First published in the Law Institute of Victoria Journal, cite: August 2014 88 (08) LIJ, p.54
Prior to September 2012 the Transport Accident Commission (TAC) sought orders for costs only where it intended to seek recovery of such costs and such orders were only sought against unsuccessful parties where:
- there had been a material witting misrepresentation on the part of the person against whom the costs order was made; or
- there was another exceptionally good reason the TAC should give effect to an order for costs.
The governing consideration of these guidelines was to “promote clarity and certainty in the management of the TAC’s recovery rights in accordance with the model litigant guidelines”.
In September 2012, the TAC introduced substantial changes to its costs recovery guidelines. These changes represent a paradigm shift in the way the TAC approaches the recovery of legal costs from transport accident victims. These changes represent a punitive, inconsistent and unworkable approach to the recovery of legal costs.
The new guidelines
The new Legal Costs Recovery Guidelines were introduced by the TAC after a brief and ineffectual consultation with the Australian Lawyers Alliance (ALA) and the LIV. Despite having received a detailed submission with proposed revisions to the guidelines from members of the ALA and the LIV as part of the consultation process, not one of the proposed revisions was subsequently adopted by the TAC.
The new costs guidelines set out the TAC’s intention to seek orders for costs:
- After the dismissal of any application by the court;
- At the withdrawal of that application after the hearing of the proceeding has commenced; or
- At the Victorian Civil and Administrative Tribunal (VCAT) where orders are made in terms less favourable than the terms of a Calderbank offer served by the TAC (subject to mandatory considerations imposed by s79(2) of the VCAT Act 1998).
Under the new policy, costs orders are obtained by the TAC in all matters after the dismissal of a person’s application, or the withdrawal of that application after the hearing has commenced. A decision is then made whether to apply the recovery guidelines. The process of seeking costs on behalf of the TAC has therefore been broken down into the seeking of an order on one hand and its enforcement on the other. Figures released by the TAC show that between the introduction of the new costs guidelines in September 2012 and 8 May 2013, the TAC sought to enforce 38 per cent of the costs orders obtained in that period by writing letters of demand to the plaintiffs. So far, the TAC has not sought to bring any of these matters to taxation for recovery.
Under the new costs guidelines, the TAC Costs Recovery Committee (CRC) will consider factors in determining whether to institute costs recovery proceedings including, but not limited to:
- The findings of fact made by the court in the course of the proceedings;
- Whether the person against whom the costs order has been obtained has the capacity to meet the order;
- The youth, age, intelligence, physical health, mental health or any special infirmity of the person, including whether the person is represented by a litigation guardian;
- Whether the consequences of seeking recovery in relation to the person would be unduly harsh and oppressive;
- The objects of the Transport Accident Act 1986 (the Act), as outlined in s8 of the Act;
- The need to promote a consistent approach to the recovery of costs;
- The requirement to promote clarity and certainty in the management of the TAC costs recovery rights in accordance with model litigant guidelines;
- The extent of compliance by the person’s legal representative with the provisions of the Civil Procedure Act 2010 (Vic) and rules and regulations made pursuant to this and other relevant Acts (e.g. Supreme Court General Civil Procedure Rules) during the pre-trial and trial stage of the proceedings;
- The extent of compliance by the person or the person’s legal representative with court orders made during the pre-trial and trial stage of the proceedings;
- Whether in relation to an action for damages to be awarded pursuant to s93 of the Act, any judgment obtained by the person falls below the statutory threshold for damages; and
- Whether, if as a result of the CRC’s deliberations it is determined that costs ought to be recovered, those costs should include both professional costs and disbursements, or only the latter.1
Is the CRC decision reviewable?
The TAC has stressed, in correspondence circulated to plaintiff practitioners, that these factors are non-exhaustive, and that some may assume more importance than others to the various members of its CRC. It also noted that decisions of the CRC are made on consensus, and members need not be unanimous as to which factors were weighed more heavily than others.
In what may be an attempt to avoid CRC decisions becoming subject to administrative review, the TAC has notified practitioners that the minutes of the CRC meetings will record only the final determination, and that no notes will be kept of the CRC’s discussion of the issue. It is the TAC’s view that the seeking of recovery of a costs order does not come within the meaning ascribed to “decision” in s4 of the VCAT Act 1998 (Vic), as it is only “giving effect to an order for costs previously made”.2
However, there is a more immediately apparent way of conceptualising the issue. Upon reading s4(1) of the VCAT Act, for the purposes of the VCAT Act, or an enabling enactment, a person makes a decision if the person “makes, suspends, revokes or refuses to make a decision, order, determination or assessment”.
Section 4(2) states that for the purposes of the VCAT Act or an enabling enactment “a decision is made under an enactment if it is made in the exercise or purported exercise of a function conferred or imposed by or under that enactment”.
Whether the CRC is making a decision therefore depends on whether its determination to “give effect to an order for costs” is done in the exercise or purported exercise of a function conferred upon the TAC. When examining the functions of the TAC set out in s12 of the TAC Act 1986, s12(1)(a) states the first function of the TAC is to “administer the Transport Accident Fund”. On a literal interpretation, a decision by the CRC to recover monies owed to the TAC pursuant to costs orders would clearly fall within the administration of the Transport Accident Fund. Even if done on the basis of “giving effect to an order for costs previously made”, the decision affects the revenue of the scheme and therefore appears inherently connected to its administration.
This raises questions as to whether the TAC’s refusal to keep notes of the decision-making process will adequately comply with the obligations imposed by s49 of the Act if an application for review is filed with VCAT. This section imposes obligations on the decision maker to lodge with the tribunal all relevant documents considered as part of the decision making process. It also requires a statement setting out the reasons for the decision and the findings on material questions of fact that led to the decision, referring to the evidence or other material on which those facts are based.
If the TAC does maintain its view that enforcement determinations are not reviewable, it may be appropriate that the Victorian Ombudsman investigates the approach it is taking, and whether it properly complies with the statutory obligations imposed on the scheme.
Why the change?
The purpose of the new costs guidelines was primarily to comply with the comments of Judge Frances Millane in Appelbee v TAC.3
After succeeding in a serious injury application, the plaintiff sought an award of costs on an indemnity basis, alleging that the TAC’s threats to enforce a costs order amounted to intimidating and bullying conduct. Her Honour suggested the TAC needed to clarify the interpretation given to “another exceptionally good reason” as part of the costs policy at the time, as “withdraw bear own formal offers of compromise” (where each party withdraws from the proceeding and bears their own legal costs) were increasingly being made by the TAC, justified on the basis that claims that were simply “without merit”, in its view,4 met the criterion of “another exceptionally good reason why the TAC should give effect to an order for costs”.
Her Honour noted that “Based on the current exchanges ‘without merit’ could apply to a wide spectrum of cases, including inappropriate cases, cases (as was first asserted in this case) where the evidence does not justify the granting of a serious injury certificate or, some but not all cases where the TAC has decided not to grant a certificate. The basis on which the TAC differentiates between one case and another does raise questions of consistency and fairness in the application of the Costs Recovery Guidelines which in a given case could reflect a breach of its obligations as a model litigant.”5
While her Honour ultimately did not award costs on an indemnity basis, she noted that “the application has helped expose problems arising in association with the interpretation and application of the Costs Recovery Policy.”6
Relevance to the model litigant guidelines
The concept of the state and its agencies acting as “model litigants” originated after the High Court decision in Melbourne Steamships Co Ltd.7 The Federal Court in Hughes Aircraft Systems International8 suggested policy grounds that governments act as model litigants because:
- Citizens have a reasonable expectation that public bodies act honestly and fairly;
- Public bodies must exercise their powers “for the public good”; and
- Governments and their agencies should act as “moral exemplars”.
In addition to the enunciated common law duty, Victoria has developed its own policy guidelines issued by the former Attorney-General in 2001 and later incorporated into a schedule of the standard legal services to government panel contracts. They essentially provide that the state should:
- Act fairly and consistently;
- Deal with claims promptly;
- Pay legitimate claims without litigation while keeping costs to a minimum;
- Not rely on technical arguments; and
- Not take advantage of a claimant who lacks resources to litigate a legitimate claim.
In accordance with the TAC model litigant obligations to promote consistency and fairness, the previous costs guidelines9 were drafted with the recognition that the TAC should not unfairly dissuade legitimate claims. In arriving at that position, the previous guidelines made reference to A226 of 2003 & Ors,10 in which Federal Magistrate Rolf Driver commented in relation to the conduct of the Minister for Immigration and Multicultural and Indigenous Affairs in seeking an order for costs that the department did not necessarily intend to enforce. His Honour noted:
“. . . it would be cruel to subject the parents to a costs order if the Minister does not intend to enforce it. The Minister is subject to the Attorney-General’s direction issued with effect from September 1999 under s55ZF of the Judiciary Act 1903 (Cth) which requires the Commonwealth to act as a model litigant . . . In my view, the Commonwealth, as a model litigant, should not seek a costs order if there is no intention to seek to enforce it. Generally, an intention to enforce a costs order can be assumed if one is sought”.
In the TAC’s attempt to respond to the Court’s concerns in Appelbee, the new costs guidelines now arguably take unfair advantage of the disparity in costs resources between the TAC and a person bringing the claim and act as a prohibitive barrier to unfairly dissuade legitimate claims.
The TAC’s subsequent enforcement of costs orders after proceedings have concluded, without warning the plaintiff of such intent during the proceeding, raises questions as to whether the TAC is properly complying with the obligation to act fairly. It also raises concerns as to whether not flagging the intent to enforce costs orders during the proceeding allows the person subject to the order fair opportunity to properly consider their legal position. The failure on the part of the TAC to consider whether it intends to enforce a costs order, before the seeking of such order, is precisely the situation that brought Federal Magistrate Driver’s disapproval in A226 of 2003 & Ors (2005).11
Accessing common law entitlements
In his 2008 review12 of the Accident Compensation Act 1985, Peter Hanks QC noted that statistics revealed that 81 per cent of initial serious injury decisions made by the Victorian Workcover Authority (VWA) were eventually reversed in favour of the applicant. He commented that this could either indicate that the initial decision-making process was flawed or that there was a significant difference between the VWA’s approach to serious injury and the approach taken by the courts. Hanks recommended the VWA lower the deemed serious injury from 30 per cent to 15 per cent of the Whole Person Impairment13 threshold to reconcile the decisions the VWA was making with those made by the courts. The Hanks recommendation, while not subsequently adopted by the VWA, was to allow more applications through the deemed serious injury gateway.
Information provided by the TAC reveals that between 1 January 2011 and 31 December 2011, the TAC participated in 206 Pre-Originating Motion Hearing Conferences, which is a pre-hearing dispute resolution procedure typically taking place six weeks before a serious injury hearing. Of these 206 serious injury claims, 105 were granted by the TAC at the conference; 28 were granted by the TAC after the conference; and 23 were granted by the court.
The matters which did not subsequently result in a serious injury certificate being issued included 17 which were subsequently withdrawn (presumably at the OM conference); 23 which did not proceed after the TAC refused to grant a serious injury certificate at the conference; and eight which were subsequently rejected by the court.
Allowing for the fact that two matters were yet to be decided when these statistics were released, it can be concluded that 76 per cent of TAC serious injury decisions, which were litigated by plaintiffs, were successful.
Chief Judge of the County Court, Judge Michael Rozenes, raised concern with the VWA and TAC’s approach to litigation in the Court’s 2012-2013 Annual Report. He noted that:
“In 2012-2013 the Victorian Workcover Authority (VWA) was respondent to 228 serious injury applications in which judgments were delivered. Only 40 (or 18 per cent) of these applications were dismissed. Plaintiffs were successful in the remaining 188 (or 82 per cent) of the applications. For Transport Accident Commission contested applications, 77 per cent . . . were successful and 23 per cent . . . were dismissed.
“These figures, particularly in the case of the VWA, reflect the position that has existed for many years – the VWA is a litigant which consistently loses at least 80 per cent of the applications it contests. I continue to hope that in future greater consideration is given, and a more realistic assessment of the prospects of success conducted, before litigation that is both costly and time consuming is proceeded with.”14
While the TAC has suggested that the new costs guidelines are consistent with VWA’s approach to the recovery of legal costs, they are in fact quite different. The VWA guidelines make it clear that in serious injury cases it will consider recovery of costs where there is a strong likelihood that the plaintiff’s case will fail to establish a serious injury, and it will generally seek to recover from a plaintiff arising from a material witting misrepresentation. However, where the plaintiff has insufficient financial resources to meet the order, VWA may decide not to institute proceedings. The VWA guidelines also set out that where a matter is withdrawn during the pre-litigation phase or an OM is not issued, no costs will be sought. There is also a schedule listing the maximum amount of costs which will be sought at any given stage of the OM process.
Instead of taking the approach set out by Hanks and allowing more matters through the deemed serious injury gateway, what the TAC has done by introducing the new costs policy is make it harder for people to bring legitimate claims.
The effect of the change to the costs recovery guidelines is that people with legitimate claims are being forced to discontinue action against the TAC due to the uncertainty caused by the possibility of costs enforcement against them. While the TAC is right to point out that “costs follow the event”, at least in the course of usual civil proceedings, an unsuccessful party can be certain that such costs consequences will in fact follow. It also has to be acknowledged that statutory insurance schemes are involved in a unique subset of litigation, given the purpose of the schemes, as well as the frequency with which poor decisions are made. After all, the TAC’s vision is to “Provide Victorians with the most equitable personal injury compensation scheme in the world and set international standards in its delivery . . .”.
The changes to the TAC costs policy guidelines now operate as a prohibitive disincentive to claims in the form of the threat of cost consequences, and are now incorporated into the TAC’s precedent “denial of serious injury” letter in bold underlined font. The guidelines now effectively form an additional roadblock to the accessing of the serious injury gateway (and common law entitlements) which, in the opinion of Justice Robert Brooking, already lamentably hinders access to common law rights due to the protracted nature of serious injury hearings. Justice Brooking doubted “. . . very much whether Parliament had the present foolish, wasteful and inconvenient system in mind when it enacted s93”.15
One of the primary drivers of plaintiff firms’ “No Win, No Fee” policy was to allow clients who could not afford legal services the proper access to justice. In the current climate, clients who have suffered serious injuries and are seeking to access their common law entitlements must now not only run the gauntlet of establishing a case of serious injury in a court, but must also do so in an uncertain and threatening costs environment.
The new costs guidelines were introduced to address concerns with the TAC’s approach to the model litigant guidelines to ensure that the TAC acted consistently and fairly. Given the uncertainty of the costs enforcement process, and the unfair dissuasion of legitimate claims, whether intentional or not, these changes have not achieved their stated purpose. While these changes will no doubt have a beneficial effect on the TAC’s balance sheet, they cannot be reconciled with the vision and purpose of the scheme or the model litigant guidelines.
Clients need to be advised that in the event an application is unsuccessful, the TAC will seek an order for costs against them. Practitioners are faced with the impossible task of properly advising clients as to the likelihood the TAC will seek to enforce such orders. Injured clients now face an extremely difficult and uncertain process when considering their legal position and weighing the risks involved in pursuing a claim. This has led to many clients choosing not to proceed with legitimate claims for fear of unknown costs consequences. For many the risks and uncertainty are simply too much.
Jonathan King is a lawyer in the TAC team at Maurice Blackburn Lawyers and an accredited specialist in personal injuries law.
1. TAC Legal Costs Recovery Guidelines (2012).
2. Letter from TAC Costs and Prosecutions Division, “Legal Costs and Recovery Guidelines effective from 3 September 2012”, 8 May 2013.
3. (2012) VCC 54 (6 March 2012).
4. Note 3 above.
5. Note 3 above, at -.
6. Note 3 above, at .
7. Melbourne Steamships Co Ltd v Moorhead (1912) 15 CLR 333, 342.
8. Hughes Aircraft Systems International v Airservices Australia (1997) 76 FCR 151, 196-7.
9. Guidelines for the Recovery of Legal Costs in Common Law and Administrative Review Proceedings.
10. A226 of 2003 & Ors v Minister for Immigration (2004) FMCA 772 at .
11. A226 of 2003 & Ors v Minister for Immigration (No.2) (2005) FMCA 17.
12. Hanks QC, “Accident Compensation Act Review – Final Report” (August 2008).
13. American Medical Association, Guides to the Evaluation of Permanent Impairment, 4th edn (1993).
14. Page 1.
15. Petkovski v Galletti (1993) VSC 20.