When proceedings are commenced in the SA Workers Compensation Tribunal costs will be incurred by both parties: the worker and the relevant compensating authority (as well as by the employer when it is also a party).

The starting point for awards of costs in the Tribunal is section 88F of the Workers Rehabilitation and Compensation Act 1986 (SA). Section 88F gives the Tribunal a general discretion in relation to costs of proceedings, however this section is expressed to be “subject to this Act” and therefore, it has been held that this “means that the discretion is subject to the matters set forth in Section 95”[1].

Subsections (1) and (2) of section 95 are regarded however as setting out the general working principles on costs. These subsections change the common law position considerably. They prescribe that a party is entitled to recoup reasonable costs incurred from the relevant compensating authority, while subsection (2) outlines the types of costs that may be awarded to the worker.  However, subsection (3) of section 95 allows the Tribunal to disallow or reduce an order for costs in favour of a party if it “is of the opinion that the party acted unreasonably, frivolously or vexatiously in bringing or in relation to the conduct of proceedings”.

The common law position is essentially that the loser pays (subject to certain relevant court rules).

Section 95 is a significant departure from the common law position. The starting point is that the compensating authority generally pays costs, even if it wins.

It should however also be noted in any event that an order for costs against a party cannot exceed 85% of the Supreme Court scale (section 95(5)).

The Wording of Section 95

Costs

(1) A party (other than the relevant compensating authority) is entitled, subject to this Part and to limits prescribed by regulation, to an award against the relevant compensating authority for the party’s reasonable costs of—

(a) the initial reconsideration of a disputed decision; and

(b) any subsequent proceedings for resolution of the dispute under this Part (but not proceedings by way of an appeal or case stated to a Full Bench of the Tribunal or the Supreme Court).

(2) Costs may only be awarded to cover—

(a) the cost of representation by a legal practitioner or an officer or employee of an industrial association; and

(b) costs of a kind authorised by the regulations that were reasonably incurred.

(3) If the Tribunal is of the opinion that a party acted unreasonably, frivolously or vexatiously in bringing or in relation to the conduct of proceedings, the Tribunal may—

(a) decline to make an award of costs in favour of the party and may further (if it thinks fit) make an award of costs against the party; or

(b) reduce the amount of the award to which the party would otherwise have been entitled.

(4) An award of costs to cover professional advice or assistance may, if the Tribunal considers appropriate, be made in favour of the person who provided the professional advice or assistance.

(5) An award of legal costs cannot exceed 85% of the amount that would be allowable under the relevant Supreme Court scale if the proceedings were in the Supreme Court.

What does this mean in practice? It demonstrates is that there is what might be described as a sliding discretionary scale in awarding costs, which can be summarised as follows:

1              the starting point is that a party[2], other than the compensating authority, is entitled to costs even if he or she loses (section 95(1));

2              costs will only be awarded in favour of a legal practitioner or officer or employee of an industrial association and then only in accordance with the regulations (section 95(2)); however,

3              where a party acts:

3.1         unreasonably,

or

3.2         frivolously,

or

3.3         vexatiously

in either:

3.3.1.           bringing the proceedings,

or

3.3.2.           in the conduct of the proceedings,

the tribunal has a number of choices; it may:

3.3.2.1.   decline to make an award of costs in the party’s favour,

or

3.3.2.2.   make an award of costs against the worker,

or

reduce the amount of the award of costs to which the party would (otherwise) have been entitled.

Therefore, in deciding whether to reduce the award of costs; refuse an award of costs or order the worker to pay the compensating authority’s costs, the Tribunal is required to consider whether the worker’s conduct was frivolous or unreasonable or vexatious. If it was, it does not automatically follow that the usual order for costs will not be made – this is where the discretionary element comes in.

The issue of the worker’s credit (or more particularly, lack of credit) features in an analysis of cases in which costs have either been reduced or not awarded in favour of workers.

The Application of Section 95(3)

Case law: the findings on the credibility of workers and the impact on subsequent orders for costs under section 95(3)

A number of cases have dealt with applications for costs following adverse findings as to credit in relation to particular workers.  Below is an outline 12 such cases. I have for each case included a discussion of the findings made as to the worker’s credibility and the orders that were made on costs given these findings.

1. Pignataro v GH Michell and Sons (Australia) Pty Ltd JD35/1998

(Deputy President Acting Judge Gilchrist)

This decision on costs followed the hearing in this matter in which His Honour:

“formed a very unfavourable view of the worker. [He] found that [the worker] mislead the employer about his capacity for work and that he feigned an inability to attend work when in fact he was quite capable of performing the work on offer.” (At page 2).

However, despite this finding, although “not without some hesitation”, His Honour was not satisfied that the worker had ceased to be incapacitated for work as a result of the accepted disability (the issue in dispute was the employer’s decision to discontinue the worker’s weekly payments of income maintenance on the basis that he had ceased to be incapacitated and/or that the worker had breached mutuality; the employer failed on the first of these issues, but succeeded on the second).

Both parties sought an order for costs. The employer’s application was based on the findings as quoted above.  In deciding this issue, His Honour commented:

“I am inclined to think that the primary focus of the Tribunal’s attention in considering the issue of costs, must be directed towards the conduct of the party in lodging and pursuing the proceedings, although I would not be prepared to exclude the possibility that circumstances pre-dating that, might be relevant.” (At page 4).

In respect of the issue of the employer’s determination that asserted that the worker had ceased to be incapacitated for work, His Honour held that it was not unreasonable for the worker to seek his costs of the proceeding in relation to that issue. However, on the worker’s challenge to that part of the determination asserting that he failed to perform work which had been made available to him His Honour found:

“had the worker been entirely candid about this, he would of conceded the correctness of this aspect of the employer’s determination. In my view, in challenging it, the worker acted unreasonably. In fact, I would put the worker’s unreasonableness in relation thereto, at the upper end of the scale. He unnecessarily put the employer and the Tribunal to the time and expense of conducting a hearing on this issue, because of his patent lack of candour.” (At page 4).

His Honour then ordered the worker pay the employer’s costs in respect of this issue and went on to say that he could not properly differentiate between the two portions of the hearing in relation to the two issues and ordered that each party bear their own costs.

2. Disotto v WorkCover Corporation [1999] SAWCT 92

(Deputy President Acting Judge Gilchrist)

This was a decision on costs following a determination that the worker’s claim for compensation was correctly rejected by the Corporation.  In the original hearing, when determining whether there was a connection, as the worker alleged, between the assault that occurred in the course of the worker’s employment and her medical condition, His Honour observed that the worker was evasive in cross-examination, prone to exaggeration, and was uncomfortable when faced with matters she perceived to be unfavourable to her case.  His Honour concluded that the worker’s memory of her condition was a product of reconstruction and was not an accurate reflection of what in fact transpired. His Honour lacked confidence in the worker’s honesty and in addition, there was a lack of corroborative evidence.  His Honour was not persuaded that the worker’s condition resulted from the assault for which the claim was made.

In light of these findings His Honour said, in relation to costs, in an often quoted passage:

“There are cases where a worker fails on issues of credit where his or her conduct has clearly been unreasonable so as to require the invocation of Section 95(3). A case where the Tribunal is of the view that the worker is clearly lying on issues central to the pursuit of the claim is an obvious example. But not all adverse findings as to the credit of a worker necessarily translate to a finding that the witness was telling lies. As Professor Eggleston in his text `Evidence, Proof and Probability‘ noted at pp.152 and 153:-

‘The assessment of the credibility of a witness does not merely involve making a decision as to whether the witness is telling lies. Strictly speaking, a lie is a statement which the speaker does not believe to be true, but many witnesses make false statements in the firm belief that they are telling the truth.’

In this case, I did not think that in giving her evidence the worker was deliberately lying to me. I think that her evidence was coloured and tainted by her reconstruction and that she subconsciously elevated `well I must have been in continuous pain in that region over the relevant period’ to `I was in continuous pain in that region over the relevant period’.

The worker’s demeanour did not demonstrate to me a person who was patently lying. What it did do was demonstrate to me a person who felt doubts about the conviction she had in her recall of events when inconsistencies between that recall and other evidence was placed before her.” (Emphasis added).

His Honour concluded that an order for costs in the worker’s favour was appropriate. It is important therefore to note the distinction between deliberate lying and unconscious reconstruction.

3. Chapman v WorkCover [2000] SAWCT 126

(Deputy President Judge Gilchrist)

This was an application for costs following a judicial determination upholding the Corporation’s determination to suspend weekly payments to, and subsequent claims by, the worker.  His Honour noted that the worker’s evidence during the hearing was confused, inconsistent, and at times, totally unbelievable or completely dishonest.  There was a finding that the worker had deceived not only the Tribunal, but also his solicitors and medical examiners.  His Honour commented that an order for costs against a worker should be reserved for the most extreme cases and noted that in this case, the worker’s lack of credibility (and therefore degree of unreasonableness), was at the upper end of the scale, although not its outer limit.  Therefore, the worker was ordered to pay 75% of the Corporation’s costs. As is apparent, there was a finding of deliberate lying by the worker.

4. Elvey v WorkCover [2000] SAWCT 60

(Deputy President Judge Gilchrist)

This was an application for costs following a decision to set aside a determination of the Corporation rejecting the worker’s claim for compensation.  His Honour determined that the worker was entitled to weekly payments of income maintenance, but for a closed period.  His Honour noted that although he found in favour of the worker, he rejected the worker’s evidence regarding his continued incapacity for work due to a “profound lack of confidence in his credibility” which arose out of the viewing of certain video footage.  His Honour found that the worker’s evidence was irreconcilable with the video however he had no difficulty accepting that the worker sustained an injury as alleged.

His Honour found that in the circumstances, the worker had acted unreasonably although this was not a case of the worker being “an out and out liar”.  In light of this finding, His Honour found that the worker was entitled to two thirds of his costs in order to reflect the time and expense wasted due to his lack of candour.

5. Dutton v Mitsubishi Motors Australia Ltd [2001] SAWCT 68

(Acting Deputy President Thompson)

In the course of his original judgment, His Honour made adverse findings on the issue of credit of the witnesses for the worker and also the worker himself (although it was found that the worker had undoubtedly been injured).  His Honour felt that there were three situations that could arise in relation to credit:

1.              Making a false statement believing it to be true.

2.              Making a false statement without having any reasonable grounds for believing it to be true.

3.              Making a statement when it must be patently obvious that the statement is untrue.

His Honour went on to observe that workers who are injured tend to view matters with a perspective of self-interest and that this may well be considered with some compassion, however such a situation was to be contrasted with deliberate falsity.  His Honour then considered the reasons for decision in Disotto (discussed above) and concluded that the present case was not one of evidence being tainted by reconstruction: this case involved an invention of a set of facts, the worker had deliberately tried to mislead the Tribunal.  Therefore, the worker was ordered to pay all of the employer’s costs.

With respect, I believe that this is a correct application of the intention of the legislature.

6. Seeby v WorkCover [2001] SAWCT 63

(Full Bench: President Judge Jennings, Deputy President Judges McCusker and Parsons)

This was an appeal against a decision of a Deputy President rejecting the worker’s application for costs.  The Deputy President had found that the worker had “concocted” and “manufactured” evidence in relation to both the circumstances and severity of the alleged injury and had intended to deceive the Tribunal in order to obtain compensation.  His Honour therefore concluded that the worker had acted unreasonably for the purposes of section 95(3) and although the worker’s conduct was at the upper end of the scale of unreasonableness, he did not make an award of costs against him even though the Corporation sought such an order.  The Full Bench found that the Deputy President exercised appropriate discretion in applying section 95(3) and dismissed the appeal.

Paragraph 10 of this judgment contains an important statement of principle for the manner in which section 95(3) is to be applied:

Whether a worker has acted unreasonably in bringing or in the conduct of proceedings requires a case by case consideration. However, for a worker to engage in deliberate misleading on significant evidence going to the resolution of the issues would rarely avoid such a conclusion.  That has been an approach consistently taken in this Tribunal, its predecessors and in the Industrial Court in its workers compensation jurisdiction. [Number of authorities cited]  To the degree some indication of the approach may be of assistance, these authorities indicate that mendacious testimony by an applicant carries with it a very high risk of forfeit under subsection (3).

Given the very adverse findings on credit against the worker, it is difficult to avoid the conclusion that the worker was, with respect, very lucky to avoid a costs order of the type imposed in Dutton v Mitsubishi.

7. Lagogiannis v Unisure Pty Ltd [2002] SAWCT 74

(Deputy President McCouaig)

In this case, Unisure’s rejection of the worker’s claims was upheld at both arbitration and judicial determination.  In addition, the worker had rejected offers of settlement on more than one occasion and was found to be an unreliable witness.  Unisure argued that the rejection of the settlement offers and the findings regarding reliability amounted to adverse findings on credibility.

His Honour said that he had indeed found the worker to be an unreliable witness, as had the arbitration officer who had commented that some of his evidence was “beyond belief”.  However, His Honour did not think that these findings necessarily made the worker a liar, it merely made his evidence unreliable.  His Honour noted that there was no evidence which either confirmed that the worker viewed his claim as a “try-on” or that he intentionally deceived the Tribunal.  His Honour reasoned that therefore the benefit of the doubt must go to the worker in the absence of a clear finding of deception in the bringing or the conduct of the proceedings.  In the end, His Honour was not persuaded that the worker’s conduct was unreasonable and therefore did not invoke section 95(3).  The respondent was ordered to pay the worker’s costs.

8. Wojciak v South Australia Water Corporation [2003] SAWCT 24

(Deputy President McCouaig)

The worker in this case applied for costs following a judicial determination in which he was partially successful: three determinations by SA Water to reject income maintenance were upheld, while five determinations to discontinue weekly payments were set aside.  The worker’s credibility was the predominant issue; his claims failed because he failed to persuade the Deputy President that he was incapacitated for the available work and His Honour disbelieved him in relation to his alleged inability to attend independent medical examinations.  However, His Honour found that a breach of mutuality by the worker was not proved notwithstanding his obstructionism and provocative behaviour at work.  His Honour said that: “It was, in short, the worker’s contrived testimony that made issues out of circumstances that ought not have given rise to issues and that significantly prolonged the hearing.”

His Honour concluded that the worker’s want of credibility and deliberately deceptive testimony constituted unreasonable conduct.  His Honour considered certain other factors such as: the worker undoubtedly suffered a compensable disability; he has occasionally experienced psychological symptoms that were largely attributable to his disability, and his relationship with his employer has been less than perfect for some time.  However, His Honour did not feel that these factors explained or justified the worker’s lack of candour.  In the circumstances, His Honour held that an appropriate order under section 95(3) would be that SA Water was to pay 50% of the worker’s costs.

9. O’Neil v WorkCover [2003] SAWCT 89

(Acting Judge Thompson)

The worker appealed to the Tribunal against the following determinations:

1.              Rejection of a section 43 claim for benefits: appeal successful.

2.              Discontinuance of weekly payments on the basis of recovery: appeal successful.

3.              Discontinuance of weekly payments of income maintenance: appeal unsuccessful.

4.              Rejection of claim for weekly payments: appeal unsuccessful.

5.              Rejection of claim for compensation due to an alleged aggravation of the original disability: appeal unsuccessful.

The worker had a history of defrauding WorkCover, indeed he had been convicted of more than 90 counts of fraud arising from claims for travelling expenses and benefits.  During the hearing of his appeals, His Honour found that the worker had lied to his medical examiners about his activities and his attendance on doctors, and that he had persisted with those lies during the hearing.  In his reasons for decision, His Honour had concluded that “the worker’s credibility has been largely destroyed.  I do not propose to accept anything he says unless it is apparently corroborated.”  In the reasons for decision as to costs, Deputy President McCouaig noted that: “Upon reflection those assessments of the applicant’s credibility are if anything, unduly lenient.”  His Honour noted that main issue in the appeals in which the worker was successful was largely medical but that he failed in his main claim because of his “incapacity to be truthful.”  Having regard to the time expended on important aspects of credibility, His Honour ordered the worker to pay 60% of the Corporation’s costs due to his unreasonable conduct. Again, I respectfully believe that the worker could count himself lucky with this outcome.

10. Danielsen v OneSteel Manufacturing Pty Ltd [2004] SAWCT 2

(Deputy President Judge Gilchrist)

His Honour had previously upheld the employer’s rejection of the worker’s claim for an alleged disability to his right shoulder; he set aside the rejection of a claim for an injury to his lower back and determined the worker was entitled to weekly payments of income maintenance.  His Honour found that the trial was prolonged by the worker due to the introduction of evidence not covered in his witness statement.  His Honour then cited the passage from Disotto referred to above and concluded that the worker in this case had not been honest but that did not mean he was necessarily lying.  His Honour concluded that the adverse findings against the worker were not sufficient to conclude that his conduct had been unreasonable.  His Honour ordered that the worker recover his costs.

11. Charter v Detmold Packaging Pty Ltd [2005] SAWCT 16 and [2005] SAIRComm 11

(Deputy President Judge Gilchrist)

This matter involved a number of issues, one of which was the employer’s rejection of the worker’s claim for income maintenance, and another was the worker’s claim for compensation pursuant to section 43 of the Act.  The claims for income maintenance were held to be correctly rejected, however His Honour awarded the worker compensation pursuant to section 43.  His Honour said that he remained of the view previously expressed in Disotto in relation to the application of section 95(3).  His Honour held that the worker was clearly entitled to an order for costs for his claim under section 43.  As to the other aspects of the matter His Honour found that: “Had the worker been entirely candid, he would have conceded that he had misled the doctors and his employer” and therefore the worker acted unreasonably in undertaking the actions and in failing to be candid.  His Honour ordered that each party bear their own costs in relation to the matters undertaken by the worker in which he failed to be truthful.

12. An extreme case: Mr Kowalski

Many people within the South Australian legal profession, as well as those practicing in the workers compensation jurisdiction generally (whether lawyers or not), are familiar with the name Kowalski and his relentless, obsessive attempts to claim compensation from his former employer, Mitsubishi.

The cases cited to date generally deal with situations in which adverse credit findings have been made against the workers and whether those findings are sufficient to trigger a ruling that the worker acted unreasonably, such as to deprive him or her of the usual entitlement of a favourable order for costs.

They do not however discuss the question of vexatiousness by a worker and the impact it has on a costs ruling. One would expect that a finding of vexatiousness would have the effect of not only disentitling a worker to an order for costs in his or her favour, but also result in an order for costs being made against the worker.

In 2004, Mitsubishi applied to the Supreme Court to have Mr Kowalski declared a vexatious litigant. This would in effect prevent him from instituting any further proceedings against his former employer. This application was granted earlier this year[3] (although Mr Kowalski has since naturally appealed this finding). That appeal was heard by the Full Court earlier this month and a decision is currently awaited.

Mr Kowalski had issued numerous proceedings against Mitsubishi in the Tribunal (and elsewhere) over many years. He had however been notably unsuccessful in his pursuit of litigation. Given his lack of success, it is hardly surprising that he has also had numerous costs orders made against him on the basis of his unreasonable, frivolous and/or vexatious behaviour.

Deputy President Thompson made an order for costs in Mitsubishi’s favour in JD 2A/1997.  He observed that “in this case what Mr. Kowalski was met with was a good defence from the outset, that is, assuming everything alleged by Mr. Kowalski had been proven, the case was doomed” (at page 2).

And further at page 3:

“I am of the view that Mr. Kowalski has acted unreasonably in the bringing of and the conduct of these proceedings.  They cannot be called reasonable when one seeks to relitigate a matter that has been exhaustively heard to finality in the Review Panel, the Workers Compensation Appeal Tribunal and the Supreme Court.  It cannot be asserted that this was an attempt to assert a legal right or to rectify a legal wrong in any way which is available.”

Deputy President McCouaig also delivered a judgment regarding costs ([2001] SAWCT 102).  Mitsubishi sought an order (which was granted) that Mr Kowalski pay the costs of the proceedings.  In making a costs order, Deputy President McCouaig commented that he found Mr Kowalski “to be an unreliable witness, prone to prevarication and opportunism” (at paragraph 18).  Further, His Honour held that “[t]he worker’s application was from the outset founded on a lie … The worker maintained this lie throughout the proceedings.  I find that in doing so he acted unreasonably” (at paragraph 19) and “[i]n pursuing his application on baseless allegations, the worker in my view acted unreasonably” (at paragraph 20).  Not only were Mr Kowalski’s primary alleged grounds of relief unreasonable but so too were his: “alternative grounds for relief … [as they] were patently untenable and [could] not mask the innate dishonesty underlying his application” (at paragraph 21).

In relation to the meaning to be given to the terms unreasonable, frivolous, and vexatious, His Honour said the following at paragraph 13:

“I proceed on the basis that the words unreasonably, frivolously, and vexatiously are not legal or technical words and are to be given their ordinary, natural meaning.  The Shorter Oxford English Dictionary provides the following definitions:-

unreasonable

1      Not endowed with reason; irrational.

2      Not based on or acting in accordance with reason or good sense.

3      Going beyond what is reasonable or equitable; excessive.

frivolous

1      Of little or no value or importance; paltry (of a claim, having no reasonable grounds).

2      Lacking seriousness or sense; silly.

vexatious

1      Causing or tending to cause vexation, annoyance, or distress; annoying, troublesome.

2      Specially in law – Of an action; instituted without sufficient grounds for winning purely to cause trouble or annoyance to the defendant.

At paragraph 22 His Honour further found that not only were Mr Kowalski’s applications unreasonable, but also that he:

“acted unreasonably in relation to the conduct of the proceedings.  His various applications for a stay of proceedings, for discovery and production of irrelevant documents, for leave to tender fresh evidence and for me to disqualify myself, were uniformly without merit and served only to delay and frustrate the progress of the matter.  I have no doubt that this was his intended purpose.”

Therefore the Deputy President had no hesitation in finding at paragraph 26:

“that in bringing these proceedings the worker acted unreasonably. He also acted frivolously, on the basis that his application was not made on reasonable grounds. It was a hopeless and unmeritorious application from the outset, based on spurious grounds.”

In May 2003, Mr Kowalski issued (yet another) section 97 application in the Tribunal.  Mitsubishi sought to have the application struck out, which order was granted in June 2003.  Mr Kowalski appealed against the strike out order; the Full Bench dismissed the appeal and in so doing, Deputy President Judge Thompson, who wrote the leading judgment, made various comments regarding Mr Kowalski’s level of vexatiousness:

“Giving due regard to the fact that the appellant is unrepresented… I am left with the impression that the appellant will not accept the judgment of this Tribunal as to the true history and legal import of his position.  He has entered upon a campaign of attempting to impugn the previous decisions of the Tribunal.” (At paragraph 74)

“Until the date of the decision of [2003] SAWCT 203 (7 May 2003), the appellant had at least 41 matters before the Tribunal.  He is a very experienced and tenacious litigant and cannot shelter behind the fact that he is “unrepresented”.” (At paragraph 75)

“Such merit as his position might have, is not assisted by his truculent and at times insulting references to members of the Bench, their judicial capacity and objectivity.” (At paragraph 76)

“I see no merit whatsoever in the appellant’s arguments.  Considered afresh they lack substance. Considered in the light of previous decisions of this Tribunal both at the primary level and at the appellate level they are bound to fail.” (At paragraph 79)

In December 2003 Mr Kowalski issued yet another Notice of Dispute against Mitsubishi, which Mitsubishi again sought to have struck out. The Notice was indeed struck out by Deputy President McCouaig; however Mr Kowalski appealed this decision.  In the reasons for judgment of the Full Bench on the appeal, the three members of the Bench remarked as follows:

“For the reasons expressed earlier, the learned Deputy President was also correct in denying the appellant the opportunity to re-litigate the issues that were the subject of the earlier Full Bench ruling.” (At paragraph 48)

“The appellant needs to understand that the decision of the Full Bench of the Tribunal in [2002] SAWCT 76 is a final and conclusive decision and that notwithstanding his strongly held belief that the decision is wrong and that he should be permitted to pursue claims for compensation against the respondent in respect of the injuries and disabilities specified in the Agreement, his endeavours to re-litigate matters already determined through the initiation of further proceedings in the Tribunal are doomed to fail.” (At paragraph 53)

The Full Tribunal then invited Mr Kowalski to reflect on a passage from Wentworth v Graham and Another [2003] NSWCA 307 including the following excerpt:

“there comes a time when it is no longer appropriate for judges to be impervious to improper behaviour by litigants, particularly those who make false allegations, are consistently rude, provocative, aggressive and obstructive, and who refuse to accept the decisions of the Court. …  Eventually, steps must be taken to ensure that the time of the court and other parties is not wasted, and unnecessary costs are not incurred in futile litigation launched by obsessive and obdurant [sic] litigants.” (At paragraph 54)

It is appropriate at this point to refer to some of the findings of Bleby J in the Supreme Court in his reasons for decision in declaring Mr Kowalski as vexatious.

“Despite these findings, the defendant [Mr Kowalski] has continued to argue in various forums that parts of the Heads of Agreement are invalid and should be set aside.  He is unwilling to accept that his arguments have been found, on numerous occasions, to be misguided and wrong and so he pursues them relentlessly.  The defendant also continues to assume that he is automatically and without question entitled to certain rights, for example to income maintenance, when this assumption is incorrect.

Over the course of the various proceedings involving the defendant, including the hearing of the present application, he has frequently made accusations of professional misconduct by his own former lawyers, by those representing the plaintiff by members of the Workers Compensation Tribunal and by members of the judiciary. He seems to believe that the entire South Australian legal profession is engaged in a conspiracy against him. On numerous occasions he has been warned that, were it not for special allowances which have been made for him as an unrepresented litigant, he would have been held in contempt.”[4]

And later:

“…The defendant has demonstrated his unwillingness or inability to accept decisions on his claims for compensation which have been conclusively and repeatedly determined against him. I have no hesitation in deciding that the proceedings which have been identified as being vexatious have been instituted persistently and that the plaintiff is entitled to the orders it seeks.”[5]

As would be expected, an order for costs was made against Mr Kowalski.

Quantum Of Fees

Fees on judicial determination: 85% of the Supreme Court scale

I mentioned earlier that section 95(5) provides that an award of costs cannot exceed 85% of the Supreme Court scale. These costs are costs that will normally be paid by the compensating authority.

These are also the costs that will be paid in relation to a judicial determination (or an appeal to the Full Bench). They are not the costs payable at either conciliation or arbitration, which are governed by scales contained in the regulations.

This 85% maximum is historical. It was first introduced when the scale of costs awarded in District Court matters was capped at 85% of the Supreme Court scale. That ceiling in the District Court was however abandoned many years ago. Costs awarded in the District Court are now awarded at the same level as costs awarded in the Supreme Court.

Given the complex nature of the hearings that generally take place at judicial determination, it is difficult to understand how this limitation can (or should) be maintained.

Rule 28

The manner in which the quantum of fees is set is contained in Rule 28 of the Workers Compensation Tribunal Rules 2005, a copy of which is included at the end of this paper as Attachment A.

In so far as counsel fees is concerned, counsel is entitled to a fee not exceeding $2,500 for all pre-trial preparation and the first five hours of the hearing. Once again, a sliding scale applies and the quantum of fees to which counsel is entitled reduces to $100 an hour when the time spent at hearing exceeds 20 hours.[6]

New Rule 28A – Excessive representation fees

A number of changes were made to the Workers Compensation Tribunal Rules earlier this year. One such change related to the quantum of representation costs with new Rule 28A designed to address a concern about instances of excessive charges. This rule reads

(1) A representative of a party shall not charge excessive representation costs. Unless there are exceptional circumstances representation costs greater than the Supreme Court scale as varied from time to time (“the Supreme Court scale”) shall be regarded as excessive.

(2) If a representative of a party seeks to charge the party an amount greater than the Supreme Court scale the representative may obtain an order from a Presidential member to do so. Such order shall be sought by the filing of an Application for Directions and a supporting affidavit.

(3) A person who is liable to pay or who has paid representation costs may make an application to the Registrar to investigate the matter by filing a form titled “Application to the Registrar to review representation costs”. If upon such application the Registrar considers that the representation costs are excessive the Registrar shall refer the matter to a Presidential Member for further directions. Such directions may include directing the representative to produce a Bill of Costs in taxable form, referring the representative and the party for conciliation or such other order as the Presidential Member may think appropriate.

The effect of this is that if a representative of a party wishes to charge an amount greater than the current Supreme Court scale the representative may obtain an order from the Tribunal likewise, a remedy exists – an application to review representation costs – if a party believes that he or she has been charged excessive representation costs.

Costs at conciliation and arbitration

Of more concern however are the regulations relating to the costs awarded at conciliation and arbitration. Those costs are set out hereunder:

Workers Rehabilitation & Compensation

(Dispute Resolution) Regulations 1999 (SA)

Costs – Regulation 7

Participation in the initial reconsideration of a disputed decision and in the initial conciliation process, including attendance at a conciliation conference $110

Appearance before an arbitration officer for an arbitration hearing (to a maximum of $341)

I will now break down these costs to an hourly rate for what might be regarded as an average conciliation or arbitration hearing; for example, a conciliation conference that involves one adjournment and lasts for a total of four hours would allow the legal representatives, at an hourly rate, $27.50 an hour.

Similarly, let’s take the example of a one and a half day arbitration hearing which on the first day runs from 10:00am to 1:00pm (3 hours), and then again from 2:15pm to 4:30pm (2.25 hours); on the second day it runs from 10:00am to 1:00pm (another 3 hours).  Therefore, the total time spent at the hearing would be 8.25 hours excluding any travelling and discussions with the client before or after the hearing. But for the ceiling which is set under the regulations, this amount to approximately $382 under Regulation 7, however given the ceiling set under the regulations this is over the maximum allowable.  When we then apply the $341 maximum, we are left with an hourly rate of approximately $41.00 –marginally better than the $27.50 for our conciliation example.

Contrast this with tradesman. Enquiries by my office staff indicate the following as at 26 October 2005. First, electricians; two firms of electricians were contacted. The first firm charges $137.50 for the first hour (including the travelling to site) and $84 per hour thereafter. The second firm charges $110 for the first hour and $88 per hour thereafter.

Secondly, plumbers; the first firm charges $145 for the first hour (including the travelling to site) and $72 per hour thereafter. The second firm charges $128 for the first hour and $80 per hour thereafter.

Obviously, both are considerably above the party/party amounts allowed under the regulations for either conciliation or arbitration.

It is difficult to provide any logical or equitable support for a scale set at the present level. Even in the most straightforward case, the disparity between the amount to which a worker will be entitled and the amount the worker will be required to pay his solicitors will be significant. Presumably that amount will have to be paid out of the arrears of weekly payments or out of the section 43 entitlement or out of some other entitlement (or out of the worker’s own pocket). Hardly remedial legislation.

Moreover, clearly one of the objects of the exercise must be to ensure that both conciliation and arbitration work effectively (and fairly) while they remain a part of the dispute resolution system. It can hardly be regarded as fair when a worker has to contribute significantly to his or her account for costs when the stated intention of the legislation as set out in section 95(1) is that the worker be entitled to costs – particularly if the worker has actually won. While there may be some logic for a reduction in entitlement if the worker loses, that is not what the Act says (absent any unreasonable conduct, etc).

There can be no doubt that the current scale of costs is manifestly inadequate. Equally, the scale of costs for conciliation should be increased, first of all to reflect the importance of the conciliation process in the dispute resolution scheme, and secondly, to reflect more appropriately the actual amount of work that has been done. There is no reason at all why a range of figures could not be specified in the regulations, rather than simply a specific set fee. This would provide flexibility to take in to account the more straightforward cases on the one hand, compared to the more complex cases on the other.

This is an issue which should be addressed urgently.

However, notwithstanding the clear intention of the legislation, it appears that what some regard as an excessive overall total in the quantum of legal costs justifies what any objective observer would have to agree is an exceptionally unfair result (again, bearing in mind the clear intention of the legislation).

This leads to the question of whether the total of legal costs have in fact been excessive in South Australia.

Are legal costs excessive in SA (as a percentage of overall claims costs)?

There appears to be strong view in certain sectors that legal costs are a significant contributor in the blow-out of the unfunded liability – or at the very least that they need to be contained much more effectively (presumably because they are excessive). This, so it is argued, not only justifies maintenance of the scales of costs at their current levels, but could also provide a basis for a reduction in costs.

While I have no current information on comparative figures throughout the different jurisdictions in Australia, fairly recent information clearly shows that the total legal costs in South Australia paid are well below the other states.

As delegates will know, Comcare is the workers compensation insurer for the Australian Government.  In its annual report for 2002-2003, Comcare published information regarding comparative performance monitoring (‘CPM’). CPM is a cooperative project effort by all State and Territory governments, as well as the New Zealand Government.  CPM seeks to compare outcomes in a number of key areas under OH&S and workers compensation programs in each jurisdiction.  One such area compared was legal costs as a percentage of the total claims cost.

Below you can see the results, by jurisdiction, for these costs:

As is apparent, the legal costs in our state at the time this data shows that they were clearly the lowest in Australia, by a significant margin. I suspect that the position is not too different now in relation to the comparison between the jurisdictions.

Apart from legal costs per se, is there anything that can be done to improve efficiency?

Other Issues

Risks of Litigation

I have heard it suggested that the prospects of a compensating authority’s decision in the Tribunal against a worker are slim. I hasten to point out that that has never been my experience and I simply do not accept this to be the case. Ultimately it is a usually a matter of fact and of the quality of the decision.

However, with that comment in mind, I have had an analysis done of decisions handed down in the Tribunal over the last two years, and their outcome. While I do not put this forward as forensically detailed analysis, the results are interesting. The two graphs below give a breakdown of the matters in the Tribunal in the current year and for 2004 (in terms of whether the worker or compensating authority, or both, were successful in the three areas specified[7]):

Arbitration

I have already mentioned the inadequacy of the arbitration costs. There can be no doubt that many of those practising in the jurisdiction wish to improve its efficiency. Some will remember that I made a presentation at this forum two years ago on the legal profession’s review of the Stanley Review on behalf of the Law Society. It might be remembered that the Stanley Review recommended that the primary full hearing on notices of dispute should always take place before an arbitration officer. While the Law Society’s view was that that would be a retrograde step we nevertheless considered that that there were cases that could adequately proceed to hearing and determination before an arbitration officer. The Law Society acknowledged that some cases could be quite adequately heard by arbitration officers, rather than by Judges or Deputy Presidents. Examples are many section 43 matters or notional weekly earnings disputes. We suggested that this could be done in one of two ways: either the parties could simply consent to a full hearing taking place before an arbitration officer, or in the event that one party considered that a case should more appropriately be heard by an arbitration officer and the other did not, the issue could be determined in chambers by a Deputy President. The Law Society believed that this was a reasonable and workable approach.

The rationale for this is simple: clearly an important objective is to avoid two hearings (and hence, among other things, save costs). If a more appropriate scale of costs at arbitration is set – as is proposed – it is likely to result in a higher uptake of the use of arbitration. Used appropriately, this should result in a consequential reduction of matters that then proceed on to judicial determination.

No steps have been taken to implement any such change.

While no doubt many (complex) matters would still quite properly bypass arbitration, it is however important to minimise the number of matters that bypass arbitration when they should not.

This leads directly to the issue of the Stanley Review, which warrants further comment.

Stanley Review

When the Minister stood on this podium towards the end of 2002 about a month before Mr Stanley was due to provide his report to the Minister, he (the Minister) made it abundantly clear that there would be no extension of time granted for the provision of the report. The report was due on 20 December 2002; the Minister told us that he had made it quite clear to Mr Stanley that this was an inflexible deadline. Moreover, the Minister then went on to say that after receiving and considering the Stanley report, his intention was to table a bill for debate in the first session of Parliament in 2003. That bill is yet to materialise.

At my presentation on the Law Society’s position regarding the Review of the Stanley Review at Both Sides of the Fence in 2003 I spoke to a lengthy paper that set out the Law Society’s position. I mentioned the fact that the Law Society believed that it was in a position to provide a more balanced view than many other stakeholder interest groups. Some of the key points made in that paper included the following:

Rehabilitation

• The manner in which section 58B was applied needed to be reviewed.
• The real objectives of rehabilitation needed to be reviewed, including a review of section 26 and redrafting of sections 28A–C (to ensure their consistency with section 26).

Continuing entitlements

• While a pension-plan scheme was appropriate, it should only be used in cases of serious incapacity, and not for what we described as “soft partial incapacity”.
• Lump sum redemption should be maintained.
• The manner in which section 35(6a) is calculated and applied should be carefully reviewed, including stakeholder consultation

Section 43

• A review in the manner in which non-economic loss was to be awarded should be overhauled; this was long overdue.

Dispute resolution

• Major surgery to the dispute resolution system was not required. Overall the system worked quite well.
• Arbitration hearings should no longer take place (in their present form).
• Appeals should lie to the Full Bench both on questions of fact and law.
• There should be a limited right of appeal to the Full Supreme Court.
• Members of the Tribunal should be empowered to deal with all questions arising out of all work injury matters.

Negligent third parties and common law

• The third party wrongdoer should be able to claim contribution from the employer.
• Rehabilitation obligations should be placed on both the host employer and the actual employer in labour hire situations.
• Hold harmless clauses should be prohibited.

When the Stanley Review was released in the community stakeholders were told that the Minister would invite comments, which was done however to date no deadline has been set for the provision of stakeholder responses to the Minister (now almost two years after the general release of the report). Certainly no legislation has been introduced.

In fact, notwithstanding the fact that our legislation has been the most frequently amended legislation in South Australian history (or very close to it), there has been no substantive legislation at all during the currency of the current Government.

In addition to any proposed reforms of the type suggested by the Law Society, there have been no reforms on issues that have, for years, been crying out for urgent reform. Perhaps the most glaring example of this is extraterritoriality.

Legal Panel

There is another area in which costs – in a broader sense – had recently been driving the Scheme: the review of the legal panel. I mentioned the perception – presumably by the Corporation (and the Minister) – that legal costs had to be controlled.

In May this year the Corporation decided to move to a sole legal provider as from 1 July in all areas of claims management and recovery work.

We were told that a significant factor in the appointment of a single firm to provide claims management and recovery services – as opposed to a panel – is because of significant costs savings.

The Corporation issued a media release on 17 June this year headed:

“WorkCover saves $30 million in legal fees”.  The release said a number of things, including:

• The Corporation has signed an exclusive sole provider contract for legal services;
• The arrangement had the potential to save more than $30 million in legal costs over the next five to six years;
• The Corporation indicated that it wished to ensure legal expenditure would be focused on where it could most benefit injured workers, employers and the scheme;
• That maximising the effectiveness and minimising the costs of legal representation was one of the initiatives the Corporation had under way to deliver better outcomes for employers and injured workers.

For its part, Minters Chief Executive Partner was quoted as saying that his firm believed the agreement provided a great opportunity to improve legal outcomes for WorkCover and that the firm was fully committed to its partnership with WorkCover; together they would identify better ways to achieve equitable and early solutions to resolve claims to the satisfaction of all parties.

In my almost 30 years of practice[8], this decision to move to a single provider for the provision of important, difficult and extensive legal work is unique among large statutory or private corporations. Indeed, when the Motor Accident Commission (another statutory corporation which is also heavily involved in personal injury litigation)[9] reviewed its own legal panel just last year it increased the panel from 3 to 4; this new and increased panel included one former panel member dropping off and two new panel members being appointed.

I should make it clear that although my firm was previously a WorkCover panel member, we did not seek reappointment to the WorkCover panel. I should also make it clear that the views I am expressing here are personal.

We are aware that after the decision was made to move to a sole legal provider, Ms Tas Carabelas was appointed by the Corporation to act in-house as its senior legal officer. Tas is not only an extremely experienced lawyer, but she is also a lawyer held in very high regard.

Not surprisingly, the Corporation has high expectations – as it should – for the appointed firm as its legal provider. We are told that a series of quite demanding key performance indicators are in place which will be monitored very carefully – as they should. The Corporation is entitled to expect a high standard in its legal service providers – as would always have been its expectation.

I would however like to make a few general points on the issue of the provision of a sole legal panel provider:

1              Competition is healthy. Competition between panel members is healthy. [My firm is appointed to a number of panels and I believe that this is good, not only for us, but also for our clients.] Accepting that to be the case, it is difficult to understand the logic of removing competition. Moreover, and potentially worryingly, it will inevitably result in some element of a “brain drain” of talented and experienced lawyers who have operated on “one side of the fence”, who will naturally have to move into other areas of practice. This reduction might be significant. I cannot see how it can be objectively justified. If it occurs – and I will be most surprised if it does not – it will be most unfortunate.

2              I would have liked to have thought that even in the 21^st century relationships are still important. Some of the former panel members who have been dropped off the panel have been doing this work for a very long time. I accept that this, of itself, is not a reason for their retention. Obviously results are still a critical factor. As I understood it, it was generally acknowledged that they were doing the work very competently. Certainly they were doing the work at well below commercial market levels of remuneration. In addition, they were required to – and did – provide considerable Value Added Benefits to their client (at no cost). This outcome in these circumstances is disappointing and again difficult to understand on an objective analysis. It is said to be justified for costs reasons.

3              Perhaps most importantly, at the end of the day, I have real reservations about whether the expected savings in legal costs (which will presumably occur) will result in a real net overall saving to the Scheme. In making this comment I am not levelling any criticism at the appointed legal provider. Experience shows however that the legal profession’s role in dispute resolution can often be reactive. Often the problems arise before lawyers are involved. It is not uncommon for those problems (and consequential disputes) to arise as a result of claims mismanagement. Additional disputes can of course arise between the parties at a later time, however by then the die has already been cast and the situation is extremely difficult to salvage. I am sure that there will be few who will disagree with my comment that the best method of reducing disputes is not simply to decrease legal costs – the disputes have to be properly managed – but rather to improve claims management (and rehabilitation) at the front end. I know it sounds simple. I know equally that it is not. Disputes will inevitably arise.

Effective, consistent claims management should significantly reduce the number of disputes. This must inevitably lead to a reduction in legal fees.

Wrong decisions will almost always be disputed. The Corporation’s object must be to ensure that clearly wrong decisions simply should not be made. It is almost inevitable that wrong decisions will be overturned.

Of course the prospect exists that decisions which are right in the first place will also be disputed. Indeed, some of the cases discussed earlier in this paper are clearly good examples which show that there will be some who are prepared to make claims for compensation to which they know are simply not entitled. We all hope that they will be detected and not succeed with their claims (or that the attempts to stop payments which are being inappropriately paid will succeed). Such matters are however difficult and sometimes incur significant legal costs. I hope that with those in this category of cases – those who clearly are not entitled to compensation – there will be at least a good prospect of an order being made under section 95(3) in the compensating authority’s favour.

Concluding comments

The issue of costs covers a very wide range.

Many delegates will have noted in the paper last Thursday, 20 October 2005, an article relating the Auditor-General’s demand to audit the Corporation’s books. The newspaper report noted that in his recent annual report, the Auditor-General said that despite Treasury assurances in August that steps were being taken to improve the Corporation’s financial performance, its unfunded liability has continued to worsen (with the Corporation announcing last month that its unfunded liability has risen in the first 6 months of this year from $631 million to $647 million).

The unfunded liability stands at its highest level ever. Obviously this is a major challenge for the Corporation; perhaps its biggest challenge ever. It has all the hallmarks of becoming a major issue for the Government. Naturally workers do not wish to see a decrease in benefits; equally, employers do not wish to see an increase in levies.

From a costs point of view – on both a micro and a macro point of view – I am sure that we will all be watching this space with considerable interest over the next few years.

By John Fountain[10]

28 October 2005

[1] Pignataro v GH Michell and Sons (Australia) Pty Ltd JD35/1998 per DPAJ Gilchrist at page 3.

[2] The relevant authorities for this provision all relate to workers, rather than employers; for this reason, for the purpose of this paper I will concentrate on the rules as they are applied to workers.

[3] For those of you interested in reading the full judgment on the application to have Mr Kowalski declared a vexatious litigant you can refer to Justice Bleby’s comprehensive reasons in Mitsubishi Motors Australia Ltd v Kowalski [2005] SASC 154 (19 April 2005).

[4] Reasons for decision, para 273-274

[5] Ibid, para 278

[6] this scale does not however apply when the hearing relates to a referral directly to the Full Bench under section 94A(2)

[7] The numbers of decisions cited per year is not comprehensive as we have disregarded certain decisions for the purpose of this analysis, for example recovery actions, third party discovery, and adjourned applications or determinations.

[8] I was for many years the solicitor for the exempt employer’s association; I was also a member of the Workers Rehabilitation and Advisory Committee for many years; I remain the Chair of the Law Society’s Accident and Compensation Committee; finally I have acted for some of SA’s major exempt employers for many years (and continue to do so)

[9] It administers SA’s CTP scheme for motor vehicle accidents

[10] Partner, fountain + bönig

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