HOBART, 23 May 1997 (hearing), 5 June 1997 (decision)

1. This is an appeal against an order made by the Workers Compensation Tribunal dismissing the appellant's application for an order that the respondent pay his costs of a reference to the Tribunal pursuant to the Workers Rehabilitation and Compensation Act 1988 ("the Act"), s86(4). The parties agreed that I determine the appeal by reference only to the reasons for the Tribunal's order upon the appellant's reference pursuant to s86(4), the medical certificate relied upon by the respondent to terminate weekly payments pursuant to the Act, s86(1)(c) and the Tribunal's reasons for dismissing the appellant's application for costs.

Costs under the Workers Rehabilitation and Compensation Act 1988, s59(1)

2. By the Workers Compensation Act 1988, Parliament removed the jurisdiction to determine claims for workers compensation from this Court into a special division of the Court of Requests and appointed a Workers Compensation Commissioner to hear and determine those claims. That Act made far reaching changes to the law as enacted by its predecessor, the Workers' Compensation Act 1927. One of those changes concerned the power to make an order for the payment of costs of proceedings to recover workers compensation. Prior to the 1988 Act the jurisdiction to order costs was conferred by the Workers' Compensation Act 1927, s33 and the Local Courts Act, s133. The latter provided:

"All the costs of any action or proceeding in the Court shall be paid by or apportioned between the parties in such manner as the Court or Commissioner directs, and in default of any special direction shall abide the event of the action or proceeding ...".

3. Pursuant to that section, this Court exercised its discretion in proceedings to obtain compensation by awarding costs in favour of the successful party unless there was good reason not to do so. In this respect, there was no distinction between the exercise of the discretion to award costs in proceedings to recover compensation and the exercise of that discretion pursuant to the Rules of Court, O80, r1 which provides:

"Subject to the provisions of the Act and these rules, the costs of and incidental to all proceedings in the Court, including the administration of estates and trusts, shall be in the discretion of the Court or judge."

4. Even if a statutory discretion is expressed to be without fetter, its proper exercise calls for the application of established principles. With respect to this, Mason CJ said in Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534 at 541:

"But it does not follow that any attempt to formulate a principle or a guideline according to which the discretion should be exercised would constitute a fetter upon the discretion not intended by the legislature. Indeed, a refusal to formulate a principle or guideline can only lead to exercises of discretion which are seen to be inconsistent, a result which would not have been contemplated by the legislature with any degree of equanimity."

5. It is now a well settled principle that where there is an unfettered discretion to order costs, the court will in ordinary circumstances award them to the successful party. See Ritter v Godfrey [1920] 2 KB 47 at 60; Monier Ltd v Metalwork Tiling Company of Australia Ltd & Another (No 2) (1987) 43 SASR 588 at 590; Armstrong v Boulton [1990] VicRp 20; [1990] VR 215 at 223. The nature of an order awarding costs was described in Latoudis v Casey (supra), by McHugh J at 567:

"The rationale of 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."

6. Thus, prior to 1988 the ordinary rule in proceedings to recover workers compensation was that an order for payment of the costs of those proceedings would "follow the event" unless there was good reason not to do so. However, the Workers Compensation Act 1988, made a significant change to that ordinary rule. The Act, s59(1) provided:

"59 (1) Except as provided in an order under section 57(2) or where the Commissioner, in the circumstances of the case, otherwise determines, costs shall not be awarded to or against a party to a proceeding before the Commissioner.

(2) Costs shall not be awarded in respect of any case referred to the Supreme Court by the Commissioner pursuant to section 58."

7. Since the enactment of that section, this Court has held on several occasions that the proper exercise of the statutory power to order costs required the Workers Compensation Commissioner to consider as a threshold test, whether there was some special feature or features of the case that made the general rule that each party pay its own costs, inappropriate. Only if this is shown does a general discretion to order payment of costs arise. See Evans v Knight A89/1991; Trident Seafoods Pty Ltd v Dransfield A64/1993; Guiney v Bury A59/1994; The Returned Services League of Australia (Devonport Sub-Branch) v Garwood A59/1995.

8. The Workers Rehabilitation and Compensation Reform Act, No 16/1995, enacted substantial changes to the scheme put in place by the 1988 Act. Jurisdiction was taken from the Court of Requests and vested in a Tribunal constituted by the 1995 Act. With respect to the costs of proceedings before the Tribunal, s59 was repealed and re-enacted in the following terms:

"59 (1) Except as provided in subsection (2), the Tribunal may make such order as to costs as it considers appropriate in any proceedings before it.

(2) The Tribunal may not order costs in respect of a conciliation conference conducted under section 43A unless it appears to the Tribunal that a party to the conciliation conference has unreasonably obstructed or prolonged proceedings."

9. This legislative change was enacted in the knowledge of the settled interpretation given to s59 as enacted in 1988 and accordingly "must be construed according to its own terms, rather than by reference to constructions placed on its statutory predecessor", per Brennan J in Bushell v Repatriation Commission [1992] HCA 47; (1992) 109 ALR 30 at 43. Further, by the 1995 amendment, the Legislature took a deliberate step away from conferring a discretion to award costs only if there were some special circumstances about the case, and reverted to the pre-1988 position by conferring a totally unfettered discretion to make such order as the Tribunal considered appropriate in any proceedings before it. I see no distinction between the terms of the Act, s59(1) as now enacted, the Local Courts Act, s133 and the Rules of Court, O80, r1. In Clousen v Taylor A57/1996, Slicer J referred to the power conferred by the Act, s59(1) and said this at 2:

"A wide discretion is afforded to the Tribunal. The discretion must be exercised judicially (Donald Campbell & Co, Ltd v Pollack [1927] AC 732) but many factors may be relevant to that exercise. As Bowen LJ observed in Jones v Curling (1884) 13 QBD at 272:

'... the judge should look in the first place at the result of the action itself, namely, the verdict of the jury, and he should look also at the conduct of the parties to see whether either of them had in any way involved the other unnecessarily in the expense of litigation, and beyond that he should consider all the facts of the case so far as no particular fact was concluded by the finding of the jury; ...'

It was a relevant consideration that the matter did not proceed to hearing and that the respondent had exercised a statutory right afforded by the Act, s81A whilst an assessment was made of the medical condition of the appellant and its relationship to her employment. The principle that ordinarily, costs follow the event (Ritter v Godfrey [1920] 2 KB 47, Hughes v Western Australian Cricket Association (Inc) and Ors [1986] FCA 382; [1986] ATPR 40-748) does not involve a mandatory approach (R v Freshney [1977] Tas SR 126)."

10. Any reference to Jones v Curling (supra) must take into account the fact that it concerned a special costs rule. The relevant rule, (O45, r1) conferred a general discretion to order costs but specifically provided that in a trial by jury "the costs shall follow the event unless the judge by whom such action, cause, matter or issue is tried, or the Court shall, for good cause, otherwise order." There had been a jury trial and the issue was whether there had been "good cause" sufficient to confer jurisdiction to make any order other than that the costs follow the event. In was in that context that Bowen LJ made the remarks cited in Clousen. I am in agreement with Slicer J's general observations in Clousen to the effect that the discretion conferred by the Workers Rehabilitation and Compensation Act 1988 as amended, s59(1) is wide and must be exercised judicially, although I have some reservation about the application of R v Freshney (supra) in the case of a general discretion to order costs for the Costs in Criminal Cases Act 1976, s4(2) expressly spells out the matters that must be taken into account in the proper exercise of the discretion. Indeed, in Latoudis (supra) Mason CJ referred to Freshney at 541, and held that the conditions imposed by s4(2) were such that he did "not regard the Tasmanian approach as an authoritative or influential guide to the manner in which a general discretion, unconfined except by reference to its subject-matter and the scope and purpose of the statute, should be exercised."

11. The reasons for the Tribunal's decisions which formed the material on the hearing of this appeal disclose that the appellant was examined at the request of the respondent by a Dr Schutz. Dr Schutz gave a certificate that opined that the appellant had wholly or substantially recovered from the effects of the relevant injury. There was compliance with the procedural requirements of the relevant parts of s86 and weekly payments were terminated. The appellant referred the matter to the Tribunal pursuant to the Act, s86(4) and there was a hearing. At the hearing, evidence was given by Dr Schutz, the appellant's general practitioner, Dr Suttar, and a Dr Humphrey together with a number of non-medical witnesses. It appeared that all the medical practitioners were given the same history and all the medical practitioners reached the same conclusion with respect to physiological changes in the appellant's leg, but there was a difference of opinion as to the extent of the appellant's recovery from those physiological changes. The Tribunal determined the matter in favour of the appellant by finding that he had not wholly or substantially recovered from the effects of the injury. However, costs did not follow the event. The Tribunal found that the employer had acted reasonably in terminating payments, as the opinion of Dr Schutz appeared to be properly held, and at the time it was given, Dr Schutz was unaware of any different medical opinion. The Tribunal said "I do not think that the conduct of the employer was such as to unnecessarily involve the expense of litigation for the worker." [Emphasis added.] The Tribunal went on to observe that the worker had also acted reasonably in referring the matter pursuant to s86(4) in the light of the medical opinion that he had in his possession. The Tribunal reached this conclusion:

"Both parties had a reasonable case to put and I do not think it could be said that the employer should have taken the view that Mr Schutz's opinion was founded on a misapprehension of the law or on a misapprehension of the facts, given that on examination there was substantially agreement [sic] as to the history but a different interpretation as to the results."

12. It is clear that the exercise of the discretion conferred by the Act, s59(1) miscarried. The Tribunal found that both parties acted reasonably in the institution and the defence of the reference. The appellant succeeded because there was evidence before the Tribunal not available to the certifying doctor. There was nothing in the conduct of the parties nor other relevant circumstance to displace application of the general rule that in the proper exercise of the discretion, the costs will "follow the event." There seems perhaps to have been a suggestion in the Tribunal's reasoning that the appellant had to show that he had been put to expense, at least in part by "unnecessary" conduct of the respondent. Prior to the 1995 amendment, such a matter may have been material to the issue of whether there was sufficient cause to displace the ordinary rule that no order for costs is made, but since the amendment, that rule no longer exists. In a case such as this, where both parties acted reasonably prior to the institution of proceedings, by the institution of proceedings and in the conduct of the proceedings, any order other than the successful party has his costs reflects an error in the exercise of the discretion.

13. The appeal is allowed. The order of the Tribunal dated 14 February 1997 is quashed and in lieu thereof it is ordered that the respondent pay the appellant's costs of the reference to the Tribunal and of the application to the Tribunal for an order for costs.