KTKY and Comcare (Compensation)
[2016] AATA 77
•16 February 2016
KTKY and Comcare (Compensation) [2016] AATA 77 (16 February 2016)
DecisionYear: 2016
[2016] AATA 77
Division
General Division
File Number
2013/4143
Re
KTKY
APPLICANT
And
Comcare
RESPONDENT
DECISION
Tribunal Deputy President Dr Christopher Kendall
Date 16 February 2016 Place Perth The Tribunal orders that Comcare’s liability for KTKY’s costs in Application No 2013/4143 be limited to:
I.all reasonable and proper disbursements; and
II.75% of all professional costs, including counsel's fees, which would be allowable under the Federal Court scale,
incurred from the date of lodgement of KTKY’s Application for Review with the Tribunal up to and including 27 October 2014.
.......................[Sgd].................................................
Deputy President Dr Christopher Kendall
CATCHWORDS
Compensation – Review by the Tribunal – Costs - Calderbank offer - Discretion under 67(8) of Safety, Rehabilitation and Compensation Act 1988 - Amount of costs reduced due to failure to accept compromise offer not substantially different than final Tribunal decision
LEGISLATION
Administrative Appeals Tribunal Act 1975 – section 34J
Safety, Rehabilitation and Compensation Act 1988 – section 67
CASES
Hronopoulos and Telstra Corporation Limited [2002] AATA 625
Perry and Comcare [2005] AATA 365
KTKY and Comcare (Compensation) [2015] AATA 309
REASONS FOR DECISION
Deputy President Dr Christopher Kendall
16 February 2016
INTRODUCTION
On 8 May 2015, Deputy President Hotop delivered his decision in 3 related matters: Application Nos 2013/0186, 2013/4143 and 2013/6692 (“the 3 KTKY Applications”):
KTKY and Comcare (Compensation)[2015] AATA 309. In Application Nos 2013/0186 and 2013/6692, the decision under review was affirmed. In Application No 2013/4143,
the decision under review was set aside and a new decision substituted.
These written reasons relate to relate to the costs for Application No 2013/4143. No decision was made in relation to costs by Deputy President Hotop in relation to that Application and the Tribunal has now been asked to do so.
With the consent of the parties the Tribunal has determined this matter without conducting a formal hearing pursuant to s 34J of the Administrative Appeals Tribunal Act 1975. Written submissions were received by both parties and a brief telephone conference in relation to certain aspects of those submissions was held on 29 January 2016.
The respondent in this costs matter, Comcare, accepts that it is liable to pay some of KTKY’s costs in relation to Application No 2013/4143 but argues that Comcare’s liability for costs should cease on 27 October 2014, being the date on which a letter offering to settle the matter was sent to KTKY’s legal representative.
In effect, Comcare says that the offer made on 27 October constitutes a Calderbank offer (the nature of which is discussed in detail below at paragraphs 24 to 26 of this decision) and that KTKY’s right to recover all costs should be limited because the Calderbank offer of 27 October 2015 sought to settle on the same terms as the decision that was ultimately made by Deputy President Hotop. Comcare argues that had KTKY accepted this offer, she would not have incurred further legal costs after 27 October 2014.
In written and oral submissions to this Tribunal, KTKY’s solicitors contended in effect that the Tribunal is not bound by Calderbank principles by virtue of section 67 of the Safety, Rehabilitation Act 1988 (the “SRC Act”). They further contended that, in the event that the Tribunal is inclined to adopt Calderbank principles, the Tribunal should not do so here. Specifically, it was contended at paragraphs 2 and 3 of their Written Submissions that the decision of Deputy President Hotop:
… substituted a new decision and a component of that new decision was that the Applicant was entitled to her “normal weekly earnings” to be calculated under Section 8 of the SRC Act from 29 October 2010 at 36.75 hours per week. The Respondent’s offer …. with respect to the period from 29 October 2010 was for pre-injury hours of 36.45 hours. The difference between 36.45 hours and 36.75 hours may appear minimal but the Applicant has a life expectancy of 35 years. The Applicant is currently 53 years old and would be entitled to normal weekly earnings for a further 12 years or 624 weeks which over that period of time the difference of .30 hours per week will result in the Applicant receiving a significant benefit.
FACTUAL BACKGROUND
The Tribunal repeats below the summary provided at paragraphs 3-15 of Comcare’s Written Submissions, with which KTKY’s solicitors did not disagree.
KTKY receives incapacity payments from Comcare in relation to her accepted conditions of “right trapezius pain, exacerbation of pre-existing condition, major depressive disorder, recurrent episode, chronic pain syndrome and disorders of bursae and tendons shoulder region (bilateral)”. The Tribunal was advised that prior to the events referred to below, the incapacity payments received by KTKY pursuant to s 19 of SRC Act were based on normal weekly earnings (NWE) of 20 hours per week, which had been reduced pursuant to s 8(10) of the SRC Act. At the time of her injury on 17 March 1997, KTKY had been working “full time hours of 36:45 hours per week” (read as 36 hours and 45 minutes per week).
On 19 February 2013, a delegate of Comcare made a determination that KTKY’s incapacity entitlements under s 19 of the SRC Act should be reduced pursuant to s 8(10) of the SRC Act, because she had voluntarily reduced her hours for child care reasons to 20 hours per week.
By letter dated 17 April 2013, KTKY sought review of this determination. A delegate of Comcare affirmed the determination on 26 June 2013 (the “Reconsideration Decision”).
On 13 August 2013, KTKY lodged an Application with the Tribunal seeking review of the Reconsideration Decision.
On 13 February 2014, the Full Court of the Federal Court delivered its decision in Comcare v Simmons [2014] FCAFC 4 (“Simmons”).
On the basis of the decision in Simmons, on 23 July 2014 Comcare wrote to KTKY and offered to resolve the application consistent with the reasoning in the Simmons decision.
On 27 October 2014, Comcare wrote to KTKY again offering to settle the matter on the following terms:
The reviewable decision of 26 June 2013 be set aside and substituted with a new decision that, for the purpose of calculating the compensation payable by the Respondent to the Applicant, pursuant to s 19 of the Safety, Rehabilitation and Compensation Act 1988, the Applicant's Normal Weekly Earnings are to be calculated on the basis that the Applicant's Normal Weekly Hours are as follows:
·in the period from the date of injury to 3 September 2000, full time hours of 36:45 hours;
·in the period from 4 September 2000 to 30 January 2005, 25 hours;
·in the period from 31 January 2005 to 28 October 2010, 20 hours; and
·in the period from 29 October 2010, pre-injury hours of 36:45 hours.
These terms were the same as those provided in the letter sent to KTKY’s solicitors on 23 July 2014, with the main differences between the 2 offers being that the second offer was made pursuant to the principles of Calderbank v Calderbank [1975] 3 All ER 333. In that regard, the letter dated 27 October 2014 stated:
Please note that, if this offer is not accepted, Comcare proposes to rely upon the terms of this letter on the question of costs in the event that the matter proceeds to hearing, in particular, if the offer is not accepted and the Applicant does not achieve an outcome in the Tribunal proceedings which is materially better than the terms of Comcare's offer, as set out in this letter, Comcare will, in due course:
a)oppose the Applicant being awarded costs on and from the date of this letter; and
b)apply to have any costs the Applicant would otherwise be awarded up to the date of this letter reduced by the amount of costs Comcare incurs from the date of this letter.
4.Should your client agree to resolve the matter on this basis, would you please sign the enclosed Terms of Agreement as to Decision, and return it to AGS at your earliest convenience. We will then ask the Tribunal to consider making orders in accordance with section 42C of the Administrative Appeals Tribunal Act 1975.
5.This offer is open for acceptance in writing until 17 November 2014, after which it will lapse.
On 9 to 13 March 2015, Deputy President Hotop held a hearing in relation to the 3 KTKY Applications. On 8 May 2015, Deputy President Hotop affirmed the decisions under review in Application Nos 2013/0186 and 2013/6692 and set aside the decision in Application No 2013/4143. In relation to the latter, Deputy President Hotop substituted a new decision that:
… for the purpose of determining the amount of weekly compensation for incapacity for work payable to the applicant, pursuant to s 19 of the Safety, Rehabilitation and Compensation Act 1988 (Cth) ..., in respect of the compensable injuries relating to her neck and shoulders, for the period from 4 September 2000, the amount of her "normal weekly earnings" is to be calculated under s 8 of the SRC Act on the basis that her normal work hours in the following specified period were are follows:
·from 4 September 2000 to 30 January 2005 - 25 hours per week;
·from 31 January 2005 to 28 October 2010 - 20 hours per week;
·from 29 October 2010 - 36.75 hours per week.
Deputy President Hotop’s decision also allowed the parties to make an application to the Tribunal for costs within 14 days of the decision, failing which, the Tribunal would order that costs of that proceeding incurred by KTKY would be paid by Comcare in accordance with Section 6.8 of the Tribunal's Guide to the Workers' Compensation Jurisdiction.
On 22 May 2015, Comcare wrote to the Tribunal to make an application in relation to costs to the effect that Comcare’s liability for KTKY’s costs in relation to application 2013/4143 be limited to:
a)all reasonable and proper disbursements; and
b)75% of all professional costs, including counsel's fees, which would be allowable under the Federal Court scale,
incurred up to and including 27 October 2014.
The application was not immediately listed for hearing so that the parties could have an opportunity to negotiate an agreed outcome in relation to costs.
Following negotiations between the parties, Comcare requested that the matter be listed for the Tribunal to determine whether or not Comcare is liable for KTKY’s costs beyond the date of the settlement letter of 27 October 2014. It is anticipated that once the Tribunal determines this issue, the parties will negotiate further in relation to the quantum of costs payable to KTKY.
RELEVANT LEGISLATION AND CASE LAW
The jurisdiction of the Tribunal to make an order in relation to the costs of this application is conferred by s 67 of the SRC Act.
Section 67 relevantly provides:
(1)Subject to this section, the costs incurred by a party to proceedings instituted under this Part in respect of that reviewable decision shall be borne by that party.
…
(8)Where, in any proceedings instituted by the claimant, the Administrative Appeals Tribunal makes a decision:
(a)varying a reviewable decision in a manner favourable to the claimant; or
(b)setting aside a reviewable decision and making a decision in substitution for the reviewable decision that is more favourable to the claimant than the reviewable decision;
the Tribunal may, subject to this section, order that the costs of those proceedings incurred by the claimant, or a part of those costs, shall be paid by the responsible authority.
A clear and useful analysis of the interaction between section 67 and what are commonly referred to as Calderbank offers is found in the decision of Senior Member McCabe in Re Perry and Comcare [2005] AATA 365.
In Re Perry, Senior Member McCable noted as follows:
[4]Section 67(8) makes it clear that the power to award costs is a discretionary one. Successful parties are not entitled to costs as of right. Even so, the Tribunal would ordinarily make an order in favour of a successful applicant.
[5]The respondent does not deny the applicant was successful in the sense he obtained a decision from the Tribunal that was more favourable than the decision of the original decision-maker. But Comcare goes on to argue its solicitors put an offer of settlement to the applicant’s solicitors in a letter dated 21 August 2002. The letter said:
"We confirm that our client is willing to accept liability for your client’s claim and pay compensation for incapacity payments for the period April 1976 to February 1979 with a cessation of liability from the end of February 1979.
Could you please note that, if this offer is not accepted, our client proposes to rely upon the terms of this letter on the question of costs in the event the matter proceeds to hearing. In particular, if the offer is not accepted and the Applicant does not achieve an outcome in the Tribunal proceedings which is materially better than the terms of our client’s offer, as set out in this letter, our client will, in due course:
1.Oppose the Applicant being awarded costs on and from the date of this letter; and
2.Apply to have any costs the Applicant would otherwise be awarded up to the date of this letter reduced by the amount of costs our client incurs from the date of this letter. "
[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 [1976] Fam 93. 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 (1987) 10 NSWLR 525, Rogers J explained (at 528) 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 [1984] Ch 290 at 305 per Oliver J; AMEV Finance Ltd v Artes Studios Thoroughbreds Pty Ltd (1988) 13 NSWLR 486 at 487 per Hodgson J. The offers must also be clear and unambiguous before they can be admitted into evidence in relation to the question of costs. As Gillard J explained in White v Director of Housing [2003] VSC 124, "the terms of the offer must be clear, precise, certain and capable of acceptance...": at [17]. Winneke P suggested in Grbavac v Hart [1996] VSC 37; [1997] 1 VR 154 (at 155) 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.
Senior Member McCabe then proceeded to examine whether or not the Calderbank letter in question should be disregarded because it was defective in some respects:
[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 says the offer fails to:
• identify the precise amount of the settlement offer;
• specify the precise duration of the period in respect of which the closed offer was made;
• identify whether the offer was inclusive of costs.
[12]The applicant says the offer is therefore void for uncertainty.
[13]Mr Willis noted that his client was – to the respondent’s knowledge – suffering from a severe psychiatric condition at the time the offer was made. Mr Willis suggested it was therefore incumbent on the respondent to take care to be clear about what was on offer so that the applicant did have the opportunity to make an informed decision.
[14]I will deal with Mr Willis’s last contention first. The respondent does have an obligation to make its offer clear, but I think one makes a judgement about its clarity from the point of view of the applicant’s lawyers. … The question is whether the offer was clear to the applicant’s legal representatives.
[15] I think it was. I do not think there is a problem about failing to identify the dollar amount of the settlement. The Tribunal does not award dollar amounts in these circumstances; it makes a decision about entitlements in a period. It was therefore appropriate to make an offer to compensate with respect to a particular period: see, for example, Hronopoulos and Telstra Corporation Limited [2002] AATA 625; (2002) 68 ALD 419.
[16] I am also satisfied that the duration of the closed period was clear enough. The letter referred to liability being accepted "for the period April 1976 to February 1979". It is clear from other documents (the applicant’s statement of facts, issues and contentions, for example) that the relevant date in April is 3 April, the date of the incident in question. While it would have been better if the date was set out in the letter, I accept the date could be (and was intended to be) ascertained from the surrounding documentation. The end of the closed period is even more clear-cut: there can be no doubt that "the end of February 1979" (when liability was to cease) means 28 February 1979.
[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.
Tribunals should always endeavour to encourage parties to settle proceedings before costs rise. In Hronopoulos and Telstra Corporation Limited [2002] AATA 625, the Tribunal said:
11.In our view the Tribunal should take all necessary steps to induce parties to settle matters before hearing. To this end the Tribunal has mandated per its Conciliation Conference Direction of 18 May 1998 that in the Compensation Jurisdiction of the Tribunal unless a member or conference registrar has otherwise certified a Conciliation Conference (more accurately described as a settlement conference) will be held.
12.If such so called "Conciliation Conferences" are to have any value the parties must approach them in a realistic manner. There is a little point in a Respondent making a realistic offer of settlement if an Applicant can reject such an offer confident that if he or she is successful before the Tribunal to the slightest extent they will still obtain an order for costs in their favour. For the Tribunal to adopt such an approach is unfair to a Respondent as it places an Applicant in a position whereby he or she has nothing to lose by running up costs.
13.For these reasons therefore the Tribunal should approach the question of costs without any presumption as to beneficial legislation or that an Applicant by the mere fact of having a reviewable decision varied or set aside is entitled to full or indeed any costs. There is nothing new in the concept that for good and sufficient reasons a successful litigant can be deprived of his or her costs.
It is clear from the above that while it is certainly the case that the Tribunal is not “bound” by Calderbank principles, an offer to settle a claim made by Comcare (or another responsible authority within the meaning of s 67(1A) of the SRC Act) is nonetheless a relevant and central consideration in exercising the Tribunal’s discretion in relation to costs.
WHAT SHOULD THE COSTS ORDER BE IN THIS CASE?
Having found that the Tribunal can, assuming the offer made is clear, take a Calderbank letter into consideration in determining whether to exercise the discretion afforded by section 68 of the SRC Act, the Tribunal must now determine whether the Calderbank letter in question here should have the effect that KTKY’s costs are limited to costs arising prior to 27 October 2014.
As in Re Perry, above, Comcare does not dispute that KTKY is entitled to costs up until the time the Calderbank offer was made because the final decision was more favourable than the original decision. However, Comcare does say that the rejection of the Calderbank offer of 27 October 2014 should weigh heavily against the exercise by Tribunal of the discretion under s 67(8) of the SRC Act because what was offered was effectively the same as what was awarded by Deputy President Hotop.
The evidence shows that this is not, in fact, the case.
As noted above at paragraph 6, it was contended by KTKY’s solicitors in their written submissions in relation to the costs issue that Deputy President Hotop’s decision in relation to Application No 2013/4143 was such that KTKY received an award that was in fact greater than that offered in the Calderbank offer of 27 October 2014.
Having reviewed Deputy President Hotop’s decision, the contention put by KTKY’s solicitors at paragraph 6 above appears to be founded on an mis-reading/misunderstanding of Deputy President Hotop’s use of “36.75” hours in his decision of 8 May 2015 (at paragraph 162), as opposed to Comcare’s use of “36:45” in their Calderbank letter of 27 October 2015. The confusion appears to relate to the Deputy President’s use of a “.” as opposed to Comcare’s use of a “:” (such that KTKY’s solicitors mistakenly refer to as “36.45”, instead of “36:45”, in their written submissions to the Tribunal). KTKY’s solicitors have read Deputy President Hotop’s use of “36.75” as being greater than “36.45” because they have not read Comcare’s offer as being expressed as “36:45”. In fact, it is clear that in referring to 36.75 hours, Deputy President Hotop was in fact referring to 36 and ¾ hours (in other words, 36 hours and 45 minutes). Comcare refers to 36:45 hours (also meaning 36 hours and 45 minutes). Hence, what KTKY ultimately received from the Tribunal was not materially different than that which was offered by Comcare in its Calderbank offer of 27 October 2014. In a telephone conference on 29 January 2016, solicitors for KTKY agreed that this was in fact the correct interpretation of the meaning and effect of their use of “36.45 hours” versus “36:45” (as used by Comcare) when read in light of Deputy President Hotop’s use of 36.75 (also meaning 36:45).
Having resolved that ambiguity, the evidence shows that an offer was put to KTKY to resolve the matter on terms not materially different to those ultimately decided by the Tribunal and that Calderbank offer was not accepted. In these circumstances, the Tribunal must determine whether there are any other reasons why the Tribunal should not exercise its discretion under section 68 of the SRC Act and award KTKY her costs, including those that arose after 27 October 2014.
The Tribunal can find no reason why the Calderbank offer in question should not be relied on here. Nor, it is worth noting, were any submissions received from KTKY’s solicitors as to whether or not the particular letter in question was ambiguous, defective etc.
The terms of Comcare’s Calderbank letter of 27 October 2014 to KTKY’s solicitors are clear and cannot be deemed to be void for uncertainty. What is being offered (ie, settlement in relation to entitlements as of a certain date) is spelt out unambiguously in plain English. This letter is indicative of the sort of Calderbank letter frequently put before this Tribunal when it is asked to consider the effect of a settlement offer. A similarly drafted letter was the subject of Senior Member McCabe’s decision in Re Perry and this Tribunal cannot see any reason to question or disregard the analysis provided in that decision in relation to what is required in a letter of this sort in terms of drafting and clarity.
In relation to KTKY’s matter, the Tribunal notes that Comcare also provided extensive submissions in relation to the effect of Deputy President Hotop’s analysis of certain concessions made by Comcare throughout the course of these proceedings. In effect, Comcare argued that KTKY would not have been successful but for concessions made by Comcare and that, as such, Comcare’s actions should be taken into account by the Tribunal in determining whether or not to exercise its discretion to award costs pursuant to section 68 of the SRC Act. The Tribunal does not find it necessary in the circumstances of this matter to analyse this particular line of argument. Having found that Calderbank principles do apply and that the terms of this Calderbank letter are unambiguous in a situation where KTKY received a decision not materially different from what was offered in that letter, it is not necessary to explore this other contention.
DECISION
For the reasons outlined above, the Tribunal is satisfied that Calderbank principles are relevant in proceedings before this Tribunal in which it is asked to exercise its discretion under section 67(8) of the SRC Act.
Further, Comcare’s Calderbank offer of 27 October 2014 to KTKY was clear and should be taken into account when making a costs determination. To again quote Senior Member McCabe in Re Perry, KTKY “chose to go on. With the benefit of hindsight, it is obvious [s]he should not have done so.”
In the circumstances, the Tribunal orders that Comcare’s liability for KTKY’s costs in application 2013/4143 is limited to:
III.all reasonable and proper disbursements; and
IV.75% of all professional costs, including counsel's fees, which would be allowable under the Federal Court scale,
incurred from the date of KTKY’s application to the Tribunal up to and including 27 October 2014.
I certify that the preceding 39 (thirty nine) paragraphs are a true copy of the reasons for the decision herein of Deputy President Dr Christopher Kendall ....................[Sgd]....................................................
Administrative Assistant
Dated 16 February 2016
Date of hearing 29 January 2016 (on the papers) Counsel for the Applicant Mr J Fiocco Solicitors for the Applicant Slater & Gordon Lawyers Representative of the Respondent Ms A Ladhams Solicitors for the Respondent Australian Government Solicitor
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