ACN 115 918 959 Pty Ltd v Hoeys Lawyers Pty Ltd (No 2)
[2021] VSC 184
•20 April 2021; revised 28 April 2021
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
PROFESSIONAL LIABILITY LIST
S CI 2015 02476
| ACN 115 918 959 PTY LTD (FORMERLY KNOWN AS PEARL HILL PTY LTD) | Plaintiff |
| v | |
| HOEYS LAWYERS PTY LTD (ACN 102 409 263) | First Defendant |
| KENNETH OLIVER | Second Defendant |
| GEOFFREY JOHN DIGBY | Third Defendant |
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JUDGE: | BLUE AJ (sitting as a Judge of the Supreme Court of Victoria) |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 7 April 2021 |
DATE OF JUDGMENT: | 20 April 2021; revised 28 April 2021 |
CASE MAY BE CITED AS: | ACN 115 918 959 Pty Ltd v Hoeys Lawyers Pty Ltd & Ors (No 2) |
MEDIUM NEUTRAL CITATION: | [2021] VSC 184 |
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COSTS – Costs of proceeding – Apportionment – Where plaintiff and defendants had varying success at trial – Conduct of unsuccessful defendants – Whether a Bullock or Sanderson order should be made.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J Twigg QC | GPZ Legal |
| For the First Defendant | Mr P Santamaria QC with Ms A Golding | Minter Ellison |
For the Second Defendant | Ms C Pierce | Moray & Agnew |
| For the Third Defendant | Mr D Collins QC | DLA Piper |
HIS HONOUR:
On 26 February 2021 I delivered reasons for judgment in which I concluded that the plaintiff (Pearl Hill) was entitled to judgment against the first defendant (Hoeys) and the third defendant (Mr Digby QC) for damages provisionally assessed at $1,185,000 and Pearl Hill’s claim against the second defendant (Mr Oliver) failed.
The parties subsequently agreed that the figure of $1,185,000 accorded with my reasons for judgment, interest up to 7 April 2021 should be fixed at $620,117 and liability should be apportioned equally between the first and third defendants.
In consequence, on 7 April 2021 judgment was entered in favour of the plaintiff against each of the first and third defendants for $592,500 plus interest fixed at $310,058 and the plaintiff’s claim against the second defendant was dismissed.
Pearl Hill seeks an order that the first and third defendants pay the whole of its costs of the proceeding and a “Sanderson order” that the costs of the proceeding of the second defendant be paid by the first and third defendants.
The first and third defendants do not resist an order that they pay Pearl Hill’s costs of its claim against them, excluding costs solely referable to its claim against the second defendant, but oppose an order that they pay Pearl Hill’s costs of the proceeding insofar as they are solely referable to its claim against the second defendant. They oppose any order that they pay the second defendant’s costs of the proceeding.
Pearl Hill’s costs of the proceeding
Costs are in the discretion of the Court under section 24 of the Supreme Court Act 1986 (Vic). The discretion is unfettered but must be exercised judicially.[1] When costs are awarded, they are awarded as an indemnity to the party entitled to them.[2]
[1]Transport Accident Commission v O'Reilly, Cavanagh, Moore & Davey [1999] 2 VR 436 at [9]-[10] per Tadgell JA (with whom Callaway JA agreed).
[2]Harold v Smith (1860) 5 H&N 381 at 385 (157 ER 1229 at 1231) per Bramwell B; Anstee v Jennings [1935] VLR 144 at 148 per Mann J (with whom Macfarlan J agreed).
As a general rule, costs follow the event.[3] Like all general rules or principles expressed in the context of costs, it must be understood against the background that costs remain in the discretion of the Court. As between Pearl Hill and the first and third defendants, Pearl Hill was successful and prima facie costs should follow the event.
[3]Transport Accident Commission v O'Reilly, Cavanagh, Moore & Davey [1998] VSCA 106, [1999] 2 VR 436 at [10]-[11] per Tadgell JA (with whom Callaway JA agreed) and [46] per Ormiston JA.
Pearl Hill’s case raised multiple issues that were common to all defendants and one issue that was specific to each defendant. The specific issue was whether each defendant was negligent because different considerations arose in respect of each defendant’s alleged negligence.[4] The remaining issues were common and included background, the advocate’s immunity issue,[5] the causation issues, the gross quantum issues and the loss of opportunity/contingency issues. For ease of reference, I refer to the loss of opportunity/contingency issues addressed at Part F of my primary reasons for judgment (as opposed to causation issues addressed in Part E or issues as to whether a particular contingency was to be assessed as a causation or loss of opportunity issue) as contingency issues. I refer to the gross quantum issues addressed in the second half of Part E of my primary reasons for judgment as quantum issues.
[4]This is not to say that there was no overlap in relation to the issues of negligence of each defendant, but ultimately the issue of negligence of each defendant had to be considered separately.
[5]Common to the first and third defendants. Although not raised by the second defendant, that is irrelevant for present purposes as he is not liable to pay costs.
The great majority of Pearl Hill’s costs of the proceeding were incurred by reason of its successful claims against the first and third defendants. A minority of its costs were incurred or increased solely by reason of its unsuccessful claim against the second defendant. Under the indemnity principle, and to reflect costs following the event, prima facie Pearl Hill should recover its costs of the proceeding except insofar as those costs were only incurred because, or were increased only because, of the joinder of its claim against the second defendant. For example, Pearl Hill incurred the court fee to issue the writ by reason of its claim against the first and third defendants, that fee was not increased by reason of the joinder of claim against the second defendant and Pearl Hill should recover that fee as part of its costs of the proceeding recoverable from the first and third defendants. Conversely, Pearl Hill incurred the cost of serving the writ on the second defendant, that fee was only incurred because of the joinder of the claim against the second defendant, and prima facie Pearl Hill should not recover that cost as part of its costs of the proceeding recoverable from the first and third defendants. Pearl Hill incurred the cost of drawing the statement of claim, that part of the statement of claim that pleaded the profession of, retainer of and negligence by the second defendant was solely referable to the unsuccessful claim against the second defendant and prima facie Pearl Hill should recover the cost of drawing the statement of claim excluding that portion referable to the pleading against the second defendant.
I have described the position in paragraph [9] as “prima facie” because that position is subject to consideration of Pearl Hill’s contention (addressed below) that this is an appropriate case in which to make a “Sanderson order” (or a “Bullock order”). If that is so, and the first and third defendants should bear (directly or indirectly) the second defendant’s costs of the proceeding, it follows that Pearl Hill should also recover from the first and third defendants the entirety of its costs of the proceeding including those solely referable to its claim against the second defendant.
Subject to consideration of Pearl Hill’s contention addressed below, the appropriate order in respect of Pearl Hill’s costs of the proceeding is to the effect that it recover from the first and third defendants all of its costs of the proceeding except insofar as its costs were incurred or increased by reason only of its claim against the second defendant.
Mr Oliver’s costs of the proceeding
As between Pearl Hill and Mr Oliver, Mr Oliver was successful. Prima facie, Pearl Hill should pay Mr Oliver’s costs of the proceeding.
Bullock or Sanderson order
It is well established that in some circumstances it is appropriate to order that the costs of the proceeding of a successful defendant be borne by an unsuccessful co-defendant rather than by the plaintiff. This can be achieved either by an order that the plaintiff pay the successful defendant’s costs of the proceeding and the unsuccessful defendant reimburse the plaintiff for those costs (a Bullock order)[6] or by a single order that the unsuccessful defendant pay the successful defendant’s costs of the proceeding (a Sanderson order).[7] It is necessary to determine first whether the successful defendant’s costs should be borne by the unsuccessful defendant before considering the form of the order because, unless this is established, there will be no such order.[8]
[6]Bullock v London General Omnibus Co [1907] 1 KB 264.
[7]Sanderson v Blyth Theatre Co [1903] 2 KB 533.
[8]State of Victoria v Horvath & Ors [No 2] [2003] VSCA 24 at [3] and [15] per Winneke P, Chernov and Vincent JJA.
A relevant factor in exercising the discretion as to costs generally is the extent to which the costs in question have been caused or increased by the conduct of a party in, relating to or leading up to the action or application in question.[9] When a plaintiff seeks a Bullock or Sanderson order, ordinarily a plaintiff will need to establish that the conduct of the unsuccessful defendant renders it fair to require that defendant to bear the costs of the successful defendant.[10] In turn, this will ordinarily require a plaintiff to establish that the plaintiff prosecuted the claim against the successful defendant due to the conduct of the unsuccessful defendant.[11]
[9]Bostock v Ramsey Urban District Council [1900] 2 QB 616 at 622 per A. L. Smith LJ; Anglo-Cyprian Trade Agencies Ltd v Paphos Wine Industries Ltd [1951] 1 All ER 873 at 874 per Devlin J; Verna Trading Pty Ltd v New India Assurance Co Ltd [1991] 1 VR 129 at 154-155 per Kaye J.
[10]State of Victoria v Horvath & Ors [No 2] [2003] VSCA 24 at [10] and [14] per Winneke P, Chernov and Vincent JJA; Berrigan Shire Council v Ballerini (No 2) [2006] VSCA 65 at [13] per Callaway JA, [24] per Chernov JA and [41] per Nettle JA; Victorian WorkCover Authority v Kagan Bros Consolidated Pty Ltd [2011] VSCA 91, (2011) 31 VR 386 at [26] per Redlich and Bongiorno JJA.
[11]Central Goldfields Shire v Haley & Ors (No 2) [2009] VSCA 203 at [9] per Redlich JA (with whom Neave and Pagone JJA agreed); Victorian WorkCover Authority v Kagan Bros Consolidated Pty Ltd (2011) 31 VR 386 at [26] per Redlich and Bongiorno JJA.
In Gould v Vaggelas,[12] Gibbs CJ said:
[12](1985) 157 CLR 215.
Obviously a judge should make a Bullock order only if he considers it just that the costs of the successful defendant should be borne by the unsuccessful defendant, and, if nothing that the unsuccessful defendant has said or done has led the plaintiff to sue the other defendant, who ultimately was held not to be liable, it is difficult to see any reason why the unsuccessful defendant should be required to pay for the plaintiff's error or overcaution.[13]
Brennan J said:
A judicial discretion can be exercised to make a Bullock order against an unsuccessful defendant in an action brought against two or more defendants for substantially the same damages only if the conduct of the unsuccessful defendant in relation to the plaintiffs' claim against him showed that the joinder of the successful defendant was reasonable and proper to ensure recovery of the damages sought.[14]
[13]At 229.
[14]At 260.
In Victorian WorkCover Authority v Kagan Bros Consolidated Pty Ltd,[15] Redlich and Bongiorno JJA said:
The conduct of the unsuccessful defendant must be such as to make it fair to impose some liability on it for the costs of the successful defendant. Such conduct will be found where the unsuccessful defendant tells the plaintiff in one way or another that it should look to the successful defendant for its remedy or has done something to induce the plaintiff to maintain its suit against the successful defendant. In the present case, the question raised by the parties was whether the conduct of the respondent was such that it should have to assume the burden of the indemnity costs which the VWA had agreed to pay Playcorp. Accordingly, it will be necessary to consider whether the respondent induced the VWA to proceed against Playcorp or to persist in maintaining its claim against it so as to make it just for a Sanderson or Bullock order be made against it.[16]
[15](2011) 31 VR 386.
[16]At [26] (Citations omitted).
In Cox v McMillan,[17] I observed that many of the general rules and principles that have been formulated in relation to the exercise of the costs discretion may be seen as part of ascertaining which party caused or contributed to the incurring of the costs in question. This applies also in considering whether to make a Bullock or Sanderson order.
[17][2020] VSC 11 at [40].
The paradigm case in which a Bullock or Sanderson order might be made is when a plaintiff sues a defendant, the defendant pleads that it is not responsible for the plaintiff’s loss because it was caused instead by a third party, that conduct induces the plaintiff to join the third party as a second defendant and the plaintiff succeeds against the original defendant but fails against the second defendant.
An example of a case close to this paradigm is State of Victoria v Horvath (No 2).[18] In that case, the plaintiffs sued four police officers involved in the planning and execution of a raid for injuries caused by the raid. The police officers joined the State of Victoria as a third party, claiming entitlement to an indemnity. This induced the plaintiffs to join the State as a defendant on the same basis, replicating the pleading of the police officers against the State. Following the enactment of section 123 of the Police Regulation Act 1958 (Vic), the police officers amended their defence to plead immunity from suit and that the State was liable in their place. This induced the plaintiffs to amend their pleadings against the State to in effect replicate the police officers’ pleading. Winneke P, Chernov and Vincent JJA made a Sanderson order, observing that:
… it was the police defendants who first raised the issue whether the State was bound to indemnify them because it was vicariously liable for their conduct or by virtue of the operation of s.123 of the Act. The plaintiffs essentially came in on their "coat tails" to join the State as defendant and to press those matters at trial…
We are also of the view that the conduct of the police defendants was such as to make it just in all of the circumstances that they should, directly or indirectly, pay the State's trial costs. It was they who introduced into the proceedings the relevant claims against the State.[19]
[18][2003] VSCA 24.
[19]At [12], [14].
Another case in which it has been accepted that a Bullock or Sanderson order might be made is when a plaintiff is uncertain at the commencement of the action which of two parties is liable and joins both as defendants, each defendant blames the other, that conduct induces the plaintiff to continue to prosecute the action against both defendants and the plaintiff succeeds against one defendant but fails against the other defendant.
An example of such a case is Altamura v Victorian Railways Commissioners.[20] In that case, the injured worker sued his employer, the occupier of the building site where he was working and the Railways Commissioners who operated the train that injured him. Kaye J made a Sanderson order against the two unsuccessful defendants after observing:
Throughout the hearing of the action, and in the course of their final addresses, counsel for each defendant continued to blame the other for the plaintiff’s injuries. [21]
[20][1974] VR 33.
[21]At 35-36.
Conversely, in Berrigan Shire Council v Ballerini (No 2),[22] the Court of Appeal by majority found that the mere fact that the Council contended that the log from which the plaintiff dived was on land belonging to the Forestry Commission and not on land managed by the Council did not cause the plaintiff to maintain his claim against the Commission and he would have maintained it in any event. Chernov JA said:
[22][2006] VSCA 65.
It is true that the Council denied liability principally because, it said, the land from which the log protruded was not under its control but was under the control of the Commission. And it is also the case that it did not abandon that position until the first day of the trial. But I doubt that this attitude by the Council induced the plaintiff to proceed against the Commission or that it otherwise amounted to conduct that makes it just for a Sanderson or Bullock order be made against it. For the reasons given, I think that the plaintiff would have proceeded against the Commission in any event.[23]
Nettle JA said:
… although the Council denied that it was liable to Mr Ballerini and alleged that, if anyone were liable, it was the Commission, it can hardly be doubted that Mr Ballerini would have joined the Commission regardless of the Council’s allegations.[24]
[23]At [24].
[24]At [43].
A different situation in which a defendant might potentially induce or encourage a plaintiff to prosecute a claim against another defendant is when the first defendant’s liability will be reduced by the operation of proportionate liability legislation if the other defendant is also found liable for the damage suffered by the plaintiff and the conduct of one defendant causes or encourages the plaintiff to join, or continue to prosecute, a second defendant to avoid suffering such a reduction.
An example of such a case would be where a plaintiff sues a defendant, the defendant pleads reduction of its liability because the plaintiff’s loss was also caused by wrongdoing of a concurrent wrongdoer under proportionate liability legislation, induced thereby the plaintiff joins the alleged concurrent wrongdoer as a defendant and the plaintiff succeeds against the original defendant but fails against the alleged concurrent wrongdoer.
As in the case of alternative liability, a Bullock or Sanderson order might be made when a plaintiff joins two alleged concurrent wrongdoers as defendants at the outset, each defendant actively blames the other over and above the plaintiff’s allegations against the other, that conduct induces the plaintiff to continue to prosecute the action against both defendants and the plaintiff succeeds against one defendant but fails against the other defendant.
An example of a case in which the plaintiff sought a Bullock or Sanderson order on such a basis but failed on the issue of the unsuccessful defendant’s conduct causing the plaintiff to continue to prosecute the action against the successful defendant is Victorian WorkCover Authority v Kagan Bros Consolidated Pty Ltd.[25] In that case, section 138 of the Accident Compensation Act 1985 (Vic) gave to the Authority statutorily subrogated rights against any third party liable to the employee for damages as a result of the injury that resulted in the payment of compensation by the Authority to the employee. The amount recoverable was calculated (subject to a cap being the amount of compensation paid) as being equal to the damages multiplied by the extent, expressed as a percentage over 100, whereby the third party's negligence caused or contributed to the injury. This created proportionate liability. The Authority sued both Kagan Bros and Playcorp such that, if it succeeded against both, the liability of Kagan Bros would be reduced to the extent that Playcorp’s negligence caused the injury. The Court of Appeal treated this interconnectedness as amounting to interdependence in the sense referred to in previous authorities.[26]
[25](2011) 31 VR 386.
[26]At 394-395
In relation to the question whether the conduct of Kagan Bros caused or encouraged the Authority to continue to prosecute its claim against Playorp, Redlich and Bongiorno JJA said:
The VWA contended that the conduct of the respondent by its pleadings, examination of witnesses and final submissions put in issue Playcorp’s alternate or interdependent liability to that of the respondent. The respondent in its defence gave particulars of negligence alleged against Playcorp, in an attempt to reduce its own legal liability to indemnify the VWA under s 138 of the Act. Contrary to Playcorp’s defence, it denied any agreement between it and Playcorp which would relieve Playcorp of its duty as an occupier. The allegation attributing responsibility to Playcorp was withdrawn when the respondent filed and served a further amended defence six weeks prior to trial. The denial of an agreement remained…
It was in substance submitted by the respondent that the VWA had always intended to pursue Playcorp and that was evident from its pleadings and the way the case was conducted. It was submitted that the respondent had done nothing that could be said to constitute the form of encouragement that would justify a Bullock order…
The claims made by the VWA against each defendant were interdependent or real alternatives, and were thus claims which could have supported a Bullock order had the conduct of the respondent been such that responsibility for the award of indemnity costs could be placed at its feet. But there was no such conduct by the respondent. His Honour’s discretion would have miscarried had he required the respondent to bear the successful defendant’s indemnity costs.[27]
[27]At [27], [28], [31].
In Chan v Acres (No 3),[28] Ms Chan and Mr Cox bought a house from Mr Acres. They sued Mr Acres for breach of statutory warranty in relation to defects in the house as a result of renovations undertaken by him. Mr Acres had engaged Mitchell Howes Civil & Structural Engineers Pty Ltd (MHE) as engineers and Ku-ring-gai Council as the principal certifying authority. Mr Acres pleaded in his defence a reduction in his liability as a result of the alleged negligence of MHE and the Council. Mr Acres also brought a cross-claim against MHE and the Council for indemnity as a result of their alleged negligence. Mr Acres filed affidavit evidence implicating MHE. Ms Chan and Mr Cox then joined MHE and the Council as additional defendants. The Council pleaded in its defence a reduction in its liability as a result of the alleged negligence of MHE.
[28][2016] NSWSC 1389.
Ms Chan and Mr Cox succeeded against Mr Acres and the Council but failed against MHE. Mr Acres succeeded against the Council on his cross-claim for indemnity. Ms Chan and Mr Cox sought a Bullock order in respect of MHE’s costs against Acres and a Sanderson order in respect of MHE’s costs against the Council. McDougall J made a Bullock order against Mr Acres (who did not appear on the costs argument) but did not make a Sanderson order against the Council. In relation to Mr Acres’ conduct, McDougall J said:
That evidence of Mr Acres had been served well before MHE was joined as a defendant (which happened after the matter was transferred to this Court in October 2013). Given that Mr Acres also raised a proportionate liability defence, naming MHE and the Council as concurrent wrongdoers, it is in my view clear that he did more than deny liability. He sought actively to deflect responsibility to MHE and the Council...
In those circumstances, I think, it is fair, and thus in accordance with the interests of justice, that Mr Acres should be ordered to indemnify the plaintiffs for the costs that they will have to pay MHE. It was in a real sense Mr Acres’ evidence (based on his pleaded case) that indicated to the plaintiffs the real risk that if they proceeded against him alone, they might not recover the whole of their damages.[29]
[29]At [72]-[73].
In relation to the Council’s conduct, McDougall J said:
As against the Council, the position is less clear. MHE and the Council were joined at the same time. It cannot be said that there was anything in the Council’s pleading or evidence that caused or contributed to the plaintiffs’ decision to join MHE.
It is correct that the Council named MHE as a concurrent wrongdoer, and sought to shift responsibility to it. But the Council was faced with a situation where it was one of four defendants, and where two at least of the other defendants were asserting that it was a concurrent wrongdoer, proportionately responsible for the plaintiffs’ loss.
The Council pleaded, and through the inspecting officer sought to prove, that it relied on MHE’s certificates in performing its functions as PCA. … that case of reliance was one as between the Council and MHE, perhaps relevant to apportionment of loss between them should they both be found to have been concurrent wrongdoers. It was thus of limited relevance as between the Council and the plaintiffs (although, I accept, not entirely irrelevant to the present question).
In those circumstances, I do not think that the Council’s conduct, in maintaining in its defence assertions that MHE was a concurrent wrongdoer and was proportionately responsible for the loss, was such as to make it fair that, MHE having escaped liability, the Council should meet, and pay direct, the plaintiffs’ costs of suing MHE.[30]
[30]At [74]-[77].
It has sometimes been suggested that a Bullock or Sanderson order can only be made if the claims are alternative or interdependent. However, such an absolute rule would fetter the unfettered costs discretion.[31] Rather, the existence of an interconnectedness between the claims should be seen merely as the typical (but not exclusive) situation in which the unsuccessful defendant has induced or encouraged the plaintiff to prosecute a claim against the successful defendant. Thus, in Victorian WorkCover Authority v Kagan Bros Consolidated Pty Ltd,[32] Redlich and Bongiorno JJA said:
The language sometimes employed in cases where Bullock orders have been sought suggests that an order cannot be made unless the claims are interdependent or in essence alternative claims, but the preponderance of authority is to the clear effect that the jurisdiction to make such an order does not depend upon such a characterisation of the claims. It would lead to error if it was mandatory that the claims be interdependent or essentially alternatives...
Whether the claims can be described as interdependent or alternatives is an important factor that should be taken into account and which will commonly be a critical consideration. But regardless of how the claim has been initiated or formulated, the justice of the case may still merit such an order if there is a substantial connection between the claims.[33]
[31]Nationwide News Pty Ltd v Naidu (No 2) [2008] NSWCA 71 at [17]-[18] ; Victorian WorkCover Authority v Kagan Bros Consolidated Pty Ltd (2011) 31 VR 386 at [21] per Redlich and Bongiorno JJA.
[32](2011) 31 VR 386 per Spigelman P, Beazley and Basten JJA.
[33]At [20]-[21] (Citations omitted).
It has often been suggested that a Bullock or Sanderson order can only be made if it was reasonable for the plaintiff to prosecute the action against the successful defendant. First, it is clear that the mere fact that it was reasonable for the plaintiff to prosecute the action against the successful defendant is not a ground in itself for making a Bullock or Sanderson order.[34] Secondly, the relevance of its being unreasonable for the plaintiff to prosecute the action against the successful defendant is that, in those circumstances, it will be very difficult for the plaintiff to establish that it was the conduct of the unsuccessful defendant that caused it to prosecute the action; rather it is likely to be found that, whatever the conduct of the unsuccessful defendant, the cause of the incurring of the costs of the successful defendant was the unreasonable decision by the plaintiff to prosecute the action against that defendant. Accordingly, I consider that determining whether it was reasonable for the plaintiff to prosecute the action against the successful defendant is not an initial threshold question but rather a question to be considered in the context of the question whether the conduct of the unsuccessful defendant caused the incurring of the costs of the successful defendant. It might be that in practice a plaintiff will never (or hardly ever) establish that the unsuccessful defendant’s conduct caused the prosecution of the action against the successful defendant when the plaintiff’s decision to so prosecute was unreasonable. However, I do not consider that reasonableness of the decision should be elevated to an absolute rule.
[34]Central Goldfields Shirev Haley & Ors (No 2) [2009] VSCA 203 at [9] per Redlich JA (with whom Neave and Pagone JJA agreed); Victorian WorkCover Authority v Kagan Bros Consolidated Pty Ltd (2011) 31 VR 386 at [12] per Redlich and Bongiorno JJA.
I turn to consider whether in the present case the conduct of the first and third defendants caused or contributed to the prosecution by the plaintiff of the claim against the second defendant.
First, this is not a case in which the liability of the first or third defendants was in any sense alternative to the liability of the second defendant. The liability of the first and third defendants did not depend in any way on the liability of the second defendant. Indeed, the second defendant would not have been liable unless the third defendant was found to be liable.
Secondly, this is not a case in which Pearl Hill initially joined the first and third defendants, they pleaded that their liability was reduced by proportionate liability legislation because the second defendant was also liable to Pearl Hill, and Pearl Hill then joined the second defendant as a result of those allegations. The case is different to the case of Chan v Acres (No 3)[35] in this respect.
[35][2016] NSWSC 1389.
Thirdly, this is not a case in which the first or third defendants conducted their cases by blaming the second defendant for their own advice.
Fourthly, the first and third defendants pleaded in their defences that Pearl Hill’s claim was an “apportionable claim”, and if they were liable the other defendants were “concurrent wrongdoers” within the meaning of Part IVAA of the Wrongs Act 1958 (Vic) (the Act) and accordingly their liability was limited to a just proportion of Pearl Hill’s loss or damage. However, these pleas followed and were the result of Pearl Hill’s anterior decision to sue the second defendant. The first and third defendants did not allege against the other defendants any particulars of negligence or other facts in addition to those already pleaded by Pearl Hill. At trial, the first and third defendants did not adduce any evidence against the second defendant. For example, they did not give any evidence that they relied on the second defendant or his silence in any way in giving the advice that they did. Nor did they make any submissions that the second defendant was negligent. In short, apart from their pleadings raising proportionate liability under the Act, the first and third defendants added nothing to the case against the second defendant prosecuted by Pearl Hill.
Pearl Hill contends that it was necessary to join Mr Oliver as a defendant to the action when it was instituted because otherwise the first and third defendants might have relied on Part IVAA of the Act to reduce the damages awarded against them on account of the responsibility of Mr Oliver for its damages and, because it instituted the action shortly before expiration of the limitation period, it would then be too late to join Mr Oliver as a defendant and seek the balance of its damages from him. I reject that contention.
Section 24AI relevantly provides:
24AI Proportionate liability for apportionable claims
(1) In any proceeding involving an apportionable claim—
(a)the liability of a defendant who is a concurrent wrongdoer in relation to that claim is limited to an amount reflecting that proportion of the loss or damage claimed that the court considers just having regard to the extent of the defendant's responsibility for the loss or damage; and
(b)judgment must not be given against the defendant for more than that amount in relation to that claim.
…
(3)In apportioning responsibility between defendants in the proceeding the court must not have regard to the comparative responsibility of any person who is not a party to the proceeding unless the person is not a party to the proceeding because the person is dead or, if the person is a corporation, the corporation has been wound-up.
By virtue of subsection 24AI(3), if Pearl Hill had not sued Mr Oliver in the first place, the Court would have been precluded from apportioning any responsibility for Pearl Hill’s loss to Mr Oliver. In this respect, the proportionate liability regime under Part IVAA of the Act differs from the proportionate liability regime under section 138 of the Accident Compensation Act 1985 (Vic) or from the general proportionate liability regime under the legislation of the other States and the Territories.[36] In particular it differs from the Civil Liability Act 2002 (NSW) section 35(3)(b) which applied in Chan v Acres (No 3).[37]
[36]See Civil Liability Act 2002 (NSW) section 35(3)(b); Civil Liability Act 2003 (Qld) section 31(3); Law Reform (Contributory Negligence and Apportionment of Liability) Act 2001 (SA) section 8(2)(b); Civil Liability Act 2002 (WA) section 5AK(3)(b); Civil Liability Act 2002 (TAS) section 43B(3)(b); Proportionate Liability Act 2005 (NT) section 13(2)(b); Civil Law (Wrongs) Act 2002 (ACT) section 107F(2)(b).
[37][2016] NSWSC 1389.
Pearl Hill contends that it was reasonable for it to institute the action against Mr Oliver because at that time he did not have discovery from the defendants to show what internal dealings there were between them particularly during the period from 13 to 20 May 2009. It is not necessary to decide this question due to my conclusion concerning the conduct of the first and third defendants.
Pearl Hill contends that the pleading by the first and third defendants of proportionate liability by reference to the responsibility of the other defendants justifies the making of a Bullock or Sanderson order. However, as observed above, the first and third defendants did not plead any negligence by Mr Oliver other than by reference to Pearl Hill’s own allegations of negligence against him. I observe that it is doubtful that the defendants needed to plead proportionate liability in their defences to invoke the application of section 24AI of the Act; subsection 24AI(1) appears to mandate a reduction by the Court of the amount of judgment against a defendant by reference to the responsibility of other defendants regardless of any pleading by the first mentioned defendant.[38] However, on the assumption that proportionate liability needs to be pleaded, the pleading added nothing to Pearl Hill’s own allegations of negligence against Mr Oliver.
[38]The position is likely to be different in jurisdictions where the court may have regard to the comparative responsibility of any concurrent wrongdoer who is not a party to the proceeding. In that case, unless a defendant gives proper notice (by its defence or otherwise) that it contends that there is another concurrent wrongdoer who is not a party to the proceeding, then it is likely to be precluded from so contending at trial.
Pearl Hill contends that, because the defendants invited the Court at the commencement of the trial to defer hearing submissions on the quantum of apportionment as between any defendants found liable until after the delivery of reasons for judgment on all other issues, the defendants engaged in conduct justifying a Bullock or Sanderson order. The ruling I made at trial was limited to deferring submissions on the quantum of apportionment; the parties were still required to adduce any evidence on which they wished to rely on the issue of quantum of apportionment and were still required to make submissions on all issues of negligence. For example, it did not remain open to the first and third defendants to make submissions that Mr Oliver was negligent after delivery of reasons for judgment on all issues except quantum of apportionment. The ruling sought by the defendants was manifestly sensible because it would have been difficult for the parties to have made submissions on the comparative liability of the defendants without knowing which defendants (if any) would be found liable or the basis on which they would be found liable. There was nothing in the conduct of the first and third defendants in seeking the ruling deferring submissions on the quantum of apportionment that encouraged Pearl Hill to pursue its case at trial against Mr Oliver.
The first and third defendants took no steps at trial to advance any affirmative case in negligence against Mr Oliver over and above the mere passive adoption of Pearl Hill’s allegations against Mr Oliver for the limited purpose of proportionate liability. This is exemplified by the fact that, at the beginning of trial, Pearl Hill modified its case against Mr Oliver. In its statement of claim, its pleading of negligence against Mr Oliver was confined to a pleading that Mr Digby QC and Mr Oliver jointly advised Pearl Hill to send the termination letters. In particulars provided at the beginning of trial, Pearl Hill articulated a different case, namely a primary case that Mr Oliver acquiesced in the advice given by Mr Digby QC (rather than participating in the giving of joint advice) and a secondary case that Mr Oliver failed to warn Pearl Hill concerning Mr Digby QC’s advice or the consequences of termination. The first and third defendants did not amend their defences pleading proportionate liability in consequence of this substantial modification. At the end of the trial during closing address, Pearl Hill abandoned its primary acquiescence case against Mr Oliver. The first and third defendants did not advance any acquiescence case of their own against Mr Oliver.
There is nothing in the conduct of the first or third defendants from the beginning to the end of the action that caused, encouraged or contributed to Pearl Hill’s decision to prosecute a claim against Mr Oliver. There is no conduct by the first or third defendants capable of justifying a Bullock or Sanderson order. By comparison with the circumstances in Victorian WorkCover Authority v Kagan Bros Consolidated Pty Ltd,[39] there is less basis for making a global Bullock or Sanderson order and one was refused in that case. By comparison with the circumstances in Chan v Acres (No 3),[40] there is less basis for making a Bullock or Sanderson order against the Council and one was refused in that case. The case is distinguishable from the circumstances that gave rise to a Bullock order against Mr Acres because Mr Acres had already blamed MHE (by his pleadings and evidence) before Ms Chan and Mr Cox joined it and this induced Chan to join it; further, Mr Acres was sued for breach of warranty rather than negligence.
[39](2011) 31 VR 386.
[40][2016] NSWSC 1389.
There is no ground for making a global Bullock or Sanderson order in respect of Mr Oliver’s costs of the proceeding.
Costs of second defendant on discrete topics
It does not follow from the refusal of a global Bullock or Sanderson order that Pearl Hill should bear the entirety of the second defendant’s costs of the proceeding.
As observed above, the general rule is that costs follow the event. The starting point is therefore that Pearl Hill should pay the second defendant’s costs of the proceeding.
The defendants conducted their cases on common issues in unison and their cases on their own alleged negligence largely separately. In relation to common issues, the second defendant focused on contingency and quantum issues. The first and third defendants focused on other issues including background, credit of Pearl Hill’s witnesses, negligence to the extent that common issues arose and causation issues.
The second defendant retained Mr Way to provide a report and called him to give evidence at trial on gross quantum issues, undertook the principal questioning of the valuation experts Mr Kilby and Mr Way and made the principal closing submissions on contingency and quantum issues. In addition, even though Mr Berrill was a former employee of the first defendant, the second defendant obtained a witness statement from him and called him to give evidence at trial.
The work undertaken by the second defendant in retaining and calling Mr Way and addressing contingency and quantum issues was undertaken for the mutual benefit of all three defendants. The first and third defendants relied on the evidence of Mr Way and adopted (with little addition) the closing address of the second defendant on contingency and quantum issues. This was in circumstances in which, objectively assessed, Pearl Hill’s cases against the first and third defendants were always stronger than its case against the second defendant and, if all three defendants had been found liable, the responsibility of the second defendant would have been much less than that of the first and third defendants.
The first and third defendants accept that Pearl Hill is entitled to recover against them its own costs reasonably incurred in addressing contingency and quantum issues (including for example reasonable report and witness fees payable to Mr Kilby). It would be anomalous if Pearl Hill were required to bear the reciprocal costs incurred by the second defendant in addressing those same issues in circumstances in which the work the subject of those costs was for the direct benefit of the first and third defendants. Moreover, if the second defendant had not engaged or called Mr Way, the first and/or third defendants would have engaged and called him or an alternative valuer. If the second defendant had not undertaken the closing address on contingency and quantum issues, the first and third defendants would have had to have undertaken that work.
In these circumstances, it is fair and reasonable that the first and third defendants bear the costs of the second defendant incurred in retaining and adducing evidence from Mr Way and in preparing the written closing address insofar as it addressed contingency and quantum issues. Considered from the perspective of causation of those costs, I consider that they were caused by the first and third defendant’s unsuccessful defence of Pearl Hill’s claims against them rather than by the unsuccessful claim by Pearl Hill against Mr Oliver. This does not, however, extend to time spent by the counsel and the solicitor for the second defendant at trial when Mr Way and Mr Kilby were giving evidence nor while counsel for the second defendant was orally addressing contingency and quantum issues because counsel and solicitors for all three defendants were present throughout the trial.
In addition, for similar reasons, it is fair and reasonable that at least the first defendant bear the costs of the second defendant incurred in preparing the witness statement by Mr Berrill and his witness fee for attending to give evidence. Mr Berrell was employed by the first defendant and the evidence he gave was primarily for the benefit of the first defendant (rather than the second defendant). His evidence had no, or at best marginal, relevance to the discrete case against the second defendant. Although his evidence was relevant to background, which was applicable to all three defendants, it was somewhat anomalous that he was called by the second defendant and not the first defendant. Otherwise the first defendant would have borne the cost of calling him. This does not, however, extend to time spent by counsel and the solicitor for the second defendant at trial while Mr Berrell was giving evidence for the same reason as in respect of Mr Way.
Conclusion
I will hear the parties concerning the wording of the orders to be made to reflect these reasons for judgment (including whether proposed orders 4 and 5 should be in the form of Sanderson or Bullock orders). If the costs the subject of the orders made are required to be taxed, the taxing officer will have the benefit of these reasons for judgment in understanding the purpose and effect of the orders made. I will also hear the parties whether I should make broad axe percentage-based orders that the first and third defendants pay a nominated percentage of the plaintiff’s costs of the proceeding instead of proposed orders 1 and 2 or that the first and third defendants pay a nominated percentage of the second defendant’s costs of the proceeding instead of proposed orders 4 and 5.
Subject to hearing the parties, the orders to be made will be to the following effect:
1.Subject to order 2, the first and third defendants pay the plaintiff’s costs of the proceeding (against all defendants) on the standard basis.
2.Excluded from the costs the subject of order 1 are any costs that were incurred, or increased, by reason only of the joinder of the claim against the second defendant.
3.Subject to orders 4 and 5, the plaintiff pay the second defendant’s costs of the proceeding on the standard basis.
4.The first and third defendants, and not the plaintiff, pay those components of the second defendant’s costs of the proceeding that relate to:
(a) Mr Way’s evidence including his retainer; preparing, filing and serving of his valuation reports; arranging for him to give evidence; proofing, interviewing or otherwise dealing with him; and his fees for preparing his valuation reports and attending to give evidence but excluding costs of counsel and the solicitor for the second defendant at trial of Mr Way (and Mr Kilby) giving evidence; and
(b) the preparation of the written closing address of the second defendant insofar as it addressed contingency and quantum issues as defined in my reasons for judgment on costs.
5.The first defendant, and not the plaintiff, pay those components of the second defendant’s costs of the proceeding that relate to Mr Berrill’s evidence including interviewing him; preparing, filing and serving of his written witness statement; arranging for him to give evidence; proofing, interviewing or otherwise dealing with him; and his witness fees for attending to give evidence but excluding costs of counsel and the solicitor for the second defendant at trial of Mr Berrill giving evidence.
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