Board of Examiners v XY [2006] VSCA 190

1 On 26 February 2003 the appellant, the Board of Examiners ("the Board"), determined to refuse to certify for the purposes of the Legal Practice Act 1996 ("the Act") that the respondent, to whom I shall refer, as his Honour did, as "Ms XY", was a fit and proper person to be admitted to legal practice in this State. Ms XY appealed against that decision pursuant to s.342(1) of the Act and, after hearing the matter de novo, on 15 July 2005, a judge of the Trial Division upheld the appeal. On 15 August 2005 his Honour ordered that the Board pay Ms XY's costs of the appeal. The Board now appeals against the costs order by leave granted by this Court on 7 October 2005 on condition that it pay Ms XY's costs of the appeal on an indemnity basis in any event.

Scheme for admission to legal practice

2 Before considering the merits of the appeal, it is necessary to mention briefly the relevant aspects of the statutory structure that governed the admission of persons to legal practice in this State at the relevant time and the circumstances relating to Ms XY's application to the Board for a certificate that she was a fit and proper person to be admitted to practice. I turn first to the legislative framework. That was contained in the relevant provisions of the Act, the Legal Practice (Admission) Rules ("the Admission Rules")[1] and Chapter II of the Supreme Court Rules 1998.[2] So far as is relevant, s.6(1)(a) of the Act recognised the Supreme Court's power to admit a person to legal practice where he or she has met the requirements of the Admission Rules. Importantly, it was the Board that had the responsibility for determining, in the first instance, whether these conditions were satisfied. One of the requirements of the Admission Rules was that the applicant demonstrate to the satisfaction of the Board that he or she was a fit and proper person to be admitted and, upon that requirement being met, the Board was obliged to provide to the applicant a certificate to that effect in terms of Schedule 14 to the Act.[3] The applicant was then required[4] to produce the certificate to the Court, and it was on the basis of that certification that the Court would ordinarily order that the applicant be admitted to legal practice.

Matters before Board

3 The background circumstances to this appeal were these. In March 2002, Ms XY, who was then aged approximately 30 years, applied to the Board for a Schedule 14 certificate and in support of the application filed material which relevantly disclosed that for a period prior to her application for admission, she had experienced certain mental problems and had been charged with a considerable number of criminal offences involving violence on her part. The material is described in his Honour's comprehensive reasons for judgment and it is not necessary to restate it here. But in order to appreciate the difficult situation that faced the Board in respect of that application I shall set out the gist of what it disclosed. Thus, the Board was told that Ms XY was sexually abused as a child and that, primarily as a result of this, she developed alcohol and substance abuse problems. Nevertheless, she successfully completed school and commenced to study for degrees in Arts and Law. In 1992, after temporarily withdrawing from her studies, Ms XY overdosed on prescription medicines and, between July 1992 and July 1993, attempted self harm on numerous occasions. In August 1992, she was charged with a number of offences arising out of one of these incidents - namely, refusing to provide information to police, resisting arrest and assaulting protective officers and police - that were struck out because of her mental illness. At this time, Ms XY was diagnosed with borderline personality disorder with impulsive disruptive behaviour and self-mutilation risk and spent some time in psychiatric institutions. Although her mental health improved in 1993, it deteriorated in the following year and she was involved in further offending conduct, including violent behaviour on her part that continued on and off between 1994 and 1998. Furthermore, her mental condition during this period was such that, on a number of occasions, she was admitted to psychiatric hospitals. In order to indicate the seriousness of Ms XY's conduct and her mental state, I mention by way of example that her behaviour included abusive telephone calls to police and others, threats to kill a police officer, threats to inflict serious injury, assaults, attempts to commit self harm, resisting arrest and criminal damage to property. During the relevant period, said his Honour, Ms XY drank heavily, up two to three litres of wine per day. Nevertheless, as his Honour pointed out, she ceased drinking in 1998, and in 2000, she completed her Bachelor of Laws Degree with third class Honours, "a remarkable achievement", as the learned judge noted.

4 All this, as I have said, was disclosed by Ms XY to the Board. But she did not disclose four incidents that were plainly relevant to her application.[5] In respect of two of the incidents his Honour accepted Ms XY's explanation for non-disclosure and they can be put to one side. But the learned judge considered that the failure by her to disclose the other two incidents ("the serious incidents") raised "more serious issues". The first incident was the termination of her position as a volunteer at a community legal service due to her offensive attitude and conduct towards another volunteer (seemingly only because he was a policeman) that cumulated in her saying to him "I hope they kill you. I hope they kill you before you retire. I hope they kill you". The second serious incident that Ms XY did not initially disclose to the Board occurred in March 2000 while she was staying at a meditation centre. It seems that, after consuming Serapax tablets, she used a knife to rip a mattress in her room. She also broke a mirror and wrote on the wardrobe that the other residents were impure. On the next day, when one of the residents tried to stop her from leaving, Ms XY told him that if he did not let her go she would stab herself with a pocket knife that she had taken out of her backpack. In the result, she was admitted to the Emergency Department of the local hospital. Ms XY was not charged in relation to these events and, later, paid $1,000 to compensate for the damage she had caused.

5 His Honour noted that the Board gave two reasons for refusing Ms XY's application. Essentially, the first was that she was "not fit to engage in legal practice at this time". His Honour said that this conclusion was hardly surprising given that the material disclosed that Ms XY continued to have mental problems. As his Honour said, the evidence of Dr Hacker, a psychiatrist, was that "the applicant continued to be dissociative and affected by post-traumatic stress disorder and long standing borderline personality disorder". The second ground for refusal, his Honour noted, was failure by Ms XY to disclose at the time of lodging her application the four incidents to which I have referred.

Matters before his Honour

6 It has already been mentioned that Ms XY's appeal against the Board's decision involved a hearing de novo. At the hearing, the Board's counsel told his Honour that they were present to assist the court by highlighting factors which the Board considered were relevant to the determination of the ultimate question, namely, whether Ms XY was a fit and proper person to be admitted to practice. In support of her appeal, Ms XY filed three further affidavits sworn by her, one of which was 61 pages long. She also filed seven affidavits from people attesting to her good character and her satisfactory work with voluntary legal services. The material included affidavits by Dr Hacker, a second consultant psychiatrist, Dr Josephine Beatson and a psychologist, Ms Jill Mancini. As part of the Board's preparation for the appeal its solicitor proposed to Ms XY, and she agreed, that she should submit to an examination by an independent psychiatrist. That proposal resulted in a report dated 30 August 2004 from Dr Prager, that was prepared consequent upon three two hour interviews with Ms XY. Importantly, Dr Prager's conclusion essentially echoed that of the other relevant witnesses, namely, that Ms XY no longer suffered from the previously mentioned mental problems and that, psychologically, she could cope with the pressures of legal practice.

7 In his reasons for judgment, his Honour said that, like the Board, he considered that there were two issues that governed the outcome of Ms XY's application for admission to legal practice - first, whether, given her past conduct and mental health, she should be regarded as being a fit and proper person to be admitted to practice and, secondly, whether her failure to disclose the above incidents disqualified her from being considered a fit and proper person for admission.

8 As to the first issue, his Honour noted that the unexplained lengthy delay in the hearing of the appeal had worked in Ms XY's favour because of the psychiatric evidence that was before him to the effect that she was no longer suffering from mental illness. On the basis of what he called strong and virtually unanimous expression of opinion from medical experts, his Honour said that he was satisfied that Ms XY's mental health was such that she was "now" fit to engage in legal practice.

9 In relation to the issue of non-disclosure, his Honour considered that, in the circumstances, it did not make her a person unfit for admission to legal practice. As to the first serious incident his Honour said that, although Ms XY should have disclosed it to the Board, he considered that her failure to do so was, in circumstances that need not be described here, an error of judgment rather than a deliberate attempt to mislead. His Honour was of the view that the failure to disclose the second serious incident also did not warrant a refusal to grant the certificate.

10 Thus, his Honour concluded, Ms XY had discharged the burden of showing that she was now a "fit and proper person" to be admitted to legal practice.

11 In his reasons for judgment on the question of costs, his Honour recognised that there were factors applicable to the case before him, to which I will refer later, that would ordinarily warrant no order as to costs notwithstanding Ms XY's success in the appeal. But his Honour concluded that, having regard also to the "significant" financial burden on Ms XY of having to repay Victoria Legal Aid the legal expenses incurred in representing her on the appeal, it would be just and reasonable for costs to be awarded in her favour "in the normal way". As I have noted, it is against the costs order that the Board now appeals.

Parties' respective submissions on appeal

12 Mr Hurley for the Board accepted that the court had a wide, and relevantly unfettered, discretion on the question of costs and that, as in any case of an attack on a discretionary decision, it was for the Board to establish that, in coming to the impugned conclusion, his Honour erred in principle or that his decision is plainly wrong.[6] Counsel argued that, in exercising his discretion on the question of costs, his Honour so erred in a number of respects with which I will deal later. For present purposes it is sufficient to note that it was claimed for the Board that, in exercising the costs discretion, his Honour effectively treated the proceeding before him as if it were an ordinary civil proceeding without giving any or any due weight to the special position of the Board and the role it played in the appeal. It was also said that in making the costs order, his Honour did not give sufficient recognition to his finding that the impugned decision was correct, given the material that Ms XY had placed before it. Counsel also contended that Ms XY's financial stress was irrelevant to the exercise of the costs discretion.

Costs discretion

13 As I have noted, it was common ground that the court's discretion on the question of costs is wide and relevantly unfettered.[7] In general terms, however, a successful party is justified in having a reasonable expectation that its proper costs of the proceeding would be paid by the unsuccessful party. But clearly there is no such right and the court may, depending on the circumstances, make a costs order on other terms. In Donald Campbell & Co v. Pollak[8] Viscount Cave, L.C. said:

"My Lords, it appears to me that the true view is substantially that taken by Lord Sterndale in the above quoted passage in Ritter v. Godfrey ... . A successful defendant in a non-jury case has no doubt, in the absence of special circumstances, a reasonable expectation of obtaining an order for the payment of his costs by the plaintiff; but he has no right to costs unless and until the Court awards them to him, and the Court has an absolute and unfettered discretion to award or not award them. This discretion, like any other discretion, must of course be exercised judicially, and the judge ought not to exercise it against the successful party except for some reason connected with the case. Thus, if - to put a hypothesis which in our Courts would never in fact be realized - a judge were to refuse to give a party his costs on the ground of some misconduct wholly unconnected with the cause of action or of some prejudice due to his race or religion or (to quote a familiar illustration) to the colour of his hair, then a Court of Appeal might well feel itself compelled to intervene. But when a judge, deliberately intending to exercise his discretionary powers, has acted on facts connected with or leading up to the litigation which have been proved before him or which he has himself observed during the progress of the case, then it seems to me that a Court of Appeal, although it may deem his reasons insufficient and may disagree with his conclusion, is prohibited by the statute from entertaining an appeal from it."

The purpose of a costs order and its underlying rationale were more recently explained by McHugh, J in Latoudis v. Casey:[9]

"An order for costs indemnifies the successful party in litigious proceedings in respect of liability for professional fees and out of pocket expenses reasonably incurred in connexion with the litigation: ... The rationale for the order is that it is just and reasonable that the party who has caused the other party to incur the costs of litigation should reimburse that party for the liability incurred. The order is not made to punish the unsuccessful party. Its function is compensatory. Thus, in civil proceedings an order may, and usually will, be made even though the unsuccessful party has nearly succeeded or has acted reasonably in commencing the proceedings. It may, and usually will, be made even though the action has failed through no fault of the unsuccessful party. In Cilli v. Abbot, Keely, Toohey and Fraser, J.J. pointed out that 'the object of costs is not to penalize; it is to indemnify the successful party in regard to expenses to which he has been put by reason of legal proceedings'..."

Consistently with this explanation, Dawson, J.[10] and McHugh, J.[11] made it apparent in Latoudis that, generally, a successful litigant is entitled to have a reasonable expectation of obtaining an order for costs in its favour unless its conduct relating to the case was such that it would be unjust for the order to apply. But it is plain enough from what their Honours said that this was a rule of general application in ordinary civil proceedings and there was no suggestion that it fettered the court's overall discretion in the matter.

14 In Oshlack v. Richmond River Council the majority,[12] consistently with the views of Viscount Cave, L.C. in Pollak, emphasised that the court's discretion is unfettered by any such general rule and that, in the circumstances of that case, the trial judge did not err in declining to order costs in favour of the successful council against a plaintiff who had brought the proceeding, essentially, in the public interest, seeking a declaration that the council's consent to the proposed development was void. It is important to note the principal circumstances of the case that were relevant to the exercise of the costs discretion. First, the legislation under which the proceeding was brought relieved the plaintiff from the obligation to satisfy the usual requirements of standing. Secondly, the act provided that the costs of and incidental to proceedings in court were in its discretion. Next, the plaintiff had no personal interest in the outcome of the proceedings, being motivated in bringing it by a desire to preserve the environment in proximity to the development site. The action was dismissed, but as I have said, the trial judge refused to order costs in favour of the successful council largely on the ground that the proceeding had been commenced in the public interest. The Court of Appeal allowed the appeal by the council on the basis that Latoudis required the application of the general rule that costs should follow the event and that consideration of the public interest was irrelevant to the exercise of the costs discretion.

15 The majority, however, distinguished Latoudis and concluded that the principal ground on which the trial judge exercised his discretion on the question of costs was not irrelevant, given the width of the statutory discretion, the policy underpinning the legislation pursuant to which the proceeding was brought and the purpose for which the claim was made. In other words, their Honours impliedly recognised that in refusing to order costs against the unsuccessful plaintiff the trial judge exercised his discretion judicially by reference to a number of relevant considerations that included the policy of the legislation and the public interest in the proceeding. Gaudron and Gummow, JJ. said:[13]

"There is no absolute rule with respect to the exercise of [the costs discretionary] power ... that, in the absence of disentitling conduct, a successful party is to be compensated by the unsuccessful party."

Their Honours went on to note that there is also no "rule that there is no jurisdiction to order a successful party to bear the costs of the unsuccessful party." A little later their Honours pointed out[14] that the policy of the legislation that gave the court the discretion on the question of costs was applicable to "new species of litigation" and contemplated that the discretion might be exercised "so as to allow for the varied interests at stake in such litigation." Kirby, J. also rejected the proposition[15] that Latoudis laid down a general rule that "the only consideration to be taken into account in the exercise of a statutory costs discretion is the compensation of the unsuccessful party for the recoverable expense to which it has been put by the litigation". Nevertheless, his Honour seems to have accepted that[16] "the general purpose of an order for costs in favour of a successful party is to provide compensation in the form of a partial indemnity for the costs incurred ...", so that usually costs will be ordered in favour of a successful party. But his Honour cautioned that "the compensatory principle cannot be treated as an absolute rule. Otherwise, the discretion conferred in unqualified terms would indeed be shackled and confined. To permit this would be incompatible with statutory language expressed in such terms."[17]

16 Thus, it is plain, as I have said, that even if one accepts the existence of a general rule that the costs follow the event in ordinary civil proceedings, it is just that a general rule may yield to other relevant considerations that operate in particular circumstances, as was the situation in Oshlack.

Circumstances relevant to costs discretion

17 It seems to me that there were a number of significant factors that were present in this case that pointed to the costs discretion being exercised so as to leave the costs of the appeal where they fell. For example, the Board's role in the administration of justice and in the appeal were relevant to this question. More particularly, as has been mentioned, the Board has the obligation of determining, in the first instance, whether an applicant for admission has met the requirements of the rules and is a fit and proper person to be admitted to practice. And it is on its certificate that the Court makes the order admitting the applicant to legal practice. The Board is comprised of three barristers and three solicitors, each with considerable expertise in the practice of the law, who combine, on an honorary basis, to administer the admissions of persons to legal practice in Victoria. As the Full Court said in Re Warren[18] the position and function of the Board were appropriately described by Stawell, C.J. in Re Shaw[19] in the following terms:

"The members of the Board discharge onerous and responsible duties, for which the profession and the Court are indebted to them. They occupy, relatively to this Court, a position similar to that occupied by the Benchers, to the Courts in England. It is manifestly desirable that the Courts should sustain and support the position of the Board as fully as they can, and it is clearly not the duty of the Court to enter on the consideration of any subject, unless directly invited to do so."

18 Next, not only was the Board a necessary party to the appeal but, given its position and the fact that it was the only contradictor, it was in the public interest that it appear. Generally, the Board cannot decline to participate in an appeal without depriving the court of the benefit of the presence of a contradictor. In that respect, its position is materially different from that of a tribunal, such as the Victorian Civil and Administrative Tribunal, or a lower court, that is joined as a party to an appeal or a review process in relation to its decision - the tribunal can effectively withdraw from the proceeding without depriving the court of the benefit of having before it a respondent that can contradict the claimant.

19 Importantly, the Board's appearance in the appeal was limited to assisting his Honour in determining the very important question whether Ms XY was a fit and proper person to be admitted to practice. It did not oppose, as such, the orders sought by Ms XY and it did not participate in the proceeding as an ordinary litigant with a vested interest. Dr Freckelton submitted, however, that the Board's participation in the appeal was not confined to assisting the court. It was put that, on a number of issues, the Board "crossed the line" and became a protagonist in the proceeding. Consequently, it was said, it should have been treated by his Honour as any other litigant in civil proceedings on the question of costs and, therefore, that it was appropriate for his Honour to have ordered that costs be awarded to Ms XY in the "normal way", namely, in accordance with the general rule that costs follow the event. With his usual thoroughness, Dr Freckelton took us to a number of passages in the transcript which, he said, demonstrated the Board's partisan approach. It is not necessary to deal here with all the passages that counsel mentioned. Those to which I will refer, I think, sufficiently reflect the tenor of the Board's submissions to which we were taken by counsel. Thus, Dr Freckelton pointed to submissions by the Board's counsel that Ms XY lacked insight into the significance of her failure to disclose the matters to which I have referred earlier. Counsel also noted the Board's submission to his Honour that the cross examination of Ms XY made it apparent that there was deliberate non-disclosure by her of relevant material. Reference was also made to the Board's submission that Ms XY's claim that her attitude to the policeman at the community legal service centre was merely a "one off difference with a work mate" was "slightly disingenuous". Dr Freckelton also referred to the Board's claim to his Honour that there was a significant difference between the history that Ms XY gave Dr Prager as to her mental condition and that which she put in her affidavit material**.** Yet another example of the Board's partisan participation in the appeal, it was said, was the submission by its counsel that if his Honour made the findings that the Board submitted were open to him to make, they would constitute elements of deliberate deception by Ms XY or at least demonstrate a significant lack of insight and "failure to appreciate what is fundamental to a legal practice ...". Dr Freckelton said that the Board's counsel effectively submitted that, on either basis, Ms XY was not a suitable person to be admitted to legal practice.

20 In my view, however, when the Board's submissions to his Honour that were emphasised by Dr Freckelton are considered in their context, it is apparent that they did no more than highlight matters that counsel thought should have been taken into account by his Honour when determining Ms XY's claim. Importantly, as I have said, the Board's counsel made it plain to his Honour that the Board was not "opposing" Ms XY's application. It is also apparent from what his Honour said during the hearing of the appeal and in his reasons that he accepted that the Board's counsel acted only for the purpose of assisting the court.

21 Unsurprisingly, there was no claim by Dr Freckelton during the hearing of the appeal that the cross-examination by the Board's counsel or their submissions to the court were such as to demonstrate a partisan approach. Similarly, no such observation was made by his Honour. On the contrary, as I have noted, the learned judge's reasons make it apparent that he accepted that the Board appeared merely to assist him by testing the evidence and making submissions for his consideration on the important question of Ms XY's fitness for admission to legal practice. The Board's submissions that were highlighted by Dr Freckelton show no more than that the Board's counsel tested some of the evidence put forward on behalf of Ms XY. Although at times this was done with some vigour, it did not amount to the Board pursuing a partisan approach to the matter. I consider that the Board's submissions were put in a responsible manner for the purpose of highlighting to his Honour that some of the evidence could be viewed differently from the way that was pressed on behalf of Ms XY. [20]

22 I note for completeness that it was also submitted by Dr Freckelton, although not pressed, that once Dr Prager's report was available to the Board, it should have merely submitted to the court's jurisdiction and played no role in the appeal. The inference underlying this submission was that the Board's failure effectively to withdraw from the appeal demonstrated its partisan attitude. I would reject such a submission. For the reasons I have given, it was appropriate for it to assist the court, as it did, in the context of Dr Prager's evidence.

23 A different, but related, matter that would have been of relevance to the exercise of the costs discretion was his Honour's finding that the Board acted correctly in refusing Ms XY's application given the material that she had put before it. The reason why the Board's decision effectively was reversed, as I have said, was the change in Ms XY's relevant circumstances as demonstrated by what was, in essence, "fresh" evidence. Two relevant consequences flow from this. The first is that, because Ms XY's success was attributable almost exclusively to the fresh evidence, it could not properly be said that the Board caused Ms XY to incur costs of the appeal such that it would be just that it reimburse her for them. The second is that those circumstances provide a foundation for the claim that Ms XY should bear at least the costs of the appeal as is commonly the case where "fresh evidence" brings about a reversal or other relevant change to the order below. Thus, for example, in Ex parte Hauxwell; In re Hemingway, Bagallay, L.J. said:[21]

"As regards the costs, we think there should be no costs on either side. ... [W]e put it on this ground, that the Appellants have succeeded here, not upon the materials before the Chief Judge, but upon the additional evidence given here today. This applies to the whole of the costs."

To similar effect is the decision in Luther v. Sagor & Co.[22] Whilst Bankes, L.J. in that case made an order for costs in favour of the successful appellant**,** his Lordship also granted the respondent its costs in the matter below. He did this because the decision of the court at first instance was correct on the facts at the time, whereas, on appeal, the facts clearly indicated the appellant should succeed.

24 It is also relevant to bear in mind in this context that it is uncommon for courts to order costs against tribunals and courts that perform adjudicatory or quasi judicial functions where their decisions are effectively overturned on appeal or on a review process. This position was recognised, for example, in City of Subiaco v. Minister for Planning and Heritage.[23] And as Charles, J.A.[24] said in Psychologists' Registration Board of Victoria v. The Herald & Weekly Times Ltd:[25]

"... there is a very well established line of authority which holds that costs ought not to be awarded against a statutory tribunal which makes an order in excess of its powers unless it can be demonstrated that the tribunal has been guilty of serious misconduct or corruption or has acted perversely.

It not infrequently happens that statutory tribunals will be asked by one or other of the parties to make suppression orders in matters which affect the interests of the media. Nor is it uncommon that media interests are given leave to make submissions contesting these applications. If, however, the tribunal makes an order contrary to the interests of the media and such order is subsequently successfully challenged, it should be a rare case indeed where the court will order costs of the successful challenge against the tribunal. If it were otherwise, statutory tribunals would be discouraged from making determinations, pertinent to their own proceedings, for fear of being ordered to pay costs."

Similarly, Williams, J. said in Ex parte Alexander[26] that where a person or body against whom an application for mandamus has been made had purported to exercise a jurisdiction of a quasi judicial kind that was vested in them (and had relevantly erred) then unless the person or body had been guilty of serious misconduct, they should not be directed to pay costs.[27] A like view is expressed by Lord Bridge of Harwich in Holden & Co. v. Crown Prosecution Service (No. 2).[28]

25 Dr Freckelton, however, contended that the above dicta of Charles, J.A. runs counter to the decision in Latoudis in which the majority accepted that, in the appropriate case, costs may be awarded against police notwithstanding that their impugned conduct would have been carried out in the purported performance of their public duty. But in my view Latoudis does not assist counsel on this point because the position of the Board is relevantly different to that of a police prosecutor. Unlike the latter, the Board is a statutory body that performs a quasi judicial function in the public interest and appears at appeals brought against its decision not as a protagonist but only for the purpose of assisting the court.

Whether his Honour failed to take into account relevant circumstances

26 As I have mentioned, it was contended for the Board that his Honour's costs discretion miscarried for a number of reasons. Primary amongst them was the claimed failure by the learned judge to give due recognition to the particular nature of the proceeding and his treatment of it, effectively, as an ordinary civil case to which the general rule as to costs applied. That is made apparent, said counsel, by his Honour's statement that because Ms XY had been "successful in her appeal [she] should be entitled to an award of costs in her favour in the normal way". This showed, it was argued, that his Honour wrongly applied the general rule that costs follow the event, which may be appropriate in ordinary civil litigation but not in a case such as the present. It was next said that his Honour's characterisation of the outcome of the appeal as one where Ms XY was "successful" was erroneous, given that his Honour recognised that the Board had made the correct decision on the material before it and that Ms XY succeeded only because new evidence showed that, during the lengthy period between the Board's decision and the hearing of the appeal, her mental health materially improved such that she could now be regarded as being a fit and proper person to be admitted to legal practice. Yet another error for which counsel contended was his Honour's treatment of Ms XY's financial position as being relevant to the exercise of the costs discretion. It was argued that this was an irrelevant consideration that vitiated the impugned decision.

27 Dr Freckelton, for the respondent, on the other hand, argued that merely because the Board's appearance was in the public interest did "not provide a sufficient reason by itself for refusing the successful respondent [her] costs". In that respect, Dr Freckelton pointed out that summary criminal proceedings are generally brought in the public interest, yet in the appropriate case costs are nevertheless awarded against the police. Moreover, as I have said, Dr Freckelton claimed that the Board's involvement in the proceeding went beyond mere provision of assistance to the court and amounted to "crossing [the line] into active participation in the proceedings."

28 Dr Freckelton further contended that it was appropriate for his Honour to have taken into account the fact that Ms XY faced a considerable, if not oppressive, financial burden in respect of her costs of the appeal and the impact that an order that costs should lie where they fall would have on her financial situation. In that respect, counsel relied on Frugtniet v. Board of Examiners[29] in which Pagone, J. said:[30]

"In the proceeding the Board of Examiners seeks its costs of the proceedings. Ordinarily costs should be ordered in favour of the successful party. However, I have decided not to award costs to the Board of Examiners because of the applicant's personal financial circumstances."

29 It would be unfair, Dr Freckelton said, for the Board to claim its costs when it successfully defended an appeal (as it did, for example, in Frugtniet (No. 2))[31] but rely, as it did in the present case, on its "special status" to avoid paying costs where its decision had been overturned. It is convenient to mention in this context that we were informed by Mr Hurley, without contradiction from Dr Freckelton, that the practice of the Board as to the seeking of costs in relation to appeals against its decisions was broadly this: where an appeal against its decision fails, generally the Board does not seek costs against the unsuccessful appellant except where the appeal was plainly hopeless, or where the refusal to grant the Schedule 14 certificate was based essentially on the applicant's lack of candour.[32] Importantly, it seems that where an appeal against the decision of the Board has succeeded, ordinarily costs have not been awarded against the Board.[33]

30 I cannot accept the Board's argument that his Honour failed to consider the matters that I have mentioned as being relevant to the exercise of the costs discretion. Thus, I consider that it is plain enough from his Honour's reasons that he recognised that there were aspects of the appeal that distinguished it from ordinary civil litigation. More particularly, his Honour's reasons make it apparent that he accepted the Board's argument that it played an important role in the administration of justice, that the appeal was "not a simple inter partes proceeding", and that the Board did not oppose Ms XY's appeal but appeared merely to assist the court by testing the evidence and making submissions. His Honour also noted that Ms XY's circumstances had materially changed since the Board's decision so that its impugned order was justified. After referring to these factors his Honour said: "All these matters are relevant considerations to take into account and could well lead to the result that there should be no order for costs". The learned judge then referred to Ms XY's burden of having to repay Victoria Legal Aid and concluded: "Taking all these matters into consideration it would be just for the Board to pay her costs of the appeal."

Ms XY's financial position

31 It is apparent enough that, but for the fact that his Honour took into account Ms XY's financial position as he saw it, he would have concluded that the costs of the appeal should lie where they fall. In other words, it seems to me that his Honour's perception of Ms XY's financial burden was the dominant factor that determined the costs question in her favour. I consider, however, that, by taking Ms XY's financial stress into account in the exercise of the costs discretion, his Honour erred either because that factor was irrelevant to the exercise of that discretion or, if it was relevant, his Honour plainly gave it undue weight.

32 There is no authority of which I am aware that makes the financial stress of a party a matter that is relevant to the exercise of the costs discretion and Dr Freckelton could not point to any, although, as has been noted, he did refer to the decision of Pagone, J. in Frugtniet in which his Honour refused to award costs in favour of the successful Board on the sole ground that the appellant was impecunious. But that decision was made without any reference to authority or principle and, in my view, is not supported by either.

33 It seems to me that a number of problems would arise if it were accepted that the impecuniosity of a party is relevant to the exercise of the costs discretion. Thus, the question would arise whether the court should also have regard to the material position of the other party. Importantly, on what basis would the court determine the level of impecuniosity or wealth of a litigant that would justify it having regard to that factor in the exercise of the costs discretion?

34 But even if these difficulties were put to one side, it seems to me that the claim that, absent special circumstances, the financial stress of a litigant may be a relevant consideration in the exercise of the costs discretion is inconsistent with principle and such authorities as I have been able to locate that have touched on the matter, albeit in different contexts. In terms of principle, as has been mentioned, the reason that, as a general rule, a successful party is entitled to have a reasonable expectation of recovering its proper costs is that it is just and reasonable that it be compensated for such expenses because it was brought to court by the losing party. It seems to me that the financial circumstances of the successful party play no part in the rationale underpinning the general rule. They also seem to have no role to play in determining whether there are circumstances calling for a "departure" from the general rule. If it is determined that, putting aside the financial position of the successful party, circumstances exist that warrant such a "departure", it is difficult to see how the financial position of that party can bring about a contrary conclusion, namely, that the general rule should nevertheless apply. If, for example, the party's financial position was sound I would have thought that this factor would be irrelevant to the exercise of the costs discretion. Similarly, the fact that the party is in straitened circumstances would ordinarily be equally irrelevant. There may be exceptional circumstances that make a particular party's financial position relevant to the exercise of the costs discretion. For instance, the proceeding may have been brought by it in the public interest pursuant to legislation that evinces the intention of redressing, by way of an appropriate costs order, any serious inequality in resources between the claimant and the entity that resists the claim. Thus, in Oshlack, Kirby, J. said,[34] in the context of the legislative provisions under which the proceeding in that case was brought, that any inequality that may be said to exist where the successful council is deprived of its costs "is simply one designed to redress, in the appropriate case, the serious inequality in resources which typically (but not always) applies in the case of litigation commenced in the public interest between an objector and the public or private body resisting the objector's demands". But his Honour was effectively dealing with the argument that there would be relevant inequality if the successful council were to be deprived of its costs where the unsuccessful proceeding had been instituted in the "public interest". Be that as it may, it is plain enough that this is not the case here. Moreover, no such legislative provisions exist here and the contrary was not contended for by the respondent's counsel. Consequently, in terms of principle, given the absence of exceptional circumstances, I can see no basis for considering that Ms XY's financial stress was a relevant consideration in the exercise of the costs discretion.

35 As far as authorities are concerned, they, too, suggest that, absent exceptional circumstances, the financial position of the litigant is not a matter that can be properly taken into account in the exercise of the discretion. Thus, in Scott v. Secretary, Department of Social Security (No. 2)[35] Beaumont and French, JJ. did not accede to the submission of the unsuccessful parties that the general rule that costs follow the event should not be applied because of their impecunious position. It was put on their behalf that since they relied on social security benefits they would not be able to satisfy any costs order made against them. Their Honours said:[36]

"However sympathetic one may personally be to arguments of this kind, inability to meet a costs order or the fact that the losing party has limited financial means has never been a sufficient reason to deny a successful party his costs."

Similarly, in Hollier v. Australian Maritime Safety Authority (No. 2)[37] Heerey, Whitlam and North, JJ. also considered that the losing party had very limited financial means was not relevant to the exercise of the costs discretion. It has also been held in Harris v. Bennett (No.2)[38] that the financial position of the parties is not a relevant consideration in determining whether the successful plaintiff should be awarded costs on a solicitor/client basis even if it appears that failure to do so may result in her inability to pursue the merits of her claim. In that case the defendant made an unsuccessful application for summary judgment. The successful plaintiff, an infant who sued through her litigation guardian, sought costs on a solicitor/client basis seemingly on the ground that otherwise, because of her straitened circumstances, she might not be able to prosecute her claim on its merits. Unsurprisingly, McDonald, J. refused the application. His Honour concluded:[39]

"The fact that a defendant has large financial resources whereas a successful plaintiff has little or moderate financial resources and may suffer disproportionately to a defendant if he or she does not recover costs on a solicitor and client basis does not provide the reasons why such plaintiff should have his or her costs on a higher measure than as between party and party.

The fact that the estate of the deceased is large and the financial resources of the infant plaintiff and her mother, her litigation guardian, are moderate does not provide good reason why in the exercise of my discretion I should order that the plaintiff should have her costs of and incidental to the order of the Master and the appeal on a higher basis than as between party and party."

Earlier, his Honour observed that the mere fact that making an order for costs on a party and party basis might have a severe adverse effect upon the ability of the plaintiff to pursue the merits of her claim did not amount to a reason for awarding greater costs.

36 Thus, although the cases to which I have referred do not deal with the situation that confronted his Honour, namely, whether the successful party should not have the benefit of the general rule that costs follow the event, they demonstrate, I think, that courts are disinclined to consider the financial position of a party as a relevant matter in the exercise of the costs discretion. Consequently, it seems to me that, in terms of principle and in light of such authorities as I could find, absent exceptional circumstances, the financial stress of a party is not a matter relevant to the exercise of the costs discretion. In this case, no such circumstances have been suggested by counsel and none appear to me to exist. I consider that even if Ms XY's

financial burden could be properly described as "significant" that does not constitute an exceptional circumstances in this case. It follows, as I have noted, that Ms XY's financial position was not relevant to the exercise of the costs discretion so that his Honour erred by taking it into consideration and, for that reason, the discretionary decision is vitiated and should be set aside.

37 But even if his Honour was entitled to treat the financial position of Ms XY as a matter that was relevant to the exercise of the costs discretion, it seems to me that his Honour plainly gave it undue weight such as to vitiate the impugned conclusion. As I have noted, there were powerful considerations that called for the costs discretion to be exercised such that the Board would not be required to pay Ms XY's costs of the appeal. If they were to be considered for the purposes of the exercise of the costs discretion, absent the financial plight of Ms XY, it is difficult to see how a proper exercise of discretion could lead to any conclusion other than that the general rule should not apply. In my view, the addition of Ms XY's financial position as a relevant factor to the consideration of this issue could not properly lead to the conclusion that the Board should pay her costs of the appeal. This is because such a result would necessarily be based on the view that the financial position of Ms XY outweighed, or effectively rendered nugatory, the reasons why such an order should not be made. I consider that this would be the tail wagging the dog. It is necessarily implicit in his Honour's conclusion that he attributed to Ms XY's financial position importance or relevance that was unduly excessive such as to constitute error in the exercise of the costs discretion.

38 Thus, as I have said, on either basis, his Honour's discretion miscarried. In the circumstances, I would uphold the appeal and set aside his Honour's order, thereby leaving the situation as one where there will be no order as to costs.

39 I agree with Chernov, J.A. that the appeal should be allowed.

40 I do not consider that it was open to the judge to treat the financial position of Ms XY as a matter relevant to the exercise of his Honour's costs discretion.

41 The notion that a litigant should be accorded special consideration in relation to costs on the grounds of poverty or financial disadvantage has nothing to commend it.

42 Conceptually, it is not unlike the idea which held sway for a short while about 20 years ago, that large and wealthy organisations to whom the costs of litigation are part of their day to day businesses should be refused security for costs as against impecunious plaintiffs. Arguably, that idea owed its origins to the judgement of Ormiston, J. in Irwin Alsop Services v. Mercantile Mutual Insurance Co Ltd.[40] But it suffered a mortal blow at the hands of Southwell, J. in Athprom Ltd v. Federal Commissioner of Taxation[41] and it was brought to an end by Brooking, J. in Prime Forme Cutting Pty Ltd v. Baltica Insurance Co,[42] for the reasons which his Honour there expressed.

43 The idea that the financial circumstances of a litigant may be relevant to costs orders in a proceeding of this kind will be seen to be erroneous for much the same reasons.

44 For the reasons given by Chernov, J.A. I would also uphold the appeal.

[1] The Admission Rules were made pursuant to s.337 of the Act by the Council of Legal Education.

[2] The Act was repealed on 5 December 2005 by the Legal Profession Act 2004 but its transitional provisions have the effect that the appeals before his Honour and before us are governed by the 1996 Act and the Rules to which I have referred.

[3] See s.341 of the Act, Rule 14.11(2) of Chapter II of the Rules of the Supreme Court and Rules 4.01(c) and r.4.11(1) of the Admission Rules.

[4] R14.11(2) of the Supreme Court Rules, Chapter II.

[5] The Admission Rules, particularly the form of the affidavit prescribed in Schedule 8, make it apparent that all matters relevant to the question whether the applicant is a fit and proper person to be admitted to practice had to be disclosed to the Board.

[6] See, for example, House v. The King [1936] HCA 40; (1936) 55 C.L.R. 499 at 505 per Dixon, Evatt and McTiernan, JJ.

[7] See s.24(1) of the Supreme Court Act 1986, Donald Campbell & Co v. Pollak [1927] A.C. 732 at 811-812 per Viscount Cave, L.C., Latoudis v. Casey [1990] HCA 59; (1990) 170 C.L.R. 534 at 540 per Mason, C.J., at 558 per Dawson, J. and at 568 per McHugh, J., Oshlack v. Richmond River Council (1998) 193 C.L.R_._ 72 at 88-89 per Gaudron and Gummow, JJ and at 117-118, 121, per Kirby, J. and Bass Coast Shire Council v. King [1997] 2 V.R. 5 at 29 per Winneke, P.

[8] At 811-812.

[9] At 566-567 (citations omitted).

[10] At 557.

[11] At 567 and 568.

[12] Gaudron, Gummow and Kirby, JJ.

[13] At 88.

[14] At 88-89.

[15] At 117-118.

[16] At 121.

[17] The notion that, in exercising the wide discretion on the costs question, the court should take into account the nature of the proceeding and the role in it played by the unsuccessful party was also recognised by this Court in Transport Accident Commission v. O'Reilly [1998] VSCA 106; [1999] 2 V.R. 436 at 446 per Tadgell, J.A.

[18] [1976] VicRp 38; [1976] V.R. 406 at 408 per Young, C.J., Gillard and Anderson, JJ.

[19] [1878] VicLawRp 199; (1878) 4 V.L.R. (L) 509 at 511.

[20] By way of contrast note the role played by the Australian Broadcasting Tribunal in The Queen v. Australian Broadcasting Tribunal; Ex parte Hardiman [1980] HCA 13; (1980) 144 C.L.R. 13 at 17 and 35-36.

[21] (1883) 23 Ch. 626 at 643-644.

[22] [1921] 3 K.B. 532 at 546-547.

[23] Unreported, Full Court of the Supreme Court of Western Australia, Kennedy, Wallwork and Scott, JJ., 19 February 1997, at 4-5.

[24] With whom Winneke, P. and Phillips, J.A. agreed.

[25] [2000] VSCA 118 at [11]- [12].

[26] (1886) 8 A.L.T. 43.

[27] It is plain that no misconduct was alleged against the Board. As to an example of relevant misconduct in this context, see Magistrates' Court of Victoria v. Robinson [2000] VSCA 198; (2000) 2 V.R. 233.

[28] [1994] 1 A.C. 22 at 40.

[29] [2002] VSC 140.

[30] At [16].

[31] [2005] VSC 332.

[32] Such a claim was made, for example, in Frugtniet (No.2).

[33] See, for example, Fraukes v. Board of Examiners (Unreported, Supreme Court of Victoria, Phillips, J., 8 March 1989), In the matter of Lisa Bronwyn Mann (Unreported, Supreme Court of Victoria, Nicholson, J., 9 December 1987), Nicholls v. Board of Examiners [1986] VicRp 71; [1986] V.R. 719 at 733 per Ormiston, J. (with whom Fullagar and Vincent, JJ. agreed), In the matter of Beverley Honig (Unreported, Supreme Court of Victoria, Nicholson, J. 28 August 1986), Board of Examiners v. Whalen [1983] VicRp 39; [1983] 1 V.R. 437, Re Miller [1979] VicRp 40; [1979] V.R. 381, Re Warren [1976] VicRp 38; [1976] V.R. 406 at 409 per Young, C.J. and Gillard and Anderson, JJ., Cash v. Board of Examiners [1972] VicRp 48; [1972] V.R. 426.

[34] At 125-126.

[35] [2000] FCA 1450.

[36] At [4].

[37] [1998] FCA 975.

[38] [2002] VSC 163.

[39] At [18] and [19].

[40] [1986] VicRp 6; [1986] V.R. 61.

[41] (1987) 5 A.C.L.C. 711.

[42] (1990) 8 A.C.L.C. 29.