Workers Rehabilitation and Compensation Act 1988 (Tas), ss25(1)(b), 25(1A), 59.

Farrow v State of Tasmania [1997] TASSC 62; (1997) 7 Tas R 127, applied.

Unilever Australia Limited v Gunn and Another 143/1998; Lowrie v State of Tasmania (Education Department) 109/1998, considered.

Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534, discussed

Judgment ID Number: [1999] TASSC 8

SIMS KNIPE MAVER & PEREIRA PTY LTD v SHEILA JEAN VINCE

1 By application dated 24 March 1997, the respondent worker applied to the Workers Rehabilitation and Compensation Tribunal for a determination that she was entitled to worker's compensation in respect of a disease which arose out of and in the course of her employment on or about 20 January 1997. She alleged that she suffered from an "adjustment disorder" caused by matters which occurred at her workplace over a period of time.

2 The learned Commissioner found that the worker suffered from an adjustment disorder as a consequence of a number of matters which arose out of and in the course of her employment. He was accordingly satisfied that she suffered from a disease for the purposes of the Workers Rehabilitation and Compensation Act 1988 ("the Act"), s25(1)(b). The learned Commissioner then considered whether the worker was denied compensation because her disease arose substantially from the employer's reasonable actions, decisions and the like as detailed in the Act, s25(1A). Relying on the decision of the High Court in Vines v Djordjevitch [1955] HCA 19; (1955) 91 CLR 512 at 519, the learned Commissioner approached this aspect of the claim on the basis that the burden of proving the disentitling matters was on the appellant employer. He concluded that the disentitling matters had been established, that is, that the worker's disease arose substantially from matters which were encompassed by the Act, s25(1A), and accordingly the worker was denied compensation.

3 The learned Commissioner ordered that each party bear their own costs of the application to the Tribunal. The employer has appealed against that order.

4 Pursuant to the Act, s59(1), the learned Commissioner had an unfettered discretion as to costs. The exercise of that discretion required the application of established principles. I adopt the following passage from the decision of Underwood J in Farrow v State of Tasmania [1997] TASSC 62; (1997) 7 Tas R 127 at 129:

"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.'

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.'"

5 Circumstances recognised as warranting a departure from the usual order that costs follow the event are:

* conduct on behalf of the successful party, other than that which gave rise to the claim, which could be described as unreasonable or improper; and/or

* whether the successful party did something connected with the institution or the conduct of the proceedings calculated to occasion unnecessary litigation and expense. See Unilever Australia Limited v Gunn and Another 143/1998, Underwood J at 5.

6 In the course of giving reasons for his order for costs, the learned Commissioner rejected a submission that the employer's conduct in opposing the worker's application had been unreasonable and unnecessarily inflated the costs. The learned Commissioner then focused on the reasonableness of the worker's conduct in pursuing her application and not conceding that compensation was not payable because her disease substantially arose from matters which came within the Act, s25(1A), and said:

"This was not a case where it could be said that a reasonable person in the worker's position ought to have conceded the point and I do not accept that it was unreasonable that the worker pursued her claim in the circumstances existing as at the commencement of this hearing. As I noted in my reasons for decision, the onus of establishing the circumstances relied upon by the employer pursuant to Section 25(1A) lay with the employer and I discussed the application of reasoning set out in Vines v Djordjevitch [1955] HCA 19; (1955) 91 CLR 512 at 519. Given that the employer was obliged to establish the reasonableness of its relevant action and that its action was taken in a reasonable manner then in my view it was reasonable that these questions proceeded to formal determination and I do not consider that the worker ought be obliged to meet the costs should the employer be successful in that task. The fact that the employer did not seriously challenge the threshold entitlement by the worker to benefits pursuant to Section 25(1)(b) of the Act and that the employer bore the onus in respect of the main issue to be determined by these proceedings (that is the application of the exclusion provision Section 25(1A)), is in my view a relevant circumstance to displace the application of the general rule that costs ought follow the event. In determining this application in favour of the employer, no adverse findings were made as to the genuineness of the beliefs and views held by the worker as to what had occurred in the workplace and her perception as to the manner in which she was treated. Given the numerous issues raised on the evidence as to the contribution to the worker's incapacitating condition, and the different factual circumstances that surrounded each of those issues it was not unreasonable for the worker to pursue her application and challenge the employer's submission that in respect of each of those factual situations Section 25(1A) of the Act applied.

Accordingly in all the circumstances noting the particular statutory scheme applicable to this application and also noting the beneficial nature of the legislation generally, I consider that the most appropriate order as to costs is that both parties bear their own. Accordingly the employer's application for costs is dismissed."

7 In summary, the matters which the learned Commissioner considered warranted the displacement of the general rule that costs follow the event were:

* the employer's failure to seriously challenge the worker's threshold entitlement to compensation pursuant to s25(1)(b);

* that the employer bore the onus of proof on the s25(1A) issue;

* the reasonableness of the worker's conduct in pursuing her claim.

The employer's failure to seriously challenge the worker's threshold entitlement to compensation pursuant to s25(1)(b)

8 The fact that the employer did not seriously challenge the worker's threshold entitlement to compensation is not a matter which was adverse to the interests of the employer in the context of costs. If anything, this was a factor in the employer's favour. The reverse situation could have been an adverse factor. Had the employer unreasonably disputed the worker's threshold entitlement, and thereby occasioned unreasonable expenses, that is a matter which may have been taken into account in the exercise of the discretion as to costs. The learned Commissioner found that that was not the case.

That the employer bore the onus of proof on the s25(1A) issue

9 Whether or not a party bears the onus of proof is not relevant to an exercise of the discretion as to costs following a final determination of the matter in issue. The successful party is not at risk in relation to costs simply because he or she bore the onus of proof.

10 That the legislation is beneficial in nature is a matter which has been taken into account by courts when construing the Act or its predecessor, the Workers' Compensation Act 1927. Counsel for the worker submits that this was a proper matter for the Commissioner to pay heed to in the exercise of his discretion. I do not agree. Whilst it is appropriate to take into account the beneficial nature of legislation when construing its provisions, that process is quite separate and distinct from the process of determining factual and discretionary issues between the parties. The beneficial nature of the legislation should not intrude into the determination of such issues. It does not justify the Tribunal favouring the evidence or circumstances of the worker over that of the employer. The parties are equal before the Tribunal.

The reasonableness of the worker's conduct in pursuing her claim

11 This appears to have been the main reason for the learned Commissioner denying the successful employer its costs. He said:

"This was not a case where it could be said that a reasonable person in the worker's position ought to have conceded the point and I do not accept that it was unreasonable that the worker pursued her claim in the circumstances existing as at the commencement of this hearing.

... it was not unreasonable for the worker to pursue her application and challenge the employer's submission that in respect of each of those factual situations Section 25(1A) of the Act applied.

... it was reasonable that these questions proceeded to formal determination and I do not consider that the worker ought be obliged to meet the costs should the employer be successful in that task."

12 Many unsuccessful litigants act quite reasonably in pursuing or defending a claim. Reasonable conduct on the part of the unsuccessful party to proceedings does not deprive the successful party of his or her entitlement to an order for costs. Farrow v State of Tasmania (supra) at 133 and Lowrie v State of Tasmania (Education Department) 109/1998 at 4.

13 The learned Commissioner erred in giving weight to the matters to which I have referred and allowing them to persuade him that the successful employer should be denied costs. Save that it was submitted that the learned Commissioner was entitled to have regard to the beneficial nature of the legislation, counsel for the worker did not submit otherwise. However, the worker's counsel submitted that notwithstanding these errors, the order for costs was sound as the conduct of the employer during the proceedings and the hearing was not reasonable and unnecessarily inflated the costs. The conduct complained of was the failure of the employer to concede that the worker was suffering from a disease within the Act, s25(1)(b). This concession had been sought on behalf of the worker prior to the hearing of the claim at a conciliation conference and by a letter to the employer's solicitor. The worker had provided the employer with particulars of the conduct and behaviour of the employer, or circumstances and matters caused by the employer, which were responsible for her disease and incapacity for work. Counsel for the worker contended that as the employer was aware of the basis upon which the worker's claim was put, it was unreasonable for the employer not to concede the existence of the disease alleged by the worker. I reject that submission. It was reasonable for the employer to put the worker to proof in relation to her disease. This enabled the employer to elicit evidence from the worker and her witnesses which was necessary for the employer's case. Making the concession sought would not have significantly reduced the costs of the proceedings. The learned Commissioner said:

"I do not accept that the attendance of the medical experts would have been unnecessary had the employer formally conceded that the worker had in fact suffered her injury (disease) within the meaning of Section 25(1)(b) of the Act. Such medical evidence was material to a determination of precisely what incidents and issues arising within the workplace had in fact caused the worker's injury (disease) and also whether or not the worker was incapacitated for work as a result of such disease and for how long. I do not consider that the failure of the employer to make any formal concessions as to the threshold point materially affected the nature or length of the evidence that was required to be produced to the Tribunal."

I am not persuaded that the employer acted unreasonably in failing to concede the existence of the worker's disease or that that failure had a material effect on the costs of the proceedings.

14 For the reasons given, I am satisfied that the learned Commissioner erred in giving weight to irrelevant matters in exercising his discretion as to costs. I am not persuaded that there was any reason to deny the successful employer costs. The appeal is allowed. The order for costs is set aside, and in substitution for it I order that the worker pay the employer's costs of the reference to the Tribunal, including the costs of the application to the Tribunal for an order for costs.