Fussell v Pilbara Iron Company (Services) Pty Ltd - [2024] WADC 72 (S)

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL

LOCATION:   PERTH
CITATION:   FUSSELL -v- PILBARA IRON COMPANY (SERVICES) PTY LTD [2024] WADC 72 (S)
CORAM:   PALMER DCJ
HEARD:   ON THE PAPERS
DELIVERED          :   18 DECEMBER 2024
FILE NO/S:   CIV 3707 of 2020
BETWEEN:   GRAHAM FUSSELL
Plaintiff
AND
PILBARA IRON COMPANY (SERVICES) PTY LTD
Defendant
AAI LIMITED t/as GIO
Third Party

Catchwords:

Costs order following trial - Effect of plaintiff recovering judgment no less favourable than an offer made pursuant to District Court Rules 2005 (WA) rule 42A - Whether third party should be ordered to pay costs of third party proceedings - Whether special costs order should be made

Legislation:

District Court Rules 2005 (WA), rule 42A

Result:

Costs orders made

Representation:

Counsel:

Plaintiff	:	Mr R D McCabe
Defendant	:	Mr G R Hancy
Third Party	:	Mr J J Sheldrick

Solicitors:

Plaintiff	:	Percy Kakulas Gleeson
Defendant	:	Minter Ellison
Third Party	:	Mills Oakley

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

Boothman v George [2024] WADC 26 (S)
Cooper Ellis (by his Next Friend Christopher Graham Ellis) v East Metropolitan Health Service [2018] WADC 36 (S)
Tahlia Burns by her next friend Liesel Nicola Burns v North Metropolitan Health Service [2019] WADC 65
Unioil International Pty Ltd v Deloitte Touche Tohmatsu (a firm) (1997) 18 WAR 190

PALMER DCJ:

Introduction

These reasons concern the costs orders that should be made in these proceedings.
The plaintiff seeks orders that:
(a)the defendant pay the plaintiff's costs to be taxed on a party/party basis up to 13 March 2023, or in the alternative up to 21 July 2023;
(b)the defendant pay the plaintiff's costs from 13 March 2023 to be taxed on an indemnity basis;
(c)alternatively, the defendant pay the plaintiff's costs taxed between a law practice and client from 21 July 2023 onwards.

The plaintiff argues that the defendant should pay his costs on an indemnity basis from 13 March 2023 because it was unreasonable for the defendant to have continued to defend these proceedings after that date. 13 March 2023 was the date on which the plaintiff and defendant agreed quantum. The plaintiff says that the true dispute after that date was between the third party and the defendant.
The alternate order sought by the plaintiff is sought because on 21 July 2023 the plaintiff made an offer to the defendant to resolve his claim for $1,100,000.00 pursuant to Rule 42A of the District Court Rules 2005 (WA) (the Rule 42A Offer).
The defendant seeks orders that the third party pay all of the costs of the action, including the costs of the defendant's defence of the main action. The defendant also seeks a special cost order pursuant to s 143 of the Legal Profession Uniform Law Application Act 2022 (Uniform Law Application Act).
The third party submitted that the defendant should pay the costs of the main action as it was unreasonable for the defendant to have continued to defend that action after quantum was agreed. The third party argued that there should be no order as to costs in the third party proceedings. The third party contended that it was partly successful in those proceedings and it offered to settle them on better terms than those ultimately achieved by the defendant after trial.
It seems to me that the issues to be determined in these proceedings are as follows:
(a)who should pay the costs of the main action?;
(b)should indemnity costs be paid from 13 March 2023?;
(c)should the third party pay the costs of the third party proceedings?; and
(d)should a special costs order be made?

Who should pay the costs of the main action?

Rule 42A of the District Court Rules provides that if an offer made pursuant to the rule is refused and the plaintiff obtains judgment on terms no less favourable than the offer, then the plaintiff is entitled to an order against the defendant for the plaintiff's costs from the date on which the offer was made taxed as between a law practice and its client (and on a party/party basis before then) unless the court 'otherwise orders'.
The plaintiff obtained judgment on terms no less favourable than those provided for in the Rule 42A Offer following this trial. Therefore, pursuant to Rule 42A, the plaintiff is entitled to an order that the defendant pay his costs on the basis set out in the rule, unless the court 'otherwise orders'.
The defendant did not dispute that the plaintiff was entitled to have his costs taxed as between a law practice and its client from the date the offer was made but it argued that the third party should pay those costs. Making such an order would involve me ordering that costs should be paid other than as provided for in Rule 42A.
In Ellis (by his Next Friend) v East Metropolitan Health Service (Ellis),[1] Gething DCJ (as he then was) identified the principles which have been established by the authorities dealing with the phrase 'unless the court orders otherwise' as follows:[2]
[1] Cooper Ellis (by his Next Friend Christopher Graham Ellis) vEast Metropolitan Health Service [2018] WADC 36 (S).
[2] Ellis [44].
(a)the purpose of the rule is to encourage the proper compromise of litigation, in the private interests of individual litigants and the public interest;
(b)the discretion to replace the rule is a judicial one, requiring that the private and public purposes of the rule be borne in mind;
(c)the prima facie consequence of non-acceptance will be that the rule will be enforced against the non-accepting party;
(d)in any ordinary case the rule should be applied in its terms;
(e)the rule should only be departed from for proper reasons which, in general, only arise in an exceptional case;
(f)to the extent that a party seeks an exercise of discretion to vary the ordinary operation of the rule, it is for that party to demonstrate that there are adequate reasons to justify the exercise of the discretion;
(g)the aim is to oblige the offeree to give serious thought to the risk involved in non-acceptance;
(h)lying behind the rule is the common knowledge that litigation is inescapably chancy;
(i)the offer cannot be viewed in isolation from the circumstances in which it was made;
(j)the mere fact that it was reasonable for the offeree to take the view that it did in rejecting the offer is not enough to displace the rule;
(k)the offeree is put on notice that unless it accepts the offer there is a significant risk that the order provided for by the rule may follow;
(l)in declining to accept the offer, the offeree undertakes the risk and consequences that naturally flow from that risk;
(m)the general factors which apply in most, if not all, cases such as hardship and difficulty predicting the result of the trial cannot support the exercise of the discretion in favour of the party who rejected the offer; and
(n)the ordinary operation of the rule is not to be displaced just because the case is a difficult one.
(footnotes omitted)
As I indicated in Boothman v George,[3] I respectfully agree with Gething DCJ.
[3] Boothman v George [2024] WADC 26 (S) [7].
The defendant submitted that the issue that occupied the substantial part of the trial was whether the defendant was liable to pay damages to the plaintiff for breach of a personal duty of care. The defendant referred to the fact that the third party was entitled to defend the plaintiff's claim that the defendant breached such a duty and that the defence on that issue was materially and substantially conducted by the third party. The defendant submitted that the third party ultimately lost on that issue.
The defendant argued that if the third party had agreed to indemnify the defendant, the defendant would not have been put in the position of having to choose between proceeding to trial with the plaintiff seeking to prove liability, or what the defendant described as the 'unusual' path of admitting liability and seeking to prove its case against the third party.
The third party submitted that the defendant's submissions did not demonstrate any reasonable basis for not accepting liability prior to trial. The third party argued that it was not necessary for the defendant to have denied the plaintiff's claim for it to be able to pursue the third party proceedings. The third party contended it was open to the defendant to settle the plaintiff's claim and still pursue those proceedings.
The third party argued that the defendant should pay the plaintiff's costs. It said that the defendant's conduct in defending the plaintiff's claim was unreasonable and to order the third party to pay the defendant's costs would undermine my finding that the defendant was not entitled to indemnity for its costs of defending the plaintiff's claim.
I am not satisfied that I should make an order that avoids the consequences that would otherwise flow from the operation of Rule 42A.
The true contest at trial was between the defendant and the third party.
The defendant could have settled the proceedings and still pursued the third party. The defendant accepts as much.
Although it is true that the third party had the carriage of the dispute about whether the defendant breached a personal duty of care to the plaintiff, this was because this issue formed part of the dispute between the defendant and the third party. This issue could still have been addressed as part of the third party proceedings (albeit in the context of consideration of the reasonableness of the settlement) if the defendant had settled the plaintiff's claim and the plaintiff would not have had to incur the legal costs of the trial. The defendant has not suggested otherwise.
The plaintiff was not a necessary party to permit the third party proceedings to proceed. As the defendant's submissions properly acknowledged, the defendant had a choice about whether to proceed to trial with the plaintiff or not. The choice made by the defendant has increased the legal costs of the trial by requiring the plaintiff to be separately legally represented. I do not consider that the fact that the defendant made the choice that it did, is a good reason to make an order for costs other than that provided for in Rule 42A.

Should indemnity costs be paid from 13 March 2023?

The plaintiff also sought an order that the defendant pay the plaintiff's costs from 13 March 2023 on an indemnity basis.
The plaintiff submitted that it should be inferred that the defendant's denial of liability was tactical and reference was made to the judgment of Ipp J in UnioilInternational Pty Ltd v Deloitte Touche Tohmatsu (a firm).[4] The submission seemed to be that the defendant's denial of liability was tactical because the plaintiff's continued participation in the trial assisted the defendant's claim against the third party.
[4] UnioilInternational Pty Ltd v Deloitte Touche Tohmatsu (a firm) (1997) 18 WAR 190 (Unioil).
The defendant disputed that there was any tactical denial of the kind that might warrant the award of indemnity costs. It submitted that there was nothing unusual or inappropriate about the choice made by the defendant, particularly where the third party disputed that the defendant had breached the duty of care that the defendant owed to the plaintiff and refused to indemnify the defendant.
It seems to me that this case is different to Unioil. That case concerned the denial of uncontroversial matters that unnecessarily lengthened the trial. In this case, what the plaintiff says the defendant should have admitted was liability.
Although I do not consider that the defendant's decision to continue to contest the plaintiff's liability justifies making an order for costs other than that provided for in Rule 42A, I do not consider that decision so unreasonable as to warrant an order for indemnity costs. The defendant’s conduct should be assessed in the context of the third party's refusal to indemnify the defendant and the allegations made by the third party that the defendant had breached the relevant insurance policy by making admissions that it did (which fell short of an admission of liability).
The plaintiff's submissions also referred to questions asked by various judicial officers about whether it was really necessary for the plaintiff to continue to participate in the trial. He referred to questions asked by Vernon DCJ on 18 July 2023, Gething DCJ on 8 February 2024 and me at a directions hearing shortly before the trial commenced.
It does not seem to me that the fact that these questions were asked establishes that it was unreasonable for the defendant to have continued to defend the proceedings after 13 March 2023. This questioning did not begin until several months after that date and around the time the Rule 42A Offer was made. In any event, such questioning is a normal part of the proper case management of proceedings in this court. That such questions were asked does not of itself establish unreasonable conduct.

Should the third party pay the costs of the third party proceedings?

The orders sought by the defendant included orders that the third party pay the costs of the third party proceedings.
The third party submitted that no order for costs should be made in relation to the third party proceedings because:
(a)while the defendant obtained policy coverage in respect of the plaintiff's damages award, the defendant failed on its claim for indemnity for defence costs; and
(b)the defendant's result at trial was less favourable than was offered by the third party in a written offer of compromise dated 21 July 2023.
The third party's letter offered to settle on the following terms:
(a)payment by the defendant to the plaintiff of the agreed quantum of damages in the sum of $801,611.73 (being $1.1 million less the workers' compensation benefits already paid totalling $298,388.27);
(b)payment by the defendant of the plaintiff's costs in full as either agreed between the plaintiff and the defendant or as taxed;
(c)payment by the third party to the defendant of the sum of $500,000.00 all inclusive, plus the workers compensation benefits already paid of $298,388.27; and
(d)dismissal of the third party proceedings with no order as to costs.
It may be observed that this offer would have involved the defendant being paid $301,611.73 less than the amount recovered at trial and nothing for its legal costs. The third party’s submission that this offer was better than the position achieved at trial assumed that the defendant would be left with the liability to pay its legal costs of the third party proceedings.
I consider that the defendant was the successful party in the third party proceedings and costs should follow the event. Although the third party succeeded on one issue, this does not alter my assessment that the defendant was the successful party.
I do not consider that the offer made by the third party offered to settle on terms better than those achieved by the defendant at trial. The terms offered were manifestly worse than those achieved by the defendant at trial. While it is true that the defendant has had to incur legal costs, whether the third party should contribute to those costs is the issue presently under consideration.
Further, I do not consider that the fact that the defendant did not accept that offer establishes that the defendant's conduct in proceeding to a trial of the third party proceedings was unreasonable, so as to warrant the defendant being deprived of its costs. The defendant ultimately prevailed at trial and recovered more than the defendant offered.

Should a special costs order be made?

The principles relevant to consideration of whether a special costs order should be made were conveniently summarised by Gething DCJ in Tahlia Burns by her next friend Liesel Nicola Burnsv North Metropolitan Health Service[5] as follows:
(a)the court must first form an opinion that the costs otherwise allowable would be inadequate and second form an opinion that such inadequacy arises because of the unusual difficulty, complexity or importance of the matter;
(b)the requirement of inadequacy will be demonstrated if the applicant shows that there is a fairly arguable case that the bill to be presented to the taxing officer may tax at an amount which is greater than the limit that would be imposed by the relevant costs determination;
(c)because the determination would ordinarily be made in advance of taxation, it is a matter of impression, rather than a matter of detailed evaluation, precision or science;
(d)the word 'unusual' only qualifies 'difficulty' and not 'complexity' or 'importance';
(e)the characteristics of unusual difficulty, complexity or importance qualify the matter before the court, rather than the work done or services provided in respect of each applicable item of the costs determination; and
(f)there must be a causal connection between the unusual difficulty, complexity or importance of the matter brought before the court and the inadequacy of the costs allowable under the relevant determination.
[5] Tahlia Burns by her next friend Liesel Nicola Burnsv North Metropolitan Health Service [2019] WADC 65 [72].
The defendant's application for a special costs order is supported by an affidavit from the defendant's solicitor who deposes to the fact that there is over a $100,000.00 difference between the costs incurred by the defendant (inclusive of reasonable work undertaken by counsel) and the sum likely recoverable under the scale.
The bulk of the difference between the scale costs and the amount likely to be assessed identified in the affidavit relates to item 19 of the scale: preparation of case. The affidavit says that these costs relate to the proofing of a number of witnesses who were not ultimately called at trial because of what the defendant says were late concessions made by the third party.
The affidavit also identified small differences between the costs incurred by the defendant and what it might be able to recover under the scale because a senior practitioner performed discovery and a second solicitor sometimes attended trial.
The third party submitted that the defendant's solicitor's affidavit provided insufficient assistance to determine whether there is a fairly arguable case that the bill to be presented to the taxing officer may tax at an amount which is greater than the scale limit. The third party argued that the only information provided about why there was a variation in relation to item 19 was that the costs incurred in 'collecting evidence, identifying, locating and proofing the witnesses regarding the mobile plant operator contract' exceeded $18,000.00.
The defendant argued that the third party proceedings were unusually difficult and complex by reason of:
(a)the contractual arrangements between the defendant and WorkPac, the defendant and Rio Tinto Services, the insurance contract between the third party and WorkPac and the relevant extension to that insurance contract;
(b)the requirement to prove all relevant underlying facts that engaged the applicable provisions;
(c)overlapping legal and factual questions in the plaintiff's action and in the third party proceedings concerning the defendant's conduct and alleged and found, negligence;
(d)the third party's 'tactical' position of asserting the defendant was liable to pay damages by reason of vicarious liability for the conduct of the loader operator, while disputing that this amounted to relevant negligence for the purposes of the extension to the insurance contract and at the same time the third party disputing that the defendant breached a personal duty of care; and
(e)the third party's failure to make concessions until days before the commencement of the trial.

The defendant submitted that these proceedings were also important as there is other outstanding litigation between related parties with similar issues. It was contended that the resolution of these proceedings might affect those other proceedings.
The third party disputed that the third party proceedings were unusually difficult or complex, or that the position it adopted could fairly be described as 'tactical', or its concessions as last minute.
I am not satisfied that this matter was unusually difficult. The legal issues that arose in the third party proceedings did not seem to be unexpectedly challenging for a dispute of this type.
I am satisfied, however, that the bill to be presented to the taxing officer may tax at an amount which is greater than the limit that would be imposed by the relevant costs determination and that such inadequacy arises because of the complexity, or importance of the matter.
I accept the evidence given by the defendant's solicitor that the complexity and importance of the matter made it necessary to proof a significant number of witnesses with the result that the maximum amount for item 19 of the scale (preparation of the case) could be exceeded. On the basis of this evidence, it seems fairly arguable to me that the costs allowable in relation to item 19 of the scale would be inadequate.
I consider that it is appropriate to order that the defendant's costs for the preparation of its case for trial be taxed without regard to the maximum limits imposed by the scale in relation to item 19, including reasonable allowances for work undertaken by counsel.
I am not persuaded however that the complexity and importance of the matter justifies the scale rates in relation to other items being lifted, or that I should order that costs be taxed without reference to the hourly and daily rates provided for in the scale.

Conclusion

For the reasons I have given:
(a)the defendant should pay the plaintiff's costs of the main action, taxed between a law practice and client from 21 July 2023 onward and on a party/party basis prior to that;
(b)the third party should pay the defendant’s costs of the third party proceedings; and
(c)for the purposes of taxing the defendant's costs of the third party proceedings, the defendant's costs for the preparation of its case for trial should be taxed without regard to the maximum limits imposed by the scale in relation to item 19, including reasonable allowances for work undertaken by counsel.
I will make orders accordingly.

I certify that the preceding paragraph(s) comprise the reasons for decision of the District Court of Western Australia.
GS
Associate
18 DECEMBER 2024