought an order for indemnity costs in its favour, with a number of alternatives being advanced if its primary application was rejected. The applicants' position was that there should be no departure from the usual order as to costs.

3 There is no question that the respondent here made a number of offers of settlement, in circumstances where it was finally able to resist the claims brought against it in their entirety. From the outset, the respondent had raised the jurisdictional difficulties which it asserted the applicants' summonses raised. At the hearing on costs the respondent led evidence, without objection, as to various offers of settlement made after the proceedings were commenced.

The unmeritorious nature of the case

4 The first offer, made by the respondent shortly after the applications were initiated in 1998, was on the basis that the Court lacked jurisdiction to make the orders sought. The respondent proposed that the applicants withdraw their applications and that it would not seek any costs orders in its favour. The offer was rejected.

5 The respondent then unsuccessfully pursued its views on jurisdiction in interlocutory proceedings heard by Marks J (Mt Thorley Operations Pty Limited v Burgess & Ors (2001) 103 IR 184) and the Full Court on appeal (Mt Thorley Operations Pty Limited v Raymond Gordon Wills & Ors (Unreported; Wright J President, Walton J Vice-President, Glynn J; 2 November 1999). Separate proceedings were instituted before the Federal Court, in which this Court's jurisdiction to make the orders sought was also challenged (Construction, Forestry, Mining and Energy Union v Mount Thorley Operations Pty Limited (1997) 76 IR 364.) In each case, the view taken was that it was premature to determine the jurisdictional issues raised by the respondent. Costs orders were made against the respondent in the appeal proceedings.

6 The Court ultimately found that it had no jurisdiction to make the orders sought. It also found that the applicants had not demonstrated that the award and enterprise agreement upon which they relied had been incorporated into their contracts of employment, as they had alleged. It was submitted to be relevant to this application for indemnity costs, that the applicants went to great lengths to avoid having the jurisdictional points determined at an early stage, thereby forcing the respondent to a costly trial, when the cases which they brought faced insurmountable difficulties from the outset, both in law and on the facts.

7 The respondent also argued that it would be accepted that the cases which the applicants' had advanced raised special or unusual features of an unmeritorious or improper nature. On a rational basis, the claims advanced were untenable or doomed to failure. It was unreasonable and unfair that the respondents should be out of pocket as a result of the proceedings. (Boner v Anderson (No 2) (1993) 50 IR 470 at 475.)

8 The applicants argued that there was no presumption arising from the Court's Rules that simply because an offer greater than the final result was made, that the offeror was entitled to indemnity costs. Rule 216 only permitted costs on a party/party basis following indemnity costs.

9 It was also submitted to be wrong to suggest that the cases were untenable or doomed, or that they were pursued in disregard of the facts, or the law. The interlocutory judgments showed that the applicants had an arguable, if not strongly arguable case, on jurisdictional issues not previously determined. Reliance was placed upon a number of recent judgments of this Court, where no inconsistency had been found between the claims advanced in s106 proceedings and the federal industrial instruments applying to the particular employment in question.

Offer made during the s109 Conciliation conference

10 Even though the matters were not formally joined, they were the subject of a single conciliation conference pursuant to s109 of the Act before Marks J in Newcastle on 24 March 2000. The evidence was that while offers of settlement were exchanged by the parties at the conference, no settlement was reached.

11 The respondent submitted that pursuant to s181 of the Act, the Commission would exercise its discretion to award indemnity costs in its favour, after the conciliation, for a number of reasons.

12 The respondents relied upon the fact that during the conciliation conference conducted by Marks J, it clearly again raised the jurisdictional difficulties which the applicants faced. There, a settlement proposal was made by the applicants, that they be paid a lump sum by the respondent, to be distributed in a way which they determined amongst themselves. The respondent rejected that offer, but made a counter lump sum offer of $580,000, inclusive of costs. The offer was subject to the condition that all applicants had to accept. The offer was also to settle proceedings which the applicants had brought in the Australian Industrial Relations Commission ('AIRC'), about their alleged unfair dismissal and it required the parties to enter into a deed of release.

13 It was argued by the respondent that this offer was a clear offer of settlement, more favourable to the applicants than the ultimate result of the proceedings. It was submitted that as a result, the applicants should bear the costs incurred by the respondent after the conciliation proceedings, on an indemnity basis, they having rejected the offer and not having established that they had a reasonable basis for doing so. (See s131(2)(h) of the Evidence Act 1995; Van Huisstede v Commissioner of Police (No 2) (2001) 106 IR 56; Kelly v Foley (1993) 51 IR 331.)

14 The applicants argued that the respondent could not rely upon the offer made in conciliation, as though it were an offer of compromise. The Court's Rules dealt with such offers and Rule 165(2) made it clear that offers of compromise could not be made until after the conciliation. In any event, it was submitted to have been relevant that the respondent had not made it clear that its offer was made 'without prejudice, except as to costs'.

15 In the alternative, it was submitted that it was relevant that the offer was an offer not capable of acceptance or rejection by one applicant, or by any combination, apart from the whole group. It followed that the offer was uncertain and incapable of being compared with the final judgment. It was submitted that a single offer to end all proceedings did not provide enough certainty so as to satisfy the general requirements of an offer of compromise. This same result followed from the requirement that the deed of release contain a confidentiality provision. That feature of the offer meant that there could never be a true comparison between the offer made and the outcome of the proceedings, because confidentiality was a provision which would never be ordered by the Court under s106(5) of the Act.

16 It was further argued that the offer did not, in any event, fall within the provisions of s131 of the Evidence Act. It was relevant that the offer was made during a s109 conciliation conference. This was a compulsory process required by the Act, rather than settlement negotiations in which the parties had engaged voluntarily. It would be contrary to the Court's established practice for costs orders to have regard to offers made during such conferences. It would also be contrary to the policy underpinning such conferences and would reduce the likelihood of settlement being achieved at such conferences. It was for this reason, it was submitted, that Part 23 of the Rules precluded offers of compromise being made prior to a s109 conciliation conference, and it was submitted that there was no warrant for departing from that general approach, as a matter of policy.

The offer of compromise after conciliation

17 The respondent next relied upon an offer of compromise which it had made under Part 23 of the Rules, on 28 July 2000. This offer was in the sum of $600,000, plus legal costs to a maximum of $100,000. Again this offer required that all of the applicants accept the offer and that it settle the AIRC proceedings. This offer, too, was submitted to have been considerably more favourable to the applicants than the ultimate result of the proceedings and so, it was submitted, an order for indemnity costs should flow to the respondent, at the least, from the date of expiry of that offer.

18 The applicants argued that this offer suffered from the same defects as that made in the conciliation. The offer was uncertain for each applicant and was only available to be accepted by them all. It did not amount to an offer of compromise in accordance with the Rules and it was relevant that the respondent had been put on notice of the defects in the offer and their consequences, shortly after the offer was made.

19 The applicants also relied upon offers made by three of the applicants, Mr Hoye, Mr Brown and Mr Fong, shortly afterwards. They each offered to settle their claims for identified sums. The applicants did not do better in the proceedings than these offers, because they were entirely unsuccessful. It was, however, submitted to be relevant to consider their position separately from that of the other applicants, if consideration was being given to the making of any indemnity costs orders against any of the applicants.

20 The respondents argued that this approach could not be accepted and that costs orders should be made in each case against each applicant in the same terms, namely that the applicant bear the respondent's costs on an indemnity basis. The applicants had each received a number of offers, each of which was better than the result finally achieved. They had an onus of establishing that they had not been unreasonable in rejecting those offers, which they had not met.

The Calderbank offers

21 The respondents also relied upon further offers made in May 2001 to each applicant by way of individual Calderbank letters, offering additional payments ranging from $14,000 to $57,000, plus $12,000 costs in each case. These offers too sought to settle the AIRC proceedings and required execution of a deed, including a term as to confidentiality. They did not, however, depend on all other applicants agreeing to a settlement.

22 It was argued that in circumstances such as this, where the respondent was later entirely successful in resisting the claim brought, a prima facie presumption arose that the applicants should pay costs on an indemnity basis, from the date of making the offer. (See Multicon Engineering Pty Ltd v Federal Airports Corporation (1996) 138 ALR 425, followed in Ballard v Incoll Management (No 2) [2001] NSWIRComm 217 and Hairman v FileNET Corporation Pty Ltd [2002] NSWIRComm 76).

23 It was also submitted that in order for this presumption to be departed from, an onus fell upon the applicants to establish that it was reasonable for them to have rejected the offers of compromise made to them. (See Hairman at [14] and [15].)

24 The applicants disputed that such a presumption arose. (See Multicon; RT Thomas & Family Pty Ltd v Jeffries Industries Ltd (unreported Supreme Court of New South Wales; Giles CJ; 2 February 1996); MGICA (1992) Ltd v Kenny & Good Pty Ltd and Another (No 4) 140 ALR 707.) They also submitted that it was a matter for the respondent to show that its offer was reasonable, which it had failed to do. (See MGICA; NMFM Property Pty Ltd v Citibank Ltd (No 2) (2001) 109 FCR 77.) The respondent had also failed to show that the applicants' rejection of the offers made was unreasonable (see Multicon).

25 The applicants also argued that the offers were well below what they would have achieved, had the merits of their cases been considered. It was relevant that the applicants had failed on a strongly arguable jurisdictional point. It was submitted that that situation did not give rise to any prima facie entitlement in the respondent to indemnity costs. Further, the offers were subject to the giving of a release, which would have bound the applicants to keep the terms of the settlement confidential. This may have brought the offer outside the terms of the rules.

Consideration

May evidence of offers made at a conciliation conference be relied upon in an application for a costs order?

26 Section 181 of the Act provides:

181. Costs

(1) Subject to the rules of the Commission and any other Act or law:

(a) the Commission may award costs, and

(b) costs are in the discretion of the Commission, and

(c) the Commission may determine by whom and to what extent costs are to be paid, and

(d) the Commission may order costs to be assessed on the basis set out in Division 6 of Part 11 of the Legal Profession Act 1987 or on any other basis.

(2) However, the Commission when it is not in Court Session may award costs only in the following cases:

(a) the Commission may award costs against an applicant if it considers that the application to it was frivolous or vexatious, or

(b) the Commission may award costs against a party to proceedings who, in the opinion of the Commission, instituted proceedings without reasonable cause, or

(c) the Commission may award costs against a party to proceedings under Part 6 of Chapter 2 (Unfair dismissals) who, in the opinion of the Commission, unreasonably failed to agree to a settlement of the claim or whose application was frivolous or vexatious, or

(d) the Commission may award costs in proceedings for a breach of an industrial instrument or the recovery of money under Chapter 7, as provided by sections 357 and 373.

(3) The Commission in Court Session may not award costs in proceedings for a contravention of a dispute order or in proceedings under Division 2 of Part 4 of Chapter 5 (Rules of industrial organisations).

(4) In this section, "costs" includes:

(a) costs of or incidental to proceedings in the Commission, and

(b) in the case of an appeal to the Commission, the costs of or incidental to the proceedings giving rise to the appeal, as well as the costs of or incidental to the appeal.

27 Rule 168 in Part 23 Offer of Compromise and Rule 216 in Part 27 Costs provide:

168. Time for making or accepting offer

(1) An offer may be made at any time before the time prescribed by subrule (8) in respect of the claim to which it relates.

(2) A party may make more than one offer.

(3) An offer may be expressed to be limited as to the time it is open to be accepted but the time expressed must not be less than 28 days after it is made.

(4) An offeree must, within 3 days after service, serve a written acknowledgment of receipt on the offeror.

(5) An offeree may accept the offer by serving notice of acceptance in writing on the offeror before:

(a) the expiration of the time specified in accordance with subrule (3) or, if no time is specified, the expiration of 28 days after the offer is made, or

(b) the time prescribed by subrule (8) in respect of the claim to which the offer relates,

whichever is sooner.

(6) An offer must not be withdrawn during the time it is open to be accepted, unless the Commission otherwise orders.

(7) An offer is open to be accepted within the period referred to in subrule (5) notwithstanding that during that period the party to whom the offer (the "first offer") is made makes an offer (the "second offer") to the party who made the first offer whether or not the second offer is made in accordance with this Part.

(8) The time prescribed for the purposes of subrules (1) and (5) and Rule 216 (3) is after the Commission or Registrar gives a decision or begins to give reasons for a judgment (except an interlocutory judgment).

(9) Where an offer is accepted under this Rule, a party to the compromise may request the Commission or Registrar to order in accordance with the compromise.

216. Offer of compromise

(1) Upon the making of an order under Rule 168 (9), a party entitled to costs may, unless the Commission otherwise orders, have those costs assessed up to and including the day the offer was accepted.

(2) If a notice of offer contains a term which purports to negative or limit the entitlement to costs, that term shall, unless the Commission otherwise orders, be of no effect for any purpose under Part 23 or this Rule.

(3) Subrules (4) - (7) apply to an offer which has not been accepted at the time prescribed by Rule 168 (8).

(4) Where an offer is made by an applicant and not accepted by the respondent, and the applicant obtains an order on the claim to which the offer relates no less favourable than the terms of the offer, then, unless the Commission otherwise orders, the applicant shall be entitled to an order against the respondent for costs in respect of the claim from the day on which the offer was made, assessed on an indemnity basis in addition to costs incurred before and on that day, assessed on a party and party basis.

(5) For the purpose of subrule (4), where the offer was made on the first or a later day of the hearing of the proceedings, then, unless the Commission otherwise orders, the applicant shall be entitled to costs in respect of the claim from 11 am. on the day following the day on which the offer was made, assessed on an indemnity basis, in addition to costs incurred before that time, assessed on a party and party basis.

(6) Where an offer is made by a respondent and not accepted by the applicant, and the applicant obtains an order on the claim to which the offer relates not more favourable than the terms of the offer, then, unless the Commission otherwise orders, the applicant shall be entitled to an order against the respondent for costs in respect of the claim up to and including the day the offer was made, assessed on a party and party basis, and the respondent shall be entitled to an order against the applicant for costs in respect of the claim thereafter, assessed on a party and party basis.

(7) For the purpose of subrule (6), where the offer was made on the first or a later day of the hearing of the proceedings, then, unless the Commission otherwise orders, the applicant shall be entitled to costs in respect of the claim up to 11 am on the day following the day on which the offer was made, assessed on a party and party basis, and the respondent shall be entitled to costs in respect of the claim thereafter, assessed on a party and party basis.

(8) Where an applicant obtains an order for the payment of a remuneration, compensation or damages and:

(a) the amount payable under the order includes interest or damages in the nature of interest, or

(b) by or under any Act the Commission awards the applicant interest or damages in the nature of interest in respect of the amount,

then, for the purpose of determining the consequences as to costs referred to in subrules (4) and (6), the Commission shall disregard so much of the interest as relates to the period after the day the offer was made.

(9) For the purpose only of subrule (8), the Commission may be informed of the fact that the offer was made, and of the date on which it was made, but shall not be informed of its terms.

(10) Subrules (4) and (6) shall not apply unless the Commission is satisfied by the party making the offer that the party was at all material times willing and able to carry out what the party offered.

28 As Rule 165 makes clear, Part 23 applies only to proceedings before the Court and that it does not apply to conciliation proceedings, otherwise than by order. The Rules do not, however, preclude or otherwise regulate settlement negotiations or offers made in proceedings brought before the Court or in conciliation proceedings before the Court. To the contrary settlement is encouraged in various provisions of the Act.

29 Sections 131(1) and (2)(h) Evidence Act provides:

131. Exclusion of evidence of settlement negotiations

(1) Evidence is not to be adduced of:

(a) a communication that is made between persons in dispute, or between one or more persons in dispute and a third party, in connection with an attempt to negotiate a settlement of the dispute, or

(b) a document (whether delivered or not) that has been prepared in connection with an attempt to negotiate a settlement of a dispute.

(2) Subsection (1) does not apply if:

...

(h) the communication or document is relevant to determining liability for costs, or

...

30 The Evidence Act applies to proceedings brought under s106 of the Act. (See s163(2) of the Act.) Section 131 of the Evidence Act has been considered in a number of cases. It has been held that no particular form of document or communication of the offer, such as a Calderbank letter, is required. (See Bruinsma v Menczer (1995) 40 NSWLR 716.) Nevertheless, the adoption of such a form can have a bearing on the determination of costs. (See Nobrega v Trustees of the Roman Catholic Church Sydney (No 2) [1999] NSWCA 133 at para 17ff.) There is nothing in s131 which would suggest that an offer made in a s109 conciliation conference was not caught by the section.

31 In Van Huisstede, consideration was given by the Commission to the use which might be made of what transpired in conciliation proceedings, in an application for costs brought under s181 of the Act. That case was generally concerned with a claim brought under s181D of the Police Service Act 1990, for review of an order removing the applicant from the Police Service of New South Wales. By s181G of the Police Service Act, the provisions of the Act are generally incorporated, including s181. Walton J applied the authorities which had considered the provision of s181(2)(c) of the Act, which deals with costs orders in unfair dismissal applications brought before the Commission under the Act. In doing so, his Honour also accepted that 'observations made by the Commission during the course of conciliation may be taken into account in the assessment of costs'. ([48] at p75.)

32 This approach was consistent with that adopted by the Full Bench in Kelly v Foley, where, at p334, the Full Bench was dealing with the predecessor to s181, s252 of the Industrial Relations Act 1991. Walton J then proceeded also to consider the offers and counter offers made by the parties, consistent with the provisions of s131 of the Evidence Act. His Honour ultimately was satisfied that a costs order should be made in favour of the applicant pursuant so s181(2) of the Act.

33 These authorities, it seems to me, throw some light on the way forward here. Section 181(1) grants a general discretionary costs power, subject to the Rules. Section 181(2) provides for certain limitations, in cases which are not conducted before the Court. Those exceptions include cases where it is concluded that an application was 'frivolous or vexatious' (ss(2)(a)) and where a party has 'unreasonably failed to agree to a settlement of the claim or whose application was frivolous or vexatious' (2)(c)).

34 The Commission has concluded that in applications for costs brought under s181(2), regard may be had to what occurred at a conciliation conference conducted by a member of the Commission, rather than the Court. There is no reason, either from the point of view of logic, or statutory construction, to think that a different result should flow in cases where an application for a costs order is brought in proceedings before the Court under s181(1).

35 Indeed, the provisions of s131 of the Evidence Act reinforce the conclusion that such evidence is available to be relied upon by an applicant for a costs order. Offers of settlement made at a conciliation conference conducted under s109 of the Act are plainly 'communications made between persons in dispute', on occasions in the presence of a third party, the member of the Commission conducting the conciliation. They are also plainly communications made 'in connection with an attempt to negotiate a settlement of the dispute'.

36 It is relevant to those conclusions that there is no definition in the Evidence Act of the phrase 'a third party', which must therefore be given its ordinary and natural meaning. These conclusions are also reinforced, when it is considered that the practice of the Commission, that discussions at a conciliation conference under s109 of the Act be conducted in private and off the record, accords with the common law position in relation to settlement discussions as well as the provisions of s131(1) of the Evidence Act. There is no provision of the Act which expressly deals with how such conciliation conferences are to be conducted other than s109(1), which requires the Commission to endeavour to settle the matter 'by all means it considers proper and necessary'. The practice also accords with the emphasis upon settlement of conflict by discussion and conciliation, which generally pervades the Act.

37 The Evidence Act applies to proceedings brought under s106 and s131 preserves the common law position in relation to the confidentiality of settlement negotiations, subject to the provided exceptions. It follows that there is nothing in either the Evidence Act, or the later enacted Act, which could leave open the conclusion that s131(2)(h) does not apply to applicants for costs orders made pursuant to s181(1) of the Act.

38 It cannot be doubted that in s106 proceedings justice will, on occasions, require that a costs order be made in circumstances where a party has made a settlement offer and the other side has rejected it and later does no better at the hearing. Section 131 of the Evidence Act is concerned with the evidence permitted to be led when such a question of costs arises, so that the discretion to be exercised may be fairly considered in the light of the parties' relevant conduct. Costs orders usually follow the event. The making of an indemnity costs order is a different thing involving a further discretion to be exercised in accordance with the approach discussed in the authorities.

39 Relevant to the exercise of that discretion is that s109 imposes an obligation upon the Commission to 'endeavour, by all means it considers proper or necessary, to settle the matter by conciliation'. It, however, imposes no obligation upon any party to the proceedings to make, accept or reject any offer of settlement. Parties remain free to act in whatever way seems appropriate to them in the conciliation.

40 Nevertheless, it follows from the statutory scheme that the way in which the parties conduct themselves at the conciliation and, indeed, before and afterwards, may ultimately become relevant to a determination of the costs of the proceedings. There is a risk inherent in rejecting any offer of settlement, including one made in conciliation, if the party rejecting the offer does not, at the end of the day, do better than what was offered. The risk is that the party making the offer will be able to rely upon it, in seeking an order for costs in its favour, including on an indemnity basis.

41 That a member of the Commission may be present when such an offer is made, cannot detract from this result. That is but another feature of the Act, which seeks, in a variety of ways, to increase the prospect that parties might settle their differences. One way is by giving them access to a member of the Commission, available to assist them in arriving at a settlement in conciliation. Another is by granting the Court a discretion to make costs orders in the proceedings. That policy is entirely consistent with that underpinning s131 of the Evidence Act. It is but another part of the 'carrots' and 'sticks' which various legislation and rules of various courts provide to encourage parties engaged in what may prove to be chancy litigation, to settle their differences.

42 I have been fortified in the conclusion which I have reached by another consideration. The parties to these proceedings were litigating not only in this Court, but also before the AIRC and the Federal Court. That is not unusual. Indeed, it is commonplace for parties to litigation such as this to be pursuing other causes of action elsewhere. Such litigation in State Supreme Courts, District Courts and the Federal Court, where the Evidence Act, or its counterparts, also apply, is commonplace.

43 It follows that once an offer of settlement of such other proceedings has been made and rejected in proceedings before this Court, there is nothing in the Act or the Rules to preclude the party who made the offer, later seeking to rely on that offer, in an application for costs in such other proceedings. To the contrary, the Evidence Act, in s131(2)(h) expressly permits evidence to be given of such communications in which settlement was sought to be negotiated, where relevant to 'determining liability for costs'.

44 This but reinforces the conclusions which I have otherwise reached. It would be a strange result indeed if reliance could be placed upon offers made in conciliation proceedings in this Commission, when orders as to costs are being pursued elsewhere, but not in the proceedings in this Court, where the offers were made.

The usual order as to costs

45 In the ordinary course, the respondent, having successfully resisted the claims brought by the applicant, is entitled to an order for costs in its favour. Nothing put for the applicants could lead to any other view. That one of the issues litigated at the hearing was the question of the Court's jurisdiction to make the orders sought, is not a proper basis for any departure from the usual approach.

46 The starting point for a consideration of the respondent's application for an order for indemnity costs is the conclusion reached in the judgment given in May, summarised in para [200]:

'For all of these reasons, I have concluded that the basis upon which the applicants advanced their claims was not made out, as to ground a basis for the relief sought, and that the Court has no jurisdiction to entertain the orders sought in any event. Accordingly, the applications are dismissed. The usual order as to costs would be that the applicants should bear the respondent's costs, as agreed or assessed. If no agreement is reached within 21 days of this judgment as to the appropriate costs order, the parties have liberty to approach.'

47 Given the submissions advanced for the applicants, it is relevant to note that the applications were not dismissed simply on jurisdictional grounds. In those circumstances, the question which must be determined is whether any of the various offers made by the respondent, each of which would plainly have put the applicants into a more favourable position than that which they ultimately achieved, was such that the respondents were thereafter entitled to have their costs borne by the applicants on an indemnity, rather than party/party, basis.

Were the claims hopeless from the outset?

48 It was a part of the Court's conclusion that it lacked jurisdiction to make the orders sought, in the circumstances revealed on the evidence and in light of the cases advanced. This was consistent with the position taken by the respondent from the outset as to jurisdiction, a question which it sought, unsuccessfully, to have determined prior to the conciliation and the hearing of the merits of the claim.

49 That situation does not, however, in my view, bring this case into that unusual category where a costs order is warranted because, as was submitted, the applicants' cases were commenced and pursued in disregard of known facts and clearly established law. In my view, the earlier interlocutory and appeal judgments on the question of jurisdiction, to which I have referred do not leave that conclusion open, notwithstanding the doubts expressed by the Full Court in the appeal judgment, as to jurisdiction.

The offer made at conciliation

50 Given the views to which the respondent adhered in relation to the Court's jurisdiction and which ultimately proved correct, the undoubted position is that the first offer which it made the applicants at the s109 conciliation, proved to be more favourable to all of the applicants than they ultimately achieved at the hearing. But for several features of that offer, I might have been inclined to take the view that an indemnity costs order should be made in favour of the applicants thereafter.

51 The offer was made on the basis of an overall sum, to be divided amongst the applicants, on terms agreed amongst them. That aspect of the offer reflected an approach which the applicants had themselves devised and put to the respondent at the conference, on the basis that it would be a matter left to the applicants to divide the sum which they had proposed as a settlement amongst themselves. This, in my view, cannot overcome difficulties which flow from the way in which the offer was put. One problem was that the offer also included costs. Another that it was put on the basis that it had to be accepted by all of the applicants as settling all claims, leaving it to them to reach agreement as to how the sum was to be divided. The other proceedings brought before the AIRC, in relation to the termination of their employment, were also thereby to be settled.

52 As I have observed, while it is not unusual for parties to proceedings such as these to be litigating in other tribunals and Courts, in Australia and elsewhere, and then to seek to resolve all litigation between them in the conciliation proceedings conducted before this Court, this latter aspect of the respondents' offer makes it such that, in my view, as a matter of discretion it would not be just to require the applicants to bear the respondent's costs on an indemnity basis following their rejection of the offer. This must particularly follow given that the offer did not make certain, for any individual applicant, the amount which would finally be received in settlement of the claims advanced.

53 It is also of relevance that all of these applications were dealt with together, both at conciliation and at the hearing. Nevertheless, at conciliation, the lack of any opportunity for any individual applicant to have accepted the respondent's offer to settle those proceedings as well as the AIRC proceedings, had he wished to do so, is a matter which cannot be overlooked and, in my view, takes the circumstances beyond those in which an indemnity costs order may properly flow to the respondent, following upon the rejection of the offer. It is impossible to conclude, in these circumstances, that the applicants, or any of them, acted unnecessarily in rejecting the offer.

The first written offer of compromise made after conciliation

54 A similar difficulty flows in relation to the first written offer of compromise made, after the conciliation. I have similar reservations about that offer and have reached the same conclusions, for the reasons given. I also doubt whether the offer accorded with the provisions of the Rules, but it is unnecessary to develop these reservations. (See however the discussion of Peterson J in Sheffield v Brambles Australia Limited and Anor [2002] NSWIRComm 166 at [39].)

The Calderbank offers

55 An offer of compromise under Part 23 of the Rules may not be made until after conciliation has concluded, but then will give rise to certain rights. Contrary to the submissions advanced for the applicants, it is well settled that the Rules do not preclude settlement offers being made at a conciliation conference, or indeed at any time, including before such a conciliation is conducted. Indeed it is commonplace for that to occur. Such offers may also be made by a Calderbank letter.

56 In Maciver v Hilton Nursing Home Pty Limited [2001] NSWIRComm 56, I described the different consequences of a settlement offer in a formal offer of compromise made under Part 23 and an offer made in a Calderbank letter, at [34]:

'The Court has a discretion to award costs on the basis sought, as a departure from the usual rule. Section 131 of the Evidence Act 1995 now expressly deals with such offers being received in evidence in relation to the question of costs. The position of a Calderbank letter is rather different to that of an offer of compromise made in accordance with Part 23 of the Rules, which gives the party who made the offer certain rights as to costs, which the recipient of the offer may seek to dislodge. A Calderbank letter, on the other hand, provides but a basis for the maker of the offer to ask the Court to exercise a discretion in its favour as to costs.'

57 Here the respondent made a third round of offers, by way of individual Calderbank letters to each applicant. As I have noted, on any view, each of the applicants would have been considerably better off, had they accepted these offers. That the offers were 'well below what the Applicants would have achieved had the merits of their claims been considered', as the applicants submitted, cannot be a basis for concluding that the respondent should not have the benefit of an indemnity costs order.

58 As was explained by Rolfe J in Multicon at p441 and followed by Boland J in Ballard:

'In my opinion the proper approach to take to an Offer of Compromise, whether made under the Rules or pursuant to a Calderbank letter, is that there should be a prima facie presumption in the event of the offer not being accepted and in the event of the recipient of the offer not receiving a result more favourable than the offer, that the party rejecting the offer should pay the costs of the other party on an indemnity basis from the date of the making of the offer. I proceed on the basis that the unreasonableness was the failure by the offeree to accept the offer, which unreasonableness is demonstrated, prima facie, by the ultimate result. This approach is consistent with the decisions to which I have referred, the policy evidenced by the Act and the Rules and the widely accepted philosophy that settlements should be encouraged. The relevant Rules provide that costs will be paid on the basis set out therein "unless the Court otherwise orders". My understanding is that the Court is required to proceed on the basis that it should make the order provided for by the Rules, unless the party rejecting the offer is able to establish good reason for having done so.

It seems to me anomalous that there is no provision whereby a defendant, which is totally successful, is placed in the same position as a plaintiff, which is totally successful. In my view the Rules should be reviewed. The decision of this court have overcome the anomaly by an application of similar reasoning in the event of an offer of compromise by way of a Calderbank letter. Cole J observed that by taking that step the defendant, which is ultimately successful, has done everything it can to extricate itself from expensive and extensive litigation, and it seems to me that if a defendant has done that and its prognostication of the case proves to be correct, in the relevant sense, it is totally unfair that it should be required to pay costs as if it had not acted in that way. In the circumstances the relevant unreasonableness of the recipient of the offer is the failure to accept what is established to be an appropriate offer.'

59 I followed those views in Hairman and adhere to them still. A Calderbank letter, as observed by Boland J in Ballard 'is a formal offer to settle the case, together with a warning that, in the circumstances of such an offer by the respondent, if the applicant does not achieve a result in the proceedings which is more favourable to the applicant than the offer made, the offer will be disclosed to the court in the context of the question of costs.'[9]

60 That the applicants in these cases pursued claims, the basis for which was not established on the evidence and in respect of which the Court concluded that it had no jurisdiction, cannot properly lead to the result that thereby, the respondent may not seek to rely on the offers of settlement which it made by way of Calderbank letter. To adopt such an approach could only encourage the bringing and pursuit of dubious jurisdictional claims, inconsistent with the public interest which lies in parties being encouraged to bring their litigation to an early and proper conclusion. (See Bailey v Meredith, 11 May 2001 NSWCA 149 and Maitland Hospital v Fisher (1992) 29 NSWLR 721 at 725.)

61 This is particularly the case in s106 proceedings, where the Act provides parties with early access to a member of the Commission in conciliation proceedings. There the differences which lie between the parties can be explored, as well as the risks which the litigation raises for each of them. It is a process in which the parties may have the assistance not only of legal representatives, but also that of a member of the Commission. In those circumstances, to approach the question of an application for an order for indemnity costs on the basis urged for the applicants, when they were made a further offer of settlement after the conciliation in a Calderbank letter, is in my view not properly available, as a matter of discretion, consistently with the need for the Court always to seek to do justice between the parties.

62 The making of an offer in the form of a Calderbank letter does not mean that the Court has no discretion to decline to make the indemnity costs order sought, indeed, to the contrary, the making of such an order is a discretionary matter, as I have discussed in Bell & Berg v Macquarie Bank & Anor [2003] NSWIRComm 21. I do not repeat that discussion here but adhere to the views there expressed. Nevertheless, it falls upon the applicants to establish that it was not unreasonable for them to have rejected the offer.

63 There can be no doubt in this case that the respondent's final offers were genuine attempts to settle the litigation. The applicants were legally represented and it follows, must have appreciated the risks inherent in rejecting the offers they had received. There was no basis for concluding that the time during which the offers were open was unreasonable .

64 Nevertheless, consideration must be given to two other aspects of the offers. The first, that the offers also sought to settle the unfair dismissal claims brought before the AIRC and second, that they were subject to a requirement that the applicants execute deeds of release, which contain confidentiality provisions.

65 I am not satisfied that a requirement for the terms of the settlement to be included in a deed of release is to impose a condition of a kind which made the applicants' rejection of the offer a reasonable one. This is such a commonplace incidence of settlement arrangements in modern litigation, that the fact of such a requirement alone, in my view, is not a proper basis for disposal of an indemnity costs argument. It may well be in a particular case, for example where there was a dispute as to particular terms proposed in a deed, that a view would be taken that the rejection of the offer was a reasonable one in the circumstances. In this case, however, the only problem averted to was the requirement for confidentiality of the settlement to be maintained.

66 In Hairman I expressed the view at para [12] that the desire for confidentiality did not make the offer one which the applicant could reasonably have refused, particularly when it was considered that the applicant was entirely unsuccessful in the claim advanced. I have not been dissuaded from that view here. In a case where the respondent has vigorously denied, from the outset, the Court's jurisdiction and power to grant the relief sought and is ultimately proved to be correct, but, nevertheless, has made a reasonable offer of settlement on the basis that liability is not accepted and thus the confidentiality of the settlement is to be required as a term of the settlement, I do not accept that the view cannot properly be taken that the offer was both a reasonable one and indeed that the applicant acted unreasonably in rejecting the offer. The applicant in such a case, after all, fails utterly to prove either jurisdiction or liability. The judgment proves the correctness of the respondent's assessment. In such a case, an applicant agreeing to confidentiality of the settlement is no worse off, by way of comparison in having agreed to the settlement. Indeed, it must be concluded the applicant would be advantaged thereby. This approach, I observe, is also consistent with the provisions of s131 of the Evidence Act and the policy underpinning it.

67 Nevertheless, there is a further factor to consider in this case. The offer was put on the basis that it also to settled the AIRC proceedings, where the applicants were entitled to seek relief not only by way of monetary compensation for unfair dismissal, but also orders for reinstatement and back pay. Having regard to the amount of the offers and the fact that the judgment given in these proceedings does not deal at all with those claims, it is, in my view, impossible for the conclusion to be reached, that the applicants would have been better off accepting the offers made and that they acted unreasonably in refusing them. There was no evidence as to the fate of the AIRC proceedings. No views to the contrary are thus available on the evidence.

68 In all of those circumstances, I have concluded that no indemnity costs order can properly flow from these Calderbank offers.

Orders

69 For these reasons I order the applicants to bear the respondent's costs, as agreed or assessed.

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LAST UPDATED: 13/02/2003