Aylward Dowling and Wall Pty Ltd t/a DMI Global Manufacturing v Richards [2006] QIRC 88 (2006) 182 QGIG 376

[Extract from Queensland Government Industrial Gazette, dated 7 July, 2006, Vol. 182, No 11, pages 376-380] QUEENSLAND INDUSTRIAL RELATIONS COMMISSION Industrial Relations Act 1999 - s. 74 - application for costs Aylward Dowling and Wall Pty Ltd t/a DMI Global Manufacturing AND Jonathon Richards (B/2006/118) COMMISSIONER FISHER 27 June 2006 Application for costs - Industrial Relations Act 1999 s. 335(1)(b) - Resfusal to sign AWA - Applicant successful - Commission ordered respondent to pay compensation and penalty - Amounts remain unpaid - Offer of settlement prior to hearing - Case law - Without prejudice save to costs letter - Post decision correspondence - Conclusions - Application refused - B/2006/118 dismissed - Cross-application for costs - Case law - Cross-application refused. DECISION On 13 February 2006, the Commission as currently constituted released a decision in relation to the application for reinstatement made by Jonathon Richards in respect of his former employers, Aylward Dowling and Wall Pty Ltd t/as DMI Global Manufacturing (2006) 181 QGIG 281. In summary, the Commission found that Mr Richards' dismissal had been both harsh, unjust and unreasonable and for an invalid reason, namely, refusal to sign an Australian Workplace Agreement (AWA). The Commission awarded an amount of $3,543.88 as compensation and a further amount of $3,750.00 as a sanction under s. 80 of the Industrial Relations Act 1999 (the Act). The Commission ordered that both amounts were to be paid within 21 days of the date of release of the decision. Both amounts presently remain outstanding. Mr Phil Dowling, one of the Directors of the respondent to the reinstatement application, has filed an application seeking that Mr Richards pay the costs of the respondent incurred with respect of the reinstatement application (B/2006/118). That application is resisted by Mr Richards. The application is made pursuant to s. 335(1)(b) of the Act. For ease of reference, I shall refer to the applicant in these proceedings as DMI and the respondent as Mr Richards. Prior Offers The main argument put forward by DMI in support of the granting of costs related to the prior offers of settlement made before the substantive hearing. Mr Chris Mossman, a Partner of the firm BCI Law (the firm of Solicitors who have acted for DMI), swore an affidavit outlining the offers and counter-offers that had been made. It should be noted that the hearing of the reinstatement application occurred on 19 December 2005. On 5 December 2005 Mr Mossman wrote to Mr Richards' Solicitors, Finemore Walters & Story, with an offer to settle the reinstatement application in the amount of $5,270.72. The amount was calculated on the basis that DMI considered that Mr Richards' loss was $202.72 per week. The weekly loss was then extrapolated over a period of 26 weeks, to give the figure of $5,270.72. This offer was made despite Mr Mossman's instructions that only a loss of $1,175.72 had been suffered by Mr Richards over the 26 week period since he concluded his employment. In considering the loss suffered by Mr Richards DMI rejected that his working week was 45 hours including a component for overtime. This was an issue to which some time was ultimately devoted in the substantive hearing. Reference was also made in the letter to the decision of the Federal Court of Australia in Schanka v Employment National (Administration) Pty Ltd (2001) 112 FCR 101 where a penalty in the amount of $2,500 was ordered against the defendants for requiring the plaintiffs to sign AWAs as a condition of employment. Mr Mossman advised that a penalty of this order was considered to be what the Commission might determine where an invalid reason was to be found. However, Mr Mossman went on to say that "our client strongly denies there has been a dismissal for an invalid reason.". The letter from Mr Mossman was headed "Without Prejudice Save as to Costs" and the final paragraph was in the following terms: "We advise that if your client rejects this offer then we intend to produce this letter to the Commission and rely upon it in respect to any application for costs our client makes pursuant to s. 335 of the Act. It is our client's view that if the offer is rejected this will amount to an unreasonable act and our client will reserve its right to bring a costs application.". From the correspondence tendered in the proceedings it is apparent that some discussions occurred between Mr Mossman and Mr Geoff Ebert of Finemore Walters & Story after Mr Ebert received the letter of 5 December 2005. A further letter was sent by Mr Mossman to Mr Ebert on 16 December 2005. It too was headed "Without Prejudice Save as to Costs". Mr Mossman advised that his client had instructed his firm to reinstate its offer of $5,270.72. This letter reiterated his client's -- 1 of 4 -- 2 belief as to Mr Richards' actual loss for the 26 week period. Nonetheless in order to settle the matter the offer of $5,270.72 was made. Included in Mr Mossman's letter also was reference to a "letter of comfort" which Mr Richards had also sought. Details of a proposed letter were set out. In his response of 16 December 2005, Mr Ebert set out Mr Richards' proposed terms of settlement. These were, in summary: (1) the letter of comfort as set out in Mr Mossman's letter of even date together with an acknowledgement that Mr Richards' "dismissal resulted from an unlawful act by requiring our Mr Richards to execute an AWA to continue his employment with our company;" and (2) financial compensation in the amount of $8,600.00 "to be paid by way of reimbursement of legal fees and outlays incurred.". Mr Ebert's letter was headed "Without prejudice save for costs" and concluded by advising that Mr Richards "intends to rely on this letter and previous offers made in respect to any Section 335 application". Post Decision Correspondence As mentioned earlier the Commission ordered that DMI pay Mr Richards two amounts totalling $7,293.88. This sum was more than the offer made by DMI but less than that made by Mr Richards. The amounts were ordered to be paid within 21 days of the date of release of the decision, i.e., by 6 March 2006. On 7 March 2006 Mr Ebert wrote to BCI Law attempting to secure payment of the amount ordered. He made a further attempt by way of letter dated 29 March 2006 and requested that the monies be paid by 3 April 2006. On 7 April 2006 Mr Mossman wrote to Mr Ebert advising that DMI had instructed him to pursue an application for costs in relation to the reinstatement application in the grounds that Mr Richards' "offer of $8,600.00 by way of reimbursement of legal fees and outlays incurred amounted to an unreasonable demand for compensation". Further, it was said that Mr Richards' claim for compensation without deduction of his earnings from his new job amounted to an unreasonable action. (It seems that this position was adopted by Mr Richards in the early stages of negotiations. It is not clear on the material how long that position was maintained). The letter concluded by advising that an application for costs was being finalised and stating that: "Given our client's claim for costs is likely to exceed the amounts of compensation awarded by the Commission our client intends to retain the judgement amount as an offset against its claim for compensation.". Mr Ebert responded by letter of 11 April 2006 and said, in part: "We place on record that our client considers that application for costs as proposed by your client is without merit and is being filed for the purpose of delay only.". Mr Ebert also advised that in addition to the amounts awarded, Mr Richards would be seeking costs for resisting the costs application. Conclusion The offers of settlement made prior to the hearing in December were quite properly not raised at the hearing. However, neither party reserved its position on costs at the hearing nor otherwise alerted the Commission that the issue of costs had been the subject of some correspondence between them. Had they done so the Commission would have noted this in its decision and allowed for a timely consideration of the matter. As it happened, the first the Commission became aware that costs were in issue was when Mr Dowling's application was filed on 17 May 2006. Although the Act does not provide a time limit for the filing of a costs application it is somewhat of concern that the first the Commission is aware of a claim is three months after the release of the decision in the substantive matter. DMI seek that Mr Richards pay its costs of the reinstatement hearing for these reasons (as contained in Mr Mossman's affidavit): (i) Mr Richards acted unreasonably in rejecting DMI's offers of settlement. (ii) Mr Richards acted unreasonably by insisting he would not settle the matter for less than $8,600.00 which was disclosed to be his legal fees incurred just prior to the hearing. Further, the claim for $8,600.00 on account of legal fees incurred prior to the hearing constituted an unreasonable demand for compensation given that Mr -- 2 of 4 -- 3 Richards incurred further legal fees as a result of the hearing proceeding and in circumstances where he had little prospect of receiving compensation greater than the amount he had claimed. (iii) Because of Mr Richards' "unreasonable demand for compensation" and his "unreasonable rejection" of DMI's offer to settle, both parties, including DMI, incurred additional costs and expense which were said to be unreasonable. All of these contentions were rejected by Mr Ebert who appeared for Mr Richards. In particular he submitted that Mr Richards' offer of settlement of $8,600.00 was closer to the figure awarded by the Commission than the offer made by DMI. In addition, settlement of an application based on a reimbursement of legal expenses is not unknown in this jurisdiction and is done in order to minimise the taxation that would be required to be paid. Section 335(1)(b) of the Act provides that the Commission may order costs in a reinstatement application where one party caused costs to be incurred by the other party because of an unreasonable act or omission connected with the conduct of the application. DMI have argued that Mr Richards acted unreasonably in three respects. In my view none of these arguments can be sustained. The offer of settlement made by DMI was more than the award of compensation ordered by the Commission. In the substantive proceedings the Commission had to consider whether overtime would be included in the compensation to be awarded. I decided against making any allowance for overtime on the grounds that overtime was not a feature of Mr Richards' employment under the new owners, DMI. While I accept DMI's contention that it was not reasonable for Mr Richards to seek compensation which included a component for overtime, it is not clear on the material before me that this was a position that was maintained in the pre-trial discussions until the hearing. Certainly, the counter-offer of settlement contained in Mr Ebert’s letter of 16 December 2005 is silent on this point. Of course, in a hearing, parties are free to put matters they consider relevant to the Commission's determination of any compensation that may be awarded irrespective of whether they have been advanced or abandoned in pre-trial discussions provided they have been disclosed as part of the discovery process or in witness statements. Although the award of compensation was less than the offer of settlement made by DMI in December 2005, the total amount awarded exceeded that offer. As Mr Ebert said, the total sum was closer to the amount sought by Mr Richards than that offered by DMI. That is an important factor which should not be overlooked. To seek to settle for a sum by way of reimbursement of legal expenses is not unknown in this jurisdiction and to suggest that this was an unreasonable proposition is in itself unreasonable. It is clearly a matter for the parties directly concerned as to whether settlement in this manner is acceptable and simply because one party does not consider it appropriate does not mean the other is acting unreasonably in pressing for it in pre-trial negotiations. The third reason advanced for the respondents is that Mr Richards was unreasonable both in respect of his demand for compensation and his rejection of the offer made by DMI. On the basis of the correspondence tendered in this hearing it does not seem to me that Mr Richards was being unreasonable in the amount he sought, although the amount awarded was less than that claimed. Further, Mr Ebert's letter of 16 December 2005 shows that Mr Richards was not averse to settling the matter. He just had a different view about the sum involved. However, the main reason that costs must be refused in this case is that Mr Richards was entitled to have his claim for dismissal based on an invalid reason heard and determined. As evidenced by Mr Ebert's letter of 16 December 2005, acknowledgement by the respondent that Mr Richards had been dismissed for an invalid reason was fundamentally important to him. It could not be divorced from the financial aspect of the settlement. DMI's consistent rejection of this component of the claim left Mr Richards with little option but to pursue the matter to hearing. And, at trial, his claim succeeded. He not only received a finding that he was dismissed for an invalid reason but also received the benefit of the penalty imposed on DMI for their unlawful action. For these reasons Matter No B/2006/18 is dismissed. Mr Richards' claim for costs Mr Richards has sought costs to be awarded against DMI for resisting their costs application. DMI's application for costs was said to have been instituted without reasonable cause and was otherwise vexatious (s. 335(1)(a)). Mr Ebert submitted that the costs application made on behalf of DMI was without merit and was only brought for the purpose of delaying the payment of the sum awarded and to cause Mr Richards to incur further cost. -- 3 of 4 -- 4 Mr Dwyer, who appeared for DMI, opposed the application on the grounds that there was clear evidence from both parties that DMI intended to pursue costs in the event its offers were rejected. Further, Mr Dwyer said, DMI were partly vindicated at the hearing as their position with respect to overtime was accepted by the Commission. In MIM Holdings Limited v Automotive, Metals, Engineering, Printing and Kindred Industries Industrial Union of Employees, Queensland (2000) 164 QGIG 370, Hall P adopted the view that the phrase "vexatiously or without reasonable cause" was to be read disjunctively so that if the application was not instituted vexatiously consideration could be given to whether it was constituted without reasonable cause. In Earner v Queensland Investment Corporation and QIC Properties Pty Ltd (No 2) (2002) 169 QGIG 132, Hall P accepted that "without reasonable cause" set the lower standard for an award of costs. Ultimately, for an award of costs to be successful under either limb of s. 335(1)(a), the case must be one in which it "was objectively recognisable" that it "could not succeed at the time when the application was made." MIM Holdings Limited v Automotive, Metals, Engineering, Printing and Kindred Industries Industrial Union of Employees, Queensland (2000) 164 QGIG 370. The issue is whether the application for costs made by DMI falls within that category. In my view the application for costs by DMI was not without its difficulties. Firstly, the total amount ordered was in excess of the amount offered by DMI and secondly, Mr Richards' claim that he was dismissed for an invalid reason was not only arguable but ultimately, accepted. That the application had its problems does not necessarily make it one which was objectively recognisable from the outset as one which would not succeed. DMI had an arguable point that the amount of compensation offered would exceed the amount ordered and also the amount of penalty suggested by them was not substantially below the amount ordered. In fact, the Commission accepted the principle applied in the Federal Court case as suggested by DMI. To hold the sum awarded while the application for costs was determined was presumptuous. The Commission issued an Order for payment which encompassed both the sum and the time for payment. The proper process is for the sum to be paid in accordance with the Commission's decision. If costs were to be sought by DMI an application could have been made within the time period specified for payment or if DMI wished to retain the sum ordered until the costs application was determined then it should have taken steps to secure the Commission's approval to do so. A party does not have authority to act unilaterally to withhold payment when an Order has been made. But this conduct does not make the application for costs vexatious. It may be unreasonable conduct but to fall within s. 335(1)(b) such conduct has to be done in connection with the reinstatement application. This application for the costs of a costs application is one step removed. For the foregoing reasons the claim for costs of the costs application is refused. Order accordingly. G.K. FISHER, Commissioner. Hearing Details: 2006 8 June Appearances: Mr J. Dwyer (Barrister) instructed by BCI Law for the respondent. Mr G. Ebert of Finemore Walters & Story for the applicant. Released: 27 June 2006 Government Printer, Queensland The State of Queensland 2006. -- 4 of 4 --