HENDRIKA MISIANI (As Executor of the Will of Alfredo Antonio MISIANI (Dec)) v Welshpool Engineering Pty Ltd 008 669 421 (In Liq)
[2003] WASC 263 (S)
HENDRIKA MISIANI (As Executor of the Will of ALFREDO ANTONIO MISIANI (DEC)) -v- WELSHPOOL ENGINEERING PTY LTD 008 669 421 (IN LIQ) & ANOR [2003] WASC 263 (S)
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2003] WASC 263 (S) | |
| Case No: | CIV:1214/2002 | 4-7, 10-14 MARCH 2003 | |
| Coram: | BARKER J | 19/12/03 | |
| 24/03/04 | |||
| 20 | Judgment Part: | 1 of 1 | |
| Result: | Costs order made in favour of second defendant | ||
| B | |||
| PDF Version |
| Parties: | HENDRIKA MISIANI (As Executor of the Will of ALFREDO ANTONIO MISIANI (DEC)) WELSHPOOL ENGINEERING PTY LTD 008 669 421 (IN LIQ) AMACA PTY LTD 000 035 512 (Formerly JAMES HARDIE & COY PTY LTD) |
Catchwords: | Costs Contribution proceedings Calderbank letter Whether second defendant entitled to indemnity order against first defendant |
Legislation: | Nil |
Case References: | Alpine Holdings Pty Ltd v Warwick Entertainment Centre Pty Ltd [2003] WASC 53(S) Calderbank v Calderbank [1976] Fam 93 Dobb v Hacket (1993) 10 WAR 532 Henderson v Simon Engineering (Aust) Pty Ltd [1988] VR 867 Hendrie v Rusli [2000] WASCA 420 Lend Lease Retail Projects Pty Ltd v Construction Engineering (Aust) Pty Ltd [2000] VSCA 114 Multicon Engineering Pty Ltd v Federal Airports Corporation (1996) 138 ALR 425 Samuel Shang Ren bhnf v Biswanath Mukerjee, unreported; SCt ACT; 16 April 1997 Toomey v Scolaro's Concrete Constructions Pty Ltd (In Liq) (No 4) [2002] VSC 28 Tremain v Jones and Lilley [1968] VR 658 Australian Medical Innovations Pty Ltd v Go Medical Industries Pty Ltd, unreported; SCt of WA; Library No 960214; 22 April 1996 Mutual Community Ltd v Lorden Holdings Pty Ltd, unreported; SCt Vic; 28 April 1993 Quirk v Bawden (1992) 112 ACTR 1 Skinner v Byrnecut Mining Pty Ltd [2001] WADC 103; (2001) 27 SR(WA) 331 SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CIVIL
DECISION : 24 MARCH 2004 FILE NO/S : CIV 1214 of 2002 BETWEEN : HENDRIKA MISIANI (As Executor of the Will of ALFREDO ANTONIO MISIANI (DEC))
- Plaintiff
AND
WELSHPOOL ENGINEERING PTY LTD 008 669 421 (IN LIQ)
First Defendant
AMACA PTY LTD 000 035 512 (Formerly JAMES HARDIE & COY PTY LTD)
Second Defendant
Catchwords:
Costs - Contribution proceedings - Calderbank letter - Whether second defendant entitled to indemnity order against first defendant
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Legislation:
Nil
Result:
Costs order made in favour of second defendant
Category: B
Representation:
Counsel:
Plaintiff : Mr T J Hammond
First Defendant : Mr M A McAuliffe
Second Defendant : Mr B J H Goetze
Solicitors:
Plaintiff : Slater & Gordon
First Defendant : Dibbs Barker Gosling (Formerly McAuliffe Williams & Partners)
Second Defendant : Minter Ellison
Case(s) referred to in judgment(s):
Alpine Holdings Pty Ltd v Warwick Entertainment Centre Pty Ltd [2003] WASC 53(S)
Calderbank v Calderbank [1976] Fam 93
Dobb v Hacket (1993) 10 WAR 532
Henderson v Simon Engineering (Aust) Pty Ltd [1988] VR 867
Hendrie v Rusli [2000] WASCA 420
Lend Lease Retail Projects Pty Ltd v Construction Engineering (Aust) Pty Ltd [2000] VSCA 114
Multicon Engineering Pty Ltd v Federal Airports Corporation (1996) 138 ALR 425
Samuel Shang Ren bhnf v Biswanath Mukerjee, unreported; SCt ACT; 16 April 1997
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Toomey v Scolaro's Concrete Constructions Pty Ltd (In Liq) (No 4) [2002] VSC 28
Tremain v Jones and Lilley [1968] VR 658
Case(s) also cited:
Australian Medical Innovations Pty Ltd v Go Medical Industries Pty Ltd, unreported; SCt of WA; Library No 960214; 22 April 1996
Mutual Community Ltd v Lorden Holdings Pty Ltd, unreported; SCt Vic; 28 April 1993
Quirk v Bawden (1992) 112 ACTR 1
Skinner v Byrnecut Mining Pty Ltd [2001] WADC 103; (2001) 27 SR(WA) 331
SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323
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- BARKER J:
Introduction
1 On 19 December 2003, I delivered a reserved judgment in this action and ordered that judgment be entered for the plaintiff against the defendants in the sum of $527,999.16.
2 In relation to the question of costs, I ordered that the first and second defendants pay the plaintiff's costs and disbursements of the action to be taxed if not agreed.
3 In relation to contribution proceedings between the defendants, I found that the second defendant was entitled to a contribution from the first defendant in respect of the total damages payable to the plaintiff in the proportion of 97:3.
Question of costs in contribution proceedings
4 In light of the terms of the judgment and the finding in the contribution proceedings, the second defendant sought a special order for costs against the first defendant. I ordered that the question of such an order be reserved and gave the defendants leave to file written submissions in relation to the question.
5 In the further written submissions of the second defendant dated 13 January 2004, the second defendant seeks a special costs order in these terms:
"(a) the first defendant pay the plaintiff's costs and disbursements to be taxed if not agreed;
(b) the first defendant pay the second defendant's costs and disbursements as incurred after 17 May 2003 to be taxed if not agreed; and
(c) there be a certificate for two counsel in the action; and
(d) there be a certificate for the costs of transcript"
6 In light of the order I have already made that each of the defendants should pay the plaintiff's costs and disbursements, a separate order in terms of par (a) of that sought by the second defendant would appear to be redundant. The plaintiff is entitled to have an order for costs against each of the defendants. The question is whether the first defendant should, in effect, indemnify the second defendant in respect of the whole or part of
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- the costs incurred by the second defendant after 17 May 2003. (I apprehend that the second defendant intends that the relevant date should be 17 May 2002, the date of a "Calderbank" letter from the solicitors for the second defendant to the solicitors for the first defendant, to which I refer in greater detail below, and proceed on this understanding.)
The Calderbank letter and other material circumstances
7 On 17 May 2002, the solicitors for the second defendant, by facsimile transmission to the solicitors for the first defendant, wrote, "Without Prejudice Save as to Costs", formally proposing the making of consent orders in the action. The formalisation of the offer as to consent orders followed a mediation of the action in the court, conducted on 16 May 2002 and involving the first defendant and the second defendant. As finally formulated in the facsimile transmission dated 17 May 2002, the second defendant's solicitors put to the first defendant's solicitors the following offer:
"We therefore formalise Amaca's offer that consent orders be made reflecting a discharge of Amaca's liability upon payment to the plaintiff of $250,000 plus 50% of costs, plus 50% reimbursement to HIC and HBF.
This offer is open until 4.00 pm on 24 May 2002.
The offer is made in accordance with the principles discussed in Calderbank v Calderbank [1976] Fam 93 and the many cases which have applied this principle since then.
In the event that this offer is not accepted and in the event that Amaca's contribution is less than the 50% offer, we propose to tender this letter as a basis for a special costs order that any parties who have not achieved a better result against Amaca pay Amaca's costs and disbursements from the date of this letter."
8 In the event, the first defendant did not accept the offer put by the second defendant.
9 In further support of its application for a special costs order, the second defendant refers to the nature of the negotiations between the second defendant and the first defendant at mediation on 1 May 2002 and later on 16 May 2002. Jacqueline Marie Kubacz, a solicitor in the employ of the solicitors for the second defendant, has set out the nature of these negotiations in an affidavit sworn 19 December 2003 and filed in support
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- of the application of the second defendant. The first defendant has not contested any of the matters stated in Ms Kubacz's affidavit.
10 Ms Kubacz says that three salient points arose from the mediation which occurred on 1 May 2002:
"(a) the first defendant was prepared to offer to the plaintiff the sum of $50,000 inclusive of costs to settle the matter;
(b) the second defendant made an offer to the first defendant to contribute 50% of the damages award to be made to the plaintiff; and
(c) the first defendant would not consent to the second defendant settling its liability with the plaintiff such that if the second defendant did do this, then, the first defendant intended to join the second defendant back into the proceedings as a third party to the action."
11 The matter then proceeded to a second mediation on 16 May 2002. At that mediation, the second defendant, in the absence of the plaintiff, offered to contribute up to $250,000 to settle the matter. This seems to have been proposed on the basis that the first defendant should make a matching contribution so that an offer of about $500,000 could be put to the deceased (who was then still alive) in settlement of his action. The first defendant was only prepared to contribute $70,000.
12 In those circumstances, on 17 May 2002, the second defendant's solicitors sent the Calderbank facsimile transmission dated 17 May 2002 to which I have referred, to the first defendant's solicitors.
13 From 17 May 2002 until trial, there was no waiver in the first defendant's position. In short, the first defendant did not seek to negotiate any further with the second defendant concerning the terms of any settlement that might be negotiated with the plaintiff.
The second defendant's position
14 The second defendant now observes that, based on the judgment entered in this action, the second defendant's contribution is significantly less than the 50 per cent offer made at the first mediation and equates to $15,839.97, which is also significantly less than the $250,000 offered at the second mediation on 16 May 2002 and confirmed in the facsimile transmission dated 17 May 2002 from the second defendant's solicitors to the first defendant's solicitors.
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15 The second defendant also observes that, having regard to the fact that the deceased died on 9 July 2002, that is after the making of the offer on 17 May 2002, if the offer had been accepted and the matter settled with the deceased, expenses such as funeral and probate expenses and interest would not have been incurred in the matter.
16 In short, the second defendant says that it was essentially prepared to contribute half of a settlement with the plaintiff, capped at $500,000, as well as to pay half of the HIC and HBF expenses (referred to in the reasons for decision and comprising about $21,000 at trial). The second defendant says its assessment of the likely damages to be recovered by the plaintiff was largely accurate, given the damages award of $527,999.16 made by the Court in the event. Thus, the second defendant says that if the first defendant had acted on the second defendant's offer, or if it had combined with the first defendant to make an offer to the plaintiff, it is extremely likely that the litigation would have been resolved, that Court time and expenses would have been saved, that the litigants would have been saved a much greater part of their legal costs and expenses, and the matter would have been resolved amicably. The second defendant contends the administration of justice would have been served by that result.
The first defendant's position
17 The first defendant acknowledges the principles governing costs arising from Calderbank v Calderbank [1976] Fam 93, but says that the full context in which the formalised offer of the second defendant dated 17 May 2002 was made must be taken into account before the principles applying to a Calderbank offer are applied to the prejudice of the first defendant.
18 In that regard, the first defendant says that, when the offer was made on 17 May 2002, it was expressly stated to be open until 4 pm on 24 May 2002. At the time the offer was made, CSR Ltd and Midalco Pty Ltd were respectively first and second third parties to the action. This is reflected in the fact that the offer, as stated in the facsimile of the second defendant's solicitors dated 17 May 2002, was copied to solicitors who represented those third parties. The action against the third parties was subsequently discontinued. The first defendant says that, as is apparent from Ms Kubacz's affidavit, no revised offer was made by the second defendant at that time; that is to say, at the time the action against the third parties was discontinued.
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19 The first defendant also says that, in the pleadings, the plaintiff alleged that the second defendant knew, or ought to have known, of the dangers of asbestos and that the second defendant expressly denied that accusation in its defence, as indeed it denied the duty pleaded in par 13 of the plaintiff's statement of claim and negligence pleaded in par 14 of the statement of claim. The first defendant says that a perusal of the defence of the second defendant clearly illustrates its formal position was non-admission or denial of each of the material facts pleaded in the case against it.
20 The first defendant submits that the position of the second defendant in this regard is surprising, given the numerous reported decisions on these very issues in Western Australia and in other Australian jurisdictions. The first defendant further observes, as noted in the reasons for decision in the action at [7], that at the outset of the trial Senior Counsel for the second defendant modified the second defendant's position as disclosed by the pleadings by contending that the real issue in the action was the allocation of legal liability; that is, whether the first defendant or the second defendant or both should be held liable.
21 Nonetheless, the first defendant submits that, as the trial progressed, the issue of liability was hotly contested by the second defendant and significant time was spent with many of the medical and scientific witnesses addressing the issue of causation in particular. Further, that the second defendant took the primary lead in defending the quantum claim, as appears extensively from both cross-examination of the plaintiff by Senior Counsel for the second defendant and in the second defendant's detailed written submissions upon the issue.
22 The first defendant also contends, for reasons set out below, that it was reasonable for it to continue to deny liability to the plaintiff in the action.
The position as it developed at trial
23 In relation to these particular submissions of the first defendant, it is correct to observe that the second defendant identified, in particular, the issue of causation as a primary line of its defence.
24 It is also correct to observe that at trial the second defendant took the lead in defending the quantum claim.
25 However, in circumstances where the first defendant was not willing to join with the second defendant to attempt to settle the action of the
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- deceased, it is hardly surprising that the second defendant determined to avoid or limit its prospective liability at trial by agitating the causation issue and carefully scrutinising the plaintiff's claimed damages.
26 As to the quantum claim, I do not consider that the second defendant can be criticised, in all the circumstances, for making a careful defence of the quantum of damages claimed by the plaintiff. The second defendant having taken its own counsel prior to trial and having assessed that an award of damages in the vicinity of $500,000 would appear appropriate if liability were found, it no doubt was incumbent upon the second defendant to demonstrate through cross-examination of witnesses and appropriate analysis and submissions that its assessment was correct. I do not consider that the submission of the first defendant that the second defendant should, in some way, now be penalised for taking that course of action in respect of quantum has any reasonable basis to it.
27 Indeed, at trial, the first defendant was content to adopt the very precise analysis and detailed submissions made on behalf of the second defendant in regard to quantum.
28 Nor do I accept the related submission of the first defendant that, had the second defendant properly admitted liability, leaving damages and apportionment as the only live issues, the duration of the trial may well have been shortened by up to half, and this factor should now count against it in relation to the costs on the contribution proceedings. The question of causal potency in the contribution proceedings would have necessitated the leading of evidence of much the same nature as that led on the causation issue. In circumstances such as these, it seems to me that the second defendant was fully entitled to defend the plaintiff's action in the manner that it did.
The effect of the Calderbank letter
29 In essence, the position so far as the Calderbank offer is concerned may be summarised in this way. At the material time in May 2002, when the first defendant and the second defendant were in mediation concerning the possible settlement of the plaintiff's action, the second defendant put to the first defendant a significant offer to assist in the resolution of the plaintiff's claim. That offer, in the event, was based on an assessment of the plaintiff's action that was very close to the damages as finally assessed in the action. At no time after the making of that offer by facsimile transmission dated 17 May 2002 did the first defendant come back to the second defendant to take advantage of that offer, or otherwise attempt to
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- negotiate some other offer, which may have induced the plaintiff to settle the action.
30 The suggestion of the first defendant that the discontinuance of the proceedings against the third parties somehow has some relevance to the proper consideration of the effect of the Calderbankoffer is, in all of the circumstances, misconceived. The offer had earlier been made and not then acted upon. The subsequent discontinuance of the action against the third parties must be considered in all the circumstances irrelevant to the proper effect of the Calderbank offer in the conduct of the proceedings.
31 Much has been said about the nature of the Calderbank offer. The effect of a Calderbank offer usually is to displace the ordinary costs rules. The effect of a party refusing a Calderbank offer, at least one made in food faith, and then failing to improve its position when compared with the effect of the offer is to create a prima facie presumption that the party refusing the offer should pay costs: Multicon Engineering Pty Ltd v Federal Airports Corporation (1996) 138 ALR 425. At 451, Rolfe J stated:
"In my opinion the proper approach to take to an offer of compromise, whether made under the Rules or pursuant to a Calderbank letter, is that there should be a prima facie presumption in the event of the offer not being accepted and in the event of the recipient of the offer not receiving a result more favourable than the offer, that the party rejecting the offer should pay the costs of the other party on an indemnity basis from the date of the making of the offer. I proceed on the basis that the unreasonableness is demonstrated, prima facie, by the ultimate result. This approach is consistent with the decisions to which I have referred, the policy evidenced by the Act and the Rules and the widely accepted philosophy that settlements should be encouraged."
32 This approach has been adopted and applied in this Court.
33 In Dobb v Hacket (1993) 10 WAR 532 at 540 Murray J said of a Calderbank offer:
"The court should preserve in the minds of litigants, the conscious consideration that their behaviour may place them at risk as to costs if they refuse reasonable offers of settlement. The court should be careful not to foster the proposition that obstinacy and unreasonableness will not be punished by orders
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- as to costs. Such considerations foster the public interest in the desirability, not only from the point of view of the particular litigants in the case in question, but from the point of view of litigants generally, of the court so behaving as to encourage the achievement of reasonable and timely settlements."
- See also Alpine Holdings Pty Ltd v Warwick Entertainment Centre Pty Ltd [2003] WASC 53(S) per Roberts-Smith J at [54], [73].
34 If there is any doubt in the mind of a party or their legal advisers as to how an offer is to be interpreted, it is always open to them to discuss it with the offeror or their solicitor and, if necessary, ask that the terms of the offer be amended: Hendrie v Rusli [2000] WASCA 420 at [8], per Murray J.
35 The second defendant submits that the familiar Calderbank principles, which ordinarily apply between a plaintiff and defendant, should also apply between two defendants in a case such as the present where each defendant has maintained proceedings for contribution against the other.
36 In the written submissions of the first defendant opposing the second defendant's application dated 16 January 2004 at par 15, the first defendant submits that the fundamental question underlying the exercise of discretion in relation to the second defendant's application is whether the first defendant's failure to accept the offer is in all the circumstances unreasonable such that it warrants departure from the ordinary rules as to costs. The first defendant says that, in considering this issue, the Court should note that:
"- other than cases concerning heavy exposure at Wittenoom, or against the State or James Hardie, this is the first case to progress to trial in Western Australia upon the liability of an employer for exposure to an employee to asbestos dust on an intermittent basis in the early 1960s;
- the issue of foreseeability is a real issue for employers during the early 60s, particularly in the absence of any evidence of actual knowledge on the part of the employer;
- the approach taken by the First Defendant in the conduct of the case was not unreasonable given the contentious
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- issues as to the actual knowledge that was available in the medical and scientific communities at various points in time, and the reasonable availability of that knowledge being accessible for an employer in the position of the First Defendant. These issues have never previously been explored in this jurisdiction;
- - other than the speculative proposition proposed by counsel for the Second Defendant upon the handing down of judgment, that acceptance of the offer may have led to the matter being settled, the position taken by the Plaintiff is indicative of the parties being too far apart for any reasonable prospect of settlement to be achieved;
- the Second Defendant by its own conduct has done little to reduce the time and expense of the trial. Had the Second Defendant made an appropriate concession on liability leaving the trial to be conducted solely upon issues of quantum and apportionment against the First Defendant, the trial may well have been substantially shortened in its duration and complexity;
- on any view of the matter 'acceptance of the offer would not have caused any material lessening of any costs incurred … '."
37 Indeed, the first defendant submits that the second defendant's offer in circumstances such as the present cannot easily be equated with the normal circumstances in which a Calderbank letter achieves its desired effect in an action between a plaintiff and a defendant. It refers to Samuel Shang Ren bhnf v Biswanath Mukerjee, unreported; SCt ACT; 16 April 1997. In that case, Miles CJ had to deal with a claim for indemnity costs based on an offer of compromise in contribution proceedings between defendants which was in the familiar Calderbank form. The offer was in the following terms:
"We have received instructions from our client to propose a resolution in the proceedings between ourselves. We have instructions to propose that our client agree to pay 30%, and your client agree to pay 70%, of any award for damages and costs made in favour of the plaintiff by way of judgment and/or settlement.
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- This is an important offer. It is made in accordance with the principles of Calderbank … "
38 In the event, the defendant who made the Calderbank offer received a more favourable result than what was offered in the letter, in that the plaintiff was wholly unsuccessful in the claim against that defendant and that defendant was not required to contribute to the plaintiff's damages at all.
39 Miles CJ considered a submission that:
"[I]n accordance with a virtual worldwide trend of authority, expressed most notably in this jurisdiction in Quirk v Bawden (1992) 112 ACTR 1 … [the first defendant] should be awarded a costs advantage against the second defendant for the second defendant's failure to accept an offer from the first defendant which was markedly less favourable to the first defendant than the outcome of the case. The purpose of awarding a costs advantage in such situations is … to try to contain the costs of litigation by putting a premium on a realistic assessment of the results of a case."
40 Miles CJ, however, considered that the difficulty with this submission was that it was impossible to forecast what effect the offer would, or might have had, if it had been accepted. He considered the terms of the offer were "ambiguous", in any event, in that the offer did not stipulate whether the agreement was to apply if the plaintiff was successful against only one defendant instead of against both defendants.
41 Further, Miles CJ considered an agreement between the defendants as to their respective shares of damage, should the plaintiff be successful, would hardly have affected the course that the plaintiff was likely to take in the action. This was because, as his Honour explained, in the absence of further agreement with the plaintiff the claims against both defendants would have proceeded. The same issues on liability would have been agitated and, in particular, the same doctors would have been called to give evidence on behalf of the respective parties and the same cross-examination would have ensued. Again, in the absence of an agreement with the plaintiff, the same evidence on damages would have been called. As a result, Miles CJ considered that:
"At its highest, in my view, all that can be said about a hypothetical acceptance of the offer is that it might have set the scene for more production negotiations with the plaintiff. It is
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- impossible to assess, even in retrospect, whether such negotiations, if they had taken place, were likely to have resulted in a shortening of the trial or in the saving of costs. Whilst the making of the offer is to be commended (not forgetting that there may have been other efforts at compromise of which I know nothing), it is in all the circumstances too flimsy a foundation to make a special order as to costs which goes beyond the usual party and party basis."
42 In Henderson v Simon Engineering (Aust) Pty Ltd [1988] VR 867 (to which Miles CJ referred in Samuel Shang (supra)), a claim for a special order for costs arose in not dissimilar circumstances. The plaintiff sued three defendants claiming damages from each of them as joint tortfeasors for negligently exposing him to asbestos. The case commenced on 5 October 1987 and a verdict was returned on 20 October 1987. At 10.30 am on 12 October 1987, the third defendant served on each of the other defendants an offer to contribute "35 per cent of any verdict or settlement obtained by the plaintiff". If that offer had been taken up, the third defendant would have been required to contribute to a greater extent than it was found liable after the verdict. The relevant rules of the Supreme Court of Victoria permitted the Court to take an offer to contribute into account in determining whether it should order that the party on whom the offer to contribute was served should pay the whole or part of the costs of the party who made the offer, or any costs which that party is liable to pay the plaintiff.
43 Murphy J, at 869, held that the purpose of the relevant rule was to provide a spur to enable a defendant to bring litigation to an end, to lessen costs and to shorten litigation. He also considered it enables a reasonable defendant to protect itself against incurring costs occasioned by the unreasonable conduct of a fellow defendant.
44 However, in the circumstances of the case, Murphy J held, at 871, that the third defendant's offer to contribute could only shorten the litigation, or lessen the costs, if it eliminated the need as between defendants of being separately represented, or of calling or eliciting evidence from witnesses which laid blame upon the third defendant, or which exculpated the third defendant and inculpated the first or second defendants.
45 Murphy J found, at 872 - 873, that acceptance of the offer would not have caused any material lessening of any costs incurred and therefore the third defendant was not entitled to an order that the first defendant should
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- pay or contribute to its costs or to its proportionate liability to pay the plaintiff's costs incurred after the date of the offer.
46 Murphy J, at 872, noted that even if notices of contribution were ineffective as notices under the relevant rule, the giving of them will, nonetheless, be a factor to consider as material relevant to the exercise of the Court's discretion on the issue of costs, as suggested by Tremain v Jones and Lilley [1968] VR 658, at 662 per Smith J. This confirms the view that the general Calderbank principles are capable of having application in contribution proceedings.
47 The question of costs in contribution proceedings and the principles discussed in Henderson's case (supra) have been considered more recently, in Toomey v Scolaro's Concrete Constructions Pty Ltd (In Liq) (No 4) [2002] VSC 28. There, Eames J in an action involving 10 defendants found for the plaintiff and made contribution orders between a number of the defendants. He made orders that the first, second and fourth defendants were liable to make contribution to the seventh defendant to the extent, each, of 20 per cent. He also made orders as to contribution as between the second defendant and the sixth defendant.
48 During the course of the proceedings, many of the defendants had caused notices to be served constituting either offers of compromise pursuant to r 26.10 of the rules of the Supreme Court of Victoria or delivered letters making offers of compromise in the Calderbank form. Eames J, at [12], noted that offers in a Calderbank form are accepted and given weight by the Supreme Court of Victoria.
49 Eames J, at [13] - [15], noted that, while the proceedings in the case raised a number of extremely complex issues, there were good commercial reasons why the case should have settled. The complexity and multiplicity of issues meant that the trial was likely to be long and costly. It occupied 56 sitting days prior to judgment, as well as many more days since dealing with various applications.
50 Various factors led his Honour, at [17], to consider that apportionment was never going to be easy and this led him to further consider that a number of the compromise offers constituted "fairly hollow attempts to protect … interests on costs".
51 Eames J, at [20], considered that, whilst it is undoubtedly the case that the question of imposing a penalty on costs when an offer has been
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- unreasonably rejected must be determined without undue regard for technical objections as to the form of the offer:
"[I]t remains the case that the offer must be in unambiguously clear terms [see Grbavac v Hart [1997] 1 VR 154 at 160, per Tadgell JA], leaving no reasonable doubt as to the nature and extent of what was being offered [Grbavac v Hart [1997] 1 VR 154, at 155 per Winneke P]."
"In a case in which liability is accepted as being clear against both or more defendants and only the issue as between defendants as to their proportionate contribution and the amount to be paid remains to be settled, a defendant may offer to his co-defendant to contribute a nominated percentage, either of the specified amount or of any sum that the plaintiff obtains by way of verdict … The amount that the offeror has in mind to offer the plaintiff need not in these circumstances be relevant, if the plaintiff was only prepared to settle for an unreasonable amount which neither defendant would pay. However, if the defendant proposed to be protected as to costs both on the issue of liability and damages, he would no doubt in his offer specify an amount to be offered to the plaintiff. But nonetheless the rule would operate to assist in cutting down costs if the issue as to liability between defendants and between the plaintiff and the defendants could be eliminated … "
53 Eames J, at [27], accepted that the purpose of the rule, and by implication the purpose of the principle behind the Calderbank letter is to encourage "genuine attempts to resolve an action".
54 Eames J, at [28], also accepted that if an offer of compromise was unlikely to be accepted by one or more of the other defendants, or the defendant making the offer, knowing full well that its offer would not be
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- accepted, made it simply to set up the position for a later costs argument, are circumstances that do not necessarily deprive an offer of effect: see Lend Lease Retail Projects Pty Ltd v Construction Engineering (Aust) Pty Ltd [2000] VSCA 114 per Callaway JA, at [13].
55 In Lend Lease Retail (supra) one of three defendants made an offer to contribute 51 per cent towards the judgment or settlement sum and costs. That defendant was held to be only 40 per cent liable following conclusion of the proceedings. No offer was made to the plaintiff, so the offer of contribution of 51 per cent was not itself an attempt to compromise the plaintiff's action, but to reduce the length and cost of the trial. The Court held that the defendant who made the offer should have had the benefit of the offer because he did better than the offer he made, thus demonstrating that his assessment was reasonable, and had his offer been accepted the case would have been reduced in length and cost.
56 In Lend Lease Retail (supra), at [15], Callaway JA (with whom Phillips and Charles JJA agreed) further stated:
"I hasten to say that the foregoing is not a rule. There are too many possible factors in a case with three of more defendants and, in any event, the discretion should not be fettered. It is simply an indication of the way in which the discretion is likely to be exercised in most cases where one defendant makes a comprehensive offer to the others. The offers made in Henderson's Case were far from comprehensive. There may be cases where the group or one or more of its members have legitimate reasons for refusing such an offer that would not have been available to a single defendant, but they will not ordinarily include inability to agree among themselves."
57 In Toomey's case (supra), Eames J, at [31], confirmed that, in his view, the primary purpose of the rule is directed to encouraging unreasonable defendants to see reason, by accepting what turns out later to have been a sensible offer, thereby avoiding the incurring of unnecessary costs by the defendant making the offer. It is a rule which is not directed to rewarding the defendant whose counsel proves to have been closest in estimating the probable outcome of the case, but is directed to encouraging an unreasonable litigant to contribute to settlement of a case where his unreasonableness has caused other defendants to unnecessarily incur costs. I respectfully adopt his Honour's statement of purpose as the purpose underlying the Court's power to award costs in contribution proceedings in the light of a Calderbank letter.
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Conclusion
58 In my estimation, the offer of the second defendant made at mediation and confirmed by the Calderbank letter dated 17 May 2002 was a genuine offer designed to compromise the proceedings. It was an offer made at an important juncture in the pre-trial manoeuvrings in the action, at a formal mediation in the court. It was confirmed in writing after the mediation. It was made the subject of a Calderbank proposal. It was for a significant sum of money, being half of what the second defendant's advisers had estimated by way of a total damages award in the action at that point.
59 The first defendant must be regarded as having failed adequately to respond to the offer made. As I have said above, the discontinuance of proceedings involving third parties must be considered of no relevance to the question of the exercise of the Court's discretion as to costs in contribution proceedings in a case such as the present.
60 Unlike the positions in Samuel Shang (supra) and Henderson's case (supra) in which a defendant merely offered to contribute to any judgment in a certain proportion and the nature of the offer was "ambiguous" in any event, and its acceptance would not have affected the course of the action because a trial needed to be undertaken in order to find whether the defendants were liable and, if so, in what sum by way of damages, here the second defendant proposed to the first defendant that an offer in a precise sum, to which it would contribute half, be put to the plaintiff. In the result, the total sum proposed was very close to the damages assessed at trial in favour of the plaintiff. The contribution ordered by the Court in relation to the second defendant, however, is considerably less than the sum the second defendant in its Calderbank letter offered to contribute to the settlement with the plaintiff that it proposed. There was no ambiguity about the terms of the Calderbank offer made by the second defendant's solicitors to the first defendant's solicitors.
61 If the first defendant had seriously entertained the offer of the second defendant, there would have been a prospect of a settlement being achieved with the plaintiff. It is not possible to say that that prospect was likely or probable, particularly in light of the quantum of damages contended for at trial on behalf of the plaintiff, which far exceeded the damages as assessed by the Court. Nonetheless, the inaction of the first defendant meant that the settlement option was not given a chance.
62 The first defendant seeks to justify its inaction by arguing that, at all material times, it was not clear that an organisation such as that which it
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- operated in the 1960s, owed a relevant duty of care to the deceased not to expose him to asbestos at that time.
63 However, this line of reasoning goes against the policy underlying the Court's discretion to make a special costs order and which is designed to encourage parties seriously to entertain reasonable proposals designed to shorten litigation in the interests of the parties and our system of civil justice.
64 In my view, there was nothing so exceptional about either the facts or the law relating to this action, so far as the first defendant is concerned, to suggest that the first defendant should not have considered itself at risk if it failed to entertain seriously the offer put to it by the second defendant.
65 As I have noted, there was no ambiguity in the nature of the offer. The second defendant sought to protect itself as against the costs it would incur in the action by using the Calderbank letter.
66 At the same time, I do not consider it right to say, as I have already indicated, that the offer of settlement it proposed to the first defendant, if it had been put to the plaintiff, would have made it "extremely likely" that the litigation would have resolved, as the second defendant submits. In my view, that outcome remained speculative. Nonetheless, the assessment of damages made by the Court in this action suggests that the plaintiff would have been well-advised seriously to have considered an offer in the terms proposed by the second defendant to the first defendant in May 2002.
67 In the result, I consider that the failure of the first defendant to give any real consideration to the second defendant's Calderbank offer to put the carefully framed consent judgment proposal to the plaintiff, an offer that might possibly have lead to the settlement of the action, is a circumstance which entitles the Court to exercise its discretion to make a special costs order as against the first defendant in favour of the second defendant. The offer was not ambiguous. If accepted, it would obviously have concluded the action. It was, in my view, unreasonably ignored.
68 However, I also consider that, because there was no certainty that the plaintiff would have consented to a judgment being entered in the terms of the judgment that has, in fact, been entered in this action, the second defendant is not entitled to a full indemnity in respect of its costs.
69 Taking into account the terms of the judgment entered in the action, the finding in the contribution proceedings, the Calderbank letter dated
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- 17 May 2002, and the uncertainty of outcome if the Calderbank offer had been acted upon, I consider it is reasonable that the first defendant should indemnify the second defendant in respect of two-thirds of its costs.
70 In those circumstances, in relation to the question of costs as between the first defendant and the second defendant, I would order as follows:
(a) The first defendant pay the second defendant's costs and disbursements as incurred after 17 May 2002 as taxed to the extent of two-thirds if not agreed;
(b) there be a certificate for two counsel in the action;
(c) there be a certificate for costs of transcript.
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