FEDERAL COURT OF AUSTRALIA

Grabovsky v Secretary, Department of Social Services (No 2) [2015] FCA 1225

THE COURT ORDERS THAT:

1.    The first respondent’s costs be awarded in a lump sum of $8,500 instead of taxed costs.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

1    This is an application for a lump sum costs order.

2    Igor Grabovsky was an applicant for a disability support pension. After his application was refused by Centrelink (on behalf of the Secretary of the Department of Social Services), he unsuccessfully sought internal review, then external review, applying first to the Social Security Appeals Tribunal (“SSAT”). The SSAT affirmed the decision of the internal reviewer. Mr Grabovsky then applied to the Administrative Appeals Tribunal (“AAT” or “Tribunal”) for a review of the SSAT decision. This time he was successful. The AAT set aside the decision of the SSAT and remitted the matter to the Secretary with a direction that Mr Grabovsky’s eczema be assessed under Table 14 of the Impairment Tables. These are Tables contained in the Social Security (Tables for the Assessment of Work-related Impairment for Disability Support Pension) Determination 2011 (Cth). Their significance is that one of the conditions of eligibility for a disability pension is that the applicant has an impairment which carries a rating of 20 points of more under the Impairment Tables: Social Security Act 1991 (Cth) s 94(1)(b).

3    Despite his success before the AAT, Mr Grabovsky was unhappy with the Tribunal’s decision to remit his application to the Secretary and appealed to this Court, complaining, amongst other things, that the hearing was lacking in procedural fairness, the Tribunal applied an irrelevant statute, and that the decision was reached “without due consideration of the merits”. Appeals from the AAT to the Court are confined to appeals on a question of law: Administrative Appeals Tribunal Act 1975 (Cth) s 44(1). Mr Grabovsky was unable to persuade the primary judge that the Tribunal had erred in law and his appeal was dismissed: Grabovsky v Secretary, Department of Social Services (No 2) [2014] FCA 1130. He then applied for an extension of time to appeal from the primary judge’s decision (“the substantive application”), but, on 20 March 2015 I dismissed his application, largely because I considered it was doomed to fail: Grabovsky v Secretary, Department of Social Services [2015] FCA 244 (“Grabovsky No 1”). I considered that costs should follow the event and, accordingly, ordered Mr Grabovsky to pay the Secretary’s costs.

4    There then ensued a prolonged dispute between the Secretary and Mr Grabovsky over payment of the Secretary’s costs, culminating in the filing of the present interlocutory application.

The interlocutory application

5    By an interlocutory application dated 5 August 2015 and filed the next day, the Secretary seeks an order that costs be awarded in a lump sum of $8,500 instead of any taxed costs, pursuant to r 40.02(b) of the Federal Court Rules 2011 (Cth).

6    I ordered that the parties file written submissions and that the question be determined on the papers.

The evidence

7    The application was supported by an affidavit affirmed by Joseph Karl Edwards on 6 August 2015. Mr Edwards is a lawyer with the Australian Government Solicitor (“AGS”) who appeared for the Secretary at the hearing of the substantive application. The AGS took over the conduct of the proceeding from Sparke Helmore Lawyers on about 19 January 2015.

8    In the affidavit Mr Edwards set out the background to the dispute, which I summarised in the opening paragraphs of this judgment, and the history of the application upon which I adjudicated. Mr Edwards’ affidavit referred to the following relevant matters:

(1)    Mr Grabovsky filed the substantive application on 9 December 2014. It was accompanied by a number of documents:

(a)    a notice under s 78B of the Judiciary Act 1903 (Cth) in which allegations were made of violations of Chapter III of the Constitution by the primary judge and the Secretary; a breach of the rules of natural justice (for actual and apprehended bias); and fraudulent conduct on the part of the primary judge “induc[ing] and affect[ing]” his decision;

(b)    a draft notice of appeal containing 10 grounds and seeking constitutional writs and other orders, including leave to appeal to the High Court;

(c)    a 33 paragraph affidavit with four annexures (20 pages in toto).

(2)    There was a directions hearing on 6 February 2015 at which I made timetabling orders for the filing and service of submissions by both active parties and fixed Mr Grabovsky’s application for hearing.

(3)    On 27 February 2015 Mr Grabovsky served on the Secretary unfiled submissions.

(4)    On 9 March 2015 Mr Grabovsky served on the Secretary an “[a]pplication for orders about procedures” in which Mr Grabovsky applied for orders:

(a)    removing the Secretary as a party;

(b)    barring the AGS from representing any of the respondents;

(c)    requiring the AAT (which had filed a submitting appearance) to “stipulate its legal position”;

(d)    in the event that the AAT had no objection to Mr Grabovsky’s position:

(i)    setting aside the judgment of the primary judge;

(ii)    setting aside the orders of the AAT;

(iii)    ordering the AAT to vary its decision by remitting the matter to the Secretary with a direction to grant Mr Grabovsky’s claim for a disability support pension from the date of his original application; and

(iv)    issuing a circular or “any appropriate direction” “to preclude any further breach of Chapter III of the Constitution”, “prohibiting any further practice of representation of the arbitrating institution(s) (e.g. [the AAT]) by a Commonwealth officer (e.g. Secretary Social Services Department)”; and

(e)    in the event that the AAT did object to Mr Grabovsky’s position, requiring its legal representative “to stipulate those objections and to produce the Certificate of the reasonable prospect of success on or before … 10 March 2015”.

(5)    On 10 March 2015 the Secretary filed and served his submissions in relation to the substantive application.

(6)    On 17 March 2015 an oral hearing took place at which I heard arguments from both Mr Grabovsky and the Secretary in support of their respective positions.

(7)    On 20 March 2015 I dismissed Mr Grabovsky’s substantive application and ordered him to pay the Secretary’s costs.

9    The rest of the affidavit dealt with the dispute as to costs. The evidence, which was not contested, was to the following effect.

10    On 7 May 2015 Mr Edwards wrote to Mr Grabovsky advising him that the Secretary’s costs in the proceeding totalled approximately $16,000, the amount comprised professional costs only, and no disbursements were being claimed. The letter was marked “without prejudice save as to costs”. In order to avoid the additional expense and delay involved in having costs taxed, Mr Edwards invited Mr Grabovsky to pay $8,500 in full and final satisfaction of the costs order made in the Secretary’s favour (“the offer”). In determining the offer, Mr Edwards said that the Secretary had had regard only to party and party costs, that is “costs that were fairly and reasonably incurred by [the Secretary] in the conduct of the proceeding” and to Sch 3 to the Federal Court Rules, which sets out the costs allowable on taxation. The Secretary’s costs were itemised in a table as follows:

11    The offer was left open for 21 days. In the event that it was not accepted, Mr Edwards indicated that the AGS was instructed to proceed with the preparation of a formal bill of costs for taxation “incurring additional costs for which [Mr Grabovsky] may be liable”.

12    On 25 May 2015 Mr Grabovsky replied to Mr Edwards’ letter, declining the offer, and requesting that Mr Edwards provide a “formal itemized invoice generated by the Secretary that stipulates the whole amount (no discount) of asking costs” (original emphasis). He also requested that the invoice provide contact details of the person who authorised the litigation, as well as details of all legal practitioners, both in-house and external, their involvement in the matter, and the costs of the services they provided.

13    On 5 June 2015 Mr Edwards responded, advising that the Secretary did not propose to accede to either of Mr Grabovsky’s requests. As to the first request, Mr Edwards wrote that the Secretary had already provided him with a sufficiently detailed outline of the costs incurred and the costs sought. He reminded Mr Grabovsky that the costs were calculated having regard to Sch 3 of the Federal Court Rules. He said that the second request was misguided because the person who authorised the litigation was Mr Grabovsky himself. He noted that Mr Grabovsky was advised at an early stage of the proceeding that if he chose to press on and was unsuccessful the Secretary would pursue his costs. Even so, Mr Edwards indicated that the Secretary was prepared to renew his settlement offer. The offer was left open until 16 June 2015.

14    On 20 June 2015 — after the offer had lapsed — Mr Grabovsky replied, insisting that he be given details of the particular person who authorised the litigation on behalf of the Secretary. In substance, his point was that the Secretary had insinuated himself in a dispute between Mr Grabovsky and the AAT and then between Mr Grabovsky and the Court. According to Mr Grabovsky, the Secretary’s involvement ended with the AAT’s decision. He wrote (without alteration):

Though extremely convenient and being used for decades (I suppose) the conduct of the ATT and the Federal Court is/are in breach of the Constitution of Australia and involvement of the Secretary as the Respondent in a dispute between the Applicant and the ATT is unacceptable (by law).

Someone authorise you to act for the Secretary using/wasting public funds for purposes that are not corresponding with the law. You, personally, in turn refused to provide the Certificate of reasonable prospect of success which you are obliged to provide as a lawyer.

I changed (!) The Respondent from “the AAT” to “the Secretary” on insistence of the Secretary and being under duress from the Federal Court. The motives of such pressure are under investigation.

(Original emphasis.)

15    Mr Grabovsky then proposed a counter offer, the terms of which involved the AGS identifying the person or persons who authorised the litigation, the Secretary paying “the outstanding difference between my current payments and what I have to receive as a recipient of the Disability Support Pension from the date of the application and continue the payments at the current rate”, and compensation “in amount of the full invoice the Secretary intends to charge me — that is about $18,000 (according to your letter) …”. Mr Grabovsky enclosed a copy of a letter he had sent to the Minister for Health on 13 June 2015 alleging impropriety (ranging from misleading statements, to criminal negligence, to fraud and corruption) against her and others, including the United Protestant Association, the Fair Work Commission, the Australian Aged Care Quality Agency, the Aged Care Commissioner, WorkCover, and the primary judge, and claiming that a second Federal Court Judge (presumably me) “was trying to prevent [him from] obtaining leave to appeal to the High Court”. He went on to claim in the letter to the Minister (without alteration):

Not being able [also] to win the argument by legal means the judge ran out of the courtroom (literary) and delivered her verdict five days later from Brisbane through a video link. All this time the Court was acting for and on behalf of the Secretary and was allowing parties unrelated to the dispute to interfere with the proceedings …

16    On 16 October 2015 Mr Grabovsky filed an affidavit of his own. The affidavit began with a “disclaimer”, which reads (without alteration):

I named the Secretary of the Department of Social Services as the First Respondent under duress. I am strenuously protesting the inclusion of the Secretary and its legal representative as the Respondent to the proceedings.

17    The affidavit mostly consisted of submissions, rather than evidence. Mr Grabovsky accepted that he had been sent the letters of offer, continued to protest that he should receive a formal invoice, and expressed suspicion about the motives of the Secretary when in the 7 May letter he was told that if he did not accept the offer the AGS would proceed with the preparation of a formal bill of costs and yet now the Secretary was refusing to provide one.

18    Mr Grabovsky asserted that all costs claimed by the Secretary should be disallowed on the following grounds:

(1)    the interlocutory application was misconceived;

(2)    the ground upon which the interlocutory application was based was not applicable to him;

(3)    costs have been incurred due to the misconduct of the AGS;

(4)    the Department “is not the party to the proceedings”;

(5)    “the AGS failed to reveal a valid defence” to his application for an extension of time, the Secretary’s defence was bound to fail, and that is why the AGS never produced “a certificate of reasonable prospects of success”;

(6)    participation of the AGS as the legal representative of the Secretary is prejudicial to him; and

(7)    the costs were “improperly, unreasonably and negligently incurred”.

19    In support of the first ground, Mr Grabovsky contended that the interlocutory application was misconceived because the AGS is not entitled to bill him directly; the AGS was representing the Department, not him, and therefore it is the Department who is responsible for the payment of the AGS’s costs. He stated that the proper course is for the AGS to present its bill to the Department, for the Department to add its costs and to produce a combined itemised invoice, and, if upon presentation of the invoice to him, he refuses to pay, then the AGS might be instructed by the Department to take further action. He submitted that the AGS may not take action of its own initiative.

20    In support of the second ground, Mr Grabovsky contended that the AGS was not entitled to its costs because it was not a party to the proceeding.

21    In support of the third ground, Mr Grabovsky relied on the AGS’s failure to file a certificate under Div 10 of the Legal Profession Act 2004 (NSW) “stipulating grounds based on provable facts for the reasonable prospect of success” (original emphasis) and that, in making submissions and filing documents, the AGS “violated” ss 345 and 347 of that Act.

22    The fourth and fifth grounds raise matters that were agitated in the principal application.

23    The sixth ground complains that, once the s 78B notice was issued, the Attorney-General’s office appointed the AGS to represent the Attorney-General in the proceedings when, according to Mr Grabovsky, the Attorney-General is supposed to act as an arbitrator if the appeal is allowed. Mr Grabovsky contended that this constituted a conflict of interest and that by continuing to represent the Secretary and the Attorney-General the AGS “indicates their knowledge that the extension of time and subsequent appeal will not be allowed and therefore there would be no conflict of interest”. This, he submitted, was very prejudicial to him.

24    The final ground was said to be obvious based on the earlier grounds.

The applicant’s submissions

25    Mr Grabovsky’s submissions were largely irrelevant. They were also inflammatory. Notwithstanding that I had decided that his proposed appeal was doomed to fail and he had not applied for special leave to appeal it, he complained that the judgment of the primary judge was “a travesty of justice”. He submitted that the Department recklessly wasted tens of thousands of taxpayer dollars and that this is one of the reasons he insists on “the full itemised invoice”. He also made wild, unsubstantiated allegations of wrongdoing on the part of the AGS and the Department (with respect to this proceeding and unrelated proceedings involving his wife). In the submissions he revived the argument he had put to the primary judge and on the substantive application that the Secretary is not a proper party to the proceeding — an argument I held the primary judge had correctly rejected — and appears to attribute bad faith to the Secretary and his legal advisors merely because they, too, considered that the Secretary should be named as a party. He claimed that the Department was trying to harm him.

The applicant’s application

26    Mr Grabovsky concluded his submissions with a request that the orders I made in March this year be set aside because of the Department’s misconduct and, in the alternative, a stay, although he stated he had no intention of making an application to the High Court for an extension of time to appeal. In addition, he asked the Court to disallow the whole of the costs as between the AGS and the Department pursuant to rr 40.07(1)(a) and 40.07(2)(b)(i) of the Federal Court Rules “due to misconduct of the Australian Government Solicitors”. It is convenient to deal with that application at this point.

27    Rule 40.07 relevantly states:

(1)    A party who has reasonable cause to believe that additional costs have been incurred because of the party’s lawyers’ misconduct, may apply to the Court for an order:

(a)    that the whole or part of the costs as between the lawyer and the party be disallowed;

…

(2)    For this rule, a lawyer has engaged in misconduct if:

…

(b)    the lawyer:

(i)    incurs costs improperly or without reasonable cause;

…

28    Mr Grabovsky did not file an interlocutory application seeking the orders he asked for in his written submissions, nor did he ask for an order that the rules which require such an application to be filed be dispensed with. On that basis alone his application should be dismissed.

29    In any event, the application should be dismissed for the following reasons.

30    First, Mr Grabovsky did not identify the Departmental officer or the lawyer in question. While two lawyers were named in the draft notice of appeal filed with Mr Grabovsky’s application for an extension of time to appeal, Mr Grabovsky has never filed any evidence to suggest misconduct on the part of either of them.

31    Secondly, the fact that the AGS did not file a certificate under Div 10 of the Legal Profession Act (which I note, for completeness, has since been repealed and replaced by the Legal Profession Uniform Law Application Act 2014 (Cth)) does not amount to misconduct. As I explained in Grabovsky No 1 at [50]-[52], these provisions only applied to actions for damages and appeals in such actions. Neither the appeal from the AAT nor the substantive application is an action for damages or an appeal in such an action. To the extent that Mr Grabovsky is reviving the allegations that he made against the Secretary in the principal proceeding, I disposed of them in Grabovsky No 1 at [37]-[56].

32    Thirdly, the letters from Mr Edwards made clear that the AGS was writing to Mr Grabovsky on behalf of the Secretary. The AGS is the Secretary’s agent in the litigation. There is no reason to conclude that it did not have the Secretary’s authority to write to Mr Grabovsky or to doubt that at all relevant times it was acting on the Secretary’s instructions.

33    Fourthly, the proposition that the only proper respondent was the AAT is (and always has been) baseless. As the primary judge observed at [26] of his reasons, because the Secretary was the original decision-maker, he was the proper party to defend the proceeding. As I pointed out in Grabovsky No 1 at [61], for the reasons given by the High Court in R v Australian Broadcasting Tribunal; Ex parte Hardiman (1980) 144 CLR 13 at 35-36, it is generally inappropriate for the AAT to appear in court to defend its own decisions. Furthermore, Mr Grabovsky was seeking orders against the Secretary. In these circumstances, the Secretary was not only a proper party, he was a necessary party.

34    Fifthly, the submission that the AGS failed to reveal a valid defence also seeks to revive arguments I dismissed in Grabovsky No 1 and to re-agitate the substantive application;

35    Sixthly, there is no conflict of interest in the representation of the Secretary by the AGS and no prejudice to Mr Grabovsky. The Attorney-General did not appear in these proceedings and there is no evidence that the Attorney-General ever engaged the AGS to represent him in the proceedings. Ground 6 appears to be based on a misunderstanding of Mr Edwards’ evidence.

36    Finally, there is no evidence that costs have been improperly, unreasonably or negligently incurred and no basis to set aside judgment on the substantive application.

Should the Court make an order under r 40.02(b)?

37    Rule 40.02(b) of the Federal Court Rules states that a party or person who is entitled to costs may apply to the Court for an order that costs awarded in their favour be awarded in a lump sum, instead of, or in addition to, any taxed costs.

38    Section 37M(3) of the Federal Court of Australia Act 1976 (Cth) (“Federal Court Act”) relevantly provides that the civil procedure provisions of the Act and Rules must be interpreted and applied, and any power conferred by them exercised, in the way that best promotes their overarching purpose. That purpose is set out in s 37M(1), which states that:

The overarching purpose of the civil practice and procedure provisions [defined in subs (4) to include the Act and Rules] is to facilitate the just resolution of disputes:

(a)    according to law; and

(b)    as quickly, inexpensively and efficiently as possible.

39    The overarching purpose includes the following objectives:

(a)    the just determination of all proceedings before the Court;

(b)    the efficient use of the judicial and administrative resources available for the purposes of the Court;

(c)    the efficient disposal of the Court’s overall caseload;

(d)    the disposal of all proceedings in a timely manner;

(e)    the resolution of disputes at a cost that is proportionate to the importance and complexity of the matters in dispute.

See s 31M(2).

40    Without doubt, and perhaps with the benefit of hindsight, the best way to have promoted the overarching purpose of the civil procedure provisions of the Act and Rules would have been for the Secretary to have sought a lump sum costs order at the time judgment was handed down. Had the Secretary foreshadowed in his written submissions or in oral argument that, if he were successful, he would seek an order of this kind, the application could have been dealt with at the time of judgment and saved the parties and the Court the time and effort involved in dealing with the present application. Nevertheless, Mr Grabovsky did not complain about the delay and, based on all the evidence before me, I am satisfied that it would unnecessarily prolong the costs dispute and it would be inefficient and productive of unnecessary expense to require the Secretary to prepare an itemised bill for taxation. Having regard to the information in the table contained in the letter from the AGS to Mr Grabovsky dated 7 May 2015, extracted above at [10], which is consistent with the way the AGS presented its case, I am satisfied that, if costs were to be taxed the Secretary’s bill would be likely to exceed the amount claimed.

41    As Mr Edwards submitted in his affidavit, the Secretary is seeking to recover only party and party costs and only a portion of those. The fact, for example, that Mr Grabovsky raised constitutional issues in the substantive application meant that the Secretary incurred additional costs in consulting with lawyers from the Constitutional Litigation Unit of the AGS but those additional costs have not been included in the lump sum sought. Nor does that sum include the costs associated with the futile attempts to reach agreement with Mr Grabovsky in relation to costs. What is more, the Secretary has not asked that Mr Grabovsky pay the costs of this application.

42    In all the circumstances, not only would it promote the overarching purpose of the civil procedure provisions of the Federal Court Act and Rules to make the order the Secretary seeks, it is in Mr Grabovsky’s interests that the order be made. It seems to me to be highly likely, if not inevitable, that if I were not to make the order the Secretary seeks the costs that Mr Grabovsky would have to pay would exceed by a not insignificant margin the $8,500 the Secretary asks for.

Conclusion

43    For the foregoing reasons, the order sought in the Secretary’s interlocutory application should be made.

Associate:

Dated:    16 November 2015