Farmakis v J & N Pty Limited trading as Nonie Ressler Realtor [2006] NSWIRComm 1008 (30 March 2006)

Last Updated: 30 March 2006

NEW SOUTH WALES INDUSTRIAL RELATIONS COMMISSION

CITATION : Farmakis v J & N Pty Limited trading as Nonie Ressler Realtor [2006] NSWIRComm 1008

FILE NUMBER(S): 7076

HEARING DATE(S): 24/05/2004

25/05/2004

09/05/2005

DECISION DATE: 30/01/2006

PARTIES:

APPLICANT

Sue Farmakis

RESPONDENT

J & N P/L t/as Nonie Ressler Realtor

JUDGMENT OF: Tabbaa C

LEGAL REPRESENTATIVES

Mr. Dean Groundwater, Solicitor

Warren McKeon Dickson, Lawyers

CASES CITED: Dima Homes Case (1989) 5 AILR Rep. 4 (Bauer J, Varnum DP and Shiels CC)

Bankstown City Council v. Paris (1999) 93 IR 209, Tuholi Pty. Limited v. Caltex Petroleum Pty. Limited [2001]NSWIR Comm.7 Wright P)

Krajewska v University of Adelaide

LEGISLATION CITED: Industrial Relations Act 1996

JUDGMENT:

INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES

CORAM: TABBAA C

30 January, 2006

Matter No IRC 7076 of 2003

SUE FARMAKIS and J. & N. PTY. LIMITED trading as NONIE RESSLER REALTOR

Application by Sue Farmakis re: unfair dismissal pursuant to section 84 of the Industrial Relations Act, 1996.

..................................................................................................................

DECISION ON COSTS

[2006] NSW IRComm 1008

BACKGROUND

1 A claim by Sue Farmakis for relief relating to alleged unfair dismissal by J. & N. Pty. Limited trading as Nonie Ressler Realtor was refused on 09 May, 2005. The Commission held that a finding could not be made that the termination of her employment had been harsh, unreasonable or unjust.

2 On 16 May, 2005, a written request was received from Solicitors for the Respondent seeking a re-listing of the matter for the purpose of determining the question of costs. The correspondence indicated that a copy had been forwarded to the Solicitors acting on behalf of Ms Farmakis.

3 On 15 June, 2005, correspondence was forwarded to the Solicitors for Ms Farmakis advising that attempts, since 07 June, 2005, to make contact by telephone had been unsuccessful. A request was made for her Solicitors to advise whether Ms. Farmakis wished to have the matter determined in a formal hearing or by written submissions. A reply was sought by 20 June, 2005. The correspondence was successfully transmitted by facsimile on the same day. No response was received to that communication.

4 On 28 June, 2005, a filing schedule was faxed to the Solicitors

representing both parties providing for the following:

The submissions on behalf of J. & N. Pty. Ltd were due by 4pm on 18 July, 2005

The submissions on behalf of Ms Farmakis were due by 4pm on 08 August, 2005

The submissions in reply were due by 4pm on 22 August, 2005

5 The notification concluded with the following notice:

Unless either party indicates to the Commission, in writing and within 14 days, that they wish to have the matter listed for formal arbitration, the issue as to costs will be determined by submissions only.

6 The submissions on behalf of the Company were received by facsimile on the due date. Ms Farmakis failed to comply with the filing schedule.

7 On 11 August, 2005, contact was made with her Solicitors to determine her intentions in relation to the claim for costs. My Assistant was advised that the Solicitor who had charge of the matter, Mr. Corbett, was on leave from 09-22 August, 2005. His Assistant advised that the firm had been unsuccessful in its attempts to make contact with Ms Farmakis to obtain instructions in the matter.

8 An attempt was made to establish direct contact with Ms Farmakis. My Assistant was advised, by the person who responded to the call to her home, that she was not available on that day but that she would be available to contact on the following day.

9 Numerous calls were made to her home from 15-19 August inclusive and again on 22 August, 2005. All attempts to talk to her personally had been futile.

10 On 22 August, 2005, correspondence was forwarded to Ms Farmakis advising her of the application for costs, informing her of the filing schedule that had been forwarded to her Solicitors and confirming that no submission had been filed on her behalf. The correspondence concluded by advising of the risk she ran of having the costs application determined ex parte should no contact be made by, or on her behalf, within seven days:

This office has attempted to contact you on numerous occasions over the last month, by telephone (directly) and through your Solicitors, to determine whether you wish to defend the claim for costs made against you by the Respondent.

You are required to contact the undersigned urgently in relation to the Application for Costs.

Should no contact be made within 7 days, then, a decision will be made on Costs based on the Respondent’s submissions only.

11 A copy of the above correspondence was faxed to the Solicitors representing both parties.

12 In response, the Assistant to Mr. Corbett telephoned on 22 August, 2005 and advised that the firm intended to file a notice of ceasing to act on behalf of Ms Farmakis within seven days.

13 On 30 August, 2005, a Notice of Change of Solicitor was filed by Mr. Corbett attached to which was an Affidavit of Service from Ms. Lisa Jones, Legal Secretary, attesting to the fact that a Notice of Change of Solicitor had been served on Ms Farmakis by prepaid post to her place of residence.

14 To date, no contact has been made by, or on behalf of, Ms Farmakis regarding the correspondence from the Commission dated 22 August, 2005.

ORDERS SOUGHT

15 J. & N. Pty. Ltd. trading as Nonie Ressler Realtor is seeking the following orders:

1.An order that Ms Farmakis pay its costs as agreed or assessed and payable within 28 days.

2. In the alternative, an order that Ms Farmakis pay its costs on an indemnity basis and payable within 28 days.

SUBMISSIONS

16 J. & N. Pty. Ltd. Trading as Nonie Ressler Realtor states that it is relying on the following facts in support of its contention that Ms Farmakis had not only failed to agree to a reasonable offer of settlement of the claim, but had pursued a claim that was both frivolous and vexatious:

1. On 11 December, 2003, Ms Farmakis filed a claim pursuant to section 84 of the Industrial Relations Act, 1996.

2. On 07 January, 2004, Ms Farmakis was advised, in correspondence addressed to her Solicitor, that her claim was considered to be frivolous and vexatious and was put on notice that if the matter proceeded to a hearing, reliance would be had on Section 181 (2)(c) of the Act in relation to costs. Nevertheless, Ms Farmakis was invited to discontinue the proceedings before substantial further legal costs were incurred by agreeing to a settlement, detailed in that correspondence, which did not involve any financial consideration. It was considered, however, that the terms ought to be attractive to the Applicant if she intended to pursue her career in the real estate industry.

3. Ms Farmakis had made no attempt to settle the claim before the conciliation and directions hearing in the Commission.

4. On 27 January, 2004, Mr. Josef Ressler, a Co-Director of the Company, represented it at a conciliation and directions hearing before the Commission as currently constituted.

An affidavit was attached from Mr. Josef Ressler in which he stated that he recalled that Ms Farmakis and her Solicitor were in attendance at that conciliation and directions hearing. He had sought, and was granted, with the consent of the Applicant, a brief one-on-one discussion with Ms Farmakis. He attested to the fact that he made an offer of $2,500.00 (the equivalent of 3.84 weeks’ pay) to settle the claim. He stated that Ms Farmakis had rejected that offer, had not made a counter-offer, and focused, instead, on the assertion that the Company had dismissed the wrong person. She contended that the Receptionist should have been the one to be dismissed because of her use of recreational drugs.

5. On 17 February, 2004, Solicitors for Ms Farmakis rejected the settlement offer made the previous day by the Solicitors for the Company (details not disclosed). Once again, no counter-offer was made by Ms Farmakis.

6. On 04 March, 2004, Solicitors for Ms Farmakis responded to correspondence from the Solicitors for the Company, dated 24 February, 2005, denying that any settlement offer had been made to her on 17 February, 2004, that was over and above the two week’s paid notice she had already received. Nevertheless, it is noted that apart from the denial of any previous knowledge of that offer, no indication was given as to whether that offer was acceptable or negotiable or rejected.

7. On 05 March 2004, Solicitors for Ms Farmakis wrote to the Solicitors for the Company giving notice that proceedings for the recovery of a sum of $8,287.00, allegedly owed to her in relation to commissions, would be commenced within seven days if no satisfactory response was received. The Company was also put on notice that the Applicant intended to rely on that letter in support of a costs application. No mention was made of the unfair dismissal proceedings.

8. On 11 March, 2004, Solicitors for Ms Farmakis formally offered, on behalf of their client, to settle all claims for a total sum of $13,287 made up as follows:

(a) In addition to the two weeks' notice already paid by the Respondent, the payment of an additional $5,000.00 as compensation for the alleged unfair dismissal;

(b) Payment of $8,287.00 in alleged outstanding commissions.

(c) The Applicant required a Deed of Release to be signed which would include, amongst other things, a non-disparagement undertaking and a confidentiality clause.

That offer had not been acceptable to the Company.

9. The 2-day hearing commenced on 24 May, 2004.

10. On 25 May, 2004, further settlement discussions were held between the parties’ legal representatives during the course of the day. An offer was made on behalf of Ms Farmakis to settle all claims by the payment of $14,000.00. That offer had been rejected by the Company on the basis that the firm’s calculations revealed that the amount owing for unpaid commissions was in the vicinity of $400 only.

11. During further negotiations, Ms Farmakis offered to settle all claims by the payment to her of an additional 12 weeks’ pay, inclusive of costs. The Company had maintained its offer of an additional two weeks’ pay.

17 It was submitted that the bases for establishing whether Ms Farmakis had unreasonably failed to agree to a settlement of the claim in breach of Section 181 (2) (c) of the Act were established in Bankstown City Council v. Paris (1999) 93 IR 209 – namely, the rejection by a party of a reasonable offer of settlement of a claim and/or that the conduct of that party did not illustrate an intention to settle the claim.

18 The Commission had found in favour of the Company and dismissed the unfair dismissal claim. It was submitted that, having regard to the outcome, the offer to Ms Farmakis of a settlement of $2,500.00 during the conciliation proceedings on 27 January, 2004, was, therefore, reasonable in the circumstances. Ms Farmakis had not only rejected that offer but had failed to propose a more sensible counter-offer preferring to remain on $13,287.00.

19 In addition, it was deposed that Ms Farmakis had deliberately frustrated attempts to conciliate on her unfair dismissal claim by her insistence that any settlement include payment of her alleged upaid commissions.

20 It was concluded, therefore, that it was open to the Commission to make a finding that Ms Farmakis had breached Section 181 (2)(c) of the Act by unreasonably failing to agree to a settlement of the claim and to award costs as assessed.

21 Alternatively, if the Commission was to form the opinion that the first criterion in Section 181 (2)(c) was satisfied, then the Respondent would be seeking indemnity costs. The relevant authorities in that regard clearly envisage the circumstances in the current proceedings (Bankstown City Council v. Paris, Tuholi Pty. Limited v. Caltex Australian Petroleum Pty, Limited [2001]NSWIRComm. 7 Wright P.)

22 In conclusion, it was submitted that Ms Farmakis would have been aware from the outset that there was no reasonable cause for instituting the proceedings, that the claim had been frivolous and vexatious and, despite all that, had unreasonably failed to agree to a settlement of her claim during conciliation proceedings.

CONSIDERATION

23 Both parties were legally represented up until 30 August, 2005, when the Solicitors for Ms Farmakis filed a Notice of Ceasing to act on her behalf.

24 The Applicant is aware that the Commission, as presently constituted, preferred the evidence of the Respondent’s witnesses in arriving at the conclusion that the termination was neither harsh nor unreasonable nor unjust.

25 The Commission is not obliged to go to the lengths described above in order to advise a party of the listing of a claim against them.

26 In a Full Bench decision in the Dima Homes Case (1989) 5 AILR Rep. 4 (Bauer J, Varnum DP and Sheils CC), it was held that:

... the only essentials are proper and fair notice and sufficient particulars to regulate the decision making process....

27 I am satisfied that Ms Farmakis has been afforded ample opportunity to be heard on the claim by the Company for costs to be awarded against her. I am also satisfied that she had received ample warning that the claim may be determined ex parte. I propose therefore to proceed to determine the claim ex parte.

28 The Commission’s power to award costs in Part 6, Ch. 2 proceedings is a discretionary one and is set out in s. 181 of the Industrial Relations Act 1996, which relevantly reads:

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 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

(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.

181 (3) ......

181 (4) In this section, costs includes:

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

(b) ......

29 The legislature therefore requires a positive finding to be made with respect to the provisions of s. 181(2)(c). If the Commission finds that a case has been properly made out that a party had unreasonably failed to agree to a settlement of the claim, or that an application was frivolous or vexatious, or both, then a discretionary order may be made pursuant to the provisions of section 181 (1).

30 The Appeal Bench, in Paris, explained the two-stage approach in detail and held that the legislative intention of ss. 181 (2)( c) of the Act is to encourage the settlement of unfair dismissal claims:

...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 in 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 unreasonably 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.

31 The parties both had legal representation in the proceedings with the exception of the first conciliation and directions hearing when the Respondent was represented by an Officer of that company. The parties ought to have been aware, therefore, that due regard was to be had to the policy of the Act which requires parties to take seriously their obligation to attempt to settle the proceedings. That obligation was described in detail in Paris (at 220):

Far from indicating any retreat from the inflexible approach adopted by the appellant, its approach in relation to settlement on this occasion, served only to emphasise the consistent position that had been adopted. We emphasise that there will be many circumstances in which parties to litigation, including unfair dismissal proceedings, may appropriately take firm position generally, including on the question of conciliation or settlement. Nevertheless, such a position runs significant risks in terms of the exercise of the power and discretion under section 181 (2)(c). This is particularly so where such a position is assumed without due regard to the policy of the Act which requires parties to take seriously their obligation to attempt to settle the proceedings. That, in turn, involves an obligation to consider in any objective way the strengths or limits upon the case that they will be propounding should the matter proceed to arbitration. On the material before us, we consider that the appellant failed to give appropriate consideration to such matters before it adopted its inflexible position. We consider that, in the circumstances of this matter, the criterion in the relevant provision has been made out. It has been met as to the proceedings both at first instance and on appeal.

32 The Applicant had been on notice, since 07 January, 2004, of the Respondent's intention to defend the claim and seek costs against her on the grounds that it considered her claim to be both frivolous and vexatious. An offer to settle on terms advantageous to the Applicant, albeit not including monetary compensation, was made to the Applicant.

33 There is no evidence before the Commission of any approach by, or on behalf of, the Applicant to the Respondent to initiate settlement discussions prior to the initial conciliation and directions conference.

34 The evidence before the Commission is that settlement offers were made on behalf of the Respondent on 27 January ($2500 or 3.84 weeks' pay) and 16 February, 2004 (details unknown). The Applicant had rejected both offers without putting forward any counter-proposal.

35 It is apparent that the Applicant would not consider any settlement offer that did not include payment for what she considered to be her outstanding commissions. The Applicant insisted that she was owed $8,287.00 in that regard. The Respondent was adamant that the total amount of commissions owing to her was in the vicinity of $400. Obviously the parties were too far apart in terms of her entitlement to commissions to be able to arrive at a settlement in the unfair dismissal proceedings that was in full and final satisfaction of all matters arising out of the employment relationship. The Applicant was aware, having regard to the correspondence to the Company dated 05 March, 2004, that it was a separate issue and was to be pursued in separate proceedings initiated on her behalf. Yet no settlement proposal was made by, or on behalf of the Applicant, that excluded payment of that disputed amount. The Respondent, at all times, made offers in settlement of the unfair dismissal claim only.

36 Private settlement discussions were held between the parties during the during the two days of hearings. The offers to settle, made on behalf of the Applicant, had once again included payment for the alleged outstanding commissions. The Applicant had spent a considerable period of time being cross-examined on the first day of the proceedings. Her evidence has been quoted extensively in the decision on the merits of the claim and played a substantial role in arriving at the "inescapable conclusion that the evidence on behalf of the Respondent is to be preferred". The Applicant should not have been under any illusion by the time she concluded her oral evidence of the weaknesses in her claim. She had a golden opportunity to settle the claim by accepting the offer of an additional two weeks' pay, there would have been no question as to costs and she would have retained her right to pursue her alleged unpaid commissions in other proceedings. She failed to grab that opportunity.

37 The evidence that unfolded in the proceedings on 24 and 25 May, which ought not to have taken the Applicant by surprise, clearly demonstrates, in my opinion, that the applicant's claim is both frivolous and vexatious.

38 During the conciliation and directions hearing on 27 January, 2004, the Respondent had, at the request of the Commission, elaborated extensively on the grounds upon which the dismissal was based and upon which the Respondent would seek to rely if the matter proceeded to arbitration. The Applicant was aware of the allegations she had to defend and only she would have been aware of whether or not she was capable of defending those allegations. Her attempts to do so failed dismally. If she was not aware of it before, she should have become aware, during her cross-examination, that her claim had very little chance of success if the Respondent mounted a good defence. It follows that the offer of settlement made by the Respondent during the hearing was a reasonable offer (2 weeks' pay) and the offer of settlement made on 27 January, 2004 (3.84 weeks' pay) was an even better offer.

39 Her refusal, therefore, to accept such reasonable offers of settlement of her unfair dismissal claim constituted, in each of the circumstances, a clear demonstration of an unreasonable failure to agree to a settlement and therefore a breach of s. 181 (2) of the Act.

ORDERS

40 Pursuant to s 181 (2)(c) and s 181 (1) of the Industrial Relations Act 1991, the Commission orders that:

1. Ms Farmakis shall pay to J & N Pty. Ltd. trading as Nonie Ressler Realtor, on a party to party basis, costs calculated from the conclusion of the conciliation and directions proceedings on 17 February, 2004 up to and including the determination of this costs application.

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

3. The application by J & N Pty. Ltd. trading as Nonie Ressler Realtor for costs on an indemnity basis is dismissed; and

4. The proceedings in Matter No. IRC 7076 of 2003 are concluded.

I. Tabbaa

COMMISSIONER

LAST UPDATED: 06/02/2006