Amaca Pty Ltd v Werfel (No 2)

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SUPREME COURT OF SOUTH AUSTRALIA

(Full Court)

AMACA PTY LTD v WERFEL (No 2)

[2021] SASCFC 26

Judgment of The Full Court  

(The Honourable Chief Justice Kourakis, the Honourable Justice Nicholson and the Honourable Justice Livesey)

25 May 2021

APPEAL AND NEW TRIAL - PROCEDURE - SOUTH AUSTRALIA - POWERS OF COURT - COSTS

PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - COSTS

Following the Court’s decision to allow the appellant’s appeal to the extent of reducing the total damages awarded to the respondent from $3,077,187.00 to $2,228,478.00, the parties made written submissions on the costs of the appeal.

The appellants contended that, although the respondent ultimately succeeded in his negligence claim, the appellants succeeded on most of the issues contested on the appeal. In addition they referred to the effect of s 8(4) of the Dust Diseases Act 2005 (SA) and emphasised the importance of setting aside the findings made by the trial Judge, failing which they may have been used in other litigation. Consequently, they sought an order that the respondent pay half of the appellant’s party and party costs of the appeal.

The respondent contended that he won the appeal and should be awarded his party and party costs of the appeal. The respondent relied on his appeal offer of $2.2 million filed on 18 September 2019 to submit that, because he ultimately bettered that offer, he should be awarded indemnity costs from 3 October 2019. In reply, the appellant contended that the respondent’s formal offer did not comply with the rules of court.

Held, (the Court) awarding the respondent 85 per cent of his costs of the appeal on a party/party or standard basis until 10 October 2019 and, thereafter, 85 per cent of his costs on solicitor/client basis:

1.      The respondent’s appeal offer complied with the rules of court. A failure to specify whether         an appeal will be allowed or dismissed does not invalidate a formal offer.

2.      In any event the appellant’s failure to serve a formal response meant that the offer was taken        to be a complying offer under r 188A(5).

3.      Under r 188H, r 188J does not apply and there are differences in the wording and operation of these rules in the event that a party obtains an order no less favourable than the offer made.       The requirements of rr 188H(5) and (6) discussed. 

4.      In the circumstances the starting point is that the respondent should recover his costs and that       from 14 days after the offer was made they should be on a solicitor/client basis. In this case   however the respondent determined to litigate all issues and failed in eight of the nine issues     contested, adding to the time and cost of the appeal. A party is not free to litigate all issues      without risk on costs simply because of a formal offer.

5.      Whilst the number of unsuccessful issues is relevant, the exercise of discretion must recognise that the respondent succeeded in recovering a judgment in negligence…

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Details
Case
[2021] SASCFC 26
Decision Date

CaseChat Overview and Summary

In *Amaca Pty Ltd v Werfel (No 2)*, the Full Court of the Supreme Court of South Australia considered an appeal concerning the costs of an appeal. The dispute arose from an offer to settle made by the respondent, Mr Werfel, to the appellant, Amaca Pty Ltd (James Hardie), during the appeal proceedings. The court was required to determine the appropriate costs order, particularly in light of the offer and the parties' conduct during the appeal.

The central legal issues before the court were whether Mr Werfel's appeal offer complied with the relevant court rules, and if so, what costs consequences should follow from Amaca's failure to accept the offer. Specifically, the court had to consider the application of rules governing appeal offers, including the test for determining if an offer was "no less favourable" to the offeror, and the court's discretion in awarding costs on a solicitor-client basis. The court also had to weigh the success of the parties on the various issues in the appeal against the existence and nature of the settlement offer.

The court reasoned that Mr Werfel's appeal offer was a complying offer, noting that a failure to specify whether an appeal would be allowed or dismissed did not invalidate it. Furthermore, Amaca's failure to serve a formal response meant the offer was deemed compliant under rule 188A(5) of the Supreme Court Civil Rules 2006 (SA). The court applied rule 188H, which governs appeal offers, and found that while it did not automatically trigger an indemnity costs order after 14 days as some other rules might, it required the court to take into account the offer and the stage at which it was made when determining costs. The court acknowledged that Amaca had a significant interest in the appeal due to its precedential effect, but found that Amaca's determination to litigate all issues, despite the offer, and its limited substantive response, undermined any claim for relief from adverse costs.

Ultimately, the court ordered that Mr Werfel recover 85 per cent of his costs of the appeal on a standard basis until 10 October 2019, and thereafter, 85 per cent of his costs on a solicitor-client basis. This reflected a balance between Mr Werfel's success in recovering a judgment in negligence and his appeal offer, and the fact that he failed in eight of the nine issues contested on appeal.

Orders

Orders of the court

Held, (the Court) awarding the respondent 85 per cent of his costs of the appeal on a party/party or standard basis until 10 October 2019 and, thereafter, 85 per cent of his costs on solicitor/client basis:

1. The respondent’s appeal offer complied with the rules of court. A failure to specify whether an appeal will be allowed or dismissed does not invalidate a formal offer.

2. In any event the appellant’s failure to serve a formal response meant that the offer was taken to be a complying offer under r 188A(5).

3. Under r 188H, r 188J does not apply and there are differences in the wording and operation of these rules in the event that a party obtains an order no less favourable than the offer made. The requirements of rr 188H(5) and (6) discussed.

4. In the circumstances the starting point is that the respondent should recover his costs and that from 14 days after the offer was made they should be on a solicitor/client basis. In this case however the respondent determined to litigate all issues and failed in eight of the nine issues contested, adding to the time and cost of the appeal. A party is not free to litigate all issues without risk on costs simply because of a formal offer.

5. Whilst the number of unsuccessful issues is relevant, the exercise of discretion must recognise that the respondent succeeded in recovering a judgment in negligence and considerable weight must be given to his appeal offer.

6. The appellant's interest in the issues raised on appeal transcend this particular case. The precedent set by this case was important to the appellant but of less importance to the respondent. As well, the history of the offers made by the respondent, to which the appellant made little or no substantive response, demonstrated that the appellant had determined to pursue the litigation to judgment because of concerns about so-called ‘third wave’ claimants. That undermines significantly any claim the respondent might otherwise have to be relieved of an adverse costs order.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Reliance is also placed upon s 8(4) of the Act which has the effect of making factual findings made in dust diseases actions relevant and admissible in other actions:8—Evidentiary presumptions and special rules of evidence and procedure(4)If—(a) a finding of fact has been made in a dust disease action by a court of this State, or a court or tribunal of the Commonwealth or another State or Territory; and(b) the finding is, in the District Court's or SAET's opinion, of relevance to an action before it under this Act,the District Court or SAET (as the case may be) may admit the finding in evidence and indicate to the parties that it proposes to make a corresponding finding in the case presently before it unless the party who would be adversely affected satisfies the District Court or SAET (as the case may be) that such a finding is inappropriate to the circumstances of the present case. James Hardie emphasises that the adverse precedential effect of the trial decision in this case flowed from “the wholesale adoption” of the written submissions made by Mr Werfel at trial; that is to say, the “decision of the trial court created a precedent favourable to claimants, drawn up by a claimant”. It is in this context that James Hardie submits that it had “little choice” but to press on with the appeal so as to challenge the decision made by the trial Judge. Having done so, it now emphasises its relative success and says that this must be reflected in any order for costs.Mr Werfel’s submissions Mr Werfel points to the fact that the appeal was commenced on 23 August 2019 and that his offer was made as early as 18 September 2019, long before any significant costs were incurred in connection with the appeal. Mr Werfel contends that his offer was made before the Uniform Civil Rules 2020 (SA) came into effect on 18 May 2020, so that the Supreme Court Civil Rules 2006 (SA) continue to apply to that “step” in these proceedings.[4] [4] See r 1.4(1) of the Uniform Civil Rules 2020 (SA). Mr Werfel says that the offer was a formal “appeal offer” pursuant to r 188H. As no time limit was specified in the offer, by r 188(1) the offer was taken to have lapsed seven calendar days before the hearing of the appeal on 6 February 2020. Mr Werfel contends that, because James Hardie did not file any “formal response” to what it now claims was a defective offer, this was a breach of r 188A and, absent “exceptional circumstances”, James Hardie cannot now contend that the offer did not comply with r 187.[5][5] See rr 188A(5) of the Supreme Court Civil Rules 2006 (SA). In these circumstances Mr Werfel seeks orders that James Hardie pay his costs of the appeal on a standard costs basis until 3 October 2019 and, thereafter, on an indemnity basis, relying upon rules 188H(5) and (6) of the Supreme Court Civil Rules 2006 (SA), together with the Court’s broad general costs discretion pursuant to rules 193.1(4), 194.3 and 194.6 of the Uniform Civil Rules 2020 (SA). By the latter rules, in particular, the Court may have regard to the failure to make an offer to resolve the proceeding and the Court may also consider the “non‑acceptance of an offer”.

Decision

Reasons for decision

The fact is that James Hardie had no wish to settle on reasonable terms, for reasons important to it, but of little concern to Mr Werfel. This undermines significantly any claim James Hardie might otherwise have to be relieved of an adverse costs order, or an award of costs on a solicitor/client basis.Conclusion Having regard to the competing considerations, it is appropriate to order that Mr Werfel recover 85 per cent of his costs of the appeal on a standard basis until 10 October 2019 and, thereafter, 85 per cent of his costs on a solicitor/client basis.

Ratio Decidendi

Legal Principle Established

Under the former r 188(6), the test was whether the Court’s determination was “no more favourable” to the offering party, rather than the present test under r 188F(3) of a “no less favourable” outcome. The difference is a subtle one, but tends to benefit the offeror because it requires an assessment of the result from the perspective of whether it can be said to be no less favourable rather than no more favourable. Any doubt would, one might think, tend to work to the advantage of the offeror.The operation of r 188H – appeal offers In so far as is relevant, r 188H is as follows:(3)The provisions of rules 187, 188 and 188A to 188E apply mutatis mutandis to an appeal offer as if it were a formal offer in a proceeding at first instance.(4)An appeal offer may be on terms that take into account any cross-appeal.(5)Where on an appeal—(a) a party has made an appeal offer;(b) the offer was not accepted; and(c) the offeror obtains an order on the appeal no less favourable to that party than the terms of the offer—the Court is to take those matters, and also the stage of the appeal at which the offer was made, into account in determining what order for costs to make in respect of the appeal or in respect of the appeal and the proceeding more generally.(6)Without affecting the generality of the discretion of the Court, in exercising its discretion under subrule (5), the Court may order that the offeree pay the costs of the offeror on a solicitor/client basis or a party and party basis or not recover that party’s costs from the time the offer was served or from any other time that the Court thinks fit. The wording and potential operation of r 188H are quite different to r 188F in a number of respects, although both share the same test of “no less favourable”, see r 188H(5)(c), cf r 188F(3). As for the differences, first, r 188H does not refer to a “complying offer”, cf r 188F(1). Whilst a curious difference, apparently nothing turns on it because r 188H explicitly picks up the rules relating to a “formal response”, and the presumption that an offer does comply with r 187 if no formal response is made, see r 188A(5). Secondly, and most importantly, r 188H does not utilise the ordinary rule under r 188F(3), namely, that the costs consequences of not accepting an offer that is “no less favourable” start with an award of indemnity costs after 14 days following service of the offer. Thirdly, though r 188H does not explicitly use the language regarding the “overriding discretion of the Court” found in r 188F(2), the operation of r 188H depends upon an exercise of discretion. Whilst that might be thought implicit in r 188H(5), it is made clear by the reference in r 188H(6) to “the generality of the discretion of the Court, in exercising its discretion under subrule (5)”. Fourthly, the operation of r 188H(5) requires that the circumstances specified in that subrule which “the Court is to take … into account” be considered when determining what order for costs is to be made. The breadth of that discretion is not constrained by the potential orders specified by subrule (6), though it is noteworthy that these refer to costs “on a solicitor/client basis or a party and party basis” rather than the indemnity basis referred to in r 188F(3).