Boylan Nominees Pty Ltd v Williams Refrigeration Australia Pty Ltd

[2006] NSWCA 100

Reported Decision: 65 NSWLR 717

Court of Appeal

CITATION:	Boylan Nominees Pty Ltd v Williams Refrigeration Australia Pty Ltd [2006] NSWCA 100 This decision has been amended. Please see the end of the judgment for a list of the amendments.
HEARING DATE(S):	6 April 2006
JUDGMENT DATE:	30 May 2006
JUDGMENT OF:	Beazley JA at 1; Tobias JA at 2; Basten JA at 82
DECISION:	(a) Leave to appeal granted upon condition that the claimant file its notice of appeal within seven days of the date hereof; (b) Appeal dismissed; (c) The claimant to pay the opponent’s costs of the summons for leave to appeal and of the appeal
CATCHWORDS:	PERSONAL INJURY – negligence – damages – cross-claim for contribution - DAMAGES – negligence – award of personal injury damages – award overturned on appeal - STATUTORY CONSTUCTION – Legal Profession Act 1987 s198C and s198D –whether a cross-defendant is a “defendant” for the purposes of s198C – whether legal services provided to cross-defendant are provided “in connection with” a claim for personal injury damages for the purposes of s198D – whether a verdict for a defendant is an “award” of damages for the purposes of s198D - COSTS – costs cap in Legal Profession Act 1987 s198D – whether cap applies to costs incurred by a cross-defendant – whether cap applies when defendant is successful - WORDS AND PHRASES – “defendant” – “in connection with” – “award”
LEGISLATION CITED:	Administrative Decisions (Judicial Review) Act 1977 (Cth) Civil Liability Act 2002 Legal Profession Act 1987 Legal Profession Act 2004 Law Reform (Miscellaneous Provisions) Act 1946 Motor Vehicles Insurance Act 1936 (Qld)
CASES CITED:	Allianz Australia Ltd v Wentworthville Real Estate Pty Ltd (2004) NSWCA 100 Boylan Nominees Pty Ltd v Sweeney [2005] NSWCA 8 Boylan Nominees Pty Ltd v Williams Refrigeration Australia Pty Ltd [2005] NSWSC 469 Brown v Rezitis (1970) 127 CLR 157 Collector of Customs v Pozzolanic Enterprises Pty Ltd (1993) 43 FCR 280 Genders v Government Insurance Office of New South Wales (1959) 102 CLR 363 GIO v Crittenden (1966) 117 CLR 412 Groth v Audet [2006] NSWCA 48 Maria Sweeney v Boylan Nominees Pty Ltd [2006] HCA 19 Newcastle City Council v Travis McShane (No 3) [2005] NSWCA 437 Nickels v Parks (1948) 49 SR(NSW) 124 Our Town FM Pty Ltd v Australian Broadcasting Tribunal (1987) 16 FCR 465 Rolls Royce Industrial Power (Pacific Ltd) v James Hardie & Coy Pty Ltd (2001) 53 NSWLR 626 State of New South Wales v Mastronardi [2003] NSWCA 72 Technical Products Pty Ltd v State Government Insurance Office (Qld) (1988) 167 CLR 45 Unsworth v Commissioner for Railways (1958) 101 CLR 73 Walton v National Employers’ Mutual General Insurance Association Ltd [1973] 2 NSWLR 73
PARTIES:	Boylan Nominees Pty Ltd Williams Refrigeration Australia Pty Ltd
FILE NUMBER(S):	CA 40485/05
COUNSEL:	Cl: N Chen Opp: B Coles / C Carroll
SOLICITORS:	Cl: Holman Webb Lawyers, Sydney Opp: Michael Samios, Lawyer, Sydney
LOWER COURT JURISDICTION:	Supreme Court - Equity Division
LOWER COURT FILE NUMBER(S):	SC 14270/04
LOWER COURT JUDICIAL OFFICER:	Master Malpass
LOWER COURT DATE OF DECISION:	20/06/3006
LOWER COURT MEDIUM NEUTRAL CITATION:	Boylan Nominees Pty Ltd v Williams Refrigeration Australia Pty Ltd [2005] NSWSC 469

CA 40485/05
SC 14270/04

BEAZLEY JA
TOBIAS JA
BASTEN JA

Tuesday 30 May 2006

BOYLAN NOMINEES PTY LIMITED v WILLIAMS REFRIGERATION AUSTRALIA PTY LIMITED

Facts:

A plaintiff commenced proceedings against the claimant, seeking damages for negligence. The claimant brought a cross-claim for contribution against the opponent. The opponent successfully defended the cross-claim, and the claimant was ordered to pay the opponent’s costs.

The plaintiff was initially awarded $43,932, although the award was ultimately overturned on appeal and judgment was entered for the claimant. The claimant argued that the opponent’s costs in relation to the cross-claim were capped by Division 5B of the Legal Profession Act 1987 (which has now been replaced by Division 9 of the Legal Profession Act 2004). Section 198D(1) provided that:

If the amount recovered on a claim for personal injury damages does not exceed $100,000, the maximum costs for legal services provided to a party in connection with the claim are fixed as follows:
(a) in the case of legal services provided to a plaintiff maximum costs are fixed at 20% of the amount recovered or $10,000, whichever is greater,
(b) in the case of legal services provided to a defendant maximum costs are fixed at 20% of the amount sought to be recovered by the plaintiff or $10,000, whichever is greater.

Section 198C(1) stated that, for the purposes of Division 5B:

defendant means a person against whom a claim for personal injury damages is or may be made.
party means plaintiff or defendant.
personal injury damages has the same meaning as in Part 2 of the Civil Liability Act 2002 .
plaintiff means a person who makes or is entitled to make a claim for personal injury damages.

Held, granting leave to appeal and dismissing the appeal with costs:

Per Tobias JA, Beazley and Basten JJA agreeing

1. If a plaintiff is unsuccessful in a claim for personal injury damages, there is no “amount recovered” for the purposes of s198D(1). Thus, the costs cap in s198D will not apply to any party to the proceedings if there is a verdict for the defendant: [72], [107].

2. Section 198D was intended to restrict the costs payable to the legal profession in the case of properly advanced or defended small claims, whether or not they proceeded to litigation. (Per Tobias JA, Beazley JA agreeing) The word “defendant” in s198C(1) therefore includes a person against whom a claim for personal injury damages had only been foreshadowed. (Per Basten JA) A claim may be “made” without the institution of legal proceedings: [26], [32], [91]-[92].

Per Tobias JA, Beazley JA agreeing

3. The definition of “defendant” in s198C(1) does not include a cross-defendant to proceedings for contribution. Accordingly, the costs cap provided by s198D(1) does not extend to cross-claims made against third parties: [48], [53].

4. The definitions of “plaintiff” and “defendant”, as they appeared in ss198C(1), must be construed in a way that reflects relationship between a “plaintiff” as defined and a “defendant” as defined. The necessary connection is not made simply because a plaintiff may theoretically have made a claim for damages or instituted proceedings against a third party: [33].

5. The phrase “entitled to make a claim” in s198C(1) must mean more than that a person has a theoretical claim against another person, or that the claim is the subject of a non-demurrable pleading. The phrase must also mean more than that an existing defendant was prepared to institute a cross-claim against that other person. However, it would not be necessary to demonstrate that the potential plaintiff would be successful in making such a claim: [33], [42]–[43].

6. The words “in connection with” do not extend s198D(1) to cover the costs of legal services provided to a person who was not one against whom an injured person had in fact made a claim for personal injury damages: [63]–[65].

7. Although that the costs cap in 198D(1) would not apply to the costs of a cross-defendant, the cap would apply to costs incurred by a defendant who pursued such a cross-claim: [50], [52]. Newcastle City Council v Travis McShane (No 3) [2005] NSWCA 437 referred to.

Per Basten JA (dissenting)

8. The phrase “entitled to make a claim” in s198C(1) implies that such a claim must be bona fide, more than merely colourable, but not necessarily that it have reasonable prospects of success: [96].

9. If proceedings were instituted after the introduction of, and in accordance with, Part 5C, it can be assumed that a claim would have had reasonable prospects of success: [96].

10. A cross-defendant who is properly sued for contribution by a defendant to a personal injury damages claim would necessarily be another tort-feasor who would be liable to the plaintiff if sued directly by him or her. The definitions of “party” and “defendant” in s198C(1) would thus include a cross-defendant to a claim for contribution: [99].

11. The concept of entitlement does not require a potential plaintiff to have knowledge of the entitlement, or to have assessed the prospects of success: [96].

12. The phrase “in connection with a claim” is broad enough that the costs of a cross-claim can be considered costs incurred “in connection with” the claim for the purposes of s198D(1): [103]-[104]. Newcastle City Council v Travis McShane (No 3) [2005] NSWCA 437 considered.

CA 40485/05
SC 14270/04

BEAZLEY JA
TOBIAS JA
BASTEN JA

Tuesday 30 May 2006

BOYLAN NOMINEES PTY LIMITED v WILLIAMS REFRIGERATION AUSTRALIA PTY LIMITED

Judgment

1 BEAZLEY JA: I agree with Tobias JA.

2 TOBIAS JA: The task now before the Court is to determine the proper construction of two aspects of the Legal Profession Act 1987 (the Act). The first is the definition of “defendant” in s198C(1) of the Act, and the second is the meaning of the phrase “a maximum cost for legal services provided to a party in connection with the claim”, which appears in s198D(1). The Act has now been superseded by the Legal Profession Act 2004, and ss198C and 198D of the 1987 Act have been replaced, respectively, by ss337 and 338 of the 2004 Act in identical terms.

3 These expressions must be construed in order to resolve two questions that arise from the facts of this case. The first is whether the opponent, Williams Refrigeration Australia Pty Limited (Williams), was a “defendant” within the meaning of s198C(1) when it was the cross-defendant to a cross-claim by the claimant, Boylan Nominees Pty Limited (Boylan), for contribution claimed pursuant to s5(1)(c) of the Law Reform (Miscellaneous Provisions) Act 1946 (Law Reform Act). The second is whether the legal services provided by Williams’ solicitors and counsel with respect to that cross-claim were “in connection with” the claim for personal injury damages within the meaning of the chapeau to s198D(1).

4 Associate Justice Malpass (the primary judge) did not answer the first question in his judgment of 20 May 2005. His Honour answered the second question in the negative and, as a consequence, Williams had its costs of the cross-claim assessed pursuant to Division 6 of Part 11 of the Act, without reference to the costs cap provided by s198D(1)(b) of the Act. Boylan now seeks leave to appeal to this Court against that decision. The substantive appeal and leave application were heard concurrently.

The relevant background

5 On 2 August 2000, Mrs Maria Sweeney attended the BP Service Station at West Pymble. She refuelled her car and then entered the convenience store inside the service station to pay for her petrol and to purchase some milk. After taking a carton of milk from a refrigerator cabinet at the rear of the store, she closed the refrigerator door and turned towards the counter at the front of the store. At this point, the door came off its hinges and struck her head, causing her injury.

6 Mrs Sweeney commenced proceedings for damages against two defendants. These were the proprietors of the service station and Boylan, who provided maintenance services for the refrigeration unit. Boylan then instituted a cross-claim against Williams, the manufacturer of the unit, seeking contribution as between tort-feasors pursuant to s5(1)(c) of the Law Reform Act.

7 The proceedings were heard in the District Court by Robison DCJ (the trial judge). His Honour dismissed Mrs Sweeney’s claim against the proprietors of the service station but upheld her claim against Boylan on the basis that it had breached its duty of care to her. His Honour assessed her damages in the sum of $43,932 and entered a verdict in her favour for that amount.

8 Boylan appealed to this Court against that judgment. On 18 February 2005 the Court upheld the appeal (Boylan Nominees Pty Ltd v Sweeney [2005] NSWCA 8), set aside the judgment and verdict in favour of Mrs Sweeney and in lieu thereof ordered judgment and a verdict in favour of Boylan. The High Court of Australia granted Mrs Sweeney special leave to appeal against that decision on 2 September 2005. However, the appeal was dismissed by a majority consisting of Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ (Kirby J dissenting) in a judgment delivered on 16 May 2006: Maria Sweeney v Boylan Nominees Pty Ltd [2006] HCA 19.

9 The trial judge dismissed Boylan’s cross-claim against Williams and ordered Boylan to pay Williams’ costs. On 19 May 2004 Williams applied to the trial judge for an order pursuant to s198G of the Act excluding the legal services provided to Williams with respect to its defence of the cross-claim from the operation of Division 5B, which provided for maximum costs in personal injury damages matters. That application was unsuccessful.

10 Accordingly, Williams prepared and submitted a bill of costs for assessment by a Costs Assessor appointed under the Act. Williams contended before the Costs Assessor that its costs with respect to defending Boylan’s cross-claim for contribution were at large (subject to them being fair and reasonable) and were not subject to the costs cap imposed by s198D(1)(b). Boylan opposed that argument. The Costs Assessor accepted Williams’ submission and assessed its costs without reference to Division 5B of the Act. Pursuant to s208L of the Act, Boylan by summons appealed the decision of the Costs Assessor, alleging that he had erred with respect to a matter of law arising in the proceedings before him. The primary judge dismissed the summons and Boylan now seeks to appeal that decision.

The relevant statutory provisions

11 The relevant provisions of Division 5B of the Act are as follows:

“ 198C Interpretation and application

(1) In this Division:

defendant means a person against whom a claim for personal injury damages is or may be made.

party means plaintiff or defendant.

personal injury damages has the same meaning as in Part 2 of the Civil Liability Act 2002.

plaintiff means a person who makes or is entitled to make a claim for personal injury damages.
…
198D Maximum costs fixed for claims up to $100,000
(1) If the amount recovered on a claim for personal injury damages does not exceed $100,000, the maximum costs for legal services provided to a party in connection with the claim are fixed as follows:
(a) in the case of legal services provided to a plaintiff maximum costs are fixed at 20% of the amount recovered or $10,000, whichever is greater,
(b) in the case of legal services provided to a defendant maximum costs are fixed at 20% of the amount sought to be recovered by the plaintiff or $10,000, whichever is greater.
…
(4) When the maximum costs for legal services provided to a party are fixed by this Division the following provisions apply (subject to sections 198E-198G):
…

(b) a court or tribunal cannot order the payment by another party to the claim of costs in respect of those legal services in an amount that exceeds that maximum,

(c) in assessing the amount of those costs that is a fair and reasonable amount, a costs assessor cannot determine an amount that exceeds the maximum set by this section.
…
(6) If proceedings are commenced on a claim, the amount sought to be recovered by the plaintiff is taken to be the amount sought to be proved by the plaintiff at the hearing of the claim.
…
198I Meaning of ‘amount recovered’ on a claim
(1) A reference in this Division to the amount recovered on a claim includes any amount paid under a compromise or settlement of the claim (whether or not legal proceedings have been instituted).
(2) In determining the amount recovered on a claim for personal injury damages, no regard is to be had to any part of the amount recovered that is attributable to costs or to the addition of interest.”

12 The expression “personal injury damages” is defined in s11 of Part 2 of the Civil Liability Act 2002 as relevantly meaning:

“damages that relate to … injury to a person”


and “ injury ” is defined to mean personal injury.

The determination of the Costs Assessor

13 The Costs Assessor made his determination on 30 November 2004. He set out the following written reasons for holding that Division 5B did not restrict the costs he was requested to assess:

“It is my view that the Legal Profession Act does not apply to the costs orders in the present case.
If the Legal Profession Act were to apply to the present case, then a defendant could simply issue claims against possible cross-defendant with the belief that at worst, each claim would result in $10,000.00 in costs being payable. This must be a logical extension of applying the words ‘or may be made’, as provided in s198C of the Legal Profession Act .
It seems to me that the Legal Profession Act has been enacted with particular reference to claims brought by plaintiffs and consequential cost orders related to such a claim being made. Regard can be had to the second reading speeches insofar as they may be relevant.
Insofar as it is necessary to decide, I am of the opinion that a claim for contribution is not one that is otherwise caught by a claim for personal injury damages.”

14 Division 5B was inserted into Part 11 of the Act by a schedule to the Civil Liability Act 2002. It was common ground that the Second Reading speeches with respect to that Act did not directly assist the construction exercise that was to be undertaken in this appeal. Nevertheless, there is authority based on those speeches with respect to the object or purpose of the restrictions contained in Division 5B to which I shall refer later in these reasons.

The reasoning of the primary judge

15 Boylan contended before the primary judge that Williams was a “defendant” within the meaning of that term in s198C(1) of the Act. It was argued that this was because that section defined “defendant” as a person against whom a claim for personal injury damages “may be” made and that Mrs Sweeney could have made and was entitled to make such a claim against Williams as a joint tortfeasor with Boylan.

16 However, the primary judge did not consider it necessary to determine this question of construction. Rather, he concluded (at [15]) that the opening words of s198D(1) made it clear that the provision

“was intended to operate to impose maximum costs only in respect of those legal services provided to a party in connection with a claim for personal injury damages.”

In the present case that requirement was not satisfied as the relevant legal services were not provided to Williams “ in connection with ” such a claim. On the contrary, his Honour noted (at [17]) that,

“[t]he legal services which were the subject of the costs order and the costs dispute were provided to a party [Williams] in connection with the cross-claim for contribution.”

17 The primary judge was referred to authorities that established that a claim for contribution was of a different character to a claim for damages for personal injury. Thus, according to his Honour, the claims of Mrs Sweeney in her originating process and those of Boylan in the cross-claim were separate and independent, involving different parties, notwithstanding the fact that both might be propounded in the same proceedings.

18 Accordingly, the legal services provided to Williams and which were the subject of dispute were not “services provided to a party in connection with [a] claim” for personal injury damages as required by s198D(1).

The parties’ contentions and their resolution: was Williams a “ defendant ” within the meaning of s198C(1) of the Act?

19 Boylan submitted that the primary judge should have begun by asking himself whether Williams was a “defendant” within the definition of that term in s198C(1). If the answer to that question was in the affirmative, his Honour should then have considered a second question, which was whether the relevant legal services were provided to Williams “in connection with” a claim for personal injury damages, in respect of which the amount recovered did not exceed $100,000, within the meaning of s198D(1).

20 In one sense this submission is correct. The question concerning s198D(1) was irrelevant because the antecedent question was whether the party in respect of whom the relevant legal services had been provided was either a “plaintiff” or a “defendant” within the definition of those terms in s198C(1). However, I see no reason why the second question could not be answered on the assumption that the first question was answered in the affirmative. This appears to have been what the primary judge did, and I see no error in such an approach.

21 Returning to the question of whether Williams did fall within the definition of “defendant”, Boylan submitted that that definition was sufficiently wide to include Williams as a person against whom a claim for personal injury damages “may be made” by Mrs Sweeney. Given that Williams was the manufacturer of the refrigerator door that injured Mrs Sweeney, there could be no doubt, so it was contended, that Williams was a person against whom Mrs Sweeney could have claimed personal injury damages. There was a sufficient connection between the manner in which she was injured and the fact that Williams manufactured the refrigerator to qualify Williams as a person against whom such a claim “may be made”.

22 Furthermore, given the definition of “plaintiff” in s198C(1), Boylan argued that Mrs Sweeney was a person who was “entitled to make a claim for personal injury damages” against Williams. It therefore followed that Williams was a “party” for the purpose of the chapeau to s198D(1).

23 Williams responded to these contentions in the following way. First, it was submitted that the proper construction of the phrase “may be made” contained an implicit assumption that such a claim would have reasonable prospects of success. An interpretation that might include any potential claim no matter how groundless or untenable, and which “may be made” against the world at large, would give a ridiculous and unintended meaning to the definition. Further, such an interpretation would be inconsistent with the provisions of Division 5C of the Act, which were inserted into the Act at the same time as Division 5B. It was submitted that these provisions limited the legal services provided by a solicitor or barrister on, or in defence of, a claim for damages to those based on provable facts and a reasonably arguable view of the law such that the solicitor or barrister reasonably believed that the claim or defence (as the case may be) had reasonable prospects of success: see s198J(1) of the Act.

24 In the present case it was submitted that Mrs Sweeney not only did not make a claim for personal injury damages against Williams but was also not “entitled to make” such a claim as it would not have had reasonable prospects of success. This was so because Boylan’s cross-claim pleading negligence and breach of statutory warranties under the Sale of Goods Act 1923 by Williams was ultimately unsuccessful. Although Williams called evidence and tendered an expert report at the trial, it appears that Boylan did not elicit any evidence in support of its cross-claim for contribution.

25 There is a difficulty with this aspect of Williams’ argument in that it is appropriate to assume that, pursuant to s198L(2) of the Act, the solicitor who filed the cross-claim certified that there were reasonable grounds for believing, on the basis of provable facts and a reasonably arguable view of the law, that the cross-claim had reasonable prospects of success. Although the cross-claim did not ultimately succeed, this cannot detract from the fact (which I have assumed) that the appropriate certificate was filed as part of the originating process when the cross-claim was filed in the Registry. It should also be observed that it is problematic to suggest that the question of whether an action had reasonable prospects of success should be answered by reference to the actual outcome of the action. If that was the case, any legal practitioner who provided services to an unsuccessful party to personal injury litigation could be liable for unsatisfactory professional conduct under the provisions of Division 5C. Rather, the true test for reasonable prospects of success turns on whether there was, at the time court proceedings were commenced, a reasonably arguable case that could support either an action or the defence of an action. The failure of an action (or defence) does not necessarily indicate that there was no reasonably arguable case when the action (or defence) was commenced. Similarly, a reasonably arguable case will not always lead the court to adopt the outcome that is sought.

26 In any event, Division 5C was inserted into the Act for quite a different purpose than Division 5B: see Groth v Audet [2006] NSWCA 48 at [33(e)]. Division 5C was inserted to regulate the conduct of the legal profession in the commencement or defence of court proceedings. Division 5B was intended to restrict the costs payable to the profession in the case of properly advanced or defended small claims, irrespective of whether they are the subject of court proceedings.

27 Williams further submitted that it could not be correct that the phrase “or may be made” in the definition of “defendant” in s198C(1) should require a costs assessor to make an enquiry as to the bona fides of any such claim, let alone an enquiry as to whether such a claim would be arguable. Accordingly, so it was contended, the words “or may be made” were included in the definition of “defendant” so that legal costs incurred by a person before they were joined as a defendant to legal proceedings also fell within the restrictions contained in s198D(1)(b). In the absence of those words, it would be possible to argue that the limitations in that provision only commenced to operate when the person to whom legal services were provided was so joined.

28 This submission derives some support from the obiter remarks of Mason P, with whom Giles JA and Hunt AJA agreed, in Newcastle City Council v Travis McShane (No 3) [2005] NSWCA 437 at [15]. The President made a number of what he referred to as “general observations” with respect to the issues thrown up by Division 5B of the Act. Relevantly, his Honour observed:

“The Division is not restricted to costs for legal services incurred in and after commencement of court proceedings. The word ‘plaintiff’ is given an extended definition in s198C(1) referable to a person who makes or is entitled to make a claim for personal injury damages. A claim may be made and disposed of without proceedings (see the opening words of s198D(6) and s198I. See also Walton v National Employers’ Mutual General Insurance Association Ltd [1973] 2 NSWLR 73 at 82, State of New South Wales v Mastronardi [2003] NSWCA 72 at [25].).”

29 His Honour’s reference to Walton relates to a statement made by Bowen JA (at 82) that the word “claim” was used in the insurance policy there under consideration:

“in its primary sense of a demand for something as due, an assertion of a right to something. It imports the assertion, demand, or challenge of something as a right.”

30 The President’s reference to Mastronardi is, I think, more in point. The case concerned the construction of certain provisions of the Civil Liability Act 2002. Spigelman CJ, with whom Handley JA and Young CJ in Eq agreed, noted (at [8]) that the word “claim” was not defined in that Act, although the word “claimant” was defined, in its original text, in the following terms:

“claimant means a person who makes or is entitled to make a claim for personal injury damages.”

It will be noted that this definition is identical to that provided for the word “ plaintiff ” in s198C(1) of the Act.

31 The Chief Justice (at [25]) considered that the concept in the originally enacted definition of “claimant” in the Civil Liability Act:

“indicates reference to a person who not only makes but also a person who is entitled to make a claim for personal injury damages. The expansion of the idea of a ‘claim’ to encompass a person entitled to make a ‘claim’ suggests that where used in the Act, the word was intended to encompass persons who had not yet instituted proceedings.” (emphasis in the original)

32 It was submitted that the same reasoning should apply to the extended definition of “defendant” in s198C(1) upon the basis that the definitions of “plaintiff” and “defendant” were two sides of the same coin. There was no reason to give a different construction to the one rather than the other. Accordingly, so it was submitted, the word “defendant” was given an extended definition in s198C(1) in order to render it applicable not only to a person against whom a claim for personal injury damages was in fact made, but also to a person against whom such a claim had only been foreshadowed by a person entitled to make such a claim (that is, a “plaintiff” as defined). In other words, a person could be a “defendant” even though a claim for personal injury damages had not yet been actually made against that person, irrespective of whether the claim was ultimately resolved through formal proceedings instituted in a court or pursuant to an agreement to arbitrate.

33 If the foregoing analysis is correct, as I think it is, then there needs to be some link or relationship between a “plaintiff” as defined and a “defendant” as defined, that is, between the person who is entitled to make a claim for personal injury damages and the person against whom such a claim may be made. Relevantly to the facts of this case, there needed to be some factual scenario whereby the plaintiff, Mrs Sweeney, foreshadowed a claim for personal injury damages against Williams and, on the other side of the coin, Williams apprehended the making of such a claim. The necessary connection is not made, in my view, simply because Mrs Sweeney might theoretically have made a claim for such damages and/or instituted proceedings against Williams. There was no evidence that she ever contemplated making any such claim against Williams.

34 Nevertheless, the cross-claim was for contribution pursuant to s5(1)(c) of the Law Reform Act. Boylan therefore submitted that a condition precedent to the success of any such claim was that Williams was a joint or several tortfeasor “who is, or, would if sued have been, liable in respect of the same damage”. In other words, Williams would have been liable for Mrs Sweeney’s injuries if it had been sued by her. It followed, so it was contended, that Williams was a person against whom a claim for Mrs Sweeney’s injuries “may be made” by her.

35 The question, then, is whether Mrs Sweeney was “entitled” to make such a claim for personal injury damages against Williams. If she was, then according to Boylan’s submissions, Williams might properly be a person against whom a claim for personal injuries damages “may be made”. There is some difficulty with this proposition given that the italicised words are in the present tense but I will leave that to one side.

36 To establish the proposition for which it contends, Boylan needs to persuade the Court that because a claim for contribution was in fact made against Williams, upon the basis that it would have been liable in respect of Mrs Sweeney’s damage if she had sued Williams, Mrs Sweeney was a person who was “entitled” to make a claim for that same damage against Williams.

37 The expression “personal injury damages” is defined in terms of damages that relate to the injury to a person. However, when used in the context of Division 5B of the Act, the expression must refer to damages that relate to the injury to a person who, relevantly, is “entitled” to make a claim for such injury. Such a claim must be one which the injured person is “entitled” to make against another person, who by dint of the definition of the word in s198C(1), is a “defendant”.

38 I have had the benefit of reading in draft the judgment of Basten JA. In [99], his Honour has concluded, firstly, that there is a correlation between the definition of “plaintiff” and “defendant” in s198C(1), a proposition with which I agree. Secondly, Basten JA has held that

“a cross-defendant, who, if properly sued by the defendant [to a plaintiff’s action] (bona fide and in compliance with Division 5C – see [15] above) must, for the purposes of s 5(1)(c) of the [Law Reform] Act, be another tortfeasor and who would, if sued by the plaintiff, have been liable to her, falls within the concept of a person whom the plaintiff was entitled to sue”

and is thus a “ defendant ” as defined. In other words, as I understand his Honour’s reasoning, a cross-defendant sued for contribution pursuant to s5(1)(c) of the Law Reform Act would be a “ defendant ” within the meaning of s198C(1) because it would fall within the concept of a person against whom the plaintiff was “ entitled ” to bring an action. This is so because a cross-defendant could only be “ properly sued ” by a defendant to a plaintiff’s action if it was alleged to be a another tortfeasor who, if sued by the plaintiff, would be liable to that plaintiff.

39 With respect, I have some difficulty with this second proposition, and particularly with his Honour’s use of the phrase “if properly sued”. According to his Honour, this phrase means that an action has been commenced against a cross-defendant bona fide and in compliance with Division 5C, that is, in the belief that the action has reasonable prospects of success, it not being sufficient that such an action is merely colourable.

40 However, this reasoning is problematic where only a claim has been or may be made, and court proceedings have not been commenced. In such a circumstance no question of compliance with Division 5C arises. How, therefore, does one determine whether the claim is “bona fide” and not merely colourable? Is it the claim of the defendant/cross-claimant that must be “bona fide”? Or, in a claim for contribution under the Law Reform Act, must it be established that, if the plaintiff had made a claim against the cross-defendant, that claim was “bona fide”? A costs assessor would need to answer these questions in order to determine whether the Division 5B costs cap would apply. This would, at the very least, require the assessor to consider the merits of the claim; in other words, to conduct some sort of mini-trial. Likewise, the costs assessor would need to assess whether or not the claim would exceed $100,000. I do not believe that this was the intention of the legislature in enacting Division 5B of the Act.

41 It is nevertheless true that in one sense Williams was “properly sued” by Boylan insofar as the cross-claim was, I assume, properly pleaded by reference to s5(1)(c) of the Law Reform Act in that it disclosed on its face a cause of action for contribution pursuant to that provision. But there is a difference, I think, between a person being “properly sued” in this sense, and a claim against the person being “properly pleaded” in the sense that the pleading discloses a reasonable cause of action. In any event, these considerations are irrelevant where there is only a bare claim.

42 Furthermore, it does not necessarily follow that Mrs Sweeney was “entitled” to sue Williams herself merely because Boylan sued Williams upon the basis that Williams would have been liable to Mrs Sweeney if sued by her. As Basten JA points out in [92] of his judgment, a person against whom a claim may be made is one who may be legally liable for the relevant injury. As I have observed in [33] above, the word “entitle” must mean more than that a person has a theoretical claim against another person. It also requires more than that claim is the subject of a non-demurrable pleading. Accordingly, in my opinion, it must be tested and not merely assumed that a plaintiff would have been “entitled” to make a claim against a given cross-defendant.

43 In the context of the facts of this case, I am content to adopt the proposition that if she was to be entitled to make a claim against Williams, Mrs Sweeney would need to have established more than that she could have made a demand on Williams or joined it as a defendant in the proceedings she in fact instituted, notwithstanding that she would not have needed to establish that she would be successful in making such a claim. Understandably, no attempt appears to have been made before the Costs Assessor to establish that Mrs Sweeney would have had, at least, an arguable or “bona fide” claim against Williams.

44 Again, the question to be determined is this: just how far must Boylan have gone to establish that Mrs Sweeney was “entitled” to make a claim against Williams? Was it required to establish that she had an arguable case against Williams on the merits? Given that it instituted the cross-claim, Boylan must have thought so, particularly as one can assume that its solicitors provided a certificate, as required by s198(2), that the cross-claim had reasonable prospects of success. But it does not necessarily follow that Mrs Sweeney would have been of the same view.

45 To answer the question posed involves difficult questions of construction that receive little, if any, guidance from either the text or context of Division 5B. Perhaps the answer is that which I have adumbrated in [33] above in that there must be some link or relationship between the person entitled to make a claim and the person against whom such a claim is entitled to be made, which is capable of creating a legal liability of the latter to the former. But again, such a response raises more questions than it answers.

46 If this is the correct approach to the issue (rather than the temporal approach referred to in [27]-[32] above, which I prefer), then in my opinion, and given the manner in which Mrs Sweeney apparently sustained her injuries, the mere fact that Williams was the original manufacturer of the refrigeration unit did not of itself create a sufficient relationship between it and Mrs Sweeney to satisfy the requirement that she was “entitled” to make a claim against Williams.

47 The foregoing reasons, coupled with what I regard to be the true purpose or objective of the extended definition of the words “defendant” and “plaintiff” in s190C(1), support the conclusion that Williams was not a “defendant” in the relevant sense, vis-à-vis Mrs Sweeney as a “plaintiff”, merely because Williams was made a cross-defendant by Boylan to a claim for contribution under s5(1)(c) of the Law Reform Act.

48 It therefore follows that I would uphold Williams’ contention that it was not a “defendant” within the meaning of that word in s198C(1). For that reason alone the costs of the legal services provided in defence of the cross-claim for contribution were not restricted by s198D(1)(b) of the Act.

Were the legal services provided to Williams “ in connection with ” Mrs Sweeney’s claim for personal injury damages?

49 Mason P made an observation relevant to this issue in Travis McShane (at [15]). He said:

“… s198D(1) addresses the costs of both ‘ plaintiff ’ and ‘ defendant ’. These terms would not appear to embrace the costs of third parties joined in the proceedings, which is not the same as saying that the Division does not extend to include the plaintiff’s and defendant’s costs referable to third party proceedings for contribution or indemnity. Master Malpass has held the provision inapplicable to costs incurred on a cross claim for contribution ( Boylan Nominees Pty Ltd v Williams Refrigeration Australia Pty Ltd [2005] NSWSC 469).”

50 I understand the learned President to be saying in the above passage that the definition of “defendant” cannot include a third party or cross-defendant to proceedings for contribution or indemnity. On the other hand, a defendant/cross-claimant’s costs referrable to such third party proceedings may well be subject to the restriction in s198D(1). Of course, given the present appeal, his Honour’s reference to the primary judge’s decision in this case does not, and was not intended to, give that decision this Court’s imprimatur.

51 It was suggested in argument that if the President intended to support that construction, the result would be that a cross-claimant’s costs with respect to the cross-claim for contribution would be limited by s198D(1), while a cross-defendant would be entitled to its costs at large. This result, it was contended, would be illogical.

52 With respect to those who may differ, I do not see that there is any illogic or inconsistency in such a result. In this respect, it must be remembered that Division 5B is concerned with the cost of legal services provided to a plaintiff or defendant where the amount recovered on a claim for personal injury damages does not exceed $100,000. In the case of a defendant against whom a plaintiff makes a claim for a personal injury caused by that defendant, s198D restricts the costs of both parties where the amount recovered is below the threshold. In this respect s198D(1)(b) is somewhat more generous to the defendant than it is to the plaintiff. As I discuss below, this is understandable because the intent of the legislation is to contain the magnitude and cost of litigation in respect of small-scale personal injury claims by making it more difficult to make such claims.

53 Division 5B does not in terms extend to what might be referred to as cross-demands made against a third party by a person against whom a claim for personal injury damages has been made by a “plaintiff” as defined, that is, by a person who has sustained a personal injury. This position can be contrasted with that taken in other legislation. For example, s3 of the Civil Procedure Act 2005 defines “defendant” as expressly including a person against whom a cross-claim is made, and “plaintiff” as including a person by whom a cross-claim is made.

54 Nevertheless, Boylan submitted that the words “in connection with” in s198D(1) should be construed broadly, so as to include a claim by a defendant against a third party to contribute to the amount recovered by the plaintiff on a claim for personal injury damages. In the present case, it was submitted that Mrs Sweeney was, at least before the decision of this Court on the appeal, entitled to recover the amount of $43,932 from Boylan. The cross-claim by Boylan was for Williams to contribute to that amount. Therefore, so the argument ran, the claim for contribution was relevantly connected to Mrs Sweeney’s claim for the amount of personal injury damages that she was awarded.

55 Boylan submitted that the phrase “in connection with” was one which had been generally considered to be of wide import and cited, to that effect, Brown v Rezitis (1970) 127 CLR 157 at 165 and Our Town FM Pty Ltd v Australian Broadcasting Tribunal (1987) 16 FCR 465 at 479.

56 In Brown, the High Court was required to construe s88F(2) of the Industrial Arbitration Act 1940 (NSW), which empowered the Industrial Commission to make an order or award pursuant to s88F(1) as to the payment of money “in connection with” any contract, arrangement, condition or collateral arrangement that had been declared void or varied, in whole or in part, by the Commission. In that context, Barwick CJ, with whom McTiernan, Windeyer and Owen JJ agreed, said:

“Whilst it can be said that the expression ‘in connection with’ is of wide import, it does emphasize the need for a close connexion between the order made and the contract or arrangement varied or avoided.”

57 In Our Town FM Pty Ltd, Wilcox J was required to construe s5(1)(b) of the Administrative Decisions (Judicial Review) Act 1977 (Cth), which prescribed as a ground of review “that procedures that were required by law to be observed in connection with the making of the decision were not observed”. At 479 his Honour said (omitting citations):

“The words ‘in connection with’ have a wide connotation, requiring merely a relation between one thing and another. They do not necessarily require a causal relationship between the two things … They may be used to describe a relationship with a contemplated future event”.

However, it is clear that like the Chief Justice in Brown , Wilcox J construed the phrase “ in connection with ” in the context of the particular provision of the legislation with which he was dealing.

58 On the other hand, when construing a provision of the Customs Act in Collector of Customs v Pozzolanic Enterprises Pty Ltd (1993) 43 FCR 280, Neaves, French and Cooper JJ in a joint judgment of the Court observed (at 288-289) that:

“The words ‘connected with’ are capable of describing a spectrum of relationships ranging from the direct and immediate to the tenuous and remote. As Sheppard and Burchett JJ observed in Australian National Railways Commission v Collector of Customs (SA) at 378, the meaning of the word ‘connection’ is wide and imprecise, one of its common meanings being ‘relation between things one of which is bound up with, or involved in, another’: Shorter Oxford English Dictionary. Although the words of the statute are construed according to their ordinary English meaning, that does not mean that their application to a set of facts is simply described as the matching of that set of facts with a factual description. There is necessarily a selection process involved. The range of relationships to which the words apply for the purpose of the Act depend upon a judgment about that purpose.”

59 Williams also made reference to the judgment of Menzies J in Genders v Government Insurance Office of New South Wales (1959) 102 CLR 363, who, when considering the width of the words “in respect of” in s5(1)(c) of the Law Reform Act, observed (at 387) that:

“… while in some cases there may be good reason for confining the meaning of the general words ‘in respect of’, there is no reason for restricting their amplitude in a statutory provision that is clearly enough intended to secure comprehensive protection to drivers of motor vehicles, not only for their own good but for the benefit of those who are effected by the use of such vehicles.”

60 Mason P also referred to the purpose or object of Division 5B in Travis McShane at [23]. As his Honour noted, according to the Second Reading speech made by the Premier, the cap on fees was intended to “promote efficiency on the part of the legal profession and help to contain claims costs”.

61 Again, the President stated (at [30]) that:

“It is possible to view the introduction of Division 5B as legislative regulation of that market [being the market for legal services]. The exercise of that market control will affect clients and their lawyers in the area of smaller claims for personal injuries, but it is undoubtedly intended to do so.”

62 Although his Honour considered the Second Reading speeches to be of no assistance in resolving the issue before the Court in Travis McShane, he emphasised (at [43]) that purpose and context must not be ignored and that the legislation must be applied “faithfully”.

63 Nevertheless, Williams submitted that Division 5B was not intended to be comprehensive. It only operated to limit the recovery of costs in the circumstances to which s198D(1) applied and, unlike the legislation referred to in Genders, was not intended to protect all clients or their legal services providers.

64 In my opinion, there can be little doubt that the objective or purpose of Division 5B, as stated by the Premier in his Second Reading speech and accepted by the President in Travis McShane, was to promote efficiency on the part of the legal profession and to contain the costs of relatively small claims. A further objective was to discourage the making of small claims or, at the very least, to encourage their settlement at an early stage in order to minimise the costs which would otherwise exceed the maximum threshold fixed by s198D(1) and/or increase at a rate that was disproportionate to the damages ultimately awarded if the matter proceeded to trial. However, in my opinion, those restrictions were aimed at the legal service providers and their clients who were, on the one hand, the instigators of claims for personal injury damages and, on the other, the recipients of those claims.

65 Section 198D of Division 5B was not, in my opinion, intended to limit the costs of legal services provided to a person (such as Williams in the present case), who was not one against whom the injured person (Mrs Sweeney) had in fact made a claim for personal injury damages. Rather, Williams was joined in a third party action, by the person against whom Mrs Sweeney did make a claim, to contribute to damages ultimately awarded, or to indemnify the person primarily liable to pay such damages.

66 In the present case it was properly accepted by Boylan that a claim for contribution against an alleged joint tortfeasor under s5(1)(c) of the Law Reform Act was a statutory claim and not a claim to recover damages in respect of personal injury: Unsworth v Commissioner for Railways (1958) 101 CLR 73 at 91; Rolls Royce Industrial Power (Pacific Ltd) v James Hardie & Coy Pty Ltd (2001) 53 NSWLR 626; Allianz Australia Ltd v Wentworthville Real Estate Pty Ltd (2004) NSWCA 100.

67 However, that fact in itself would not necessarily prevent the legal services provided to Williams in defending Boylan’s third party claim for contribution from being provided “in connection with“ Mrs Sweeney’s claim for personal injury damages.

68 In my opinion, notwithstanding the prima facie width of the words “in connection with”, they ought not to be construed so as to provide a relevant relationship between Mrs Sweeney’s claim for personal injury damages on the one hand, and the cost of legal services provided to Williams to defend Boylan’s claim for contribution on the other, so as to attract the costs cap provided by s198D(1).

69 Rather, in my view, the opening words in the chapeau to that provision require, and are limited to, a connection between the cost of the legal services provided to the person against whom a claim for personal injury damages is made (the defendant) and the person who makes that claim (the plaintiff). I therefore respectfully agree with Mason P, who stated in Travis McShane that s198D(1) does not embrace the costs of a third party cross-defendant such as Williams. Williams was involuntarily joined in the proceedings at the behest of the defendant Boylan in an attempt to obtain a contribution to the liability of Boylan to pay damages to Mrs Sweeney, which, according to the statute, is required to be “just and equitable”. Such a claim for contribution does not, in my view, generate the necessary relationship to Mrs Sweeney’s claim for personal injury damages and so does not enliven the costs cap in s198D(1)(b).

Does s198D(1) apply when there is a verdict and judgment for the defendant?

70 Williams submitted that this question should be answered in the negative as Mrs Sweeney did not recover any amount on her claim for personal injury damages. It contended that the words “the amount recovered … does not exceed $100,000” both contemplated and required that there be a positive result in favour of the party claiming such damages, even if the amount was nominal. The primary judge found that it was unnecessary to decide this issue.

71 However, the point received some passing attention from Mason P in Travis McShane (at [15]) in these terms:

“I note, without deciding, the question whether any ‘amount’ is recovered within s198D(1) if there is a verdict for the defendant. I incline to the view that nil is an amount in this context, especially given the legislative policy (discussed below) and the terms of s198D(1)(b).”

72 With respect, I am unable to agree with the President’s tentative view that a verdict for the defendant so that the plaintiff recovers nothing can be construed as an “amount recovered” on a plaintiff’s claim for personal injury damages. In my view the whole tenor of s198D(1), when read together with the inclusive definition of “amount recovered” in s198I(1), is that the plaintiff is “successful” on his or her claim for personal injury damages when and if he or she receives or is paid an amount of money. That is not the case where there is a verdict and judgment for the defendant.

73 I accept, as the President observed in Travis McShane, that the purpose of Division 5B was to assist in containing the costs of making and defending claims for personal injury damages and that the legal services provider of each party would be aware from the outset that their recoverable fees would be capped in the manner provided in s198D(1) if the amount ultimately recovered on the claim did not exceed $100,000.

74 It is also true, as the President recognised in Travis McShane (at [24]), that the legal service providers could protect themselves by negotiating a costs agreement with their clients pursuant to s198E, by making a reasonable offer of compromise pursuant to s198F or, ultimately, by seeking a limiting order at the end of the process in a proper case pursuant to s198G. But, apart from entering into a costs agreement pursuant to s198E (which may well be pointless in the case of a plaintiff without assets or funds), there is nothing in the provisions to which I have referred that would enable a defendant’s legal service provider to protect their position in the event that they are successful on behalf of their client in resisting a plaintiff’s claim in its entirety.

75 Thus, s198F only entitles a party who makes a reasonable offer of compromise that is not accepted to obtain an award of costs against the other party on an indemnity basis. However, that entitlement would have no value if the unsuccessful plaintiff were indigent. Again, s198G would not assist the legal service provider of a successful defendant who obtains a judgment and verdict in favour of their client where the particular conditions referred to in that provision are inapplicable.

76 It seems that there is little support for, and much opposition to, the proposition that the legal service providers of a defendant who are successful in obtaining a judgment and a verdict for the defendant should not be subjected to the costs cap imposed by s198D(1). However, in my respectful opinion, the legislative language of the opening words of s198D (which, as the President noted in Travis McShane at [43], must be applied “faithfully”) would need to be rewritten if a judgment and verdict for a defendant is to be construed as being an amount recovered on a claim for personal injury damages by a plaintiff.

77 Accordingly, as a consequence of the decision of this Court in Boylan’s appeal against the judgment made by the trial judge in favour of Mrs Sweeney, and the ultimate dismissal of Mrs Sweeney’s appeal against that judgment by the High Court, the latter has not recovered any amount on her claim for personal injury damages. As a consequence, s198D(1)(b) does not impose any restriction upon the costs recovered by Williams against Boylan with respect to the cross-claim.

78 At the time of the hearing of this matter, Mrs Sweeney’s appeal to the High Court had not been determined. Both parties were in agreement that, if Boylan’s only success on the present appeal was on the ground that Mrs Sweeney had not recovered any amount on her claim for personal injury damages within the meaning of s198D(1), this Court should not, on that ground alone, finally determine the appeal until the High Court had delivered its judgment. As noted above, that judgment has now been delivered and Mrs Sweeney’s appeal was ultimately dismissed.

79 However, from my point of view, this issue would have been academic in any event. I am of the opinion that Williams has succeeded in resisting Boylan’s appeal in the present matter on other grounds.

80 For the foregoing reasons I am of the opinion that the primary judge was correct to reject Boylan’s appeal against the assessment of Williams’ costs of the cross-claim without the invocation of the costs cap contained in Division 5B of the Act. Nevertheless, I do consider that Boylan had a sufficiently cogent argument as to justify a grant of leave to appeal. However, that appeal should fail.

81 I would therefore propose the following orders:

(a) Leave to appeal granted upon condition that the claimant file its notice of appeal within seven days of the date hereof;

(b) Appeal dismissed;

(c) The claimant to pay the opponent’s costs of the summons for leave to appeal and of the appeal.

82 BASTEN JA: The claimant, Boylan Nominees Pty Ltd (“Boylan”) was the defendant in proceedings brought by Ms Maria Sweeney for damages for personal injury suffered by her when the door of a refrigerator fell on her in the convenience store of a BP Service Station in West Pymble. The defendant, Boylan, was responsible for the supply, maintenance and servicing of the refrigeration equipment. Boylan joined the Opponent Williams Refrigeration Australia Pty Ltd (“Williams”) by notice of cross-claim, seeking contribution by way of a full indemnity, pursuant to s 5(1)(c) of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) (“the 1946 Act”). Although, in the District Court, judgment was given in favour of the plaintiff against Boylan, Boylan’s claim against Williams was dismissed with costs. The question in the present proceedings is whether Boylan’s liability under the costs order is limited to the amount of $10,000, pursuant to s 198D of the Legal Profession Act 1987 (NSW), as in force at the date of judgment in the District Court.

83 The relevant provisions in Part 11, Division 5B of the Legal Profession Act 1987 are set out above at [11]. To succeed in its argument that the maximum costs provisions apply, Boylan must establish that:

(1) Williams, being the cross-defendant in the proceedings in the District Court, was a “defendant” for the purposes of s 198C(1);

(2) the legal services for which Williams sought costs in those proceedings were services provided to it “in connection with the claim”, for the purposes of s 198D(1), and

(3) section 198D is engaged.

84 The Master did not determine the first question, but it is logically anterior to the second question. If the cross-defendant was not a “defendant” for the purposes of Division 5B, it was not a “party” for the purposes of s 198D(1). The maximum amounts fixed by that provision relate only to costs for legal services provided to a party.

(1) Is a cross-defendant a “defendant”?

85 The first issue is whether the definition of a “defendant”, so far as it involves a person against whom a claim “is … made” (the first limb) is limited to the person against whom the plaintiff claims damages for personal injury to herself. In other words, does the phrase “a claim for personal injury damages” extend to a claim for contribution by a person against whom a claim for such damages is made?

86 In order to answer that question, it is necessary to read into the phrase the separate definition of the sub-phrase “personal injury damages”. Section 198C(1) provides that it is to have the same meaning as in Part 2 of the Civil Liability Act 2002 (NSW). According to s 11, contained in Part 2 of that Act, “personal injury damages means damages that relate to the death of or injury to a person”. Thus, omitting the reference to death, the nature of the claim referred to in s 198C(1) is “a claim for damages that relate to the injury to a person”.

87 Ignoring this further definition, it is arguable that the definition of “defendant” could be construed to mean a person against whom a claim is made for personal injury suffered by the plaintiff. (A similar reading would be available in relation to the definition of “plaintiff”.) However, when the Civil Liability Act definition is incorporated, one is left with the more general proposition that the damages are not payable for personal injury to the plaintiff, but are damages “that relate to the injury to a person”. On their face, these words are capable of referring to an injury suffered by a person other than the plaintiff and where the amount claimed is not the damages payable to the injured person, but damages which merely “relate to” the injury. On the other hand, an amount payable by way of contribution under s 5(1)(c) of the 1946 Act, by way of contribution, does not necessarily fall within the term “damages”.

88 If the definitions of “plaintiff” and “defendant” could be read to encompass the parties to a cross-claim, the first question would be answered favourably to the claimant. However, the claimant did not embrace this line of reasoning and it might give rise to further questions as to the intended scope of the definition in s 11 of the Civil Liability Act, being questions which were not agitated on the appeal. For example, s 19 of the Civil Liability Act, which also falls within Part 2, appears to accept the possibility that a third party who seeks contribution from a defendant may be subject to an award to which Part 2 of the Civil Liability Act does not apply. Whether such contextual material casts any light on the scope of the definition in s 11 was not addressed in argument.

89 The alternative approach and that primarily relied upon by the Claimant, was based on the second limb and averred that the cross-defendant, being a potential joint or several tortfeasor, was a person against whom the injured person could have made a claim and was thus a person against whom a claim “may be made”. That reading was said also to reflect the second limb of the definition of “plaintiff” as encompassing a person who “is entitled to” make a claim, against another. This terminology, this Claimant contended, reflects the provision in s 5(1)(c) of the 1946 Act that a tortfeasor may recover contribution from any other tortfeasor “who is, or would if sued have been, liable in respect of the same damage”. The definition in s 198C(1), in keeping with its different purpose, does not require a finding of liability if sued, but merely a finding that the person was someone against whom the plaintiff was “entitled to” make a claim.

90 The Opponent proffered a number of arguments against the acceptance of that construction. First, it noted that Mason P in Newcastle City Council v McShane(No. 3) [2005] NSWCA 437 (with whom Giles JA and Hunt AJA agreed) suggested that s 198D(1) addresses the costs of plaintiffs and defendants but “would not appear to embrace the costs of third parties joined in the proceedings”. Whilst that conclusion is clearly open, it was not an issue in the proceedings being determined, it formed part of “some general observations” made by the President and was not expressed in definitive terms. Furthermore, that paragraph noted the decision now under appeal as support for the conclusion reached; it would be inappropriate for this Court to treat itself as bound by such a statement, made in a case in which the issue did not arise for determination, when the Court is now dealing with an appeal from the very decision on which the dictum was, at least in part, based.

91 The second contention of the Opponent was that the words “may be made” are temporal and not merely conditional in nature: in other words, they were intended to ensure that the cap covered costs incurred prior to the making of a claim as well as from the time the claim was made. (Section 198I suggests that a claim may be “made” whether or not legal proceedings have been instituted, and may be compromised or settled, without such legal proceedings. A claim must therefore be capable of being made by the communication of an appropriate demand.)

92 That the words “may be made” can have a temporal element may be accepted; it does not follow that they operate only in circumstances where a claim is in fact made against that person to cover the period between the infliction of the injury and the making of a claim. Similarly in relation to the definition of “plaintiff” a person who is entitled to make a claim against another, in relation to an injury, need not be limited to a description of the person who has not yet made a claim but later does. A person against whom a claim may be made is one who may be legally liable for the injury suffered.

93 The third objection raised by the Opponent was that the successful outcome of the proceedings demonstrated that it was not in fact a person whom the plaintiff was entitled to sue. A weaker form of that contention was that, even if one were required to look at the question at an earlier point in time, the claim would have to be one which enjoyed reasonable prospects of success and a claim against the Opponent, in the present circumstances, would not qualify under that test.

94 The first limb of the argument, which allows the issue to be viewed with hindsight, might obtain support from s 198D itself, which only operates “if the amount recovered on a claim” is of a certain value. That cannot be known until after judgment has been delivered, or, consistently with s 198I, a settlement has been effected. However, that approach is difficult to reconcile with the terminology of the definitions which in each case involves the present tense and at least includes present entitlement to make a claim in the future and the prospect of future claims.

95 The second limb of the approach is said to be unattractive because it would require a retrospective analysis by the costs assessor of the prospects of a claim which might have been, but was not, made. This argument, with respect, proves too much. The basis upon which an assessment may be made may also depend upon whether there was a costs agreement that complies with Division 3: see s 198E. This may in turn involve a decision as to the validity and effect of any particular costs agreement, again a matter which may not be capable of determinative resolution by a costs assessor, who is not an officer of the Court.

96 In any event, the requirement that the entitlement of the plaintiff to bring a claim be restricted to circumstances where there are “reasonable prospects of success” was said to derive from the contemporaneous inclusion of Division 5C which imposed constraints on legal practitioners bringing proceedings absent a reasonable belief that the claim or defence has such prospects. But the provisions of Part 5C are not directed to the entitlement of a person to sue, nor do they constrain the right of an injured person to bring proceedings. Rather, they are a constraint upon the proper conduct of proceedings (including their commencement) by legal practitioners: see Groth v Audet [2006] NSWCA 48 at [33] (Tobias JA). Arguably an entitlement which could not be described as bona fide, or was in some sense merely colourable, would not qualify. However, it is not necessary to inquire into such questions in the present case. The proceedings against the cross-defendant were commenced by the defendant who was represented by a solicitor and counsel and were filed after the commencement of Part 5C. The Court is entitled to assume that they were commenced in compliance with Part 5C, to the extent that such compliance would be necessary. Nor does the definition of “plaintiff” require that the plaintiff had knowledge of her entitlement. If the defendant, who may well have had better information available to it than the plaintiff, thought that a claim for contribution was warranted, it is difficult to see why the plaintiff in the proceedings would not herself have been entitled to sue the cross-defendant. The concept of entitlement does not necessarily engage particular knowledge or assessments of the likelihood of success.

97 The Court was referred to various authorities which might assist on the question whether a claim for contribution fell within the concept of a claim for personal injury damages. Support for the view that a claim for contribution was of a different kind, was sought from Nickels v Parks (1948) 49 SR(NSW) 124 at 129; Unsworth v Commissioner for Railways(Qld) (1958) 101 CLR 73; Rolls Royce Industrial Power (Pacific) Ltd v James Hardie & Co Pty Ltd (2001) 53 NSWLR 626 and Allianz Australia Finance Ltd v Wentworthville Real Estate Pty Ltd [2004] NSWCA 100. On the other hand, a different view to Unsworth was taken in Genders v GIO (1959) 102 CLR 363 and in GIO v Crittenden (1966) 117 CLR 412. In Rolls Royce, Stein JA distinguished the latter two cases on the basis that they dealt with claims “in respect of damage from personal injury”, as opposed to claims for damages “for personal injury” at [50]. They were also distinguished in Allianz at [42] and [43] respectively, on a similar basis.

98 The fine distinctions drawn in seeking to follow Unsworth rather than Genders and Crittenden, the latter two being later authorities dealing with s 5(1)(c) of the 1946 Act, at least call into question the aptness of applying Unsworth and its progeny to resolve questions of construction arising in a different statutory context. In my view those authorities do not assist. Furthermore, as Mason P noted in McShane, there is little guidance to be obtained from the extrinsic material available in relation to Part 5B of the Legal Profession Act 1987 to assist in resolving the question of construction which arose in that case or, it might be added, the present question. As the contentions in this Court vividly demonstrated, harsh and anomalous results can be achieved on either construction.

99 In my view a cross-defendant, who, if properly sued by the defendant (bona fide and in compliance with Part 5C – see [96] above) must, for the purposes of s 5(1)(c) of the 1946 Act, be another tortfeasor and who would, if sued by the plaintiff, have been liable to her, falls within the concept of a person whom the plaintiff was entitled to sue for the purposes of the definition of “plaintiff” in s 198C(1). One would expect a correlative definition of “defendant”, a conclusion which would follow if one accepts that a person who the plaintiff is entitled to sue is a person against whom a claim may be made. That conjunction should be accepted and, accordingly, the cross-defendant is a defendant within the meaning of the definition and is also, therefore, a “party” within the meaning of that term as defined in s 198C(1).

(2) “in connection with”

100 The next question is whether the costs of the cross-defendant are costs incurred “in connection with the claim” for the purposes of s 198D(1). This is but one of a number of similar expressions denoting connection or relationship: see generally, Pearce and Geddes, Statutory Interpretation in Australia (5th ed, 2001) [12.6]-[12.11]. Not all will have the same flavour and each will take its particular meaning from its context. Nevertheless, phrases such as “in respect of”, “connected with” and “in connection with” have a similar meaning. If anything, at least in some contexts, “in respect of” may involve a more limited class of relationships.

101 In Technical Products Pty Ltd v State Government Insurance Office (Qld) (1988) 167 CLR 45 the High Court was concerned with the construction of s 3(1) of the Motor Vehicles Insurance Act 1936 (Qld). Section 3(1) required that the owner of the vehicle be insured “against all sums for which he … shall become legally liable by way of damages in respect of such motor vehicle for accidental bodily injury … where such injury is caused by, through, or in connection with such vehicle” (emphasis added). In a joint judgment Brennan, Deane and Gaudron JJ made the following comments in relation to this language:

“The effect of the words ‘in respect of such motor vehicle’ in s 3(1) is to add to the requirement that the relevant accidental bodily injury be ‘caused by, through or in connection with’ the motor vehicle, the further requirement that the circumstances giving rise to the relevant legal liability by way of damages for that injury show a discernable and rational link between the liability and the particular vehicle. In most cases where the injury itself was ‘caused by, through or in connection with’ the relevant vehicle that further requirement will, no doubt, be satisfied. There will, however, be cases in which the superimposed requirement will be critical in the sense that, notwithstanding that the injury was ‘caused by, through or in connection with’ the insured motor vehicle, there is no discernable rational relationship between the relevant legal liability for the injury and that vehicle.”

102 It appears that the relevant distinction between the two limbs turns not so much on whether the phrase “in respect of” is narrower or broader than the subsequent terms, but on the fact that in the former limb, it is the liability which must be in respect of the motor vehicle, where as the latter limb requires that the injury giving rise to the liability is subject to a relevant connection to the motor vehicle.

103 Once it is accepted that a cross-defendant is a party for the purposes of s 198D(1), there is no reason to restrict the operation of that provision, given the breadth of the connection contemplated by the phrase “in connection with the claim”, so as to exclude legal services which are provided in resisting a cross-claim for contribution.

104 In McShane, the Court accepted that legal services provided in relation to an appeal to this Court were provided in connection with the plaintiff’s claim, allowing a broad scope to the phrase “in connection with”. However, the President’s general comments suggested a possible limitation. After stating that s 198D(1) would appear not to embrace the costs of third parties joined in the proceedings, the President continued that that “is not the same as saying that the Division does not extend to include the plaintiff’s and defendant’s costs referable to third party proceedings for contribution or indemnity”. This is not a firm statement that the defendant’s costs in relation to the cross-claim are caught by s 198D(1), but merely leaves the question open. But there is good reason to accept the suggestion: it is comfortably within the ordinary scope of the language to say that costs incurred by the defendant in pursuing a cross-claim for contribution have a relevant and discernable connection with its defence of the claim. However, that casts some doubt on the separate comment with respect to costs incurred by the third party cross-defendant. If the defendant’s costs of pursuing the cross-claim are caught, it is difficult to see why the cross-defendant’s costs of resisting the cross-claim are not also within the scope of the provision. Indeed, if a cross-defendant is a defendant for the purposes of the provision, not having been joined by the plaintiff, the only relevant costs which it will have will be the costs of the cross-claim.

105 These separate considerations point to the same conclusion, namely that the costs of the cross-claim, incurred by any of the parties to the proceedings, will be the costs of legal services provided in connection with the claim.

(3) Is the section engaged where plaintiff fails?

106 Section 198D(1) purports to apply only in circumstances where “the amount recovered on a claim … does not exceed $100,000”. In the District Court, the plaintiff was successful, but for an amount well below the statutory figure. However, in this Court, the decision of the District Court was reversed and the judgment set aside: Boylan Nominees Pty Ltd v Sweeney [2005] NSWCA 8. That would, if it were the end of the story, gives rise to the question whether a failure on liability, resulting in no recovery, engages the operation of s 198D(1). In McShane, the President expressed a tentative view that it was engaged, because a contrary conclusion would be subversive of the underlying legislative policy: see [15], sub-par 4.

107 If it had been intended that the section apply in those circumstances, it would have been a simple matter to draft the conditional clause in the chapeau of sub-s (1) to cover that eventuality. That was not done. Nor is it clear that the legislative policy requires such a result. Thus, with the possible exception of transitional cases, where client and solicitor have entered into a fee agreement constituting an entire contract, prior to the commencement of Part 5B, the clear expectation is that the relevant parties will enter into costs agreements with their lawyers that comply with Division 3: see s 198E. Costs recovery as between solicitor and client will not then be dependent on the operation of s 198D, although costs to be paid by one party to another, pursuant to a costs order, will be assessed in accordance with that provision. However, if the plaintiff is entirely unsuccessful, the plaintiff will pay costs and not recover them, according to the general practice. But in such a case, the legislative policy to limit small claims by limiting the costs recovered on small but successful claims, would not operate to constrain the costs which a defendant might recover. Although one purpose of the provision was to limit the costs a defendant would have to pay, absent a valid costs agreement, it does not appear that a purpose was to protect plaintiffs from adverse costs orders, when pursuing small and unsuccessful claims. In my view s 198D(1) only applies in respect of a successful claim.

108 In that result, the costs payable between the defendant and the cross-defendant would also, because the section does not distinguish, be outside the statutory constraint. However, because the plaintiff has failed on her appeal to the High Court, her claim stands dismissed: see Sweeney v Boylan Nominees Pty Ltd [2006] HCA 19.

Conclusions

109 The matters raised by the application for leave to appeal being of some importance in the administration of civil procedure in this State, in my view leave to appeal should be granted.

110 It is apparent from the last matter discussed that the orders which should properly be made depend upon the outcome of the plaintiff’s claim. If the plaintiff had been successful in the High Court and had reinstated her judgment, I would have allowed the appeal, set aside the judgment and orders of the Master and allowed the “appeal” from the costs assessor. However, as the High Court has dismissed the plaintiff’s appeal, the decision of the costs assessor should stand. The orders should be as proposed by Tobias JA.

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30/05/2006 - Correction to cover sheet - Paragraph(s) coversheet