Collins v Military Rehabilitation & Compensation Commission

Federal Court of Australia|2005-12-07|Before: Jacobson J

REASONS FOR JUDGMENT 1 This is an application for judicial review of a decision of the Administrative Appeals Tribunal ('the AAT') constituted by Senior Member Allen, dated 8 July 2005. The application has been brought under s 39B of the Judiciary Act 1903 (Cth) and s 5 of the Administrative Decisions (Judicial Review) Act 1977 (Cth) ('the ADJR Act'). 2 The short question which arises is whether Senior Member Allen had power to make a direction, the effect of which was to amend a costs order made by consent by Senior Member Kelly pursuant to subs 42C(1)(a) of the Administrative Appeals Tribunal Act 1975 (Cth) ('the AAT Act') on 28 February 2005. On that date Senior Member Kelly ordered by consent that, inter alia, a reviewable decision of the respondent be set aside; that in substitution for that decision there be a finding that the applicant suffered a 30 per cent 'Whole Person Impairment' as a result of his compensable psychiatric condition and that: 'The Respondent is to pay the Applicant's legal costs and disbursements, as agreed or assessed/taxed.' 3 The respondent successfully contended before Senior Member Allen that the effect of the agreement between the parties which resulted in the settlement and consent orders was that on taxation of the applicant's bill of costs there should be no allowance for items incurred between 14 February 2005 and 22 February 2005. 4 The background facts are set out in a statement of Hervee Dejean, a solicitor in the employ of the Australian Government Solicitor, dated 22 June 2005. The essential facts drawn from this statement are included in Senior Member Allen's decision. Senior Member Allen accepted Ms Dejean's evidence in the absence of any contrary evidence from the applicant. 5 The orders of 28 February 2005 were made in settlement of a dispute between the parties as to the extent of the applicant's impairment. The applicant contended for a 40 per cent impairment, the respondent for 20 per cent. On 11 January 2005 Ms Dejean wrote a letter to the applicant's solicitor without prejudice except as to costs. The letter offered to compromise the dispute with an agreed level of 30 per cent impairment being accepted. The letter stated that the applicant's costs should also be payable. The letter also stated that failing agreement, the respondent would contend for 20 per cent impairment at the hearing which was scheduled to take place on 22 February 2005. Although there were communications between the parties' legal representatives in the month following the letter of 11 January 2005, the offer was not accepted. On 14 February 2005 Ms Dejean wrote to the applicant's solicitor: 'Dear Sir We refer to the above matter and to our offer to settle the application, contained in our facsimile of 11 January 2005. It has now been one month since that offer was made, with no meaningful reply from you in relation to whether or not the offer is accepted. It is regrettable that some agreement has not been reached at this time. Please note that the respondent proposes to rely upon the terms of our earlier correspondence on the question of costs in the event the matter proceeds to hearing. In particular, if the offer is not accepted and the applicant does not achieve an outcome in the proceedings which is materially better than the terms of our offer, the respondent will in due course: - oppose the applicant being awarded costs on and from the date of this letter; - apply to have any costs the applicant would otherwise have been awarded up to the date of this letter, reduced by the costs the respondent incurs from the date of this letter. regards Hervee Dejean' 6 The applicant's solicitor replied on 16 February 2005 in terms which did not amount to acceptance but which asked for further time to obtain instructions. The letter was received by Ms Dejean on 18 February 2005. Ms Dejean assumed on the basis of the letter of 16 February 2005 that the matter was proceeding to a hearing. She prepared the matter accordingly and attended the Newcastle Local Court with Mr Elliott of counsel on 22 February 2005. Mr Lott, solicitor for the applicant, attended the Court with his counsel, Mr Hart. Settlement discussions then took place. The relevant events are recorded in [20] - [23] of Ms Dejean's statement, which I will set out in full as follows: '20. About 40 minutes later, Mr Hart came back and said to me words to the following effect "Mr Collins will take the 30% whole person impairment, using the figures you calculated". I called my client, and my client agreed over the telephone to settle on this basis. However, I was instructed to attempt to reach agreement on costs, if possible, so as to finalise the matter. 21. Mr Lott, Mr Hart, Mr Elliott and I then had a discussion about the quantum of costs claimed by the applicant. There were several offers made by each side, but the final offers were still $4,000 apart. I then said to Mr Hart, in the presence of Mr Lott "You remember that we rely on the Calderbank letter. You can't claim all of your costs, as we offered to settle some time ago, on exactly the terms of settlement. You've done no better than that offer". I recall showing Annexure I to Mr Hart, who appeared to have not been aware of the letter. Neither Mr Hart nor Mr Lott mentioned any objection to the terms of the letter or the ability of the respondent to rely on it to reduce the amount claimable on costs. 22. After further discussion about costs, I said "We obviously can't agree, as you're claiming more than we think you're entitled to. We'll just have to deal with costs on taxation, and we'll rely on our letter". Annexed hereto and marked "L" is a true copy of my file note of this conversation. 23. Later that morning at around 11am, the parties handed up signed consent terms to Senior Member Kelly, including an agreement that the respondent pay the applicant's costs "as agreed or taxed". Senior Member Kelly indicated that she would make orders in accordance with the consent terms.' 7 The file note of the settlement conversation which was Annexure L to Ms Dejean's statement was set out in full at [18] of Senior Member Allen's decision. It reads as follows: 'Consent terms drafted - 30% WPI Costs as agreed or taxed - can't agree today due to Calderbank AAT will make orders in acc. with terms We offered $5,000 for costs App. rejected - offered $10,000 We reject - $6,000 final Rejected. Did not move from $10k Will deal with costs on taxation as can't agree today' 8 It appears that some time after 28 February 2005 the parties were unable to agree on the quantification of the costs order. On or about 9 March 2005 the respondent's solicitor wrote to the applicant's solicitor. The letter was not in evidence but I infer from a letter of 17 March 2005 to which I refer below, that the respondent raised the question of what it called the Calderbank letter, that is, the letter of 14 February 2005, to reduce the quantum of costs. 9 The applicant's solicitor's letter of 17 March 2005 to the respondent's solicitors stated relevantly as follows: 'We know of no Calderbank letter. If the letter you are referring to is your facsimile of 14 February, 2005, your offer is expressed in terms of this matter proceeding to hearing. The matter did not proceed to hearing but was settled in discussions prior to commencement thereof. We further note terms of Settlement included the respondent to pay the Applicant's legal costs and disbursements as agreed or assessed/taxed. There is no mention in the Terms of Settlement with respect to your letter of 14 February, 2005. The Terms do not refer to any Offer of Compromise and do not refer to costs to any particular stage of proceedings.' 10 Thereafter the matter was referred to a Deputy Registrar of the AAT for taxation of the costs. The taxation was due to take place on 3 June 2005, however, the Deputy Registrar referred the matter to Senior Member Allen to consider the effect of the letters of 11 January 2005 and 14 February 2005. The respondent maintained that as a result of those letters no costs were payable after 14 February 2005.

The Legislation 11 The following provisions of the AAT Act are relevant to the issues canvassed on the application before me: '33. Procedure of Tribunal 1) In a proceeding before the Tribunal: … b) the proceeding shall be conducted with as little formality and technicality, and with as much expedition, as the requirements of this Act and of every other relevant enactment and a proper consideration of the matters before the Tribunal permit; and … 3) A direction as to the procedure to be followed at or in connection with the hearing of a proceeding before the Tribunal may be varied or revoked at any time by any member or Conference Registrar empowered in accordance with this section to give such a direction in relation to the proceeding at that time. … 42C. Power of Tribunal if parties reach agreement 1) If, at any stage of a proceeding for a review of a decision: a) agreement is reached between the parties or their representatives as to the terms of a decision of the Tribunal in the proceeding or in relation to a part of the proceeding or a matter arising out of the proceeding that would be acceptable to the parties (other than an agreement reached in the course of an alternative dispute resolution process under Division 3); and b) the terms of the agreement are reduced to writing, signed by or on behalf of the parties and lodged with the Tribunal; and c) the Tribunal is satisfied that a decision in those terms or consistent with those terms would be within the powers of the Tribunal; the Tribunal may, if it appears to it to be appropriate to do so, act in accordance with whichever of subsection (2) or (3) is relevant in the particular case. 2) If the agreement reached is an agreement as to the terms of a decision of the Tribunal in the proceeding, the Tribunal may make a decision in accordance with those terms without holding a hearing of the proceeding or, if a hearing has commenced, without completing the hearing. … 43AA. Correction of errors in decisions or statement of reasons Correction of errors 1) If, after the making of a decision by the Tribunal, the Tribunal is satisfied that there is an obvious error in the text of the decision or in a written statement of reasons for the decision, the Tribunal may direct the Registrar to alter the text of the decision or statement in accordance with the directions of the Tribunal. 2) If the text of a decision or statement is so altered, the altered text is taken to be the decision of the Tribunal or the reasons for the decision, as the case may be. Examples of obvious errors 3) Examples of obvious errors in the text of a decision or statement of reasons are where: a) there is an obvious clerical or typographical error in the text of the decision or statement of reasons; or b) there is an inconsistency between the decision and the statement of reasons. Exercise of powers 4) The powers of the Tribunal under this section may be exercised by the President or by the member who presided at the proceeding to which the decision relates.' 12 The respondent relied upon s 67 of the Safety Rehabilitation and Compensation Act 1988 (Cth) ('the SRC Act') as a source of power for Senior Member Allen's direction. In particular counsel relied on subss 67(1), (8) and (13) which I will set out in full: '67. Costs of proceedings before Administrative Appeals Tribunal 1) Subject to this section, the costs incurred by a party to proceedings instituted under this Part in respect of that reviewable decision shall be borne by that party. … 8) Where, in any proceedings instituted by the claimant, the Administrative Appeals Tribunal makes a decision: a) varying a reviewable decision in a manner favourable to the claimant; or b) setting aside a reviewable decision and making a decision in substitution for the reviewable decision that is more favourable to the claimant than the reviewable decision; the Tribunal may, subject to this section, order that the costs of those proceedings incurred by the claimant, or a part of those costs, shall be paid by the responsible authority. … 13) Where the Administrative Appeals Tribunal orders a responsible authority to pay costs incurred by a claimant, the Tribunal may, in the absence of agreement between the parties as to the amount of the costs, tax or settle the amount of the costs or order that the costs be taxed by the Registrar, a District Registrar or a Deputy Registrar of the Tribunal.' 13 Counsel for the respondent also relied on subs 33(1) of the Acts Interpretation Act 1901 (Cth) ('the Acts Interpretation Act') which is as follows: '33. Exercise of powers and duties 1) Where an Act confers a power or imposes a duty, then, unless the contrary intention appears, the power may be exercised and the duty shall be performed from time to time as occasion requires.' 14 Reference was also made to [6] of the AAT's General Practice Direction which reads as follows: '6. Costs The Tribunal has the power under the Safety, Rehabilitation and Compensation Act 1988, the Seafarers Rehabilitation and Compensation Act 1992, the Freedom of Information Act 1982, the Mutual Recognition Act 1992, the Lands Acquisition Act 1989, to order or recommend that the respondent pay the costs, or part of the costs, of a successful applicant, or where the application has been instituted by the Commonwealth. Under the Safety, Rehabilitation and Compensation Act 1988, the Tribunal may also award costs to a person where the application has been instituted by the Commonwealth. Unless the order determines otherwise, the costs payable may include: - witness expenses at the prescribed rate; - all reasonable and proper disbursements; and - 75 percent of all professional costs, including counsel's fees, which would be allowable under the Federal Court Scale. Costs will be assessed on a party and party basis. Costs may be agreed between the parties. Where there is no agreement, a Registrar of the Tribunal will tax the bill, but may refer any question for the direction of the Tribunal. Either party may apply to the Tribunal for a direction on any question related to costs, before the taxation is concluded.

Senior Member Allen's Decision 15 Senior Member Allen stated at [2] of his reasons for decision that the reference was made pursuant to [6] of the AAT's General Practice Direction. Senior Member Allen set out part of the direction which I have recorded in full above. At [5] Senior Member Allen stated that the respondent's submission was that following a series of communications between the solicitors for the parties an offer to settle the matter was made and that Senior Member Kelly's decision of 28 February 2005 was not more favourable to the applicant than the settlement offer. Accordingly, it was said that the applicant ought to be deprived of his costs from the date of the so called Calderbank letter of 14 February 2005 which was sent to the applicant's solicitors. 16 Senior Member Allen referred at [7] of his reasons to two decisions of the AAT in Hronopoulis v Telstra Corporation Limited (2002) 68 ALD 491 and Re Perry and Comcare [2005] AATA 365, where it was held that a successful applicant can be deprived of part of his or her costs that would ordinarily have been awarded pursuant to s 67(8) of the SRC Act in circumstances where a firm offer of settlement has been made and the resulting AAT decision has not been more favourable to the applicant than the offer of settlement. At [8] Senior Member Allen referred to the history of the matter set out in Ms Dejean's statement. The Senior Member then set out at [9] - [10] the relevant sections of the letters of 11 January 2005 and 14 February 2005. 17 Senior Member Allen stated at [11]: 'To my mind the letter of 14 February 2005 clearly sets out the Respondent's intention and the fact that an offer of settlement would be raised when and if any order for costs was sought by the Applicant.' 18 Senior Member Allen then referred at [12] to the letter of 16 February 2005. At [14] Senior Member Allen found that the letter of 11 January 2005 put the applicant's solicitors upon notice as to the respondent's intentions. Senior Member Allen stated that '[t]he unequivocal letter' of 14 February 2005 should have been acted upon expeditiously and that there were no apparent grounds for determining that any period of grace should be extended during which the matter of settlement could be considered. At [15] Senior Member Allen made the following finding: '…the letter of 14 February 2005 is clearly a "Calderbank" letter and put the Applicant and his solicitors upon notice. In any event, an award of costs pursuant to ss67(8) of the SRC Act is discretionary and the fact that reasonable offers of settlement have been made and rejected is a matter that can be taken into account when making any order for costs pursuant to that subsection.' 19 Senior Member Allen went on to say at [17]: 'It therefore seems to me that the real question in this matter is whether the agreement which became the consent decision signed by Senior Member Kelly was an agreement to pay the Applicant's costs in total as per the Bill of Costs dated 4 March 2005 (which I note does not descend into particularity), or whether costs incurred after 14 February 2005 can be disallowed on taxation.'

20 At [18], Senior Member Allen set out Ms Dejean's file note which I have referred to above. Senior Member Allen then stated, at [19] - [20], that: 'Given no material contradicting that file note was produced by the Applicant's solicitors, I find that the agreement entered into chose a formula regarding costs that allowed the parties to argue the effect of the letter of 14 February 2005 at taxation. As stated above, the purport of the letter was quite clear and in the taxation of the Applicant's Bill of Costs there should be no allowance for items incurred after 14 February 2005.' 21 At [21] Senior Member Allen said that it was not possible to lay down any specific ruling as to individual items but that it was proper and prudent to have delivered counsel's brief prior to 14 February 2005. He said that these and other matters which he mentioned were for determination by the taxing officer. Senior Member Allen's direction, set out at [22], was that the taxation of the applicant's bill of costs be returned to the Deputy Registrar taxing the bill with the direction that she was to rule on the disputed items in accordance with Senior Member Allen's reasons.

Discussion 22 The plain meaning of Senior Member Kelly's costs order of 28 February 2005 was that the respondent was to pay the whole of the applicant's costs of the application which resulted in the substitution of a finding of a 30 per cent impairment. This included the costs up to 22 February 2005 when the matter was listed for hearing before Senior Member Kelly. The costs and disbursements were to be assessed/taxed on the basis of [6] of the AAT's General Practice Direction. Senior Member Allen's direction of 8 July 2005 varied Senior Member Kelly's order because the effect of it was to direct the Deputy Registrar that there should be no allowance for costs incurred after 14 February 2005. 23 It may be accepted that the costs which were ordered were to be allowed only on the basis that they were necessary or proper for the attainment of justice: see O 62 r 19 of the Federal Court Rules. However, to exclude costs incurred after a certain date is different from a determination as to whether they were necessary or proper costs. The approach taken by Senior Member Allen was not to determine this question but to exclude costs incurred after 14 February 2005 because of his view of the effect of the letters of 11 January 2005 and 14 February 2005. 24 The question which then arises is whether Senior Member Allen had power to make the direction. In my respectful opinion, he did not. It seems to me that this conclusion follows from the observations of Senior Member Lewis in Re Murray and Repatriation Commission (1998) 52 ALD 117 ('Re Murray') and of Mansfield J in Comcare v Moon (2003) 75 ALD 160 ('Moon'). In Re Murray, Senior Member Lewis held that it was unlikely that the AAT has any inherent power akin to the slip rule following the insertion of s 43AA in the AAT Act in 1995. Senior Member Lewis held at [31] that s 43AA of the AAT Act confers power upon the AAT to amend errors in the text of its decision, being errors of a clerical or typographical nature or if the decision is inconsistent with the statement of reasons. The effect of Senior Member Lewis' observations is that the extent of the power under s 43AA of the AAT Act does not run to the correction of other errors or mistakes. 25 The position is made even clearer by Mansfield J's decision in Moon. His Honour held at [65] that there is power under s 43AA of the AAT Act to correct obvious errors in the text of a decision or the reasons, 'but not to reverse or vary the decision'. It seems to me to follow from what Mansfield J said at [65] that once Senior Member Kelly made the consent orders on 28 February her role, to the extent that she ordered the payment of the whole of the costs of the substituted decision in the terms previously mentioned, was spent; there was no power to revisit the decision so as to vary the terms of the order. 26 However, the respondent submitted that there were a number of different bases upon which Senior Member Allen was empowered to make the direction. The first basis suggested was under subs 67(8) of the SRC Act. That subsection authorises the AAT, where it makes a decision varying a reviewable decision in a manner favourable to a claimant, to order that the costs be paid by the responsible authority. However, that subsection could have no application to the purported exercise of power by Senior Member Allen. It is true that subs 67(8) of the SRC Act was the foundation of the exercise of power by Senior Member Kelly to make a costs order pursuant to s 42C(1)(c) and 42C(2) of the AAT Act, a more favourable decision being substituted for an earlier decision made in March 2004. But once the costs order was made the power was spent and the AAT was functus officio: see Fu v Australian Postal Corporation [2003] AATA 864 at [8]. 27 It is pertinent that Senior Member Allen did not purport to act under s 67 of the SRC Act. Rather, he considered that he had power to make the direction under [6] of the AAT's General Practice Direction. It is plain that a practice direction cannot confer on the AAT a power which it does not otherwise have under the Act, or under authority conferred by statute: see Comcare v Labathas (1995) 61 FCR 149 at 154. See also Re Murray at [22] where Senior Member Lewis cites Re Williams and Australian Electoral Commission and The Greens (1995) 38 ALD 366 at 373. 28 The second ground submitted by counsel for the respondent was that Senior Member Allen was empowered to make the direction pursuant to subs 67(13) of the SRC Act. However, this subsection merely confers authority on the AAT where a costs order has been made to tax or settle the amount of the costs. It cannot be a mandate to vary an existing costs order. 29 The third ground submitted as a basis for Senior Member Allen's direction was subs 33(1)(b) of the AAT Act. A similar provision in s 420 of the Migration Act 1958 (Cth) was considered by Gleeson CJ and McHugh J in Minister for Immigration & Multicultural Affairs v Eshetu (1999) 197 CLR 611 at [49] to [51]. It is true, as their Honours said, that the provision is intended to be facultative not restrictive. However, the effect of their Honours' observations, in particular at [51], is that provisions such as subs 33(1)(b) of the AAT Act cannot confer jurisdiction which is excluded by the express terms of the legislation. 30 The decision of Mansfield J in Moon makes it plain that s 43AA of the AAT Act does not empower the AAT to vary a decision already made, save in the limited circumstances expressly stated. Section 33(1)(b) of the AAT Act cannot confer a power which is excluded by the provision that deals expressly with the power to amend existing orders. 31 A fourth source of power was said to be s 33(1) of the Acts Interpretation Act 1901 (Cth). However, the effect of the observations of a majority of the judges in Minister for Immigration & Multicultural & Indigenous Affairs v Watson [2005] FCA 181 ('Watson') is that this section cannot be a source of power where a contrary intention is disclosed by the relevant legislation: see [19] - [24] per Hely J and [118] - [120] per Lander J. 32 In my opinion, the effect of s 42C of the AAT Act and s 67(8) of the SRC Act is that the power to make a costs order can only be exercised once. It follows from the observations of Hely and Lander JJ in Watson that this is sufficient to disclose a contrary intention so as to preclude s 33(1) of the Acts Interpretation Act as a source of power to vary the order made by Senior Member Kelly. 33 In my opinion, therefore, the direction of Senior Member Allen was made without power and is amenable to an order of review under subs 39B(1A)(c) of the Judiciary Act 1903 (Cth) or subs 5(1) paras (d), (e), and (j) and s 16 of the ADJR Act. The decision was one to which the ADJR Act applies, it was not excluded from operation and it was sufficiently final in character to be reviewable: see Director-General of Social Services v Chaney (1980) 31 ALR 571 at 590; see also Federal Commissioner of Taxation v Beddoe (1996) 68 FCR 446 at 447. In any event, the decision is reviewable under s 39B(1A)(c) of the Judiciary Act as a decision made without power. 34 The result is hardly surprising. The effect of the order of 8 July 2005 was to vary a consent order made pursuant to a settlement reached on 22 February 2000. In Harvey v Phillips (1956) 95 CLR 235 at 243-244 the High Court said that a compromise made with the authority of a party's legal representatives cannot be set aside except on a ground which would suffice to render a simple contract void or voidable, for example, fraud, mistake or undue influence; no such suggestion was made here. 35 Nevertheless, counsel for the respondent argued that Senior Member Kelly's costs order had to be construed 'in its context' in particular in light of what he said was the agreement reached on 22 February 2005. The respondent's counsel relied on Senior Member Allen's finding at [19] that the effect of the agreement was to choose a formula regarding costs that allowed the parties to argue the effect of the letter of 14 February 2005 at taxation. 36 I respectfully disagree with Senior Member Allen's finding. The costs order made by Senior Member Kelly seems to me to have been plain. If it was intended to leave scope for argument about the effect of the letter of 14 February 2005, that was nowhere mentioned on the face of the order. In any event, I do not see how it is open to construe the order in light of communications between the parties which were not known to the learned Senior Member who made the costs order on 28 February 2005. 37 Counsel for the applicant argued in the alternative that Senior Member Allen's decision was reviewable on another basis. He submitted Senior Member Allen took into account irrelevant considerations in finding that the letter of 14 February 2005 was a Calderbank letter and having regard to it in the exercise of his discretion to vary the costs order. It is unnecessary to deal with this ground in detail because of the view I have reached on what seems to me to be the essential question raised in the application. The short answer to the question seems to me to be that it would be inconsistent with the principles stated by Cairns LJ in Calderbank v Calderbank [1976] Fam 93 at 105 - 106 to permit a party to rely upon a Calderbank letter as an answer to a costs order where proceedings are compromised rather than determined at a contested hearing. It is unnecessary to consider the other submissions which were put to me on this issue. 38 Review of Senior Member Allen's decision was also said to be open on another ground, namely, Wednesbury unreasonableness. However, counsel for the applicant conceded that if I found in his favour on the first ground it was unnecessary to determine the application of the Wednesbury principle. 39 It follows that the orders I will make are that:

The direction of Senior Member Allen dated 8 July 2005 be set aside.
The matter be remitted to the Deputy Registrar of the AAT to tax or assess the applicant's bill of costs in proceedings N2004/406 in accordance with these reasons.
The respondent pay the applicant's costs of this application. I certify that the preceding thirty-nine (39) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jacobson.

Solicitor for the Respondent: Australian Government Solicitor

Safety Rehabilitation and Compensation Act 1988(Cth)s 67

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