Koutsioukis and Koutsioukis t/as Taste of Europe Bakery v Bouza - [2011] NSWWCCPD 52

WORKERS COMPENSATION COMMISSION
DETERMINATION OF APPEAL AGAINST A DECISION OF THE COMMISSION CONSTITUTED BY AN ARBITRATOR
CITATION:		Koutsioukis and Koutsioukis t/as Taste of Europe Bakery v Bouza [2011] NSWWCCPD 52
APPELLANTS:		Gerry Koutsioukis and Frank Koutsioukis t/as Taste of Europe Bakery
FIRST RESPONDENT:		Francisco Manuel Bouza
SECOND RESPONDENT:		WorkCover Authority of New South Wales
THIRD RESPONDENTS:		Gerry, Vicki and Frank Koutsioukis t/as Taste of Europe Bakery or Hurstville Hot Breads
INSURERS:		Appellant:	Uninsured
Third Respondents:		Employers Mutual (NSW) Limited
FILE NUMBER:		A2-986/06
ARBITRATOR:	Ms Annette Simpson
DATE OF ARBITRATOR’S DECISION:		13 December 2006; 30 September 2008; 15 May 2009
DATE OF APPEAL DECISION:		14 September 2011
SUBJECT MATTER OF DECISION:		Costs where appellants filed Election to Discontinue Proceedings; s 341 Workplace Injury Management and Workers Compensation Act 1998
PRESIDENTIAL MEMBER:		Deputy President Bill Roche
HEARING:		On the papers
REPRESENTATION:	Appellants:		Steven Kouris
First Respondent:		P K Simpson & Co
Second Respondent:		Sparke Helmore
Third Respondents:		Edwards Michael Lawyers
ORDERS MADE ON APPEAL:		The appellants, Gerry Koutsioukis and Frank Koutsioukis t/as Taste of Europe Bakery, are to pay the costs of the third respondents’ insurer, Employers Mutual (NSW) Ltd, assessed at $1,500 plus GST

BACKGROUND

The worker, Mr Bouza, alleged that he injured his back, left leg and both arms (particularly his shoulders) as a result of heavy duties he performed with his employer between 1994 and August 2001. His claim has a long history that started in the former Compensation Court of NSW in 2003 and concluded in the Commission in 2011. I will only set out a brief summary of the relevant background facts.
In respect of the period prior to 19 July 2001, the appellants were uninsured, and the WorkCover Authority of New South Wales (WorkCover) appeared for that period. In respect of the period after that date, Employers Mutual (NSW) Limited (Employers Mutual) insured the employer. Employers Mutual was at all times separately represented and conducted the proceedings on behalf of the employer, the third respondents on appeal, in respect of any liability for any injury received after 19 July 2001.
After a contested hearing in December 2006, at which the appellants’ interests in respect of the uninsured period were not represented (other than by WorkCover), Arbitrator Simpson found that Mr Bouza had suffered a personal injury to his right shoulder on or about 4 June 2001 and another personal injury to the same shoulder on 27 July 2001. She also found that the left shoulder condition was of gradual onset due to Mr Bouza’s work, but rendered symptomatic because of his right shoulder symptoms. She found that he had suffered an injury to his back as a result of the heavy nature of his work.
The Arbitrator found that Mr Bouza’s incapacity resulted from the second shoulder injury on 27 July 2001. It followed that Employers Mutual was liable for any award of weekly compensation and the appellants were liable for part of the lump sum compensation.
Employers Mutual appealed the Arbitrator’s decision. In a decision delivered on 28 August 2007, Moore ADP confirmed the Arbitrator’s determination and remitted the matter for referral to an Approved Medical Specialist (AMS) for assessment of Mr Bouza’s permanent impairments or losses said to have resulted from the injuries (Gerry, Vicki and Frank Koutsioukis t/as Taste of Europe Bakery or t/as Hurstville Hot Breads v Bouza [2007] NSWWCCPD 185).
Employers Mutual appealed the AMS’s assessment to an Appeal Panel. The Appeal Panel assessed Mr Bouza to have certain losses as a result of his injury on 4 June 2001 and certain losses as a result of his injury on 27 July 2001. At a post Appeal Panel teleconference on 25 September 2008, it was agreed, in the absence of the appellants, that Mr Bouza’s claim for lump sum compensation would be settled as follows:
(a) Employers Mutual to pay $35,000, and
(b) the appellants to pay $26,800.
It was also agreed that, as at 4 June 2001, the appellants were uninsured under the workers compensation legislation. The Commission ordered that WorkCover pay any compensation and costs awarded against the appellants and that the appellants reimburse WorkCover under ss 145 and 145A of the Workers Compensation Act 1987 (the 1987 Act). These orders were dated 30 September 2008 and amended to correctly identify the parties on 15 May 2009.
In several notices served on the appellants under s 145(1) of the 1987 Act, the last being served on or about 17 November 2009, WorkCover claimed reimbursement of the money it had paid to Mr Bouza under the consent orders. Under s 145(3), the appellants had 28 days from service of the notice to apply to the Commission for a determination of their liability in respect of WorkCover’s claim. The appellants did not dispute the notice with the Commission within that period. This omission was significant and will be discussed further below.
On 17 August 2010, the appellants applied for the Arbitrator to reconsider her determination of 13 December 2006 on the ground that, because they had not been served with the proceedings, they had been denied procedural fairness. In a decision delivered on 16 November 2010, Arbitrator Simpson refused that application.
In an appeal filed on 30 August 2010, the appellants sought leave to challenge the Arbitrator’s determinations of 13 December 2006, 30 September 2008 and 15 May 2009. This appeal was filed over one year outside the 28 day time limit in s 352(4) of Workplace Injury Management and Workers Compensation Act 1998 (the 1998 Act).
Because of deficiencies in the appellants’ submissions, I held a series of teleconferences and issued directions on 16 December 2010, 24 January 2011 and 22 February 2011, directing the appellants to file and serve an amended appeal and submissions in support dealing with the issues raised in submissions filed by WorkCover and Employers Mutual. The appellants did not comply with any of those directions.
The Commission listed the appeal for hearing on 22 December 2010 and 28 February 2011. Both hearing dates were vacated because the appellants were not ready to proceed. The Commission listed the matter for hearing on 3 June 2011. On 2 June 2011, the appellants filed an Election to Discontinue Proceedings (the Election).

COSTS APPLICATION

Employers Mutual, acting in the interests of the third respondents, did not consent to the discontinuance. In an email dated 8 June 2011, the third respondents sought costs in accordance with Pt 15 r 15.7(4) of the then relevant Workers Compensation Commission Rules 2010, which are in identical terms to the 2011 rules. The relevant rule states:
“(4) A party against whom proceedings are discontinued and who has not agreed to the discontinuance may, within 7 days after the discontinuance takes effect, lodge and serve an application to the Commission for an order for payment of the party’s costs of the proceedings incurred before the discontinuance.”
Though the application for costs is by the third respondents in the interests of Employers Mutual, the parties have (appropriately) treated it as Employers Mutual’s application.
None of the other parties to the appeal sought costs.

ON THE PAPERS

Section 354(6) of the 1998 Act provides:
“(6) If the Commission is satisfied that sufficient information has been supplied to it in connection with proceedings, the Commission may exercise functions under this Act without holding any conference or formal hearing.”
The parties have made no submissions on whether the costs application can be dealt with on the papers. Having regard to Practice Directions Nos 1 and 6, the documents that are before me, and the submissions by the parties, I am satisfied that I have sufficient information to proceed “on the papers”, without holding any conference or formal hearing, and that this is the appropriate course in the circumstances.

SUBMISSIONS

The third respondents seek an order for costs in the amount of $2,200 plus GST pursuant to Table 4, Item 1 of Sch 6 to the Workers Compensation Regulation 2010 (the 2010 Regulation). It submitted that s 341(2) of the 1998 Act provides the Commission with a broad discretion to determine by whom, to whom and to what extent costs are to be paid.
It submitted that:
“the circumstances of the claim and the appeal, the Appellant’s delay in bringing the appeal, the issues raised in the Written Submissions filed and served by the various Respondents and the conduct of the Appellant after the appeal was lodged, which conduct necessitated multiple Teleconferences and involved a number of breaches of directions made by Deputy President Roche more than justifies the making of a costs order.”
The appellants submitted that the application for costs should be dismissed for the following reasons:
(a)     they had not delayed in bringing the appeal. They only became aware of their liability to WorkCover when reimbursement was requested in May 2009. They entered into negotiations with WorkCover for several months and “repeatedly stated they had not been given any opportunity to defend their position and were unaware they had any personal exposure”. The appellants believed that an insurer was acting on their behalf. They were not legally represented during these negotiations. They contended that “they lodged an appeal within the time frame of the September reimbursement notice”;
(b)     their appeal was arguable and they were “denied natural justice in every facet of the arbitral proceedings”. Employers Mutual, who was their insurer in respect of the July 2001 injury “drove the appeal process which ultimately resulted in the Appellants being liable for the alleged June 2001 injury”;
(c)     Employers Mutual engaged in disentitling conduct by:
(i)failing to make the appellants aware of the arbitral proceedings and that they faced uninsured exposure to allow them the opportunity to defend their position;
(ii)failing to fulfil “an implied duty to act with the utmost good faith in respect of any matter arising under or in relation to their contract of insurance”;
(iii)alternatively, if Employers Mutual has no such duty as described in (ii) above, then “it was nevertheless incumbent on EMI’s lawyers, as officers of the Supreme Court, to take every reasonable step to ensure the Appellants were notified or made aware of these issues”;
(iv)driving the appeal of Arbitrator Simpson’s decision dated 13 December 2006 and the appeal of the medical assessment that followed, and
(v)delaying in providing copies of its replies to the applications to resolve a dispute to the appellants.
(d)     they were “denied the opportunity to take contemporaneous issue with causation”, “denied the opportunity to cross-examine the employee” and “denied the opportunity to argue the employee suffered from a disease”;
(e)     they had great difficulty with “several barristers withdrawing after accepting the brief to prosecute their appeal”;
(f)      their amended appeal had been finalised by Mr Niven (who appeared on their behalf at the teleconference of 20 May 2011) but they “were not permitted to file this document by the Deputy President during the teleconference on 20 May 2011”, and
(g) Schedule 6 to the 2010 Regulation does not apply for the following reasons:
(i)Schedule 6 uses the word “application” which “is analogous to an originating process, and the Appellants have made no such application”;
(ii)only a claimant or insurer can be awarded costs or made liable for costs;
(iii)the Schedule only “becomes operative once the appeal is resolved by decision of the Presidential Member. There has been no such decision, as the leave and appeal applications were discontinued”;
(iv)as the application for leave to appeal was discontinued, there were no appeal proceedings, and
(v)the Schedule does not contemplate a situation where an insurer seeks to recover costs from an uninsured employer.
In response, it was submitted on behalf of the third respondents that:
(a)     the appellants’ submissions regarding delay are misconceived and “proceed on an erroneous assumption that the time for lodging the s 352 appeal commenced on receipt of a reimbursement notice issued by WorkCover in September 2009”. The appeal was brought more than 15 months after the decisions were made and the third respondents opposed the extension of time in which to appeal;
(b)     there were significant obstacles to the success of the appeal including the time issue, “the fact that no appeal was brought against the decision of Deputy President Moore dated 28 August 2007” or the “Medical Appeal Panel” and “that the liability of the third respondent had been completely discharged by the subsequent entry of a Deed of Release between it and the worker”;
(c)     Employers Mutual had a duty to act in good faith in respect of liabilities covered by the policy of insurance but not in respect of any liability which rested with the appellants during an uninsured period;
(d)     WorkCover undertook the defence of the claim in respect of the appellants’ uninsured period. The third respondents or their legal representatives were not under any obligations to make the appellants aware of the proceedings;
(e)     the third respondents were “entitled to assume that any relevant information regarding the conduct of the proceedings was known to WorkCover, who were in a position to keep the uninsured Appellants informed”;
(f)      the fact that the appellants had difficulty with counsel is “not a matter for which the third respondent is responsible or which should effect the entitlement to costs which it may otherwise have”;
(g) section 341 provides the power to order costs and “grants the Commission full power and a broad discretion to determine ‘by whom, to whom and to what extent costs are to be paid’” subject to the restriction in sub-s (4), and
(h) the making of a costs order in circumstances where proceedings have been discontinued is contemplated by Pt 15 r 15.7(4) of the Rules, which anticipates an application for costs where proceedings are discontinued.

DISCUSSION AND FINDINGS

The appellants’ submissions are specious.
The discontinuance of the appeal does not prevent the making of a costs order. The Rules expressly contemplate an application for costs in that situation, provided the application is made within seven days of the matter being discontinued. The third respondents applied for costs within that time limit. The current Rules are consistent with the practice in the former Compensation Court, where it was consistently held that, once proceedings had been commenced, the Court’s jurisdiction with respect to costs was not extinguished by the withdrawal or discontinuance of those proceedings (Davis v State Rail Authority (NSW) (2001) 21 NSWCCR 322).
The appellants’ submission regarding the delay in lodging the appeal is incorrect. Time to appeal under s 352 did not start to run from the date of service of the s 145 notice/s, as the appellants’ submissions have assumed. The appeal against the Arbitrator’s decisions was over one year out of time. In determining whether to extend time in which to appeal, the Commission must have regard to the history of the matter and the prospects of success. The explanation for the delay was inadequate and the prospects of success were poor.
There was clear evidence, which the Arbitrator accepted, that Mr Bouza had received an injury on 4 June 2001. More importantly, having not disputed the s 145 notice in the Commission within the 28-day period in that section, the appellant lost the right to do so (Raniere Nominees Pty Ltd t/as Horizon Motor Lodge v Daley (2006) NSWCA 235; 5 DDCR 61 (Raniere)). WorkCover made this point in its submissions filed on 13 October 2010 and it was repeated at several of the teleconferences on appeal. Despite several directions that the appellants file submissions dealing with this and other issues, they did not do so.
Given that the appellants discontinued the appeal, the submission that the appeal was arguable is surprising. The submission that Employers Mutual “drove the appeal process” is a reference to the appeal to Moore ADP, which has no relevance to the current costs application.
The common law presumption is that costs follow the event. A successful party to proceedings has a “reasonable expectation” of being awarded costs against the unsuccessful party to the proceedings (Oshlack v Richmond River Council [1998] HCA 11; 193 CLR 72 at [134]). A court has a discretion to depart from this presumption if it is exercised judicially (Donald Campbell & Co Ltd v Pollak [1927] AC 732), and “according to rules of reason and justice” (Williams v Lever [1974] 2 NSWLR 91 at 95).
Usually, it is misconduct on the part of the successful party that is the basis on which the discretion is exercised to displace the presumption (Anglo-Cyprian Trade Agencies v Paphos Wine Industries Ltd [1951] 1 All ER 873 at 874; Ritter v Godfrey [1920] 2 KB 47; Trade Practices Commission v Nicholas Enterprises Pty Ltd (1979) 28 ALR 201). In determining whether to depart from the common law presumption, the parties’ conduct during the proceedings and leading up to the proceedings may be considered.
I reject the appellants’ submissions that Employers Mutual engaged in any conduct that would disentitle it to a costs order. While Employers Mutual had a duty to act in good faith with respect to the period when it insured the employer, it did not have such a duty in respect of the period when it was uninsured. The fact that the appellants had not been notified of the hearing before the Arbitrator, which was disputed on appeal, is not determinative of the costs question before me.
Even if the appellants had been denied procedural fairness by not being notified of the proceedings before the Arbitrator, they faced major difficulties on appeal. Those difficulties included the lengthy delay in bringing the appeal and, because of the lack of reasonable prospects of success on the substantive issue of whether Mr Bouza had suffered an injury during the uninsured period, limited prospects of obtaining an extension of time in which to appeal. More importantly, Raniere is binding Court of Appeal authority that, having not challenged the s 145(1) notice in the Commission within the time allowed (28 days), the appellants were barred from doing so.
The other submissions made by the appellants argue or reiterate submissions made in support of the substantive appeal, without referring to the real issues, and are of limited relevance to the issue of costs of the appeal.
The submission that I denied the appellants’ counsel the opportunity to file an amended appeal at the teleconference on 20 May 2011 is incorrect. The transcript reveals that counsel made no application to tender an amended notice of appeal. The submission that he did is more than a little surprising.
Sections 340 and 341 of the 1998 Act state:
“Application of Division
340 This Division applies to costs payable by a party, or by a party’s insurer, in or in relation to a claim for compensation.
Costs to be determined by Commission
341 (1) Costs to which this Division applies are in the discretion of the Commission.
(2) The Commission has full power to determine by whom, to whom and to what extent costs are to be paid.
(3)The Commission may order costs to be assessed on the basis set out in Division 11 of Part 3.2 of the Legal Profession Act 2004 (or in relevant regulations under Division 4 of this Part) or on an indemnity basis.
(4)The Commission may not order the payment of costs by a claimant unless the Commission is satisfied that the claim was frivolous or vexatious, fraudulent or made without proper justification.
(5)If the Commission is satisfied that a part only of a claim was frivolous or vexatious, fraudulent or made without proper justification, the Commission may order the claimant to pay the costs relating to that part of the claim.
(6) Any party to a claim may apply to the Commission for an award of costs.”

A Presidential member constituting the Commission under s 375(3) of the 1998 Act may determine an application for an award of costs in respect of proceedings on an appeal against a decision of an arbitrator. Section 341 gives the Commission a broad discretion to determine questions relating to costs.
Section 341(4) of the 1998 Act expressly alters the common law presumption that costs follow the event, as it prevents the Commission from making an order for costs against an unsuccessful claimant unless the claim was frivolous or vexatious, fraudulent or made without proper justification. The term “claimant” is defined in s 4(1) of the 1998 Act as “a person who makes or is entitled to make a claim”. A “claim” means a claim for compensation or work injury damages that a person has made or is entitled to make. It follows that insurers and employers do not have the protection of s 341(4), as they are not persons entitled to make a claim for compensation or work injury damages.
Section 341 must be read with s 337 of the 1998 Act which states, so far as is relevant:
“337   Maximum lawyer and agent costs
(1) The regulations may make provision for or with respect to the following:
(a)  fixing maximum costs for legal services or agent services provided to a claimant, an employer or an insurer in or in connection with any workers compensation matter or work injury damages matter,
(b)  fixing maximum costs for matters that are not legal services or agent services but are related to a claim for compensation or work injury damages (for example, expenses for witnesses or medical reports).”
Part 17 of the 2010 Regulation regulates costs in the Commission. Clause 96 of Div 1 of Pt 17 outlines costs that are not regulated by Pt 17. The subject matter of the current costs application is not included in that clause. Division 2 of Pt 17 is made under s 337 of the 1998 Act and applies to costs for legal services provided in or in relation to a claim for compensation payable on a party/party basis, a solicitor/client basis or any other basis (cl 97 of the 2010 Regulation). Clause 98 states costs that are recoverable, and the maximum costs that are recoverable for legal services provided in or in relation to a claim for compensation are as set out in Sch 6 to the 2010 Regulation, except as otherwise provided by Pt 17.
Clause 100 of the 2010 Regulation states:
“100   Costs not recoverable in certain circumstances (workers compensation matters)
(1)    This clause applies to workers compensation matters.
(2) No amount is recoverable for costs (including disbursements) that are referred to in neither clause 96 nor Schedule 6.
(3) No amount is recoverable for costs for any service or matter unless the claim or dispute (or the relevant aspect of the claim or dispute) to which the service or matter relates is resolved or otherwise dealt with in accordance with Schedule 6.
(4)     Despite subclause (3), if an appeal is lodged in respect of a claim or dispute, no amount is recoverable for costs for any service or matter (or the relevant aspect of the claim or dispute) unless the appeal is determined, is withdrawn or lapses.”
There is an entitlement to the recovery of costs for services that are referred to in Sch 6 to the 2010 Regulation. The matter for which costs are claimed must be resolved or otherwise dealt with in accordance with Sch 6 for costs to be recoverable. In relation to appeals lodged in respect of a claim or dispute, no amount is recoverable unless the appeal is “determined, is withdrawn or lapses” (cl 100(4)). The appellants in this matter filed an Election to Discontinue Proceedings in the Commission on 2 June 2011. By the filing of that document, the appeal was “withdrawn” and, subject to s 341(4), costs are recoverable for any service or matter with respect to the appeal.
Part 2 of Sch 6 contains four Tables. Each Table sets out the maximum amount of costs recoverable in respect of a specific type of claim or dispute. Table 4 identifies the costs potentially recoverable by parties in an appeal to a Presidential member under s 352.
Item 1 of Table 4 is headed “Appeal against an arbitral decision to Presidential member” and the resolution described under that heading is “Appeal resolved by decision of Presidential member”. Costs are recoverable in appeal proceedings if the appeal “is determined, is withdrawn or lapses” (cl 100(4)). An appeal is withdrawn by filing an Election to Discontinue Proceedings.
Item 1 of Table 4 also outlines the amount of costs recoverable by each party if the (appeal) application is made on behalf of a claimant and if the (appeal) application is made on behalf of an insurer. The fact that an uninsured employer lodged the current (appeal) application does not mean the Commission has no power to order costs in favour of the employer’s insurer. The reference to insurer in Sch 6 includes an employer (cl 94 Div 1 Pt 17). It follows that the Commission has power to order costs in this matter. Were it otherwise, if the appellants had succeeded on appeal, the logical conclusion of their argument is that they would not have been entitled to recover costs. That is not consistent with either s 341 or Sch 6.
The third respondents were, through their insurer, compelled to participate in the appeal proceedings filed by the appellants. The appellants’ persistent failure to comply with directions issued by the Commission prolonged the proceedings and forced the third respondents to participate in numerous teleconferences that would have been unnecessary had the appellants prosecuted the proceedings in a timely manner and in accordance with the original directions issued by the Commission. The appellants have advanced no valid reason why the third respondents, or their insurer, Employers Mutual, should not recover costs of the appeal.
The maximum amount recoverable for costs in a s 352 appeal is $2,200 plus GST. Having regard to the history of this matter, the written submissions prepared by the third respondents’ solicitor, the numerous teleconferences held, and the late filing of the Election to Discontinue, I assess the third respondents’ costs to be $1,500 plus GST.
As the third respondents applied for costs against the appellants, an order in their favour would be open, even though the third respondents have not incurred any costs (McCullum v Ifield [1969] 2 NSWR 329, applied in Dyktynski v BHP Titanium Minerals Pty Ltd [2004] NSWCA 154 at [77]). However, the parties have correctly treated the application as an application by Employers Mutual. In these circumstances, and given that:
(a) Employers Mutual has a right of subrogation to enforce any order made in favour of the third respondents;
(b) a reference to an insurer in Sch 6 includes a reference to an employer, and
(c) Employers Mutual has a direct interest in the subject of the litigation (Knight v F P Special Assets Ltd [1992] HCA 28; 174 CLR 178 at [34],
it is appropriate that, for the avoidance of doubt, the costs order be made in favour of Employers Mutual.

DECISION

The appellants, Gerry Koutsioukis and Frank Koutsioukis t/as Taste of Europe Bakery, are to pay the costs of the third respondents’ insurer, Employers Mutual (NSW) Ltd, assessed at $1,500 plus GST.

Bill Roche

Deputy President
14 September 2011

I, PENELOPE FLEMING, CERTIFY THAT THIS IS A TRUE AND ACCURATE RECORD OF THE REASONS FOR DECISION OF BILL ROCHE, DEPUTY PRESIDENT OF THE WORKERS COMPENSATION COMMISSION.

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