FEDERAL COURT OF AUSTRALIA

Ringshaug v Comcare (No 2) [2017] FCA 349

ORDERS

THE COURT ORDERS THAT:

1.    Ms Ringshaug pay Comcare its costs of the application in this Court:

(a)    before 11.00 am on 22 April 2016, on a party and party basis; and

(b)    after 11.00 am on 22 April 2016, on an indemnity basis.

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

REASONS FOR JUDGMENT

BROMWICH J:

1    On 3 February 2017, the applicant, Ms Ringshaug, failed in her appeal on questions of law under s 44(1) of the Administrative Appeals Tribunal Act 1975 (Cth), in relation to a decision of the Administrative Appeals Tribunal to affirm determinations of the respondent, Comcare: Ringshaug v Comcare [2017] FCA 48. Ms Ringshaug, while accepting that in the ordinary course she would be ordered to pay Comcare’s costs, contended that in the particular circumstances of this appeal the appropriate costs order would be that each party bear its own costs. Comcare disagreed, not only seeking costs, but in part seeking indemnity costs. The parties each provided written submissions and this adjudication has taken place on the papers without either party seeking an oral hearing.

2    The reasons for dismissing the appeal to this Court provide the background for this determination, and in particular the context for consideration of the issues raised by Ms Ringshaug in seeking to resist costs orders in Comcare’s favour. That background includes the timing, relevance and impact of the Full Court’s decision in Martin v Comcare [2015] FCAFC 169; (2015) 238 FCR 373 by which Ms Martin’s appeal succeeded; the successful application for special leave to appeal by Comcare in Comcare v Martin [2016] HCATrans 116 in which the Tribunal’s decision in this matter was raised; and the subsequent successful appeal by Comcare in Comcare v Martin [2016] HCA 43; (2016) 339 ALR 1. The following short chronology assists to understand the arguments set out below.

Whether costs should follow the event

3    Ms Ringshaug asserts that because the Full Court’s decision in Martin v Comcare was only handed down shortly before this matter was heard by the Tribunal, this had an impact on the manner in which she was required to conduct the hearing both in the Tribunal and in this Court. Comcare contests that characterisation and submits that the decision of the Full Court could not have had the impact asserted. Comcare contends that the timing of the Full Court’s decision and the alleged impact that this decision may have had on her forensic decisions in conducting her case before the Tribunal could not have been relevant to her decision to commence and continue her appeal in this Court. That must be correct because, having regard to the chronology above, the Full Court’s decision could only have affected the very last stages of preparation for the Tribunal proceedings, that is, between 30 November 2015 and 7 December 2015.

4    Comcare also points out that the timing of the decision of the Full Court could not have materially affected the manner in which she conducted her case in this Court because the decision of the Full Court was delivered on 30 November 2015, the decision of the Tribunal in this case was made on 18 February 2016 and her appeal from the Tribunal’s decision took place thereafter, having been filed on 17 March 2016. Again, Comcare’s characterisation of that sequence of events is correct. Accordingly the timing of the Full Court’s decision in Martin v Comcare does not afford any reason for not awarding Comcare its costs.

5    Ms Ringshaug next asserts that at the time she conducted her hearing in the Tribunal, at the time that the Tribunal’s decision was published, and at the time she commenced her appeal, she was unaware that Comcare had sought special leave to appeal from the Full Court’s decision in Martin v Comcare. She contends that she could only have known that Comcare had sought special leave to appeal when special leave was granted on 16 May 2016. Comcare submits that whether or not it had sought special leave to appeal the Full Court’s decision was irrelevant, the possibility of that taking place was always open, and it was always open to Ms Ringshaug, through her legal advisers, to make enquiries as to whether a special leave application had been, or was going to be, filed. Further, the fact of Comcare applying for special leave to appeal was hardly surprising on the face of the Full Court’s decision and reasons in Martin v Comcare, given the obvious impact of the more limited interpretation given to the scope of the exclusion from “reasonable administrative action” given by the Full Court (a matter directly relevant to Ms Ringshaug’s case), and also that it was a majority decision. Comcare is therefore correct in its contention that the fact of Comcare seeking special leave to appeal from Martin v Comcare and the fact that Ms Ringshaug apparently was not specifically aware of that taking place has no material bearing on the question of costs.

6    As to the impact of the High Court’s post-trial decision in Comcare v Martin, Ms Ringshaug asserts that she was entitled to, and did, rely on the state of the law as it stood at the time of the Tribunal hearing and at the time of lodging and arguing the appeal in this Court, rather than the law as later stated by the High Court. Comcare contends that these submissions lacked substance because Ms Ringshaug’s appeal was destined to fail when it was instituted. That was said to be so because the Tribunal was correct to reject her claim even on the narrower test of causation formulated by the Full Court in Martin v Comcare and, in any event, the concession made on her behalf at the hearing before the Tribunal meant that failure in her “first action” would lead inevitably to failure in her “second action”. Comcare’s submissions on this issue are to be preferred to those made on behalf of Ms Ringshaug. That is because the application of the law according to the Full Court in Martin v Comcare did not support her case either before the Tribunal or before this Court on appeal; her appeal would still have been dismissed if the High Court had refused special leave to appeal, or had dismissed Comcare’s appeal. Accordingly the subsequent High Court decision did not make a material difference to her poor prospects of success, albeit that the High Court decision put that position beyond any residual doubt.

7    In relation to her response to the High Court decision once handed down, Ms Ringshaug asserts that she promptly and appropriately submitted that her core argument in the appeal in this Court, which relied upon the Full Court’s decision in Martin v Comcare, must fail. In those circumstances, it was submitted that it would be unfair to her and would impose great financial hardship on her if she was ordered to pay the Commonwealth’s costs in circumstances where there was a significant change in the legal position with respect to her claim after she lodged and argued her appeal but before the High Court’s decision was handed down. She relied upon an application to waive the appeal filing fee supported by a statutory declaration to demonstrate her limited financial means.

8    Comcare again asserts these are irrelevant matters because the prospect of obtaining an adverse costs order is a risk of which Ms Ringshaug ought to have been aware before instructing her legal representatives to institute the appeal in this Court and, at the very least, her legal representatives ought to have made her aware of that risk. Comcare submitted that a fatal flaw in her argument is that the asserted significant change in the legal position with respect to her claim was of no real moment because her appeal was destined to fail when it was instituted. Comcare submitted that there was no reason why it, and through it the Australian taxpayer, should have to bear the costs of an appeal that was unmeritorious in the first place. Further, Comcare submitted that Ms Ringshaug’s concession in relation to her core argument failing following the High Court’s decision did not assist as Ms Ringshaug had still called on this Court to adjudicate upon her appeal (necessarily causing the incurring of costs associated with that course) rather than seeking to withdraw it.

9    Comcare’s submissions should be accepted. Despite the High Court’s decision resulting in any residual arguments being largely futile, Ms Ringshaug still required this Court to adjudicate upon her appeal rather than abandoning it. It would be contrary to principle that somehow an impecunious litigant has a greater license to bring and maintain an unmeritorious appeal than another litigant not in that position. Neither Ms Ringshaug’s stance on the High Court’s decision, nor her financial circumstances afford any proper reason for costs not to follow the event.

10    None of the reasons above advanced on behalf of Ms Ringshaug warrant a departure from the usual practice that costs follow the event. The remaining question is whether costs should be awarded on the usual basis, or in part upon an indemnity basis as sought by Comcare.

Whether indemnity costs should be awarded

11    Comcare submitted that it would be appropriate to order that Ms Ringshaug pay its costs of the application in this Court:

(1)    before 11.00 am on 22 April 2016, on a party and party basis; and

(2)    after 11.00 am on 22 April 2016, on an indemnity basis.

12    Annexed to Comcare’s submissions in chief on costs were copies of two parallel settlement offers made in writing and sent by email on 20 April 2016. The offers were made both by way of a formal offer to compromise under Part 25 of the Federal Court Rules 2011 (Cth) and by way of a Calderbank offer (made in accordance with Calderbank v Calderbank [1975] 3 All ER 333). The substance of each offer was that the application in this Court be dismissed and the parties bear their own costs. Both offers were expressed to be open for a period of 14 days (either from the date of the Calderbank offer or after the date of service for the offer to compromise). Both offers warned of the consequences of not accepting the offer made. No issue was taken by Ms Ringshaug as to the form in which either offer was made or placed before this Court.

13    On 12 May 2016, both offers were rejected and a counter offer made by Ms Ringshaug that:

(1)    the appeal in this Court be dismissed by consent;

(2)    each party bear its own costs of the appeal in this Court;

(3)    Comcare agree to issue a determination under the existing physical injuries claim to reimburse Ms Ringshaug for outstanding medical expenses in accordance with an enclosed schedule of out-of-pocket expenses; and

(4)    Comcare agree to pay 50% of Ms Ringshaug’s legal costs plus disbursements of the Tribunal proceedings being an amount in the sum of $32,055.97.

14    The counter offer was made in accordance with Calderbank v Calderbank and stated on its face that if the offer was not accepted and the appeal was allowed, or Ms Ringshaug otherwise achieved an outcome materially better than the terms of the counter offer, the counter offer would be relied upon in support of an order that Comcare pay her legal costs on an indemnity or solicitor/own client basis from that date.

15    On 5 July 2016, Comcare emailed a reiteration of the earlier offers leaving them open until 19 July 2016. This was not a formal reissuing of the prior offers, but rather an extension of time in which to accept the prior offers. Comcare placed primary reliance upon the original 20 April 2016 offers. Comcare’s email pointed out that as the Tribunal had amended the errors in its decision it was considered that Ms Ringshaug’s appeal had no prospect of success whatsoever and also warned that if the renewed offers were rejected and Comcare succeeded in the appeal it was likely to seek an order that she pay Comcare’s costs on an indemnity basis. The renewed offers were apparently not responded to.

Rules and principles on indemnity costs

16    The offers made by Comcare referred to:

(1)    r 25.14 of the Federal Court Rules;

(2)    Calderbank v Calderbank; and

(3)    the observations of Buchanan J in Dye v Commonwealth Securities Limited (No 2) [2012] FCA 407 (Dye (No 2)) at [7].

17    Rule 25.14 of the Federal Court Rules provides as follows (notes omitted), with reliance being placed on r 25.14(2) consequent upon Ms Ringshaug’s application being dismissed:

Costs where offer not accepted

(1)    If an offer is made by a respondent and not accepted by an applicant, and the applicant obtains a judgment that is less favourable than the terms of the offer:

(a)    the applicant is not entitled to any costs after 11.00 am on the second business day after the offer was served; and

(b)    the respondent is entitled to an order that the applicant pay the respondent’s costs after that time on an indemnity basis.

(2)    If an offer is made by a respondent and an applicant unreasonably fails to accept the offer and the applicant’s proceeding is dismissed, the respondent is entitled to an order that the applicant pay the respondent’s costs:

(a)    before 11.00 am on the second business day after the offer was served—on a party and party basis; and

(b)    after the time mentioned in paragraph (a)—on an indemnity basis.

(3)    If an offer is made by an applicant and not accepted by a respondent, and the applicant obtains a judgment that is more favourable than the terms of the offer, the applicant is entitled to an order that the respondent pay the applicant’s costs:

(a)    before 11.00 am on the second business day after the offer was served—on a party and party basis; and

(b)    after the time mentioned in paragraph (a)—on an indemnity basis.

18    In Dye (No 2), an offer to compromise proceedings involved offering to relieve another party of potential exposure to a substantial costs order. Comcare noted that this can also be described as a “walk away” offer. Buchanan J in Dye (No 2) observed:

6    The offer of compromise made on 20 March 2009 erects a presumptive right to indemnity costs under the Federal Court Rules as they stood at the time the proceedings were commenced and the time that the offer of compromise was made, and as they stand now (see r 25.14 of the Federal Court Rules 2011). There would be no reason to deny the respondents the benefit of this presumption in the present case.

7    The Calderbank letters would also provide a sufficient foundation for an award of indemnity costs, were it necessary to rely upon them. In appropriate circumstances an offer to compromise proceedings by relieving another party of potential exposure to a substantial costs order might serve as a sufficient justification for an order for indemnity costs if the offer was refused. In my view it would do so in the present case. The defects and difficulties in the applicant’s case were pointed out in each of the Calderbank letters. Pursuit of the proceedings and rejection of the offers in order to place before the Court what I found to be a false version of the relevant events was, in my view, clearly unreasonable and unjustified.

8    As the respondents are entitled to their costs on an indemnity basis on the first foundation they rely upon, no further specific attention need be given to the alternative bases on which indemnity costs were sought, although each would, if necessary, have provided an independent foundation for such an order from the relevant dates identified above.

19    If r 25.14(2) is properly triggered, the application of that rule by its terms will lead to an order for indemnity costs unless an order is made that is inconsistent with that rule. The power to do so is in r 1.35, which provides as follows:

1.35    Orders inconsistent with Rules

The Court may make an order that is inconsistent with these Rules and in that event the order will prevail.

20    The operation of r 1.35 of the Federal Court Rules to relieve a party from the ordinary effect of an offer to compromise was considered in Sydney Equine Coaches Pty Ltd v Gorst [2017] FCAFC 34. In particular, the following observations were made at [19], emphasising the presumptive nature of the entitlement to indemnity costs if an offer is not accepted:

The provisions of r 1.35 are remedial in character. They, like r 1.34, enable the Court to make an order that is inconsistent with the Rules. The purpose of the broad power in a provision such as r 1.35 is to relieve against injustice: FAI 165 CLR at 283. Parties can expect that r 25.14(1) provides for the costs consequences that in the ordinary course of litigation will flow from the non-acceptance of an offer of compromise made under Pt 25 of the Rules where the offeree obtains a less favourable result than the one made in the offer. Nonetheless, the purpose of r 1.35 is to allow the Court to make an order that is inconsistent with what r 25.14 prescribes would otherwise occur, so as both to meet the justice of the case or to prevent injustice and to give effect to the Court’s broad discretion to make orders for costs conferred in s 43(2) of the Federal Court Act.

Consideration on indemnity costs

21    In resisting an indemnity costs order, Ms Ringshaug asserted that her decision to reject Comcare’s offer and make a counter offer was reasonable because at that time the Tribunal’s decision contained clear errors which must have been conceded to be so because those errors were corrected at Comcare’s instigation. Ms Ringshaug submitted those corrections had the effect of addressing some of her grounds of appeal by rendering those errors benign and undermining her prospects of success in the appeal. Ms Ringshaug submitted that it was relevant that the errors were “real” and present in the Tribunal’s decision at the time her appeal was commenced. Comcare characterised the Tribunal’s errors as “obvious” and “immaterial”. Comcare’s characterisation should be accepted because those errors would not have produced any different result had they not been corrected. Moreover, the ground of appeal that depended upon those errors was not formally abandoned until the hearing of the appeal, even if that may have been seen as inevitable.

22    Comcare was entitled to rely upon its 20 April 2016 offer to compromise, although I most likely would also have found in its favour upon the basis of the Calderbank offer had that been necessary. In reaching this conclusion, it is plain that the basis upon which Ms Ringshaug’s case failed in the Tribunal meant that even if the High Court had refused special leave from the Full Court decision in Martin v Comcare, or had dismissed Comcare’s appeal, and even if the Tribunal had not corrected the errors in its decision, the appeal in this Court would have failed and the application would have been dismissed. In all the circumstances, it was unreasonable for Ms Ringshaug to refuse the 20 April 2016 offer to compromise. There is no reason, let alone any compelling reason, for the terms of r 25.14(2) to be departed from pursuant to r 1.35.

23    Having found that Comcare was entitled to rely upon its 20 April 2016 offer to compromise, no consideration of Ms Ringshaug’s submissions about the form of the reiterated offer made by Comcare on 5 July 2016 is required.

Conclusion

24    Ms Ringshaug must pay Comcare’s costs of the application in this Court:

(1)    before 11.00 am on 22 April 2016, on a party and party basis; and

(2)    after 11.00 am on 22 April 2016, on an indemnity basis.

Associate:

Dated:    4 April 2017