New South Wales Court of Appeal CITATION: Chubs Constructions Pty Ltd v Sam Chamma (No 2) [2010] NSWCA 225 HEARING DATE(S): On the papers JUDGMENT DATE: 3 September 2010 JUDGMENT OF: Beazley JA at 1; McColl JA at 1; Mathews AJA at 1 DECISION: Each party is to pay its and his own costs of the appeal. CATCHWORDS: COSTS – costs of appeal in work injury damages matter – Work Injury Management and Workers Compensation Act 1998, s 346 – whether s 346 governs costs in relation to an appeal against costs – Smith v Sydney West Area Health Service (No 2) [2009] NSWCA 62 - COSTS – costs of appeal in work injury damages matter – Workers Compensation Regulation 2003, cl 91 – whether cl 91 governs costs in relation to an appeal against costs – whether parties should bear their own costs of an appeal against costs - COSTS – costs of appeal in work injury damages matter – Workers Compensation Regulation 2003, cl 93 – ancillary proceedings – whether cl 93 governs costs in relation to an appeal against costs – whether the UCPR should apply in relation to costs - WORDS & PHRASES – ancillary proceeding – Workers Compensation Regulation 2003, cl 93 Civil Procedure Act 2005 Proceeds of Crime Act 1987 (Cth) Telecommunications (Interception) Act 1979 (Cth) Telecommunications (Low-Impact Facilities) Determination 1997 LEGISLATION CITED: Uniform Civil Procedure Rules 2005 Victorian Civil and Administrative Tribunal Act 1998 Workers Compensation Act 1987 Workers Compensation Regulation 2003 Workplace Injury Management and Workers Compensation Act 1998 Clutha Developments Pty Ltd v Barry (1989) 18 NSWLR 86 Director of Housing v Hutchinson 3G Australia Pty Ltd [2003] VSC 310 Fraser Credits Pty Ltd v Osterberg-Olsen [1978] 1 NSWLR 121 Martin v O'Reilly (1914) 14 SR (NSW) 277 CASES CITED: McCleary v DPP (1998) 157 ALR 301 Newcastle City Council v McShane (No 3) [2005] NSWCA 437; 65 NSWLR 155 New South Wales Crime Commission v Ollis [2006] NSWCA 76; 65 NSWLR 478 Smith v Sydney West Area Health Service (No 2) [2009] NSWCA 62 Wilson v State Rail Authority of New South Wales and Anor [2009] NSWSC 1455 Woodcroft v Director of Public Prosecutions [2000] NSWCA 128 PARTIES: Chubs Constructions Pty Ltd (Appellant) Sam Chamma (Respondent) FILE NUMBER(S): CA 2008/290162 COUNSEL: S Campbell SC; D P O'Dowd (Appellant) P Semmler QC (Respondent) SOLICITORS: Bartier Perry Solicitors (Appellant) CMC Lawyers (Respondent) LOWER COURT JURISDICTION: Supreme Court - Common Law Division LOWER COURT FILE NUMBER(S): SC 20252/05 LOWER COURT JUDICIAL OFFICER: Patten AJ LOWER COURT DATE OF DECISION: 7 May 2008 LOWER COURT MEDIUM NEUTRAL CITATION: Sam Chamma v Solima & Sons & Anor [2008] NSWSC 382 - 1 - IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL 2008/290162 BEAZLEY JA McCOLL JA MATHEWS AJA 3 September 2010 Chubs Constructions Pty Ltd v Sam Chamma (No 2) Judgment 1 THE COURT: The respondent brought a claim for work injury damages against his employer, the appellant. He also claimed damages for personal injuries against a third party. He was successful in both claims and was awarded costs, including indemnity costs from the date of the final offer he had made at the mediation of the matter. The appellant sought leave to appeal against the costs order. 2 Judgment on the appeal was given on 5 May 2009: Chubs Constructions Pty Ltd v Sam Chamma [2009] NSWCA 98, in which the Court granted leave to appeal, allowed the appeal and set aside the costs order made by the trial judge in favour of the respondent. The Court found that the respondent was entitled to costs pursuant to the Workers Compensation Regulation 2003 (the Regulation), cl 89. Accordingly, the Court ordered that the appellant pay 25 per cent of the respondent's costs at trial on a party and party basis. This reflected the proportion of the respondent's total damages that the appellant had been ordered to pay by the trial judge. 3 Mathews AJA, with whom Beazley and McColl JJA agreed, considered that "both parties to the appeal … enjoyed success and suffered failure in roughly equal measure". This was so because the appellant had succeeded in establishing error in the trial judge awarding costs on an indemnity basis. However, the Court rejected the appellant's argument that the matter was governed by the Regulation, cl 91, so that the order for costs should have been that each party bear their own costs of the proceedings. 4 Neither party had addressed what order for costs should be made on the appeal in the event of the outcome which eventuated. The Court thus gave directions for the filing of written submissions as to the costs of the appeal proceedings. Those directions were complied with by the parties. The appellant sought costs. In doing so, it indicated it wished to challenge the finding that the parties had enjoyed success in "roughly equal" measure, characterising that as a "provisional finding" of the Court. It also sought to argue that, notwithstanding the Court's decision in Smith v Sydney West Area Health Service (No 2) [2009] NSWCA 62, that proceedings in the Court of Appeal are "court proceedings" for the purposes of the Workplace Injury Management and Workers Compensation Act 1998 (the WIM Act), the Court was empowered in this case to make an order for costs pursuant to the Civil Procedure Act 2005, s 98 and the Uniform Civil Procedure Rules 2005 (UCPR), Pt 42. 5 The Civil Procedure Act 2005, s 98 provides that costs are in the discretion of the court, subject to the provisions of the UCPR and any other Act. This requires consideration, in this case, of UCPR, r 42.1, the WIM Act and the Regulation. 6 Pursuant to UCPR, r 42.1, costs follow the event, unless the court considers that some other order should be made as to the whole or part of the costs. 7 The WIM Act, s 346 provides: "(1) This section applies to costs (including disbursements) payable by a party in or in relation to a claim for work injury damages , including court proceedings for work injury damages. (2) The regulations may make provision for or with respect to the awarding of costs to which this section applies. The regulations may provide for the awarding of costs on a party and party basis, on a practitioner and client basis, or on any other basis. (3) A party is not entitled to an award of costs to which this section applies, and a court may not award such costs, except as prescribed by the regulations under this Act or by the rules of the court concerned. (4) In the event of any inconsistency between the provisions of the regulations under this section and rules of court, the provisions of the regulations prevail to the extent of the inconsistency." (emphasis added) 8 For the purposes of s 346(2), the Regulation, Pt 19, Div 3, subdiv (2) deals with costs. Relevantly, the Regulation, cls 89, 91 and 93 provide as follows: " 89 Costs where claimant no less successful than claimant's final offer "If a claimant obtains an order or judgment on a claim that is no less favourable to the claimant than the terms of the claimant's final offer of settlement in mediation under the 1998 Act as certified by the mediator under section 318B of the 1998 Act, the court is to order the insurer to pay the claimant's costs on the claim assessed on a party and party basis. (emphasis added) … 91 Costs in other cases Except as provided by this Subdivision, the parties to court proceedings for work injury damages are to bear their own costs. … 93 Subdivision does not apply to ancillary proceedings This Subdivision does not apply to costs payable in or in relation to proceedings that are ancillary to proceedings on a claim for work injury damages, and a court is to award costs in such ancillary proceedings in accordance with the rules of the court." 9 The appellant submitted that the WIM Act, s 346 did not apply because appeal proceedings relating to costs alone, as was the position here, were not proceedings "in relation to … court proceedings for work injury damages". It followed on this submission that the Civil Procedure Act, s 98 and UCPR, r 42.1 applied and that the appellant was entitled to an order for costs, unless the Court ordered otherwise. The reason for the appellant seeking to challenge the finding of a "roughly equal" outcome on the appeal was to advance its submission that it should have an order for costs, that there was no basis for the Court to make any other order and the costs order on the appeal should be that the respondent pay the appellant's costs. 10 The appellant submitted, alternatively, that if the appeal was a proceeding that was caught by s 346, then the costs of the appeal fell to be determined by the Regulation: see the WIM Act, s 346(2). In this regard, the appellant submitted that the appeal proceedings were 'ancillary proceedings' within the meaning of the Regulation, cl 93, in which case, again, the rules of court applied. The appellant contended, for the same reasons as stated above, that it was entitled to its costs unless the Court considered some other order ought to be made: UCPR, r 42.1. Again, the effect of the appellant's submission was that there was no basis for the Court to make any order other than that costs followed the event. 11 Alternatively to either of the preceding submissions, the appellant contended that the appeal proceedings were caught by the Regulation, cl 91, as being "costs in other cases" and that accordingly, each party was to bear its and his own costs of the appeal. 12 The first question to be determined, therefore, is whether the proceedings in the Court of Appeal, which was an appeal from the costs order made by the judge at first instance, fell to be governed by the WIM Act, s 346. In other words, are the costs of the appeal: "… costs … [which are] payable by a party in or in relation to a claim for work injury damages, including court proceedings for work injury damages." (WIM Act, s 346) (emphasis added) 13 In Smith the Court (Beazley, Giles and Macfarlan JJA) held that the costs of an appeal from a decision of a court in a workplace injury matter were governed by s 346 and the Regulation. The Court noted that the phrase "in relation to" in s 346 is "of particularly wide import" that extended to proceedings in the Court of Appeal. As the Court observed, at [15], the phrase "in relation to": "… is designed to catch matters that have a sufficient nexus to the subject matter of the provision: see PMT Partners Pty Ltd (In Liq) v Australian National Parks & Wildlife Service [1995] HCA 36; (1995) 184 CLR 301at 330. In O'Grady v Northern Queensland Co Ltd [1990] HCA 16; (1990) 169 CLR 356 McHugh J, at [27], commented that the phrase 'in relation to is indefinite' and required 'no more than a relationship, whether direct or indirect, between two subject matters'." 14 In reaching its conclusion in Smith, the Court considered the decision of this Court in Newcastle City Council v McShane (No 3) [2005] NSWCA 437; 65 NSWLR 155. That decision related to the cost capping provisions of the Legal Profession Act 1987 in respect of certain classes of personal injury litigation. Mason P (Giles JA and Hunt AJA agreeing) held, at [46], that where an appeal is "necessarily directed at vindicating a party's legal rights" those rights are "in turn connected with the claim … to some degree at least". 15 Smith and Newcastle were different from this case, in that in each of those cases, the appeal involved the issue of liability. In the case of Newcastle, the matter was procedurally more complicated in that there was also an application for a stay, the appellant required leave to appeal and the respondent had sought leave to cross-appeal. In this case, the Court on the appeal (leave having been granted to appeal) was only concerned with the costs order made by the primary judge. It is thus necessary to determine whether an appeal from a costs order has the necessary relationship with a claim for work injury damages, so as to fall within s 346. 16 In Newcastle, Mason P, in considering whether the appellate proceedings in that case were "in connection with the … claim" for personal injury damages, noted, at [18], that subject to the question of leave, the appeal was by way of rehearing; both duty of care and breach were in dispute in the Court of Appeal; and the respondent had sought to challenge quantum. His Honour then observed that: "In all of these senses, the legal services provided in and for the proceedings in the Court of Appeal were intimately connected with the plaintiff's claim for personal injury damages." 17 Mason P acknowledged the appellant's submission that an appeal was distinguishable from a hearing at first instance in that, for example, a decision at first instance was final unless set aside and the trial was the place where evidence was brought forward. Nonetheless, as his Honour said, at [35]: "These considerations … do not assist the plaintiff in constricting the fair reading of the words 'legal services provided to a party in connection with the claim' in s 198D(1). And they offer no basis for treating any and every foray into the Court of Appeal or any post-trial proceedings referable to a claim as outside the scope of s 198D(1). It may have been different if the provision had spoken of the plaintiff's costs incurred in making the claim, but this is not the language of the section." 18 Relevantly to the present question, his Honour observed, at [36]: "Several examples show the difficulty in drawing any bright line of exclusion. What about proceedings in the trial court after verdict, for example concerning costs, invoking the slip rule, or seeking a stay? What about an interlocutory appeal referable to the grant or refusal of an extension of time or some key evidentiary ruling? What about a retrial, whether ordered by the court at first instance or the Court of Appeal?" 19 There was no need for his Honour to answer the several questions he posed, as he concluded that an appeal that sought to challenge the verdict was self-evidently "in connection with" the original claim. However, the first of the questions posited by his Honour arises directly for consideration in this case. 20 As already indicated, the respondent made a claim for work injury damages against the appellant, his employer. There was no challenge to the verdict or to the award of damages. The appeal to this Court was, by leave, in respect of the trial judge's costs order. Section 346 makes specific provision for the costs "in or in relation to a claim for work injury damages, including court proceedings for work injury damages". An entitlement to costs is a valuable legal right which is part of, or is connected with, the work injury damages claim. With this in mind, an appeal with respect to costs is properly characterised as being "necessarily directed at vindicating a party's legal rights": see Newcastle at [46]. In our opinion, an appeal in respect of costs ordered in a court proceeding for work injury damages has a sufficient, indeed an obvious nexus to such proceedings, so as to fall within s 346(1). The appellant's attempt to distinguish Smith should be rejected. 21 This leads to the appellant's second submission, that if the Regulation applies, the appeal was "ancillary to proceedings on a claim for work injury damages" within the meaning of that term in cl 93, so that costs were governed by the UCPR, r 42.1 and, therefore, the usual rule that costs follow the event should apply. 22 The term 'ancillary' is not defined in the WIM Act, the co-ordinate Workers Compensation Act 1987, or the Regulation. The appellant referred to a number of synonyms of the term: viz, subservient or subordinate, accessory or auxiliary, incidental. These synonyms are consistent with the Macquarie Concise Dictionary 1996 definitions of accessory and auxiliary (when used as an adjective), and an accessory, subsidiary, or helping thing or person (when used as a noun). 23 The word "ancillary" has been considered in the following cases to which the appellant referred: McCleary v DPP (1998) 157 ALR 301; Director of Housing v Hutchinson 3G Australia Pty Ltd [2003] VSC 310; and New South Wales Crime Commission v Ollis [2006] NSWCA 76; 65 NSWLR 478. 24 In McCleary v DPP the Full Court of the Supreme Court of Western Australia considered whether proceedings for enforcement of an undertaking, given in relation to a restraining order, were exempt proceedings for the purposes of the Telecommunications (Interception) Act 1979 (Cth), s 6K. In that case, s 6K which expanded the definition of a proceeding under that Act, had been amended to include, at (c)(i): "… a proceeding by way of an application for a restraining order or an order that is ancillary to a restraining order under [the Proceeds of Crime Act]." (emphasis added) 25 The Full Court held, at 332: "The proceedings for the enforcement of the Commonwealth's undertaking are brought by reason of the fact that the undertaking was given pursuant to s 44(10) in support of the application for a restraining order, and the undertaking becomes open for enforcement because the restraining order has expired. The giving of the undertaking has a close and direct connection with the restraining order. While proceedings for the enforcement of the undertaking are not supplementary or incidental to the main relief (the latter being the obtaining of the restraining order), the enforcement proceedings are incidental and subordinate to the restraining order as they are dependent on the grant of the restraining order and the expiry thereof … on this basis, the proceedings for the enforcement of the undertaking are ancillary to the restraining order." (emphasis added) 26 Director of Housing v Hutchinson 3G concerned an appeal from a decision of the Victorian Civil and Administrative Tribunal regarding the interpretation of the phrase "low-impact facility" under the Telecommunications (Low-Impact Facilities) Determination 1997. It was in this context that the Court considered the definition of the term 'ancillary', which was not defined in the Victorian Civil and Administrative Tribunal Act 1998, or the 1997 Determination. In its reasoning the Court referred, with approval, to the dictionary definition of 'ancillary': viz, accepting it to mean "accessory; auxiliary". 27 In Ollis Giles JA explored the meaning of 'ancillary orders' in the context of the Criminal Assets Recovery Act 1990, s 12, which provided that the Supreme Court may make "ancillary orders" when it makes a restraining order under the Act. The "ancillary orders" included, but were not confined to, certain enumerated matters. His Honour held, at [60]: "The derivation of the term 'ancillary' is evocative, but does little to identify the bounds within which it must operate in a particular statutory context … In the present case, the term must take its meaning from the kinds of orders which the Parliament envisaged could be properly described as 'ancillary orders' without, as the provision states, 'limiting the generality of' the power. They include orders varying the interests in property to which the restraining order relates (par (a)), an order for the examination of any person on oath in relation to the location of property the subject of a restraining order (par (b)), orders with respect to the carrying out of any undertaking with respect to the payment of damages or costs (par (c)), and orders requiring or authorising the seizure or taking possession of property (par (e))." 28 Giles JA referred, at [28], to his decision in Woodcroft v Director of Public Prosecutions [2000] NSWCA 128 at [72], where his Honour had held, in relation to the Proceeds of Crime Act 1987 (Cth), s 48(1) that in order to be ancillary, an order "must be ancillary to something, here to the restraining order, in that it is incidental or supplemental to it". 29 The appellant also relied upon Clutha Developments Pty Ltd v Barry (1989) 18 NSWLR 86 where Gleeson CJ (Samuels and Priestley JJA and Hope AJA agreeing; Kirby P dissenting) referred to a number of examples of "ancillary proceedings" such as applications: for further and better particulars; for discovery; for change of venue; for examination of medical witnesses; and a variety of similar matters. An appeal, including in respect of costs did not appear in the Chief Justice's list, which, it must be said, included obvious examples of ancillary proceedings, that is, proceedings subsidiary to the main litigation. 30 The appellant's particular reliance on Clutha, however, was for its endorsement of an earlier decision of the Court in Fraser Credits Pty Ltd v Osterberg-Olsen [1978] 1 NSWLR 121 and the importance given by the Court in Fraser Credits to the decision of Martin v O'Reilly (1914) 14 SR (NSW) 277, where it was held that no appeal lies from the order of a District Court judge for a summons for a review of the taxation of costs. The appellants submitted that Martin: "… may be taken as authority for the idea that in context proceedings solely in respect of costs are ancillary to the principal proceedings." 31 In the Court's opinion, Martin does not assist in the determination of this matter. A summons seeking to review the amount of costs that had been assessed in accordance with the procedures for the taxation of costs is of a different nature to a substantive order for costs. A substantive order for costs can be the subject of enforcement once assessed. However, a review of the amount of costs only results in a determination of the costs that may be recovered by enforcement, if necessary. Proceedings for a review of the amounts of costs, as in Martin, are truly ancillary to the substantive order for costs made in this proceeding. 32 The researches of the Court reveal that there is at least one decision dealing with the proper application of cl 93, although, again, it did not deal with the precise question in issue here. In Wilson v State Rail Authority of New South Wales and Anor [2009] NSWSC 1455 it was claimed that the determination of a separate question was an ancillary proceeding under cl 93. Hidden J held, at [9]: "The ambit of the word 'ancillary' in cl 93 is unclear, and [counsel] referred me to no authority bearing upon it. However, whatever its ambit might be, the proceedings I heard were anything but ancillary. They led to a finding that the plaintiff's claim faced an insuperable procedural barrier, such that it had to be dismissed. Whether or not a motion under Pt 28 r 2 might generally be classified as ancillary, the effect of the motion before me was the final disposition of the proceedings ." (emphasis added) 33 His Honour's last comment draws a contrast between matters that are ancillary in the sense of being incidental, such as an order for particulars, for discovery or for change of venue, as discussed above, and orders that are final. On an appeal, the orders made by the Court involve a final disposition of the appeal. This is so even where the Court orders that a matter be remitted for rehearing. In any event, we cannot see that an appeal could ever be described as an ancillary proceeding. An appeal against the costs awarded in court proceedings for work injury damages is itself a proceeding in which one of the substantive orders made by the lower court are challenged. It is not incidental, or subsidiary or auxiliary to the proceedings at first instance, either in the ordinary meaning of the term 'ancillary' or in the same sense as the applications to which we have referred. 34 It follows, in our opinion, that the appellant's appeal in respect of the costs awarded by Patten AJ was not an ancillary proceeding within the Regulation, cl 93. 35 That leaves for consideration the appellant's third argument: that the appeal was governed by the Regulation, cl 91 which provides that except as provided by the other clauses in the Regulation, Pt 19, Div 3, subdiv (2), the parties to court proceedings for work injury damages are to bear their own costs. 36 In this regard, the respondent contended that the costs of an appeal from the costs orders made at the conclusion of and in consequence of, an award of work injury damages are costs "on the claim" within the meaning of the Regulation, cl 89. The respondent pointed out that his final offer of settlement at the mediation was less favourable than the order he obtained at trial, so that he was thereby entitled to his costs of the proceedings in accordance with cl 89. He submitted that cl 89 also governed the costs of the appeal. The respondent contended, therefore, that compliance with cl 89, as held by the primary judge (and confirmed on appeal to this Court) entitled him to his costs of this appeal. 37 The resolution of this question is not without difficulty. Clause 89 provides that the court is to order the insurer to pay the claimant's costs on a party and party basis in circumstances where the claimant obtains an order no less favourable than the claimant's final offer at mediation. The trial judge erred in making the costs order, as his Honour ordered that part of the costs be paid on an indemnity basis. That is not the basis upon which costs are payable under cl 89. On the appeal, the appellant also challenged the trial judge's order for costs on the basis that cl 91 applied, so that each party was to pay its own costs. The Court rejected that argument and held that cl 89 operated, so that the respondent was entitled to an order for costs on a party and party basis. 38 The final offer made at the mediation is set out at [9] of the principal judgment. Relevantly, the offer was a joint offer to both defendants that the economic loss component of the claim be settled for $500,000 plus costs. The offer did not distinguish between the two defendants as to the quantum or percentage each should pay, either of economic loss, or of costs. Nonetheless, the trial judge held that the offer fell within cl 89 as the respondent obtained an order or judgment that was no less favourable than the terms of its final offer. 39 For the reasons given in the Court's principal judgment, we found that his Honour was correct in so finding, but had erred in ordering that part of those costs be awarded on an indemnity basis. It followed that the respondent was entitled to an order for costs, those costs to be on a party and party basis. 40 It is difficult to see that the costs of the appeal, which related only to costs, fall within cl 89. The costs that are dealt with by cl 89 are the costs to be awarded on a claim for work injury damages if the judgment obtained by the claimant is no less favourable to the claimant than the terms of the claimant's final offer at the mediation. The appeal to this Court was not "on the claim", as cl 89 requires, but in respect of the costs that the trial judge ordered on the claim. As cl 89 does not apply, the matter is governed by cl 91, so that the parties are to bear their own costs of the appeal. 41 We would only add that even if we had reached a different conclusion as to the construction of the Regulation and found that this was a matter where the Civil Procedure Act and the UCPR applied, we would still have ordered each of the parties to bear their own costs of the appeal. This is so notwithstanding the attempts by the appellant in the affidavit evidence it sought to file to demonstrate that the finding that the parties had "roughly equal" measure of success and failure on the appeal was erroneous. 42 The appellant advanced two issues on the appeal. It succeeded on one, the indemnity costs issue, and lost on one, that is, whether the respondent was entitled to an order for costs. The respondent unsuccessfully sought to retain the order for indemnity costs, but succeeded in maintaining the order for costs in its favour. Overall, the time spent on the arguments was slightly longer in respect of the issue on which the appellant lost, but not in such a degree as to interfere with the assessment the Court made of success and failure in "roughly equal" measure. Accordingly, even if we gave leave for the appellant to file its affidavits, they would not have persuaded us that the finding we made in the principal judgment on the appeal as to the degree of success and failure of the parties, was wrong. 43 The Court makes the following order: Each party is to pay its and his own costs of the appeal. ********* DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. 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