RHB Chartered Accountants Ltd, Kenneth Brown and Steven Wilkins v David John Rawcliffe
 NZEmpC 31
IN THE EMPLOYMENT COURT AUCKLAND
In the Matter of a challenge to a determination of the Employment Relations Authority
Defendant in person
Iain Hutcheson, counsel for Plaintiffs
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there was a general rule that costs would not be awarded for preparing a statement in reply where claim settled or withdrawn following mediation — whether executive or management time spent by receiver's agent was an expense.
Held: The Authority had a broad general discretion to order costs. It was open for it to consider whether all or part of the parties' costs was unnecessary or unreasonable and that costs generally followed the event. Each case had to be considered on its own merits.
The practical effect of the filing of the amended statement of problem was to discontinue the claim against RHB after it had incurred costs preparing and attending for mediation that they had been directed to attend. The Authority had not distinguished between the categories of costs incurred by RHB; it had simply declined to award costs at all. It had observed that the case was no different to other matters which had been settled or withdrawn after mediation, which suggested there could be a practice of not allowing costs associated with steps taken after proceedings were filed in circumstances where the grievance was subsequently settled or withdrawn.
While there was a discernible reluctance to award mediation costs, such costs had been allowed in cases where parties had been directed to mediation. There were strong policy considerations to be weighed in assessing the extent to which mediation costs were recoverable. Consistent with the Employment Relations Act's (“ERA”) emphasis on good faith and the efficient resolution of employment relationship problems, mediation was to be encouraged. Practical difficulties were likely to arise in terms of assessing the reasonableness of the mediation costs. Such difficulties were compounded by the confidentiality of mediation, which limited the Court's inquiry into whether the conduct of the parties had increased or limited costs.
However, a blanket rule should not be adopted. Costs were inherently discretionary and should neither be automatically awarded nor withheld. The Authority was required to exercise its discretionary powers in a principled, not arbitrary, manner. The parties had been directed to mediation despite the objections of RHB and despite an obvious preliminary issue arising as to whether RHB had been properly named. RHB was not R's employer and was not properly a party to the grievance. The issue could have been dealt with by the Authority by a preliminary determination pursuant to s159(1)(b)(i) ERA (Authority must direct mediation unless it would not contribute constructively to resolving the matter). RHB was effectively compelled to attend. Given the direction to attend, it was difficult to conceive of the mediation as being anything other than a necessary step in the proceedings.
As RHB was not R's employer it was difficult to see how mediation could have resolved R's grievance except to the extent of clarifying what had already been made clear, that RHB had been incorrectly cited. It was suggested that R proceeded with the claim as an attempt to extract a pragmatic settlement from RHB. Costs could be used to supervise litigation. It was in the broader interests of justice to ensure that those who commenced it acted responsibly and that strategic litigation involving the wrong parties was discouraged. Although this could not be decided, it was clear that R had been put on early notice of the party issue and had proceeded anyway.
The general policy considerations applying to mediation costs did not apply in this case. A costs award in the circumstances of the present case was likely to have the broader beneficial effects above.
RHB was entitled to a contribution to costs relating to the preparation of the statement in reply. The Authority appeared to have applied a rule that costs ought not to be awarded in circumstances where a claim had settled or been withdrawn following mediation. There was no principled reason for excluding costs for preparing a statement in reply prior to mediation and no indication that imposing costs would compromise or discourage mediation in any way. The general principle was that a plaintiff who discontinued a proceeding was liable for costs of and incidental to and including the discontinuance. An award of costs was consistent with the general approach that where technical or futile points were advanced by an unsuccessful party, it could be expected that a larger contribution to the successful party was required.
The plaintiffs could not claim executive or management time spent by the receiver's agent dealing with the litigation as an expense when determining costs. The time spent by the receiver's agent was time any defendant would be required to spend defending a claim, however unmeritorious. The fact that the receiver's agent should not have been a party to the proceedings could be adequately reflected in any costs award relating to legal fees.
RHB's costs had been reasonable. RHB was entitled to an award of $1,000.
JUDGMENT OF Judge Christina Inglis
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.
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.
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 … Colgan J stated that he had reservations regarding whether the Authority could order costs for participation in mediation. In … 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.
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.
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.
The plaintiffs filed a statement in reply saying that they were improperly named and detailing why they contended this was so. Documentation from theCompanies 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.
Mr Rawcliffe subsequently filed an amended statement of problem, naming Circle 54 NZ Ltd and Eurotech Audio Limited (in receivership) as respondents. 3
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.
The plaintiffs submit that, while it would be unusual, costs ought to be awarded in the particular...
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