Smith v Sydney West Area Health Service

CATCHWORDS: COSTS - work injury - mediation - offers of compromise - damages less than claimant's/appellant's final offer and more than defendant's/respondent's final offer at the conclusion of mediation - costs governed by Workplace Injury Management and Workers Compensation Act 1998, s 346 and Workers Compensation Regulation 2003, rr 89-91, 93

Civil Procedure Act, s 98 Legal Profession Act 1987, s 198D LEGISLATION CITED: Uniform Civil Procedure Rules, Pt 42 Workers Compensation Act 1987, ss 2A, 151A Workers Compensation Commission Rules 2003, r 88 Workers Compensation Regulation 2003, rr 89-91, 93 Workplace Injury Management and Workers Compensation Act 1998, ss 4, 60(2), 318B, 346

Newcastle City Council v McShane (No 3) [2005] NSWCA 437; 65 NSWLR 155 CASES CITED: O'Grady v Northern Queensland Co Ltd [1990] HCA 16; (1990) 169 CLR 356 PMT Partners Pty Ltd (In Liq) v Australian National Parks & Wildlife Service [1995] HCA 36; (1995) 184 CLR 301 Smith v Sydney West Area Health Service [2008] NSWCA 267

PARTIES: Denise Allyn Smith (Appellant) Sydney West Area Health Service formerly Wentworth Area Health Service (Respondent)

COUNSEL: M McAuley (Appellant) J E Maconachie QC; P Khandhar (Respondent)

SOLICITORS: Everett Paull (Appellant) DLA Phillips Fox (Respondent)

• 7 - IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40771/07

BEAZLEY JA GILES JA MACFARLAN JA

24 March 2009 Denise Allyn Smith v Sydney West Area Health Service (formerly Wentworth Area Health Service) (No 2) Judgment 1 THE COURT: The Court delivered its reasons for judgment in this matter on 22 October 2008: Smith v Sydney West Area Health Service [2008] NSWCA 267. The effect of the Court's judgment was that there was to be a verdict for the appellant on her claim against the respondent. The Court indicated that it would pronounce formal orders after hearing from the parties in respect of the appropriate judgment sum to which the appellant was entitled. The Court also reserved the question of costs, allowing the parties seven days to make further submissions on the appropriate order for costs should the appeal be allowed. 2 Counsel for the appellant informed the Court by letter of 6 November 2008 that the appellant did not wish to make any application in respect of costs. The respondent relied upon its short submissions on costs handed to the Court at hearing. Attached to those submissions was a Certificate of Mediation Outcome from the Workers Compensation Commission, issued under the Workplace Injury Management and Workers Compensation Act 1998 (the WIM Act), s 318B and in accordance with the Workers Compensation Commission Rules 2003, r 88. The Certificate stated that the parties attended a mediation conference on 1 May 2006, but failed to resolve the dispute. The final offers of settlement made by the parties at the mediation were $180,000 by the appellant and $150,000 by the respondent. 3 The parties agreed that the amount of damages to which the appellant was entitled as at 24 August 2007, the date of judgment at first instance, was $166,083. In accordance with the Workers Compensation Act 1987 (the WC Act), s 151A, any weekly payments of compensation already paid in respect of the injury concerned are to be deducted from the damages and are to be paid to the person who paid the compensation. The parties agreed that, as at 22 October 2008, these payments amounted to $13,981. 4 There was some disputation between counsel as to how s 151A operated, that is, whether the amount of workers compensation paid was deducted from the amount of damages awarded so that the judgment sum reflected the deduction; or alternatively, whether the deduction was made administratively by the defendant from the judgment sum and paid to the worker's compensation insurer. 5 In this case, the correct construction of s 151A does not affect the question in issue in respect of costs, because even if deducted from the damages awarded prior to the pronouncement of judgment, the result would be that the appellant received more than the respondent's offer, but less than her own offer. The respondent submitted that in such circumstances, the parties should bear their own costs of the appeal and the proceedings in the Court below: see the WIM Act, s 346 and the Workers Compensation Regulation 2003 (the WC Reg). 6 Section 346 provides: " Division 3A Special provisions for costs in work injury damages proceedings

(1) This section applies to costs (including disbursements) payable by a party in or in relation to a claim for work injury damages, including court proceedings for work injury damages.

(2) The regulations may make provision for or with respect to the awarding of costs to which this section applies. The regulations may provide for the awarding of costs on a party and party basis, on a practitioner and client basis, or on any other basis.

(3) A party is not entitled to an award of costs to which this section applies, and a court may not award such costs, except as prescribed by the regulations under this Act or by the rules of the court concerned.

(4) In the event of any inconsistency between the provisions of the regulations under this section and rules of court, the provisions of the regulations prevail to the extent of the inconsistency." 7 The WC Reg, regs 89-91 provide: " 89 Costs where claimant no less successful than claimant's final offer

If a claimant obtains an order or judgment on a claim that is no less favourable to the claimant than the terms of the claimant's final offer of settlement in mediation under the 1998 Act as certified by the mediator under section 318B of the 1998 Act, the court is to order the insurer to pay the claimant's costs on the claim assessed on a party and party basis.

90 Costs where claimant less successful than insurer's final offer or insurer found not liable

(1) If a claimant obtains an order or judgment on a claim that is less favourable to the claimant than the terms of the insurer's final offer of settlement in mediation under the 1998 Act as certified by the mediator under section 318B of the 1998 Act, the court is to order the claimant to pay the insurer's costs on the claim assessed on a party and party basis.

(2) If a claimant does not obtain an order or judgment on a claim (that is, if the court finds the insurer has no liability for the claim), the court is to order the claimant to pay the insurer's costs on the claim assessed on a party and party basis.

Except as provided by this Subdivision, the parties to court proceedings for work injury damages are to bear their own costs." 8 Regulation 93 is also relevant: " 93 Subdivision does not apply to ancillary proceedings

This Subdivision does not apply to costs payable in or in relation to proceedings that are ancillary to proceedings on a claim for work injury damages, and a court is to award costs in such ancillary proceedings in accordance with the rules of the court." 9 Counsel for the respondent submitted that the effect of regs 89-91 is that if a claimant for work injury damages does not receive an order for judgment more favourable than the claimant's offer at mediation, the default position as provided for in reg 91 applies so that each party is to bear that party's own costs. It was submitted, therefore, that the order for indemnity costs made by Garling DCJ, based on an offer of compromise made by the respondent on 9 August 2006, was made in error and not in accordance with the WIM Act and the WC Reg. It was further submitted that reg 91 applies to proceedings on an appeal, an appeal being "court proceedings" within the meaning of s 346. 10 The appellant did not seek to argue against either proposition. The Court was subsequently informed that the matter has been finalised between the parties. We understand from this that the appellant has accepted that she is not entitled to costs, either in respect of the first instance hearing, or on the appeal. Nonetheless, it is appropriate to give the question some consideration. 11 In the usual course, costs are in the discretion of the Court: see the Civil Procedure Act, s 98. However, s 98 is expressly subject to, relevantly, "any other Act": s 98(1). The WIM Act, s 346 makes specific provision for the award of costs in claims for work injury damages including costs in court proceedings for such claims. 12 By operation of the WC Act, s 2A, the relevant regulation for the purposes of s 346 is the WC Reg. See also the WIM Act, s 4, which provides that the definition of "workers compensation legislation" includes the WIM Act, the WC Act and instruments under each, and the WIM Act, s 60(2) which provides: "The 1987 Act is, by the operation of section 2A of that Act, to be construed as if it formed part of this Act." 13 Following the mediation, the respondent made a further offer of compromise (the Calderbank offer). The trial judge, in the purported exercise of his discretion, ordered costs, including indemnity costs, in the respondent's favour. That order must be set aside, as the appellant has been successful on the appeal. The respondent contends, however, that by operation of the WIM Act and the WC Reg the appellant is not entitled to an order for costs in this case and that the appropriate order is that each pay her and its own costs, in accordance with the provisions of WC Reg, reg 91. 14 The respondent's submission is correct. The effect of the WIM Act and the WC Reg is that the discretion conferred by the Civil Procedure Act, s 98 does not operate, and costs are governed by the WIM Act and the WC Reg. It should be added that the Uniform Civil Procedure Rules, Pt 42 relating to offers of compromise, also do not operate once a Certificate of Mediation has issued. In short, so far as costs are concerned (but subject to agreement between the parties), parties to court proceedings in a claim for work injury damages are fossilised in their respective positions at the conclusion of the mediation. 15 Does the same position apply in respect of proceedings in the Court of Appeal? Section 346 provides that the section applies to costs payable "in relation to … court proceedings for work injury damages": see the WIM Act. The phrase "in relation to" is of particularly wide import. It is designed to catch matters that have a sufficient nexus to the subject matter of the provision: see PMT Partners Pty Ltd (In Liq) v Australian National Parks & Wildlife Service [1995] HCA 36; (1995) 184 CLR 301 at 330. In O'Grady v Northern Queensland Co Ltd [1990] HCA 16; (1990) 169 CLR 356 McHugh J, at [27], commented that the phrase " 'in relation to' is indefinite" and required "no more than a relationship, whether direct or indirect, between two subject matters". 16 In the opinion of the Court, on the construction of the section in accordance with its ordinary meaning, costs "in relation to … court proceedings" extends to proceedings in the Court of Appeal. 17 This Court was not referred to any authority to assist in the interpretation of s 346 or the WC Reg. Our own researches did not turn up any decision dealing with s 346 or with the WC Reg insofar as their operation on appeal is concerned. Such decisions as there are on the WC Reg do not assist with the question presently under consideration. However, assistance is provided by the decision of this Court in Newcastle City Council v McShane (No 3) [2005] NSWCA 437; 65 NSWLR 155. 18 In Newcastle City Council v McShane, the Court was concerned with the question of whether a statutory cap for the maximum costs recoverable for "legal services in connection with a claim" for personal injury damages under the Legal Profession Act 1987, s 198D included proceedings on appeal. In that regard, Mason P (Giles JA and Hunt AJA agreeing) stated at [37]: "An appeal by a plaintiff who comes to the Court of Appeal seeking to challenge a verdict for the defendant or an inadequate award of damages seems self-evidently to be in connection with the original (and continuing) claim." 19 It had been argued in that case that as s 198D regulated "legal services provided in connection with a claim" and not "proceedings in connection with a claim", a practitioner providing services for the first time on appeal was not providing services otherwise than for the appeal. Mason P remarked of this "beguiling submission" that it merely restated the issue. As his Honour noted, at [46]: "The services are provided to the appellant/respondent, but they are necessarily directed at vindicating that party's legal rights, rights that are in turn connected with the claim for personal injury damages, to some degree at least." 20 If s 198D, with which the Court was concerned in Newcastle City Council v McShane, applied to proceedings in the Court of Appeal, the necessary connection between appellate proceedings and a claim for a workplace injury is more directly established in the case of s 346. It follows that proceedings in the Court of Appeal are "court proceedings" for the purposes of s 346. 21 Accordingly, the Court makes the following orders:

1. Grant leave to the appellant to appeal from the orders of Garling DCJ made on 24 August 2007;

4. Set aside the order for costs made at first instance in favour of the respondent;

5. Verdict and judgment for the appellant in the sum of $166,083. The Court notes the agreement between the parties that the respondent is to have a statutory credit in the sum of $13,981;

6. No order as to costs, with the intent that the parties are to bear their own costs of the hearing before Garling DCJ and of the appeal. **********

20/07/2010 - Typographical error - Paragraph(s) 15

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