| JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA LOCATION : PERTH CITATION : HOWELLS -v- MURRAY RIVER NORTH PTY LTD & ANOR [2003] WADC 68 CORAM : FENBURY DCJ HEARD : 28 NOVEMBER 2002 DELIVERED : 21 MARCH 2003 FILE NO/S : CIV 4955 of 1993 BETWEEN : SY HOWELLS Plaintiff
AND
MURRAY RIVER NORTH PTY LTD
First Defendant
GAUCHO PTY LTD
Second Defendant
ZURICH AUSTRALIAN INSURANCE LIMITED
First Third Party
MANUFACTURERS MUTUAL INSURANCE LIMITED
Second Third Party
Catchwords: Costs - Apportionment of hearing time - Sanderson order - Special costs order - Turns on own facts
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Legislation:
Nil
Result: Various costs orders made Representation:
Counsel:
Plaintiff : Mr T Lampropoulos
First Defendant : Mr R J L McCormack
Second Defendant : Mr R J L McComack
First Third Party : Mr M W Odes QC
Second Third Party : Mr J R Criddle
Solicitors:
Plaintiff : Gibson & Gibson
First Defendant : Blake Dawson Waldron
Second Defendant : Blake Dawson Waldron
First Third Party : Srdarov Richards
Second Third Party : J R Criddle
Case(s) referred to in judgment(s):
Fluor Daniel Constructors Pty Ltd v Zurich Australian Insurance Ltd [2002] WASCA 218
Howells v Murray River North Pty Ltd & Ors [2002] WADC 222
Sanderson v Blyth Theatre Co [1903] 2 KB 533
Case(s) also cited:
Bullock v London General Omnibus Co [1907] 1 KB 264
Fimiston Mining NL v Western Reefs Ltd & Ors (1996) 14 WAR 387
Lackersteen v Jones & Ors No 2 (1988) 93 FLR 442
Johnsons Tyne Foundry Pty Ltd v Shire of Maffra (1948) 77 CLR 544
Athlone Pty Ltd v General Accident Fire and Life Insurance Corp (1985) 3 ANZ Ins Cas 60-648
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1 FENBURY DCJ: This matter involves a dispute about costs in an action for damages for personal injuries brought by the plaintiff alleging negligence against the first and second defendants (as employer alternatively as occupier), breach of statutory duty and breach of the contract of employment. (Howells v Murray River North Pty Ltd & Ors [2002] WADC 222).
2 Each of the first and second defendants issued third party proceedings against two insurance companies each of which declined to indemnify the first and second defendants against the plaintiff's claim. There were a number of matters in dispute between the parties including an issue as to whether the plaintiff was an employee, and if so by whom he was employed. Alternatively, there was an issue whether he was a sub-contractor and, again, if so, to whom he was sub-contracted. 3 The first third party was the public liability insurer for both the first and second defendants. It was at risk under an insurance policy if the plaintiff was not an employee. 4 The second third party was the workers' compensation and common law insurer for both the first and second defendants. It was at risk if the plaintiff was held to be an employee of either of the defendants, or both of them. 5 The Court decided that the plaintiff had failed to establish that either the first or the second defendants was liable. Consequently the claim was dismissed. 6 The Court went on to make findings in relation to the other issues raised in the event that the finding on liability was overturned. On the issue of the nature of the relationship between the plaintiff and the first and second defendants the Court found the plaintiff was an employee of both the defendants. The consequence of that finding was that it was the insurance policy held by the second third party that applied and therefore that it was the second third party who was liable to indemnify the first and second defendants should they have been held liable to pay damages to the plaintiff. 7 Thus it can be seen that the first and second defendants failed as against the first third party, but succeeded as against the second third party. 8 As a result of submissions made in the last moments of the hearing a finding was made relating to the notional apportionment of liability as
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between the two defendants and the two third parties. In the result, the Court's view was that it was the first defendant who was in reality the employer of the plaintiff. 9 The first and second defendants were jointly represented at the hearing by a single firm of solicitors who briefed the one counsel. 10 The third parties were separately represented, the first third party's solicitor briefing senior counsel. 11 There are a number of preliminary issues raised which it is convenient to deal with now.
Hearing time 12 Counsel for the plaintiff submitted that the issues of negligence, breach of contract and breach of statutory duty only occupied about 1.5 days of the four days required for the trial. Consequently it was submitted that the order for costs inevitably to be made against the plaintiff be limited to 1.5 days of trial with the costs of the balance of 2.5 days to be borne by the second third party. 13 Counsel's reasons for making this submission were as follows. Although the first and second defendants succeeded on the issues of negligence, etc, the first defendant lost on the issue of whether there was an employment relationship. Counsel said this was an important and time consuming issue and if the first defendant had admitted it there would have been no need for the plaintiff to join the second defendant and no need for "all the evidence concerning the nature of the employment relationship and there would have been no need for the third party proceedings." (T405) 14 As counsel put it, the strong inference is that it was the second third party, the workers' compensation and common law liability insurer, who would have been responsible for the lack of concession of the fact that the plaintiff was an employee. In declining to concede that point, the second third party was in breach of the insurance policy. As counsel put it: "So at the end of the day the ultimate outcome was that the second third party was unsuccessful and it was responsible for the third party proceedings and for the evidence concerning the employment relationship and really the third party proceedings
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were none of the plaintiff's concern and he should not be penalised." 15 Thus, as counsel for the plaintiff submitted, "In relation to costs with the defendant, they should be limited to the time that would have been spent on liability if this employment relationship hadn't been raised as an issue upon which the plaintiff was successful. If you didn't have the third party proceedings, you didn't have the employment issue, then in my submission the liability trial would have taken about one and a half days and that is why, I submit, their costs should be limited to 1.5 days of trial." 16 In response counsel for the second third party pointed to the plaintiff's statement of claim and the fact that it alleged the alternative "…either employment by one or both and/or a sub-contract relationship with one or both." That was the way in which the plaintiff's claim was pleaded. Counsel submitted the plaintiff ultimately lost and that therefore the plaintiff should bear the defendants' costs. 17 In reply counsel for the plaintiff said: "The whole reason why it was done that way with Gaucho and Murray River North, employer employee, in the alternative contractor principal, is because no admissions were made. If the admission was made that Murray River North was the employer, there wouldn't have been any need for any of that." 18 The evidence relating to how it was the unfortunate plaintiff was injured required a relatively brief telling. It was a simple tale. It took less time to lead the evidence on that than the evidence about the internal workings, set-up and inter-relationship of the first and second defendants and their dealings with the plaintiff. 19 The involvement of the two counsel for the third parties, having opposing interests and goals, very significantly increased the length of the trial. I did not keep a stop watch nor especially focus on this aspect during the hearing. However I think that the plaintiff's counsel's assessment of the relative time that would have been required to deal with the issues of negligence and the like is fair and reasonable. Further, it seems to me that whether the plaintiff was an employee or a sub-contractor was not likely to be a critical issue for the plaintiff as a part of his case. He was one or the other.
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20 The approach I infer the second third party took in these proceedings significantly increase their length. In my view the cost to be paid by the plaintiff should be limited to 1.5 days of trial.
One bill? 21 Counsel for the plaintiff also submitted that the costs of the first and second defendants should be taxed as one bill. This was because although there were two defendants only one set of solicitors represented both of them. There was also a single counsel representing both the defendants at trial. No significant issue seemed to be taken with this submission and consequently I accept it and will order that the bill of costs of the first and second defendants should be taxed as one bill.
Sanderson order 22 As has been mentioned, assuming the first and second defendants or either of them to be liable to the plaintiff (which they were found not to be) then it is the second third party's insurance policy which would have become relevant. In other words the first and second defendants failed against the first third party but succeeded against the second third party. 23 Counsel for the first and second defendants argues that the most "time and cost efficient" order to be made would be a Sanderson order (Sanderson v Blyth Theatre Co [1903] 2 KB 533) which permits a court to order an unsuccessful defendant (here the third party) to pay the successful defendant's (third party's) costs. 24 Counsel submitted that I should accept this submission because such an order would be appropriate having regard to the "balance of considerations of policy, equity and convenience" arising in the case. 25 From the point of view of the first and second defendants their workers' compensation insurer and their public liability insurer indicated that their policies did not apply to the matter. It was clear that one of those policies would apply. It was reasonable and proper for both the third parties to be joined in the action in those circumstances. 26 It might also be said that, on balance, and in all the circumstances, the facts of the matter strongly indicated that the plaintiff was an employee of one or other of the defendants or both. That view of the matter might make it fair that the second third party should pay the first
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third party's costs, in other words that an order in the nature of a Sanderson order should be made. 27 Counsel for the first third party on the other hand expressed the view that orders for costs should be made against the first and second defendants. He pointed out that it was more practical from the point of view of taxation and the fact that the defendants would have "the file" and "all information in order to deal with the taxation of costs with the third party". 28 It was also pointed out that if there were to be a successful appeal by the second third party, and the first third party did not have a costs order against the defendants but merely an order against the second third party, then this will result in unnecessary further attendances and costs before the Court. In other words if the second third party were to escape liability on appeal then the first third party would be forced to return to court to seek costs orders against the defendant. 29 Finally it was submitted on behalf of the first third party that if it only has costs orders against the second third party, it is vulnerable in the unlikely event that the second third party should become insolvent. For those reasons the first third party submitted that costs orders should be made against the defendants. 30 This case has been a difficult matter to decide. The issues that were joined between the third parties were not clear cut. I have some sympathy for the concerns expressed on behalf of the first third party and after considering the opposing views I have reached the conclusion that this may not be an appropriate case to make a Sanderson order.
The insurance policy with the second third party 31 Counsel for the first and second defendants asserts that a proper interpretation of the insurance policy held by each of the defendants with the second third party entitles each of the defendants to be indemnified for all reasonable costs and expenses incurred in respect of their defence of the plaintiff's claim. These costs are said to comprise:
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(iii) their respective claims for contribution or indemnity against the first third party. 32 Counsel relies, as the basis for this submission, upon the provisions of the insurance policy annexed to the affidavit of Gemma Louise McGrath sworn 16 November 2002 (GLM-5). The relevant extract is as follows: 33 I shall put aside the question of whether the issue even arises given that no order is made in this matter to the effect that "…the employer is legally liable to make any payment in respect of such disability" (as expressed in the policy). I shall refer only to the issues as raised by the parties. 34 Counsel on behalf of the first and second defendants submits that this clause simply means what it says; that the second third party should "pay all reasonable costs and expenses incurred" by the first and second defendants. In other words indemnity costs. Counsel relies on the recent decision of the Full Court in Fluor Daniel Constructors Pty Ltd v Zurich Australian Insurance Ltd [2002] WASCA 218 per Fitzgerald AJ at pars 21-32. 35 In that case the insurer gave written consent as required by the policy. In the case at hand no such consent was given. Counsel for the second third party submitted therefore that the lack of consent dealt with the point and indemnity costs were not to be ordered. Counsel for the first and second defendants argued out that given the second third party asserted its policy did not apply, no question of it consenting could ever have arisen. According to counsel for the first and second defendants the second third party breached the contract of insurance.
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36 Liability to pay indemnity costs arises under the contract of insurance abovementioned. The written consent of the insurer is required. In the absence of written consent it seems to me no order can be made that indemnity costs be paid.
37 Counsel for the first and second defendants asserted that the judgment entered on behalf of each of the defendants against the second third party be in terms, inter alia, that there be a declaration: "That the second third party's refusal to indemnify the first defendant against the claim of the plaintiff is in breach of the contract of insurance No WWH0022809 between the first defendant and the second third party respectively." 38 Counsel for the second third party agreed that a declaration was appropriate but that it should be in the terms that: "The first defendant and the second defendant are entitled to be indemnified against the claim of the plaintiff pursuant to contract of insurance No WWH0022809." 39 It seems to me that the suggestion of counsel for the second and third party is to be preferred in the circumstances. Counsel for the first and second defendants' assertions were based upon the Court's acceptance of the proposition that indemnity costs as provided for in the contract were to be paid. 40 In my view the following orders would be appropriate: 1. The plaintiff's claim be and is hereby dismissed. 2. The plaintiff do pay the costs of the first and second defendants to be taxed as one bill limited to 1.5 days of trial. 3. The attendance of the instructing solicitor for the first and second defendants at the trial of both the main action and the third party proceedings on 13, 14, 15 and 16 May 2002 be certified for. 4. The first defendant's claim against the first third party be and is hereby dismissed. 5. The first defendant pay the first third party's costs to be taxed.
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6. The second defendant's claim against the first third party be dismissed. 7. The second defendant pay the first third party's costs to be taxed. 8. The first third party's solicitor's engagement of senior counsel is approved and the monetary limits on counsel fee appearing in items 14(a) and 14(b) of the Fourth Schedule to the Rules shall be read and applied by the taxing officer as if two counsel had been certified for. 9. Judgment be entered for the first defendant against the second third party in that there be a declaration that the first defendant is entitled to be indemnified against the claim of the plaintiff pursuant to contract of insurance No WWH0022809. 10. Judgment be entered for the second defendant against the second third party on terms that there be a declaration that the second defendant is entitled to be indemnified against the claim of the plaintiff pursuant to contract of insurance No WWH0022809. 11. The second third party do pay the first defendant's and second defendant's costs of the third party proceedings to be taxed as one bill.
Special costs order 41 Counsel for the first and second defendants also submits that "the limits imposed by items listed in the fourth schedule to the Rules of the Supreme Court 1971 be disregarded for the purposes of any such taxation." This is said to be justifiable because of the complexity of the matter. 42 On the issue of complexity counsel for the second third party submitted: "In relation to costs generally, I confirm that the complexity of this matter was in large part due to the financial arrangements between the two defendants which of course neither of the third parties had anything to do with. It was the complexity of those arrangements which were certainly brought about by decisions
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43 The evidence in this case revealed that the arrangements made between the first and second defendants as to the operation of the business, the employees and staff were made primarily for taxation purposes. Another factor related to protection of the directors of the first defendant from the consequences of commercial misfortune. 44 I think it is fair to say that the reason the trial was complex was because of the way the first and second defendants set up their business and their relative relationship. I am not persuaded that a special costs order is warranted. |