Moore v AI Automotive Pty Ltd - [2012] SASCFC 64

SUPREME COURT OF SOUTH AUSTRALIA
(Full Court)
MOORE v AI AUTOMOTIVE PTY LTD
[2012] SASCFC 64
Judgment of The Full Court
(The Honourable Chief Justice Doyle, The Honourable Justice Vanstone and The Honourable Justice Peek)
6 June 2012
MAGISTRATES - JURISDICTION AND PROCEDURE GENERALLY - PROCEDURE - ORDERS AND CONVICTIONS - PARTICULAR ORDERS - ORDERS FOR COSTS - COSTS AGAINST DEFENDANT
PROCEDURE - COSTS - DEPARTING FROM THE GENERAL RULE - POWERS OF COURT
Application for permission to appeal against a decision of the Full Court of the Industrial Relations Court of South Australia – at trial, three offences were alleged against the respondent under the Occupational Health, Safety and Welfare Act 1986 (SA) – at trial, an Industrial Magistrate found the respondent guilty of each offence, recorded a conviction on each count, and imposed a fine – the prosecutor applied for an order that the respondent pay his costs of the prosecution – Industrial Magistrate departed from the scale and awarded costs of $89,000 – on appeal, a majority of the Full Court of the Industrial Relations Court of South Australia held that the Magistrate’s orders should be set aside, and that the question of costs should be remitted for hearing by a different Magistrate.
The issue on appeal was whether the Industrial Magistrate erred in principle in departing from the scale and ordering the defendant, convicted of three offences under the Occupational Health, Safety and Welfare Act 1986 (SA) after a hearing before the Magistrate, to pay the prosecutor’s costs.
Held: the discretion conferred by s 189(1) of the Summary Procedure Act 1921 (SA) is at large – the decision of Konieczka v Police [2006] SASC 228; (2006) 245 LSJS 458 does not place a fetter on that discretion – although broad, the discretion must be exercised judicially – the Industrial Magistrate was entitled to depart from the scale – there was no indication that the Industrial Magistrate erred in the manner in which he arrived at the award of costs.
Appeal allowed.
Occupational Health, Safety and Welfare Act 1986 (SA); Summary Procedure Act 1921 (SA) s 4(1), s 5, s 8, s 189, s 189(1); Magistrates Court Rules 1992 (SA) r 51, referred to.
Konieczka v Police (2006) 245 LSJS 458; Police v Pericic (2008) 100 SASR 141; Curnow v Police (2008) 100 SASR 290; Latoudis v Casey (1990) 170 CLR 534, discussed.
Cilli v Abbott (1981) 53 FLR 108; Kelly v Noumenon Pty Ltd (1988) 47 SASR 182; Norbis v Norbis (1986) 161 CLR 513, considered.

WORDS AND PHRASES CONSIDERED/DEFINED
"depart from the scale of costs", "prosecutor’s costs"

MOORE v AI AUTOMOTIVE PTY LTD
[2012] SASCFC 64
Full Court: Doyle CJ, Vanstone and Peek JJ

DOYLE CJ: This is an application for permission to appeal against a decision by the Full Court of the Industrial Relations Court. The issue raised by the proposed appeal is whether an Industrial Magistrate erred in principle in ordering the defendant, convicted of three offences after a hearing before the Magistrate, to pay the prosecutor’s costs. The majority of the Full Court held that the Magistrate’s approach to the award of costs reflected errors of principle affecting the exercise of the power to award costs. The majority held that the Magistrate’s orders should be set aside, and that the question of costs should be remitted for hearing by a different Magistrate.
For the reasons that follow I would grant permission to appeal. The appeal raises issues of principle that should be settled. I would allow the appeal to this Court, set aside the order allowing the appeal to the Full Court of the Industrial Relations Court, and substitute an order dismissing the appeal to that Court.
Facts
Mr Moore (the prosecutor) filed a complaint charging AI Automotive Pty Ltd (AI) with three counts that alleged offences under the Occupational Health, Safety and Welfare Act 1986 (SA) (the OHSW Act). The charges were based on an alleged failure to protect an employee of AI from injury in the workplace. The Magistrate found AI guilty of each offence, recorded a conviction on each count, and imposed a fine.
The prosecutor applied for an order that AI pay his costs of the prosecution. The Magistrate awarded costs of $89,000. The Magistrate gave brief written reasons for that decision. During the submissions on costs, counsel for the prosecutor gave the Magistrate a number of memoranda and accounts setting out the matters in respect of which a claim was made (work done by solicitors, by counsel and by an expert) and also setting out the amounts claimed. In making the award the Magistrate departed from the scale of costs that applied subject to an order to the contrary. The Magistrate said that this was justified by the “difficulty, complexity and seriousness of the case”, by the length of the trial (8.5 sitting days), and by the “highly technical and complex evidence” given before the Magistrate. The Magistrate said that the prosecutor was:
… entitled to compensation for its reasonable costs irrespective of the level of penalty imposed and in respect of which I am able to apply a broad brush …
The Magistrate was satisfied that the work in respect of which a claim was made was properly and appropriately carried out in connection with the prosecution, and that the rate at which claims were made for the work of solicitors, counsel and an expert was reasonable. The Magistrate commented that a greater amount than that claimed might well have been justified.
AI appealed against that decision. The majority (Judge Parsons, with whom Judge Farrell agreed) held that in deciding the amount to be awarded the Magistrate had failed to take into account a number of relevant considerations identified by the majority, and that the exercise of the discretion to award costs had miscarried. Accordingly, they ordered that the order for costs be set aside, and that the question of costs be remitted to another Industrial Magistrate for rehearing: AI Automotive Pty Ltd v Moore [2011] SAIRC 65 at [65]-[72]. Judge McCusker held that the Magistrate was entitled to depart from the scale ordinarily applicable, and that in arriving at the amount to be awarded, once the decision was made to depart from the scale, there was no error on the part of the Magistrate: AI Automotive at [23].
Legislation
The complaint charged summary offences for the purposes of the Summary Procedure Act 1921 (SA) (the SPA): see the definition of “summary offence” in s 4(1) of the SPA and in s 5 of the SPA. As each offence was an “industrial offence” as defined in s 4(1) of the SPA, the charges were heard by an Industrial Magistrate: s 8 of the SPA. The hearing of the charges was governed by the SPA.
The power to award costs is found in s 189(1) of the SPA, which provides as follows:
189(1) Subject to this section, the Court may award such costs for or against a party to proceedings as the Court thinks fit.
The Magistrates Court Rules 1992 (SA) (the Rules) contain rules relating to the exercise of the criminal jurisdiction of that court, which rules were applicable to the hearing of the complaint. Rule 51 of the Rules provides as follows:
51.01Subject to these Rules, the provisions of any Act, or to an order of the Court, a successful party in an action is entitled to costs against an unsuccessful party.
51.02For the purpose of this Rule a successful party includes a party who instigates proceedings that are admitted by plea of guilty, and a party who defends proceedings that are withdrawn or dismissed as a result of no evidence being tendered.
51.03Subject to any order of the court to the contrary, the scale of costs set out in the first schedule shall apply.
The first Schedule to the Rules contains the “Magistrates Court Criminal Scale of Costs”. A note to the Schedule states that the Scale “is intended for use in making orders as between party and party”. The Scale contains only eight items, followed by several unnumbered items relating to disbursements. The Scale has been described in the proceedings as a “process-based scale”. That is, the Scale refers to stages or steps in the proceedings, and allocates to each a monetary amount. A monetary amount is also allocated for the fee on brief, and each day after the first day. The scale is not an item based scale, that is, it does not provide an amount that will be allowed for individual items such as letters and telephone calls, nor does it provide for time based fees.
Issues on appeal
The reasons of the members of the Full Court of the Industrial Relations Court refer to a decision by this Court in Konieczka v Police [2006] SASC 288; (2006) 245 LSJS 458, and to differing opinions of single Judges of this Court about the effect of the decision in Konieczka.
In Konieczka the Court was considering an award of costs made by a Magistrate. A successful defendant in summary proceedings had claimed costs from the prosecutor on an indemnity basis. The Magistrate had declined to so order, but awarded costs exceeding the amount that would have been awarded according to the Scale referred to above. The prosecutor appealed, claiming that the amount awarded was excessive. The successful defendant cross-appealed, claiming that the amount awarded was inadequate. The Court refused permission to appeal. In that context Perry J, with whom the other members of the Court agreed, said:
[22]There is no doubt that in a proper case the jurisdiction as to costs extends to the making of a costs order on the basis of an indemnity or the award of solicitor and own client costs. It is also open to the court to award something between First Schedule costs and an indemnity. The discretion as to costs is at large, although it must not be exercised arbitrarily. Relevant factors must always be taken into account.
Then, after referring to submissions dealing with the circumstances of the case, he said:
[39]Nothing I have said should be understood to detract from the general rule that a successful defendant is entitled to an order for costs in his or her favour. But an award of costs at a level beyond the party and party scale set by the rules should only be justified when there are exceptional circumstances. Emphatic protestations of innocence coupled with assertions that the complainant is lying, are commonplace. Standing alone, they would not ordinarily justify a departure from the general rule.
With reference to the amount to be awarded, once a decision was made to depart from the party and party scale, he said:
[41]But having done so, the amount to be allowed was entirely a matter for the exercise of discretion. The discretion should not be circumscribed by any attempt to lay down any rigid rules or principles. Justification for departure from the scale may arise from a large variety of circumstances, including the complexity of the case, the seriousness of the charge, whether it was reasonable to brief senior counsel, the conduct of the prosecution or of witnesses for the prosecution, and other matters. Likewise, the amount allowed will be influenced by similar factors.
It is the reference to “exceptional circumstances” at [39] which has caused some uncertainty.
In Police v Pericic [2008] SASC 59; (2008) 100 SASR 141 White J considered the decision, and at [22] said:
[22]On its face, Konieczka appears to suggest that the amount claimed by the respondent for costs in the present case is to be considered by inquiring whether there are, in the circumstances of the case, special or exceptional circumstances justifying a departure from the scale of costs fixed by Schedule 1. It seems, in other words, to have the effect of imposing a fetter on what would otherwise be the wide discretion to which the earlier authorities referred.
In Curnow v Police [2008] SASC 84; (2008) 100 SASR 290 Debelle J also considered the reasons of Perry J and said:
[20]… These remarks must be read bearing in mind the claim for indemnity costs in that case. That tends to explain the somewhat emphatic matter in which Perry J has expressed himself in paragraph 39. When Perry J used the expression “exceptional circumstances”, he was referring only to the circumstances in which an order as to indemnity costs should be made. In paragraph 41 Perry J discussed the circumstances in which a magistrate might exercise the discretion to award costs on a basis other than that fixed in the First Schedule. His Honour clearly stated that that discretion is not to be circumscribed by any rigid rules or principles. In no respect did he fetter the exercise of that discretion. Instead, he clearly stated that a departure from the rule may be justified in a large variety of circumstances. He added that the amount to be allowed will be influenced by similar factors.
[21]… For the reasons just expressed, Perry J did not fetter the wide discretion imposed by s 189(1). Instead, the expression “exceptional circumstances” was applied only to occasions when indemnity costs might be awarded. In paragraph 41 of his reasons, Perry J clearly stated that the discretion was not to be circumscribed by any rigid rules or principles.
I agree with Debelle J that in Konieczka Perry J at [39] intended only to explain what is likely to be the case if costs are awarded on an indemnity basis. That is, that the circumstances will be exceptional. He was not intending to place a fetter on the discretion conferred by s 189(1) of the SPA. He did no more than comment on the circumstances that will usually be present if costs are awarded on an indemnity basis. The decision in Konieczka should be understood in that way.
The discretion conferred by s 189(1) of the SPA is at large. Konieczka should not be understood as deciding otherwise. Ordinarily, costs will be awarded on a party and party basis. But there are well established bases for a Magistrate to adopt a different approach, such as an award of costs on a solicitor and client basis, or on the basis of an indemnity. If costs are to be awarded on a party and party basis then, ordinarily, the Scale of costs in Schedule 1 will be applied, but the Magistrate has power to depart from that Scale, even when awarding costs on a party and party basis.
When a Magistrate exercises the power to award costs, it is to be remembered that costs are intended to compensate the party in whose favour they are ordered for the costs incurred in and in connection with the case, and that costs are not ordered to punish or to penalise the other party. This fundamental principle is established by the decision of the High Court in Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534. There, Mason CJ said at 543:
If one thing is clear in the realm of costs, it is that, in criminal as well as civil proceedings, costs are not awarded by way of punishment of the unsuccessful party. They are compensatory in the sense that they are awarded to indemnify the successful party against the expense to which he or she has been put by reason of the legal proceedings: Cilli v. Abbott (1981) 53 FLR [108] at p 111.
Similarly, at 562-563, Toohey J said:
What has emerged from a number of decisions is recognition that costs are awarded by way of indemnity to the successful party and, expressly or impliedly, that they are not by way of punishment of the unsuccessful party. … In particular, those decisions reject or lend no countenance to the view that costs should not be awarded to a successful defendant in summary proceedings because to do so would discourage police officers from bringing prosecutions.
Citations omitted
The context makes it clear that when Toohey J referred to an “indemnity” he was referring to the compensatory nature of an award of costs. A similar statement of principle was made by McHugh J at 566-567:
An order for costs indemnifies the successful party in litigious proceedings in respect of liability for professional fees and out-of-pocket expenses reasonably incurred in connexion with the litigation: Kelly v. Noumenon Pty. Ltd. (1988) 47 SASR 182 at p 184. The rationale of the order is that it is just and reasonable that the party who has caused the other party to incur the costs of litigation should reimburse that party for the liability incurred. The order is not made to punish the unsuccessful party. Its function is compensatory.
Although the discretion is a broad one, it is to be exercised judicially. A court, and in particular an appellate court, can properly identify guidelines to be applied when a power such as the power conferred by s 189(1) of the SPA is exercised, provided that those guidelines are not treated as rigid rules that displace the discretion conferred on the court. Illustrations of this point can be found in the reasons of the High Court in Latoudis v Casey. As Mason CJ said at 541:
... the courts have been correct to emphasize the unconfined nature of the discretion. But it does not follow that any attempt to formulate a principle or a guideline according to which the discretion should be exercised would constitute a fetter upon the discretion not intended by the legislature. Indeed, a refusal to formulate a principle or guideline can only lead to exercises of discretion which are seen to be inconsistent, a result which would not have been contemplated by the legislature with any degree of equanimity.
On the same point Toohey J said at 562:
However, it is one thing for an appellate court to refrain from fettering the discretion of the magistrate unduly. It is quite another thing for such a court to refrain from giving guidance, “whether in the form of principles or guidelines”: Norbis v. Norbis (1986) 161 CLR 513 at p 519. Without such guidance, it is hard for those exercising the discretion to achieve consistency and avoid arbitrariness in decision-making.
Subject to the uncertainty about the effect of the decision in Konieczka, all members of the Full Court of the Industrial Relations Court appear to have accepted that the Magistrate’s decision involved the exercise of a broad discretion, that was to be exercised judicially: Judge McCusker (dissenting) at [6] and [18]-[19]; Judge Parsons at [55]-[56] with whom Judge Farrell agreed at [73]. With reference to Schedule 1, Judge Parsons said at [56]:
The role of Schedule 1, as a guide to reasonable compensation for costs and its description as the “norm” or the “general rule,” is explained by reference to Latoudis v Casey in which Mason J noted that a general statutory discretion unconfined by principles or guidelines can lead to the inconsistent exercise of a discretion. Thus a scale of costs which provides a guide to party and party costs does not fetter the wide discretion provided by s 189(1) but guards against the arbitrary exercise of discretion which Perry J cautioned against in Konieczka.
Citations omitted
I agree.
The members of the Full Court of the Industrial Relations Court differed at the next stage of their reasoning. The majority found that the Magistrate erred in the exercise of the discretion, and in the manner in which he departed from the Scale. On this point Judge McCusker dissented: reasons at [20]-[23]. This Court would not usually grant permission to appeal for the purpose of considering the manner in which the power to award costs is exercised. But the reasons of Judge Parsons (with whom Judge Farrell agreed) are likely to be read as giving guidance to Magistrates exercising the power conferred by s 189(1) of the SPA, are therefore likely to be followed in later cases, and in my respectful opinion those reasons are in some respects erroneous. For that reason, it is desirable to deal with this aspect of the reasons of the majority.

Judge Parsons indicated some reservations about the Magistrate’s conclusion that the length and complexity of the case justified an award of costs at a higher rate than that provided by the Scale: at [64]-[65]. I make no comment on that, other than to accept the point made by her Honour at [65] that:
The extent to which the complexity of a case is reflected in the award of costs must bear some relationship to the costs awarded in other complex industrial prosecutions heard by Industrial Magistrates and in the wider range of summary offences heard by magistrates, some of which will also involve complexity and difficulty. …
But if the Magistrate was right in finding that, having regard to the length and complexity of the proceedings, the Scale would not provide adequate and proper compensation for the costs incurred by the prosecutor, the Magistrate could not be criticised for departing from the Scale nor for referring to another scale such as the Supreme Court Scale. Mr Jacobi, counsel for the prosecutor on the appeal, told the Court, and this was not disputed, that the costs claimed were not in fact claimed at the rate permitted by the Supreme Court Scale, but at a lesser figure, at least in relation to some of the costs claimed. It is not clear to me whether Judge Parsons intended to say that the Magistrate erred in this respect, but it does appear that this was one of the matters that caused her to decide that the Magistrate had erred.
The Judge also expressed concern that the line between the costs of the initial investigation into the workplace incident, and the costs of the proceedings, might have been blurred: reasons at [61]. I can find nothing in the material before the Magistrate to suggest that this had happened, and that the Magistrate overlooked the point. Again, Mr Jacobi submitted that the costs claimed included no costs attributable to the initial investigation of the workplace incident.
Judge Parsons then referred to some matters that should have been considered by the Magistrate. She did so in terms suggesting that she was giving general guidance on the exercise of the power to award costs. She said:
[66]There is also an important public policy consideration when awarding costs in summary proceedings. The costs likely to be awarded should be sufficiently predictable so that the parties may make sensible and strategic decisions about criminal litigation based on an understanding about what the reasonable party and party costs will be in the event that they are successful or unsuccessful. A process-based scale fulfils that role.
I disagree. The predictability of the amount to be awarded by way of costs is a factor entitled to very little, if any, weight indeed. It is true that a “process-based scale” enables an estimate to be made, fairly easily, of the costs likely to be awarded on the basis of such a scale. But a properly advised litigant will be warned that there are circumstances in which the court might depart from that scale. In particular, a properly advised litigant would be informed that if the length and complexity of a case warrants departure from the Scale, a court can do so, and may well do so. It is not to the point that when the Scale is departed from, the party ordered to pay costs would not have been able to make a reliable estimate in advance of the amount of those costs. The reason why it is not to the point is that identified by the High Court in Latoudis v Casey. That is, the award of costs is intended to be compensatory, and if a proper and reasonable award requires a departure from the Scale, then so be it.
The Judge also said:
[67]If costs are determined on an item-based approach then a defendant who is found guilty may face a large order for costs resulting in serious financial consequences. Such an award of costs may impose an additional penalty as its foremost effect.
Again, I disagree that this is a relevant factor. The award of costs is intended as compensation for the costs incurred by the party in whose favour the award is made. Payment of those costs will, in a sense, amount to “an additional penalty” for the paying party. But that will be the case, whether the costs are awarded according to the Scale or not. A court should make an order for costs that provides proper compensation to the party entitled to those costs, and its decision in that respect cannot be influenced by the circumstance that the requirement to pay costs could be regarded by the unsuccessful party as a penalty. The Judge went on to refer to the circumstance that the Magistrate’s reasons did not contain any criticism of AI in the conduct of the trial. But that cannot be a reason for refraining from departing from the Scale. To so reason is to undermine the basic principle that costs are intended to compensate the successful party. The Judge went on to say:
[69]In such circumstances it is important that a person not be deterred from the proper defence of an action by the prospect of a significant and unpredictable order for costs being made against them. Conversely, a public officer, fulfilling a statutory responsibility to prosecute, should not be deterred from prosecuting by the prospect that the public purse may be depleted by a significant costs award in favour of a defendant.
[70]The IM did not take into account the defendant’s position, the punitive nature of a significant costs award or the general public policy issue.
In Latoudis the majority rejected the view that costs should not be awarded to a successful defendant in summary proceedings. As Toohey J said at 563:
In particular, those decisions reject or lend no countenance to the view that costs should not be awarded to a successful defendant in summary proceedings because to do so would discourage police officers from bringing prosecutions.
McHugh J made similar remarks at 567 and 569. Granted, their Honours were referring to the question of whether or not costs should be awarded, rather than the amount of those costs. But it follows from their reasons that if costs are awarded, and are intended to be compensatory, then the circumstance that an award of costs might discourage a public officer from instituting proceedings is not a reason to refrain from awarding costs. The same approach must apply to the other side of the coin, and to the possibility of a person being deterred from defending an action by the prospect of an award of costs.
For these reasons, I consider that the majority erred in the approach that they indicated should be taken to an award of costs in a case like this.
It follows that I agree in substance with the approach of Judge McCusker, the dissenting member of the Court, when he said:
[23]Thus the learned Industrial Magistrate was well justified in his conclusion that the case was one of particular difficulty, complexity and seriousness. He was therefore entitled on the authorities to depart from the scale of the First Schedule. Once he had reached this stage in his analysis the learned Industrial Magistrate exercised his discretion adopting a calculation based upon the work actually done and accepting the amounts attributed to each such item. Moreover that was reduced by some 40% out of caution and to ensure it reflected only attributable costs. In the circumstances there is no warrant in my opinion for our interference on appeal.
The reasons of the Magistrate do not indicate error, nor does the decision that he made indicate that some unexpressed error must have affected that decision.
Conclusion
The Magistrate was entitled to depart from the Scale of Costs set out in the First Schedule. There is no indication of error on the part of the Magistrate in the manner in which he arrived at the award of costs.
I would allow the appeal, set aside the order made by the Full Court of the Industrial Relations Court allowing the appeal to it, and order that there be substituted an order dismissing the appeal to the Full Court of the Industrial Relations Court.
VANSTONE J: I agree with the orders proposed by the Chief Justice and with the reasons he has given.
PEEK J: I agree with the orders proposed by the Chief Justice and with his reasons.