Whitmore & Woolworths Australia Ltd [2004] NSWIRComm 1099 (8 October 2004)

Last Updated: 18 November 2004

INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES

Industrial Relations Act 1996

ANNA ADA WHITMORE

(applicant)

-V-

WOOLWORTHS AUSTRALIA LTD

(respondent)

8 October 2004

Commissioner Macdonald

Matter No. IRC 02/3681

Application by Anna Ada Whitmore re unfair dismissal pursuant to section 84 of the Industrial Relations Act 1996

D E C I S I O N O N C O S T S

1. This Decision concerns an application for costs by an employee against a former employer.

The costs application is made in the context where it is asserted that the employer unreasonably failed to settle the unfair dismissal proceedings. The order for costs is sought pursuant to s. 181 (2) ( c ) of the Industrial Relations Act 1996 (“the Act”).

The grounds for costs are that the employer unreasonably failed to agree to a settlement.

BACKGROUND

2. Ms Anna Whitmore filed an unfair dismissal against Woolworths Australia Limited.

3. That application came before the Commission for Conciliation and Directions on 25 July 2002.

4. The matter came before the Commission for Further Conciliation on 15 August 2002.

The parties failed to settle the application. An agreed hearing program was put in place. Hearing dates were set for 31 October and 1 November 2002.

5. The dismissed employee was represented by Mr Young, barrister.

The employer was represented by Ms Swift, Australian Retailers Association - New South Wales Division.

The decision in the s. 84 proceedings was made in favour of the Applicant. An amount of $12,600 gross was awarded to the Applicant as compensation for the dismissal.

6. An application for costs was initiated by the Applicant’s solicitors by way of letter dated 6 May 2003. This letter requested that the matter be re-listed for hearing on the question of costs. Arising out of the appearance of the parties before the Commission, the parties agreed to determine the issue of costs by way of written submissions. A filing program was then put in place. The Applicant’s legal representative filed, inter alia, a memorandum of costs and disbursements- being $12,899.

THE PARTIES SUBMISSIONS AND EVIDENCE

7.	Chronologies were filed by both parties, which were largely agreed but for some events taking place on one of two dates being either 24 July or 25 July 2002. The Commission states that this date is not a matter on which these proceedings turn.

Having regard to the Chronologies filed by both parties in these proceedings, it is clear that the Respondent made an offer of settlement, in a financial sense, of “no more than $4,000.00” on 24 or 25 July 2002, in response to the Applicant’s offer to settle of $15,000. These offers were made at the first preliminary hearing.

At the second preliminary hearing (15 August), the Applicant offered to settle for $7000. The Respondent needed time to consider this offer and several day’s later, rejected the offer and did not put a counter offer.

On the first day of the Hearing (31 October), the Applicant made a further offer to settle but increased its offer to $10,000. The Respondent countered with $5,500. No agreement was reached and no further offers were put by either side.

8.	For the Applicant

The Applicant submits that the maximum financial offer put by the Respondent was $5,500. This offer was not put until the first day of Hearing by which time the Applicant had been forced to incur significant costs in preparing her case for Hearing. In the circumstances, the offer did not constitute a reasonable effort to settle the proceedings and was an offer which the Respondent knew or ought to have known would have no attraction to the Applicant.

The Applicant submits that at the second preliminary hearing on 15 August 2002, the Applicant offered to accept $7,000, all inclusive, to settle the proceedings. The Applicant submits that the offer of $7,000 constituted a significant compromise on the part of the Applicant in a genuine effort to settle the proceedings. The offer was made at the second preliminary hearing by which time the Applicant had already incurred significant costs in pursuing the proceedings. The Applicant submits the rejection of the offer by the Respondent constituted an unreasonable failure to settle the claim.

The Applicant submits that Ms Whitmore was justified in adopting the position that she would accept no less than $7,000 to settle the proceedings and submits that the position was vindicated by the Commission’s decision in the matter. The amount being awarded as compensation being more than the Applicant put forward as an amount to settle the matter.

9. For the Respondent

The Respondent agrees with the Applicant’s submissions in terms of the financial offers that were put by both of the parties. The Respondent submits though that the relevant circumstances of these proceedings are:

•	That the Respondent attended two conciliation conferences for the matter; and
•	openly and willingly participated in these conferences; and
•	made a number of offers to settle the matter at the conference on 25 July 2002 including a monetary offer of $4,000 and an offer to re-employ the Applicant in a different position at another store.
•	That at the conclusion of the first conciliation conference, the Applicant’s then final offer was $15,000 which was above the amount ultimately awarded by the Commission;
•	That the Applicant’s offer ‘went backwards’ in that prior to the Hearing when the Respondent put the offer of $5,500, the Applicant was asking for a higher amount than $7,000-indeed seeking $10,000;
•	That the Respondent did not adopt a rigid or dogmatic approach to settlement negotiations. The Respondent’s conduct during conciliation and subsequent, was not belligerent or anything less than open and honest.

CONSIDERATION

The Issue

10. Does the fact that the Respondent refused to accept an offer of settlement put by the Applicant at the second conciliation conference, which was below the amount of compensation awarded by the Commission, mean that the Respondent unreasonably failed to settle the matter ?

11. The foregoing issue must be considered against the statutory power to award costs.

The Statutory Power To Award Costs

12. The power to award costs in proceedings before the Commission is found in

s 181 of the Act. The relevant parts of that provision are:

"181(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.

181(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

(c1) ...

(d) ...

181(3) ...

181(4) ..."

13. Paragraphs (a), (b) and (c) of s 181(2) are exhaustive as to the powers of the Commission when not in Court Session to order costs in unfair dismissal proceedings: Bankstown City Council v Paris (1999) 93 IR 209 at 218.

The Ground of Unreasonably Failed to Settle

14. The Applicant/employee sought costs against the Respondent/employer on the ground that the employer had "unreasonably failed to agree to a settlement of the claim ...": s 181(2)(c).

15. An analysis of what constituted an unreasonable failure to settle was considered by a Full Bench of this Commission in Bankstown City Council v Paris. The relevant passage is found at page 219.

"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 the 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 powers and discretions under s 181(1) are available for exercise."

16. This Full Bench decision sets out authoritative guidelines on the approach to be adopted to the consideration of any alleged unreasonable failure to agree to a settlement. Those guidelines require the Commission to consider whether:

(a)	there was a rejection by a party of a reasonable offer to settle the claim; or
(b)

(b) there was conduct by a party (over a relevant period) that is found to be inconsistent with an intention to settle the unfair dismissal claim.

17.	It is also clear that the Commission is required to consider all relevant circumstances in deciding whether there has been an unreasonable failure to agree to a settlement.

The Issue

18. The issue then is whether the offers of settlement put by the Applicant that were rejected by the Respondent were reasonable offers, and so the refusal of the Respondent to agree to those offers of settlement falls into the category of an unreasonable failure to settle the matter.

19. In considering that question, it needs to be noted firstly that costs do not follow the event in unfair dismissal proceedings. This was made clear in the Full Bench decision in Copperart v Martin (1996) 68 IR 58 page 64, a decision referred to in Paris:

"It is clear, that in a scheme where costs are not the usual regime, the part of the Act contemplates and apprehends two distinct propositions:

•	that costs are not the automatic outcome of a refusal to settle;
•	that under certain circumstances costs are appropriate."

20.

Another issue raised by the Applicant was that its $7000 offer to settle was a reasonable offer to settle based on the Commission’s Decision to award a compensation amount of $12,600, which is higher than the $7,000 offer. However, the fact that the amount of compensation ordered in the substantive proceedings is more than the amount that was put forward in the negotiation and settlement discussions does not automatically mean that a costs order should be made.

21.	The Commission relies on the following extract of a decision of Deputy President Sams 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 on this point.

"15. The Union submitted that the offers of settlement were unreasonable when tested against the orders made by the Commission. In considering this submission, I have had regard to the comments of the Full Court of the Federal Court in Blagojevch v Australian Industrial Relations Commission, 98 IR 32 at 42-43, where Marshall and Lehane JJ said:

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.

16. I have also had regard for the conclusions of Stanley J of the Industrial Commission of South Australia in Krajewska and University of Adelaide, 50 IR 63, where his Honour said:

The question of whether a person clearly acts unreasonably in failing to discontinue or settle the matter before trial must be judged in the light of all the circumstances known, or which reasonably should have been known, before the trial commences.”

22. It follows then that the amount of any offers of settlement when compared to the amount of compensation ultimately awarded by the Commission, should not be given primacy in deciding whether the offers made during settlement negotiations were reasonable and accordingly as to whether or not a costs order should be made against a party. It also follows that in determining what was a reasonable offer of settlement, the position of the parties at the time the offer was made should be examined rather than a mechanical comparison of the offers of settlement and the amount of compensation awarded by the Commission.

Finally, the Applicant submitted that the $7,000 offer to settle made on 15 August 2003, was a significant compromise on the part of the Applicant. And the offer was made at the second preliminary hearing (15 August) by which time the Applicant had already incurred significant costs. Further, the Respondent’s rejection of that offer constituted an unreasonable failure to settle the claim.

The Commission has had regard to the whole of the negotiations in assessing the merits of the Applicant’s submission. In that regard the Commission has read the transcript of proceedings for the two preliminary hearings. In the 25 July proceedings the Commission was advised by the Applicant’s representative: “that there’s a substantial factual dispute in this matter” about certain issues. At the second preliminary hearing (15 August), the Applicant’s representative advised “that the essential dispute (about certain issues) remain.” Given that background, an offer to settle by the Applicant of $7000 and being submitted as a reasonable offer refused by the Respondent, takes on a different context. The Commission is unable to conclude that the Respondet was in a position to properly assess the merits of the Applicant’s offer.

Further the Commission notes that the Respondent was not in a position to re-assess the putting of any other offer in light of the Applicant’s filed material until well beyond the Applicant’s due filing date. The Applicant was due to file on 12 September but did not file until 24 October. This was only seven days out from the Hearing.

The Commission finds that the Respondent was not taking a rigid or dogmatic attitude to the conciliation process and in fact offered a non-monetary settlement of re-employment to the Applicant at the first conciliation conference. On balance then, the Respondent was participating in settlement negotiations both during the conciliation process and just prior to the commencement of the arbitral phase of proceedings.

CONCLUSION

23. The Commission has been considering a costs application by the Applicant against the Respondent pursuant to s.181.

24. Having considered the matters as a whole the Commission finds that the Respondent did not unreasonably fail to agree to a settlement of the matter. There was participation by both parties to settlement negotiations.

25. The fact that the matter did not settle does not mean that costs are an automatic outcome. Further, the fact that the Applicant was ultimately awarded a higher amount than was put forward by both parties in settlement negotiations, does not of itself make the Respondent’s refusal to settle the matter an unreasonable failure to settle.

26. Accordingly, the Commission dismisses the application for costs, made by the Applicant pursuant to s181(2) (c) in IRC 3681 of 2002.

A Macdonald

Commissioner