FEDERAL COURT OF AUSTRALIA Smith v Comcare [2012] FCA 864 Citation: Smith v Comcare [2012] FCA 864 Appeal from: Smith v Comcare [2012] FCA 502 Parties: LAWRENCE SMITH v COMCARE File number: ACD 43 of 2012 Judge: FOSTER J Date of Orders: 10 August 2012 Date of Reasons: 17 August 2012 Catchwords: COSTS – whether and to what extent the Court should investigate the merits of an interlocutory application which is to be withdrawn for the purpose of determining who should pay the costs of that application Legislation: Federal Court of Australia Act 1976 (Cth), s 43 and s 56 Federal Court Rules 2011, r 36.09 Federal Court Rules, O 52 r 20 Cases cited: Smith v Comcare [2012] FCA 502 related Airtourer Co-Operative Ltd v Millicer Aircraft Industries Pty Ltd [2004] FCA 1400 cited De Groot v The Nominal Defendant [2004] NSWCA 88 cited Kazar v Kargarian (2011) 197 FCR 113 cited Paton v Campbell Capital Ltd, unreported, Federal Court, Burchett J, 1 July 1993 cited Rickus v Motor Trades Association of Australia Superannuation Fund Pty Ltd (2010) 265 ALR 112 cited Date of hearing: 10 August 2012 Place: Sydney (Heard in Canberra) Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 25 Counsel for the Appellant: Mr Mrsic Solicitor for the Appellant: TD Kelly & Co Counsel for the Respondent: Mr DI Richards Solicitor for the Respondent: DibbsBarker IN THE FEDERAL COURT OF AUSTRALIA AUSTRALIAN CAPITAL TERRITORY DISTRICT REGISTRY GENERAL DIVISION ACD 43 of 2012 BETWEEN: LAWRENCE SMITH Appellant AND: COMCARE Respondent JUDGE: FOSTER J DATE OF ORDER: 10 August 2012 WHERE MADE: CANBERRA THE COURT ORDERS THAT: 1. The Interlocutory Application filed by the respondent on 6 August 2012 be dismissed. 2. The costs of and incidental to that Interlocutory Application be costs in the appeal. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA AUSTRALIAN CAPITAL TERRITORY DISTRICT REGISTRY GENERAL DIVISION ACD 43 of 2012 BETWEEN: LAWRENCE SMITH Appellant AND: COMCARE Respondent JUDGE: FOSTER J DATE: 17 AUGUST 2012 PLACE: Sydney (Heard in CANBERRA) REASONS FOR JUDGMENT 1 By Notice of Appeal filed on 7 June 2012, the appellant appealed from the whole of the judgment of Perram J given on 18 May 2012 in Smith v Comcare [2012] FCA 502. Before his Honour, the appellant sought answers to three questions of law. His Honour concluded that it was not necessary to answer question 1. Questions 2 and 3 were ultimately abandoned. The learned primary judge also concluded that the Administrative Appeals Tribunal (the Tribunal) had not approached its consideration of the appellant's claims before it in the manner and upon the basis which the appellant submitted before his Honour had been the approach of the Tribunal. This conclusion was fatal to the appellant's case. 2 At [18]–[23] of his Honour's Reasons for Judgment, his Honour said: 18 Central to Mr Smith's case is the emphasised portion of [81] which, so it is submitted, suggests that the issue of aggravation was looked at only through the prism of 1997. But that reading of [81] is antithetical to the surrounding context and the balance of the Tribunal's reasons. Nothing in [79] suggests that the Tribunal limited its focus to 1997; more is this so when the Tribunal's consideration of the facts concerning the events at Wagga Wagga extended over the whole of the period 1987 to 2008. Precisely the same difficulty emerges from [80] and its reference to the work at remote abattoirs. As foreshadowed above, the Tribunal's treatment of the work at those abattoirs was not in any way limited to 1997. 19 Most problematic for Mr Smith's case is [81] itself which in terms discusses the work which took place at Wagga prior to 1993. If, as Mr Smith's submission necessarily entails, the Tribunal blinkered its approach by focussing solely on 1997 in considering the issue of aggravation then is difficult to discern why it might have been examining events prior to 1993. Mr Fernon submitted that this was as close as the Tribunal got to looking at the correct issue but that it nevertheless fell short. This was because, properly construed, the statement was suggesting that the Tribunal's real concern was the 1997 question. I do not, however, think that this is a plausible reading of [81]. 20 I do not accept therefore the submission that in [81] the Tribunal limited its consideration in the manner suggested. 21 Once that is accepted, no material error can arise from the Tribunal having considered the s 7(4) issue in advance of the material contribution question. It was not explored by either party why, in this case, the s 7(4) question needed to be asked (or answered). Without drawing a final conclusion on that matter, I would imagine that the time at which the injury was taken to have occurred may well have impacted upon which version of the Act was to apply. Whatever the answer to that question, however, the Tribunal correctly approached the issue of aggravation by looking at the whole period from 1977 to 2008. Even if it was incorrect to consider the issues posed by s 7(4) before the disease in question had been identified that error had no impact on the manner in which the Tribunal approached the issue of material aggravation. 22 Pointedly, it was not suggested in this Court that the Tribunal had erred in concluding that the injury should be taken to have occurred in 1997; that is, although it was argued that the question had been answered out of order it was not suggested it had been answered incorrectly. So viewed, the only relevance advanced for the notion that it had been answered prematurely was the argument, which I have rejected, that the Tribunal had thereby mishandled the issue of material aggravation. 23 What this means is that the issue which Mr Smith seeks to ventilate has no relevance to the outcome of the proceedings. This is not a criticism of the question of law posed; rather, it is the consequence of rejecting Mr Smith's interpretation of [81]. 3 It is not necessary to set out or discuss in detail the grounds of appeal relied upon by the appellant in his appeal. In essence, the appellant challenges the correctness of his Honour's reasoning and conclusions which I have extracted at [2] above and wishes to reagitate on appeal the arguments which he made to his Honour. 4 On 27 June 2012, the solicitors for the respondent (Comcare) wrote to the solicitors for the appellant in the following terms (omitting formal parts): Smith v Comcare Federal Court Application No. ACD 43/2012 Our Ref: PGW:CMK:67119 We refer to the above appeal from a judgment of the Federal Court (Perram J): Smith v Comcare [2012] FCA 502. Comcare notes that the Appellant has not responded to our letter, of 28 May 2012, in relation to the costs order made by Perram J. Comcare's position is that the Appellant's prospects before the Full Court are poor given the maters discussed in Perram J's reasons for judgment. On the basis of the above, Comcare is concerned as to a risk that the Appellant will be unable to satisfy a costs order against him in the event that his appeal to the Full Court fails. As such, Comcare has requested that we make enquiries as to the Appellant's ability to satisfy a costs order in the event that his appeal fails. We are therefore instructed to seek copies of the following: • copies of the Appellant's personal income tax returns lodged in respect of the 2008/2009, 2009/2010 and 2010/2011 financial years; • copies of any pay slips obtained during the 2011/2012 financial year; • a statement of assets and liabilities; and • any other relevant information which the Appellant may provide for the purposes of assuring Comcare that he can meet a potential costs order made against him (for example, any guarantees, statutory declarations, financial references or other evidence as to his financial capacity). If he is unable to satisfy Comcare that he would be in a position to satisfy a costs order against him in this matter, we are instructed to make an application for an order that the Appellant give security for costs of the appeal. We look forward to receiving the above information. Please respond to this letter on or before 4 July 2012. If you wish to discuss the matter, please do not hesitate to contact us. 5 The deadline sought to be imposed by the solicitors for Comcare upon the appellant's response to their demands was extended on two occasions. 6 By letter dated 30 July 2012, the solicitors for the appellant provided the following response to the letter of 27 June 2012 sent by the solicitors for Comcare to the solicitors for the appellant: RE: LAWRENCE SMITH V COMCARE We refer to your letter of 24 July 2012 and to previous correspondence. We note that the Respondent has foreshadowed a possible application for security for costs. In the ordinary course of personal injury and workers compensation proceedings this would be a most unusual application. We do not think that in respect of an injured worker's claim under the Safety Rehabilitation and Compensation Act against an entity which is effectively the Commonwealth's workers compensation insurer that an order for security for costs would be appropriate. 7 On 6 August 2012, Comcare filed an Interlocutory Application in which it sought an order requiring the appellant to provide security for Comcare's costs of the appeal in the amount of $25,000, an order that the appeal be stayed until such time as the said security was provided and, in the event that security was not provided by 28 September 2012, an order dismissing the appeal. Section 56 of the Federal Court of Australia Act 1976 (Cth) and r 36.09 of the Federal Court Rules 2011 give to the Court ample power to make the orders sought by Comcare. The present rule of Court differs markedly from the previous rule (O 52 r 20). Previously, the rule reflected a slight bias in favour of no security being required for the costs of an appeal. It had been held that, under that rule, the impecuniosity of the appellant, considered on its own, was not a sufficient basis for ordering security for costs, at least where the appeal was arguable (Paton v Campbell Capital Ltd, unreported, Federal Court, Burchett J, 1 July 1993). The present rule may call for a different approach although I do not need to decide that question in the present case. 8 Comcare's application for security for costs had been foreshadowed at the Callover of the appeal held on 18 July 2012. In light of that circumstance, I abridged the time for service of Comcare's Interlocutory Application and listed it for hearing before me on 10 August 2012. 9 In addition to the exchange of correspondence to which I have referred at [4]–[6] above, the solicitor for Comcare affirmed an affidavit in which, at [10]–[11] thereof, she said: 10. Based on papers filed in his proceedings, I understand that the Appellant suffers from a number of physical conditions and has not worked since November 2008, and he was medically retired on or around 14 March 2012. 11. I anticipate that the Respondent's costs of appeal in this matter, based on the costs of the application before Perram J, are likely to be $25,000.00 (not taking into account fees for Queen's Counsel). 10 On 9 August 2012, the solicitor for the appellant (Mr Watson) filed an affidavit sworn on that day in which he said: 2. On 8 August 2012 I performed an online land title search on the Appellant's address which is listed in the Notice of Appeal. Annexed hereto and marked with the letter "A" is a true copy of the resulting search. 3. I am instructed by the Appellant and his wife Kerrie Lyn Smith that the property is likely valued at about $400,000. 4. I am instructed by the Appellant and his wife today that the current amount outstanding on the mortgage to Westpac Banking Corporation is $9,795.47. The property is not otherwise encumbered. 5. The online search cost $14.47 and took me less than 30 seconds to perform. 11 When the matter was called on for hearing before me on 10 August 2012, Counsel for Comcare informed me that, in light of the affidavit sworn by the solicitor for the appellant on 9 August 2012, he had been instructed not to proceed with Comcare's application for security for costs but to seek the costs of that application. Comcare's application for costs in respect of its Security for Costs Application was opposed by the appellant upon the basis that that application should never have been brought. Counsel for the appellant argued that Comcare should pay the appellant's costs of the Security for Costs Application or, alternatively, that the costs of that application should be costs in the appeal. 12 After hearing argument on 10 August 2012, I ordered that Comcare's Interlocutory Application filed on 6 August 2012 be dismissed and that the costs of and incidental to that Application be costs in the appeal. 13 Comcare then requested that I provide reasons for that decision. Accordingly, these Reasons for Judgment constitute the reasons for the Orders which I made on 10 August 2012. Consideration The Relevant Principles 14 There is no doubt that s 43 of the Federal Court of Australia Act 1976 (Cth) confers a broad discretion on the Court to award costs. The amplitude of the Court's discretion to order costs is illustrated, but not constrained, by the specific instances listed in s 43(3) of that Act (see Kazar v Kargarian (2011) 197 FCR 113 at [3] (p 115) (per Greenwood and Rares JJ) and at [43]–[44] (pp 123–124) (per Foster J)). 15 In Kazar, at [45]–[46], I also said: 45 This Court's discretion as to costs must be exercised judicially and with due regard to precedent, established principle and factors directly connected with the litigation (Oshlack at [65] per McHugh J). The discretion must not be exercised arbitrarily, capriciously or so as to frustrate the legislative intent (Oshlack at [22] per Gaudron and Gummow JJ). As Gaudron and Gummow JJ went on to say in Oshlack at [22]: ... the discretion conferred is ... unconfined except insofar as "the subject matter and the scope and purpose" of the legislation may enable an appellate court to pronounce the reasons given by the primary judge to be "definitely extraneous to any objects the legislature could have had in view" (Water Conservation and Irrigation Commission (NSW) v Browning (1947) 74 CLR 492 at 505)." (See also the observations of the plurality in Foots at [34] where their Honours cited a passage from Daniell's, Practice of the High Court of Chancery (5th ed, 1871) with apparent approval). 46 The successful party should, generally speaking, have the benefit of an order for costs in his or her favour (Foots at [25] per Gleeson CJ, Gummow, Hayne and Crennan JJ; Oshlack at [66]-[68] per McHugh J). Costs are awarded to indemnify the successful party to some extent against his or her outlays on costs, not by way of punishment of an unsuccessful party (Oshlack at [1] per Brennan CJ and at [67] per McHugh J). 16 The withdrawal or discontinuance of an interlocutory application by the moving party will very often lead to an order for costs being made against that party in favour of the respondent parties to that application. In Rickus v Motor Trades Association of Australia Superannuation Fund Pty Ltd (2010) 265 ALR 112 at [116]–[123] (pp 136–137), the Full Court said: 116 A party who discontinues a proceeding without the leave of the court becomes liable to pay the costs of the other party or parties unless, in cases where the consent of the other parties is relevant, that consent provides otherwise. This is the effect of O 22 r 3 of the Federal Court Rules. That rule reflects a more general policy of the law to the effect that a party should always be permitted to discontinue its proceedings but, in the modern setting, should usually have to pay the costs of the other parties occasioned by the bringing of the proceedings and their subsequent abandonment. 117 In Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622, 143 ALR 1 (Ex parte Lai Qin), McHugh J discussed some general principles applicable to the award of costs in Australian courts. At 624, his Honour said that, after a hearing on the merits, as a general rule, the successful party is entitled to his or her costs. It is success in the action that usually controls the exercise of the court's discretion in respect of costs. At CLR 624–5; ALR 3–4, his Honour also said: In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The court cannot try a hypothetical action between the parties (Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194 at 201; 116 ALR 523 at 530; 11 ACSR 136 at 143). To do so would burden the parties with the costs of a litigated action which by settlement or extra-curial action they had avoided. In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action (Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194 at 201; 116 ALR 523 at 530; 11 ACSR 136 at 143). In administrative law matters, for example, it may appear that the defendant has acted unreasonably in exercising or refusing to exercise a power and that the plaintiff had no reasonable alternative but to commence a litigation. Thus, for example, in R v Gold Coast City Council; Ex parte Raysun Pty Ltd [1971] QWN 133, the Full Court of the Supreme Court of Queensland gave a prosecutor seeking mandamus the costs of the proceedings up to the date when the respondent council notified the prosecutor that it would give the prosecutor the relief that it sought. The Full Court said that the prosecutor had reasonable ground for complaint in respect of the attitude taken by the respondent in failing to consider the application by the prosecutor for approval of road and drainage plans. Moreover, in some cases a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried. This is perhaps the best explanation of the unreported decision of Pincus J in South East Queensland Electricity Board v Australian Telecommunications Commission (unreported, Federal Court of Australia, 10 February 1989) where his Honour ordered the respondent to pay 80% of the applicant's taxed costs even though his Honour found that both parties had acted reasonably in respect of the litigation. But such cases are likely to be rare. If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings. This approach has been adopted in a large number of cases (footnotes omitted). 118 In Mineralogy Pty Ltd v National Native Title Tribunal [1998] FCA 1700, the Full Court accepted that, when this court is considering the question of costs in relation to an application for leave to discontinue proceedings pursuant to O 22 r 2(1)(d) of the Federal Court Rules, the appropriate test to apply is that which was explained by McHugh J in Ex parte Lai Qin at CLR 625; ALR 3–4. The Full Court held that, in most cases where there has been no trial on the merits, it is not appropriate in determining an issue of costs to make a prediction as to the outcome of the hypothetical case. That approach was followed by Rares J in Clark v ING Life Ltd [2007] FCA 1960 at [16]. See also O'Neill v Mann [2000] FCA 1680 at [11]–[13] (per Finn J) and J H Lever & Co Pty Ltd v Maniotis (2005) 215 ALR 773; [2005] FCA 252 at [3] per Mansfield J. 119 In our judgment, the question of costs thrown up by the grant of leave to the trustee to discontinue the trustee's proceedings and the subsequent discontinuance of those proceedings was one which had to be determined in light of that discontinuance and having regard to the circumstances in play at the time that that discontinuance was put into effect. As at 28 July 2008, there had been no hearing of the appellant's cross-claim and no determination on the merits of the issues raised in that cross-claim. If the question of costs occasioned by the discontinuance of the trustee's proceedings had been determined at that time, that question would have been considered in circumstances where there had been no hearing on the merits of the claims made by the trustee in its proceedings and would have fallen squarely within the principles enunciated by McHugh J in Ex parte Lai Qin. In a case such as the present, it would have been inappropriate for a judge to enter into a detailed examination of all relevant facts and circumstances in order to determine whether or not the bringing and maintaining of the trustee's proceedings up to 28 July 2008 had been reasonable. 120 It is but a happenstance that the question of the costs occasioned by the discontinuance of the trustee's proceedings came to be decided at the same time as and in light of the appellant's cross-claim. That circumstance, however, does not, in our view, elevate the significance of his Honour's approach to the underlying liability of the appellant to the trustee to produce the relevant documents in the context of determining the appellant's cross-claim to a point where, in effect, his Honour was entitled to approach the question of costs occasioned by the discontinuance of the trustee's proceedings on the basis that: (a) there had, in fact, been a hearing on the merits; and (b) on the basis of that hearing, the trustee had been successful. In our view, the correct approach in the present case was to consider and determine the question of costs occasioned by the discontinuance of the trustee's proceedings on the basis that there had been no hearing on the merits as at the date of that discontinuance and no justification for entering upon an inquiry as to whether the trustee had acted reasonably in instituting and maintaining the trustee's proceedings. 121 The primary judge erred in approaching the matter upon the basis, in effect, that there had been a hearing on the merits and that the trustee had been successful. The result was unreasonable and plainly unjust. 122 For these reasons, we would allow the appeal in ACD 7 of 2009. 123 The appropriate order for costs consequent upon the discontinuance of the trustee's proceedings is an order that the trustee pay the appellant's costs of and incidental to the trustee's proceedings as and from 27 November 2007 up to 28 July 2008 being the date when those proceedings were discontinued. 17 I propose to apply those principles in the present case, recognising that they provide guidance but understanding and accepting that they do not constitute rigid rules to be applied in every case. Decision 18 Counsel for Comcare submitted that the appellant should pay Comcare's costs of and incidental to Comcare's Security for Costs Application because the appellant had refused to comply with his instructing solicitors' reasonable requests for information made in their letter dated 27 June 2012. Ultimately, the appellant provided some details of his assets, but only after Comcare's application had been filed. Counsel said that Comcare had had no choice but to file its application. 19 Counsel for the appellant made the following submissions: (a) The Court would generally not order that the appellant provide security for the respondent's costs where the appeal is an appeal from a single judge in relation to a workers' compensation matter which had been initially determined by the Tribunal. Counsel relied upon the NSW Court of Appeal decision of De Groot v The Nominal Defendant [2004] NSWCA 88 at [29] (per Handley JA). (b) Impecuniosity on the part of an individual litigant would rarely be a ground for ordering security for costs whether at first instance or on appeal (Airtourer Co-Operative Ltd v Millicer Aircraft Industries Pty Ltd [2004] FCA 1400 at [15]–[22] (per Branson J)). (c) The appellant lives in Wagga Wagga, NSW, and has done for some time. There is no evidence that he is moving assets beyond the reach of Comcare or that he intends to leave the jurisdiction. The evidence points to a contrary conclusion. (d) The appellant's appeal is not hopeless or an abuse of process. (e) Comcare could have carried out an online purchaser's index search and ascertained the facts to which Mr Watson deposed in his affidavit sworn on 9 August 2012. It was a simple matter to do so. (f) The appellant was always a man of means. Comcare had no reason for thinking otherwise. 20 The submissions advanced by both the appellant and Comcare proceed upon the basis that, in deciding the question of who should pay the costs of Comcare's Security for Costs Application, I should, in effect, decide who would have prevailed in that application had it been heard and determined. 21 As Rickus makes clear, generally speaking, the Court will not embark upon a full hearing of the merits of an application which has been abandoned in order to determine who should pay the costs of that application. I see no reason to approach the present question any differently. 22 In the present case, Comcare embarked upon a course of action which was problematic in the sense that there were real difficulties standing in the way of the orders which it sought even if it had been able to establish that the appellant was impecunious. These difficulties are adequately captured in the submissions made to the Court by Counsel for the appellant which I have endeavoured to summarise at [19] above. The appellant, on the other hand, was unnecessarily bloody-minded in refusing to provide any comfort to Comcare that he had the means to pay any adverse costs award which might be made by the Full Court in his appeal. The stance which he adopted provoked Comcare's application. Comcare's application was not without merit, particularly when account is taken of the fact that the appellant has not yet addressed payment of the costs order made by Perram J on 18 May 2012. 23 As I see matters, both parties must bear some responsibility for the costs which have been incurred in relation to Comcare's Security for Costs Application. I see that responsibility as being more or less equal. That is why I ordered that the costs of and incidental to Comcare's application be costs in the appeal. The successful party in the appeal will recover his or its costs of Comcare's Security for Costs Application and the other party will have to pay those costs. Comcare's application was one of those applications which arises from time to time in the run of litigation, the costs of which should not be borne by any particular party. Rather, those costs should abide the result of the appeal. 24 Neither party suggested that I should make no order as to costs, thereby leaving each party to bear his or its own costs of Comcare's application. 25 For these reasons, I made the orders described at [12] above. I certify that the preceding twenty-five (25) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Foster. Associate: Dated: 17 August 2012