The Discretion Conferred by Section 67 of the SRC Act
58 The SRC Act confers jurisdiction upon the Tribunal for review of a section 62 [11] decision arising out of a reconsideration of an earlier determination. The earlier determination by or on behalf of the Respondent involved an acceptance that the accident of 3 April 1976 in the course of the Applicant's military service had given rise to an injury which precipitated the acceleration of a disease, namely the condition of schizophrenia. The Respondent in undertaking the reconsideration discharged an adjudicative function in weighing up the available medical evidence and determined that the material did not demonstrate a connection between the Applicant's condition and his military service [12].
59 The Applicant claims an entitlement to compensation under the SRC Act by force of the Transitional provisions of Division 2 of Part X of the SRC Act. That entitlement is predicated upon an entitlement to compensation under the 1971 Act. In determining whether compensation was, or would have been payable, to the Applicant under the 1971 Act, some features of the 1971 Act are important:
(a) the 1971 Act is an Act to make provision for compensation to employees by reason of injury or disease (among other things) occurring in circumstances connected with their employment;
(b) the 1971 Act established a "Commissioner for Employees' Compensation";
(c) the function of the Commissioner was to determine all matters and questions arising under the 1971 Act and the Commissioner was empowered to do all things necessary for carrying out that function;
(d) section 20(2) provided that in determining any matter or question under the Act the Commissioner "shall be guided by equity, good conscience and the substantial merits of the case without regard to technicalities and [the Commissioner] is not required to hold a formal or oral hearing and is not bound by the rules of evidence but shall give to any person who will be directly affected by the determination a fair opportunity of presenting his case";
(e) Part III of the 1971 Act established a compensation regime, methodologies for the calculation of average weekly earnings, circumstances of deemed total incapacity, compensation for personal injury (so defined), compensation in respect of death, loss, disfigurement or incapacity through disease and detailed provisions dealing with aspects of compensation in all the circumstances addressed by sections 29 to 52 of the 1971 Act;
(f) Part IV of the 1971 Act dealt with the procedures and protocols for making claims for compensation, notice, time, medical examinations, determination of claims, provision of reasons by the Commissioner and other matters;
(g) Part V of the 1971 Act dealt with references of determinations by the Commissioner to Compensation Tribunals, the Administrative Appeals Tribunal and prescribed Courts. A reference to a Compensation Tribunal had to be in writing, set out grounds for a request for a reconsideration, satisfy procedural requirements and other matters. The Commissioner was required to refer the request to the Compensation Tribunal and the Tribunal was required to allocate a date for reconsideration of the "manner" or "question". Division 4 of Part V provided for judicial review of determinations and a review jurisdiction was conferred upon the Tribunal. By section 64(2) a discretion in terms essentially identical to section 67(8) of the SRC Act was conferred upon the Tribunal.
60 In these processes under the 1971 Act, an applicant was required to comply with formalities for the making of claims, demonstrate the satisfaction of the connecting factors for the subsistence of a valid claim, provide evidence and documents in support of the claim and submit to independent medical examination. An applicant was entitled to invoke a reconsideration of particular matters or questions and exercise review entitlements including judicial review before prescribed Courts.
61 The process although plainly administrative and one couched against the background of determinations guided by equity, good conscience and the substantial merits of the case without regard to technicalities was one which exhibited the characteristics of inter-parties testing of contentions, contests as to the satisfaction of the connecting factors and aspects of an adversarial process although not strictly adversarial.
62 The SRC Act retains a similar structure and approach to the management and determination of claims for compensation. Comcare's function is (among others) to make determinations "accurately and quickly in relation to claims and requests made to Comcare under this Act" (section 69(a)) and in performing that function Comcare "shall be guided by equity, good conscience and the substantial merits of the case, without regard to technicalities; is not required to conduct the hearing; and is not bound by the rules of evidence" (section 72). The management of claims made under the SRC Act is to be conducted by reference to precisely the same principles (section 142(2)).
63 Although the discharge of the functions requires quick and accurate determinations made against the background of the section 72 and section 142 principles, the process of making a claim under the SRC Act similarly reflects elements of an inter-parties process, the testing of the satisfaction of the connecting factors, a contest as to questions of fact and law, aspects of an adversarial process and an adjudicative function on the part of Comcare as it did in respect of the Commissioner under the 1971 Act: Miller v Australian Telecommunications Commission [Miller v ATC] (1985) 5 FCR 480, per Jenkinson J at page 506.
64 In that context, the SRC Act, like the 1971 Act, confers a power upon the Tribunal to make orders concerning whether the costs or part of the costs of the Applicant should be paid by the Respondent. In Miller v ATC (supra), the Full Court of the Federal Court per Keely, Davies and Jenkinson JJ, in dealing with an allegation of conduct by an applicant for compensation under the 1971 Act of "frustrating the Commissioner in his task of gathering the information required by him to enable him to ascertain the facts" said in terms which seemed to import a more general approach to the exercise of the costs discretion, "a determination that it is appropriate that a party by or on whose behalf there has been such unjustified conduct should be deprived of his costs can be the result of a soundly exercised discretion only if it proceeds from a consideration of all the relevant circumstances of the particular case including that conduct. There can be no rule or policy controlling the exercise of the discretion" [emphasis added]. Although Miller v ATC, plainly enough, involved the consideration of allegations of unmeritorious conduct, conduct by an applicant of unreasonably rejecting an offer of settlement as the foundation for deprivation of costs in the exercise of the discretion would naturally involve a consideration of all the circumstances relevant to that particular conduct as the exercise of the discretion will be informed and influenced by the particular circumstances of every case. Otherwise, fixed rules or policies would fetter the exercise of the discretion.
65 The provisions of section 67 "constitute a code in the area of costs": Riley v Commission for the Safety, Rehabilitation and Compensation of Commonwealth Employees (1994) 48 FCR 449 per Beaumont J.
66 The elements of that code are these. The primary rule, subject to the operation of the section is, "the costs incurred by a party to proceedings instituted under Part VI before the Tribunal shall be borne by that party": (s 67(1)). Subsections 2 to 12 of section 67 provide specific circumstances where the primacy of section 67(1) might be displaced.
67 Where a proceeding before the Tribunal "is rendered abortive" because a decision has been made following a reconsideration, varying or revoking that determination, Comcare is liable to reimburse the claimant for costs reasonably incurred by the claimant in connection with that proceeding: (s 67(2))
68 Section 67(3) deals with a conjunction of circumstances which confer a discretion upon Comcare to make a declaration that, in those circumstances, section 67(2) will have no application. Those circumstances involve a situation where Comcare has determined a claim, before doing so Comcare sought information under the Act from the claimant, the claimant failed to comply, Comcare did not therefore have the information, after the determination the information was disclosed, Comcare reconsidered the determination and made a determination more favourable to the Applicant, had Comcare had the information sought it would have made a determination more favourable to the Applicant than the original determination and Comcare would have been liable to reimburse the Applicant for his costs pursuant to section 67(2). In those circumstances, Comcare may make a declaration that section 67(2) does not apply to those costs.
69 Section 67(4) operates in relation to documents in the same way section 67(3) operates in relation to information. Section 67(5) effects the displacement of section 67(2) once a declaration is made as contemplated by sections 67(3) and (4). Section 67(6) requires Comcare to give a copy of such a declaration to the claimant. Section 67(7) provides for an application to the Tribunal to review the decision by Comcare to make a declaration under sections 67(3) and (4).
70 Section 67(8) [23] confers, in proceedings commenced by the claimant, a discretion upon the Tribunal to make an order that the costs of review proceedings incurred by the claimant or a part of those costs shall be paid by Comcare. The discretion conferred by section 67(8) is enlivened in either of two circumstances, namely, where the Tribunal makes a decision varying the initial decision in a manner more favourable to the claimant or alternatively where the Tribunal sets aside a reviewable decision and makes a decision in substitution more favourable to the claimant than the initial decision. In either case, the discretion (subject to the section) is enlivened.
71 Section 67(8) does not prescribe any factors or criteria by which the discretion, once enlivened, is to be exercised. However, two observations might immediately be made. First, the discretion is a qualification upon the rule of primacy that each party shall bear their own costs of the proceedings. Secondly, the circumstances which enliven the discretion are both conditions giving rise to the discretion and considerations informing the exercise of the discretion to displace the rule of primacy having regard to the circumstances of the particular case.
72 Section 67(8A) confers a discretion as to costs incurred by the claimant in proceedings instituted by the Commonwealth. Section 67(8B) confers a discretion as to costs incurred by the claimant in proceedings instituted by a "licensed authority" under the Act in the circumstances dealt within that section.
73 Section 67(9) effects a mandatory allocation of costs in these circumstances. Where the Tribunal makes a decision setting aside a determination and remits the case for redetermination by Comcare, "the Tribunal shall, subject to section 67, order that the costs of the proceedings before it incurred by the claimant shall be paid by [Comcare]". Section 67(10) deals with any costs incurred by a claimant in relation to an application for an extension of time for applying to the Tribunal for a review of a determination and provides that nothing in sections 67(8), (8A) or (9) authorises the Tribunal to order a person to pay those costs.
74 Sections 67(11) and (12) prohibit the exercise of the discretion under section 67(8) or the making of an order for costs in favour of a claimant under section 67(9) in circumstances where Comcare sought information or a copy of a document under the SRC Act, the claimant failed to provide the information or document, Comcare made a decision without the benefit of the information or document and had Comcare had the relevant information or document it would have made a decision more favourable to the claimant. In those circumstances, the rule of primacy under section 67(1) operates to determine the balance in the burden of costs.
75 Section 67(13) confers a power upon the Tribunal to order costs ordered against Comcare to be taxed by the Registrar, District Registrar or a Deputy Registrar of the Tribunal.
76 Although the exercise of the discretion conferred by section 67(8) is not subject to any controlling rule or policy: Miller v ATC (supra), the discretion is not entirely unqualified. It is conferred expressly subject to the section which recognises that in the ordinary course of events the costs incurred by a party to proceedings before the Tribunal shall be borne by that party. The discretion in either of the events identified in section 67(8) is subject to the prohibition in sections 67(11) and (12). In exercising the discretion, the Tribunal ought have regard to the rule of primacy reflected in section 67(1), the circumstances of the case which gave rise to a decision enlivening the qualification upon section 67(1), the background circumstances concerning the claim, the nature and character of proceedings for the purposes of the SRC Act, the complexity of the claim and the conduct of the parties in relation to the proceeding.
77 Although the functions conferred upon the Tribunal are plainly administrative in character, the Tribunal in reviewing a determination of the Respondent arising out of the adjudicative processes of the Respondent, possesses procedural powers and has the capacity to decide questions of fact and questions of law arising before it, subject to appeal on questions of law. Whilst it is clear that the Tribunal is not exercising judicial power and that procedural powers and the power to decide incidental questions of law are commonly conferred upon administrative tribunals, the Tribunal is "under a duty to act judicially, that is to say, with judicial detachment and fairness": Drake v Minister for Immigration and Ethnic Affairs (1979) 24 ALR 577 per Bowen CJ and Deane J at 584 and 585. The duty to act judicially, once arising, imports an obligation not to act "arbitrarily, capriciously or so as to frustrate the legislative intent": Oshlack v Richmond River Council (supra) at page 81 per Gaudron and Gummow JJ at [22]. Once it is recognised that the power conferred upon the Tribunal must be exercised judicially, that circumstance favours a liberal construction of the scope of the discretion "for it denies the validity of considerations which might limit a grant of power to some different body, including, for example, that the power might be exercised arbitrarily or capriciously or to work oppression or abuse": Knight v F P Special Assets Limited (1992) 174 CLR 178 at 205 per Gaudron J.
78 Whilst the power conferred by the SRC Act involves the exercise of administrative power, the power predominantly intersects in the context of [77] inter-parties issues. The proceedings reflect elements of an adversarial process which suggest a legislative intention that the exercise of the discretion ought not to be read down other than by reference to specific legislative constraints. In considering the scope of the discretion and the manner of its exercise it is important to recognise that "although the finding of facts and the making of value judgments, even the formation of an opinion as to the legal rights and obligations of parties, are common ingredients in the exercise of judicial power, they may also be elements in the exercise of administrative and legislative power": Precision Data Holdings Ltd v Wills (1991) 173 CLR 167 at 188-189 per Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ. For examples of the exercise of a costs power by an administrative tribunal where broader public policy considerations beyond the predominant influence of inter-party issues were found to inform the exercise of the discretion, see GS Technology v Secretary, Copyright Tribunal & Another (1999) 163 ALR 52 (concerning the Copyright Tribunal) and Duke Eastern Gas Pipeline Pty Ltd [2001] ACompT 3; (2001) ATPR 41-827 (concerning the Australian Competition Tribunal).
79 It may mean therefore that as the exercise of administrative power (exercised judicially) takes on greater aspects of the character or "ingredients" of judicial power (although retaining its essential character as administrative power), the discretion is construed more broadly or in a more "liberal" or unfettered way.
80 In this case, the Respondent put an offer of settlement in the letter of 21 August 2002 to the Applicant and sought to risk manage its exposure to a costs order in the exercise of the discretion by reserving the right to bring the letter to the attention of the Tribunal in the event the Applicant failed to establish a decision more favourable than the offer. Plainly enough, the Respondent by making the proposal, assumed that in the event the Applicant succeeded in establishing an entitlement to incapacity compensation and secured a decision by the Tribunal in substitution for the rejection of the claim by Comcare, the exercise of the discretion was likely to mean that costs would follow the event. Otherwise, the Respondent would not have sought to put in place a qualifying Calderbank letter. The Respondent must have held an expectation in respect of proceedings before the Tribunal pursuant to the SRC Act that costs would, in the ordinary course, follow the event, consistent with the approach of Courts to the exercise of a costs power of wide "amplitude": DSE (Holdings) Pty Ltd v InterTAN Inc. [2004] FCA 1251 per Allsop J; Hughes v Western Australia Cricket Assn. Inc. (1986) ATPR 40-748 at 48136 per Toohey J.
81 There is, of course, "no absolute rule" with respect to the exercise of a costs power conferred upon a Court "that, in the absence of disentitling conduct, a successful party is to be compensated by the unsuccessful party. Nor is there any rule that there is no jurisdiction to order a successful party to bear the costs of an unsuccessful party": Oshlack v Richmond River Council (supra) at page 88 per Gaudron and Gummow JJ [40].
82 Although there is no absolute rule, put anecdotally, that costs follow the event, there is by and large an expectation (perhaps misplaced) that a party who maintains an unmeritorious claim will be likely to be ordered (in the balancing of the factors influencing the discretion) to pay the party and party costs of a successful defendant incurring costs in demonstrating the lack of merits of the claim on the facts or the law. Similarly, an expectation arises in a plaintiff or applicant put to the cost, expense and dislocation of establishing a meritorious cause of action conferred according to law, that the costs of demonstrating those rights will be ordered against the unsuccessful defendant. Such an expectation measured against all of the balancing factors influencing the exercise of the discretion does not mean that there is any absolute rule grounding an expectation or that the exercise of the discretion will be determined by the outcome on the merits.
83 Such party and party costs orders if made are not designed (absent orders adjusting the basis for payment of costs from party and party costs to solicitor and own client costs or indemnity costs due to special circumstances) to punish an unsuccessful party and there is no "absolute proposition that the sole purpose of a costs order is to compensate one party at the expense of the other": Oshlack v Richmond River Council (supra) at page 89 [43] and [44] per Gaudron and Gummow JJ.
84 However, the unfettered nature of a discretion does not mean that the duty to act judicially in exercising a discretion will not be influenced by rules or guidelines developed by the Courts in an attempt to establish settled principle in the exercise of a discretion. In Norris v Norris (1986) 161 CLR 513 at 519, Mason and Deane JJ expressed these observations:
"It has sometimes been said by judges of high authority that a broad discretion left largely unfettered by Parliament cannot be fettered by the judicial enunciation of guidance in the form of binding rules governing the manner in which the discretion is to be exercised: see, e.g. Mallet (1984) 156 CLR at pp 621-622; Evans v Bartlam (1937) A.C. 473 at pp 488-489; and Gardner v Jay (1885) 29 Ch.D. 50 at p 58.
However, it does not follow that, because a discretion is expressed in general terms, Parliament intended that the courts should refrain from developing rules or guidelines affecting its exercise. One very significant strand in the development of the law has been the judicial transformation of discretionary remedies into remedies which are granted or refused according to well-settled principles: United Engineering Workers Union v Devanayagam (1968) AC 356 at p384. It has been a development which has prompted consistency in decision-making and diminished the risks of arbitrary and capricious adjudication.
The proposition referred to at the beginning of this paragraph should not be seen as inhibiting an appellate court from giving guidance, which falls short of constituting a binding rule, as to the manner in which the discretion should be exercised: but cf. Reg v Bicanin (1976) 15 SASR 20 and p25. And despite the generality of some of the statements to which we have referred, there may well be situations in which an appellate court will be justified in giving such guidance the force of a binding rule by treating a failure to observe it as constituting grounds for a finding that the discretion has miscarried.
The point of preserving the width of the discretion which Parliament has created is that it maximises the possibility of doing justice in every case. But the need for consistency in judicial adjudication, which is the antithesis of arbitrary and capricious decision-making, provides an important countervailing consideration supporting the giving of guidance by appellate courts, whether in the form of principles or guidelines.
The reference to 'wrong principle' in the passage from House v The King no doubt refers to a binding rule rather than a guideline in the sense already explained. A failure to apply a guideline does not of itself amount to error, for it may appear that the case is one in which it is inappropriate to invoke the guideline or that, notwithstanding the failure to apply it, the decision is the product of sound discretionary judgment.
The failure to apply a legitimate guideline to a situation to which it is applicable may, however, throw a question mark over the trial judge's decision and ease the appellant's burden of showing that it is wrong. However, in the ultimate analysis and in the absence of any identifiable error of fact or positive law, the appellate court must be persuaded that the order stands outside the limits of sound discretionary judgment before it intervenes."
[emphasis added]
85 Brennan J agreed generally with the reasons of Mason and Deane JJ but at page 536, his Honour expressly disagreed with the proposition "that an appellate court which gives guidance as to the manner in which a statutory discretion should be exercised may prescribe that such guidance should have the force of a binding legal rule". At page 537, Brennan J also expressed a reservation that formulation of principles guiding the exercise of a discretion might "harden into legal rules which would confine the discretion more narrowly than the Parliament intended. The width of a statutory discretion is determined by the statute; it cannot be narrowed by a legal rule devised by the court to control its exercise". In Hyman v Rose (1912) A.C. 628 at 631, Earl Loreburn LC in considering a wide unfettered discretion conferred upon a Court expressed a similar reservation in saying "… it is not advisable to lay down any rigid rules for guiding that discretion. I do not doubt that the rules enunciated by the Master of the Roles in the present case are useful maxims in general … But I think it ought to be distinctly understood that there may be cases in which any or all of them may be disregarded. If it were otherwise the free discretion given by the statute would be fettered by limitations which have nowhere been enacted".
86 In this case, a largely unfettered discretion [77], [78] to alter the balance struck by section 67(1), once arising, was conferred upon an administrative body which was required to act judicially. The discretion was enlivened by limb (b) of section 67(8) [23] and was required to be exercised having regard to the subject matter, scope and purpose of the statute conferring the power. The question, in considering the challenge to the discretion is whether a consideration of "the subject matter and the scope and purpose of the statutory enactments may enable the Court to pronounce given reasons [by the Tribunal] to be definitely extraneous to any objects the legislature could have had in view": Water Conservation and Irrigation Commission (NSW) v Browning (1947) 74 CLR 492 at page 505 per Dixon J. It must be shown that the Tribunal in exercising the discretion "acted upon grounds outside the purposes for which it was entrusted with a discretionary power or duty", per Dixon J at page 504. The problem "lies in ascertaining what are the proper limits of the discretion" [conferred upon the administrative body]: The Queen v Australian Broadcasting Tribunal ex parte 2HD Pty Ltd (1979) 144 CLR 45 at page 49 per Stephen, Mason, Murphy, Aickin and Wilson JJ.
87 In exercising the discretion conferred by section 67, the Tribunal took into account the circumstances of the condition of the Applicant, the proposition put concerning the "severe psychiatric condition" of the Applicant, the affect of that condition upon the Applicant's capacity to make informed decisions and the Respondent's "without prejudice" letter of offer of compensation. Although the Tribunal member did not in providing reasons for the costs orders review aspects of the evidence in relation to the principal review or the findings by Ms Cowdroy, in detail, or the reasons for the decision reached by Ms Cowdroy, it is apparent from the Tribunal's assessment of the submissions of the parties and the Tribunal's consideration of the matters going to the issue of whether the Respondent's letter appropriately dealt with the Applicant's costs to the date of the offer, that the Tribunal took into account the nature of the proceedings, the content of the claim by the Applicant, the contention of a permanent incapacity for work for almost 30 years and the conduct of the parties.
88 The Tribunal took the view that in exercising the discretion in relation to such matters, the Tribunal should be informed by "common sense" [26(9)]. In reaching its decision, although the Tribunal took a different view of the construction of the letter of offer, the Tribunal was entitled in exercising the discretion to have regard to the letter of offer and in reaching its decision the Tribunal did not proffer reasons "definitely extraneous to any objects the legislature could have had in view": Water Conservation and Irrigation Commission (NSW) v Browning (supra) per Dixon J.
89 The Applicant contends that once the letter did not qualify as a Calderbank letter, it ought not to have been considered by the Tribunal or alternatively ought not to have influenced the Tribunal in the exercise of the discretion and secondly, in the absence of that letter or its influence, the Tribunal ought to have been guided in the exercise of the discretion by applying a principle that the Applicant's success in the proceedings entitled the Applicant to an order for payment by the Respondent of the whole of the Applicant's costs of the proceedings. There is no absolute rule to such an effect. Decisions of the Courts establishing principles guiding the exercise of the costs discretion based upon a broad power of wide amplitude do not derive from a consideration of a power conferred with a rule of primacy such as section 67(1). In any event, such principles must take account of the circumstances of the case. The letter of offer was such a circumstance.
90 The Tribunal properly had regard to the letter of offer in exercising its discretion. That discretion was not fettered by any rule, policy or binding principle. The fundamental obligation of the Tribunal in the exercise of the discretion was to do justice between the parties according to its assessment of the circumstances of the case. Whether, in exercising the discretion, if conferred upon it, the Court might have taken a different view about the allocation of costs or circumstances influencing whether the Respondent might be ordered to pay the costs or a part of the costs, is not to the point. The question of whether, in all the circumstances, the Applicant acted reasonably is a question of fact to be determined by the Tribunal and it is not open to the Court to substitute its own view of those facts or the exercise of the discretion.
91 The Applicant has not demonstrated that the Tribunal acted upon grounds outside the purposes for which the Tribunal was entrusted with discretionary power and nor has the Applicant demonstrated that the Tribunal made an error of law in exercising the discretion by applying a wrong principle or having regard to irrelevant matters. For the reasons indicated at paragraph [87], the Applicant has not demonstrated that the Tribunal failed to consider material facts which resulted in a decision which is unreasonable or plainly unjust. The decision on the facts was open to the Tribunal although minds might legitimately differ about the assessment of those facts. Accordingly, the exercise of the discretion has not miscarried and the Tribunal has not made an error of law in making the order for costs it made.
92 Accordingly, the application must be dismissed.
93 In relation to the question of the costs of these proceedings, I propose to make no order as to costs. I have taken a different view of the construction of the letter of offer to that adopted by the Tribunal although, in the result, there is no proper basis for interfering with the exercise of the discretion. I have also taken the view that the letter of offer does not meet the requirements of a Calderbank letter but the Tribunal was nevertheless entitled to take the letter into consideration in exercising its discretion. In addition, the application raised questions going to the scope of the discretion and it seems to me that the Applicant, in instituting the proceedings in this Court acted reasonably.
I certify that the preceding ninety-three [93]
numbered paragraphs are a true copy of the
Reasons for Judgment herein of the
Honourable Justice Greenwood.
Associate:
Dated: 2 February 2006