Birdsall v Motor Trades Association of Australia Superannuation Fund Pty Ltd (No 2)

[2014] NSWSC 891

Supreme Court

New South Wales

Medium Neutral Citation:	Birdsall v Motor Trades Association of Australia Superannuation Fund Pty Ltd (No 2) [2014] NSWSC 891
Decision date:	03 July 2014
Jurisdiction:	Equity Division
Before:	Hallen J
Decision:	Orders that the Plaintiff's claim be dismissed with costs
Catchwords:	COSTS of substantive proceedings involving determination whether Plaintiff totally and permanently disabled in which Defendants successful
Legislation Cited:	Civil Procedure Act 2005 (NSW) Industrial Relations Act 1996 (NSW) Workplace Injury Management and Workers Compensation Act 1998 (NSW) Uniform Civil Procedure Rules 2005 (NSW)
Cases Cited:	Birdsall v Motor Trades Association of Australia Superannuation Fund Pty Ltd [2014] NSWSC 632 Bullabidgee Pty Ltd v McCleary (No 2) [2011] NSWCA 343 Chapman v United Super Pty Ltd [2013] NSWSC 592 Commonwealth of Australia v Gretton [2008] NSWCA 117 Coshott v Barry [2014] NSWSC 238 Erzurumlu v Kellogg Superannuation Pty Ltd [2013] NSWSC 1115 Kazar (Liquidator) v Kargarian; In the Matter of Frontier Architects Pty Ltd (In Liquidation) [2011] FCAFC 136 Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534 In the matter of Employ (No 96) Pty Ltd (In Liquidation) [2013] NSWSC 456 Ohn v Walton (1995) 36 NSWLR 77 Sayseng v Kellog Superannuation Pty Ltd [2003] NSWSC 945 Tomanovic v Global Mortgage Equity Corporation Pty Ltd (No 2) [2011] NSWCA 256 Waters v PC Henderson (Aust) Pty Ltd [1994] NSWCA 338; (1994) 254 ALR 328
Category:	Costs
Parties:	Robert Birdsall (Plaintiff) Motor Trades Association of Australia Superannuation Fund Pty Ltd (first Defendant) MetLife Insurance Ltd (second Defendant)
Representation:	Counsel: Mr J Anderson (Plaintiff) Mr S J Walsh (Defendants) Solicitors: Stacks/Goudkamp (Plaintiff) TurksLegal (Defendants)
File Number(s):	2013/180765

Judgment

Introduction

1. HIS HONOUR: In this matter, I delivered principal reasons for judgment on 27 May 2014, the medium neutral citation of which is Birdsall v Motor Trades Association of Australia Superannuation Fund Pty Ltd [2014] NSWSC 632 ("the principal judgment").

1. In the principal judgment, I found, in summary, that, in making its decision to decline the claim, the Insurer (the second Defendant, MetLife Insurance Pty Ltd) and the Trustee (the first Defendant, the Motor Trades Association of Australia Superannuation Fund Pty Ltd) each failed to take into account that the Plaintiff, Mr Robert Birdsall, had made applications for many different alternative employment positions without success. Whilst there was a specific reference to the Allianz worker's compensation file, in which a copy of those applications was to be found, there was simply no reference, in either of the letters declining the claim, to those applications, or to the Plaintiff's many attempts to obtain alternative employment. I considered that this was a relevant matter that each ought to have considered and it was unreasonable for each not to do so. However, my analysis of the whole of the evidence led me to conclude that there were specific areas of work available that the Plaintiff was reasonably capable of performing by reason of education, training or experience and that he had the ability to engage in such work for reward, in an intellectual sense, as well as by reference to his education, training or experience, and also by reference to his medical condition. Therefore, I concluded that the Plaintiff was not within the definition of Total and Permanent Disablement ("TPD") in the Policy and the Trust Deed. It followed that the Plaintiff's claim was to be dismissed.

1. The current issue is one of the costs of the proceedings. I gave the parties the opportunity to file written submissions on the question of costs which each has now done. Those submissions, of course, will remain with the court papers.

1. The parties consented to the issue of costs being determined on the papers and in Chambers. This avoided some further costs being incurred.

1. The Defendants seek an order for costs. They say that the usual rule should apply and that costs should follow the event. They seek their costs, calculated on the ordinary basis, as agreed or assessed.

1. The Defendants, whilst accepting that they did not succeed on the whole of the case, also submit that, ultimately, the court came to the same conclusion, as did the Insurer and the Trustee, namely that the Plaintiff was not entitled to the benefit claimed. They submitted that he could not be regarded as having had "success in the proceedings in any real or practical sense".

1. Finally, the Defendants submitted:

"5. On 20 June 2014, the defendant's solicitors made an open offer to the plaintiff to accept a fixed sum of $20,000 (less than 50% of their costs incurred) to avoid the parties incurring the costs of a further hearing and assessment of costs. A copy of the open letter is enclosed with these submissions. The defendants have not at the date of drafting these submissions received a response (and no criticism of the plaintiff is intended given the relatively short period of time the plaintiff has had to consider it.) However, on 24 June 2014 the plaintiff serve [sic] a Notice of Appeal and it is assumed that the open offer is rejected."

1. The Plaintiff submitted that he sued to recover a benefit payable under an industry superannuation scheme, under which scheme there was a "reasonable shared expectation that benefits will actually be available as contemplated". He relied upon Sayseng v Kellog Superannuation Pty Ltd [2003] NSWSC 945, per Bryson J, at [59].

1. He also submitted that membership of that scheme was an incident of his employment, and it was accepted, by the court, that his symptoms, complaints and claimed restrictions on his activities were genuine. It was also accepted that he was motivated to find alternative employment. Furthermore, he had succeeded on the "jurisdictional issue", the court having found that the Defendants had acted unreasonably in failing to consider the fact that the Plaintiff had been unable to obtain employment despite having made in excess of 50 applications for alternative employment positions.

1. The Plaintiff also submitted that "[h]istorically, except in cases of frivolity or vexation, courts have not ordered unsuccessful employees to pay their opponents' costs of litigation conducted for the pursuit of entitlements associated with employment - see e.g. s 112(3) Workplace Injury [and Workers Compensation] Management Act 1998 [(NSW)]; s 181(2) Industrial Relations Act 1996 [(NSW)]".

1. For those reasons, the Plaintiff submitted he should not have to pay the Defendants' costs of the proceedings.

The Legal Framework

1. The Civil Procedure Act 2005 (NSW), s 98(1), provides that, subject to the rules of court, and that, or any other, Act, costs are in the discretion of the court. The discretion extends to the costs of all proceedings whatsoever, and the court has full power to determine by whom, to whom, and to what extent, costs are to be paid. It is a judicial discretion to be exercised on a principled basis.

1. It is clear that the discretion to award costs is unconfined or "absolute and unfettered" (Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534 per Dawson J, at 557). However, it must be exercised judicially, that is, according to relevant considerations, and taking account of the contextual features and facts of the litigation.

1. The purpose of a costs order is to compensate, or indemnify, the person in whose favour it is made, not to punish the person against whom it is made: Ohn v Walton (1995) 36 NSWLR 77, at 79, per Gleeson CJ (as his Honour then was).

1. As was noted (albeit in another context), in Kazar (Liquidator) v Kargarian; In the Matter of Frontier Architects Pty Ltd (In Liquidation) [2011] FCAFC 136, at [9] (by Greenwood and Rares JJ):

"The exercise of the discretion takes account of all of the contextual circumstances of the litigation and the conduct of the parties. One aspect of the award of costs is a recognition that a party has been put to expense which, taking account of the merits as ultimately found on the trial of the action, might otherwise have been avoided. That consideration does not infuse the award of costs with any sense of penalty or punishment but simply recognizes the compensatory nature of an award of costs, in context and according to principle. That is why an award of costs, although involving the exercise of a discretion, generally favours the successful party. As to the importance the community attaches to legal costs incurred of and incidental to the resolution of controversies before courts, see Clark v Commissioner of Taxation [2010] FCA 415 at [90]; Uniline Australia Ltd v S Briggs Pty Ltd (No. 2) [2009] FCA 920; (2009) 82 IPR 56 at [38]; and, Sagacious Legal Pty Ltd v Wesfarmers General Insurance Ltd [2011] FCAFC 53 at [130] to [132]."

1. The default position on costs, pursuant to Uniform Civil Procedure Rules 2005 (NSW) ("UCPR"), rule 42.1, is that costs follow the event, unless it appears to the court that some other order should be made as to the whole, or any part, of the costs. The "event" is generally taken to be the practical outcome of the proceedings.

1. The rule provides that the discretion to award costs, ordinarily, will require an order that the successful party's costs will be paid by the unsuccessful party. The power to "make any order as to costs" enables the court, in an appropriate case, to depart from the general rule if it would be unjust to apply it. Thus, there is flexibility in determining questions of costs. Again, the rule extends to the costs in any proceedings.

1. Whilst the discretion provides flexibility in determining how costs are borne, the rule supports the principle that, so far as possible, the determination of costs should be predictable and expeditious.

1. UCPR rule 42.2 provides:

"Unless the court orders otherwise or these rules otherwise provide, costs payable to a person under an order of the court or these rules are to be assessed on the ordinary basis."

1. Ultimately, the Civil Procedure Act and the UCPR require the court to make such costs orders as it thinks just in the particular circumstances of the case: Bullabidgee Pty Ltd v McCleary (No 2) [2011] NSWCA 343, at [10].

1. Black J, in In the matter of Employ (No 96) Pty Ltd (In Liquidation) [2013] NSWSC 456, at [7], commented:

"The principles underlying an award of costs include that costs are awarded to compensate the successful party for the expense of being put to the necessity of litigation; a wholly successful defendant should ordinarily receive its costs unless good reason is shown to the contrary; and the discretion to order costs must be exercised judicially and not against the successful party except for some reason connected with the proceedings: Milne v Attorney-General (Tasmania) [1956] HCA 48; (1956) 95 CLR 460 at 477; Oschlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 at 97-98 per McHugh J, at 129-123 per Kirby J; Ruddock v Vardalis (No 2) [2001] FCA 1865; (2001) 115 FCR 229 at 234. In Howard's Storage World Pty Ltd v Haviv Holdings Pty Ltd [2010] FCAFC 5; (2010) 182 FCR 84, Gray J observed at [17] that:

'The overriding principle that costs are in the discretion of the court can also be expressed in terms of the negative proposition that no rule or principle should be applied mechanically in the determination of the question where costs should lie in any particular case. Attention must always be paid to the particular circumstances of the individual case. The aim is to do substantial justice in relation to costs, based on the outcomes of the various issues in the proceeding, as between the entities that are parties to that proceeding.'"

1. Section 98(4) of the Civil Procedure Act provides:

"In particular, at any time before costs are referred for assessment, the court may make an order to the effect that the party to whom costs are to be paid is to be entitled to:

(a) Costs up to, or from, a specified stage of the proceedings, or

(b) A specified proportion of the assessed costs, or

(c) A specified gross sum instead of assessed costs, or

(d) Such proportion of the assessed costs as does not exceed a specified amount."

1. In Commonwealth of Australia v Gretton [2008] NSWCA 117, Hodgson JA (with whom Allsop P and Campbell JA agreed), at [121], wrote:

"In my opinion, underlying both the general rule that costs follow the event, and the qualifications to that rule, is the idea that costs should be paid in a way that is fair, having regard to what the court considers to be the responsibility of each party for the incurring of the costs. Costs follow the event generally because, if a plaintiff wins, the incurring of costs was the defendant's responsibility because the plaintiff was caused to incur costs by the defendant's failure otherwise to accord to the plaintiff that to which the plaintiff was entitled; while if a defendant wins, the defendant was caused to incur costs in resisting a claim for something to which the plaintiff was not entitled: cf Ohn v Walton (1995) 36 NSWLR 77 at 79 per Gleeson CJ. Departures from the general rule that costs follow the event are broadly based on a similar approach."

1. In the present case, because of the Plaintiff's submission that he had succeeded on the "jurisdictional issue", it is necessary to refer to an additional principle, being that, unless a particular issue is clearly dominant or separable, it will ordinarily be appropriate to award the costs of the proceedings to the successful party without attempting to differentiate between those particular issues on which it was successful and those in which he, or she, failed: Waters v PC Henderson (Aust) Pty Ltd [1994] NSWCA 338; (1994) 254 ALR 328.

1. In Tomanovic v Global Mortgage Equity Corporation Pty Ltd (No 2) [2011] NSWCA 256, at [107], Campbell JA, after referring to Waters v PC Henderson (Aust) Pty Ltd, added:

"In the application of that principle, an issue or group of issues is 'clearly dominant' when it is clearly dominant in the proceedings as a whole."

1. More recently, in Coshott v Barry [2014] NSWSC 238, Adams J, at [8], wrote:

"A successful party will usually be entitled to costs, although it may be sometimes appropriate to make an adjustment as to the extent of that entitlement if, although the result favoured the party, issues were raised in the proceedings as to which the other party was successful. However, differentiation between issues on which the party ultimately successful failed will generally not be attempted unless a particular issue or group of issues is clearly dominant or separable. Ordinarily, costs of the proceedings should be awarded to the successful party without attempting such a differentiation. Even where such differentiation is appropriate, variation of the usual order as to costs will rarely be made if the matters in respect of which the ultimately successful party failed did not take up a significant part of the trial, either by way of evidence or argument. This is a matter of fact and degree, as to which the court has a wide discretion: Elite Protective Personnel Pty Ltd & Anor v Thomas Salmon (No 2) [2007] NSWCA 373 at [6] - [11]; Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 at [38]."

Determination

1. In essence, the Plaintiff asserted that he was entitled to be paid a TPD benefit. In the events that happened, he did not succeed, and even though he was successful in having the court reconsider the matter, the court, ultimately, reached the same conclusion as the Insurer and the Trustee. Accordingly, the Defendants incurred costs in resisting a claim for something to which the Plaintiff was not entitled.

1. I do not accept the Plaintiff's submission that some special costs rule should apply to an employee who, unsuccessfully, seeks to recover TPD benefits under an employees' superannuation scheme. I have been unable to find any case that suggests that there is such a rule and counsel for the Plaintiff, in his submissions, did not identify any such cases.

1. To the contrary, I note, for example, the recent judgment of this court in Erzurumlu v Kellogg Superannuation Pty Ltd [2013] NSWSC 1115, a case referred to in the principal judgment, in which Ball J dismissed a claim against the defendants and ordered the plaintiff to pay their costs. Young AJ made a similar order in Chapman v United Super Pty Ltd [2013] NSWSC 592 when he dismissed a plaintiff's claim.

1. The Plaintiff's reliance upon a statute that relates to worker's compensation and which specifically states "Subject to this Act and the regulations and the rules of the Compensation Court and subject to any other Act" does not assist. Nor does s 181(2) of the Industrial Relations Act, which commences "the Commission when it is not in Court Session may award costs only in the following cases ...". Neither has any relevance to the present case.

1. In relation to the submission that the Plaintiff succeeded on the "jurisdictional" point, I have considered how the case could have been conducted differently and whether any additional costs were incurred. In my view, no additional costs were incurred and the same evidence would probably have been relied upon.

1. Furthermore, in my view, it would be unsatisfactory to attempt to apportion the issues and leave the fixing of costs of those issues to assessment. I approach the matter on the basis that the Plaintiff did not succeed in what he set out to achieve through the bringing of proceedings. I accept the Defendants' submission that, practically speaking, success on the issue of "jurisdiction" did not result in the success of the Plaintiff's ultimate claim.

1. Having carefully considered the submissions, I am not persuaded that there is any legitimate basis upon which I should depart from the usual rule that costs follow the event. In the circumstances, I dismiss the Plaintiff's claim with costs.

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Decision last updated: 03 July 2014