FEDERAL COURT OF AUSTRALIA

Comcare v Stewart (No 2) [2019] FCA 564

ORDERS

THE COURT ORDERS THAT:

1.    Subject to order 2, the applicant pay the respondent’s costs, as agreed or assessed.

2.    The applicant pay the respondent’s costs of meeting its application for a different costs order on an indemnity basis, that is, except in so far as those costs are of an unreasonable amount or unreasonably incurred.

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

REASONS FOR JUDGMENT

ROBERTSON J:

1    These reasons deal with costs. They are to be read with the reasons on the substantive application: Comcare v Stewart [2019] FCA 365. By orders made on 21 March 2019, I dismissed Comcare’s application for review of the decision of the Administrative Appeals Tribunal that the reviewable decision dated 15 June 2016 denying liability to compensate Mr Stewart in respect of adjustment reaction with anxious mood be set aside and, in substitution, that Comcare was liable to compensate Mr Stewart in accordance with s 14 of the Safety, Rehabilitation and Compensation Act 1988 (Cth) in respect of the injury, being adjustment disorder with anxious mood, suffered by him on 15 January 2016.

2    The orders I then made were as follows:

 1.    The application is dismissed.

2.    Subject to order 3, the applicant is to pay the respondent’s costs, as agreed or assessed.

3.    If either party wishes to contend for a costs order different to the order proposed in order 2, they notify my associate and the other party within 5 business days of the date of these orders and thereafter a timetable to determine that issue will be set.

3    On 28 March 2019, Comcare notified my associate that it wished to contend for a different costs order from order 2.

4    Comcare now submits that the appropriate costs order is not that it should pay the respondent’s costs as agreed or taxed, but as follows:

1.    Comcare pay Mr Stewart’s costs incurred from 1 November 2018 to 16 November 2018, as agreed or assessed.

2.    Mr Stewart pay Comcare’s costs incurred from 16 November 2018, as agreed or assessed.

3.    In the alternative to 2 above, each party bear its or his own costs from 16 November 2018.

5    The significance of 16 November 2018 is that it was the day on which an “offer” made by Comcare ceased to be open for acceptance.

6    Mr Stewart, for his part, resisted the costs orders sought by Comcare and submitted that the appropriate order was that Comcare pay his costs as agreed or assessed and that Comcare pay his costs of responding to Comcare’s submissions in relation to costs on an indemnity basis.

7    Comcare relied on an affidavit of Ms Katherine Ellen Watson, solicitor, affirmed 9 April 2019 which annexed correspondence and some pages of transcript. The relevant “offer” was dated 8 November 2018 and was in the following terms:

1.    The Federal Court makes orders as follows.

  a.    The appeal be allowed.

  b.    The decision of the Administrative Appeals Tribunal be set aside.

c.    The matter be remitted to the Tribunal for reconsideration according to law.

d.    Comcare is to pay Mr Stewart’s reasonable costs of the appeal, to be agreed or taxed.

2.    The “notes” justifying the making of those orders by the Federal Court, filed in accordance with practice note GPN-TRIB, will specify the following matters.

a.    The Tribunal erred in law by concluding that the meeting that Mr Stewart attended on 15 January 2016 (the meeting) was not, or did not include, “administrative action ... in respect of” his employment.

i.    The Tribunal impermissibly limited its consideration of that issue to the “primary focus” of the meeting. That distracted the Tribunal from evaluating whether the meeting actually was, or included, “administrative action ... in respect of” Mr Stewart’s employment.

ii.     However, on the findings of fact that it made, the Tribunal should have concluded that the meeting was, or included, “administrative action ... in respect of” Mr Stewart’s employment: Comcare v Drinkwater (2018) 158 ALD 244 (Kenny, Flick and Perry JJ); Drenth v Comcare (2012) 128 ALD 1 (Rares, McKerracher and Murphy JJ); Commonwealth Bank of Australia v Reeve (2012) 199 FCR 463 (Gray J, Rares and Tracey JJ).

b.    The Tribunal erred in law by concluding that the meeting was not “reasonable” administrative action in respect of Mr Stewart’s employment.

i.    The Tribunal impermissibly limited its consideration of that issue to the non­exhaustive list of examples set out at s 5A(2) of the Safety, Rehabilitation and Compensation Act 1988 (Cth) (the SRC Act).

ii.    The Tribunal should have considered more broadly whether the meeting was “reasonable” for the purpose of s 5A(1) of the SRC Act.

iii.    It is therefore necessary to set aside the decision and remit the matter to the Tribunal to consider whether the meeting was “reasonable”.

c.    The Tribunal erred in law in concluding that the meeting was not taken, or did not occur, in a “reasonable manner”.

i.    The Tribunal impermissibly evaluated that issue by reference to the judgment in Wiegand v Comcare (2002) 72 ALD 795 at [31] (von Doussa J), which discusses the test for a “disease” under s 5B of the SRC Act rather than the administrative action exclusion from the definition of “injury” in s 5A(1) and (2) of the SRC Act.

ii.    It is therefore necessary to set aside the decision and remit the matter to the Tribunal to consider whether the meeting occurred in a “reasonable manner”. The judgment required by the Tribunal in that connection is whether the meeting occurred in a “reasonable manner”, not whether it could have occurred “more reasonably”: Comcare v Martinez (No 2) (2013) 212 FCR 272 (Robertson J).

3.    On remitter to the Tribunal, Mr Stewart and Comcare will enter into the following consent terms of agreement under s 42C of the Administrative Appeals Tribunal Act 1975 (Cth).

  a.    The decision under review is set aside.

b.    In substitution, it is decided that Comcare is liable to pay compensation to Mr Stewart in respect of an “adjustment disorder with anxious mood” sustained on 15 January 2016 under s 14 of the SRC Act.

c.    Comcare is to pay Mr Stewart's reasonable costs and disbursements in accordance with the relevant practice direction, to be agreed or taxed.

  d.    The usual notations.

8    The covering email said that “Comcare is not open to any negotiations in relation to the offer.”

9    Comcare submitted that it substantially succeeded in respect of nearly all of the issues that it put before the Court. It submitted that Mr Stewart unreasonably rejected Comcare’s offer of settlement and engaged another disentitling conduct. As I understood it, the disentitling conduct was said to be that, although he accepted that Wiegand was not concerned with the application of the exclusion in s 5A of the Safety, Rehabilitation and Compensation Act before this Court, Mr Stewart relied on Wiegand in that context before the Tribunal. Mr Stewart was also said to have persuaded the Tribunal into the error of evaluating the meeting by reference to its purpose, and otherwise as set out in its reasons at [52]-[53]. But he did not maintain that position before the Court.

10    Comcare submitted that it was well accepted that in exercising the discretion to award costs under s 43(2) of the Federal Court of Australia Act 1976 (Cth), the Court may have regard to the issues in respect of which each of the parties has been successful and apportion costs in that way. Comcare also referred to ss 37M and 37N of the Federal Court of Australia Act.

11    In this case, Comcare submitted, its offer would have given Mr Stewart his claim and his costs both before the Court and the Tribunal and although the formal mechanism by which that outcome was to be achieved had not been realised, Mr Stewart was in no better position than he would have been had he accepted Comcare’s offer. In fact, Comcare submitted, Mr Stewart was in a worse position because he ultimately did not get his costs before the Tribunal: this Court did not have jurisdiction to order those costs in the present case. Comcare offered Mr Stewart everything that he could have hoped to achieve in respect of his claim, plus his costs before the Court and in the Tribunal, in return for merely agreeing to the contents of a “note” explaining that certain legal errors were made by the Tribunal. Those legal errors were either substantially accepted by the Court or not ultimately contested by Mr Stewart.

12    In the circumstances, Comcare submitted, Mr Stewart’s conduct in rejecting Comcare’s offer must be regarded as unreasonable. Further, Comcare submitted, it would not have needed to appeal the Tribunal’s decision in the first place had Mr Stewart not relied on Wiegand or contended that the meeting was “operational” rather than “administrative action” before the Tribunal, only to abandon or not press that stance before this Court.

13    Mr Stewart relied on an affidavit of Mr William John Gerard McCarthy, solicitor, sworn 15 April 2018. It annexed email correspondence dated 1 March 2019 and 28 March 2019. In the earlier email, the solicitors for Mr Stewart wrote that a real difficulty with the offer made in November 2018 was that the resolution contained in that offer could not be implemented unless the Federal Court agreed that the Tribunal’s decision contained a vitiating error of law and should therefore be set aside.

14    The normal procedure in such a case, the email continued, was that the parties agreed on a joint memorandum to the Federal Court pointing out the ground on which the Tribunal’s decision should be set aside, and that ground must amount to a consequential error of law. The parties could not simply agree that there was an error of law. The Federal Court had to be persuaded of an error of law and that the error was consequential. Mr Stewart could not see that the errors raised in the notice of appeal, to the extent that they were errors of law, were consequential, that is, were such as to vitiate the Tribunal’s decision. That was a critical reason why he was unwilling to accept Comcare’s offer.

15    The later email of 28 March 2019 was to the effect that given Comcare did not obtain a judgment that was more favourable than its offer, but obtained a judgment that was less favourable, the solicitors for Mr Stewart could not understand why Comcare would want to persist with the foreshadowed application for a different costs order. The email said that if Comcare did make that application and failed, Mr Stewart would ask for an order that Comcare pay the respondent’s costs of answering the costs application on an indemnity basis.

16    Mr Stewart submitted that the matters advanced by Comcare did not justify departure from the standard costs order, that Comcare pay Mr Stewart’s costs. He submitted that he was now in no worse position than he if he had accepted Comcare’s offer of settlement. The offer was empty – the “settlement” could not be delivered by Comcare. The note asserted errors of law that the Court found provided no ground for setting aside the Tribunal’s decision. Mr Stewart submitted that the contention that Mr Stewart was in some way responsible for the Tribunal’s errors went nowhere because those errors either did not occur at all or were inconsequential. Comcare’s appeal to the Court could only be justified by an error of law on the part of the Tribunal that affected the Tribunal’s decision, not by the conduct of Mr Stewart’s case in the Tribunal. Mr Stewart submitted that Comcare’s submissions reflected a misreading of the Court’s reasons. It was wrong of Comcare to assert that the legal errors in the note were substantially accepted by the Court or not contested by Mr Stewart. Mr Stewart submitted he had not lost the opportunity to ask the Tribunal to award him costs.

17    Mr Stewart sought an order that Comcare pay his costs of responding to the current application on an indemnity basis, as foreshadowed in the email to Comcare’s solicitors on 28 March 2019. Properly advised, he submitted, Comcare should have known that none of the matters advanced in its submissions justified denying Mr Stewart the normal costs order.

Consideration

18    It is not in dispute that the Court has a broad discretion under s 43(2) of the Federal Court of Australia Act 1976 (Cth). In some cases it is appropriate to assess costs by reference to issues.

19    In my opinion, there is no reason at all to make the costs orders for which Comcare contends. The appropriate order is that Comcare pay the respondent’s costs, as agreed or assessed.

20    Principally this is for two reasons.

21    The first reason is that, in my assessment, there were no relevantly separate issues. The decision of the Tribunal would only be set aside on a question of law, which was the basis of Comcare’s application to this Court, if there were a vitiating error of law. Comcare failed in its appeal.

22    To have the decision of the Tribunal set aside, which was the relief claimed, Comcare needed to succeed either on all three of the issues of law which it raised or at least on its argument that what the Tribunal said about administrative action infected what it said about whether that action was taken in a reasonable manner or on its argument that the Tribunal made an error of law in its conclusion that the action was not taken in a reasonable manner. Comcare did not succeed on any of these bases.

23    The second reason, informed by the first, concerns the reasonableness of Mr Stewart’s non-acceptance of Comcare’s offer which was “not open to any negotiations”. In the circumstances, that non-acceptance was reasonable.

24    First, the offer required Mr Stewart to agree that Comcare’s appeal be allowed and the decision of the Tribunal set aside. As I have said, Comcare failed in this respect.

25    Second, the “notes”, the correctness of which this Court would have needed to assess in order to make any consent orders allowing the appeal, did not coincide with the conclusions of the Court in dismissing Comcare’s appeal.

26    The application being on questions of law from a decision of a tribunal, it was necessary for the applicant Comcare, even if the respondent had agreed and consented to the application being allowed, to persuade the Court that there had been an error of law on the part of the Tribunal and to articulate the basis for that conclusion: see Kovalev v Minister for Immigration and Multicultural Affairs [1999] FCA 557; 100 FCR 323 at 326-8 per French J, approved in Lobo v Minister for Immigration and Multicultural and Indigenous Affairs [2003] FCAFC 168; 132 FCR 93 at [56] and Irwin v Military Rehabilitation and Compensation Commission [2009] FCAFC 33; 174 FCR 574 at [13]-[14] and Consent Orders Involving a Federal Tribunal Practice Note (GPN-TRIB) at [2.1]. I applied these authorities in Bullivant v Australian Meat Industry Superannuation Pty Ltd [2018] FCA 1588 at [59]. I reject the submission on behalf of Comcare that the Court’s consideration of the “notes” is limited to what appears on their face, or that it is relevant to the present question to say that the Court could have so proceeded.

27    In addition, Comcare took a unilateral approach to the question of the proposed consent order, such that any failure on Mr Stewart’s part to engage further with Comcare regarding its terms was reasonable. I do not see that ss 37M and 37N take the matter any further.

28    The question whether it would be open to Mr Stewart now to apply for a costs order in the Tribunal may be in dispute. That is a matter for the Tribunal.

29    The fact that Mr Stewart’s lawyer referred to Wiegand in the Tribunal was of no consequence for present purposes as it did not affect the Tribunal’s conclusion: see the substantive reasons at [80]. I reach the same view about the submission on behalf of Mr Stewart to the Tribunal as to whether the meeting on 15 January 2016 was “administrative action”: it did not vitiate the Tribunal’s decision.

30    The next question is whether in the circumstances Comcare should pay Mr Stewart’s costs of responding to its application for a different costs order on an indemnity basis rather than on the usual party/party basis. The purpose of such an order would be more fully to compensate Mr Stewart in dealing with Comcare’s application for a different costs order and would not be punitive. As Gray J explained in Hamod v New South Wales [2002] FCA 424 at [20]; 188 ALR 659 at 665, with whom Carr and Goldberg JJ agreed:

Indemnity costs are not designed to punish a party for persisting with a case that turns out to fail. They are not awarded as a means of deterring litigants from putting forward arguments that might be attended by uncertainty. Rather, they serve the purpose of compensating a party fully for costs incurred, as a normal costs order could not be expected to do, when the court takes the view that it was unreasonable for the party against whom the order is made to have subjected the innocent party to the expenditure of costs.

31    There is a number of classes of cases in which solicitor/client or indemnity costs can be awarded in relation to conduct in the litigation. The categories do not limit the Court’s discretion. Indemnity costs may be ordered when the justice of the case so requires. Some classes of case are listed in InterTAN Inc v DSE (Holdings) Pty Ltd [2005] FCAFC 54 at [11], where reference is made to authorities including Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Ltd [1988] FCA 202; 81 ALR 397 at 401. There, Woodward J said:

I believe that it is appropriate to consider awarding “solicitor and client” or “indemnity” costs, whenever it appears that an action has been commenced or continued in circumstances where the applicant, properly advised, should have known that he had no chance of success.

32    In my opinion, Comcare’s application for a different costs order had no chance of success. Comcare was put on notice by the correspondence to which I have referred dated 1 March 2019 and 28 March 2019. As I have said, Comcare notified the Court that it wished to contend for a different costs order from order 2, made on 21 March 2019, by email on 28 March 2019. Properly advised, Comcare should have known that it had no chance of success in that respect.

33    In my opinion, Comcare appears to have lost sight of the fact that its appeal and its application in respect of costs concern an individual and not just its institutional position and policies as a regulator or administrator. It also appears to have lost sight of the fact that its appeal to this Court was on and limited to a question or questions of law and the relief it sought would only be granted if any error of law was effective to vitiate the Tribunal’s decision.

34    Comcare should pay Mr Stewart’s costs of meeting its application for a different costs order on an indemnity basis, that is, except in so far as they are of an unreasonable amount or unreasonably incurred.

Associate:

Dated:    23 April 2019