BB v Helena College Council Inc t/as Helena College [No 2] - [2022] WADC 81

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS

LOCATION:   PERTH
CITATION:   BB -v- HELENA COLLEGE COUNCIL INC t/as HELENA COLLEGE [No 2] [2022] WADC 81
CORAM:   GETHING DCJ
HEARD:   ON THE PAPERS
DELIVERED          :   2 SEPTEMBER 2022
FILE NO/S:   CIV 1904 of 2020
BETWEEN:   BB
Plaintiff
AND
HELENA COLLEGE COUNCIL INC t/as HELENA COLLEGE
Defendant
QBE INSURANCE (AUSTRALIA) LTD
First Third Party
INSURANCE AUSTRALIA GROUP LTD
Second Third Party
BERKSHIRE HATHAWAY SPECIALTY INSURANCE COMPANY
Third Third Party

Catchwords:

Costs - Third party proceedings - Where one third party claims costs from another third party - Relevance of Calderbank offer

Legislation:

District Court of Western Australia Act 1969 (WA), s 64(1)
Rules of the Supreme Court 1971 (WA), O 19 r 1(3), r 12

Result:

Second Third Party's application for costs orders refused

Representation:

Counsel:

Plaintiff	:	No appearance
Defendant	:	No appearance
First Third Party	:	No appearance
Second Third Party	:	No appearance
Third Third Party	:	No appearance

Solicitors:

Plaintiff	:	Rightside Legal
Defendant	:	Jackson McDonald
First Third Party	:	Thompson Cooper Lawyers
Second Third Party	:	HWL Ebsworth Lawyers
Third Third Party	:	Minter Ellison

Case(s) referred to in decision(s):

Albion Insurance Co Ltd v Government Insurance Office (NSW) [1969] HCA 55; (1969) 121 CLR 342
Atwell v Roberts [2013] WASCA 37 (S)
Barclays Bank v Tom [1923] 1 KB 221
BB v Helena College Council Inc t/as Helena College [2021] WADC 42
Calderbank v Calderbank [1975] All R 333
Cape Lambert Resources Ltd v MCC Australia Sanjin Mining Pty Ltd [2013] WASCA 66 (S)
Commercial Developments Pty Ltd v Mercantile Mutual Insurance (Workers' Compensation) Ltd (1991) 5 WAR 208
Ford Motor Company of Australia Ltd v Lo Presti [2009] WASCA 115
Harris v Knell [2016] WASCA 11 (S)
Heartlink Ltd v Jones As Liquidator of HL Diagnostics Pty Ltd (in liq) [2007] WASC 254 (S)
HIH Claims Support Ltd v Insurance Australia Ltd [2011] HCA 31; (2011) 244 CLR 72
Hughes v St Barbara Ltd [2011] WASCA 234 (S)
Latoudis v Casey (1990) 170 CLR 534
Lawford Robinson Pty Ltd v Boston Hill Ltd [2009] WADC 122
Matthew Maxwell v Highway Hauliers Pty Ltd [2013] WASCA 115
Naidoo v Williamson (2008) 37 WAR 516; [2008] WASCA 179
Northern Territory v Sangare (2019) 265 CLR 164
O'Rourke v P & B Corporation Pty Ltd [2008] WASC 36 (S)
Oshlack v Richmond River Council (1998) 193 CLR 72
QBE Insurance (Australia) Limited v BB [2022] WASCA 61
Shaddick v JDV Ltd [2012] WASC 120 (S)
Sino Iron Pty Ltd v Mineralogy Pty Ltd [No 2] [2017] WASCA 76 (S)
Strzelecki Holdings Pty Ltd v Jorgensen [2019] WASCA 96
Wainright v Barrick Gold of Australia [2014] WASCA 15(S)

GETHING DCJ:

Introduction

In 1988 the plaintiff was sexually abused by Ian Stanley Brown who was her Grade 5 class teacher at Helena College Primary School. This was the finding of a jury at a trial of Mr Brown in 2006. Following amendments made to the Limitation Act 2005 (WA) which came into effect on 1 July 2018, the plaintiff commenced an action in this court against the defendant who was the legal entity which owned and operated the school, being Helena College Council Inc trading as Helena College.[1]
The defendant joined three insurers as third parties. The first third party is QBE Insurance (Australia) Ltd (QBE). The second third party is Insurance Australia Group Ltd (IAG). The third third party is Berkshire Hathaway Speciality Insurance Company (Berkshire).
Before the action proceeded to trial, the plaintiff settled her claim against the defendant, resulting in it being liable to pay the plaintiff an amount of damages which had been agreed between them. None of the third parties disputed that the terms of the settlement were unreasonable, both as to the admission of liability and the amount of damages. What remained in issue, and was determined at trial, were the claims by the defendant against each of QBE, IAG and Berkshire.[2]
The trial proceeded before his Honour Judge Sharp. His Honour found that each of QBE, IAG and Berkshire were liable to the defendant for the whole of the settlement amount of its liability to the plaintiff, and the costs it incurred defending the plaintiff's action, subject to any excesses payable by the defendant under the relevant policy or policies.[3]

IAG's application for a costs order against QBE
[1] See generally: BB v Helena College Council Inc t/as Helena College [2021] WADC 42 (Primary Decision) [1] ‑ [12].
[2] Primary Decision [13] ‑ [16].
[3] Primary Decision [165] ‑ [170], [310].

His Honour Judge Sharp made formal orders determining the action on 4 June 2021, reflecting the decision which I have summarised in the preceding paragraph. As to costs, his Honour ordered each third party to pay the defendant's costs of the third party proceedings as regards that particular third party to be assessed on a party/party basis. An application by IAG for costs orders against another third party was foreshadowed, with programming orders being made.[4]
[4] Trial Bundle filed 17 August 2022 (TB), pages 134 - 136.
On 16 June 2021, in accordance with the programming orders, QBE's lawyers filed:
(a)a minute of proposed orders;
(b)an outline of submissions; and
(c)an affidavit affirmed on 16 June 2021 by Keith Roy Thomas, a partner of QBE's lawyers (Thomas Affidavit).
The orders sought were:
1.The first third party pay to the second third party:
(a) The defendant's costs of the third party proceedings against the second third party incurred after 6 October 2020; and
(b) The second third party's costs of the third party proceedings against the second third party incurred after 6 October 2020 to be taxed if not agreed.
2.Pursuant to section 280(2) of the Legal Profession Act 2008 (WA) the taxing officer, in assessing the second third party's bill of costs, is directed to make reasonable allowances in relation to:
(a)the fees of Mr Geoffrey Hancy, Barrister, without limitation of the hourly rate limits imposed under the Legal Profession (Supreme and District Courts) (Contentious Business) Determination 2020; and
(b) the following items without limitation of the scale maxima imposed by the Legal Profession (Supreme and District Courts) (Contentious Business) Determination 2020:
(i) Item 22(a) - Trial - fee on brief;
(ii)Item 22(c) - Trial - Counsel fee for second and each successive day of hearing.
3.Each party have liberty to apply generally.
4.The first third party pay the second third party's costs of this application to be taxed if not agreed.
The basis on which the costs order was sought was a Calderbank letter sent by IAG's lawyers to QBE's lawyers on 6 October 2020.[5]
[5] Referring to Calderbank v Calderbank [1975] All R 333.
Judge Sharp was not able to deal with this outstanding costs issue prior to his retirement from the bench, so it was allocated to me for determination on the papers.[6]
[6] Order of Judge Stavrianou, 19 July 2022.
IAG filed supplementary submissions on 21 June 2022 and further supplementary submissions on 16 August 2022. On 16 August 2022 it also filed a second affidavit in support, this one made by Stephanie Pin Jian Tan, another solicitor employed by IAG's lawyers.
In opposition, QBE filed:
(a)submissions on 6 July 2021;
(b)an affidavit sworn by Laura Jayne Maker, a solicitor employed by QBE's lawyers, made on 6 July 2021 (Maker Affidavit);
(c)an affidavit sworn by Ms Maker, made on 2 August 2022 (Second Maker Affidavit); and
(d)further submissions filed 5 August 2022.
In order to place the Calderbank letter in its proper context, it is necessary to consider the positions of each of QBE, IAG and Berkshire at trial (Part 3). It is then instructive to consider the principles by which the issue of costs is to be determined (Part 4), before determining the costs issue (Part 5). I then deal with the issue of raising the costs scale (Part 6).

Positions of the third parties at trial

QBE had assumed the liabilities of MLC Insurance Ltd, which had issued a liability insurance policy to the defendant for the period of 23 August 1987 to 23 August 1988 (MLC Policy). This was a 'losses occurring' policy. By the time of trial, it was accepted that some, but not all, of the sexual assaults by Mr Brown occurred during this period. QBE accepted that no discrete injury sustained by the plaintiff could be attributed solely to the assaults that occurred outside its period of cover. However, it denied liability on two other grounds. The first was that the plaintiff's injuries were not the result of an 'accident or happening' within the meaning of the insuring clause in the MLC Policy. Judge Sharp disagreed. The second was that, in any event, the defendant failed to take reasonable precautions to prevent those injuries, something required by the MLC Policy. This was in the context of complaints about Mr Brown having been made in 1987, investigated by the then Principal and considered by the College Council, in particular at a meeting on 31 October 1987. Again, Judge Sharp disagreed, finding that the steps taken by the defendant in 1987 were sufficient to satisfy the reasonable precautions provision.[7] This second ground was the subject of an unsuccessful appeal to the Court of Appeal.[8]
[7] Primary Decision [171] ‑ [180], [210] ‑ [267].
[8] QBE Insurance (Australia) Limited v BB [2022] WASCA 61.
IAG was bound under a Commercial Union Assurance Company of Australia Limited policy which insured the defendant against liability for an injury or injury causing event that happened during the relevant policy period, being 23 August 1988 to 1 February 1989. This policy was also a 'losses occurring' liability policy. IAG argued that it was only obliged to indemnify the plaintiff for half of the amount of the liability of the defendant to pay damages. The defendant asserted that there was no legal basis for IAG to limit its liability to indemnify to less than a full indemnity. Judge Sharp agreed with the defendant. His Honour found that the various psychiatric conditions which the plaintiff suffered from were to be regarded as a single indivisible injury, there being no rational basis for an objective apportionment of causative responsibility.[9]
[9] Primary Decision [165] ‑ [170], [181] ‑ [188].
The defendant had a number of policies with Berkshire that were 'claims made and notified' liability policies. There were four relevant policies, commencing 31 October 2015, 31 October 2016, 31 October 2017 and 31 October 2018. Berkshire did not dispute that the liability of the defendant to pay damages and costs to the plaintiff fell within the terms of each policy. Rather, it raised two other issues. The first was which of its policies should be regarded as the policy which had been claimed upon. This was of commercial significance as there were differences in the deductible amount required to be paid by the defendant under the various policies. For reasons which I don't need to elaborate, Judge Sharp found that it was the policy commencing 31 October 2018. The second issue was whether Berkshire could rely on an exclusion clause which became operative where the defendant had notified a prior insurer of the circumstances out of which a subsequent claim arose. Judge Sharp held that it could not, again for reasons I don't need to elaborate.[10]
[10] Primary Decision [189] ‑ [202], [270] ‑ [309].

Principles

The issue raised by IAG is conceptually different from the usual context in which a Calderbank letter falls to be considered. The usual context is where a party has an entitlement to costs following the event, and the question for the court is whether a different costs order should be made in the exercise of the general discretion as to costs.[11] The context of IAG's application is that it is one of three third parties. The proceedings between a defendant and a third party are analogous to an action by the defendant as plaintiff against the third party as defendant.[12] So in the present case, each third party proceeding is a separate and independent action by the defendant against the relevant third party, each of which could have been the subject of a separate trial between the defendant and the relevant third party.[13] However, for obvious practical reasons, and as contemplated in the RSC O 19 r 4, on 30 September 2020, the court made directions that the third parties be entitled to participate in the trial of the main action (as between the plaintiff and the defendant), that the third party proceedings be heard at the same time or immediately after the main action and that the third parties be bound by the result of the trial in the main action.[14]
[11] See for example: Ford Motor Company of Australia Ltd v Lo Presti [2009] WASCA 115 (Ford Motor).
[12] Rules of the Supreme Court 1971 (WA) (RSC) O 19 r 1(3); Barclays Bank v Tom [1923] 1 KB 221, 225, 226 (Scrutton LJ with whom Eve J agreed) (Barclays Bank).
[13] Commercial Developments Pty Ltd v Mercantile Mutual Insurance (Workers' Compensation) Ltd (1991) 5 WAR 208, 217 (Malcom CJ, with whom Pidgeon & Rowland JJ agreed).
[14] As to which, see generally: Barclays Bank (224) - (225).
Each third party has the same rights in respect of its defence as if it had been duly sued in the ordinary way by the defendant.[15] So it is open to one third party to issue a notice of contribution to another third party.[16] This is what IAG in fact did as against QBE at the same time as it filed its defence on 5 October 2021 (see [52] below).
[15] RSC 0 19 r 1(3).
[16] RSC 0 19 r 8.
As to the power of the District Court generally as to costs, the 'costs of any action … shall be paid by or apportioned between the parties in such manner as the District Court judge directs'.[17] In default of such a direction, costs 'shall abide the event',[18] that is, a successful party will generally recover its costs.[19] In third party proceedings, the 'event' is the success or failure of the defendant's claim against each third party.[20] The costs orders in each third party proceedings made by Judge Sharp (set out at [5]) reflect the default position.
[17] District Court of Western Australia Act 1969 (WA) (DCA) s 64(1).
[18] DCA s 64(1); RSC O 66 r 1(1).
[19] Shaddick v JDV Ltd [2012] WASC 120 (S) [12] (Allanson J) (Shaddick).
[20] Shaddick [13].
More specifically, the discretion of the court as regards the costs of third party proceedings is reiterated in RSC O 19 r 12 in broad terms:[21]
The Court may decide all questions of costs as between a third party and other parties to the action, and may order any one or more of them to pay the costs of any other, or others, or give such directions as to costs as the justice of the case may require.
[21] See also DCA s 64(1).
I accept that it is open to the court to make an order that one third party pay the costs of another third party, including any costs which the other third party had to pay to the defendant. The question is whether an order in these terms should be made as between IAG and QBE.
Aside from the default position, the court's discretion is unconfined in the sense that it contains 'no positive indication of the considerations upon which the court is to determine by whom and to what extent costs are to be paid'.[22] The discretion is very wide.[23] However, it must be exercised judicially, that is, in accordance with established principles and factors directly connected with the litigation, and not arbitrarily, capriciously or so as to frustrate the legislative intent.[24]It must be exercised so as to achieve what is fair and just between the parties according to the circumstances of the particular case.[25] For example, these powers are wide enough to allow the court to make an order that one defendant pay the costs of another defendant.[26]
[22] Hughes v St Barbara Ltd [2011] WASCA 234 (S) [5] (judgment of the court).
[23] Naidoo v Williamson (2008) 37 WAR 516; [2008] WASCA 179 [39] (Steytler P, with whom Pullin JA & Murray AJA agreed).
[24] Northern Territory v Sangare (2019) 265 CLR 164, [24] (judgment of the court); Oshlack v Richmond River Council (1998) 193 CLR 72, [22]; [65] ‑ [66] (McHugh J); [134] (Kirby J); Strzelecki Holdings Pty Ltd v Jorgensen[2019] WASCA 96 [48] (judgment of the court).
[25] Latoudis v Casey (1990) 170 CLR 534, 558 (Dawson J); Shaddick [12] (Allanson J).
[26] See for example: Lawford Robinson Pty Ltd v Boston Hill Ltd[2009] WADC 122.
In this context, the principles in relation to Calderbank letters are relevant by way of analogy. Those principles are set out in detail in the decision of Buss JA (with whom Wheeler JA agreed) in Ford Motor and may be summarised in the following terms:[27]
[27] Ford Motor [16] - [32] (Buss JA, with whom Wheeler JA agreed); Strzelecki Holdings Pty Ltd v Jorgensen [82] ‑ [83] (judgment of the court); Harris v Knell [2016] WASCA 11 (S) [5] (judgment of the court); Matthew Maxwell v Highway Hauliers Pty Ltd [2013] WASCA 115 [7] (judgment of the court).
(a)the party who makes a Calderbank offer that is rejected bears the onus of satisfying the court that it should make an award of indemnity costs in his or her favour;
(b)a Calderbank offer will not justify an award of indemnity costs unless its rejection was unreasonable in the circumstances;
(c)the concept of 'unreasonableness' is not qualified by words such as 'manifestly', 'plainly' or 'so', words which require or at least suggest a more stringent test;
(d)all of the relevant facts and circumstances must be considered in determining whether a party's rejection of a Calderbank offer was unreasonable;
(e)the mere fact that the recipient of a Calderbank offer is ultimately worse off than he or she would have been had the offer been accepted, does not mean that its rejection was unreasonable;
(f)the decision of whether conduct is 'reasonable' or 'unreasonable' always involves matters of judgment and impression;
(g)relevant factors include (but are not limited to):
(1)the stage of the proceeding at which the offer was received;
(2)the time allowed to the offeree to consider the offer;
(3)the extent of the compromise offered;
(4)the offeree's prospects of success, assessed as at the date of the offer;
(5)the clarity with which the terms of the offer were expressed; and
(6)whether the offer foreshadowed an application for indemnity costs in the event of the offeree's rejecting it;
(h)a decision to accept or not an offer of this kind will ordinarily be based upon the offeree's perception of its ultimate chances of success, that is, it involves a prediction as to the likely outcome of the trial; and
(i)the policy behind the Calderbank principle is to encourage litigating parties to undertake genuine settlement negotiations and, for that purpose, to face up to a serious offer of settlement.
The other principle which counsel for IAG relies on by way of analogy is that contained in RSC O 66 r 1(3), which is in the following terms:
Where a party though generally successful in an action has, by the introduction of some issue or issues on which he has failed, increased the costs the Court may order such party to pay the costs of such issue or issues.
Counsel for IAG submits that, by parity of reasoning, it would be a proper exercise of a discretionary judgment to order that an unsuccessful party whose conduct has led to increased or unnecessary costs being incurred by other parties should be ordered to pay those costs.

Determination

The Calderbank letter is annexed to the Thomas Affidavit.[28] It is clearly marked: 'Without prejudice save as to costs'. In the Calderbank letter IAG advised that it had offered to indemnify the defendant for 'its half of the school's liability (excluding exemplary damages) and half of its defence costs … up to a limit of $5 m, with no deductible'. The offer was an invitation to QBE to also grant an indemnity to the defendant in equivalent terms to that of IAG, in which case the third party proceedings against QBE and IAG would be discontinued (Offer).[29]
[28] TB pages 188 - 194.
[29] TB page 193.

The rationale underlying the Offer had two parts. The first part was set out at par 14:[30]
14.Brown has been found guilty of three counts of sexual abuse occurring during QBE's policy period and three counts of sexual abuse occurring during CU's policy period. The nature and seriousness of each of those sets of counts are comparable. It follows that half of the school's liability will arise from what happened on the Carnarvon trip and the other half of the school's liability will arise from what happened in the carpark incident. IAG's contractual liability to the school is for the proportion of the school's liability to the plaintiff that corresponds with the period during which CU underwrote the school's risks. We say that proportion should be one half.
[30] TB page 190.
The second part was a detailed argument on behalf of IGA as to why QBE's argument based on the abuse not being 'accidental' is not supported.
The Calderbank letter concludes:[31]
23.We submit that, if QBE granted indemnity to the school in terms equivalent to IAG's grant of indemnity, the school's third party proceedings against QBE and IAG would be discontinued.
24.Therefore, in the event QBE fails to match IAG's offer of contribution, being to indemnify the school subject to the terms of its policy for half of the school's liability to the plaintiff, within 14 days of the date of this letter and QBE fares no better than that at the hearing, IAG will rely on this letter on the question of third party proceeding costs and seek an order for indemnity costs, or, alternatively, solicitor/client closts, against QBE from the date of this letter.
25.At the time of seeking costs IAG will explain to the court that the failure by QBE to match IAG's offer has resulted in IAG incurring significant unnecessary costs that could otherwise have been avoided.
26.In seeking an indemnity costs order, IAG will rely upon the principles expressed in Calderbank v Calderbank [1975] ALL ER 333 and Cutts v Head [1985] 1 ALL ER 597 which has been given effect by Byrne J in Mutual Community Limited v Lorden Holdings Pty Ltd (Supreme Court of Victoria, unreported 28 April 1993) and by Gillard J in M T Associates Pty Ltd v Aqua‑Max Ltd & Anor (No. 3) [2000] VSC 163.
27.If there are any aspects of this offer that are unclear or ambiguous please contact Rick Horsley to discuss clarification before the offer lapses.
[31] TB pages 193 - 194.
The Offer was not accepted by QBE.[32]
[32] Thomas Affidavit, par 7, TB page 165.
There are three factors tending to suggest that it is appropriate to make an order in terms sought by IAG.
The first is that, as set out at [27], the Offer was expressed in very clear terms.
The second is that the Offer clearly foreshadowed an application for indemnity costs in the event of the offeree's rejecting it (again see [27]).
The third is that I accept the submission made on behalf of IAG that the 'element of compromise was obvious'.[33] Acceptance by QBE would have brought the third party proceedings to an end and obviated IAG and QBE incurring the costs of a trial. Once the main action settled, it would have also obviated the defendant incurring the costs of trial, costs which each of IAG and QBE would inevitably have had to bear (subject of course of QBE's position at trial).
[33] Second Third Party's Further Supplementary Submissions filed 16 August 2022, TB pages 160 - 161.

On the other hand, there are three factors which tend to suggest that it is not appropriate to make the order sought.
The first is that the Offer was made at what I regard as a very early stage in proceedings. The proceedings against QBE were prompted by QBE's denial of indemnity on 29 July 2020, following the defendant notifying QBE of the plaintiff's claim against it on 6 May 2020.[34] The defendant had only filed its third party notices on 31 August 2020 and its statements of claim in the third party proceedings on 30 September 2020. IAG filed its defence and notice of indemnity and contribution as against QBE on 5 October 2020. The Offer was made on 6 October 2020. It was open for a period of 14 days.
[34] Second Maker Affidavit, pars 4 - 5, TB page 172.
As at the date of the Offer, it was not clear from the defence filed 31 August 2020 that any of the instances of abuse of the plaintiff for which the defendant had then accepted liability occurred during QBE's period of risk, which relevantly ended on 23 August 1988. At that point, the defendant had only admitted the instances of abuse for which Mr Brown had been found guilty in criminal proceedings, being counts 14, 15, 16, 21, 23 and 24 of the indictment dated 30 November 2004. In this regard, in the Calderbank letter, IAG acknowledged that the school trip to Carnarvon on which counts 14, 15 and 16 took place, was in September 1998. Counts 21, 23 and 24 related to abuse during a school excursion to a celebration at a hall. According to the indictment, these offences occurred between 4 February 1988 and 16 December 1988.[35] So the indictment did not make it clear whether or not this incident occurred before 22 August 1988 (in QBE's period of risk) or after (in IAG's period of risk). IAG asserted in the Calderbank letter that according to school records, this incident in fact occurred on 28 March 1988, that is, within QBE's period of risk.[36] QBE's research was to the contrary. It submits that the discovery of the defendant, which it obtained access to on 24 September 2020, suggested that this event occurred in September 1998.[37] It was not until the defendant filed its Minute of Re‑Amended Defence on 27 November 2020 that the defendant admitted that the plaintiff was sexually assaulted during QBE's period of risk.[38] It is sufficient for me to find that as at the time the Offer was made, it was unclear whether any of the sexual assaults accepted by the defendant as having occurred, occurred within QBE's period of risk.
[35] TB page 182.
[36] TB page 190.
[37] Second Maker Affidavit, pars 11 - 14, TB page 172; First Third Party's Outline of Submissions, filed 5 August 2022, pars 10 and 11, TB page 156.
[38] Defendant's Minute of Re-Amended Defence, filed 27 November 2020, par 7, TB page 56 (admitting that Mr Brown sexually interfered with the plaintiff as alleged in par 4(a) of the statement of claim). Paragraph 4, particular (a), is an allegation of multiple instances of sexual assault 'from when the plaintiff started in grade five'.
Further, I also accept the submission by QBE that it was not until November 2020 that it was able to confer with the lay witnesses it called at trial.[39] Or put slightly differently, at the time it had to make a decision whether or not to accept the Offer, QBE had not had the opportunity to confer with any lay witnesses.
[39] Second Maker Affidavit, pars 17 - 18, TB page 173.
IAG submits that there is no evidence that any of the matters which I have identified in the previous paragraphs were in fact a basis for QBE's failure to accept the Offer.[40] However, in my view there is no obligation on a party resisting a costs order following the rejection of a Calderbank offer to identify and articulate to the offeror the specific reasons which in fact led it to reject the offer. The focus is on the objective circumstances as opposed to the subjective reasons, the question being whether the rejection of the offer was unreasonable in all the circumstances. The objective circumstances are, in my view, to the effect that the Offer was made very early in the life of the third party proceedings.
[40] Second Third Party's Further Supplementary Submissions filed 16 August 2022, TB page 160.
The second is that acceptance of the Offer would have deprived QBE of the opportunity to have the court rule on its arguments that the plaintiff's injuries were not the result of an 'accident or happening' and that the defendant had not complied with the reasonable precautions provision in the applicable policy.[41] As the trial judge observed, at one level 'it is profoundly counterintuitive to describe the injuries sustained by [the Plaintiff] as accidental'.[42] Nonetheless, the issue fell for determination as an issue of construction of the relevant contract of insurance, in the context of the applicable case law. In my view, QBE's argument on this point had some prospect of success, and it cannot be said to have acted unreasonably in taking the point. No doubt, the determination of this issue would have some wider precedential value given the number of civil cases before the courts alleging historical sexual abuse in the context of negligence by an institution.
[41] See generally: Primary Decision [172] - [179].
[42] Primary Decision [215].
I note in this regard that the policy under which IAG was liable was in clearer terms, such that the issue identified by QBE did not arise.[43]
[43] Primary Decision [268].
The decision to accept the Offer would have also required QBE to have abandoned its argument that the reasonable precautions provision had not been complied with. This was the issue which it ultimately took to the Court of Appeal. Again, in my view, QBE's argument on this point had some prospect of success, and it cannot be said to have acted unreasonably in taking the point.
IAG submitted that QBE has not identified any 'cogent and reliable evidence' that it had at the time when the Offer was made (and rejected), which it produced at trial, that justified QBE's denial of the Offer.[44] However, if there was truly 'cogent and reliable evidence' which justified the rejection of an offer, one would have expected that cogent and reliable evidence to have caused the party who rejected the offer to succeed on the point at trial, in which case the Calderbank issue would not arise. So I do not accept the relevance of the point made by IAG. Rather, the decision whether or not to accept a Calderbank offer at a particular point in the life of litigation is a nuanced one, one in which the offeree balances, among other factors, the certainty of an immediate commercial resolution with the uncertainty of what information may come to light in the balance of the pre-trial disclosure and preparation processes, and the ultimate trial conclusion. This is one reason why the decision of whether the rejection of an offer was reasonable or unreasonable always involves matters of judgment and impression.
[44] Second Third Party's Further Supplementary Submissions filed 16 August 2022, TB page 161.
The third factor is that, in my view, QBE's ultimate position at trial was not worse off than had it accepted the Offer.
On the one hand, QBE was found to be 100% liable to indemnify the defendant for the full amount of its liability, including the costs of trial. So as IAG points out in its submissions, QBE's liability was found to be more that 50%. It then argues that as QBE failed to attain the equivalent of the Offer, it was unreasonable for QBE not to have accepted the Offer, which failure resulted in IAG incurring unnecessarily costs after 6 October 2020.[45]
[45] Second Defendant's Supplementary Submissions filed 21 June 2021, pars 4 -5, TB page 153.
On the other hand, both IAG and Berkshire were also found to be 100% liable to the defendant. IAG submits that the apportionment of liability that each third party might ultimately pay the defendant (which it says would be by way of negotiation) is irrelevant. I disagree. Each third party has rights to contribution, both at law and in equity, from the others such that the default position is that each insurer would contribute an equal third towards the liability of the defendant.[46] So from a legal, and ultimately commercial, perspective, QBE's position following trial was better than under the Offer.
[46] See generally: HIH Claims Support Ltd v Insurance Australia Ltd [2011] HCA 31; (2011) 244 CLR 72 [36] - [39] (Gummow ACJ, Hayne, Crennan & Kiefel JJ); Albion Insurance Co Ltd v Government Insurance Office (NSW) [1969] HCA 55; (1969) 121 CLR 342, 350 - 351 (Kitto J).
IAG makes the point that when the Offer was made, Berkshire was not an active party to the litigation. It says that at the time of the Offer, and subsequently, any claim for contribution from Berkshire was a valuable right, or contingent right, shared by each of QBE and IAG. It adds that as the future course of the litigation revealed, both were spared the need to embark on separate litigation to establish Berkshire's liability.[47] However, in my view, this point supports QBE's position that it did not act unreasonably in rejecting the Offer at the time it was made. When considering the Offer, one uncertainty it faced was whether it would be able to claim a contribution from Berkshire, who by the time the Offer was made, had been served with a third party notice. There was also the inherent efficiency of having this issue determined in the proceeding then on foot as opposed to embarking on separate litigation. In my view, the uncertainty of the position of Berkshire at the time the Offer was made is another factor suggesting that it was not unreasonable for QBE to have rejected the Offer at the time it was made.
[47] Second Third Party's Further Supplementary Submissions, pars 12 - 14, TB pages 161 - 162.
Using the Calderbank principles as an analogical framework, I am not satisfied that QBE acted unreasonably in rejecting the Offer. The factors against coming to this conclusion which I have outlined significantly outweigh the factors in favour of it. More generally, in the circumstances as I have described them, the 'justice of the case' (to use the phrase in RSC O 19 r 12) does not require there to be an order made that QBE pay any of the costs incurred by IAG in defending the third party proceedings brought against it by the defendant. IAG has not discharged the onus on it to persuade the court to depart from what I regard as the usual costs orders in a case like the present one.

If a costs order is made, should the scale rate be increased?

In case I am later found to have incorrectly exercised my discretion as to whether a costs order should be made in favour of IAG against QBE, it is appropriate that I consider the second aspect of the Application. This is an order pursuant to Legal Profession Act 2008 (WA) s 280(2) (LPA) removing the scale limits on counsel's fees generally, as well as the fee on brief and trial hearing fees.[48]
[48] I do not need to consider whether the application is properly made pursuant to LPA s 280(2) or its replacement, Legal Profession Uniform Law Application Act 2022 (WA) s 141(3), as the latter is in identical terms and the decision would be the same under either regime.
The principles for making an order pursuant to LPA s 280(2) are well established:[49]
(a) the court must first form an opinion that the costs otherwise allowable would be inadequate and second form an opinion that such inadequacy arises because of the unusual difficulty, complexity or importance of the matter;
(b)the requirement of inadequacy will be demonstrated if the applicant shows that there is a fairly arguable case that the bill to be presented to the taxing officer may tax at an amount which is greater than the limit that would be imposed by the relevant costs determination;
(c)because the determination would ordinarily be made in advance of taxation, it is a matter of impression rather than of detailed evaluation;
(d)in regard to unusual difficulty, complexity or importance, the court can have regard to whether the work done was appropriate to the significance of the issues that arose in the litigation, to the parties or the public or to the community generally;
(e)'unusual' in LPA s 280(2) qualifies 'difficulty' only and not 'complexity' or 'importance';
(f)'unusual' means unusual having regard to what one might describe as the usual run of civil cases in the court; and
(g)having heard the matter and being familiar with the way in which the case was conducted and the issues which were litigated, the court is in a position to form the opinions required under the section as matters of impression rather than science or mathematics.
[49] Sino Iron Pty Ltd v Mineralogy Pty Ltd [No 2] [2017] WASCA 76 (S) [11] ‑ [16] (judgment of the court); Atwell v Roberts [2013] WASCA 37 (S) [15] - [17] (judgment of the court); Wainright v Barrick Gold of Australia [2014] WASCA 15 (S) [7] ‑ [9] (judgment of the court); Cape Lambert Resources Ltd v MCC Australia Sanjin Mining Pty Ltd [2013] WASCA 66 (S) [3] (judgment of the court); O'Rourke v P & B Corporation Pty Ltd [2008] WASC 36 (S) [23] (Martin CJ); Heartlink Ltd v Jones As Liquidator of HL Diagnostics Pty Ltd (in liq) [2007] WASC 254 (S) (Martin CJ) [11].
I accept from the Thomas Affidavit[50] that there is a fairly arguable case that the bill to be presented to the taxing officer may tax at an amount which is greater than the limit that would be imposed by the relevant costs determination.
[50] Thomas Affidavit, pars 15 - 17, TB pages 166 - 167.
As to whether the inadequacy arises because of the unusual difficulty, complexity or importance of the matter, it is instructive to consider the issues actually involving IAG by the time of trial.
In IAG's defence filed 5 October 2020, it (relevantly) admitted that if the defendant was 'found liable to the plaintiff for any of the Sexual assaults which occurred prior to 23 August 1988 and also for any of the Sexual assaults which occurred during the Period of Insurance, then, pursuant to the Liability insuring clause, IAG will be liable to indemnify [the defendant] for a proportion of its liability'. IAG went on to plead that, in light of the sexual assaults alleged in the statement of claim, that proportion could be no more than half. Therefore, IAG's liability under the policy could be no more than half of the costs and expenses of litigation referred to in that clause.[51]
[51] Second Third Party's Defence, filed 5 October 2020, par 13.2, TB page 36.
The same day, IAG filed a notice of indemnity and contribution in which it claimed from QBE an indemnity or contribution in respect of any liability on it to indemnify the defendant for more than half of its liability to the plaintiff. It also claimed costs from QBE.[52]
[52] Second Third Party's Notice of Indemnity and Contribution Against the First Third Party, filed 5 October 2020, TB pages 37 - 38.
In its submissions filed prior to trial, IAG reiterated that it had 'always agreed to indemnify the plaintiff for half of the amount of the defendant's liability to pay damages, being its assessment of that proportion of the defendant's liability incurred in the second third party's policy period'.[53]
[53] Second Third Party's Outline of Submissions, filed 3 December 2020, par 1, TB page 63.
The submissions go to provide that the issue of a contribution as between IAG and QBE could not be determined by the District Court:[54]
If the Court finds that more than one insurer is liable to indemnify the defendant (or pay damages for breach of contract) for any proportion of the settlement amount, the defendant may select the insurer who must pay the judgment. A claim against an insurer for non-payment of an indemnity under an unvalued contract of insurance has been said to be a claim for damages for breach of contract …
Insurers who have been found liable to indemnify the defendant insured in respect of a common liability (or to pay the equivalent in damages for breach of contract), and thereby bear a common liability to the insured, are required to share the burden of the common liability. An insurer that has paid more than its share is entitled to recover contribution from another insurer who carries the common liability. This ensures that the insured is only paid once …
IAG submits that the Court does not have jurisdiction to determine, but it is not necessary for the Court to determine, a contribution claim. If any question of contribution is not resolved by agreement it will require determination by proceedings in the Supreme Court. The findings made in the third party proceedings will found any future claim for contribution.
[54] Second Third Party's Outline of Submissions, filed 3 December 2020, pars 2 - 4 (references omitted), TB page 63.

In its written closing submissions, IAG repeated its argument that the defendant's liability was not indivisible. Rather, each assault was an 'actionable injury with its own consequences'.[55] The alternate was also identified:[56]
If no distinction is drawn between assaults as injuries, or series of injuries, and each assault is viewed as cumulatively and indistinguishably contributing to one indivisible loss, then quantum of the liability for the first series of assaults will be the same as quantum of the liability for the second series of assaults. In each case quantum would be the total amount of the defendant's liability. That liability to the plaintiff would be a liability within the insuring clause of the QBE policy and a liability within the insuring clause of the IAG policy. Each of QBE and IAG would bear a common liability to the defendant.
The submissions went on to address the two issues which QBE had raised as to why it was not liable to indemnify the defendant, in effect adopting the position of the defendant.
[55] Second Third party, Outline of Submissions filed 9 December 2020, par 8, TB page 70.
[56] Second Third party, Outline of Submissions filed 9 December 2020, par 11, TB page 71.
In summary, IAG's position at trial was to argue that:
(a)the plaintiff's losses were not indivisible, so that it was possible, and appropriate, to limit its liability to half of the losses and expenses incurred by the defendant; and
(b)QBE was liable to the defendant for the other half of those losses.
The first issue was a short point, evidenced by the trial judge addressing it in seven paragraphs.[57] This finding was not the subject of appeal, indicating that IAG did not consider the finding to be attended with sufficient doubt, difficulty, complexity or importance to warrant appellate reconsideration in the appeal which had already been commenced by QBE.[58] Having reached that conclusion, his Honour observed:[59]
In the light of my finding that [the plaintiff's] psychiatric disorders are to be regarded as a single indivisible injury, and subject to any contribution claims, I therefore do not understand there to be any issues to be resolved between IAG and the defendant and the other third parties.
[57] Primary Decision [164] - [170].
[58] QBE Insurance (Australia) Limited v BB [14].
[59] Primary Decision [188].
As regards the second point, IAG's position and submissions in effect mirrored those of the defendant.
So limited, I do not consider that the issues actually in dispute in the third party proceedings as regards IAG could be characterised as being unusually difficult, complex or important having regard to the usual run of civil cases in the District Court so as to justify removing the scale limits.
So had it been necessary for me to consider IAG's application to remove the scale limits, I would have declined to do so.

What orders are appropriate?

For the reasons which I have set out above, the appropriate final orders are that:
1.The second third party's application (Application) for costs as against the first third party set out in the second third party's minute of proposed orders dated 16 June 2021 is dismissed.
2.Subject to order 3, the second third party pay the first third party's costs of the Application to be taxed if not agreed.
3.The parties have liberty to apply in relation to order 2, the liberty to be exercised by letter to the court to be received no later than seven days after the date of this order.

I certify that the preceding paragraph(s) comprise the reasons for decision of the District Court of Western Australia.
LL
Associate
2 SEPTEMBER 2022