Capital Territory and Ors

[2007] ACTSC 85

MATTHEW JAMES TRAYNOR (by his next friend PETER TRAYNOR) v
AUSTRALIAN CAPITAL TERRITORY and OTHERS

LINDA TRAYNOR and OTHERS v AUSTRALIAN
CAPITAL TERRITORY and OTHERS
[2007] ACTSC 85 (19 October 2007)

COSTS – Whether the Commonwealth can claim indemnity costs against the Australian Capital Territory – Commonwealth can seek costs orders against a State or Territory – costs awarded on the ordinary basis.

Australian Capital Territory (Self-Government) Act 1988 (Cth), s 7

Australian Capital Territory (Planning and Land Management) Act 1988 (Cth), s 29, s 30, s 51

Judiciary Act 1903 (Cth), s 64

Crown Proceedings Act 1988 (NSW), s 5

Traynor v Australian Capital Territory [2007] ACTSC 38

Quirk v Bawden (1992) 112 ACTR 1

Calderbank v Calderbank [1975] 3 WLR 586

The State of Victoria and Another v The Commonwealth (1957) 99 CLR 575

The State of SouthAustralia v The Commonwealth (1962) 108 CLR 130

Debates of the Legislative Assembly for the Australian Capital Territory, 19 October 1988, p 1930

Supplementary Explanatory Memorandum for Australian Capital Territory (Planning and Land Management) Act 1988 (Cth) (19 October 1988)

No. SC 307 of 1999
No. SC 418 of 2002

Judge:     Connolly J
Supreme Court of the ACT

Date:      19 October 2007

IN THE SUPREME COURT OF THE       )
  )          No. SC 307 of 1999
AUSTRALIAN CAPITAL TERRITORY    )          No. SC 418 of 2002

BETWEEN:MATTHEW JAMES TRAYNOR (by his next friend PETER TRAYNOR)

Plaintiff

AND:AUSTRALIAN CAPITAL TERRITORY

First Defendant

AND:JOSE ALFREDO GUEVARA

Second Defendant

AND:COMMONWEALTH OF AUSTRALIA

Third Defendant

ORDER

Judge:  Connolly J
Date:  19 October 2007
Place:  Canberra

THE COURT ORDERS THAT:

1. There be costs for the Commonwealth in these proceedings on the ordinary basis.

1. This is an application for costs on an indemnity basis following the resolution of a personal injury claim.  The circumstances of the claim were tragic.  It involved a young boy on a bike who was struck by a car and suffered profound injuries, which ultimately lead to his death.  The action was commenced on the boy’s behalf by his parents and then continued by the estate.  Another action was commenced by the boy’s parents and sibling in relation to nervous shock.

1. The circumstances of the accident are fully set out in my substantive judgment (Traynor v Australian Capital Territory [2007] ACTSC 38). Briefly, the boy and his friend were out riding in the suburbs near their homes. On their return they proceeded along a footpath that, as I found, was a shared use footpath and cycleway. The path intersected with a road, and very near that intersection a bushy shrub had been planted which, I found, significantly affected the opportunity for a motorist to be aware of the presence of the footpath.

1. The action was commenced against the motorist on ordinary grounds of negligence, and the Australian Capital Territory (the Territory) as the municipal authority responsible, as at the date of the accident in August 1996, for the pathway.  The Territory took steps to join the Commonwealth to the proceedings on the basis that the Commonwealth had, until self-government in 1989, been responsible for the design and construction of municipal infrastructure in the Territory.  The Territory, in effect, pleaded that, to the extent that the accident was caused by the design and construction of the path, road and intersection, the Commonwealth was responsible.

1. The suburb in which the accident occurred was developed in the late 1980s, and it took some time to resolve the factual questions as to which entity was responsible for the planting of the street trees and the actual planting of the shrub.  In 2002 the Territory acknowledged that it was the entity responsible for the street plantings and the actual planting of the subject shrub.

1. In my reasons I found that the accident occurred as a consequence of the negligence of the Territory in planting a bushy shrub in such a location that it obscured the view of motorists, contrary to published guidelines on street planting.  I found no negligence on the part of the motorist, who I found to have been proceeding at a safe speed below the speed limit and keeping an appropriate lookout.  I found that the shrub prevented the motorist from observing either the boy or the path itself.  I found that there was no negligence proven in respect of the design and construction of the pathway itself.  Accordingly, a judgment was entered for the plaintiffs against the Territory solely.

1. The Commonwealth’s application is for costs against the Territory on an indemnity basis, from a date shortly prior to the hearing where it offered to withdraw from the proceedings with no order for costs, if the Territory consented to the withdrawal of all of the third party proceedings against the Commonwealth.

1. It has long been accepted that costs can be awarded on an indemnity basis where a party to litigation unreasonably rejects an offer of compromise.  This Court encourages parties to resolve civil litigation and the use of “Calderbank” offers of compromise is widespread in civil litigation.  In Quirk v Bawden (1992) 112 ACTR 1 the Full Court endorsed the principle from the British decision of Calderbank v Calderbank [1975] 3 WLR 586 that:

... this court should apply an appropriate costs sanction where a party has declined to accept or to make, as the case may be, a reasonable offer of settlement.

(Per Higgins J (as he then was) at 6.)

1. The question in every case where a Calderbank offer is relied upon in a costs application will be whether the failure to accept the offer was unreasonable. As Higgins J noted (at 8) in Quirk v Bawden:

Most litigation, particularly in the area of personal injuries, admits of a range of outcomes.  Which of those outcomes will, ultimately, be reflected in the final judgment is a matter upon which the parties might reasonably differ.  Indemnity costs should not be used to inhibit either party from litigating an issue reasonably in contention between them.  However, neither should parties be permitted to persist in an unrealistic assessment of the chance that the issue or issues in dispute will be determined favourably to them when that view is able to be perceived as unrealistic.

1. The Territory accepted that it would be liable for the Commonwealth’s costs, but argued that this ought to be only on the ordinary basis rather than on an indemnity basis, as it was reasonable to bring the question of which public authority had been liable for the damage to determination.

1. It is clearly the case that, both in law and in practice, costs orders can be and are sought by the Commonwealth and a State or Territory government against the other government.  The legal basis for this is the legislation throughout the Commonwealth, which, in effect, treats the Commonwealth or State or Territory on the same basis as any other litigant (Judiciary Act 1903 (Cth) and Crown Proceedings Act 1988 (NSW)).

1. Although this has long been the law, the practice for many years, if perusal of the Commonwealth Law Reports is a sound guide, was that governments did not seek costs orders against each other.  However, at least since the 1960s, costs have been sought and awarded in such litigation.  (From a limited research, the second uniform tax case (The State of Victoria v The Commonwealth (1957) 99 CLR 575) may have been the last Commonwealth/States battle that was resolved with no order as to costs, although this seems to have been the universal approach up until this time. When South Australia sought to litigate a rail standardisation agreement and was unsuccessful in The State of SouthAustralia v The Commonwealth (1962) 108 CLR 130, costs were awarded against South Australia to the Commonwealth, and this seems to have been the approach taken ever since.) It seems to me that, as governments can and do seek and obtain costs orders against each other on the ordinary basis, there is no reason why the principles of Calderbank offers should not also apply to litigation between governments.

1. This particular matter only came on for hearing after quite protracted pre-trial proceedings.  On a number of occasions over some years I had made the observation at these proceedings that it seemed extraordinary that both the Commonwealth and the Territory were engaged in the litigation.

1. In any other part of Australia these proceedings would have been brought solely against the relevant road authority, be it municipal or state.  That is how the plaintiffs originally brought their case, against the relevant road authority, being, in this case, the Territory.  However, because on the facts of this case the relevant road and pathway were designed and constructed before self-government and the street tree plantings designed and installed after self-government, the Territory brought the Commonwealth into these proceedings.

1. It seems to me that this is an unnecessary and undesirable way to conduct such litigation, and I have raised this with the Commonwealth and the Territory on a number of occasions.  As a general principle, when a new body politic is established, it takes over the liabilities and assets of the former body politic.  At international law, the principle of state succession provided during the period of de-colonisation that, broadly speaking, newly emergent states assumed the rights and duties of their predecessors.  This broad principle was generally reflected in the establishment of self-government in the Territory in 1989.  The Australian Capital Territory (Self-Government) Act 1988 (Cth) (the Self-Government Act) established by s 7 the Territory as a body politic under the Crown by the name of the Australian Capital Territory. As a general proposition, this new body politic would be assumed to be the successor to pre self-government Commonwealth entities that conducted public activities relating to the governance of the Territory.

1. There is no question when actions are brought for medical negligence for births that occurred before 1989 that the Commonwealth is a party to such litigation.  The Territory, as the successor in title to entities that before self-government administered the hospital system in this jurisdiction, conducts the litigation.

1. However, the Commonwealth Parliament saw fit to make special provision in relation to matters arising from the use of land.  As the Territory is the national capital, it is understandable that the Commonwealth would want to preserve its position upon self-government.  Accordingly, the Australian Capital Territory (Planning and Land Management) Act 1988 (Cth) (the Land Act) was an integral part of the transition to self-government. The Land Act creates, in effect, a dual planning and land management regime, with a distinction between Territory land and national land.

1. The scheme of the Land Act is that the Commonwealth may, by notice, declare public land to be national land. Where no such declaration is made, the land is Territory land and, as such, subject to the administration by the Territory (s 29).

1. There are two provisions in the Land Act going to questions of liability for actions arsing from Territory land. Section 30 provides:

Territory liable as manager of Territory Land

Where, apart from this section, the Commonwealth would be liable in respect of an act done or omitted to be done by the Territory in the performance of its functions under section 29, the liability is vested in the Territory and ceases to be a liability of the Commonwealth.

1. This section, on its face, would seem to have the same effect that the bare establishment of self-government by s 7 of the Self-Government Act has had, that is, to transfer to the Territory both the assets and the liabilities in respect of Territory land.

1. There is a provision in s 51 of the Land Act in relation to an indemnification by the Commonwealth to the Territory which provides:

Commonwealth to indemnify Territory

The Commonwealth shall indemnify the Territory, and keep the Territory indemnified, against any action, claim or demand brought or made against the Territory in respect of any act done or omitted to be done by or on behalf of the Commonwealth, being an action, claim or demand that, apart from this Act, could be brought or made against the Commonwealth.

1. This indemnity extends to damages, expenses and costs arising from, connected with or consequential upon such an action, claim or demand.

1. This section does not apply to an action, claim or demand in respect of a liability referred to in s 30.

1. There seems to be some doubt as to the effect of this provision due to the qualification in s 51(3). On its face, it seems to me that the effect of the Land Act is that, when land previously administered by the Commonwealth was transferred to the Territory and became Territory land, the Territory became liable in respect of that land. An action for negligence arising from that land should be brought against the Territory, but s 51 provides an indemnification for liability which arose when the Commonwealth administered the land.

1. This reading is certainly consistent with the Explanatory Memorandum for s 51 which states (Hansard 19 October 1988, at 23):

This clause provides an indemnity to the ACT concerning any claims that may be brought against the ACT in respect of matters under this Bill which are properly the responsibility of the Commonwealth (in particular, in respect of matters arising from the Commonwealth’s management of National Land, or of land in the Territory before self- government). 

1. In the second reading speech, the Minister for Territories, Mr Holding, said of the indemnity provision that:

The ACT will be indemnified by the Commonwealth for any claims made against it in respect of any matter arising from the Commonwealth’s management, actions or inactions before self government or concerning national land

1. It seems to me that this indemnification provision makes it appropriate for the Territory, when it is sued in respect of acts or omissions arising from its municipal responsibilities, and when on the facts, the acts or omissions pleaded predate self-government, to seek to invoke the indemnity.  A pleaded failure in design of a public road or path predating self-government, on its face, enlivened this indemnity.

1. I had suggested that it would perhaps be a significant saving in time and complexity, as well as resources, if the Territory defended the claim, and sought to rely on the indemnity at a later time.  However, both the Commonwealth and the Territory felt the appropriate approach in this case was to be actively involved in the litigation. The question as to whether the accident was caused by the design of the path or the planting of the shrub, was a very live issue and indeed the central issue in my decision.

1. It seems to me that it was entirely reasonable for the Territory to seek to litigate this issue and that, given the importance to the administration of the Territory of such matters, (given that much of the road infrastructure of the Territory which could be the subject of litigation was planned and built by the Commonwealth) it was not unreasonable for the Territory to reject the Commonwealth’s offer and proceed to trial on the question.

1. The Commonwealth should have its costs in these proceedings, but only on the ordinary basis.

   I certify that the preceding twenty-nine (29) numbered paragraphs are a true copy of the Reasons for Judgment herein of his Honour, Justice Connolly.

   Associate:

   Date:   19 October 2007

Counsel for the first defendant:  Mr P Walker
Solicitor for the first defendant:  ACT Government Solicitor
Counsel for the third defendant:  Mr R Crowe SC
Solicitor for the third defendant:  Australian Government Solicitor
Date of hearing:  19 September 2007
Date of judgment:  19 October 2007