Smith v Sydney West Area Health Service (No 2)

The appeal concerned a dispute over costs following a workers compensation claim. The appellant, Smith, had brought proceedings against the respondent, Sydney West Area Health Service, in the District Court of New South Wales. At the conclusion of mediation, the appellant had made a final offer of compromise, and the respondent had also made a final offer. The damages awarded to the appellant at trial were less than the appellant's final offer but more than the respondent's final offer. The primary issue was how the costs provisions of the *Workplace Injury Management and Workers Compensation Act 1998* (NSW) and the *Workers Compensation Regulation 2003* (NSW) applied in this scenario.

The Court of Appeal was required to determine whether the costs order made by the first instance judge, which favoured the respondent, was correct given the outcome of the mediation and the subsequent trial verdict. Specifically, the court had to interpret sections 346 of the Act and rules 89-91 and 93 of the Regulation to ascertain the correct application of costs principles when a claimant's award falls between the parties' respective final offers made at mediation.

The Court of Appeal reasoned that the statutory provisions governing costs in this context mandated a specific approach when the award fell between the mediation offers. The court found that the first instance judge had erred in applying the costs provisions, leading to an incorrect order in favour of the respondent. Consequently, the Court of Appeal allowed the appeal, set aside the original verdict and costs order, and entered judgment for the appellant in the sum of $166,083, with a statutory credit of $13,981 to the respondent. The parties were ordered to bear their own costs of both the hearing at first instance and the appeal.