Auspine Staff Superannuation Pty Ltd v Henderson (No 2) [2006] FCA 1533

AMP LIFE LTD

Second Cross Respondent

JUDGE: JESSUP J

DATE: 17 NOVEMBER 2006

PLACE: MELBOURNE

REASONS FOR JUDGMENT 1 On 26 October 2006, I gave judgment in this matter: Auspine Staff Superannuation Pty Ltd v Henderson [2006] FCA 1281. I gave the parties leave to file written submissions on the question of costs. They have now done so. In the reasons which follow, I deal with those aspects of the parties' submissions which I regard as raising serious questions about the appropriateness of my adopting the conventional course that costs should follow the event. 2 The trustee seeks the costs of its application. It does so on two bases: first, according to the principle that costs follow the event; and secondly, by reason of a letter, which was without prejudice save as to costs, which its solicitors sent to the solicitors for the complainant on 28 October 2005 (after which date, and because of the letter, the trustee seeks its costs on an indemnity basis). The complainant resists the trustee's claim for costs on any basis and submits that the trustee should pay his costs. 3 As to the first aspect of the trustee's claim for costs, the complainant's main point is that the trustee in effect ran six grounds of appeal against the Tribunal's determinations, and succeeded on only two of them. For its part, the trustee claims that it was wholly successful. 4 Section 46(1) of the Superannuation (Resolution of Complaints) Act 1993 (Cth) ('the Complaints Act') provides for a right of appeal to this court, on a question of law, from a determination of the Tribunal. As pointed out in my reasons for judgment, in its decision the Tribunal made three determinations relevantly affecting the trustee: see [44] of those reasons. Although the trustee's Notice of Appeal covered each of those determinations, a perusal of the grounds set out in its Notice of Appeal discloses that in one respect only did the trustee's concern run wider than the utilisation by the Tribunal of r 4.7 of the former rules. Those grounds were developed at the hearing, and became the seven points upon which the trustee then relied: see [45], [46], [49], [50], [51], [53], and [57] of my reasons. Only in relation to the matter to which I referred at [51] was the trustee's argument quite separate from the legality of the Tribunal having recourse to r 4.7. As to the other six points, although it is true that the trustee succeeded on two only of them, they all related to the Tribunal's determination to make a payment under r 4.7. 5 The principle that costs follow the event means, in effect, that costs follow the outcome. It is not, I consider, appropriate (save perhaps in an extreme case) to base a costs order upon a subsequent analysis of the ups and downs of a successful party's argumentative case. The trustee has succeeded in its appeal against the Tribunal's determination regarding r 4.7, and it should have the costs of that appeal, notwithstanding that, as it turned out, it was not necessary for it to rely upon all of its grounds to achieve that success. 6 On the other hand, the trustee's argument that it had made a determination that the meaning of total and permanent disablement ('TPD') in the insurance policy be substituted for the existing definition in the rules went beyond the Tribunal's utilisation of r 4.7 of the former rules. That argument was calculated to produce the outcome that the complainant could not be regarded as totally and permanently disabled under the rules at all, regardless of any question as to the amount of any benefit which he would receive in the circumstances. In essence, this aspect of the trustee's case was concerned with an appeal against the Tribunal's determination that the complainant was entitled to be paid a TPD benefit (of any amount). I did not set that determination aside, and the complainant should be regarded as having succeeded on that appeal. To that extent, the complainant should have his costs. 7 Treating the complainant as having succeeded on so much of the trustee's appeal as involved the question of the substitution of the definition in the rules, I could order that the complainant have his costs to the extent that they related to this point, and that the trustee have its costs to the extent that they related to other points. I consider, however, that this would put the parties to further expense, which could be avoided if I made a broad judgment of an appropriate allocation, taking into account the weight and complexity of the points involved in the successful aspect, and in the unsuccessful aspect, of the trustee's appeal, respectively. Taking into account the weight of the written submissions and other material filed, and the time spent during the hearing on the various points, I think that justice would be served if I ordered the complainant to pay two-thirds of the trustee's costs of the proceeding. 8 The second aspect of the trustee's claim for costs is based upon a letter which its solicitors sent to the complainant's solicitors on 28 October 2005. Based on that letter, the trustee seeks costs on an indemnity basis for the period subsequent to that date. The letter set out in some detail the basis of the trustee's case, and broadly reflected the way the case was ultimately conducted in court. In the letter, it was proposed that the trustee had excellent prospects of success. The letter contained an offer to resolve the trustee's appeal by consent orders that the appeal be allowed, that the decision of the tribunal be set aside and that there be no order as to costs. It was further proposed that, if the court should find that the complainant was to be paid a TPD benefit under the policy, the trustee would reverse its decision to deny the complainant such a benefit, would make a decision to pay the complainant such a benefit and would pass any insurance proceeds on to the complainant. It is submitted on behalf of the trustee that the actual result which it achieved in court substantially reflected the proposal in its solicitors' letter of 28 October 2005, and that it was unreasonable for the complainant not to have accepted that proposal. 9 There are several difficulties with this submission on behalf of the trustee. First, one of the bases upon which the letter foreshadowed that the trustee would succeed was that it would be found that the Tribunal had erred in finding that the trustee had not determined to substitute the definition of TPD in the rules. In other words, it was proposed to the complainant not only that the payment upon which the Tribunal had resolved in his favour under r 4.7 would be successfully attacked, but also that he would be found not to be totally and permanently disabled under the rules at all. If this was the outcome which the trustee asked the complainant to assume, in the circumstances I cannot regard it as unreasonable for the complainant not to have concurred. 10 Secondly, the orders to which the trustee proposed the complainant should consent would have provided for the decision of the Tribunal to be set aside. Presumably, it was intended that the complainant would thereby wholly give up his rights as against the trustee (save as provided for in the letter itself, by way of linking with the proceeds of the insurance policy). As I have decided the case, the question of the complainant's rights as against the trustee has been remitted to the Tribunal for reconsideration. I could not, in the circumstances, hold it to have been unreasonable for the complainant not to have agreed to an order that the decision of the Tribunal against the trustee be set aside, without more. 11 Thirdly, the most attractive part of the trustee's solicitors' letter – that relating to the possible reversal of the Tribunal's decision with respect to the insurer – was conditional on the court finding that the complainant was to be paid a TPD benefit under the policy. It was never at all likely that the court itself would make such a finding. Indeed, the complainant has achieved substantial success as against the insurer, but has not secured a finding of that kind. I could not regard it as unreasonable for the complainant's advisers, notwithstanding the terms of their client's cross appeal, to have thought that the prospect of the court itself making a decision of the kind referred to in the letter was doubtful, to say the least. 12 Fourthly, the broad proposition underlying the trustee's solicitors' letter – that the complainant's prospect of securing any payment from the trustee should be traded away against the hope of success on a different appeal, where the trustee was not a party, and where the document contained a different definition – is not one which, I consider, the complainant and his advisers ought to have regarded as self-evidently reasonable. 13 For the above reasons, I refuse the trustee's application for indemnity costs since 28 October 2005. 14 The claimant has sought costs against the insurer upon the conventional basis that he was the successful party in the proceeding. In the case of the claimant's cross appeal, there was only one relevant determination of the Tribunal, and the complainant succeeded in having that set aside. The starting point, therefore, is that the complainant should have his costs. 15 The insurer, however, points out that the complainant succeeded only on one of two grounds which were introduced by amendment some time after the cross appeal was instituted. On each of the original nine grounds upon which the complainant relied, he failed. The other ground which was introduced by amendment was subsequently abandoned. Further, the insurer submits that, in relation to seven of the nine grounds originally advanced, it ought to have been obvious to the complainant's advisers that the cross appeal could never have succeeded: they were, according to the insurer, substantially concerned with an attempt to rehearse non-legal issues which had been before the Tribunal. The insurer submits that, as a result of the complainant's indiscriminate deployment of grounds of doubtful merit, it has been put to the considerable expense of preparing for the defence of the cross appeal on a much broader front than ought to have been necessary. 16 The insurer relies upon a dictum by Bray CJ in the Full Court of the Supreme Court of South Australia in Cretazzo v Lombardi (1975) 13 SASR 4, 12: A successful party who has failed on certain issues may well not only be deprived of his own costs of those issues, but ordered in addition to pay his opponents costs of them, and in this context 'issue' does not mean a precise issue in the technical pleading sense, but any disputed question of fact or … of law … As the insurer pointed out, this passage was referred to by Toohey J in Hughes v Western Australian Cricket Association (Inc) [1986] ATPR ¶40-748, which in turn was applied by Goldberg J in Dr Martens Australia Pty Ltd v Figgins Holdings Pty Ltd (No.2) [2000] FCA 602, [53]. The complainant, however, has pointed out that the passage from the judgment of Toohey J, upon which Goldberg J relied, gave endorsement also to the following statement by Jacobs J in Cretazzo (13 SASR at 16): The ultimate ends of justice may not be served if a party is dissuaded by the risk of costs from canvassing all issues, however doubtful, which might be material to the decision of the case. There are, of course, many factors affecting the exercise of the discretion as to costs in each case, including in particular, the severability of the issues, and no two cases are alike. I wish merely to lend no encouragement to any suggestion that a party against whom the judgment goes ought nevertheless to anticipate a favourable exercise of the judicial discretion as to costs in respect of issues upon which he may have succeeded, based merely on his success in those particular issues. 17 Once the complainant decided to challenge the determination of the Tribunal apropos the decision of the insurer, he was obliged to bring forward all the grounds upon which he might ever wish to rely in that challenge. For him to have omitted certain grounds, and attempted to make them the subject of later litigation, would have amounted to an abuse of process: Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589. For its part, the insurer should have proceeded by reference to its estimate of the complainant succeeding in having the relevant determination set aside; not, as Jacobs J said, in anticipation of a favourable costs order with respect to those of the complainant's grounds upon which it might succeed. 18 In the result, I am not persuaded that there is any legitimate basis upon which I should depart from the usual rule that costs follow the event. The complainant will have his costs as against the insurer. I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jessup.