Pathways Health Ltd v Moxon

• Jurisdiction: New Zealand
• Judge: A A Couch
• Judgment Date: 21 February 2013
• Court: Employment Court
• Docket Number: CRC 5/12
• Date: 21 February 2013

IN THE MATTER OF a challenge to a determination of the Employment Relations Authority

BETWEEN

Pathways Health Limited

Plaintiff

and

Alicia Moxon

Defendant

[2013] NZEmpC 18

CRC 5/12

IN THE EMPLOYMENT COURT CHRISTCHURCH

Challenge and cross challenge to an Employment Relations Authority costs determination — employer submitted that employee unreasonably rejected Calderbank offer — employer offered to remove formal warning on its expiry as well ascontribute toemployees solicitor's costs — employee rejected the offer and countered seeking a complete retraction of warning together with a public acknowledgement the warning was unjustified and seeking reimbursement of legal fees of $40,000 — employer's offer increased to $10,000 and then $15,000 — employee awarded $9,000 — obligationson counsel and advocates to ensure that disputes were resolved economically — whether employee's rejection of Calderbank offer was unreasonable — whether awarding costs for proceedings by reference to a notional daily rate was appropriate.

Counsel:

Simon Menzies, counsel for the plaintiff

Barbara Buckett, counsel for the defendant

JUDGMENT OF JUDGE A A Couch

1 This judgment decides a challenge and cross challenge to a costs determination of the Employment Relations Authority (the Authority).

2 The plaintiff is a charitable provider of mental health services. The defendant has qualifications in psychology and social work and was employed by the plaintiff in 2005 as a registered health professional.

3 In August 2009, the plaintiff raised concerns with the defendant about her conduct. These ultimately led to the defendant receiving a formal warning in April 2010. The defendant raised a personal grievance which was lodged with the Authority. In addition to remedies for the personal grievance, the defendant also sought reimbursement of her costs of representation in the investigation process as special damages.

4 Following a lengthy investigation, the Authority determined 1 that the warning was unjustifiable and that the defendant's employment had been affected to her disadvantage as a result. The Authority ordered that the warning be regarded as never having been given and ordered the plaintiff to pay the defendant $9,000 as compensation for distress. This included a ten percent deduction on account of the defendant's contribution to the situation giving rise to her personal grievance. The Authority dismissed the defendant's claim for special damages. That substantive determination was delivered on 6 October 2011 and was not challenged by either party.

5 Both parties then sought an award of costs. Those claims were determined by the Authority in a second determination 2 delivered on 14 December 2011. The Authority adopted the tariff approach found to be appropriate by the full Court in PBO Limited (formerly Rush Security Limited) v Da Cruz. 3 Taking account of an investigation meeting lasting three days and allowing an additional two days for unusually extensive preparation, the Authority adopted a daily rate of $3,500 to conclude that an appropriate award was $17,500. Deducting $2,500 to take account of the defendant's failure to succeed in her claim for special damages, the plaintiff was ordered to pay the defendant $15,000 as costs together with certain disbursements.

6 The plaintiff challenged the whole of that costs determination and sought a hearing de novo. The plaintiff's claim is based on what it says was the defendant's unreasonable rejection of a Calderbank offer made prior to the Authority's investigation meeting. The plaintiff seeks an award of costs in its favour of $9,000.

Scope of the cross challenge

7 Included in the statement of defence was a cross challenge. As originally framed, this included an attempt to reopen the defendant's claim for reimbursement of pre-litigation costs. In a directions conference, I drew to Ms Buckett's attention that this amounted to a challenge to part of the Authority's substantive determination

and invited her to consider whether the Court had jurisdiction to entertain it as a cross challenge to the costs determination

8 In a memorandum dated 23 April 2012, Ms Buckett said “The cross challenge should be treated as if it had not been filed.” On 23 May 2012, Ms Buckett filed a further memorandum saying that the withdrawal of the entire cross challenge was a mistake and that what had been intended was to withdraw only the claim for pre-litigation costs. Mr Menzies took issue with this approach. He submitted that the effect of Ms Buckett's first memorandum was to withdraw the whole of the cross challenge so that there was nothing before the Court which could be revived.

9 While there is obvious logic in Mr Menzies' submission, the Court must ultimately take a practical approach to such matters. The 2005 practice direction 4 provides:

A cross-challenge need not be made within the time prescribed for a challenge but may be included in the defendant's statement of defence to the statement of claim initiating the challenge.

10 Had I taken the view urged on me by Mr Menzies, it would have remained open for the defendant to have filed an amended statement of defence restating those parts of the original cross challenge which related to the Authority's costs determination. Rather than require the defendant to jump through that procedural hoop for no practical purpose, I allowed the cross challenge to proceed in its reduced form.

11 In the cross challenge which proceeded, the defendant sought full reimbursement of her litigation costs and costs associated with a second mediation directed by the Authority. They amounted to more than $30,000.

Principles

12 Conducting a de novo hearing of a claim for costs in the Authority is inevitably problematic. In Metallic Sweeping (1998) Limited v Ford, 5 I noted that a plaintiff is, in most cases, entitled to a hearing de novo on request and then said:

[12] That raises the question of how the Court can and should conduct a de novo hearing of an application for costs. As in this case, most claims for costs are determined by the Authority on the basis of written submissions by the parties or their representatives. All concerned have been directly involved in the investigation and, as the Authority did in this case, may make only brief and general references to the events which are relevant to the outcome. Evidence is rarely if ever given in relation to costs. Rather, the Authority relies on its own knowledge of events, particularly in relation to interlocutory matters and the manner in which the parties have conducted their cases.

[13] When conducting a de novo hearing of substantive issues, the Court effectively puts the Authority's determination to one side and decides the matter on the basis of the evidence adduced before it. Given the nature of the process by which costs determinations are made, however, that is simply impractical when the Court is asked to decide what costs ought to have been awarded by the Authority. The Court receives nothing from the Authority. There is no record of the investigation meeting. While it would be possible for oral evidence to be given by the parties about every aspect of the Authority's investigation and each other's conduct on which they seek to rely, that could easily lead to a hearing out of all proportion to what is at stake.

[14] It seems to me that the only practical way of deciding a challenge to a costs determination is for the Court to be primarily informed through the submissions of the parties, with the possibility that this may be supported by affidavit evidence about contentious issues. In most cases, there will not be a hearing at which the parties or their agents appear in person. Thus, resolving differences between the parties or their representatives will be problematic. Inevitably, a Judge of the Court deciding a challenge can never be as well informed about events as the member of the Authority who conducted the investigation but I can see no realistic means to bridge that gap. In areas of uncertainty, the Court will need to have regard to the Authority's assessment of matters in a manner it would not do when deciding a substantive challenge by way of a hearing de novo. It may also be helpful and appropriate for the Court to have regard to the Authority's substantive determination.

13 I approach the decision in this case in that manner although I have the benefit of more information than was available in the Metallic Sweeping case. The Authority's determination was a good deal more detailed and an affidavit was filed on behalf of each party. Attached to the defendant's affidavit were copies of invoices and her solicitor's time records together with selected parts of the pre-hearing correspondence between counsel about settlement. A full set of that correspondence was attached to the affidavit which was then filed on behalf of the plaintiff.

14 In deciding a challenge such as this, the Court must put itself in the place of the Authority. It follows that the Court must apply the principles applicable to awarding costs in relation to proceedings before the Authority. Those principles were confirmed by the full Court in PBO Ltd (Formerly Rush Security Ltd) v Da Cruz. 6 The essence of the decision is in the following three paragraphs:

[44] The costs principles which the Authority now applies are not necessarily as comprehensive or as prescriptive as those set out in Okeby 7 and similar earlier judgments. The Authority is able to set its own procedure and has, since its inception, held to some basic tenets when considering costs. These include:

• • There is a discretion as to whether costs would be awarded and what amount.

• • The discretion is to be exercised in accordance with principle and not arbitrarily.

• • The statutory jurisdiction to award costs is consistent with the equity and good conscience jurisdiction of the...