Erdevicki v Amaca Pty Limited (Costs Ruling)
[2021] VSC 248
•14 May 2021
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
DUST DISEASES LIST
S CI 2015 05207
| MILORAD ERDEVICKI | Plaintiff |
| v | |
| AMACA PTY LIMITED (FORMERLY JAMES HARDIE & COY PTY LTD) & ORS (according to the attached schedule) | Defendants |
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JUDGE: | Keogh J |
WHERE HELD: | Melbourne |
DATES OF HEARING: | 11, 12, 13 November 2020; 7, 8 December 2020 |
DATE OF RULING: | 14 May 2021 |
CASE MAY BE CITED AS: | Erdevicki v AMACA Pty Limited & Ors (Costs Ruling) |
MEDIUM NEUTRAL CITATION: | [2021] VSC 248 |
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PRACTICE AND PROCEDURE — Costs — Plaintiff’s claim for damages for lung cancer caused by inhalation of asbestos fibres — Plaintiff’s action settled — Contribution proceeding between defendants decided by Court — Offer to contribute by one defendant — Whether offeror entitled to indemnity costs — Whether offeror entitled to be indemnified for its portion of the plaintiff’s costs — Supreme Court (General Civil Procedure) Rules 2015 (Vic), r 26 — Amcor v Barnes & Ors [No 2] [2021] VSCA 87.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | No appearance | No appearance |
| For the First Defendant | DC Oldfield | Mills Oakley |
| For the Second Defendant | AT Strahan QC and NY Rattray | Colin Biggers & Paisley Lawyers |
| For the Third Defendant | No appearance | No appearance |
HIS HONOUR:
The plaintiff brought this proceeding alleging he suffered personal injury caused by inhalation of asbestos fibres which came from products manufactured by the defendants. The plaintiff’s claim settled on the second day of the trial. On 16 March this year I delivered judgment on the contribution claim by the first defendant, by finding that it should recover 29% contribution from the second defendant of the damages paid to the plaintiff (‘the contribution judgment’).[1] This ruling deals with determination of costs issues following that judgment.
[1]Erdevicki v AMACA Pty Limited (ACN 000 035 512) [2021] VSC 118.
In February 2020 the second defendant served a notice of willingness to contribute on the first defendant in relation to the plaintiff’s claim in accordance with r 26 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (‘the Rules’) (‘the contribution offer’). The second defendant submitted that, because the contribution judgment is more favourable to it than the terms of the contribution offer, the first defendant should pay its costs of the proceeding in accordance with r 26.10. Further, the second defendant submitted it should have no liability for the plaintiff’s trial costs.
The first defendant argued it was not unreasonable for it to reject the contribution offer, and that because it succeeded in the contribution proceedings the second defendant should pay its costs, and should be responsible for a share of the plaintiff’s costs consistent with the apportionment finding in the contribution judgment.
Procedural history
The proceeding was commenced by a generally indorsed writ filed in October 2015. However, it appears that because of significant uncertainty about the plaintiff’s diagnosis and prognosis there was some delay in the proceeding getting underway.
A statement of claim was filed in 2017. In early 2018, contribution notices were filed. During 2018 and early 2019 each party made discovery, interrogatories were served and answered, the plaintiff served a list of his special damages, and reports were obtained from treating doctors, medico-legal experts and occupational and environmental health consultant Mr Kottek. There was, at that stage of the proceeding, conflicting evidence about exposure of the plaintiff to asbestos from product manufactured by each of the defendants, which was the critical issue in relation to contribution.
In answer to the interrogatories of the first defendant, the plaintiff stated that 100% of the asbestos containing product to which he was exposed were manufactured by the first defendant. However, Mr Kottek reported that analysis of samples taken from three houses on which Mr Erdevicki had worked showed the product used was manufactured by the second defendant. Mr Kottek said: ‘In my opinion it is probable that [the second defendant] manufactured around 50% of the asbestos cement underlay that Mr Erdevicki cut’. Mr Kottek also identified that Mr Huckett, who worked as a sales representative for the second defendant at the relevant time, was a potentially important witness. Mr Kottek indicated Mr Huckett’s evidence would support a case that most of the asbestos product used in Mr Erdevicki’s work was manufactured by the second defendant.
On 17 February 2020 the second defendant served on the first defendant the contribution offer which was in the following terms:
TAKE NOTICE that the Second Defendant, Seltsam Pty Limited, offers to contribute 30% towards:
(a)any settlement of the plaintiff’s claim to which the Second Defendant has given its written consent; or
(b)any judgment of the Court in favour of the plaintiff at the conclusion of the trial of the proceeding plus 30% of the plaintiff’s costs of the proceeding.
It is a term of this offer that if it is accepted, the First and Second Defendant will each bear their own legal costs related to any and all claims they have made against one another in this proceeding.
THIS OFFER is open for acceptance for 14 days after service of this offer to contribute.
AND TAKE NOTICE that this offer is served in accordance with Part 2 of Order 26 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic).
When the contribution offer was served the trial was listed for 11 March 2020. On 1 March the defendants obtained a medico-legal report addressing issues of diagnosis and prognosis. On 3 March the plaintiff applied to vacate the trial because of further medical investigations he was undergoing in relation to his condition.
The trial commenced on 11 November 2020. In opening, counsel for both defendants indicated the most significant issues were whether the plaintiff was exposed to asbestos from product manufactured by the first defendant or the second defendant, whether the plaintiff’s lung cancer was caused by relevant exposure, and contribution between the defendants.
The plaintiff’s proceeding against the defendants settled on 12 November 2020, which was day two of the trial. The contribution claim by the first defendant against the second defendant proceeded. Counsel for both defendants stated it was likely the only issues requiring determination were whether the plaintiff was exposed to asbestos from product manufactured by the second defendant, and the proportion of the plaintiff’s total exposure this represented. On 13 November counsel for the second defendant confirmed his client’s instructions to proceed on that basis.
There were issues about the admissibility of Mr Kottek’s evidence, which resulted in the trial being adjourned part heard from 13 November to 7 December 2020.
On 18 November 2020 the second defendant served an offer of compromise on the first defendant to pay 50% of the damages and costs payable to the plaintiff on settlement of his action, on the basis that the first and second defendants each bear their own costs of the contribution claims.
The trial concluded on 8 December 2020.
Mr Erdevicki, Mr Kottek and Mr Huckett were witnesses at trial. It was necessary in the contribution judgment to resolve the conflicts in their evidence about exposure that had, largely, been evident since 2019.
Relevant provisions and authorities
The contribution offer was served in accordance with r 26.02 of the Rules.
Potential cost consequences of offers by contributor parties are set out in r 26.10:
(1)If two or more parties (the contributor parties) may be held liable to contribute towards an amount of debt or damages that may be recovered from the contributor parties, any of those contributor parties may, without prejudice to that contributor party's defence, make an offer to another contributor party, to contribute, to a specified extent, to the amount of the debt or damages.
(2)If an offer is made by a contributor party (the first contributor party) and not accepted by another contributor party, and the first contributor party obtains a judgment against the other contributor party more favourable than the terms of the offer, then, unless the Court otherwise orders, the first contributor party is entitled to an order that the contributor party who did not accept the offer pay the costs incurred by the first contributor party—
(a)before 11.00 a.m. on the second business day after the offer was served—on the ordinarily applicable basis; and
(b)after the time referred to in paragraph (a)—on an indemnity basis.
The wording of r 26.10 mirrors the wording in r 26.08, which concerns offers of compromise between plaintiffs and defendants. Both rules are motivated by the same purposes, including encouraging costs savings and the avoidance of uncertainty in litigation by promoting early offers of compromise, savings of the public cost of litigation, and indemnifying the party which made an offer later found to be reasonable. Rule 26.08 has been the subject of commentary by this Court and the Court of Appeal, which is applicable to r 26.10.
When a judgment is more favourable to a contributor party than the offer to contribute made by it, the rule creates a prima facie rule in relation to the award of costs.[2] The party seeking to displace the rule bears the onus of establishing why the court should order otherwise.[3] The prima facie rule is a strong one.[4]
[2]See, in respect of r 26.08, Amcor Limited v Barnes (No 2) [2021] VSCA 87, [41].
[3]Ibid citing PCCEF Pty Ltd v Geelong Football Club Ltd (No 3) [2019] VSCA 191, [23].
[4]Ibid; Gamboni v Bendigo and Adelaide Bank Ltd (No 2) [2013] VSCA 282, [51] quoting Ashley JA in Simonovski v Bendigo Bank Ltd (No 2) [2003] VSC 139, [17].
The reasonableness of rejection of an offer of compromise is a relevant consideration to the question of whether to depart from the presumption, but is not determinative.[5]
[5]Nakos v Serdaris [2016] VSC 179, [39].
The court has a broad discretion in relation to liability for the plaintiff’s costs of the proceeding. The contribution offer may be a relevant consideration in relation to that discretion if it is concluded that had the first defendant accepted the offer it is likely costs would have been saved.[6]
[6]Lend Lease Retail Projects Pty Ltd v Construction Engineering (Aust) Pty Ltd [2000] VSCA 114, [16]–[17].
Consideration
The first defendant submitted it was not unreasonable for it to reject the contribution offer because of the considerable uncertainty at the time in relation to critical issues of liability and quantum, including the work activity of the plaintiff between 1973 and 1980, identification of the asbestos containing product to which he was exposed, the causal connection between exposure and the plaintiff’s medical condition, and the likely clinical prognosis of that condition. It was submitted resolution of these issues was always going to be determined primarily on evidence led by the plaintiff, of which the first defendant could not be aware at the time the offer was served. The first defendant submitted that it succeeded in the contribution proceedings in establishing that the plaintiff was exposed to asbestos from product manufactured by the second defendant, and that there was no good reason to depart from the usual practice that costs should follow the event and be awarded in its favour against the second defendant.
For the following reasons I reject the submissions of the first defendant. First, it is not in issue that the contribution offer is an offer which satisfies the requirements of r 26. As stated, r 26.10(2) creates a presumption that an offeror party which satisfies the provision will be awarded costs accordingly. The authorities establish that the presumption is a strong one, the onus of displacing it is on the offeree contributor.
Second, the contribution offer was, having regard to the state of the evidence, a genuine attempt at compromise. Third, the first defendant has not established its rejection of the offer was reasonable. The contribution offer was directed to resolving the real issue between the defendants, that is, the relative exposure of the plaintiff to asbestos from product manufactured by each of them. The parties were aware of the conflicting evidence in relation to that issue when the offer was made. The same conflicts in evidence remained when the trial ran. While there was uncertainty at the time the offer was made about how the issue of exposure would ultimately be determined at trial, the first defendant was sufficiently aware of the relevant evidence to enable it to make a judgment, taking account of the uncertainties of litigation, about whether to accept or reject the second defendant’s offer. The contribution offer was effectively an offer to bear 50% of the responsibility for the plaintiff’s asbestos exposure and resulting injury during the period the second defendant was on risk. Given the known conflict in evidence and uncertain resolution in relation to exposure, I am not satisfied rejection of the contribution offer was reasonable.
Fourth, the contribution offer served the objects of r 26.10 in that resolving exposure might pave the way for resolution of the entire proceeding, saving costs and court time. In the circumstances of this case the second defendant is entitled to an order for its costs of the contribution proceeding in accordance with r 26.10(2).
The second defendant contended it should not be liable for any costs of the plaintiff incurred between 9 November 2020 and 12 November 2020, being what it described as the plaintiff’s costs of trial. In response the first defendant submitted that this would amount to a speculative assessment of costs that might have been saved had it accepted the offer to contribute. The first defendant submitted that the issues in contention at trial were not limited to contribution, and it could not be inferred that the sole reason for the plaintiff’s participation at trial was to resolve the contribution issue, or that absent a contest on contribution the whole case would have resolved considerably earlier.
The plaintiff’s exposure to asbestos from product manufactured by each defendant, and apportionment of responsibility for his medical condition, and consequent liability for damages were significant issues at trial. However, the trial was opened for the plaintiff on the basis that causation and quantum of damages also remained in issue. While I am satisfied that resolving the issue of contribution would have presented opportunities for settlement of the entire proceeding, I agree there is a degree of speculation in concluding that this would have occurred any earlier than the start of the second day of trial, when the plaintiff’s proceeding resolved. In the circumstances I do not accept that the liability of the second defendant for the plaintiff’s costs, which would ordinarily follow the contribution finding, should be reduced.
Conclusion
In accordance with the contribution judgment, and the above reasons in relation to costs, I will make the following orders:
1.Pursuant to s 24 of the Wrongs Act 1958 (Vic), the second defendant is liable to contribute:
(a)twenty-nine per cent of the damages paid to the plaintiff by the first defendant; and
(b)twenty-nine per cent of the amount to be paid by the first defendant to the plaintiff for the plaintiff’s costs of the proceeding pursuant to orders made on 12 November 2020.
2.The first defendant pay the second defendant’s costs:
(a)arising before 11:00am on 19 February 2020 on a standard basis; and
(b)arising after 11:00am on 19 February 2020 on an indemnity basis.
SCHEDULE OF PARTIES
BETWEEN:
| MILORAD ERDEVICKI | Plaintiff |
| - and - | |
| AMACA PTY LIMITED (ACN 000 035 512) (FORMERLY JAMES HARDIE & COY PTY LTD) | First Defendant |
| - and - | |
| SELTSAM PTY LIMITED (ACN 000 003 734) (FORMERLY WUNDERLICH LTD) | Second Defendant |
| - and - | |
| VICTORIA VINYL CO. PTY LTD (ACN 004 964 836) (FORMERLY VICTORIA PERMA BRICK CO. PTY LTD) | Third Defendant |
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