Morrison v Chevalley

COSTS - Occupational health and safety - Reference to Full Bench of questions of law arising out of Kirk v Industrial Relations Commission of New South Wales; Kirk Group Holdings Pty Ltd v WorkCover Authority of New South Wales (Inspector Childs) [2010] HCA 1; (2010) 239 CLR 531 - Questions of law decided in prosecutor's favour - Whether special circumstances justifying a departure from usual rule that costs follow the event - Whether parties should bear own costs - Public interest considerations - Need for proper balance to be struck between applying the usual rule and the degree of public interest attached to an issue that might be said to legitimately arise from Kirk for determination in relation to a prosecutor's obligations in connection with the prosecution of directors and managers - Defendants to pay 50 per cent of prosecutor's costs of the Reference - No liability of defendants for costs relating to the constitutional issue CATCHWORDS: OCCUPATIONAL HEALTH AND SAFETY - Costs - Reference to Full Bench of questions of law arising out of Kirk v Industrial Relations Commission of New South Wales; Kirk Group Holdings Pty Ltd v WorkCover Authority of New South Wales (Inspector Childs) [2010] HCA 1; (2010) 239 CLR 531 - Questions of law decided in prosecutor's favour - Whether special circumstances justifying a departure from usual rule that costs follow the event - Whether parties should bear own costs - Public interest considerations - Need for proper balance to be struck between applying the usual rule and the degree of public interest attached to an issue that might be said to legitimately arise from Kirk for determination in relation to a prosecutor's obligations in connection with the prosecution of directors and managers - Defendants to pay 50 per cent of prosecutor's costs of the Reference - No liability of defendants for costs relating to the constitutional issue

Criminal Appeal Act 1912 s 5AE LEGISLATION CITED: Industrial Relations Act 1996 s 181 s 196 Occupational Health and Safety Act 1983 s 50 Occupational Health and Safety Act 2000 s 8 s 26

Cretney v Director General, New South Wales Department of Education and Training (No 4) [2010] NSWIRComm 17 Inspector Green v The Crown in Right of the State of New South Wales (Department of Commerce) [2006] NSWIRComm 368; (2006) 158 IR 227 Inspector Jorgensen v Daoud [2005] NSWIRComm 135; (2005) 143 IR 170 Inspector Kumar v Ritchie [2006] NSWIRComm 323 Kirk v Industrial Relations Commission of New South Wales; Kirk Group Holdings Pty Ltd v WorkCover Authority of New South Wales (Inspector Childs) [2010] HCA 1; (2010) 239 CLR 531 Latoudis v Casey (1990) 170 CLR 534 CASES CITED: Morrison v Chevalley [2010] NSWIRComm 116 Morrison v Powercoal Pty Ltd [2004] NSWIRComm 297; (2004) 137 IR 253 Oshlack v Richmond River Council (1998) 193 CLR 72 R v JW [2010] NSWCCA 49 Ruddock v Vadarlis (No 2) (2001) 115 FCR 229 WorkCover Authority of NSW v Denson [2007] NSWIRComm 69; (2007) 162 IR 199 WorkCover Authority of New South Wales (Inspector Keenan) v Lucon (Australia) Pty Ltd (No 2) [2003] NSWIRComm 40; (2003) 124 IR 459

HEARING DATES: Written submissions: 31 August 2010; 7 September 2010; 14 September 2010

Mr R J Burbidge QC with Mr I Taylor of counsel and Mr M K Scott of counsel (Prosecutor) Crown Solicitor's Office

Mr R J Burbidge QC with Ms K Richardson of counsel (Intervenor in Matter IRC2007/956) Attorney General of New South Wales LEGAL REPRESENTATIVES: Crown Solicitor's Office

Mr M Thangaraj of counsel with Mr P D Keyzer of counsel (Defendant in Matter IRC2007/956) McDonald Johnson Lawyers

Mr A R Moses SC with Mr D H Nagle of counsel (Defendant in Matter IRC2007/957) Greg Murray solicitor

CORAM: BOLAND J, President WALTON J, Vice-President HAYLEN J STAFF J

Prosecution pursuant to section 8(1) of the Occupational Health and Safety Act 2000 by operation of section 26(1) of that Act

Prosecution pursuant to section 8(1) of the Occupational Health and Safety Act 2000 by operation of section 26(1) of that Act

1 In Morrison v Chevalley [2010] NSWIRComm 116, the Full Bench dealt with seven questions of law referred to it by Backman J under s 5AE(1) of the Criminal Appeal Act 1912 and s 196 of the Industrial Relations Act 1996. Six of the questions were answered in favour of the case presented by the prosecutor. The seventh question concerned the constitutionality of s 26 of the Occupational Health and Safety Act 2000. It was contended for Mr Chevalley, a defendant in the proceedings, that s 26 was invalid. The Attorney General of New South Wales defended against that proposition and the question was answered in favour of the Attorney's case. 2 The parties to the proceedings were provided with an opportunity to make written submissions on the question of costs and were advised that unless a party indicated a desire to be heard orally on costs, the question would be determined on the papers. No party sought to be heard orally. This decision deals with costs. Submissions for the defendants

3 It was accepted by the defendants that the current state of law in this jurisdiction is that costs will be determined pursuant to s 181 of the Industrial Relations Act: see WorkCover Authority of New South Wales (Inspector Keenan) v Lucon (Australia) Pty Ltd (No 2) [2003] NSWIRComm 40; (2003) 124 IR 459 at [17]. 4 The defendants contended that the appropriate order to be made by the Full Court was that each party bear their own costs of the Reference. The defendants accepted that the Reference had been determined in favour of the position advanced by the prosecutor. The defendants contended, however, that the Reference was characterised by the types of 'special circumstances' that justified a different order than the usual order that the defendants pay the prosecutor's costs. The defendants referred to Ruddock v Vadarlis (No 2) (2001) 115 FCR 229 at [13] where Black CJ and French J referred to the restorative intention of the general rule that ordinarily costs follow the event, but described one type of 'special circumstance' that, it was submitted, was 'entirely germane in the instant case': [13] ... Where, for example, declaratory relief is sought because of genuine uncertainty about the interpretation of a document or a statute, it will not explain why the successful party should be reimbursed at the cost of its opponent where the legal issue is novel and has consequences extending beyond the particular litigation. The alternative rationale for the compensation principle is simply that the winner should not have to suffer financially for vindicating its rights. The criticism of this intuitively attractive approach is again that it does not necessarily follow that the obligation to compensate the winner should be imposed on the losing party. For the losing party may have had very good legal grounds for its position and have conducted itself in the litigation in an entirely reasonable way. Where the case is close or difficult and involves no obvious element of fault on the part of the loser the proposition that costs automatically follow the event may work unfairness. Moreover it may set up a significant barrier against parties of modest means even if the contemplated claim has substantial merit: See Tollefson, "When the 'Public Interest' Loses: The Liability of Public Interest Litigants for Adverse Costs Awards" (1995) 29 University of British Columbia Law Review 303 at 309-311; see also McCool, "Costs in Public Interest Litigation: A Comment on Professor Tollefson's Article" (1996) 30 University of British Columbia Law Review 309. These criticisms will not justify a global modification, in public interest cases, of the usual rule that costs follow the event. They do however indicate the desirability of avoiding calcification of the discretion with rigid rules governing its exercise. 5 In the present case the defendants submitted that the Reference was necessary in order to clarify the current state of law post the High Court decision in Kirk v Industrial Relations Commission of New South Wales; Kirk Group Holdings Pty Ltd v WorkCover Authority of New South Wales (Inspector Childs) [2010] HCA 1; (2010) 239 CLR 531, not simply for the immediate parties in these matters, but also for all defendants currently facing charges under the Occupational Health and Safety Act 2000. It was submitted that: (a) there has now been a clear departure by the High Court from the established body of case law which existed in the Industrial Court in NSW prior to 15 February 2010;

(b) a number of occupational health and safety matters have been adjourned since the High Court delivered Kirk thereby allowing the Full Bench to hear reference cases such as the present and to give the relevant guidance to both Defendants and Prosecutors alike;

(c) clarification of issues raised by Kirk was well within the interests of justice for the public at large at that clarification has now to a great degree been provided by this reference judgment;

(d) this case is not one which requires the application "of an inflexible rule" ( Latoudis v Casey (1990) 170 CLR 534 at 565 per Toohey J). Any award of costs in this current case should (if not must) take into account the following matters:

(i) The Prosecutor posed questions which formed part of the basis for this reference. To that end the Prosecutor did not resist the questions being referred but rather joined in the application.

(ii) The reference raised questions of jurisdiction which were of importance in determining the limits of the Industrial Court's jurisdiction post- Kirk .

(iii) It was the Prosecutor who raised the Industrial Court's competency of jurisdiction with regard to the matters giving rise to the stated case, whilst the Defendants at all relevant times submitted that the Court was vested with the relevant jurisdiction.

(iv) These proceedings raised matters of substance which unlike the contentions raised by the Defendant in Inspector Hamilton v John Holland Pty Ltd (No 2) [2010] NSWIRComm 112 were far from clear. (e) the fair and judicial approach should be that each party bear their own costs. This is especially so when the costs of the reference would be likely to exceed any penalty which may be imposed on either Defendant, being individuals. 6 It was submitted in relation to the constitutional challenge brought by Mr Chevalley that it had clarified the position in relation to the deemed contravention of directors and persons concerned in management in New South Wales. In the event that the Court did not accept this contention any costs associated with this aspect of the case should not be the subject of a costs order against Mr Grugeon. Submissions for the prosecutor

7 The prosecutor sought an order that the defendants pay his costs of the Reference. In that respect, the prosecutor made submissions that are summarised below: (a) the relevant principles are those enunciated in Oshlack v Richmond River Council (1998) 193 CLR 72, and Latoudis v Casey (1990) 170 CLR 534;

(b) the relevant principle to be applied is that no good reason has been shown as to why the Full Bench should depart from the general rule that a wholly successful defendant should receive his costs;

(c) there was no genuine uncertainty about the interpretation of a document or a statute. The statute in question is one well litigated and well known to the Court;

(d) there was no legal issue that was novel with consequences extending beyond the particular litigation. Rather, it was an attempt by the defendants to apply by parity of reasoning aspects of the reasoning of the High Court in Kirk to an argument that the High Court had not had occasion to consider;

(e) the assertion that reference cases such as the present give the relevant guidance to both defendants and prosecutors alike, failed to recognise that the prosecutor's position was that its pleadings were unaffected by Kirk , either in respect of the corporate defendant or the directors. That position was formulated pre- Kirk ;

(f) the 'clarification' of matters said to have been left open by Kirk , referred to clarification by the Court, clarification that has not been accepted by the defendants as correct;

(g) the defendants should be ordered to pay his costs; should the defendants succeed on appeal to the Court of Appeal or subsequently it will fall to the relevant court to adjust the costs orders as may be appropriate;

(h) whilst it is true that the prosecutor joined in the application, he did so in circumstances where the defendants had stated that they proposed to agitate their asserted consequences of the Kirk judgment at appeal level. The prosecutor's acquiescence to the proposed referral of questions to the Court recognised that that course would both expedite resolution of the matters and economise on costs. His acquiescence followed the defendants' refusal of his suggestion that their stated intention might better be implemented by an application for exercise of supervisory jurisdiction by the Court of Appeal of the kind that they now propose to make;

(i) the prosecutor incurred only limited costs in respect of the constitutional issue (that aspect of the case being opposed by the Attorney-General);

(j) the prosecutor does not seek an order of costs in respect of the constitutional issue;

(k) the prosecutor accepts that if any costs are awarded in respect of this issue they should not be ordered against Mr Grugeon. Attorney General

8 The Full Bench was advised by letter that the Attorney General did not seek costs in relation to the constitutional issue. Consideration

9 The issue in these proceedings is whether the prosecutor should have his costs of the Reference, whether we should uphold the defendants' claim that each party should bear its own costs or whether there should be some other outcome in relation to costs. 10 The Court's power in respect of the awarding of costs is governed by s 181 of the Industrial Relations Act, which relevantly provides in s 181(1): (1) Subject to the rules of the Commission and any other Act or law: (a) the Commission may award costs, and

(b) costs are in the discretion of the Commission, and

(c) the Commission may determine by whom and to what extent costs are to be paid, and

(d) the Commission may order costs to be assessed on the basis set out in Division 11 of Part 3.2 of the Legal Profession Act 2004 or on any other basis. 11 The principles that apply to the awarding of costs pursuant to s 181, were recently summarised by the Full Bench in Cretney v Director General, New South Wales Department of Education and Training (No 4) [2010] NSWIRComm 17 at [8]. Relevantly the Full Bench stated: (a) Costs are in the discretion of the Industrial Court which has power to determine by whom and to what extent costs are to be paid: s 181(1) of the Industrial Relations Act.

(c) The discretion must be exercised judicially: Cretazzo v Lombardi [1975] 13 SASR 4; Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 at 96-98 per McHugh J.

(d) Costs are compensatory in the sense that they are awarded to indemnify the successful party against the expense to which he or she has been put by reason of the legal proceedings. The order is not made to punish the unsuccessful party: Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534 per Mason CJ at 543, per Toohey J at 562 - 563, per McHugh J at 566 - 567.

(e) The 'usual approach', the 'general position' or 'ordinary' approach is that costs will follow the event: Inspector Yeung v Donald Wilson trading as Wilson's Tree Service [2005] NSWIRComm 158; (2005) 143 IR 187 at [126]; Veney v New South Wales Local Government, Clerical, Administrative, Energy, Airlines and Utilities Union (No 2) [2009] NSWIRComm 33; (2009) 181 IR 395 at [5]; Rose v Meriton Apartments Pty Ltd [2008] NSWIRComm 25; (2008) 171 IR 49 at [8]; WorkCover Authority of New South Wales (Inspector Keenan) v Lucon (Australia) Pty Limited (No 2) [2003] NSWIRComm 40; (2003) 124 IR 459 at [19].

(f) A successful litigant is, prima facie , entitled to an award of costs, unless there are special circumstances warranting a departure from the rule: O'Sullivan v Crown in Right of the State of New South Wales (Department of Education and Training) [2003] NSWIRComm 303; (2003) 128 IR 158 at [198] - [199]; Powerlan Ltd v Squires (No 2) [2007] NSWIRComm 68; (2007) 162 IR 389; Kim Hollingsworth v Commissioner of Police [2007] NSWIRComm 137 at [14]. '[T]he making of an order that a successful party pay his or her opponent's costs requires strong justification and exceptional circumstances must exist before a party will ... be ... required to pay part of the opponent's costs': Arian v Nguyen (2001) 33 MVR 37; [2001] NSWCA 5 at [37]; Hooker v Gilling (No 2) [2007] NSWCA 214 at [21].

(g) Whether an order contrary to the general rule that costs follow the event should be made depends on the circumstances of the case viewed against the wide discretionary powers of the court, which powers should be liberally construed: Elite Protective Personnel Pty Ltd v Salmon (No 2) [2007] NSWCA 373 , citing New South Wales v Stanley [2007] NSWCA 330 at [18] per Hislop J (with whom Beazley and Tobias JJA agreed) (see also Bostik Australia Pty Ltd v Liddiard (No. 2) [2009] NSWCA 304 at [38]; Bonic v Pacific General Securities Ltd [2009] NSWSC 1221 at [12]).

… 12 In Ruddock v Vadarlis (No 2) the Court (Black CJ and French J; Beaumont J dissenting) made no order as to costs in proceedings brought by a Melbourne lawyer and the Victorian Council for Civil Liberties in relation to persons rescued by MV Tampa. Their Honours concluded: This is a most unusual case. It involved matters of high public importance and raised questions concerning the liberty of individuals who were unable to take action on their own behalf to determine their rights. There was substantial public and, indeed, international controversy about the Commonwealth's actions. The proceedings provided a forum in which the legal authority of the Commonwealth to act as it did with respect to the rescued people was, and was seen to be, fully considered by the Court and ultimately, albeit by majority, found to exist. The case is quite different in character from the predominantly environmental litigation in which many of the previous decisions concerning the impact of public interest considerations on costs awards have been made. Having regard to its character and circumstances the appropriate disposition is that there be no order as to the costs of the appeal or the application before North J. 13 It does not seem to us that the present proceedings fall into the class of being of 'high public importance' concerning 'the liberty of individuals unable to take action on their own behalf to determine their rights' such that there should be no order as to costs. Nor do the proceedings fit readily into the type of public interest litigation such as that in Oshlack. 14 The defendants in the present proceedings were undoubtedly attempting to make forensic use of the decision of the High Court in Kirk, not in any beneficent sense (and we do not say that critically), but rather to have the charges against them struck out. To that end it was contended that, by parity of reasoning, if the acts or omissions of a corporate defendant were required to be pleaded in order that the defendant could invoke a defence (as determined in Kirk), it followed that in the case of a director or manager charged under s 8(1) by operation of s 26, the acts or omissions of the director or manager were also required to be pleaded. 15 As we have said, the defendants' reliance on Kirk was on the basis of parity of reasoning. Kirk did not determine that because the prosecutor was required to plead the acts or omissions of the Kirk company and failed to do so, it was also required to plead the acts or omissions of Mr Kirk, who had been separately charged.

16 As it was observed in the substantive judgment in Morrison v Chevalley at [105]: [105] ... Under s 26, because the director or manager is taken to have contravened the same provision as the corporation, provided the acts or omissions of the corporation have been pleaded, the director or manager is thereby informed of the measures that should have been taken by the corporation, and, it follows, by the director or manager, to avoid the risk. The director or manager is, therefore, placed in the position of knowing the acts or omissions that have been charged against him or her and in that knowledge may invoke a defence under s 26(1)(a) or (b). Whether a director or manager was in a position to influence the conduct of the corporation or, if in such a position, exercised all due diligence to prevent the contravention by the corporation, are matters that are presumed to be peculiarly within the knowledge of the director or manager and, therefore, the onus of proving those matters falls on the director or manager. 17 What was said in Morrison v Chevalley at [105] is not a new notion that was only formulated following Kirk. It has always been the Court's approach to s 26 and its predecessor, s 50 of the Occupational Health and Safety Act 1983: see for example: Morrison v Powercoal Pty Ltd [2004] NSWIRComm 297; (2004) 137 IR 253; Inspector Jorgensen v Daoud [2005] NSWIRComm 135; (2005) 143 IR 170 at [25]-[30]; Inspector Kumar v Ritchie [2006] NSWIRComm 323.

18 The defendants referred to R v JW [2010] NSWCCA 49 at [28]-[30] where the Court of Criminal Appeal held that by virtue of the Kirk judgment there was a need for an appellant prosecutor to properly plead and particularise an appeal in order to inform the Court and the defendant/respondent of the Crown case so brought. It was said that this requirement arose in the criminal appellate jurisdiction of the Court of Criminal Appeal due to 'parallel reasoning': at [30]. So much may, with respect, be accepted. R v JW did not involve a provision of the nature of s 26 and, as it was explained in Morrison v Chevalley, by pleading and particularising the offence of the defendant corporation, the prosecutor had met the requirement for pleading the acts or omissions regarding the directors. 19 It may be accepted that there are matters before members of the Court that were adjourned pending the decision in Morrison v Chevalley. That is not an unusual state of affairs where some uncertainty has been created by a judgment of a higher court. 20 It is true that the prosecutor joined in the Reference application and contributed to the framing of the questions of law, but as we understand it the defendants had determined to proceed with the Reference in any event. 21 The defendants referred to WorkCover Authority of NSW v Denson [2007] NSWIRComm 69; (2007) 162 IR 199 at [45] where the Full Bench stated: [45] The issue of costs presents some difficulties. The conclusions reached by the Full Bench are consistent with the approach of all parties, both at first instance and during the reference. The need for the reference arose because of the different approach taken at first instance. Public interest considerations therefore arose in the questions referred being authoritatively dealt with. For the defendants to be obliged to pay additional costs in respect of the reference (even their own costs) has a real potential to impose an additional penalty on them. This therefore seems to be an appropriate case for the prosecuting authority to consider paying the defendants' costs of the reference. 22 The circumstances in Denson were quite different to the present proceedings. This is apparent from what was said at [14]: [14] This reference comes before the Full Bench in somewhat unusual circumstances as both the prosecutor and defendant made submissions before her Honour opposing her Honour's preliminary view as to the interpretation of the definition of "previous offender" underlying the reference. Nevertheless, Staunton J referred the two questions to the Full Bench. The defendants opposed the reference while the prosecutor had no objection to the questions being referred to the Full Bench for determination. The questions raise a serious issue given that a finding that the defendants are previous offenders paves the way for the possibility of a custodial sentence being ordered on conviction of a defendant who is a natural person. We shall consider each question in turn as they raise quite distinct issues, albeit that they both concern the definition of "previous offender". 23 The defendant also referred to Inspector Green v The Crown in Right of the State of New South Wales (Department of Commerce) [2006] NSWIRComm 368; (2006) 158 IR 227 at [43]: [43] We also consider that some of the observations made by the Full Bench in Lucon at 464 (at [24]) are apposite here. Here, as in Lucon , the reference was appropriate but it is going too far to say that there were public interest considerations in the Defendant raising the points it did by its notice of motion. The points raised were essentially to assist, or to vindicate, the Defendant's forensic situation in the litigation and, as we have already observed, ultimately the Defendant had a choice as to whether it would maintain the points that it raised. We reject the criticism which the Defendant appears to be making as to the Prosecutor's conduct in seeking the reference of the issues raised by the notice of motion as questions of law to the Full Bench pursuant to s 5AE. That step was the direct and likely consequence of the Defendant's notice of motion and it was clearly open to WorkCover to act on the basis that the Defendant in filing its notice of motion, and therefore raising similar points to that dealt with in Rockdale Beef , was making a choice in raising the issue and was therefore prepared to accept the consequences of the choice it made. 24 The defendants submitted they were not agitating for their costs to be paid by the prosecutor as was the case in Inspector Green. Rather, it was submitted, the fair and judicial approach should be that each party bear their own costs. This was especially so when the costs of the Reference would be likely to exceed any penalty which may be imposed on either defendant, being individuals. 25 The defendants' proposition is, then, that it was not going 'too far' to say that there were public interest considerations in the defendant raising the points they did in their notice of motion leading to the Reference and, therefore, each party should bear its own costs. In addressing that proposition we take the view there is merit in the prosecutor's position that the substantive points raised in the motion were 'essentially to assist, or to vindicate, the defendants' forensic situation in the litigation' and 'ultimately the [defendants] had a choice as to whether [they] would maintain the points that [they] raised'. Nevertheless, a public interest consideration does arise out of the fact that the High Court in Kirk did not address (because it was unnecessary to do so) the question whether the prosecutor was required to plead and/or prove any act or omission by a defendant in respect of a charge that relied on s 26, beyond the acts or omissions pleaded and proved against the corporation. 26 Whilst the defendants' reliance on Kirk by parity of reasoning was, in our opinion, motivated by a desire to use Kirk to their own forensic advantage, the question of what a prosecutor had to prove in proceedings involving s 26 of the OHS Act would most likely have arisen at some stage. This is notwithstanding our view, as it is expressed in Morrison v Chevalley, that provided the acts or omissions of the corporation have been pleaded, the director or manager is thereby informed of the measures that should have been taken by the corporation, and, it follows, by the director or manager, to avoid the risk. 27 The emphasis by the High Court in Kirk on the need for the prosecutor to identify with appropriate precision the acts or omissions that created the risk and the measures that should have been taken to avoid the risk, whilst they were concerned with the matters to be proved against a corporation, arguably meant that the Court would be called upon to consider the implications of Kirk for charges against directors and managers. The defendants in this case happened to be the first to raise the question. 28 As it was indicated early in our consideration of this matter, costs are in the discretion of the Court, which has power to determine by whom and to what extent costs are to be paid. However, a successful litigant is, prima facie, entitled to an award of costs, unless there are special circumstances warranting a departure from the usual rule that costs follow the event. In these proceedings, in endeavouring to strike a proper balance between applying the usual rule and the degree of public interest attached to an issue that might be said to legitimately arise from Kirk for determination in relation to a prosecutor's obligations in connection with the prosecution of directors and managers, we have decided that the defendants should pay 50 per cent of the prosecutor's costs, except that neither Mr Chevalley nor Mr Grugeon shall be liable for any costs in connection with the constitutional issue.

29 The Full Bench makes the following orders: (1) Subject to order (2), the defendants shall pay 50 per cent of the prosecutor's costs of the proceedings as agreed or assessed. (2) Neither Mr Chevalley nor Mr Grugeon shall be liable to pay any costs in connection with the constitutional issue.

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