The District Court of WA considered an appeal from an Arbitrator’s orders that the worker’s lawyer personally pay the insurer’s costs of a directions hearing, and also that the costs of the worker’s lawyer be disallowed (i.e. the worker was not required to pay his lawyer’s costs for the hearing).

Background

The worker made a claim for workers’ compensation benefits after allegedly suffering a lower back injury while lifting a bucket of ink at work. The employer’s insurer initially made payments of benefits. After the payments were discontinued, an issue arose as to continuing entitlement and the worker filed an Application for Arbitration at WorkCover seeking an order requiring payment of benefits (the ‘Application’).

The Application foreshadowed filing medical expert evidence rather than annexing that evidence, and was otherwise deficient in that the Application did not comply with the procedural rules, since it did not particularise the claimed expenses nor include a statement by the worker in support of the claim. Although it was permissible to cure these defects in the Application by filing the evidence / statement and providing the particulars, this did not occur prior to the first directions hearing.

Decision at first instance

The first directions hearing occurred on 16 August 2017, at which time the worker sought to ‘file’ an expert medical report dated 6 July 2017 provided by his general practitioner to his lawyer. The worker’s lawyer was unable to clarify the period he had held the report nor satisfactorily explain why it had not been filed in good time. The worker’s lawyer conceded that he had overlooked the report when he reviewed the file in preparation for the directions hearing. The Arbitrator made orders that the worker file and serve the report.

The insurer then sought an order that the worker pay its costs of the hearing.

The Arbitrator found that the worker’s lawyer had been unprepared, causing the directions hearing to be of little utility and thus had wasted the time of the court, the insurer, and the worker. The Arbitrator held that the fault lay exclusively with the lawyer (noting that the worker drew his lawyer’s attention to the existence of the medical report).

The Arbitrator ordered the worker’s lawyer to pay the costs thrown away by the insurer and disallowed the worker’s lawyer from claiming costs for the directions hearing (the Costs Decision).

Appeal grounds

Despite the insurer taking a very pragmatic approach in advising that it would not enforce the costs order and would pay the worker’s costs of the directions hearing, the worker’s lawyer nonetheless sought leave to appeal the Costs Decision to the District Court of WA (appeals are limited to questions of law, not fact). The appeal asserted that the Arbitrator:

1. Erred in failing to limit the discretion to award costs prescribed by section 265 of the Workers’ Compensation and Injury Management Act 1981 (WA) (the Act) to the circumstances identified in section 264 of the Act (being that the application was ‘frivolous or vexatious, fraudulent or made without proper justification’ under sub-sections 264(5) and (6) of the Act);
2. Erred in exercising the discretion under s265 of the Act by relying on a fact that was not correct (being that the expert report had not been made available prior to the directions hearing when, in fact, it had been provided to the insurer before the directions hearing [albeit that the worker’s lawyer had not made that known to the Arbitrator in the argument below]); and
3. Failed to give any, or any adequate, reasons for the decision.

Statutory provisions

Section 264 of the Act relevantly provides:

…(5) A dispute resolution authority is not to order the payment of costs by a worker unless the dispute resolution authority is satisfied that the costs relate to an application made by the worker that was frivolous or vexatious, fraudulent or made without proper justification.

(6) If a dispute resolution authority is satisfied that a part only of the application was frivolous or vexatious, fraudulent or made without proper justification, the dispute resolution authority may order the worker to pay the costs relating to that part of the application.

Section 265(1) provides:

If in any proceeding before a dispute resolution authority or in any matter under this Act which is resolved by agreement, costs are incurred improperly or without reasonable cause or are wasted by undue delay or by any other misconduct or default, of a legal practitioner or agent representing a party (the representative), a dispute resolution authority may make an order –

(a) disallowing the costs, as between the representative and the client; and

(b) directing the representative to repay the client costs which the client has been ordered to pay to any other party to the proceeding; and

(c) directing the representative personally to indemnify any other person than the client against costs payable by the person indemnified.

Appeal decision

Gething DCJ accepted that the appeal involved a question of law, and accordingly granted leave to appeal.

Application of ss264 and 265

His Honour held that the ordinary and grammatical meaning of the words of ss264 and 265, having regard to their context and legislative purpose, did not support the position put by the worker’s lawyer that an order under s265 was dependent on meeting sub-ss264(5) and (6). Indeed, His Honour decided that:

There may well be applications which are made with proper justification (and so do not enliven s 264(5) or (6)), but which are managed by the worker’s representative in the manner described in WCIMA s 265(1). To ensure that determinations are made economically, the dispute resolution service needs to be able to make orders pursuant to WCIMA s 265(1) in this instance. This is what occurred in the present case.

Exercise of discretion

His Honour found that the alleged error of discretion in applying s265 of the Act must arise on the facts before the Arbitrator to be an appealable matter of law. The submission that the Arbitrator relied on a fact that was subsequently shown to be wrong constitutes an error of fact rather than of law. Thus His Honour concluded:

…an exercise of discretion cannot be challenged on the basis of facts which the decision maker was not aware of.

Adequacy of reasons

His Honour noted the thrust of the lawyer’s argument was that the Arbitrator’s decision did not address the application of sub-ss(5) or (6) of the Act. Given the decision that the sections were not relevant, this point was moot. Rather, the Arbitrator had properly identified the facts and applicable law, and given adequate reasons for his decision. Indeed, Gething DCJ further held that:

Even if I were of the view that the Arbitrator’s Reasons were inadequate, it would not automatically follow that the decisions of the Arbitrator under appeal would be set aside. Rather, an appeal court will only intervene when the inadequacy is such as to give rise to a miscarriage of justice.

Decision

The appeal was dismissed. The costs of the appeal are yet to be determined.

Implications of decision

This decision is significant for insurers and employers as it identifies that costs thrown away as a consequence of the lack of preparation by a worker can be recovered by exercise of the discretion provided under s265 of the Act, being a discretion unrestricted by the merits of the application (in a ‘s264 sense’).