AS v Minister for Immigration (Costs Ruling)
[2017] VSC 300
•9 June 2017
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
S CI 2014 04423
| AS (by her litigation guardian MARIE THERESA ARTHUR) | Plaintiff |
| v | |
| MINISTER FOR IMMIGRATION AND BORDER PROTECTION | First Defendant |
| COMMONWEALTH OF AUSTRALIA | Second Defendant |
| INTERNATIONAL HEALTH AND MEDICAL SERVICES PTY LTD | First Third Party |
| SERCO AUSTRALIA PTY LTD | Second Third Party |
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JUDGE: | J FORREST J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 5 May 2017 |
DATE OF RULING: | 9 June 2017 |
CASE MAY BE CITED AS: | AS v Minister for Immigration & Ors (Costs Ruling) |
MEDIUM NEUTRAL CITATION: | [2017] VSC 300 |
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COSTS – Application for grant of leave to discontinue proceedings against third party with no order as to costs – Exercise of discretion as to costs – Liability of defendant for costs of third party where claim not pursued – Civil Procedure Act 2010 (Vic) – Supreme Court (General Civil Procedure) Rules 2015 (Vic).
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APPEARANCES: | Counsel | Solicitors |
| For the Commonwealth | Mr R Stanley QC with Mr J. Gorton SC and Mr A Yuile | Australian Government Solicitor |
| For Serco | Mr R Gillies QC with Ms K Burke | Corrs Chambers Westgarth |
HIS HONOUR:
Introduction
The primary proceeding (fixed for trial on 26 April 2017) between the plaintiff, AS, and defendants, the Minister for Immigration and Border Protection (the Minister) and the Commonwealth of Australia (the Commonwealth), has been settled. The claim related to the confinement of AS at the Christmas Island detention centre (the detention centre).
At the time of her detention, AS was 5 years old and spent approximately ten months in detention between July 2013 and August 2014.
The writ was issued in August 2014. The Commonwealth joined Serco as a third party on the basis that it was contracted to provide security and administrative services at the detention centre.
This ruling concerns whether the Commonwealth should be granted leave pursuant to r 25.02(6) of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (the Rules) to discontinue its third party claim against Serco and, if so, whether it should pay Serco’s costs of the third party proceeding.
In essence, there are two questions to be resolved:
(a)Whether it was reasonable for the Commonwealth to join Serco as a third party and to maintain that joinder until trial?[1] and
(b)Assuming it was reasonable to join Serco, should the Commonwealth pay Serco’s costs given that it is not prepared to prosecute the third party claim to conclusion?
[1]Said by Serco in its written submissions to be the third consideration but developed considerably in oral submissions.
Procedural background
I will not repeat, except where necessary, the factual background of the claim nor the pleadings of the case.[2]
[2]See other AS decisions: AS v Minister for Immigration and Border Protection [2014] VSC 486; AS v Minister for Immigration and Border Protection [2014] VSC 593; AS v Minister for Immigration and Border Protection (Ruling No 3) [2015] VSC 642; AS v Minister for Immigration and Border Protection (Ruling No 4) [2016] VSC 351; AS v Minister for Immigration and Border Protection [2016] VSCA 206; AS v Minister for Immigration and Border Protection (Ruling No.6) [2016] VSC 774; AS v Minister for Immigration and Border Protection [2017] VSC 137.
AS issued her proceeding under Part 4A of the Supreme Court Act 1986 (Vic). The Commonwealth then issued its third party proceeding against Serco in March 2015. Serco (pursuant to a contract with the Commonwealth) provided a number of services associated with the custody of refugees, including AS, at the detention centre. The Commonwealth made allegations of negligence against Serco that, in effect, replicated the allegations made by AS against the Commonwealth. In addition, the Commonwealth alleged breach of terms of its contract with Serco in relation to its management of the detention centre.[3]
[3]Based on the provisions of a contract between Serco and the Commonwealth.
On 27 March 2017, I ruled that the representative claim of AS not proceed as a class action, but rather, as an individual claim.[4]
[4]AS v Minister for Immigration and Border Protection(Ruling No.7) [2017] VSC 137.
On 26 April 2017, I approved the compromise of AS’ claim.
Following settlement of the primary proceeding, the Commonwealth announced that it would not pursue its third party claim against Serco. It wishes to discontinue that claim but without liability for Serco’s costs.
Serco opposes the application solely on the basis that the Commonwealth should not be given leave to discontinue the third party proceeding against Serco, unless, what it says is the usual costs order (pursuant to rr 25.05 and 63.15 of the Rules) is made in its favour.
Serco also seeks an order pursuant to r 25.06 of the Rules that any grant of leave to the Commonwealth to discontinue the third party proceedings be accompanied by an order that the grant of leave acts as a defence to any subsequent proceeding by the Commonwealth against Serco for the same, or substantially the same, cause of action relating to the main proceeding. That bold application can be deferred until this ruling is delivered: if it is still sought to be prosecuted.
Both the Commonwealth and Serco filed affidavits in support of their respective applications.
The Rules of Court
Unless otherwise expressly provided by any Act or by the Rules, the costs of and incidental to all matters in the Supreme Court are in the discretion of the Court, and the Court has full power to determine by whom and to what extent the costs are to be paid.[5] This is a ‘broad judicial discretion’.[6]
[5]Supreme Court Act 1986 (Vic) s 24(1).
[6]Kheirs v Aussie Home Loans (2010) 31 VR 46 [15] (“Kheirs”).
Order 25.02 of the Rules deals with discontinuance or withdrawal of proceedings. In particular, r 25.02(6) of the Rules concerns the discontinuance of a claim made against a third party by a defendant and reads as follows:
Discontinuance or withdrawal of proceeding or claim
(6)A defendant who has joined a third party may discontinue the claim made against the third party by the third party notice or withdraw any part of the claim at any time—
(a) by leave of the Court; or
(b) with the consent of the third party.
Then, Order 63.15 of the Rules provides:
Discontinuance or withdrawal
Unless the court otherwise orders, a party who discontinues or withdraws part of a proceeding, counterclaim or claim by third party notice shall pay the costs of the party to whom the discontinuance or withdrawal relates to the time of the discontinuance or withdrawal.
It can be accepted that by these specific rules, the discretion of the Court conferred by s 24(1) of the Supreme Court Act 1986 (Vic) to make orders for costs is modified to the extent that it places an onus on the party seeking to discontinue the proceeding (in this case, the Commonwealth) to satisfy the Court that the costs of the third party (Serco) should not be paid by it.
Analysis
In Burke v Gillett,[7] the plaintiff failed against the defendant, and the defendant in turn failed against the third party. Tadgell J concluded that, as the third party claim had been ‘fully litigated’, and the third party had been ‘ultimately vindicated’, the defendant should pay the third party’s costs of the proceeding. His Honour (with whom Ormiston and Smith JJ agreed) said:
Assuming that the defendants acted reasonably in bringing the third party proceedings, that was not sufficient to justify an order either that the third party should not receive its costs or that the defendants should not be made responsible for them.
In my opinion, costs of the third party proceedings and of the third party’s appeal should follow the event, as it was indicated in Johnson v Ribbins … should ordinarily be the case.[8]
[7][1996] 1 VR 196 (“Burke”).
[8]Burke, 200.
In Kheirs, the Court of Appeal set out the following principles in a case where a primary proceeding failed and the third proceedings were consequently dismissed:
(1)The usual rule as to costs applies to proceedings as between defendant and third party, the “event” being the success or failure of the defendant’s claim against the third party.
(2)Where the third party claim is dismissed because the plaintiff’s claim against the defendant fails, the defendant will ordinarily be liable for the third party’s costs of the third party proceeding.
(3)The award of costs remains a matter of discretion, however, and there may be circumstances of the case which justify a departure from the usual rule.
(4)In deciding (in a case of the kind referred to in (2)) whether any departure from the usual rule is warranted, the court will ordinarily need to consider at least the following matters:
•the reasonableness of the defendant’s decision to join the third party;
•Whether the joinder of the third party was reasonably foreseeable by the plaintiff, such that the plaintiff might be viewed as having some responsibility for the costs of the third party proceeding. (An order for the plaintiff to pay the defendant’s costs may thus include the defendant’s liability to pay the third party’s costs of the third party proceeding.);
•the responsibility of plaintiff, defendant and third party, respectively, for the time taken up in the hearing of the third party proceeding.[9]
[9]Kheirs, [28]
Before I go to the two primary questions, I should make several observations.
First, as I hope is now clear, this case does not involve a concluded primary proceeding (either favourable, as in Kheirs, or unfavourable to the defendant) with a subsequent determination of which party should be responsible for payment of the third party costs. Rather, it requires a decision to be made where the primary proceeding has been settled and the defendant now does not seek to persist with its claim against the third party.
Second, most of the decisions concerning the payment of costs in a third party proceeding not prosecuted to successful determination (including Kheirs) preceded the enactment in January 2011 of the Civil Procedure Act 2010 (Vic) (CPA), and particularly its provisions requiring parties to narrow the issues, and use their best efforts to negotiate a resolution in preference to litigating a case out.[10]
[10]Sections 22, 23 of the Act.
It is now clear that a court, in exercising its discretion to grant leave to discontinue third party proceedings pursuant to r 25.02(6) of the Rules, must have regard to the provisions of the CPA and in particular, s 7 which states that the overarching purpose of the Act and Rules in civil proceedings is to ‘facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute’.[11]
[11]See, e.g. Yara Australia Pty Ltd v Oswal (2013) 41 VR 302, 306, [9].
By s 8(1) of the CPA, the court is required to give effect to the overarching purpose in exercising its powers. In doing so, s 9 of the CPA directs the court to further the overarching purpose by having regard to the objects and matters which include the efficient use of judicial and administrative resources and dealing with the proceeding in a manner proportionate to the complexity and importance of the issues and amount in dispute.
Third, the effect of rr 25.05 and 63.15 should not be overstated. In Just Group Ltd v Joseph van Dyk & Ors,[12] Sloss J held that the wide discretion conferred on the Court to order costs must be exercised in conformity with rr 25.05 and 63.15 of the Rules.[13] However, her Honour then observed:
In essence, the cases summarised in Soteriadis[14] and Johnson[15] show that r 63.15 does not give rise to a presumption that costs will be ordered against the discontinuing party. Rather (and paraphrasing what their Honours have said), it creates ‘a starting position’ and the burden is on the party who seeks to persuade the court that a different order should be made to prove the relevant facts. All relevant circumstances, not just the fact of discontinuance, should be considered. If there is to be a departure from the starting position the Court should do so in a particularised and principled way and make such order as it thinks just in the particular circumstances of the case.[16]
[12][2016] VSC 66 (“Just Group”).
[13]See above.
[14][2015] VSC 363.
[15][2010] NSWSC 1301.
[16]Just Group, [28] (emphasis added).
I adopt the observations of Sloss J in Just Group. The ‘starting position’ in this case is that Serco is to be awarded its costs unless the Commonwealth persuades this Court to the contrary – but in looking at this issue, the Court is not confined to a myopic consideration of the fact of the discontinuance of the third party proceeding.
The third party claim
The allegations in the most recent version of the statement of claim of AS, dated 23 September 2016, make numerous references to Serco’s role and its responsibility in relation to AS’s confinement at the detention centre.
For instance:
12. At all material times in the Relevant Period, Serco Australia Pty Limited (Serco) was contracted by the Commonwealth to provide accommodation, security and recreational services to and in respect of persons in detention on Christmas Island.
B.1.2 Conditions affecting all persons in detention – physical conditions
18.During the Relevant Period, detention on Christmas Island was subject to physical conditions and daily routine exclusively determined by the Commonwealth and/or the Minister (and/or their servants and agents, including Serco).
19.During the Relevant Period, the physical conditions of, and daily routine pertaining to, detention on Christmas Island which were exclusively determined by the Commonwealth and/or the Minister (and/or their servants and agents, including Serco) had the following features (Christmas Island Detention Conditions):
a. perimeter fences;
b.the standard of accommodation and the amenity provided to the persons in detention;
c. the quality, quantity and serving times of and conditions of access to food;
d. the occupational activities in which persons in detention on Christmas Island could participate;
e.whether there could be and conditions of access to clothes, toiletries, toys, stationery, and any other kinds of property or personal effects that a person in detention might reasonably require;
f.the times of day at which persons in detention were to retire and wake.
I should add that paragraph 16 of the statement of claim alleges that the conditions under which AS was subject to, were under the exclusive control of the defendants, together with their agents, including Serco. Further, paragraph 19 alleges that the physical conditions, and the daily routine pertaining to the detention (such as quality, quantity and serving times of and conditions of access to food), were determined by the defendants and/or by Serco.
In response to this iteration of the statement of claim, the Commonwealth issued an amended third party notice against Serco in October 2016 which replicated, to a large extent, the allegations AS made against Serco in her statement of claim.[17]
[17]The defendants’ third party notice dated 14 October 2016 at [6], [8] and [11].
Paragraph 11 of the statement of claim annexed to that notice repeats, in essence, allegations of AS against the Commonwealth:
11. If the Plaintiff and/or other group members suffered injury while detained on Christmas Island (which is not admitted but specifically denied) she and the group members suffered injury as a result of the negligence or breach of duty of Serco.
PARTICULARS OF NEGLIGENCE AND BREACH OF DUTY
(a) Failing to ensure that the physical conditions of detention on Christmas Island were not such as were likely to cause or exacerbate injury to the Plaintiff and Group Members.
For the purposes of this Third Party Claim (and without any admission) the Second Defendant repeats against Serco the allegations set out in paragraph 87 of the Statement of Claim.
(b) Failing to adequately assess and monitor the condition of AS and Group Members to determine whether, and to what extent, they suffered from injury which might be caused or exacerbated by detention on Christmas Island.
For the purposes of this Third Party Claim (and without any admission) the Second Defendant repeats against Serco the allegations set out in paragraph 88(a) of the Statement of Claim.
(c) Failing to have in place a system for the assessment and monitoring of the condition of AS and Group Members to determine whether, and to what extent, they suffered from injury which might be caused or exacerbated by detention on Christmas Island.
For the purposes of this Third Party Claim (and without any admission) the Second Defendant repeats against Serco the allegations set out in paragraph 88(b) of the Statement of Claim.
(d) Failing to provide AS and Group Members with timely access to adequate medical service for injuries which should have been identified had an adequate assessment and monitoring system been in place.
For the purposes of this Third Party Claim (and without any admission) the Second Defendant repeats against Serco the allegations set out in paragraph 88(c) of the Statement of Claim.
(e) Failing to provide AS and Group Members with timely access to adequate medical services for injuries which it had identified.
For the purposes of this Third Party Claim (and without any admission) the Second Defendant repeats against Serco the allegations set out in paragraph 88(d) of the Statement of Claim.
(f) Failing to have in place a system for the medical treatment of AS and Group Members which was capable of ensuring that they were provided with timely access to adequate medical services in respect of injuries.
For the purposes of this Third Party Claim (and without any admission) the Second Defendant repeats against Serco the allegations set out in paragraph 88(e) of the Statement of Claim;
(g) Failing to ensure that the physical conditions of detention on Christmas Island were not such as were likely to cause or exacerbate injury to the Plaintiff and Minor Members.
For the purposes of this Third Party Claim (and without any admission) the Second Defendant repeats against Serco the allegations set out in paragraph 91 of the Statement of Claim.
(h) Failing to adequately assess and monitor the condition of AS and Minor Group Members to determine whether, and to what extent, they suffered from injury which might be caused or exacerbated by detention on Christmas Island.
For the purposes of this Third Party Claim (and without any admission) the Second Defendant repeats against Serco the allegations set out in paragraph 91 of the Statement of Claim.
(i) Failing to have in place a system for the assessment and monitoring of the condition of AS and Minor Group Members to determine whether, and to what extent, they suffered from injury which might be caused or exacerbated by detention on Christmas Island.
For the purposes of this Third Party Claim (and without any admission) the Second Defendant repeats against Serco the allegations set out in paragraph 91 of the Statement of Claim.
(j) Failing to provide AS and Minor Group Members with timely access to adequate medical service for injuries which should have been identified had an adequate assessment and monitoring system been in place.
For the purposes of this Third Party Claim (and without any admission) the Second Defendant repeats against Serco the allegations set out in paragraph 91 of the Statement of Claim.
(k) Failing to provide AS and Minor Group Members with timely access to adequate medical services for injuries which it had identified.
For the purposes of this Third Party Claim (and without any admission) the Second Defendant repeats against Serco the allegations set out in paragraph 91 of the Statement of Claim.
(l) Failing to have in place a system for the medical treatment of AS and Minor Group Members which was capable of ensuring that they were provided with timely access to adequate medical services in respect of injuries.
For the purposes of this Third Party Claim (and without any admission)the Second Defendant repeats against Serco the allegations set out in paragraph 91 of Statement of Claim.
(m)Failing to ensure that the physical conditions of detention on Christmas Island were not such as were likely to cause or exacerbate injury to the Plaintiff's parents, such that their ability to mitigate the negative impacts of any injury, or exacerbation of existing injury to the Plaintiff were further adversely affected.
For the purposes of this Third Party Claim (and without any admission) the Second Defendant repeats against Serco the allegations set out in paragraph 92(b)(i) of the Statement of Claim.
(n)Failing to ensure that reasonable care was provided to the Plaintiff's parents so as to avoid injury, or the exacerbation of injury to them, such that their ability to mitigate the negative impacts of any injury, or exacerbation of existing injury to the Plaintiff were further adversely affected.
For the purposes of this Third Party Claim (and without any admission) the Second Defendant repeats against Serco the allegations set out in paragraph 92(b)(ii) of the Statement of Claim.
(o)Failing to ensure that the physical conditions of detention on Christmas Island were not such as to cause or exacerbate developmental delay in the Plaintiff and Minor Group Members.
For the purposes of this Third Party Claim (and without any admission) the Second Defendant repeats against Serco the allegations set out in paragraph 93 of the Statement of Claim.
(p)Failing to ensure that adequate arrangements were made for the Plaintiff and School Age Group Members to undertake appropriate educational programmes or attend school;
(q)Failing to provide its services in a manner which could reasonably be expected to protect the Second Defendant's interests.
(r)Failing to exercise due skill, care and diligence in the management of the Christmas Island Detention Centre.
(s)Failing to exercise due skill, care and diligence in the provision of the detention services at Christmas Island.
(t)Failing to use its reasonable endeavours to prevent injury to the Plaintiff and/or the group members from occurring.
(u) Failing to use its reasonable endeavours to prevent the Plaintiff from being assaulted.
(v)Failing to ensure that the detention services were adequate to meet the requirements of the Second Defendant.
(w)Failing to ensure that the Plaintiff had access to educational and recreational facilities while in detention.
(x) Failing to provide the Plaintiff with access to local schools.
It is also worth noting here that the third party claim relates solely to the claim of AS and not to the group proceeding.
Was it reasonable for the Commonwealth to join and maintain a case against Serco?
In preparation for trial, witness statements were filed by the parties. It suffices to say that those filed by AS covered a range of allegations about conditions on the island and their connection with the injuries sustained by AS.[18] In substance, many of these related to the management of living conditions on the island – which, as Serco’s witness statements established, was primarily the responsibility of Serco.[19]
[18]E.g. the father and mother of AS, Christie Rafferty, Helen Zanes and others.
[19]See the witness statement of Mr Anthony Voss.
Contrary to Serco’s submission that the witness statements do not make any allegations of negligence against it, it is obvious that numerous references can be found in the outlines of evidence filed by AS which go to matters within Serco’s responsibility, including but not limited to evidence about the presence of security guards and their impact on detainee health, general conditions and routines of the camp and the overall treatment of detainees by Serco staff. Serco’s own evidence demonstrated that it was responsible for the welfare of detainees, property, food, activities and escort services.
I therefore reject Serco’s submission that it was not alleged by AS that her injuries were caused by any act or omission of Serco. As has been seen, the allegations made by AS in her statement of claim, as well as the contents of the witness statements, make it clear that the physical conditions of her confinement at the detention centre were exclusively under the control of employees and agents of the Commonwealth, including Serco - and not to an insignificant extent.
Whether the allegations of the claim could be established at trial is not to the point – the Commonwealth faced a claim framed on the basis of a non-delegable duty to AS; it was entirely reasonable for it to lay off any potential damages award against it to Serco, which had the direct responsibility for many of the activities which were the subject of AS’s complaints. Unless the allegations by AS were without foundation, the joinder was reasonable and in keeping with standard practice in negligence claims in this state.
Serco filed a defence to the third party notice; it did not make any application for summary judgment, nor did it seek to strike out the third party notice.
It follows that I am satisfied that it was both reasonable and proper for the Commonwealth to add Serco as a third party to the proceeding and to continue with that claim to trial.
Should the Commonwealth pay Serco’s costs?
First, as is clear from the authorities, the starting point is that Serco is to be awarded its costs unless the Commonwealth discharges its burden of satisfying me to the contrary.
Second, notwithstanding that the Commonwealth acted reasonably in joining Serco as a third party, that proposition, as Burke and Kheirs demonstrate, is not sufficient in itself to justify an order that Serco should not recoup its costs.
Third, I do not accept Serco’s submission that the fact that the Commonwealth has elected to discontinue its proceedings against Serco was based, in part, upon acceptance by the Commonwealth that there was a complete lack of evidence to support its claim against Serco and low prospects of success on that case. The Court cannot and will not try a hypothetical action between the parties; nor can it or should it, speculate on the merits of AS’s case against the Commonwealth or the Commonwealth’s claim against Serco.[20]
[20]Lai Quin, (1997) 186 CLR 622, 624 (“Lai Qin”); Soteriadis v Nillumbik Shire Council [2015] VSC 363, [12(h)].
Whilst the Commonwealth would, inevitably, have been found to have owed a non-delegable duty to AS and therefore held responsible for any breach of that duty by Serco, it was open to it, as it contended in the third party notice, to sheet home a claim for contribution or indemnity against Serco on the basis that its breach led to the Commonwealth’s liability.
Certainly, I do not accept Serco’s submission that the Commonwealth’s case against it was hopeless. As has been observed, the statements of a number of witnesses demonstrate that Serco had a significant degree of control over the conditions at the detention centre – which were the very subject of the claim. Serco’s role, as the contracting agent of the Commonwealth in the management of many aspects of Christmas Island, was central to the case against the Commonwealth.
I also reject Serco’s contention that it could be reasoned that the settlement of AS’s claim led to the conclusion that the Commonwealth’s case against Serco was hopeless. No such inference is available; indeed a settlement could have been reached for any number of reasons, including no doubt the fact that the costs of the trial had the potential to dwarf any potential award of damages. I should add that none of this is meant to suggest that Serco would necessarily have been held liable to the Commonwealth, it is simply to demonstrate that the fact of settlement leads nowhere in terms of an adverse inference against the Commonwealth.
In Just Group, Sloss J held that reasonableness of the conduct of the parties, as well as the reasons for discontinuance, were relevant considerations for the Court to take into account when exercising its discretion as to costs. Her Honour observed:
In the present case, the position is that there has not been any determination on the merits. There is no successful party. Each party has expended considerable sums in pursuing the litigation. Neither party has won or lost. But the course taken by the plaintiff means that each party has been spared the prospect of a three to four day trial, and the attendant costs such an exercise would involve. In my view, if the Court were to accede to the defendants' submission and make an award of costs against the plaintiff, it would be tantamount to punishing the plaintiff for acting responsibly in accordance with its obligations under the Civil Procedure Act.[21]
[21]Just Group, [48].
The Commonwealth contended that these recent observations were underpinned by the comments of McHugh J in Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin[22]:
If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the discretion will usually mean that the court will make no order as to the cost of the proceedings.
[22]Lai Qin.
I accept that settlement of AS’s claim was sensible and has saved the Court and the parties, I suggest, millions of dollars and the countless resources. It has also achieved a ‘knock-on’ benefit for Serco in that, even if it was successful in its defence of the third party proceeding, it may have been liable for its own solicitor/client costs of the trial and thus has avoided further significant expense.
I also take into consideration that the Commonwealth, in taking steps to negotiate a resolution and reach settlement of the primary proceeding, has acted in a manner consistent with the provisions of the CPA, in particular, the overarching purpose contained within section 7. It is clear that a lengthy, expensive and potentially traumatic trial has been avoided which is beneficial to all parties, as well as to the administration of justice more generally.
Notwithstanding these considerations, does this mean that Serco should pay its own costs when there is no adverse finding recorded against it, and is not alleged to be at fault in its conduct of the defence of the third party proceeding? No, I think not.
Despite the fact that the decisions in Burke and Kheirs was handed down prior to the introduction of the CPA, the basic principle advanced in these cases, I consider, still remains good: unless the third party proceeding is prosecuted to a successful conclusion against the third party why, as a matter of fairness, should the third party not have its costs when no wrong, fault, breach (or whatever it may be) has been attributed to it – and notwithstanding the reasonableness of the joinder.
I do not accept that an order for costs in favour of Serco would be considered ‘tantamount’ to punishing the Commonwealth for acting responsibly in accordance with its obligations under the CPA.[23] The other side of the coin is that if the Commonwealth’s argument is accepted, then Serco is being punished for properly defending a claim that has not been made out against it and that the proponent is unwilling to litigate to conclusion. Serco would be penalized for actions taken by another party entirely beyond its control.
[23]Just Group, [48].
The exercise of the discretion as to costs cannot be confined to the common sense and utility underpinning the resolution of the claim and the various considerations set out in the CPA. It must also include consideration of the justice of the situation if Serco, without an adverse determination against it, is required to bear its own substantial costs of defending the Commonwealth’s third party proceeding.
Ultimately, in applying the principles set out in Burke and Kheirs– and with due consideration of the principles set out in the CPA and the decision in Just Group – I am not persuaded that I should depart from the starting position: namely, that the Commonwealth should pay Serco’s costs of the third party proceeding. To put it bluntly, while I accept that the Commonwealth acted reasonably in joining Serco and in settling the primary proceeding, I can find no reason to inflict on Serco what would be a significant financial penalty for defending itself against a claim which the Commonwealth is unwilling to litigate to a conclusion.
Proposed orders
Subject to hearing from counsel, I would propose the following:
(a)That the Commonwealth have leave to discontinue its third party proceeding against Serco.
(b)That the Commonwealth pay Serco’s costs of the third party proceeding on a standard basis.
I should add the following. In late-filed supplementary submissions, the Commonwealth argued for several compromise positions relevant to the assessment of costs. In my view, it is inappropriate to limit what are standard costs orders in a case such as this, and that these propositions, may be best advanced before the Costs Court on taxation. I do note however, notwithstanding that the claim for contribution or indemnity in the third party proceeding related solely to AS, Serco determined (presumably to protect its interests generally) to play an active role in arguments concerning the application of Part 4A of the Supreme Court Act to the claim of AS against the Defendants.
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