Reported Decision: 72 NSWLR 273 New South Wales Court of Appeal CITATION: MAHENTHIRARASA v STATE RAIL AUTHORITY OF NEW SOUTH WALES (NO 2) [2008] NSWCA 201 HEARING DATE(S): 18 February 2008 JUDGMENT DATE: 21 August 2008 JUDGMENT OF: Giles JA at 1; Basten JA at 2; Bell JA at 27 Add to the orders made by this Court on 21 May 2008 the following: DECISION: (6) Set aside orders (2) and (3) made by the primary judge on 9 February 2007; (7) Order the first respondent (the State Rail Authority) to pay the appellant's costs of the proceedings in the Common Law Division and in this Court on the usual basis. CATCHWORDS: COSTS – judicial review proceedings – whether costs follow the event –respondent submitting "save as to costs" – whether respondent required to act as model litigant – whether just and reasonable for respondent to pay part or whole of costs of successful applicant – Civil Procedure Act 2004 (NSW) s 98 – Uniform Civil Procedure Rules 2005 (NSW) rr 6.11, 42.1 - STATE OWNED CORPORATION – State Rail Authority – functions of State Rail Authority – State Rail Authority as part of the executive government – application of model litigant principles – State Revenue and Other Legislation Amendment (Budget) Act 2007 (NSW) Schedule 4[11] – Transport Administration Act 1988 (NSW) s 4, Schedule 8 - WORDS & PHRASES – "model litigant" Civil Procedure Act 2005 (NSW), s 98 Judiciary Act 1903 (Cth), s 55ZF State Revenue and Other Legislation Amendment (Budget) Act 2007 (NSW), Schedule 4 [11] LEGISLATION CITED: Supreme Court Rules 1970 (NSW), Pt 52A, r 12 Transport Administration Act 1988 (NSW), s 4, Schedule 8, cll 1, 3(1) Uniform Civil Procedure Rules 2005 (NSW), r, 6.11, Pt 42, r 42.1 Workplace Injury Management and Workers Compensation Act 1998 (NSW), s 327 CATEGORY: Consequential orders Kovalev v Minister for Immigration and Multicultural Affairs [1999] FCA 557; 100 FCR 323 Latoudis v Casey [1990] HCA 59; 170 CLR 534 Logue v Shoalhaven Shire Council [1979] 1 NSWLR 537 The Melbourne Steamship Company Ltd v Moorehead [1912] HCA 69; 15 CLR 333 CASES CITED: Ohn v Walton (1995) 36 NSWLR 77 P & C Cantarella Pty Ltd v Egg Marketing Board (NSW) [1973] 2 NSWLR 366 Ritter v Godfrey [1920] 2 KB 47 Scott v Handley [1999] FCA 404; 58 ALD 373 Yong v Minister for Immigration and Multicultural Affairs (1997) 75 FCR 155 Arumugam Mahenthirarasa (Applicant) PARTIES: State Rail Authority of New South Wales (First Respondent) Registrar of the Workers Compensation Commission (Second Respondent) Dr Robert Breit (Third Respondent) FILE NUMBER(S): CA 40541/07 C Jackson (Applicant) COUNSEL: P N Khandhar (First Respondent) N/A (Second and Third Respondents) P K Simpson & Co (Applicant) SOLICITORS: DLA Phillips Fox (First Respondent) I V Knight, Crown Solicitor (Second and Third Respondents) LOWER COURT JURISDICTION: Supreme Court LOWER COURT FILE NUMBER(S): SC 30077/05 LOWER COURT JUDICIAL OFFICER: Malpass AsJ LOWER COURT DATE OF DECISION: 9 February 2007 LOWER COURT MEDIUM NEUTRAL CITATION: Mahenthirarasa v State Rail Authority of New South Wales [2007] NSWSC 22 IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40541/07 SC 30077/05 GILES JA BASTEN JA BELL JA 21 August 2008 MAHENTHIRARASA v STATE RAIL AUTHORITY OF NEW SOUTH WALES & ORS (NO. 2) Judgment 1 GILES JA: I agree with Basten JA. 2 BASTEN JA: The principal judgment in this matter was delivered on 21 May 2008: Mahenthirarasa v State Rail Authority of New South Wales [2008] NSWCA 101. The applicant was granted leave to appeal with respect to a judgment of an Associate Justice in the Common Law Division. The appeal was allowed and the challenged decision of the Registrar of the Workers Compensation Commission was set aside. 3 There were three respondents to the proceedings in this Court, being the State Rail Authority of NSW ("the SRA"), the Registrar of the Workers Compensation Commission and Dr Robert Breit (an approved medical specialist). Dr Breit was the decision-maker within the Commission, from whose certificate the appellant had sought to appeal to an Appeal Panel. The appeal did not proceed because a delegate of the Registrar, exercising authority under s 327 of the Workplace Injury Management and Workers Compensation Act 1998 (NSW) ("the Workplace Injury Act"), decided that the statutory preconditions had not been satisfied. As noted in the first judgment at [70], it was entirely appropriate that they took no part in resisting the appeal and, indeed, no order with respect to costs is sought against them. 4 The successful appellant now seeks an order for costs against the SRA. Such an order is resisted on the basis that the SRA did not appear in opposition to the proceedings either in the Common Law Division or in this Court. In each proceeding it filed an appearance, submitting save as to costs. It says that it should not be ordered to pay the appellant's costs, which were incurred in vindicating his legal entitlements. 5 The appellant seeks an order for payment of his costs by the SRA on the basis that, whilst the SRA did not actively oppose the orders sought, neither did it consent, and on the basis that it had opposed his appeal within the Commission and was thus the party which invoked the authority of the Registrar to refuse to permit the appeal to proceed to an Appeal Panel. 6 The power to award costs is contained in s 98 of the Civil Procedure Act 2005 (NSW) and is subject to no express limitations, other than those contained in a statute or in the rules of court. However, unless the Court makes an order, a party is not entitled to recover costs from any other party: s 98(2). The discretion is to be exercised, relevantly for present purposes, pursuant to Part 42 of the Uniform Civil Procedure Rules 2005 (NSW) ("the UCPR"). The general rule, is expressed in the following terms: " 42.1 General rule that costs follow the event Subject to this Part, if the court makes any order as to costs, the court is to order that the costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs." 7 There is express provision for a responding party to file an appearance submitting to the orders of the Court, "save as to costs": UCPR, r 6.11(1). One effect is that the party cannot, without leave, take any active part in the proceedings: r 6.11(2). The rules do not provide for the consequences of such an appearance in relation to costs: cf Supreme Court Rules 1970 (NSW), Pt 52A, r 12. Accordingly, the Court's discretion under r 42.1 must be exercised, taking into account the role adopted by the respondent in the proceedings. 8 In Latoudis v Casey [1990] HCA 59; 170 CLR 534, the High Court considered the proper approach to be applied by a court of summary jurisdiction in exercising a statutory discretion to award costs in criminal proceedings which have terminated in favour of a defendant: see at 537 (Mason CJ). In answering that question his Honour concluded at 542-543: "It will be seen from what I have already said that, in exercising its discretion to award or refuse costs, a court should look at the matter primarily from the perspective of the defendant. To do so conforms to fundamental principle. If one thing is clear in the realm of costs, it is that, in criminal as well as civil proceedings, costs are not awarded by way of punishment of the unsuccessful party. They are compensatory in the sense that they are awarded to indemnify the successful party against the expense to which he or she has been put by reason of the legal proceedings …." 9 The reference to the "perspective of the defendant" must be understood in the context as being a reference to the perspective of the successful party. The rationale for that inference is to be found in the compensation principle which is to be applied. The same principle is attracted in relation to disciplinary proceedings, for example in the Medical Tribunal: see Ohn v Walton (1995) 36 NSWLR 77 at 79 (Gleeson CJ). It applies with equal force in relation to judicial review proceedings. 10 It does not follow, even where the discretion is subject to the principle that costs follow the event, as required by r 42.1, that costs will inevitably be awarded in favour of the successful party. In Latoudis, Mason CJ gave examples of circumstances where that would not follow. One was where the successful defendant by his or her conduct after the event said to constitute the offence, had brought the prosecution upon himself or herself; a second was where the defendant, having had an opportunity to explain the events before a charge was laid, declined to do so, and a third was where the defence involved the unreasonable prolongation of the proceedings: 170 CLR at 544. Each example focused upon the circumstances of the successful party and not those of the unsuccessful party: see also Ritter v Godfrey [1920] 2 KB 47, 60 (Atkin LJ). 11 In the present case, there was nothing in the conduct of the appellant which would lead to a refusal to award costs in his favour. Rather, the question is whether it is just and reasonable to expect the SRA to pay his costs in circumstances where it did not actively oppose the orders he sought. The submissions for the SRA in effect rely upon two propositions. The first is that, not having actively opposed the orders, the SRA is not responsible in any relevant sense for the costs incurred by the appellant. Secondly, even if it had consented to the orders, it is likely that some costs would have been incurred in any event in satisfying the Court that the orders were appropriate, in accordance with the approach adopted in Kovalev v Minister for Immigration and Multicultural Affairs [1999] FCA 557; 100 FCR 323 at [9] (French J) referred to in the principal judgment at [65]. Accordingly, although the argument was not expressed in these terms, the only possible liability might be for additional costs incurred as a result of the SRA neither consenting nor opposing the orders sought. 12 There are two considerations which significantly diminish the force of the SRA's contentions. The first is that, as appears from the certificate issued by the delegate of the Registrar under s 327(4) of the Workplace Injury Act, the decision to reject the appeal in the Commission was made after consideration of submissions received from both the appellant and the SRA: Reasons, 18 July 2005, par 4. Annexed to an affidavit filed by the solicitor for the appellant in the Common Law Division, was a copy of the SRA's submission to the Registrar. It was a careful and detailed submission and considerably longer than the reasons given by the Registrar for his decision. Key parts of the submission were identified in the principal judgment at [27]. Having opposed the appeal in the Commission, and having obtained a favourable result, in accordance with its submissions to the Registrar, the SRA cannot disclaim all responsibility for the situation in which the appellant was placed in seeking to enforce his legal entitlements. 13 In relation to the second point, the stance adopted by the SRA with respect to the proceedings in the Court are not entirely favourable to it. In not opposing the orders sought by the appellant, it no doubt helped to minimise the costs incurred. Nevertheless, appreciating, as a matter of fact if not law, that the other respondents would not and could not properly appear in opposition to the claims, it would have been appropriate for the SRA to explain its position to the Court and indicate why it was not opposing the orders sought. A concession that it was reasonably open for the Court to accept that the approach adopted by the delegate of the Registrar was legally flawed would probably have limited costs further and removed the requirement that the appellant spend time persuading the Court as to the correctness of his position. 14 It is convenient to say something at this stage about the status of the SRA. At the time of the appellant's accident, it was a corporation constituted under the Transport Administration Act 1988 (NSW) and was "for the purposes of any Act, a statutory body representing the Crown": s 4(2). With the creation of a new corporation known as "RailCorp", from 1 January 2004, the constitution of the SRA was relegated to Schedule 8 of the Transport Administration Act, but it remained a statutory body representing the Crown. Its functions by then included facilitating the transfer of its staff, assets, rights and liabilities to new bodies created under the Act: Schedule 8, cl 3(1). That was still the position when the Registrar made the decision under review and when proceedings for judicial review were commenced. There is no suggestion that any liability to the appellant has been transferred by the SRA to any other body. 15 On 1 July 2007 the name of the SRA was changed to the "State Rail Authority Residual Holding Corporation": State Revenue and Other Legislation Amendment (Budget) Act 2007 (NSW), Schedule 4 [11], inserting new sub-cl (1A) in Schedule 8, cl 1 of the Transport Administration Act. The functions of the SRA changed with these amendments, but it has not been suggested to the Court that anything turns on these new administrative arrangements. Accordingly, the SRA is and was a statutory body representing the Crown. As such, it is a part of the executive government and should conduct itself, in the conduct of litigation, in the manner expected of the executive government. 16 In this State, the relevant principles as to the proper role of the executive government were succinctly stated by Mahoney J in P & C Cantarella Pty Ltd v Egg Marketing Board (NSW) [1973] 2 NSWLR 366 at 383 in the following terms: "The duty of the executive branch of government is to ascertain the law and obey it. If there is any difficulty in ascertaining what the law is, as applicable to the particular case, it is open to the executive to approach the court, or afford the citizen the opportunity of approaching the court, to clarify the matter. Where the matter is before the court it is the duty of the executive to assist the court to arrive at the proper and just result." 17 As his Honour noted, that principle was not novel, but was to be derived from long-standing authority applied to the Crown in the United Kingdom and reflected in this country in the remarks of Griffiths CJ in The Melbourne Steamship Company Ltd v Moorehead [1912] HCA 69; 15 CLR 333 at 342. In more recent years, the obligation of the government has been described as an expectation that it will act and be seen to act as a "model litigant": see Yong v Minister for Immigration and Multicultural Affairs (1997) 75 FCR 155 at 166E (Beaumont, Burchett and Goldberg JJ). 18 In Scott v Handley [1999] FCA 404; 58 ALD 373, the Full Court of the Federal Court (Spender, Finn and Weinberg JJ) considered the appropriateness of a refusal to grant an adjournment to litigants in person who claimed they were not ready to proceed to a final hearing, in circumstances where the respondent Minister had served affidavits with new material only six days before the hearing and three months outside the time permitted at a directions hearing: at [39]. One factor considered relevant by the Full Court was that the appellants were unrepresented litigants. The second factor was that the active respondent was an officer of the Commonwealth. Their Honours continued at [43]: "As such he properly is to be expected to adhere to those standards of fair dealing in the conduct of litigation that courts in this country have come to expect – and where there has been a lapse therefrom, to exact – from the Commonwealth and from its officers and agencies." 19 After referring to Moorehead and Cantarella, their Honours noted that the principles were stated at a level of broad generalisation, and that "the burden of this fair dealing standard is best appreciated in its particular exemplifications in individual cases": at [45]. They continued: "[46] In the present instance the second respondent (i) was in a position of obvious advantage in relation to unrepresented litigants; (ii) was significantly in default in complying with procedures designed to secure the fair and orderly preparation of the matter for hearing; (iii) served the affidavits on the appellants at an extremely late date with a consequential likely impairment of their capacity to prepare properly for a final hearing; (iv) did not inform his Honour of the default and of its possible consequences; and (v) took advantage of the inability of the appellants to articulate properly the basis for, and to secure, an adjournment. In our view the conclusion is inescapable that the second respondent has fallen considerably short of the standard properly to be expected of the Commonwealth. … [48] During the course of the present hearing counsel for the second respondent acknowledged that had Mrs Scott's submission in this court been put to his Honour, he would have been hard put to resist an adjournment. That concession was properly made. We agree. The second respondent ought to have informed the trial judge of the default. Had this been done, his Honour would have had a different appreciation of the time the appellants had available to them to prepare for the hearing." 20 These principles have for some years been recognised by express statements of the executive government. At the Commonwealth they are to be found in Legal Service Directions issued by the Attorney-General issued under s 55ZF of the Judiciary Act 1903 (Cth). Similar principles were promulgated by the Government in this State in 2004. As explained by Mahoney JA in Logue v Shoalhaven Shire Council [1979] 1 NSWLR 537, the principles apply to a statutory corporation. Although in dissent as to the outcome, his Honour considered the approach adopted by the respondent Council in seeking to uphold a compulsory sale of property to recover unpaid rates, pursuant to a defective notice. His Honour noted that, "the council is a corporation constituted by statute, and discharging public functions": at 558F. He continued at 558-559: "It is well settled that there is expected of the Crown the highest standards in dealing with its subjects: see Melbourne Steamship Co Ltd v Moorehead …, per Griffiths CJ. What might be expected from others would not been seen as in full accord with the principles of equity and good conscience to be expected in the case of the Crown: see P & C Cantarella …. In my opinion, a standard of conduct not significantly different should be expected of a statutory corporation of the present kind." 21 When proceedings were commenced in the Common Law Division in the present case, challenging the refusal of the Registrar to allow the appeal to go ahead in the Commission, the SRA, as the beneficiary of the ruling in the Commission, should, and no doubt did, give proper consideration to whether the proceedings had merit and whether it should defend the order which it had obtained in the Commission. If it had been of the view that the order could not fairly be defended, it should have advised the Court of that fact and its reasons for reaching that conclusion. It was inappropriate for the SRA as a statutory corporation to stand by and in effect require the appellant to persuade the Court of the correctness of his position. 22 On the appeal, this Court expressly invited the SRA to reconsider its position and provide assistance to the Court. It declined to do so. Again, it should be assumed that, upon the institution of the appeal, the SRA gave consideration to whether it should actively defend the benefit it had obtained in the lower Court or concede that the judgment should fairly be set aside. Whatever view was formed, on appropriate advice, this Court did not have the assistance which might have been offered consistently with the view adopted by the SRA. The principles applicable to a model litigant required it to deal with claims promptly, not to cause unnecessary delay, to endeavour to avoid litigation wherever possible, not to resist relief which it believes to be appropriate and not to decline to provide appropriate assistance to the court or tribunal whether expressly sought or not. It is probable that those principles were not applied. 23 If ordered to pay the appellant's costs, the SRA will therefore obtain the benefit of a liability reduced by the absence of opposition. Given its conduct in obtaining the order in its favour from the Registrar and its failure to provide assistance to the Court at either level, it is just and reasonable that the SRA should pay the appellant's costs of the proceedings, both in this Court and in the Court below. The remaining question is whether it should pay all of those costs. 24 In submissions resisting any order for costs, the SRA sought to obtain support from the likelihood that, in accordance with Kovalev, the appellant would have been required to satisfy the Court in any event that orders should be made, even if not opposed. However, that consideration in part weighs against the SRA. A concession by the active respondent that the orders sought were appropriate, with brief reasons for that conclusion, would have been likely to limit if not avoid the need for a hearing at either stage. The respondent did not take that step. 25 Nor did the respondent suggest that there was some basis upon which the costs actually incurred by the appellant could be divided so that he might recover part only of the costs and not those which would have been inevitable because of the nature of the proceedings. That position is understandable, the court proceedings being, in a practical sense, necessary because of the stance taken by the SRA before the Registrar, opposing the appeal within the Commission. It is therefore appropriate that the appellant have the whole of his costs in this Court and in the Court below, assessed on the usual basis. The costs incurred by the appellant in these proceedings have no doubt been limited by the absence of opposition from the SRA. Conclusion 26 Although the judgment delivered in the Common Law Division on 9 February 2007 stated that the question of costs was reserved, order (2), as recorded, stated that the appellant pay "the costs of the proceedings". Order (3) provided that "[t]he costs of the deft's [sic] are payable on a submitting basis". The SRA has not suggested any reason why those orders should not be set aside. It is appropriate to add to the orders made by this Court on 21 May 2008 the following: "(6) Set aside orders (2) and (3) made by the primary judge on 9 February 2007; (7) Order the first respondent (the State Rail Authority) to pay the appellant's costs of the proceedings in the Common Law Division and in this Court on the usual basis." 27 BELL JA: I agree with Basten JA. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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