Bartlett v Australia & New Zealand Banking Group Ltd (No 2)

THE COURT: On 7 March 2016, the Court allowed this appeal: Bartlett v Australia & New Zealand Banking Group Ltd [2016] NSWCA 30. It arose in the following circumstances.

The appellant, Mr Bartlett, is a former employee of Australian and New Zealand Banking Group Ltd (the Bank). On 15 August 2012, the Bank summarily dismissed him on the basis that he had engaged in serious misconduct. That misconduct was said to involve the doctoring of a confidential internal email relating to the Bank's lending policy, and the sending of that altered email to a journalist.

The appellant commenced proceedings in the Supreme Court for wrongful dismissal. The primary judge (Adamson J) found that the appellant had engaged in the misconduct alleged and that the summary dismissal was justified. The appellant challenged her Honour's findings as to liability and damages.

This Court held that the Bank had not established that he engaged in the alleged misconduct and that the investigation undertaken by the Bank was deficient. It also found that, if the Bank had not wrongfully dismissed the appellant in the manner in which it did, it nonetheless would have exercised its contractual right to terminate his employment with four months' pay in lieu of notice.

The Court made the following orders on 7 March 2016:

On 17 March 2016, the parties advised they could not reach agreement on a consent order. On 30 March 2016, they proposed directions by consent allowing for written submissions on the issues of interest and costs. Those directions were made on 1 April 2016 and the Court indicated that the appropriate form of order would be determined on the papers.

The dispute between the parties turns on the effect of an email sent by the Bank’s solicitors on 3 May 2013. (The Statement of Claim had been filed on 12 November 2012 and the hearing before the primary judge commenced on 10 November 2014.) By that email, the Bank offered, without prejudice, to “settle the Proceedings” on particular terms (the Offer). No response was received.

The terms upon which that Offer was made included:

The Bank submits that in relation to interest and costs, two things should follow from the making of that Offer and its non-acceptance. First, it is submitted that the Offer, as an “appropriate settlement sum”, precludes an award of interest on the judgment amount under s 100 of the Civil Procedure Act 2005 (NSW) (the CPA) for any period following the making of the Offer. Secondly, the Bank contends that the appellant should be ordered to pay its costs of the proceedings at first instance on an indemnity basis from the close of the Offer in accordance with the principles in Calderbank v Calderbank [1975] 3 All ER 333. In this respect, the proposed orders sought by the Bank are:

The Bank does not seek any variation in respect of Order 6 made on 7 March 2016 whereby it was ordered to pay 50% of the appellant’s costs of the appeal.

As the terms of Order 3 in [5] above show, no final order as to interest was entered on 7 March 2016. As such, no ‘variation’ of an order is required to deal with the question of interest, as is contemplated by the Bank’s proposed order 3. However, proposed order 4 would require a variation of Order 5 as entered. That raises a separate question as to the source of this Court’s power to make that order. The issue of the costs of the proceedings at first instance was not one left to the parties’ agreement by Order 4. It has been more than 14 days since the Court ordered that the Bank pay the appellant’s costs of the proceedings at first instance. No notice of motion has been filed to vary that order. In those circumstances, this Court may not have power to vary Order 5. It will be necessary to return to this question.

The power to award pre-judgment interest is governed by s 100 of the CPA, which provides:

In Najdovski v Crnojlovic (No 2) [2008] NSWCA 281; 51 MVR 334, Basten JA (with whom Allsop P and Windeyer J agreed) described s 100(4) as a provision which, “although subject to an exception based on a matter of evaluation and impression, depends upon a precisely identifiable criterion”: [7].

The Bank submits that the total amount for which judgment is proposed to be given, inclusive of $5,705 as interest calculated to the date of the Offer, is $115,705. That amount does not exceed the $110,000 offered by the Bank in May 2013 by more than 10%. Therefore, s 100(5) is satisfied. The Bank also says there are no “special circumstances” that would exclude the operation of s 100(4).

The appellant accepts that the amount to which he is entitled following this Court’s judgment does not exceed the amount offered by more than 10%. However, he contends that the words “a sum offered in settlement of proceedings” are limiting and that the collateral obligations required by the Offer in this case have the consequence that what was offered in settlement of the proceedings was not only the sum proffered, but also releases and promises, including that as to non-disparagement. That additional non-monetary consideration sought by the Bank for settlement of the appellant’s claim could not have been given or required if the matter proceeded to judgment.

This argument raises an issue as to the interpretation of s 100(5), which on the face of it imposes a criterion for determining whether the settlement is ‘appropriate’ that depends on a straight comparison of the sum given in judgment and the sum offered in settlement. In doing so, it appears to assume that there are no collateral benefits sought in return for the settlement which might otherwise be taken into account in assessing whether the settlement sum is ‘appropriate’. It is not necessary to resolve this question - particularly where we do not have the benefit of oral argument or submissions directed to it - because we are satisfied that there are special circumstances in this case which warrant the making of an order for interest up to judgment.

Those circumstances are that the appellant’s pursuit of the proceedings, despite the offer of an appropriate settlement sum, allowed him successfully to challenge the allegations of serious misconduct against him. This Court found that the Bank acted unreasonably in investigating those allegations and that it departed from the standard of conduct which could be expected of a reasonable corporate employer: [51]. In these circumstances, the appellant should not be exposed to the disadvantageous operation of s 100(4) because he chose to pursue proceedings against his employer to vindicate his reputation, notwithstanding that the amount he recovered did not exceed by more than 10% the amount offered.

The parties agree that interest on the sum of $110,000 up to the date of this Court’s orders on 7 March 2016 is $25,925. Accordingly, the appellant is entitled to judgment for $135,925, that judgment to take effect on 7 March 2016.

As has been noted, there is a question as to the basis on which this Court has power to vary Order 5 entered on 7 March 2016. The provisions of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) that allow for the variation of orders are as follows:

Within ten days of the orders being entered, the parties advised the Court they could not reach agreement on the terms of an order as directed. That direction did not provide the parties liberty to apply for a variation of the order entered in respect of the costs at first instance. When the consent orders and the parties’ written submissions were received, more than 14 days had passed since the entry of the Court’s judgment. Taking account of the lapse of time, and the lack of any suggestion that rr 36.15 or 36.16(2) apply, a question arises as to whether r 36.16(3) empowers this Court to vary now a costs order entered in March of this year. The relief sought by the appellant in his Notice of Appeal included by prayer 3(b) is that the Bank pay the costs of the proceedings.

The different views earlier expressed by members of this Court in relation to UCPR r 36.16(3) are referred to in Habib v Nationwide News Pty Ltd (No 2) [2010] NSWCA 291 at [34]-[39]. In Road and Traffic Authority of NSW v Palmer (No 2) [2005] NSWCA 140, the Court (Giles JA, Spigelman CJ and Handley JA agreeing) found that a costs order determines a claim “for relief, the relief claim being orders disposing of the costs of the trial and of the appeals”: [21]. However, in Hancock v Arnold; Dodd v Arnold (No 2) [2009] NSWCA 19, the Court (Ipp, McColl and Basten JJA), observed of UCPR, r 36.16(3) at [10]:

Notwithstanding the statement in Hancock, the weight of authority appears to support the position taken by Giles JA in Palmer: see AT v Commissioner of Police (NSW) (No 2) [2010] NSWCA 337 at [7]-[13] (per Basten JA, Beazley and Macfarlan JJA agreeing); Deputy Commissioner of Taxation v Meredith (No 2) [2008] NSWCA 133; 75 NSWLR 462; Roads and Traffic Authority of NSW v Refrigerated Roadways Pty Ltd (No 2) [2009] NSWCA 336 at [8], [10] (per Campbell JA, McColl JA and Sackville AJA agreeing); Short v Crawley (No 45) [2013] NSWSC 1541 at [21] (per White J). The effect of this line of authority is that the Court does not have power under r 36.16(3) to vary a costs order which determined a claim for relief where no issue as to that variation was raised within 14 days of the judgment having been entered.

It is unnecessary for this Court to express a final view as to the meaning of r 36.16(3) because no reason has been established to support a variation of the order in question.

The Bank submits that the refusal of its Offer justifies the making of a special order as to costs by reason of the principles associated with the making of a Calderbank offer. Those principles were explained by Giles JA in SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 at [37]:

In our view, it was not unreasonable for the appellant to refuse the Bank’s Offer. That is so because acceptance of the Offer would have precluded the appellant from establishing that the Bank’s allegations of misconduct against him were unreasonable and unfounded. Taking account of the potential impact of those allegations on his professional reputation, it was not unreasonable for the appellant to refuse the Bank’s Offer that he discontinue his challenge to them. Similar reasons were given in support of Order 5 in this Court’s judgment (at [96]):

In order to attract the consequences of a Calderbank offer, the offer must involve a real element of compromise, rather than an invitation to capitulate: Herning v GWS Machinery Pty Ltd (No 2) [2005] NSWCA 375 at [4]-[5]; The Anderson Group Pty Ltd v Tynan Motors Pty Ltd (No 2) [2006] NSWCA 120; 67 NSWLR 706 at [8]. The terms of the Offer required the appellant to release the Bank from any and all claims arising out of the employment relationship or the termination thereof, and to agree not to disparage the Bank or any of its officers or employees. Those conditions could be seen to require the appellant’s capitulation, at least to the extent that he would be required to abandon any challenge to the allegations of misconduct.

The Bank submits that its Offer was more favourable than the judgment because by the former, the appellant was able to recover his reasonably incurred legal costs (which remain unspecified) and to avoid the incurring of further costs. The appellant claims that he is better off having obtained judgment because he now has the benefit of having disproved the allegations of misconduct, that result having unspecified benefits to his professional reputation. While it may be accepted that the appellant would have been better off financially had he accepted the Offer, that is not determinative of the reasonableness of his conduct in this case. The factors which led the appellant to reject the Offer were relevant and material and reasonably justified that course. The Bank has not discharged its burden of satisfying the Court that there should be an exercise of the costs discretion in its favour: County Securities Pty Ltd v Challenger Group Holdings Pty Ltd (No 2) [2008] NSWCA 273 at [31] (McColl JA, Spigelman CJ and Beazley JA agreeing).

It should be noted for completeness that the Bank placed no reliance on UCPR, r 20.26. This may be because the letter of offer dated 3 May 2013 made no reference to its being made in accordance with those rules: cf UCPR, r 20.26(2)(d).

Accordingly, the Court makes the following orders: