RHB Chartered Accountants Ltd, Kenneth Brown and Steven Wilkins v David John Rawcliffe

JurisdictionNew Zealand
JudgeJudge Christina Inglis
Judgment Date24 February 2012
CourtEmployment Court
Docket NumberARC 57/11
Date24 February 2012

In the Matter of a challenge to a determination of the Employment Relations Authority

Between
RHB Chartered Accountants Limited, Kenneth Brown and Steven Wilkins
Plaintiffs
and
David John Rawcliffe
Defendant

[2012] NZEmpC 31

ARC 57/11

IN THE EMPLOYMENT COURT AUCKLAND

Challenge to an Employment Relations Authority decision declining to award the plaintiff costs associated with preparation and attendance at mediation — plaintiff was receiver of defendant's employer — plaintiff lodged claim for recovery of holiday pay — defendant was placed on notice that plaintiff was incorrect party as not employer — parties directed to mediation by Authority in spite of plaintiff's objections — defendant subsequently filed an amended statement of claim naming his employer — whether plaintiff entitled to mediation costs — whether there was a general rule that costs would not be awarded for preparing a statement in reply where claim settled or withdrawn following mediation — whether executive or management time spent by receiver's agent was an expense.

Appearances:

Defendant in person

Iain Hutcheson, counsel for Plaintiffs

JUDGMENT OF Judge Christina Inglis

1

The plaintiffs have challenged a costs determination of the Employment Relations Authority 1 declining to award costs. The challenge raises the vexed issue of the recoverability or otherwise of the costs associated with the preparation for, and attendance at, mediation.

2

The defendant had pursued a grievance against the wrong respondents in the Authority. This was pointed out to the defendant at an early stage and the Authority was requested to determine the matter, effectively as a preliminary issue. The Authority declined to adopt this course and instead directed the parties to mediation.

The defendant subsequently amended his claim and proceeded against a different party
3

The plaintiffs applied to the Authority for a contribution to the costs associated with preparing the statement of problem and with preparing for, and attending, mediation. The Authority dealt very briefly with the application, holding that: 2

There are no grounds to award costs. This matter is no different from any other matter that either settles at mediation or is withdrawn after mediation. In Eniata … Colgan J stated that he had reservations regarding whether the Authority could order costs for participation in mediation. In Naturex … Judge Ford stated that he did not see how it could be realistically determined whether, in the course of a mediation, the conduct of either party had tended to increase or contain costs. He declined to award mediation related costs. I decline to make an award of costs.

4

The challenge has been brought on a de novo basis. The parties agreed that it could be dealt with on an exchange of submissions without the need for a hearing.

Background
5

Mr Rawcliffe was originally employed by Eurotech Ltd in 2005. It sold its business to Eurotech Audio Ltd in 2008, and Mr Rawcliffe accepted employment with that company. Eurotech Audio Ltd was placed in receivership in 2009. Mr Brown and Mr Rodewald were appointed as receivers. Mr Wilkins acted as an agent for the receivers. Mr Rawcliffe filed a grievance in the Authority for the recovery of holiday pay, naming an unidentified entity “RHB”, Mr Brown and Mr Wilkins as respondents (the current plaintiffs). A support officer from the Authority wrote to Mr Rawcliffe raising concerns about whether the correct respondent had been named, and noting the results of a Company Office search. Mr Rawcliffe replied stating that the named respondents were properly cited and had been named in “another staff member file.” The grievance proceeded.

6

The plaintiffs filed a statement in reply saying that they were improperly named and detailing why they contended this was so. Documentation from the

Companies Office was annexed to the statement in reply which supported the plaintiff' position. The plaintiffs requested the Authority to issue a determination on that point but the Authority declined to do so. Rather the Authority directed the plaintiffs and the defendant to mediation. Mediation then occurred
7

Mr Rawcliffe subsequently filed an amended statement of problem, naming Circle 54 NZ Ltd and Eurotech Audio Limited (in receivership) as respondents. 3

8

The plaintiffs then applied for costs. The costs incurred by them were said to amount to $5,583, and included the costs relating to the preparation of a statement in reply, costs incurred by an agent for the receivers, costs relating to time incurred responding to the claim, and the costs associated with preparing for (and attending) mediation. The application for costs was declined, for the reasons set out above.

Parties' submissions
9

The plaintiffs submit that, while it would be unusual, costs ought to be awarded in the particular circumstances of this case. It is said, in support of this submission, that the claim was fundamentally flawed from its inception given it was directed at the receivers and the receiver's agent, notwithstanding clear advice to the defendant that this was in error. It is submitted that the plaintiffs were required to prepare and file a statement in reply and to prepare for, and attend, mediation directed by the Authority, despite the plaintiffs' objection to such a course given the party issue they had identified.

10

In addition, the plaintiffs submit that the defendant proceeded despite being aware of insurmountable deficiencies in his claim against them, and for the purpose of attempting to extract payment purely for “pragmatic” reasons.

11

The defendant has filed a brief submission on costs. He says that he does not have the luxury of being able to afford to retain a lawyer to debate the costs issue. He says that the claim was withdrawn after mediation and that the Authority was right to award no costs.

Approach to determination of challenge
12

The role of the Court on a challenge to costs is to stand in the shoes of the Authority and to assess de novo the evidence relating to the costs award in that forum in order to judge what is an appropriate award in light of all considerations which are relevant to the Authority: PBO Ltd (formerly Rush Security Ltd) v Da Cruz. 4 In approaching this task the Court takes into account factors relevant to an Authority costs determination, such as the daily tariff rate.

13

The power under cl 19 of sch 3 of the Act to award costs “in any proceedings” refers to both proceedings in the Authority and the Court. 5 If an Authority costs award is challenged, it is open to the Court to alter the Authority's costs award. 6

Discussion
14

The Authority has a broad general discretion to order that one or more parties contribute to the costs of any other party. In relation to the Authority, cl 15 of Schedule 2 of the Employment Relations Act 2000 (the Act) provides that:

15 Power to award costs

The Authority may order any party to a matter to pay to any other party such costs and expenses (including expenses of witnesses) as the Authority thinks reasonable.

The Authority may apportion any such costs and expenses between the parties or any of them as it thinks fit, and may at any time vary or alter any such order in such manner as it thinks reasonable.”

15

In Da Cruz the full Court of the Employment Court held that the principles guiding the Authority's approach to costs are different from the principles applied by the Court. In this regard it noted that: “The unique nature of the Authority and its proceedings mean that parties to investigation meetings should not have the same expectations about procedure and costs as they have of the Court.” 7

16

The Court set out a non-exhaustive list of “basic tenets” applying in relation to costs awards in the Authority, including that the Authority's discretion as to costs is to be exercised in accordance with principle and not arbitrarily; equity and good conscience is to be considered on a case by case basis; conduct which increased costs unnecessarily can be taken into account in inflating or reducing an award; it is open to the Authority to consider whether all or any of the parties' costs were unnecessary or unreasonable; and that costs generally follow the event. 8 Each case must be considered on its own merits. 9

What happened here?
17

The plaintiffs contend that the claim was withdrawn against them following mediation. Mr Rawcliffe says that, contrary to the plaintiffs' submission that the claim was withdrawn, it was in fact amended. While it is apparent from the Authority's determination that after mediation an amended statement of problem was filed (changing the name of the respondents), the practical effect of such an amendment was to discontinue the claim against the plaintiffs after costs had been incurred by them in responding to the claim – both through the preparation and filing of a statement in reply and preparing for and attending a mediation that they were directed to attend.

18

The Authority did not distinguish between the categories of cost incurred by the plaintiffs. It simply declined to award costs at all. The Authority observed that the case before it was “no different” to “other matters” which had settled or been withdrawn after mediation. This suggests that there may be a practice of not allowing costs associated with steps taken after proceedings are filed (such as filing a statement in reply) in circumstances where the grievance is subsequently settled or withdrawn.

19

There are a number of policy considerations that arise in relation to mediation costs, which have been traversed in decisions of this Court and which are referred to below. For the reasons that follow, I do not consider that the policy concerns relating

to allowing mediation costs have any real application in respect of attendances such as the preparation of a statement in reply prior to mediation taking...

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