Footscray City College v Ruzicka [2007] VSCA 136

**1 I have read the draft reasons of Chernov JA. I agree with the reasons and disposition proposed by his Honour.

2 I have had the advantage of reading in draft the reasons for judgment of Chernov JA. I would dispose of the appeal as his Honour proposes, for the reasons he gives.

3 In this proceeding the respondent, Eva Ruzicka, relevantly claimed as against the appellant, Footscray City College, weekly payments for compensation under the Accident Compensation Act 1985 ("the Act") and lump sum compensation pursuant to ss 98 and 98A of the Act in respect of ongoing injuries that she said she sustained, principally to her spine, whilst in the appellant's employ. After hearing the matter, the learned trial judge ordered, on 16 December 2005, that the appellant pay to the respondent weekly payments of compensation for the relevant period, but dismissed her claim for lump sum compensation. Following a later hearing on the question of costs, her Honour ordered, on 14 March 2006, that the appellant pay the respondent's costs on the relevant scale but excluding any costs that related solely to the ss 98 and 98A application. Her Honour considered that, in light of the terms of s 50 of the Act, which in sub-s (2A) deals with the payment of costs in respect of claims brought under ss 98 and 98A of the Act, and the decision of this Court in Civic Workers Plus Pty Ltd v Hill[1] ("Hill") to the effect that sub-s (2A) is a code or an exclusive regime for the payment of costs in s 98 or 98A applications, there should be no order as to costs in respect of the respondent's failed claim in that regard. The judge said that since there was no "order [made by the court] for the payment of an**

amount of compensation to the [respondent]" it had no power to award costs in respect of that application. The appellant appeals, pursuant to s 52 of the Act, against that aspect of her Honour's decision, essentially raising questions of law concerning the proper construction of s 50 of the Act in the context of the present circumstances.

4 Before dealing with the parties' submissions it is appropriate to set out the terms of s 50 and, for reasons which will become apparent, refer to the relevant provisions of s 104 of the Act. First, at all relevant times s 50 was in the following terms:

(1) Subject to this Act, in proceedings before the County Court under this Act or the Workers Compensation Act 1958 being proceedings brought by a person other than the Authority, employer or a self-insurer, the Court -

(a) must award costs against the party against whom a judgment or decision is made; and

(b) may, if it considers it appropriate, include in an order under paragraph (a) an award of costs to the representative of a worker in whose favour a judgment or decision is made; and

(2) Nothing in sub-section (1) applies to proceedings brought by the Authority, employer or a self-insurer.

(2A) In proceedings before the County Court under this Act which relate to a claim under section 98 or 98A, if a judgment or order is made by the County Court for the payment of an amount of compensation to the claimant -

(a) which is not less than 90 per cent of the claimant's counter statutory offer but is greater than the statutory offer made by the Authority, employer or self-insurer - the Authority, employer or self-insurer must pay the claimant's party and party costs and must bear their own costs; or

(b) which is equal to or less than the statutory offer made by the Authority, employer or self-insurer - the claimant must pay the party and party costs of the Authority, employer or self-insurer and bear his or her own costs; or

(c) which is greater than the statutory offer made by the Authority, employer or self-insurer but less than 90 per cent of the counter statutory offer made by the claimant - each party must bear their own costs -

and the County Court must not otherwise make an award of costs."

**5 As to s 104, for the present it is necessary only to note that it effectively compels each of the parties to a s 98 or 98A claim to take prescribed steps for the purpose of resolving the claim, including the making, by the parties, of offers and counter-offers and the submission of their differences to conciliation, before the claimant can institute proceedings for the enforcement of the claim. It is plain enough that s 50(2A) prescribes the various costs orders that must be made by reference to a comparison between the amount ultimately recovered in the proceedings and the offers and counter-offers made by the parties pursuant to s 104. The terms "statutory offer" and "counter statutory offer" derive from s 104.

6 In submissions to us, counsel for the appellant accepted that, in light of the decision in Hill, to which I will refer in more detail later, s 50(2A) constitutes a code in respect of all s 98/98A claims, such that the court is required to make costs orders as prescribed by paras (a)-(c), but otherwise it has no power to make any costs order on such an application. It was the appellant's primary case, however, that, applying a purposive construction of the provision, and in light of its legislative history, the impugned order fell within para (b) of sub-s (2A) and, therefore, her Honour was required to order that the respondent pay the appellant's party and party costs of the unsuccessful s 98/98A application. In support of that claim it was first argued that the effect of the order was that the respondent recovered nothing in respect of her lump sum claim, and since this was plainly less than the statutory offer, the order fell within para (b) of sub-s (2A), thereby compelling the making of the costs order sought. Alternatively, it was said, appropriate words must be read into the paragraph to give effect to what was said to be the clear statutory intention of the sub-section, namely, that the costs consequences provided in para (b) cover the situation of an unsuccessful s 98 or 98A application.

7 I would reject both arguments. In my view, it would be plainly a misuse of the English language to say that her Honour's order was one "for the payment of an amount of compensation to the claimant ... which is less than [the respondent's offer]". Properly characterised, the order here had the effect of dismissing the appellant's claim. True it is that the order had the consequence that the respondent received nothing in respect of her lump sum claim which, arithmetically, was obviously less than the appellant's offer. But it does not follow that, by reason of this, the order is one that fell within the terms of the sub-section. Furthermore, for reasons which appear below, I consider that, on the proper construction of sub-s (2A), and given its legislative history, neither the ordinary meaning of its words nor its purpose deal with the situation where a s 98/98A application is dismissed. On that basis alone, it would not be appropriate to read or imply into the sub-section the words suggested by the appellant. Moreover, the appellant has not established that there is a clear necessity to read or imply those words into the statute, even if one adopted a purposive approach to the interpretation of the section. As Stephen J said in Western Australia v The Commonwealth, "[t]o read words into any statute is a strong thing and, in the absence of clear necessity, a wrong thing".[2] And in Marshall v Watson[3] his Honour cited with approval the following proposition in the speech of Lord Simonds in Magor and St Mellons Rural District Council v Newport Corporation:[4] "If a gap is disclosed, the remedy lies in an amending Act" and not in an "usurpation of the legislative function under the thin guise of interpretation." As is explained below, I consider that there is no relevant "gap" in sub-s (2A), merely because its terms do not encompass an order dismissing a s 98/98A application. But even if that absence constituted a hiatus, the situation could not be remedied by implying words into the sub-section as the appellant proposes.

8 Nevertheless, and notwithstanding that it was only faintly pressed, I consider that there is merit in the appellant's argument that her Honour was required by the terms of s 50(1) to order the respondent to pay the appellant's party and party costs of the claim. That her Honour concluded that she had no power to order costs because of the concluding words of sub-s (2A) is, in a sense, understandable given the observations of three eminent judges of this Court in Hill that sub-s (2A) covers the field of s 98/98A applications so that, unless the order in question fell within one of the paragraphs of sub-s (2A) - which her Honour correctly said did not occur here - the court had no power to make a costs order having regard to the concluding words of the sub-section. In the circumstances, it is also unsurprising that the respondent relied on Hill for the contention that, on its proper construction, the sub-section covered the relevant field so that the judge in this case did not err as the appellant claims. In support of its case, the respondent also pointed to the observations of Beach J in Harvey v Frontline Australasia Pty Ltd[5] that it may well be the case that Parliament intended that an unsuccessful s 98/98A claimant should not be compelled to pay costs. As his Honour implied, that would have been consistent with the practice before the introduction of s 50 into the Act, namely, that, notwithstanding that the Tribunal had the discretion to make such an order, ordinarily costs were not awarded against the unsuccessful applicant.

9 Before dealing with the above cases and what is the proper meaning to be given to sub-s (2A) for relevant purposes, it is necessary to refer briefly to the legislative history of s 50 and, to a lesser extent, s 104. When the Act was first enacted in 1985, the costs of proceedings in relation to lump sum claims were at the discretion of the Tribunal. Thus, s 64 of the 1985 Act empowered the Tribunal to make such orders, if any, as to costs as it thought just. As has been mentioned, however, it was nevertheless common for costs not to be awarded against unsuccessful applicants for compensation.[6] In 1992, Act No 67[7] inserted s 50 into the Act. That provision compelled the court to award costs "against the party against whom a judgment or decision is made [but] must not otherwise make an award of costs". Thus, it is plain enough that the legislature, which must be taken as being aware of the practice identified by Beach J, imposed the requirement that the "loser" of a s 98 or 98A application had to pay the costs. It was the legislature's first step in this context of using a financial "stick" to encourage parties to give greater thought to settling such cases.

10 Act No 50 of 1994[8] further extended the "incentive" for the parties to a lump sum claim to settle the matter. It introduced a scheme whereby the insurer was effectively compelled by s 98B to follow the procedure prescribed by s 104; relevantly, to make, within the prescribed time, an offer of compensation to the s 98/98A claimant and, in the absence of an actual offer being made within that time, the insurer was deemed to have made an offer of nothing. Section 98B precluded a claimant from commencing a proceeding with respect to such a claim unless the claim had been dealt with in accordance with s 104; relevantly, until the insurer had made an actual or a deemed "final offer in settlement or compromise of the claim". Consistently with the policy of facilitating the settlement of such claims through financial incentive, the then new legislation, through sub-s (2A), for the first time tied the entitlement to the costs of a s 98 or 98A proceeding to the insurer's "final offer", but only where there was a "judgment or order ... for the payment of an amount of compensation" on a lump sum claim. Thus, under the sub-section, where the amount of compensation ordered was less than the amount of the "final offer", the court was directed to order that the applicant pay the respondent's costs (and vice versa). But the sub-section was silent on the question of costs where the claim was dismissed and it is ostensibly the case that, under s 50(1), as it was then worded (that is, absent the introductory words that are now in the sub-section, namely, "Subject to the Act"), the claimant would have been required to pay the insurer's costs.

11 In 1996, Act No 7[9] substituted a new s 104 which, amongst other matters, prescribed the manner in which the insurer was to deal with a s 98/98A claim. Relevantly, any disagreement between the parties as to the worker's entitlement, or the quantum of compensation, was to be subjected to conciliation and, if that was unsuccessful, the insurer was required to make to the claimant a "final offer" of settlement. If the insurer failed to do so, sub-s (11) deemed it to have made an offer of nothing. Paragraphs (a) and (b) of sub-s (2A) were correspondingly amended to refer to "final offer under s 104" (instead of "final offer under s 98B" as was previously the case). Paragraph (c) had not then been introduced. It seems that the costs consequences in respect of an unsuccessful s 98/98A claimant remained the same as under the 1994 amendments.

12 Act No 107 of 1997[10] brought s 50 and s 104 into their present form. Thus, sub-ss (11A) and (11B) were inserted into s 104. Sub-section (11A) relevantly required the claimant, within 21 days, to accept the insurer's statutory offer or make a "counter statutory offer". Sub-section (11D) provided that if the claimant has not accepted the statutory offer within the prescribed time or has not made a counter statutory offer, he or she is deemed to have made a counter statutory offer of an amount equal to the total of the maximum amounts that could be claimed for injuries under ss 98 and 98A. At the same time, s 50 was amended in the following important respects. First, the words "Subject to this Act" were inserted into sub-s (1) as introductory words. Secondly, the new sub-s (2A), by paras (a), (b) and (c), provided for the award of costs by reference to the amount of compensation awarded compared with the amount of any statutory offer and counter-offer that was made or was deemed to have been made under s 104, as the case may be. Thirdly, it was specifically provided at the foot of sub-s (2A) that the court "must not otherwise make an award of costs". Again, nothing was said, in terms, in the legislation as to the payment of costs on a s 98 or 98A application that has failed such that there was no "judgment or order ... or the payment of an amount of compensation to the claimant".

13 As I have said, given the terms of s 50 and its legislative history, and the context of the legislative scheme to which I have referred, I would reject the appellant's primary claim that sub-s (2A)(c) operates as to require each party to bear its own costs of the application. But I would uphold its alternative argument which was, as I have said, to the effect that the prohibition in sub-s (2A) against the court "otherwise" making an order of costs does not apply to an unsuccessful s 98/98A claim and that in that situation, sub-s (1) operates to compel the losing party to pay the costs. I say this for the following reasons.

14 First, I think that an ordinary reading of the words of the section in the context of the Act[11] makes it apparent enough that the words of prohibition in sub-s (2A) are intended to apply only to the situation where there has been an order for compensation in favour of the claimant. It seems to me that the comma in the third line of the provision, rather than supporting the respondent's argument that it compels the sub-section to read that the prohibition applies in respect of all s 98/98A proceedings, supports the opposite view. The comma, I think, is not a mere reflection of grammatical correctness but demonstrates that the legislature intended to place a demarcation between the words preceding the comma and those following it such that the mandatory provisions in paras (a)-(c), and thus the concluding words of the sub-section, apply only to the situation where an order for compensation has been made.[12] The hyphen at the end of para (c) does not constitute a further demarcation such as to suggest that the opening lines of the sub-section are also to fall within the prohibition prescribed at the end of the provision. It seems to me that the opening words of sub-s (2A) do no more than provide a description of the proceeding in respect of which the court is compelled to award costs in accordance with one of the succeeding paragraphs, "if" (but only if) an order for compensation is made. Consistently with this conclusion, it is equally apparent on an ordinary reading of s 50 that it requires, by para (a) of sub-s (1), the court to award costs in favour of the respondent to an unsuccessful s 98 or 98A application.

15 Secondly, and in any event, these conclusions are all the more apparent if one has regard to the purpose of the legislation[13] as derived from its legislative history and the words of s 50[14], and the mischief that the statute ostensibly sought to remedy[15] by the amendments to which I have referred. Given the legislative history of the two sections - ss 50 and 104 - it seems plain enough, I think, that the mischief that was sought to be eliminated or reduced by the legislature was the pursuit of proceedings to enforce s 98/98A claims without apparent effort to resolve them by negotiations or alternative dispute resolution processes. And the purpose of the amendments, it seems to me, as I have mentioned, was to maximise the prospect of the parties settling such claims by requiring them, through s 104, to refer the matter to conciliation and if that proved unsuccessful, to make offers and counter-offers to each other as prescribed. The provision effectively "punishes" or "rewards" the parties, through the costs orders contemplated by sub-s (2A), depending on the proportion that the amount recovered bore to the offer or counter-offer, as the case may be.

16 Next, given the circumstances, to construe the legislation as the respondent proposes, namely, that sub-s (2A) is to be read as covering all s 98/98A applications such that the concluding words preclude the court from awarding costs against the unsuccessful claimant, would be to disregard the legislative policy referred to earlier and would produce incongruous and manifestly absurd results that could not have been intended by Parliament. A court strains not to construe legislation to produce such an effect. Over 150 years ago Lord Wensleydale referred in Grey v Pearson to what became known as "the golden rule":**

"I have been long and deeply impressed with the wisdom of the rule, now, I believe, universally adopted, at least in the Court of Law in Westminster Hall, that in construing wills and indeed statutes, and all written instruments, the grammatical and ordinary sense of the words is to be adhered to, unless that would lead to some absurdity, or some repugnance or inconsistency with the rest of the instrument, in which case the grammatical and ordinary sense of the words may be modified, so as to avoid that absurdity and inconsistency, but no farther."[16]

It is the case, as Pearce and Geddes point out in Statutory Interpretation in Australia,[17] that "the golden rule contemplated that a mistake had been made in the wording of the Act". But the rule is also otherwise applied to avoid construing legislation so as to produce patently unintended or absurd results.[18]

**17 As the appellant submitted, to construe sub-s (1) and sub-s (2A) of s 50 as the respondent would have it would procure the plainly unintended situation where an unsuccessful claimant for, say, weekly payments, would bear the costs of an unsuccessful application by reason of the operation of sub-s (1), whereas an unsuccessful s 98/98A claimant could not be required to pay costs of that application. This would plainly result in discordant and inconsistent treatment of two relatively like applications. Worse still, it was said - correctly, I think - that a construction of the legislation according to the respondent's submission would produce the result that a claimant for lump sum compensation, whose claim was only partly successful such that it fell within para (b) of sub-s (2A), would have to pay the party and party costs of the respondent, yet a claimant who wholly failed could not be ordered to pay costs. It is apparent that such a result would be inconsistent with the aim of the legislation.

18 I now come to the respondent's contention that the construction for which she argues in respect of s 50 has been endorsed by this Court in Hill[19] where it was said, as has been noted, that sub-s (2A) provides a code or statutory regime for all s 98/98A applications such that the court only has power to award costs in such proceedings if the award of compensation falls within one of the paragraphs of the sub-section; and that otherwise there was no power in the court to award costs. Moreover, counsel pointed out, Ormiston JA said that he did "not think that it was intended that sub-s (1) should provide a 'backstop' for cases which happen to fall outside the provisions of sub-s (2A)".[20] But as counsel for the respondent properly accepted, it is plain enough that this aspect of the decision in Hill was obiter, although he contended that it was persuasive support for his argument. The case essentially was concerned with the regime set up by s 104 and, in particular, to what extent its provision of "deemed" statutory offers and counter-offers operated for the purpose of s 50(2A). In the circumstances of that case, given that the insurer had not made any "statutory offer in writing", an offer of nothing was deemed to have been made by it pursuant to sub-s (11). Similarly, by the operation of sub-s (11B), the claimant, who had consequently not made a "counter offer", was deemed to have made a counter offer in the prescribed maximum amount. Thus, although the claimant was successful in his application, the insurer argued that since the amount recovered was greater than its statutory offer, but less than 90 per cent of the counter statutory offer (the deemed maximum), the circumstances fell within para (c) of sub-s (2A) and, therefore, each party was required to bear its own costs. The judge below had held that, because the insurer had not in fact made an offer to the claimant, the provisions of s 50(2A) were inapplicable and ordered costs in conformity with s 50(1). Thus, the issue was whether the deeming provisions of s 104 could have applied to the corresponding terms of s 50(2A). Specifically, whether given that the insurer was deemed to have made an offer of nothing, and the claimant was deemed to have made a counter offer, those acts amounted respectively to a "statutory offer" and "counter statutory offer" for the purpose of invoking the costs provisions in s 50(2A). The Court held that they did. As Buchanan JA said, "it would run counter to the clear intention of the legislature to construe s 104(11B) as not to deem a counter offer to have been made if the only statutory offer was a deemed statutory offer". [21]

19 It is in these circumstances that the members of the Court came to make the general observations concerning the operation of sub-s (2A) on which the respondent relies. Their Honours, of course, did not have the benefit of argument on the issue presently before us and, more importantly, were not required to resolve it. The context in which the observation was made makes it apparent that the members of the Court did not intend to lay down a definitive construction of the provision. The same conclusion applies, I think, to the speculative observation of Beach J to which I have referred, namely, that "[i]t may well have been the intention of the legislature to ensure that the practice continued in respect of claimants who make claims under s 98 or 98A and whose claims are unsuccessful".[22] What his Honour said is, in the circumstances, unpersuasive for present purposes. It is plain enough that the learned judge was there speaking of the practice that existed prior to the introduction of s 50 when, it would seem, the court, in the exercise of its discretion, did not compel the unsuccessful claimant for lump sum compensation to pay costs.

20 But, as has been noted, that "practice" was effectively abolished in 1992 by s 50 which compelled the unsuccessful claimant to pay the respondent's party and party costs. For the reasons given, this requirement continued to be part of s 50 except to the extent that the costs regime in respect of successful s 98/98A claims was effectively removed from the ambit of sub-s (1) by the words "Subject to this Act" and was exhaustively dealt with by sub-s (2A).

21 For these reasons, I think that sub-s (1) compelled the judge in this case to have awarded costs of the proceedings to the applicant on a party and party basis. That she did not do so meant that she erred. Consequently, I would set aside her Honour's order and in lieu of it order to the effect that the appellant pay the respondent's costs on County Court Scale "D" in respect of the respondent's claim for weekly payments, but the respondent pay the appellant's party and party costs on the appropriate scale in respect of her application for compensation pursuant to ss 98 and 98A of the Act.**

[2] [1975] HCA 46; (1975) 134 CLR 201, 251, citing Thompson v Goold & Co [1910] AC 409, 420 (Lord Mersey).

[3] [1972] HCA 27; (1972) 124 CLR 640, 649.

[4] [1952] AC 189, 191. See also Parramatta City Council v Brickworks Ltd [1972] HCA 21; (1972) 128 CLR 1, 12 (Gibbs J).

[5] [2001] VSC 77, [25].

[7] Accident Compensation (WorkCover) Act 1992.

[8] Accident Compensation (Amendment) Act 1994.

[9] Accident Compensation (Amendment) Act 1996.

[10] Accident Compensation (Miscellaneous Amendment) Act 1997.

[11] Nokes v Doncaster Amalgamated Collieries Ltd [1940] AC 1014, 1022 (Viscount Simon LC); Kingston v Keprose (No 2) (1987) 11 NSWLR 404, 423 (McHugh J); Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation [1981] HCA 26; (1981) 147 CLR 297, 305-6 (Gibbs CJ); Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355, 381 (McHugh, Gummow and Hayne JJ).

[12] For examples where the court considered that the comma was used by the drafter to demarcate words, or serve a particular purpose, thus facilitating the proper construction of the provision see Ryde Municipal Council v Macquarie University [1978] HCA 58; (1978) 139 CLR 633, 636 (Gibbs ACJ); Re Collins; Ex parte Hockings [1989] HCA 42; (1989) 167 CLR 522, 525 (Toohey and McHugh JJ).

[13] See s 35(a) of the Interpretation of Legislation Act 1984.

[14] See Stingel v Clark [2006] HCA 37; (2006) 80 ALJR 1339, 1348 (Gleeson CJ, Callinan, Heydon and Crennan JJ).

[15] See, eg, CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384, 408 (Brennan CJ, Dawson, Toohey and Gummow JJ).

[16] [1857] EngR 335; (1857) 6 HLC 61, 106; [1857] EngR 335; 10 ER 1216, 1234.

[18] Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation [1981] HCA 26; (1981) 147 CLR 297, 304 (Gibbs CJ). See also Roy Morgan Research Centre Pty Ltd v Commissioner of State Revenue [2001] HCA 49; (2001) 207 CLR 72, 80 (Gaudron, Gummow, Hayne and Callinan JJ).

[19] (2001) 1 VR 640, 641 (Ormiston JA), 643 (Phillips JA), 653 (Buchanan JA).

[22] Harvey v Frontline Australasia Pty Ltd [2001] VSC 77, [25].