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[2006] FCA 33
Federal Court of Australia
2006-07-01
Greenwood J
Original judgment source is linked above.
THE COURT ORDERS THAT:
ADMINISTRATIVE APPEALS TRIBUNAL DISTRICT REGISTRY QUD129 OF 2005
the application 1 This is an application in the original jurisdiction of the Court by way of an appeal under section 44 of the Administrative Appeals Tribunal Act 1975 ("the AAT Act"). The Administrative Appeals Tribunal ("the Tribunal") determined in the exercise of a power conferred by section 67 of the Safety, Rehabilitation and Compensation Act 1988 ("the SRC Act") that the Respondent pay the costs incurred by the Applicant of a proceeding before the Tribunal (concerning a review of a claim by the Applicant for compensation under the SRC Act) up to and including the date upon which the Respondent made an offer of settlement and thereafter, the Applicant bear his own costs of the proceeding. 2 The Applicant contends that the exercise of the discretion conferred on the Tribunal by the SRC Act has miscarried as a matter of principle giving rise to an error of law because the Tribunal in exercising the discretion had regard to a letter of offer dated 21 August 2002 from the solicitors for the Respondent to the Applicant's solicitors, in reliance upon common law principles guiding the exercise of a discretion in making orders for costs derived from decisions of the English Court of Appeal in Calderbank v Calderbank (1975) 3 All ER 333; (1976) Fam 93 and Cutts v Head (1984) Ch 290 and authorities in Australian jurisdictions applying those principles, in circumstances where the letter of offer, consistent with those principles, ought not to have been taken into account. 3 Consistent with proper principle, the Applicant contends that the Tribunal in exercising the discretion ought to have disregarded the Respondent's letter of offer and ordered the Respondent pay the Applicant's costs of the proceeding. 4 The Respondent contends that the Tribunal properly took into account the letter of offer, properly outlined the principles governing the exercise of the discretion, made no error of law and consistent with the well understood approach to the supervisory review of the exercise of a discretion, it is not appropriate by way of an appeal to the Federal Court to simply invite the Court to substitute its own view of how the discretion might be exercised.
the background 5 On 3 April 1976, the Applicant was involved in an accident as an enlisted member of the Army Reserve Forces. The Applicant had enlisted in the Army Reserve in 1975 having previously served with the Citizens Military Forces for two years from 1960 to 1962. On 3 April 1976, the Applicant suffered a fall from an army jeep whilst on exercises. The Applicant suffered an injury to his right shoulder and was admitted to Singleton District Hospital where he was diagnosed as suffering from an injury to his right scapula. 6 Part X of the SRC Act deals with the transitional arrangements and consequential amendments arising out of the enactment of the SRC Act and the repeal by section 139 of the SRC Act of the Compensation (Commonwealth Government Employees) Act 1971 ("the 1971 Act"). Section 124(1A) of the SRC Act provides that subject to Part X, "a person is entitled to compensation under this Act in respect of an injury, loss or damage suffered before the commencing day if compensation was, or would have been, payable to the person in respect of that injury, loss or damage under the Compensation (Commonwealth Government Employees) Act 1971". The Applicant's injury, loss or damage arose prior to the date of commencement of the SRC Act. 7 Part XI of the SRC Act conferred on the Military Rehabilitation and Compensation Commission ("MRCC") the functions of "determining and managing claims under [the SRC Act] relating to defence service that occurred before the commencement of the [Military Rehabilitation and Compensation Act 2004]" and the function of "managing the provision of compensation" as a result of the making of a claim under the SRC Act. 8 Accordingly, the Applicant's entitlement to compensation arose under section 124(1A) of the SRC Act in respect of compensation that would have been payable under the 1971 Act and the function of determining and managing the claim was conducted by the MRCC in providing a military compensation and rehabilitation service to qualifying claimants. 9 Under the 1971 Act, the Commonwealth is liable by section 27 to pay compensation, subject to the Act, in respect of personal injury of an employee arising out of or in the course of employment of that employee. By section 5 of the 1971 Act, injury means any physical or mental injury and includes the aggravation, acceleration or recurrence of any physical or mental injury but does not include a disease or the aggravation, acceleration or recurrence of a disease. The circumstances governing an entitlement to compensation in respect of a disease are dealt with by section 29 of the 1971 Act. Under that section, relevantly in the present case, where an employee contracts a disease or suffers an aggravation or acceleration of a disease and any employment of the employee is a contributing factor to the contraction, aggravation or acceleration as the case may be and total or partial incapacity for work results, the contraction, aggravation or acceleration shall be deemed to be a personal injury and susceptible to compensation under section 27. 10 On 5 February 2001, the Military Compensation and Rehabilitation Service ("MCRS"), as delegate under the SRC Act, in the course of managing and making determinations in connection with the Applicant's claim for compensation, determined 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. On 27 April 2001, the MCRS undertook an internal review on its own motion pursuant to section 62 of the SRC Act to assess whether the earlier determination was properly made. 11 Section 62 relevantly provides: "62 Reconsideration of determinations (1) A determining authority may, on its own motion: (a) reconsider a determination made by it; or (b) cause such a determination to be reconsidered by a person to whom its power under this section is delegated, being a person other than the person who made, or was involved in the making of, the determination; whether or not a proceeding has been instituted or completed under this Part in respect of a reviewable decision made in relation to that determination." 12 The MCRS having conducted a reconsideration of the earlier determination, revoked the earlier admission and disallowed the claim, in these terms: "Dear Mr Perry, SAFETY, REHABILITATION & COMPENSATION ACT 1988 (SRCA) … For a claim to be successful under the Act, the evidence has to show that it is probable, and not merely possible, that your military service was a contributing factor to the causation, aggravation, acceleration or recurrence of the disease. … DECISION The determination of 5 February 2001 that admitted liability for schizophrenia is revoked. I determine that the claim for schizophrenia is disallowed. In making my decision I refer to all the available medical evidence, including your service medal records and reports by the Consultant Psychiatrist Dr Igor Petroff dated 2 January 2001 and 12 March 2001. In his report of 10 January 2001, Dr Petroff stated, among other things, that:
The process of Reasoning by the Tribunal 26 In reaching its decision, the Tribunal adopted the following process of reasoning: "[Having quoted the "without prejudice" offer of settlement of 21 August 2002, the Tribunal continued] (6) Offers like this are common in litigation. In appropriate circumstances, they can be admitted into evidence on the question of costs notwithstanding the general privilege that attaches to settlement negotiations. These offers are known as Calderbank offers, after the decision in Calderbank v Calderbank. In that case, the respondent made an offer of settlement that - with the benefit of hindsight - should have been accepted because it was more favourable to the applicant than the ultimate decision of the court. The letter was produced in relation to a costs application. Cairns LJ said in the circumstances the applicant should not be able to recover costs after the offer was made because it was unreasonable to reject the offer and incur the costs associated with continuing the proceedings. In Messiter v Hutchinson, Rogers J explained there was no rule to the effect one could not obtain costs if a Calderbank offer were made and rejected when it should have been accepted. However, his Honour accepted the Calderbank offer was generally a relevant consideration to be taken into account in the exercise of the discretion. (7) Calderbank offers are not normally considered unless there is a clear indication accompanying the offer that the offeror reserves the right to produce the document in relation to any dispute over costs: see, for example, Cutts v Head; AMEV Finance Ltd v Artes Studios Thoroughbreds Pty Ltd per Hodgson J. The offers must also be clear and unambiguous before they can be admitted into evidence in relation to costs. As Gillard J explained in White v Director of Housing, 'the terms of the offer must be clear, precise, certain and capable of acceptance'. Winneke P suggested in Grbavac v Hart that the court should only admit evidence of the Calderbank offer if 'the terms of the offer are such as to leave the offeree in no reasonable doubt as to the nature and extent of what is being offered'. (8) The offers in White and Grbavac were both made pursuant to the rules of the Victorian Supreme Court. The Tribunal does not have equivalent rules, but the public policy informing the discretion under s.67(8) is the same: an offer should only count against an offeree if he or she was clear on what was being offered. If the offeree was not presented with a clear choice - settle on particular terms, or proceed and assume the risk he will not do better at the hearing - the evidence of the offer should not be admitted. (9) In those circumstances, I think the Tribunal's approach needs to be informed by common sense. If the applicant knew or should have known what was on offer and made an informed decision not to accept and take his chances with a hearing, the existence of the offer weighs against an order for costs incurred after the date of the offer. I do not think it is helpful to make a technical inquiry as to whether or not the offer was legally capable of being immediately and finally accepted so as to give rise to a binding contract. (10) The respondent does not dispute the applicant is entitled to costs up until the time the Calderbank offer was made because the final decision was more favourable than the original decision. But the respondent says the rejection of the Calderbank offer should weigh heavily against the exercise of the discretion under s.67(8). (11) The applicant says the offer is defective in several respects and should therefore be disregarded. In particular, the applicant [relevantly for the purposes of this application before the Court] says the offer fails to identify whether the offer was inclusive of costs. (12) The applicant says the offer is therefore void for uncertainty. … (17) The letter of offer does not refer to costs other than to point out the respondent reserved the right to produce the letter at a hearing like this one. I do not think that matters. The applicant would have a statutory entitlement to seek costs under s.67(8) if he had settled on the basis identified in the letter. The absence of a reference to costs in the terms of the settlement offer clearly meant the applicant's right to seek costs was preserved. (18) I am satisfied the applicant was presented with an offer that was clear, and which he was able to consider in consultation with his lawyers. He chose to go on. With the benefit of hindsight, it is obvious he should not have done so. (19) In the circumstances, I think it is appropriate to order that the respondent pay the applicant's costs, taxed if necessary up to and including 11.22am on 21 August 2002 when the Calderbank offer was made. The applicant is to bear his own costs after that date." In quoting these paragraphs, the citations of the cases recited have been omitted.
grounds of appeal 27 The Applicant contends that the process of reasoning quoted at [26] reflects errors of law. The errors of law are formulated as grounds of appeal in the following way: "1. The Senior Member erred in law in finding that the settlement offer contained in a letter dated 21 August 2002 from the respondent's solicitors to the applicant's solicitors was clear. 2. The Senior Member erred in law in finding that the applicant's statutory entitlement to seek costs under subsection 67(8) of the Safety Rehabilitation & Compensation Act 1988 (Cth) in the event that the settlement offer was accepted made the offer clear. 3. The Senior Member erred in law in failing to find that the terms of the settlement offer left the applicant in reasonable doubt as to the nature and extent of what was being offered. 4. The Senior Member erred in law in ordering the respondent to pay the applicant's costs only up to and including 11.22am on 21 August 2002. 5. The Senior Member erred in law in failing to order the respondent to pay the applicant's costs of the whole of the proceedings before the Tribunal." 28 The Applicant seeks an order setting aside the decision of the Tribunal and an unqualified order of the Court rather than remission of the matter to the Tribunal for reconsideration, that the Respondent pay the Applicant's costs of the review proceedings. Since the offer relied upon by the Respondent as weighing heavily in the exercise of the discretion was made seven months before the hearing, the majority of the costs incurred by the Applicant were, one assumes, incurred after 21 August 2002.
QUESTIONS OF LAW 29 Order 53 of the Federal Court Rules read in conjunction with section 44 of the AAT Act is designed to inject a sense of discipline and precision into the Applicant Appellant's formulation of the question of law to be determined by the Court. Once a question of law is properly raised, its resolution in favour of the Applicant would normally give expression to the grounds of appeal which provide the foundation for the remedial orders. The justiciable matter (apart from the form of order) in the application is the question of law "not merely [as] a qualifying condition to ground the appeal, but also [as] the subject matter of the appeal itself, FCT v Brixius (1987) 87 ATC 4963 at 4967": Gummow J, TNT Skypack International (Aust) Pty Ltd v FCT [TNT Skypack v FCT] (1988) 82 ALR 175 at 178; Australian Securities and Investments Commission v Saxby Bridge Financial Planning Pty Ltd [ASIC v Saxby Bridge] (2003) 202 ALR 450 [42], per Branson J. In ASIC v Saxby Bridge, Jacobson and Bennett JJ at page 471 [107], although recognising the importance of precisely formulating the question of law to be determined by the Court, also recognised that the "issue for consideration in an appeal under s.44(1) of the AAT Act must always be whether, on a proper analysis, the question is one of law rather than a question of fact or a question of mixed fact and law". 30 Order 53 r 3 provides that the Notice of Appeal shall state the questions of law to be raised on the appeal, the orders sought and the grounds, stated briefly, relied upon in support of the orders. The Court may, of course, on terms, allow such amendments as the Court thinks fit and on the hearing of the appeal, the Applicant is not entitled to raise, without leave, any question of law or rely on any ground in support of the orders sought, not stated in the Notice of Appeal: Order 53 r 3(3) and (4). 31 The Notice of Appeal in this matter does not, in terms, raise any questions of law for resolution corresponding to a ground of appeal, grounding a remedial order or at all. Rather, the questions of law inhere in the statement of the Grounds of Appeal. No objection is raised by the Respondent to the Applicant's failure to formulate questions of law consistent with Order 53 r 3 but objection is taken to the competency of the appeal on the basis that the Grounds of Appeal raise no inherent question of law, seek to characterise questions of fact as questions of law and seek an impermissible intervention by the Court in the exercise of the discretion conferred by section 67 of the SRC Act upon the Tribunal. 32 The practice of formulating the question of law to be determined by the Court as an element of demonstrating an error of law by the Tribunal is both procedurally important (and required) and designed to crystallise the proper analysis identified by their Honours at paragraph [107] of ASIC v Saxby. This practice should not be ignored and a failure to act consistently with the practice is apt to cause an appeal to miscarry for an Appellant. 33 However, since no objection is taken to the failure to formulate questions of law to be determined by the Court, the first inquiry is whether the Grounds of Appeal raise a question of law. 34 The Applicant says, in argument, the questions of law are these. The exercise of the discretion "stands outside the limits of sound discretionary judgment" and consistent with the well-known passage of the joint judgment of their Honours Dixon, Evatt and McTiernan JJ in House v The King (1936) 55 CLR 499 at pp504 and 505, the exercise of the discretion has miscarried. The questions of law going to the exercise of the discretion (rather than simply a question of whether minds might legitimately differ on the exercise of the power), are put this way: (a) the Tribunal found that the Respondent's letter of offer was clear, precise and certain as to costs when, as a matter of construction and therefore a question of law, it was not; (b) the Tribunal found that the question of the clarity of the offer was to be determined by recognising that, to the extent of any ambiguity, the lawyers advising the Applicant would be in a position to construe and determine the terms of the offer and thus render the offer certain, clear and precise when the real question is simply one of construction of the document itself; (c) the Tribunal found that although the terms of the Respondent's offer did not refer to costs, that failure did not preclude the Applicant from seeking costs in the exercise of the discretion conferred by section 67(8) of the SRC Act if the Applicant settled the review proceeding on the terms identified in the letter of offer. Therefore, a question of construction of section 67, in the context of the letter properly construed, arises; (d) because the letter of offer did not refer to costs, it was unclear whether the Applicant was being invited, upon acceptance, to absorb his costs of the proceeding to the date of the letter or, alternatively, make an application to the Tribunal for an order for costs which would put the question of costs in controversy. Thus, the offer was unclear and incapable of acceptance, failed to present the Applicant with a clear choice or election, postponed the determination of the Applicant's claim for costs to the Tribunal and ought not, as a matter of principle, have been relied upon to deprive the Applicant of the post 21 August 2002 costs of the proceeding; (e) the Tribunal failed to apply the correct principles derived from decisions of the English Court of Appeal in Calderbank v Calderbank (supra) and Cutts v Head (supra) and authorities in Australian jurisdictions applying those principles in determining whether the letter of offer ought properly influence the exercise of the discretion conferred upon the Tribunal by section 67(8) of the SRC Act; and (f) the Tribunal reached a decision that was unreasonable or plainly unjust because the Tribunal failed to deal with the factual considerations arising out of the Tribunal's earlier determination concerning the factors influencing the rejection of the "without prejudice" offer of settlement, the complexity of the issues confronting the Applicant in dealing with the claim for compensation and the review of that claim before the Tribunal, the condition of the Applicant, the initial acceptance and then rejection of the claim by the Respondent and other factors which led to a rejection of the offer. 35 The Respondent contends the Tribunal identified and applied the correct principles guiding the exercise of the discretion, properly considered and construed the letter of offer, took into account the relevant material, did not allow extraneous matters to guide the exercise of the discretion and reached a decision open on the facts. As to the question of whether the Applicant acted reasonably in rejecting the offer of settlement, the Respondent says that question called for a judgment by the Tribunal on the facts. A contention that an error occurred in the exercise of the discretion on the factual question cannot be mutated into a question of law by calling the contended error an error of law. 36 This appeal concerns the scope of a power and the principles upon which a discretion conferred upon an administrative tribunal is to be exercised in making dispositive orders as to the costs of review proceedings having regard to the character of the decision and the source of the power which not only involves a consideration of section 67 of the SRC Act but the broader purposes and objectives of the SRC Act. 37 The conferral by statue upon a court of a discretion to determine by whom, to what extent and on what basis costs of proceedings before the Court are to be paid is a familiar power which attracts "the general proposition that it is inappropriate to read a provision conferring jurisdiction or granting powers to a court by making conditions or imposing limitations which are not found in the words used": Oshlack v Richmond River Council (1998) 193 CLR 72 at 81 [21] per Gaudron and Gummow JJ. Section 43 of the Federal Court of Australia Act 1976 is an example of such a provision and there are, obviously enough, many others. The exercise of the discretion thus conferred is the exercise of judicial power. Whilst, as Gummow J said in TNT Skypack v FCT (supra) at page 179, it is trite to observe (but nevertheless important to remember) the decision from which the appeal is brought is not one by a court exercising the judicial power of the Commonwealth and nor is the costs order made consequential upon a decision involving the exercise of judicial power. As a result, care needs to be exercised in analogical references to the scope of curial power when considering the exercise of a particular power conferred upon an administrative tribunal. As Finn J observed in Comcare v Labathas (1995) 133 ALR 744 at 749, "It doubtless is appropriate to have particular regard to decisions concerned with the award of costs in courts, when seeking to ascertain the scope of the costs power given by the SRC Act s 67(8). But care must be taken not to lose sight of the distinctive nature and purpose of the 'proceedings' in which the s 67(8) power can be enlivened". 38 This appeal raises the following questions of law: (a) whether the Tribunal as a matter of construction of the letter of offer properly identified the legal effect of the terms of the offer. The further question of whether the letter of offer, properly construed, constitutes "a reasonable basis for compromising or settling a proceeding" in the context of the Calderbank offer "is always a question of fact": Dr Martens Australia Pty Ltd v Figgins Holdings Pty Ltd (No. 2) [Dr Martens v Figgins Holdings] [2000] FCA 602 at [20], per Goldberg J; (b) whether the Tribunal identified and applied the correct principles in exercising the discretion conferred by section 67 of the SRC Act having regard to the letter of offer, the provisions and objectives of the SRC Act, the character of the decision-making body and the extent to which the exercise of the discretion should be guided by the failure of the Applicant to accept the Respondent's offer; (c) whether the Tribunal failed to take into account material considerations in the exercise of the discretion going to the matters identified at [34(f)]. 39 If a consideration of those questions reveals an error of law in the exercise of the discretion by the Tribunal, a proper basis for exercising supervisory intervention arises recognising that "[i]t must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed … It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance": House v The King (1936) 55 CLR 499 at pp504 and 505. The "true principle" limiting the manner in which such a jurisdiction is exercised "is that there is a strong presumption in favour of the correctness of the decision appealed from … unless the Court of Appeal is satisfied that it is clearly wrong": Australian Coal and Shale Employees' Federation v The Commonwealth (1953) 94 CLR 621, per Kitto J at 627. Kitto J, in that context at page 627, further affirmed the principles identified by Dixon, Evatt and McTiernan JJ in House v The King (supra).
The Construction of the Letter of Offer 40 By paragraph 2 of the letter the Respondent confirmed a willingness to accept liability for the Applicant's claim and pay compensation for incapacity for a period from April 1976 to February 1979 with an entitlement to payments concluding at the end of February 1979. No mention is made of the basis for the incapacity payments and whether the payments would reflect an acceptance of a partial or total incapacity but no issue is raised as to certainty concerning those matters. 41 Paragraph 3 of the letter commences by inviting the Applicant to note that "if this offer is not accepted" certain things follow. The reference to "this offer" is a reference to paragraph 2 which contains the offer of the incapacity payments for the period proposed in satisfaction of the Applicant's claim. The remainder of the letter deals with the question of costs of the proceeding on the assumption that the offer of incapacity compensation for the period is not accepted. 42 The letter is a "without prejudice" proposal and paragraph 3 of the letter deals with the reservation of the right to bring the content of the proposal to the attention of the Tribunal in certain circumstances and they are that if the offer is not accepted and the Applicant does not achieve an outcome in the Tribunal proceedings materially better than the terms of the offer contained in the letter, the Respondent will assert two positions. First, it will oppose the Applicant being awarded costs on and from the date of the letter. Secondly, the Respondent will apply to have any costs the Applicant "would otherwise be awarded up to the date of this letter" reduced by the amount of costs incurred by the Respondent "from the date of this letter". 43 The Applicant concedes that the offer made by the Respondent is materially better than the outcome achieved before the Tribunal. 44 It is clear that the Respondent's offer does not expressly deal with the question of costs. Paragraph 2 of the letter containing the offer of incapacity payments for the proposed period does not mention costs. It might have said simply "plus costs" or have dealt with a formulation (desirable or otherwise) such as "inclusive of costs" or have made it plain that the Applicant was being invited to absorb costs incurred by him as an element of the compromise. The letter having put a proposal in the language of paragraph 2 then deals with the consequential position the Respondent will adopt should the Applicant elect to reject the offer and fail to establish a more advantageous position before the Tribunal. 45 Although that part of the letter dealing with the offer does not address the question of costs incurred by the Applicant up to the date of the letter, the Respondent contends that the proper construction of the letter necessarily leads to the view that if the offer is not accepted and the Applicant fails to achieve a materially better outcome than the offer with the result that costs on and from the date the letter would be opposed, costs up to the date of the letter are conceded. Moreover, proposition 2 [19] seeks to provide the Applicant with an incentive to accept the offer by contending that the Respondent would agitate to identify its costs incurred from the date of the letter and seek to set those costs off against any costs the Applicant would "otherwise be awarded up to the date of the letter". The Respondent says, apart from the set-off question, proposition 2, particularly in conjunction with proposition 1, necessarily recognises that the Respondent has conceded that the Applicant is entitled to payment of his costs to the date of the letter of offer. 46 In construing the letter of offer, it is artificial to segment the elements of the offer concerning the substantive offer of incapacity payments for the particular period and those parts of the letter dealing with costs conditioned by the ultimate result. Although the offer does not expressly say that costs up to the date of the letter of offer will be paid the Respondent's contention that the letter, as a matter of construction, contains a concession of costs to the date of the offer, is correct. It is correct in the sense that a costs order would not be opposed. The parties concede that the terms of the Respondent's offer are to be determined as a question of construction of the letter of offer and not by reference to the interpretation that might be put upon the letter by the Applicant's advisers. The Applicant says that in construing the letter of offer, regard should also be had to the further letter of the Respondent's solicitors to the Tribunal advising that no other settlement offers would be entertained by the Respondent. The Applicant says there was no point, acting reasonably, in responding to the letter of offer because it made no offer as to costs and no further offer would be entertained. 47 The letter to the Tribunal does not bear on the proper construction of the terms of the letter of offer of 21 August 2002. To the extent that the Applicant might have been unclear about the terms of the offer and whether the letter necessarily carried, with the offer, a concession as to the payment of costs to that date, a letter from the Applicant seeking confirmation from the Respondent that "it goes without saying from your letter" that the offer includes the payment of costs up to and including the date of the letter of offer might have been prudent. 48 The legal effect of the letter was to offer the Applicant incapacity payments for the period April 1976 to February 1979 concluding at the end of February 1979 in satisfaction of the Applicant's claim for compensation under the SRC Act coupled with a concession not to oppose an application, by the Applicant, for an order that the Respondent pay the costs incurred by the Applicant of the proceedings up to and including 21 August 2002.
The Elements of a Qualifying Calderbank Letter 49 In considering the letter of offer, the Tribunal accepted that the public policy informing the exercise of the discretion conferred upon the Tribunal involved the notion that the offer must be "clear, precise, certain and capable of acceptance" and one that is "such as to leave the offeree in no reasonable doubt as to the nature and extent of what is being offered" [26(7)]. Further, the Tribunal determined that public policy informing the exercise of the discretion requires an offer only count against an offeree if the offeree is clear about what is being offered and is presented with a clear choice, namely, settle on particular terms or proceed and assume the risk of not doing better [26(8)]. Having regard to "those circumstances", the Tribunal found that if the Applicant "knew or should have known what was on offer" and made an informed decision to go to a hearing, "the existence of the offer weighs against an order for costs incurred after the date of the offer". 50 The Tribunal concluded that the Applicant was presented with an offer that was clear [26(18)] and although the letter of offer did not refer to costs, the Applicant enjoyed a statutory entitlement to seek costs under the SRC Act and that right was preserved. 51 The letter of offer, correctly put, does not refer to costs expressly. The letter of offer does as a matter of proper construction concede that the Respondent would not oppose an application for costs to the date of the letter. Since the question of the Applicant's entitlement to costs thus arises, can it be said that the offer is clear, precise and certain for the purposes of the common law principles governing the construction of Calderbank offers of settlement. It might be said that the letter of offer is not sufficiently clear because the concession as to costs arises as a matter of construction rather than clear express terms and secondly, the Applicant's entitlement to costs nevertheless remains within the discretion of the Tribunal notwithstanding a construction that the Respondent would not oppose an application for costs. The Applicant would remain obliged to satisfy the Tribunal that an order ought to be made pursuant to section 67 of the SRC Act. 52 In Dr Martens v Figgins Holdings (supra) at [24], Goldberg J in considering the adequacy of an offer of settlement formulated so as to attract admission in the exercise of the discretion as to costs as a Calderbank letter in circumstances where the offer was described as "inclusive of costs" stated the principle in these terms: "As a matter of principle, if a party is to be put at risk of losing its costs, even if ultimately successful, by not accepting an offer made to settle or compromise the proceeding at a point of time prior to trial, that risk should only be imposed if the party is given the opportunity at the time of the offer, to obtain its taxed costs to date in addition to the offer made, knowing that it has been able to make a careful comparative assessment of the value of the offer as against the ultimate relief sought to be obtained." [emphasis added] 53 Without prejudice offers of settlement coupled with a reservation as to costs where the offer incorporates a commitment to pay costs but based on the formula "inclusive of costs" or "all up" have been found insufficiently precise to qualify, as placing the offeree in a position of not being able to determine the appropriate amount to attribute to the substantive claim and the costs incurred in advancing it: Smallacombe v Lockyer Investment Co. Pty Ltd (1993) 42 FCR 97 at 102; Hanave Pty Ltd v Loft Pty Limited [1998] FCA 1429. Although such a formulae obfuscates the clarity of the offer, these authorities recognise the importance of isolating the term as to costs in a way which is clear and capable of proper assessment independently of the principal claim, as part of a Calderbank letter. The failure to make the content of the term as to costs transparently clear is generally fatal to qualifying a "without prejudice" letter (reserved as to costs) as one which should influence the discretion, in the result. For example, in Cutts v Head (supra) the proposal expressly made clear at page 299 per Oliver LJ that "each side was to pay its own costs". In Dr Martens, Smallacombe and Hanave the offer was inclusive of costs. In Fyna Foods Australia Pty Ltd v Cobannah Holdings Pty Ltd [2004] FCA 1212, the offer was put on the basis that "each party bear its own costs". In Alpine Hardwood (Aust) Pty Ltd v Hardys Pty Ltd (No 2) (2002) 190 ALR 121, the offer was an amount "plus costs". In White v Director of Housing [2003] VSC 124, the offer was a sum of money "together with the plaintiff's reasonable costs of disbursements, to be taxed in default of agreement on the appropriate scale". In Leichhardt Municipal Council v Green [2004] NSWCA 341 (although the letter of offer raised other considerations and the implications of the relationship between the common law principles and the rules of the Court in question), the proposal was put on the basis that "each party bear its own costs". 54 Ordinarily, of course, the "without prejudice" letter of offer is inadmissible. The reservation as to costs enables the letter to be admitted for the purpose of determining whether the offeree was confronted with a clear and precise offer, whether the offer was materially better than the ultimate outcome and whether in all the circumstances, in rejecting the letter the offeree acted reasonably. 55 Although the letter of offer properly construed made an offer of compensation coupled with a term not to oppose an application for costs, the offer did not clearly and precisely make it plain to the Applicant, at the time of the offer, that he would obtain his taxed costs of the proceeding to that date. The Tribunal took the view the letter did "not refer to costs" (eg. the Applicant's costs to the date of the offer) whereas the Court takes the view that the letter does, as a matter of construction, deal with the Applicant's costs to the date of the letter by indicating the Respondent would not oppose an application for costs. This difference of construction of the letter of offer suggests the letter is not, in terms, clear and precise and not one, as a matter of principle, "couched in such terms as enable the offeree to make a carefully considered comparison between the offer made and the ultimate relief it is seeking in all its aspects": Dr Martens v Figgins Holdings (supra) [24]. Moreover, if the construction favoured by the Tribunal that the letter of offer does not refer to costs but preserved the Applicant's "statutory entitlement to such costs under s 67(8) if he had settled on the basis identified in the letter" [26(17)] is correct, the question of costs would then simply have been in controversy between the parties. On such a construction, the Applicant may have believed, at the date of offer, that the Respondent would agitate for no order as to costs. The construction favoured by the Court of the letter of offer put a proposition by the Respondent that involved no opposition to a costs application but even that position called upon the Applicant to make out the grounds for the exercise of the discretion in his favour. The Respondent's proposal did not in terms or by necessary implication convey an offer which involved a clear consent to and support for an order for costs. 56 Accordingly, the Respondent's letter of offer was not sufficiently clear so as to convey without any room for ambiguity that the Applicant as a term of a proposed settlement would obtain his taxed costs of the proceedings to the date of the offer. Accordingly, the letter of offer did not satisfy the central requirement of a Calderbank letter. The Applicant contends that the failure to convey an offer in terms that meets this central requirement disqualifies the letter of offer from consideration in assessing whether the Applicant should be deprived of an order for costs which, in the view of the Applicant, would otherwise logically arise. The next question is whether in the exercise of the discretion conferred upon the Tribunal by section 67 of the SRC Act, the Tribunal properly had regard to the terms of the offer put to the Applicant. 57 Two further things should be remembered. First, very often the question of whether a particular offer qualifies for consideration as a Calderbank letter arises on an application by the offeror for indemnity costs of the proceedings consequent upon a result less favourable to the offeree than the offer. Offers that are not clear and do not provide the offeree with an informed choice fail. It seems those principles going to the requirement of certainty and precision, equally apply where what is sought is simply deprivation of the Applicant's costs from the date of the offer. Secondly, the authorities demonstrate that even if a letter of offer qualifies as a Calderbank letter, the mere refusal of such an offer does not of itself result in an order for indemnity costs. The offeror has an onus of showing that the conduct (that is, rejection of the offer and other relevant conduct) was unreasonable. Although this notion of the offeror demonstrating that the conduct of the offeree was unreasonable has a correspondence with an offeror seeking indemnity costs, the general principle that rejection of a qualifying Calderbank letter does not result in automatic orders, that is, a fettered exercise of discretion, seems consistent with a more general principle that the underlying question in the exercise of the costs discretion by Courts is whether the offeree acted reasonably. Reasonableness therefore needs a framework or as Finn J observed in GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Limited & Ors (2003) 201 ALR 55 at p63 [34]: "The reasonableness of the rejection of an offer is to be considered in the light of the circumstances which existed at the time of the rejection. And, relevant in that consideration are the terms of the offer and the circumstances of the litigation, 'including the time at which the offer is made and the understanding of the parties as to the strengths and weaknesses of their respective cases': Australian Competition and Consumer Commission v Amcor Printing Papers Group Ltd [2000] FCA 163".
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
Counsel for the Applicant/Appellant: Mr T J Willis
Solicitor for the Applicant/Appellant: Mr Robert Warren, Somerville Laundry Lomax
Counsel for the Respondent: Mr G O'Sullivan
Solicitor for the Respondent: Mr S R J Sloan, Dibbs Abbott Stillman
Date of Hearing: 21 September 2005
Date of Judgment: 2 February 2006
Perry
Comcare
[2004] AATA 289
[2003] VSC 124
(1987) 10 NSWLR 525
(1988) 13 NSWLR 486
(1997) 1 VR 154
(1988) 82 ALR 175
(2003) 202 ALR 450
(1936) 55 CLR 499
(1998) 193 CLR 72
(1995) 133 ALR 744
(1953) 94 CLR 621
(1993) 42 FCR 97
(2002) 190 ALR 121
(2003) 201 ALR 55
(1985) 5 FCR 480
(1994) 48 FCR 449
(1979) 24 ALR 577
(1992) 174 CLR 178
(1991) 173 CLR 167
(1986) 161 CLR 513
(1984) 156 CLR 605
(1976) 15 SASR 20
(1947) 74 CLR 492
(1979) 144 CLR 45
(1999) 163 ALR 52