Birdsall v Motor Trades Association of Australia Superannuation Fund Pty Ltd

Introduction 1HIS HONOUR: In this matter, I delivered principal reasons for judgment on 27 May 2014, the medium neutral citation of which is Birdsall v Motor Trades Association of Australia Superannuation Fund Pty Ltd [2014] NSWSC 632 ("the principal judgment"). 2In the principal judgment, I found, in summary, that, in making its decision to decline the claim, the Insurer (the second Defendant, MetLife Insurance Pty Ltd) and the Trustee (the first Defendant, the Motor Trades Association of Australia Superannuation Fund Pty Ltd) each failed to take into account that the Plaintiff, Mr Robert Birdsall, had made applications for many different alternative employment positions without success. Whilst there was a specific reference to the Allianz worker's compensation file, in which a copy of those applications was to be found, there was simply no reference, in either of the letters declining the claim, to those applications, or to the Plaintiff's many attempts to obtain alternative employment. I considered that this was a relevant matter that each ought to have considered and it was unreasonable for each not to do so. However, my analysis of the whole of the evidence led me to conclude that there were specific areas of work available that the Plaintiff was reasonably capable of performing by reason of education, training or experience and that he had the ability to engage in such work for reward, in an intellectual sense, as well as by reference to his education, training or experience, and also by reference to his medical condition. Therefore, I concluded that the Plaintiff was not within the definition of Total and Permanent Disablement ("TPD") in the Policy and the Trust Deed. It followed that the Plaintiff's claim was to be dismissed. 3The current issue is one of the costs of the proceedings. I gave the parties the opportunity to file written submissions on the question of costs which each has now done. Those submissions, of course, will remain with the court papers. 4The parties consented to the issue of costs being determined on the papers and in Chambers. This avoided some further costs being incurred. 5The Defendants seek an order for costs. They say that the usual rule should apply and that costs should follow the event. They seek their costs, calculated on the ordinary basis, as agreed or assessed. 6The Defendants, whilst accepting that they did not succeed on the whole of the case, also submit that, ultimately, the court came to the same conclusion, as did the Insurer and the Trustee, namely that the Plaintiff was not entitled to the benefit claimed. They submitted that he could not be regarded as having had "success in the proceedings in any real or practical sense". 7Finally, the Defendants submitted: "5. On 20 June 2014, the defendant's solicitors made an open offer to the plaintiff to accept a fixed sum of $20,000 (less than 50% of their costs incurred) to avoid the parties incurring the costs of a further hearing and assessment of costs. A copy of the open letter is enclosed with these submissions. The defendants have not at the date of drafting these submissions received a response (and no criticism of the plaintiff is intended given the relatively short period of time the plaintiff has had to consider it.) However, on 24 June 2014 the plaintiff serve [sic] a Notice of Appeal and it is assumed that the open offer is rejected." 8The Plaintiff submitted that he sued to recover a benefit payable under an industry superannuation scheme, under which scheme there was a "reasonable shared expectation that benefits will actually be available as contemplated". He relied upon Sayseng v Kellog Superannuation Pty Ltd [2003] NSWSC 945, per Bryson J, at [59]. 9He also submitted that membership of that scheme was an incident of his employment, and it was accepted, by the court, that his symptoms, complaints and claimed restrictions on his activities were genuine. It was also accepted that he was motivated to find alternative employment. Furthermore, he had succeeded on the "jurisdictional issue", the court having found that the Defendants had acted unreasonably in failing to consider the fact that the Plaintiff had been unable to obtain employment despite having made in excess of 50 applications for alternative employment positions. 10The Plaintiff also submitted that "[h]istorically, except in cases of frivolity or vexation, courts have not ordered unsuccessful employees to pay their opponents' costs of litigation conducted for the pursuit of entitlements associated with employment - see e.g. s 112(3) Workplace Injury [and Workers Compensation] Management Act 1998 [(NSW)]; s 181(2) Industrial Relations Act 1996 [(NSW)]". 11For those reasons, the Plaintiff submitted he should not have to pay the Defendants' costs of the proceedings.

The Legal Framework 12The Civil Procedure Act 2005 (NSW), s 98(1), provides that, subject to the rules of court, and that, or any other, Act, costs are in the discretion of the court. The discretion extends to the costs of all proceedings whatsoever, and the court has full power to determine by whom, to whom, and to what extent, costs are to be paid. It is a judicial discretion to be exercised on a principled basis. 13It is clear that the discretion to award costs is unconfined or "absolute and unfettered" (Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534 per Dawson J, at 557). However, it must be exercised judicially, that is, according to relevant considerations, and taking account of the contextual features and facts of the litigation. 14The purpose of a costs order is to compensate, or indemnify, the person in whose favour it is made, not to punish the person against whom it is made: Ohn v Walton (1995) 36 NSWLR 77, at 79, per Gleeson CJ (as his Honour then was). 15As was noted (albeit in another context), in Kazar (Liquidator) v Kargarian; In the Matter of Frontier Architects Pty Ltd (In Liquidation) [2011] FCAFC 136, at [9] (by Greenwood and Rares JJ): "The exercise of the discretion takes account of all of the contextual circumstances of the litigation and the conduct of the parties. One aspect of the award of costs is a recognition that a party has been put to expense which, taking account of the merits as ultimately found on the trial of the action, might otherwise have been avoided. That consideration does not infuse the award of costs with any sense of penalty or punishment but simply recognizes the compensatory nature of an award of costs, in context and according to principle. That is why an award of costs, although involving the exercise of a discretion, generally favours the successful party. As to the importance the community attaches to legal costs incurred of and incidental to the resolution of controversies before courts, see Clark v Commissioner of Taxation [2010] FCA 415 at [90]; Uniline Australia Ltd v S Briggs Pty Ltd (No. 2) [2009] FCA 920; (2009) 82 IPR 56 at [38]; and, Sagacious Legal Pty Ltd v Wesfarmers General Insurance Ltd [2011] FCAFC 53 at [130] to [132]." 16The default position on costs, pursuant to Uniform Civil Procedure Rules 2005 (NSW) ("UCPR"), rule 42.1, is that 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. The "event" is generally taken to be the practical outcome of the proceedings. 17The rule provides that the discretion to award costs, ordinarily, will require an order that the successful party's costs will be paid by the unsuccessful party. The power to "make any order as to costs" enables the court, in an appropriate case, to depart from the general rule if it would be unjust to apply it. Thus, there is flexibility in determining questions of costs. Again, the rule extends to the costs in any proceedings. 18Whilst the discretion provides flexibility in determining how costs are borne, the rule supports the principle that, so far as possible, the determination of costs should be predictable and expeditious. 19UCPR rule 42.2 provides: "Unless the court orders otherwise or these rules otherwise provide, costs payable to a person under an order of the court or these rules are to be assessed on the ordinary basis." 20Ultimately, the Civil Procedure Act and the UCPR require the court to make such costs orders as it thinks just in the particular circumstances of the case: Bullabidgee Pty Ltd v McCleary (No 2) [2011] NSWCA 343, at [10]. 21Black J, in In the matter of Employ (No 96) Pty Ltd (In Liquidation) [2013] NSWSC 456, at [7], commented: "The principles underlying an award of costs include that costs are awarded to compensate the successful party for the expense of being put to the necessity of litigation; a wholly successful defendant should ordinarily receive its costs unless good reason is shown to the contrary; and the discretion to order costs must be exercised judicially and not against the successful party except for some reason connected with the proceedings: Milne v Attorney-General (Tasmania) [1956] HCA 48; (1956) 95 CLR 460 at 477; Oschlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 at 97-98 per McHugh J, at 129-123 per Kirby J; Ruddock v Vardalis (No 2) [2001] FCA 1865; (2001) 115 FCR 229 at 234. In Howard's Storage World Pty Ltd v Haviv Holdings Pty Ltd [2010] FCAFC 5; (2010) 182 FCR 84, Gray J observed at [17] that: 'The overriding principle that costs are in the discretion of the court can also be expressed in terms of the negative proposition that no rule or principle should be applied mechanically in the determination of the question where costs should lie in any particular case. Attention must always be paid to the particular circumstances of the individual case. The aim is to do substantial justice in relation to costs, based on the outcomes of the various issues in the proceeding, as between the entities that are parties to that proceeding.'" 22Section 98(4) of the Civil Procedure Act provides: "In particular, at any time before costs are referred for assessment, the court may make an order to the effect that the party to whom costs are to be paid is to be entitled to: (a) Costs up to, or from, a specified stage of the proceedings, or (b) A specified proportion of the assessed costs, or (c) A specified gross sum instead of assessed costs, or (d) Such proportion of the assessed costs as does not exceed a specified amount." 23In Commonwealth of Australia v Gretton [2008] NSWCA 117, Hodgson JA (with whom Allsop P and Campbell JA agreed), at [121], wrote: "In my opinion, underlying both the general rule that costs follow the event, and the qualifications to that rule, is the idea that costs should be paid in a way that is fair, having regard to what the court considers to be the responsibility of each party for the incurring of the costs. Costs follow the event generally because, if a plaintiff wins, the incurring of costs was the defendant's responsibility because the plaintiff was caused to incur costs by the defendant's failure otherwise to accord to the plaintiff that to which the plaintiff was entitled; while if a defendant wins, the defendant was caused to incur costs in resisting a claim for something to which the plaintiff was not entitled: cf Ohn v Walton (1995) 36 NSWLR 77 at 79 per Gleeson CJ. Departures from the general rule that costs follow the event are broadly based on a similar approach." 24In the present case, because of the Plaintiff's submission that he had succeeded on the "jurisdictional issue", it is necessary to refer to an additional principle, being that, unless a particular issue is clearly dominant or separable, it will ordinarily be appropriate to award the costs of the proceedings to the successful party without attempting to differentiate between those particular issues on which it was successful and those in which he, or she, failed: Waters v PC Henderson (Aust) Pty Ltd [1994] NSWCA 338; (1994) 254 ALR 328. 25In Tomanovic v Global Mortgage Equity Corporation Pty Ltd (No 2) [2011] NSWCA 256, at [107], Campbell JA, after referring to Waters v PC Henderson (Aust) Pty Ltd, added: "In the application of that principle, an issue or group of issues is 'clearly dominant' when it is clearly dominant in the proceedings as a whole." 26More recently, in Coshott v Barry [2014] NSWSC 238, Adams J, at [8], wrote: "A successful party will usually be entitled to costs, although it may be sometimes appropriate to make an adjustment as to the extent of that entitlement if, although the result favoured the party, issues were raised in the proceedings as to which the other party was successful. However, differentiation between issues on which the party ultimately successful failed will generally not be attempted unless a particular issue or group of issues is clearly dominant or separable. Ordinarily, costs of the proceedings should be awarded to the successful party without attempting such a differentiation. Even where such differentiation is appropriate, variation of the usual order as to costs will rarely be made if the matters in respect of which the ultimately successful party failed did not take up a significant part of the trial, either by way of evidence or argument. This is a matter of fact and degree, as to which the court has a wide discretion: Elite Protective Personnel Pty Ltd & Anor v Thomas Salmon (No 2) [2007] NSWCA 373 at [6] - [11]; Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 at [38]."

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