Justin Thomas and Christie Direct Pty Ltd [2003] NSWIRComm 25 (18 February 2003)

Last Updated: 7 March 2003

NEW SOUTH WALES INDUSTRIAL RELATIONS COMMISSION

CITATION : Justin Thomas and Christie Direct Pty Ltd [2003] NSWIRComm 25

FILE NUMBER(S): 6638

HEARING DATE(S): 05/11/2002

DECISION DATE: 18/02/2003

PARTIES:

APPLICANT:

Justin Thomas

RESPONDENT:

Christie Direct Pty Ltd

JUDGMENT OF: Sams DP

LEGAL REPRESENTATIVES

APPLICANT:

Mr E Young (Solicitor) Phillips Fox

RESPONDENT:

Mr A Britt of counsel

SOLICITOR:

Ms A Parsons (Solicitor) Sparke Helmore

CASES CITED: Bankstown City Council v Paris (1999) 93 IR 209

Calderbank v Calderbank (1975) 3 All ER 333

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

Skalkos v Assaf (No.2) [2002] NSWCA 236 (23 July 2002)

Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union, on behalf of Mark Harrison and Keith Donaldson and Australian Co-operative Foods Limited [2001] NSWIRComm 29

John Paul Reed and Southstate Industrial Supplies Pty Ltd [2001] NSWIRComm 185

Passas v Skouloudis Group Pty Ltd t/as O Kosmos [2001] NSWIRComm 124

Four Sons Pty Limited v Sakchai Limsiripothong (No.2) (2000) 100 IR 400

Van Huisstede and the Commissioner of Police (No.2) (2001) 106 IR 56

Blagojevch v Australian Industrial Relations Commission (2000) 98 IR 32

Tuholi Pty Ltd v Caltex Australia Petroleum Pty Limited [2001] IRComm 7

Cornell v Titley [2002] NSWIRComm 326

Mervat Wahba and Miles Fresh Food Market t/as Brighton Fruit Barn Pty Ltd IRC98/4413, unreported, Sams DP, 29 July 1999

Douglas John Talbot and Rostcom Pty Ltd [1999] NSWIRComm 500

Hazel Lang v Reid and Vasely, [2000] NSWIRComm 23

Timothy Fox v GIO Australia Limited [2002] IRComm 318

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

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

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

LEGISLATION CITED: Industrial Relations Act 1996

Legal Profession Act 1987

JUDGMENT:

- 14 -

INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES

CORAM: SAMS DP

18 February 2002

Matter No IRC01/6638

JUSTIN THOMAS AND CHRISTIE DIRECT PTY LTD

Application by Justin Thomas re unfair dismissal pursuant to section 84 of the Industrial Relations Act 1996

DECISION

[2003] NSWIRComm 25

1 In a decision published on 16 July 2002, [2002] NSWIRComm 161, the Commission made orders pursuant to s89(5) and (6) of the Industrial Relations Act 1996 ("the Act") in favour of the applicant, Justin Thomas, of an amount of $19,076.92 as compensation for his unfair dismissal by Christie Direct Pty Ltd ("the respondent").

2 During the substantive proceedings both parties had foreshadowed a costs application pursuant to s181(2)(c) of the Act. In the subsequent orders, I directed that any costs application be filed by way of notice of motion within 14 days. Such notice was filed by the applicant on the 29 July 2002 in the following terms:

1) An order that the respondent pay for the costs of the applicant of and incidental to these proceedings on a party, party basis, as assessed or agreed, up to and including 20 November 2001

2) An order that the respondent pay for the costs of the applicant of and incidental to these proceedings on an indemnity basis subsequent to 20 November 2001, including the costs of this motion.

(The date of 20 November 2001 in draft order 2 was later amended to 7 February 2002.)

3 The notice of motion was listed for directions on 7 August 2002 and set for hearing on 5 November 2002. Solicitors for both parties filed affidavits but were not required for cross examination. The affidavits traced the history of correspondence between the parties' solicitors in which various offers of settlement were put and replied to. I am able to construct an agreed summary of that exchange and other relevant background.

5 October 2001

Applicant's employment terminated.

9 October 2001

s 84 application filed.

22 October 2001

Respondent's reply to the application filed.

1 November 2001

Respondent offers settlement of $1,192.31 (inclusive of costs).

13 November 2001

Applicant's offer of $15,461.52 (inclusive of costs).

22 November 2001

Conciliation conference.

Applicant's offer of $7,153.85 (inclusive of costs)

Respondent's offer of $3,576.92 (inclusive of costs and to be paid in three instalments)

Matter listed for hearing, directions issued

6 February 2002

Applicant's offer of $10,307.68 (inclusive of costs) (Calderbank letter)

12 February 2002

Respondent's offer of $2,384.62 (inclusive of costs)

6 March 2002

Respondent's offer of $4,769.23 (inclusive of costs)

7 March 2002

Applicant's offer of $10,307.68 (plus costs to date)

8 March 2002

Respondent's notice of motion heard and dismissed

22 March 2002

Respondent's offer of $7,000 (inclusive of costs)

27 March 2002

Applicant's offer of $10,307 (plus costs to date)

17 May 2002

Respondent's offer of $10,000 (inclusive of costs).

20 May 2002

Hearing commences.

3 June 2002

Hearing continues.

16 July 2002

Decision published.

SUBMISSIONS

4 Both legal representatives appropriately referred me to the Commission's statutory power to award costs under Pt 6 ch2 of the Act (s181(2)(c)) and the relevant authorities dealing with the subject - most particularly the discussion in Bankstown City Council v Paris, (1999) 93 IR 209, in relation to indemnity costs. I shall deal more extensively with the statutory power and the relevant authorities later in this decision.

For the applicant

5 Mr Young put that the effect of the case law is such that, if a party receives a reasonable offer to settle a claim, but fails to accept that offer, the failure to do so is at the party's peril if the other party is successful at litigation.

6 Mr Young referred to the principles in Calderbank v Calderbank (1975) 3 All ER 333 as being relevant to the applicant's claim for indemnity costs. He also cited Multicon Engineering Pty Ltd v Federal Airports Corporation (1996) 138 ALR 425 and Skalkos v Assaf (No.2) [2002] NSWCA 236 (23 July 2002).

7 Mr Young submitted that the offers of settlement made by the applicant were, at all times, reasonable; whereas, all of the respondent's offers were manifestly inadequate and unreasonable within the meaning of s181(2)(c) of the Act. He highlighted the disparity of 52 per cent between the respondent's highest offer and the Commission's final order.

8 Mr Young argued that the respondent displayed a stubborn refusal to make any payments to the applicant, including an underpayment of two weeks salary according to the contract of employment. Mr Young identified a number of findings and adverse comments made by the Commission in its decision, which he said were relevant to the overall conduct of the respondent in resisting the applicant's case. He said this conduct takes the costs application 'out of the ordinary' for the purposes of awarding indemnity costs.

9 The respondent's conduct, particularly that of the Managing Director and Financial Controller, can be contrasted with the facts and circumstances found in Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union, on behalf of Mark Harrison and Keith Donaldson and Australian Co-operative Foods Limited [2001] NSWIRComm 29 where no order for costs was made.

10 Mr Young submitted that, consistent with the principles established in the decided cases, indemnity costs should be ordered from 7 February 2002, having regard for:

a) The policy behind s181(2)(c) of the Act.

b) The early stage in the proceedings of the applicant's offer to the respondent.

c) The numerous reasonable offers by the applicant attempting to press settlement upon the respondent.

d) The significant compromise offers by the applicant, including Calderbank offers, not accepted by the respondent.

e) The fact that the respondent was put on notice that a failure to accept the applicant's offer would lead to an application for indemnity costs, according to the rule in Calderbank v Calderbank.

f) The unreasonableness of the respondent in failing to accept the applicant's offers.

g) The unreasonableness of the respondent's offers.

h) The unreasonableness of the respondent in it's conduct of the case generally, on the facts known to it at the time it dismissed the applicant, or facts that it ought to have known.

For the respondent

11 Mr Britt, of counsel, opened his submissions by referring to the Commission's powers to award costs in unfair dismissal proceedings. He accepted that the Commission may, in the exercise of its discretion, determine an appropriate amount of costs (s181(1)(c)).

12 Mr Britt rejected the applicant's contentions that this case was one that was "out of the ordinary". He said that an offer being made at the last minute or outstanding monies being paid during litigation, does not make this case "unusual". Indeed, in most unfair dismissal cases, the Commission frequently makes findings adverse to one party's interests. It was not unusual and cannot be held to be a basis for taking this case "out of the ordinary."

13 Mr Britt did not take issue with the chronology of events in Mr Young's submissions. However, he noted that the chronology demonstrated that the respondent had made a number of offers and was in fact the party who initiated the first offer before the matter went to the Commission. Moreover, the various offers of the respondent were increased substantially from February to May 2002. By contrast, Mr Britt observed, the applicant kept increasing his offers of settlement; albeit that the increases were due to a component for costs.

14 While conceding the offer was low in the context of the Commission's decision, Mr Britt said that was not the appropriate test. The authorities do not say that an offer of settlement must be close to the ultimate outcome. See John Paul Reed and Southstate Industrial Supplies Pty Ltd [2001] NSWIRComm 185 and Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union, on behalf of Mark Harrison and Keith Donaldson, and Australian Co-operative Foods Limited. What was particularly relevant was that the respondent actively and dynamically participated in the negotiations and did not delay responding to, or making offers of settlement. Mr Britt submitted that the respondent was not belligerent or dishonest and demonstrated no mala fides or improper purpose.

15 Mr Britt argued that this was not a case of the senior management knowing the full facts of the case and proceeding with that knowledge to arbitration. Matters such as what income the applicant earned after termination were not known. This was a factor which goes to an assessment of compensation required by s89(6) of the Act.

16 In rejecting the basis for an order of indemnity costs, Mr Britt said the appropriate test to apply is that found in Bankstown City Council v Paris and not necessarily in judgments of the Supreme Court where costs follow the event. Relying on the Calderbank letter of 6 February 2002, the test would mean taking the case 'out of the ordinary' by simply using the device of a Calderbank letter. Mr Britt put that this Commission should not establish a principle where a Calderbank letter automatically opens the jurisdictional gateway under s181(2)(c) and also opens it on an indemnity basis. Mr Britt further observed that the respondent's conduct went nowhere near that of the respondent in Passas v Skouloudis Group Pty Ltd t/as O'Kosmos [2001] NSWIRComm 124; a case where indemnity costs were awarded because of the conduct of the employer.

17 In oral submissions, Mr Britt referred to the applicant's bill of costs and various items therein which, he said, may not be reasonable expenses in relation to preparing the case and attending the Commission.

18 Finally, Mr Britt said that no order for costs was made on the respondent's notice of motion of 8 March 2002 and, in any event, this case should not deal with that matter.

19 In reply, Mr Young submitted; firstly, that this notice of motion should include costs for the respondent's notice of motion of 8 March 2002, which was dismissed.

Secondly, this was not a case about the offer being lower than the Commission's order; rather the final offer was significantly lower so as to make it unreasonable.

Thirdly, this was not a case involving honest mistakes made by the witnesses. It was a case where specific adverse findings were made as to the witnesses' honesty.

Fourthly, dynamic negotiations are not the point. It is the result of the negotiations, which tests the reasonableness, or unreasonableness of the offers made.

Fifthly, it is not the point that the respondent did not know the applicant's post dismissal earnings. The respondent could have found out, but didn't.

Sixthly, the use of a Calderbank letter is relevant to the totality of the circumstances. It would not open the floodgate to costs applications, as each case is decided on its own facts and circumstances.

Finally, the Commission need not undertake an exercise of determining whether a particular item in a bill of costs is reasonable.

CONSIDERATON

20 It is trite to observe that determination of a costs application under Pt 6 ch 2 of the Act requires a two staged process. Firstly, the Commission is required to make a finding under the discrete provisions of s181(2)(c) of the Act:

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

(a)...

(b)...

(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.

21 Secondly, if a positive finding is made under this section, the Commission may then move to the general discretionary powers to award costs available in s181(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.

22 It is under this section of the Act and Part 27 of the Industrial Relations Commission Rules that the question of whether costs should be awarded on an indemnity basis may be answered. I shall return to this question shortly.

23 Both parties appropriately referred the Commission to Bankstown City Council v Paris as the lead authority on the issue of costs applications in Pt 6 ch 2 proceedings. At p218 of the reported judgment the Full Bench said,

The relevant part of s 181(2)(c), on the other hand, does not require the Commission to focus upon the circumstances of the commencement of the proceedings, or to consider only the situation of the applicant. Instead the Commission is required to consider in a more general way, the conduct of the party in respect of which an application for costs is made; and, in that regard, to consider the conduct of the party in relation to the question of settlement of the claim.

An understanding of the meaning and purpose of s 181(2)(c) is assisted by reference to the particular provisions in Pt 6, Unfair Dismissals, of Ch 2 of the Act, which relate to conciliation or settlement of unfair dismissal applications. Section 86 for example, provides: “The Commission must endeavour, by all means it considers properly necessary, to settle the applicant’s claim by conciliation.”

Section 87(1) is also relevant. Its effect is to preclude the Commission from proceeding to determine the claim by arbitration until “all reasonable attempts to settle the applicant’s claim by conciliation have been made but have been unsuccessful”. Section 87(2) continues the statutory emphasis upon conciliation by specifying that the earlier provisions do not prevent further conciliation from being attempted at any time before the Commission makes an order in the proceeding.

Construing the relevant part of s 181(2)(c) in its overall statutory context, we conclude that the evident purpose of the provision is to encourage the settlement of proceedings to which it applies. The criterion set out in the provision is to be applied objectively and requires a consideration of the whole of the conduct of the party against whom the order is sought, or some discrete part of that party’s conduct, with a view to ascertaining whether it unreasonably failed to agree to a settlement of the claim. We also consider that on the proper construction of the provision, an affirmative conclusion may be reached on at least two bases. First, where there was a proposal put by a party which could be described as a reasonable settlement of the claim and that was not agreed by the other party. The second situation in which the criterion could be satisfied is where the course of conduct of the party over a relevant period could be said to amount to conduct inconsistent with an intention to settle the proceedings on any basis that could be considered reasonable.

We emphasise that, although the legislature has clearly intended that there be strict limits on the power of the Commission to award costs in unfair dismissal proceedings, the legislature has also evinced a clear intention that costs orders be available in circumstances where there has been a failure on the part of a party to properly conciliate proceedings to the extent that they have failed reasonably to facilitate a potential settlement of them. Further, the Commission is obliged to consider all relevant circumstances in deciding whether such failure has occurred.

Once the statutory criterion has been met, the Commission’s broad power and discretions under s 181(1) are available for exercise.

24 In Four Sons Pty Limited v Sakchai Limsiripothong (No.2) (2000) 100 IR 400 the Full Bench discussed the obligations imposed on parties to proceedings under Pt 6 ch 2 of the Act:

The obligations imposed on parties to proceedings under s84 of the Act, as identified in the Full Bench judgment in Bankstown City Council v Paris require parties to such proceedings to undertake a responsible and careful assessment of the prospects of the litigation, in the absence of which an unsuccessful party may realistically face the prospects of a costs order being made against it. In those circumstances, it may often be appropriate for a party to consider making an offer to settle, even if the offer could be seen, either with the benefit of hindsight or otherwise, to be at a rather low level. However, the making of such an offer on "the low side" does not exhaust the responsibilities of a party to reasonably attempt to settle the claim. It is conceivable that if the respondent had responded to those offers in a more timely way, the proceedings may have settled. We doubt, however, that that is the appropriate finding on the evidence before us. Rather, the evidence as to further negotiations makes plain that the appellant had no realistic intention to make an offer which was likely to settle the proceedings before McKenna C. However, it would be inappropriate not to take into account the lack of a timely response from the respondent to the nominal offers of settlement which were made by the appellant in August and September 1999.

25 The decision in Bankstown City Council v Paris identified at least two bases upon which the Commission may reach an affirmative conclusion that the test in s181(2)(c) has been established:

1) The rejection by a party of a reasonable offer of settlement of a claim, and/or

2) The conduct of a party that could be said to be inconsistent with an intention to settle the claim.

See also Van Huisstede and the Commissioner of Police (No.2) (2001) 106 IR 56 and Passas and Skouloudis Group Pty Ltd t/as O Kosmos.

26 In applying the above tests to the facts and circumstances of this matter, I would conclude as follows:

This is a case, which I believe could have fallen either way. Both Mr Young and Mr Britt put cogent and persuasive arguments in support of their client's respective positions. However, having considered the totality of the circumstances, I am disposed to the view that a proper case has been made out for a finding that the respondent 'unreasonably refused to settle the claim.' I do so primarily because of my conclusions in the substantive matter which I am satisfied represented conduct by the respondent inconsistent with an intention to settle the claim.

27 Nevertheless, I readily accept, for the purposes of s181(2)(c), that the conduct of a party is that which is relevant to the negotiations for settlement after the dismissal. However it seems to me that here the conduct of the respondent, as identified in the substantive decision, was such as to reflect very poorly on its attitude to the claim, up to and during the proceedings. In my judgment, with the facts known by the respondent's Managing Director and Financial Controller, it would have been very obvious to even the most unenlightened observer, that the respondent's prospects of success in the case were not good.

28 The respondent's conduct, up to and including the dismissal of the applicant, involved persons at the most senior level of management. This conduct included:

a) Contradictory evidence between the Managing Director and the Financial Controller about what was discussed at crucial meetings concerning the applicant's future (para 91).

b) A failure to comply with its own contract of employment with the applicant (para 81-83).

c) Certain of its evidence was "carelessly and foolishly cobbled together well after the decision to dismiss the applicant" (para 101).

d) The alleged reason for the applicant's dismissal - redundancy - was seriously doubtful (para 95).

e) A failure to establish a proper basis for the applicant's selection for redundancy (para 123).

f) the timing of the dismissal was "appallingly insensitive, heartless and uncaring" (para 127).

29 Having regard for all these matters in the context of the offers and counter offers made, it was a brave and risky strategy to avoid settling the applicant's claim on a reasonable and prudent basis. It is also pertinent to observe that the respondent was on notice, very early in the litigation, that costs were always going to be an issue.

30 One further observation is relevant at this juncture. In my opinion, it is not helpful or conclusive in a costs application under s181(2)(c), for a successful applicant to focus on what the Commission ultimately awards as compensation in comparison to offers that are made prior to the matter being determined. Mr Young highlighted the fact that the respondent's highest offer was only 52 per cent of what the Commission ordered - as if, in some way, such a correlation was crucially relevant to the statutory basis of an "unreasonable refusal to settle the claim". I do not agree.

31 In Blagojevch v Australian Industrial Relations Commission, (2000) 98 IR 32 at pp42-43 the Commission observed that such a mechanical comparison might be a consideration, but not necessarily decisive:

Certainly there is no reason to give primacy to the result of a mechanical comparison between an amount offered and the amount of compensation ultimately awarded; although, if an applicant offers to settle for a particular amount and the arbitration results in the award of a substantially lesser amount by way of compensation, it would no doubt be only in unusual circumstances that the respondent would be held to have acted unreasonably in rejecting the offer.

32 One could imagine of course another situation in which an employer offers nothing to settle a claim and the Commission subsequently makes a significant monetary order in the employee's favour. Such a situation would invariably come within the discussion in Bankstown City Council v Paris, where the Full Bench said:

We also consider that on the proper construction of the provision, an affirmative conclusion may be reached on at least two bases. First, where there was a proposal put by a party which could be described as a reasonable settlement of the claim and that was not agreed by the other party.

33 Indeed, the above proposition only emphasises the point that what is particularly relevant is whether one party's offer or offers of settlement are reasonable in the context of the then state of the litigation, whether it has commenced or not.

Indemnity Costs

34 Mr Young forcefully argued that indemnity costs should be ordered from 7 February 2002. The principles concerning the order of indemnity costs are now well settled and it is appropriate that I refer in some detail to them.

35 A convenient starting point is the discussion in Bankstown City Council v Paris. At p224 the Full Bench said:

We consider that the following principles should be applied in relation to the application for indemnity costs made in circumstances where the Commission has held that the first criterion in s181(2)(c) has been held to be satisfied, and an application for costs is made. The Commission can properly, in the appropriate exercise of its discretion, make an order for indemnity costs. The power to make a costs order of that kind is clearly available because of the terms of s 181(1)(b).

It must, however, be recognised that the exercise of discretion is being called for in the context of circumstances which are out of the usual. That, is the discretion is only available in non-Court Session matters where one or more of specified criteria are met. Secondly, although the finding that a relevant criterion has been met may, in some circumstances, be satisfaction of circumstances which might lead to the award of indemnity costs, and although the existence of such circumstances is relevant to the grant of costs on that basis, the Commission should exercise the discretion in full recognition of the caution that should be exercised before making a costs order on a basis other that that costs should simply follow the event, since that is the way in which a discretion to order costs would be exercised "regularly and judicially": see, for example, Moama Bowling Club Ltd v Armsrong (No 2) (1995) 64 IR 264 at 267 per Cahill Deputy CJ and Peterson J.

Nevertheless, and thirdly, provided such caution is exercised, where the circumstances clearly fall within those where the courts have recognised that indemnity costs should, or may, be granted, then the Commission should consider, in the exercise of its discretion, whether costs should be awarded on that basis. Nevertheless, even at that stage of the exercise of the discretion, the Commission is to recognise that, as the authorities in relation to indemnity costs make clear, the categories in which the discretion may be exercised are not closed and the exercise of the power in relation to indemnity costs remains throughout discretionary. The discretion must be exercised judicially.

We have paid regard to the detailed discussed of principles set out in the judgment of Sheppard J in Colegate-Palmolive Co v Cussons Pty Ltd, particularly to the distillation of authority set out therein at 232-234. On a consideration of those authorities it is clear that, for example, a court (or this Commission) ought not usually make a payment of costs on a basis other than the party and party basis; and there must be circumstances which would warrant a court (or this Commission) departing from the usual course.

36 In Tuholi Pty Ltd v Caltex Australia Petroleum Pty Limited [2001] NSWIRComm 7, Wright J undertook a detailed analysis of the relevant authorities on the principles to be applied when awarding indemnity costs and summarised the principles as follows:

I consider that it is possible to deduce the following propositions for the present matter from the more general authorities earlier referred to:

1. It is only in exceptional cases where a court would make a costs order other than on the usual party/party basis.

2. The grant of indemnity costs is to be seen as an unusual and exceptional course and would only occur where there is some special or unusual feature of the case to justify the Court in departing from the usual practice.

3. Nevertheless, the grant of indemnity costs is, as with any exercise of judicial discretion, one to be exercised in all the circumstances of the case and, provided regard is had to the "exceptional" nature of such an order, the primary consideration with all such discretionary orders is that it will occur "as and when the justice of the case might so require".

4. Although most judges dealing with the problem have resolved the particular case before them by dealing with the circumstances of that case and finding in it the presence or absence of facts which would be capable, if they existed, of warranting a departure from the usual rule, nevertheless "the categories in which the discretion may be exercised are not closed".

5. Further, a too rigid or narrow approach may lead to error in the exercise of discretion.

6. Although there are a number of recent judgments to the effect that there should be an increased tendency towards the awarding of indemnity costs, such statements should be applied with great caution in the light of the existence and operation of the general approach as to the usual way in which costs orders will be made.

7. It is also important to ensure that considerations such as mere "fierce opposition to the claim" or the conduct of a respondent which might justify the grant of the substantive application are not matters which, in themselves, would lead to the grant the costs on an indemnity basis.

37 His Honour's conclusions were adopted by Walton VP in Van Huisstede and the Commissioner of Police and more recently in Timothy Fox v GIO Australia [2002] NSWIRComm 318. In the later case, his Honour made this observation at para 108:

As I noted in Van Huisstede v the Commissioner of Police (No.2)(2001) 106 IR 56 the granting of indemnity costs is a matter for the discretion of the Court, and does not involve considerations of a punitive nature.

38 My colleague Haylen J, in a recent judgment, Cornell v Titley [2002] NSWIRComm 326, also relied upon the principles discussed in Tuhohli and observed as follows:

The President, Wright J, also referred to the judgment of Hill J in Bonner v Anderson (No.2) (1993) 50 IR 406 and his Honour's expressed view that there should be an increased tendency to the awarding of indemnity costs, and the caution expressed by a Full Bench to that approach in Australian Mutual Providence Society v Avis (Bauer, Peterson and Marks JJ, unreported, IRC96/5473 and 96/5941, 18 December 1997). In Bonner, it was noted that generally speaking an order for costs on an indemnity basis was justified in a case in which there are special or unusual features of an unmeritorious or improper nature surrounding the case of one party which makes it unreasonable and unfair that the successful party should be put out of pocket as a result of the proceedings.

See also my consideration in Passas v Skouloudis Group Pty Ltd t/as O'Kosmos.

Calderbank letter

39 The principles applicable to the significance of a Calderbank letter for the purposes of costs applications have been discussed by the Commission in Court Session in a number of recent cases. (See Ballard v Incoll Management (No2) [2001] NSWIRComm 217, Bell & Berg v Macquarie Bank Limited and Anor [2003] NSWIRComm 21 and Burgess & Ors v Mount Thorley Operations Pty Limited [2003] NSWIRComm 22).

40 Although it wasn't argued in this case, it seems to me on reflection, that there may be a different approach to the relevance and significance of a Calderbank letter in unfair dismissal matters before the Commission (as distinct from the Court) where plainly costs do not follow the event and there exists a discrete statutory provision dealing with costs.

41 In any event, I find it unnecessary to have any concluded view on the matter, particularly in the absence of detailed argument on the point.

42 One principle however, is pellucidly clear though and is amply demonstrated by the following paragraph from Bell & Berg v Macquarie Bank Limited and Anor:

The making of a Calderbank letter does not automatically lead to an indemnity costs order in favour of the maker of the offer. The question, rather, is whether the offer was such that the failure to accept it was unreasonable, so as to lead to an indemnity costs order.

43 In my judgment, this principle is aptly applied to applications for indemnity costs in Pt 6 ch 2 proceedings.

44 From the various authorities that I have referred to, the Commission is able to identify the following guiding principles in applications for indemnity costs in unfair dismissal matters:

a) The power to make an indemnity costs order is available under s181(1)(b) of the Act;

b) The Commission's powers to award indemnity costs are discretionary, but the discretion must be judicially exercised.

c) The circumstances of a particular case need to be 'unusual' or 'out of the ordinary' or 'out of the usual,' and may involve features of an unmeritorious or improper nature.

d) A Calderbank letter of offer may be relevant, but not a determinative factor.

e) Indemnity costs are not to be regarded as punitive.

f) An order of costs, on other than the usual basis, should be approached with caution.

45 Notwithstanding my earlier criticism of the respondent's conduct, I am not convinced that the circumstances in the case can be characterised as being "out of the ordinary" or "out of the usual".

46 I concur with Mr Britt's submission that the employer's conduct here was nowhere near as bad as that which I described in Passas v Skouloudis Group Pty Ltd t/as O'Kosmos, where indemnity costs were awarded against the employer.

47 Moreover, it is relevant to observe that most arbitrated unfair dismissal cases require the Commission to make findings on contested evidence. Less frequently, but still quite common, are findings of witness credit. To the extent that this case, inter alia, involved such findings, I am satisfied that it does not depart from the usual arbitrated unfair dismissal case.

48 It follows then that I decline to make an order for indemnity costs against the respondent. I do, however, propose to make an order for costs on a party to party basis, as agreed or assessed, after the 22 November 2001. Such order will also cover the costs associated with the respondent's notice of motion of 8 March 2002.

49 The date of 22 November 2001 is an appropriate datum point having regard for the following matters.

50 Firstly, in my opinion, the applicant's offer of settlement at the conciliation conference of $7,153.85 (inclusive of costs) was reasonable; particularly bearing in mind he was owed two weeks salary according to the terms of his contract of employment. The respondent's offer of $3,576.92 inclusive of costs, was in light of my earlier conclusions, unreasonable with in the meaning of s181(2)(c) of the Act.

51 Secondly, the matter should have logically settled at the conciliation proceedings on 22 November 2001 (or shortly thereafter) when it became clear the matter would proceed to arbitration.

52 Thirdly, it is only in exceptional circumstances do I believe that costs should be ordered up to, and including, the conciliation proceedings. See Mervat Wahba and Miles Fresh Food Market t/as Brighton Fruit Barn Pty Ltd IRC98/4413, unreported, Sams DP, 29 July 1999, Talbot and Rostcom Pty Ltd [1999] NSWIRComm 500 and Hazel Lang v Reid and Vasely, [2000] NSWIRComm 23.

ORDERS

53 Pursuant to s181(2)(c) and s181(1) of the Industrial Relations Act 1996, the Commission orders that,

1. The respondent, Christie Direct Pty Ltd, shall pay the applicant, Justin Thomas, costs on a party to party basis after 22 November 2001 in matter IRC01/6638, including the costs associated with this notice of motion.

2. Costs are to be agreed or assessed and payable within 28 days of today.

3. The applicant's notice of motion for costs on an indemnity basis is dismissed.

4. The proceedings are concluded.

Peter Sams

Deputy President

LAST UPDATED: 04/03/2003