Karam v Palmone Shoes Pty Ltd
[2011] VSCA 144
•16 May 2011
SUPREME COURT OF VICTORIA
COURT OF APPEAL
S APCI 2010 0031
S APCI 2010 0032
| AKRAM KARAM | Applicant |
| v | |
| PALMONE SHOES PTY LTD (ACN 005 663 141) | Respondent |
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| JUDGES | TATE JA and HARGRAVE AJA |
| WHERE HELD | MELBOURNE |
| DATE OF HEARING | 8 April 2011 |
| DATE OF JUDGMENT | 16 May 2011 |
| MEDIUM NEUTRAL CITATION | [2011] VSCA 144 |
| JUDGMENT APPEALED FROM | Karam v Palmone Shoes Pty Ltd (No 2) [2010] VSC 82 (T Forrest J) |
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APPEAL – Application for leave to appeal costs orders – Two proceedings brought by applicant under Accident Compensation Act 1985 and were heard together – Whether the two proceedings had become fused for the purposes of awarding costs – Leave to appeal granted – Accident Compensation Act 1985, ss 134AB(28), 135BA.
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| Appearances: | Counsel | Solicitors |
| The Applicant in person | ||
| For the Respondent | No appearance | Minter Ellison |
| For Lennon Mazzeo Lawyers | Mr S R McCredie | Lennon Mazzeo Lawyers |
| For Aloe & Co Pty Ltd | Mr J Aloe | Aloe & Co Pty Ltd |
TATE JA:
Mr Karam seeks leave to appeal from costs orders made by T Forrest J on 23 February 2010[1] following the joint trial of two compensation claims under the Accident Compensation Act 1985 (‘the Act’). Lennon Mazzeo Lawyers, former solicitors for Mr Karam, also make an application for security for costs by payment into court of the sum of $15 000 should leave be granted.
[1]Karam v Palmone Shoes Pty Ltd (No 2) [2010] VSC 82 (‘Reasons’).
The two compensation claims were made against Palmone Shoes who employed Mr Karam between 2002 and 2006. The proceedings can be referred to respectively as the ‘cancer case’ and the ‘asthma case’. The proceedings were heard together and both arose out of the exposure of Mr Karam to toxic chemicals, namely, benzene and its derivatives in glues and solvents, when working for Palmone Shoes.
In the cancer case (proceeding number 9113 of 2009), Mr Karam was unsuccessful, ultimately failing to establish liability on the part of Palmone Shoes primarily because of a failure to prove that the exposure to the relevant chemicals caused the cancer. However, he was successful in the asthma case (proceeding number 9926 of 2009).
Before the trial of the asthma case, Palmone Shoes made a statutory offer of $180 000 and Mr Karam made a counter offer of $270 000 which was rejected. When Mr Karam succeeded in establishing liability at trial, judgment was eventually entered for him in the sum of $196 315.
On 23 February 2010, the trial judge made the following orders:
(1)There be judgment for [Palmone] in [the cancer case].
(2)[Mr Karam] pay [Palmone’s] costs of [the cancer case].
(3)The payment of those costs is stayed until the resolution of the appeals by [Mr Karam] relating to both matters.
(4)There be judgment for [Mr Karam] in [the asthma case] in the sum of $196 315.
(5)[Palmone] pay into Court the proceeds from the judgment sum in [the asthma case], to be held by the Senior Master or his equivalent pursuant to s 113(1) of the Supreme Court Act 1986.
(6)Each party bear their own costs of [the asthma case] pursuant to s 134AB(28)(d) of the Accident Compensation Act 1985.
Various other ancillary orders were made, including a declaration that Lennon Mazzeo Lawyers had a lien over the proceeds of the judgment sum of the asthma case and a declaration that Aloe & Co Pty Ltd (another firm of solicitors who acted for Mr Karam in the trial before T Forrest J) had a lien over the proceeds of the judgment sum of the asthma case, such lien not to include any legal fees relating to the cancer case but to include disbursements for the cancer case and their costs and disbursements of the asthma case.
Mr Karam has since unsuccessfully appealed the judgment in the cancer case and the assessment of damages in the asthma case.[2] He sought leave to appeal in respect of the costs orders in each proceeding by 2 separate summonses, each filed 29 March 2010, but the hearing was adjourned following the outcome of the substantive appeals.[3]
[2]Karam v Palmone Shoes Pty Ltd [2010] VSCA 253. The substantive appeal was heard on 14 September 2010 by Mandie and Harper JJA and Beach AJA. In a joint judgment dated 29 September 2010, both appeals were dismissed. Mr Karam applied for special leave to the High Court but this was dismissed (by Heydon and Bell JJ) on 9 February 2011.
[3]Karam v Palmone Shoes Pty Ltd (Unreported, Supreme Court of Victoria, Court of Appeal, Mandie and Bongiorno JJA, 11 June 2010).
Costs in the cancer case
Costs in the cancer case were awarded on the basis of the ordinary rule that costs follow the event. This is apparent from paragraph (2) of the Orders. His Honour said:[4]
The cancer case was brought pursuant to s 135BA of the Accident Compensation Act1985. Sub-section (2) provides that compliance with s 134AB(1)-(21), (27), (28) and (38) of the Act is not required for actions brought under s 135BA. I accept that the ordinary rules of costs applied in this Court ought apply in this matter.
[4]Reasons, [2] (emphasis added).
This was so, the trial judge reasoned, because s 135BA(2)(a) precludes the operation of the Act’s usual scheme for the awarding of costs (ordinarily awarded pursuant to s 134AB(28) of the Act) where the worker is terminally ill and has obtained the necessary orders from an Associate Judge of the Supreme Court to that effect, as had occurred in this case.
Section 135BA of the Act relevantly provides:
Actions by terminally ill workers
(1)This section applies if a worker who may have an entitlement to recover damages in accordance with section 134AB or 135A in respect of an injury arising out of or in the course of, or due to the nature of, employment believes that that injury or an unrelated medical condition or injury gives rise to an imminent risk of death.
(2)If this section applies, the worker may subject to compliance with the requirements of this section bring proceedings in accordance with –
(a) section 134AB without complying with the requirements of subsections (1) to (21) and subsections (27), (28) and (38) of that section; or
(b) section 135A without complying with subsections (1) to (6) and subsections (13), (13A), (18A) and (18B) of that section.
Section 134AB(28) provides as follows:
In proceedings for the recovery of damages commenced in accordance with this section after a statutory offer was made, or deemed to have been made, under subsection (12) –
(a)if no liability to pay damages is established, the worker must pay the party and party costs of the employer, Authority or self-insurer and the worker’s own costs;
(b)if judgment is obtained or a settlement or compromise is made in an amount not less than 90 per cent of the worker’s statutory counter offer under subsection (12) and more than the statutory offer of the Authority or self-insurer, the Authority or self-insurer must pay the worker’s party and party costs and its own costs;
(c)if judgment is obtained or a settlement or compromise is made in an amount not more than the statutory offer of the Authority or self-insurer under subsection (12), the worker must pay the party and party costs of the Authority or self-insurer and the worker’s own costs;
(d)if judgment is obtained or a settlement or compromise is made in an amount that is more than the statutory offer of the Authority or self-insurer under subsection (12) but less than 90 per cent of the worker’s statutory counter offer under that subsection, each party bears its own costs –
and the court must not otherwise make an order as to costs.
Costs in the asthma case
The cancer case was, as discussed above, a proceeding under s 135BA of the Act. However, the asthma case had been commenced earlier in the County Court pursuant to s134AB, well before Mr Karam was aware of his cancer. It was ultimately removed to the Supreme Court to be heard with the hearing of the cancer case.
The trial judge ordered that each party bear its own costs in the asthma case, despite Mr Karam winning on the substantive issue, because his Honour considered himself bound by s 134AB(28)(d) of the Act.
Mr Karam had obtained a judgment sum which was less than 90% of his counter offer. The trial judge expressed his concern that the costs result in the asthma case was manifestly unfair:[5]
In this case, in my opinion, the strict application of s 134AB(28)(d) operates unfairly to the detriment of [Mr Karam]. The biopsy scan that revealed [Mr Karam’s] malignant plasmacytoma was conducted on 14 March 2008, that is eleven days after he committed himself to his statutory counter offer.
At the time [Mr Karam] made his counter offer, it is highly likely that he had no appreciation whatsoever that he was suffering from a terminal disease. I consider that his counter offer in all likelihood reflected a significant figure for future economic loss which, of course, was all but destroyed by his cancer. If I considered I had the power, I would set aside the statutory offers and adjudge costs on common law principles.
Regrettably, I do not consider that I have that power.
[5]Reasons, [7]-[9].
The inter-relationship of the two proceedings
During the course of his reasons, his Honour rejected the submission that the asthma case, by being heard with the cancer case, became indivisibly fused with it. A consequence of finding that the two proceedings had been fused may have been that s 135BA(2) would have operated to render compliance with s 134AB(28) unnecessary. In other words, a consequence of a finding that the two proceedings had substantively become merged (at least for the purpose of an assessment of costs) may have been that the requirement under s 134AB(28)(d) to direct that each party bear its own costs (because the judgment obtained, while more than the statutory offer, was less than 90 per cent of the worker’s statutory counter offer) would not have applied.
The trial judge rejected the submission that the two proceedings had become indivisibly fused. He said:[6]
I am unable to accept this. Whilst the underlying facts were identical, the asthma case was tried with the cancer case for convenience and for strategic reasons. It was the subject of separate submissions and ultimately separate verdicts. As a consequence, I consider that I am bound to order that “each party bear its own costs”, an outcome that I consider manifestly unfair.
[6]Reasons, [9] (footnote omitted).
The trial judge also referred to the direct and mandatory language of s 134AB(28), although of course such language will only be decisive if the prior question – whether s 134AB(28) applies in the circumstances of the case – is first determined against Mr Karam. The submissions filed by Palmone Shoes[7] in response to Mr Karam’s applications for leave to appeal the costs orders also emphasised the direct statutory language.
[7]Respondent’s Submission in response to the Applicant’s Applications by Summonses Filed 29 March 2010. There was no appearance by Palmone Shoes at the hearing of the applications on 8 April 2011.
However, while emphasising the separateness of the two proceedings for the purpose of applying s 134AB(28), the trial judge went on to make much of the overlap between the proceedings when considering the additional question of the solicitors’ liens. In declaring a lien in favour of each firm of solicitors (Lennon Mazzeo and Aloe & Co respectively) over the proceeds of the judgment sum obtained by Mr Karam in the asthma case, the trial judge attached considerable importance to the inter-relationship between the cancer case and the asthma case.
The trial judge referred to an affidavit sworn on behalf of Lennon Mazzeo to the effect that the firm had been instructed to act in both the cancer case and the asthma case, and preparation and instructions ‘have at all times been in respect of the joint proceedings as the one action with two separate components’.[8] In or about late November 2009, the trial judge granted leave for Lennon Mazzeo to withdraw as solicitors for Mr Karam.
[8]Reasons, [11.8] (emphasis added).
Aloe & Co were engaged by Mr Karam some short time after 20 November 2009.[9] The trial commenced on 30 November and concluded on 11 December 2009, occupying eight sitting days. Aloe & Co acted for Mr Karam at the hearing of both the cancer and the asthma proceedings before T Forrest J. The trial judge considered that Mr Aloe:[10]
had to master complex issues of causation, brief senior and junior counsel, prepare witnesses, assist in the preparation of complex cross-examinations and deal with a highly proactive client. …
The causation issues in the cancer case occupied the vast bulk of evidence in the trial but both cases were alive throughout the eight sitting days.
[9]It appears that they were re-engaged as Mr Karam had previously instructed Aloe & Co.
[10]Reasons, [12.3]-[12.4].
In considering that he ought to declare liens in favour of both Lennon Mazzeo and Aloe & Co, the trial judge said:[11]
Whilst Lennon Mazzeo only acted for the plaintiff for a little less than two months, they prepared the cases for trial. A perusal of the items on their bill of costs demonstrates a significant application of time, effort and money on behalf of [Mr Karam]. I regard their preparation for both cases as fundamental to the plaintiff’s judgment in the asthma case. Similarly I regard Aloe’s efforts … as fundamental to the judgment in the asthma case, although contractually I have found that they are not entitled to the legal costs in the cancer case.
It is necessary to say a little about the overlap between both cases. Whilst they were separate proceedings, the asthma case and the cancer case were brought relying on identical facts, and the identical exposure to solvents. It was essential, from [Mr Karam’s] perspective that the cases be tried together, otherwise he ran the risk of ‘falling between two poles’. Had the asthma case been tried separately he may well have encountered a defendant’s argument that his cancer had obliterated his economic loss and overtaken any pain and suffering arising from the asthma. Had the cancer case been tried alone similarly he may have encountered an argument that his future economic loss was minimal because asthma had already rendered him unfit for work. Additionally, evidence gathered for the cancer case was indirectly relevant to the asthma case [for example, evidence of life expectancy (per Associate Professor Wolf) as a result of the cancer also bore directly on future economic loss in the asthma case]. I consider that the work done on the cancer case was ‘instrumental’ to the judgment in the asthma case and I see no good reason to confine the lien to purely ‘asthma case’ work.
[11]Reasons, [14]-[15] (emphasis added).
The degree of overlap between the cancer case and the asthma case was emphasised by Aloe & Co in their written submissions:
But for the fact that the cancer was diagnosed at a later date than the industrial asthma claim, the same facts, the same exposure to volatile solvents, the same work conditions, the exact same negligence which was admitted by [Palmone] in relation to the industrial asthma claim gave rise to all of Mr Karam’s complaints. For all intents and purposes the proceedings were one and not two separate proceedings and therefore should not be treated separately.
The natural reading of s. 135BA of the Accident Compensation Act leads to the conclusion that the costs penalties expressly referred to in s. 134AB do not apply to s. 135BA and this is by express provision. This reading is also harmonious with the intendment of the Act and the cost penalty provisions which must be there only to punish a plaintiff who neglects or refuses to take a reasonable offer in the face of a reasonably predictable outcome. To force a reading upon the legislation that would apply the penalties to a worker (or his practitioners) who is utterly ignorant, at the relevant time for acceptance, of a supervening future situation (as is the present case) would make a nonsense of the purpose of the costs penalty provisions and punish him ex post facto for not having had the foresight to predict that from the same facts, same volatile solvents, same circumstances, the same negligence that he would also contract cancer in the future.
The purpose of the costs penalty in s. 134AB(28) is to encourage settlement and avoid unnecessary litigation. This purpose would be entirely defeated if the plaintiff were required to take into account an undiagnosed cancer condition when deciding whether to accept or reject the statutory offer.
The costs penalties on the plaintiff are onerous and should be read narrowly as the objects of the Act are, inter alia, to facilitate the delivery of just compensation to injured workers.
So too Lennon Mazzeo Lawyers, in their submissions in support of the scope of their lien as extending beyond the asthma case to include the costs they incurred in the cancer case, also emphasised the degree of overlap between the two proceedings:
Although the moneys have been recovered only in respect of the asthma claim and not the cancer claim it is artificial to draw any distinction based on costs incurred in respect of the two claims. Arguably the two claims arose out of the same cause of action involving exposure to noxious fumes and certainly the alleged breach of duty of care was the same. Furthermore to a significant extent there was a “cross-over” in respect of injury, namely psychological injury, to which each claim related.
By reason of these overlaps it would have been inevitable as a matter of practice that a court would refuse to hear one claim without hearing the other at the same time. Indeed a solicitor who had failed to prepare the cancer case would be likely to face a personal costs order in respect of costs thrown away by reason of any adjournment. It follows that exertions made in respect of the cancer case were essential to enable the asthma claim to proceed to judgment.
The inter-relationship between the proceedings was close, as was accepted by the trial judge and in my view it is reasonably arguable that the cancer case and the asthma case should be treated, for the purposes of an award of costs, as a single proceeding subsumed within the provisions of s 135BA. In my opinion, the trial judge’s rejection of this proposition is attended with sufficient doubt as to warrant a grant of leave to appeal.[12]
[12]Niemann v Electronic Industries Ltd [1978] VR 431.
If the proceedings were ultimately to be treated as indivisibly fused, this may have implications for the solicitors’ liens.[13] If the award of costs in both the cancer case and the asthma case were to be determined in the exercise of the costs discretion at common law, there could be a variety of outcomes (including an award of costs on an ‘issues’ basis).
[13]This is so because the terms of s 134AB(30) may not be satisfied and, unless satisfied, the declaration of a lien is precluded. Section 134AB(30) is set out below.
I am also of the opinion that substantial injustice would flow if the error was to be left unreversed. Mr Karam is terminally ill and has obtained orders to that effect from an Associate Judge of the Supreme Court. In the circumstances, if there is an error in the costs order made in the asthma proceedings it would be unjust to allow it to stand uncorrected.
For similar reasons I am of the opinion that the hearing of the appeals should be expedited.
Alleged inconsistency in the trial judge’s reasons
At the hearing of the applications for leave, Mr Karam drew the Court’s attention to what he alleged were manifest inconsistencies in paragraphs [2] and [18] of the trial judge’s reasons for awarding costs. This appeared to be prima facie an arguable ground of appeal as, in those paragraphs, the trial judge appears to contradict himself as to whether costs were awarded in the cancer case under the Act or in the Court’s general discretion at common law.
As mentioned above, the trial judge appeared to make it clear at the outset of his reasons on costs (at paragraph [2]) that, because of the effect of s 135BA(2), costs in the cancer case were awarded on the basis of the ordinary rule that costs follow the event.[14] Yet, later in the judgment, his Honour said (at paragraph [18]):
In the cancer case, s 134AB(28)(a) requires that the worker must pay his own costs.
[14]Reasons, [2].
The trial judge used this observation to draw the conclusion that the solicitors were entitled to a lien over the damages awarded to Mr Karam and were not barred from recovery by s 134AB(30) which provides:
A person who represent or acts on behalf of a worker is not entitled –
(a) to recover any costs from that worker in respect of any proceedings under this section; or
(b) to claim a lien in respect of those costs; or
(c) to deduct those costs from any sum awarded as damages –
unless an award of costs has been made by the court in respect of those costs or those costs are payable in accordance with this section by the worker.
Mr McCredie, for Lennon Mazzeo submitted, and I think correctly, that the reference to ‘the cancer case’ in paragraph [18] must have been a slip and the correct reference would have been to ‘the asthma case’. This must be so because there were clearly no costs payable ‘in accordance with this section’ in the cancer case. In my opinion, nothing turns on this.
Other grounds
Mr Karam proposes a number of other grounds of appeal, running to some 19 pages, in his draft Notice of Appeal. They raise a miscellany of allegations as to professional negligence and misconduct on the part of the various legal practitioners he engaged from time to time. I am satisfied that the trial judge’s findings of fact as to the competence of the Mr Karam’s legal representatives[15] should not be disturbed. The other various grounds which relate to alleged errors of law committed by the trial judge and apprehended bias are unmeritorious.
[15]Reasons, [12].
Security for Costs application
Furthermore, I do not consider it appropriate to order security for costs in either appeal. A grant of security for costs, pursuant to r 64.24(2) of the Supreme Court (General Civil Procedure) Rules 2005, is an exercise of a discretion requiring special circumstances. Even where an appellant is impecunious, this may give way to considerations as to the likelihood of success on the appeal and whether the appeal raises an issue of general importance.[16]
[16]Li v Herald & Weekly Times (Unreported, Supreme Court of Victoria, Court of Appeal, 25 July 2007, Nettle and Redlich JJA).
It has not been established that Mr Karam is impecunious but, in any event, there is no absolute rule that the impecuniosity of a party will entitle an opposing party to security for costs[17] although clearly that is not an irrelevant consideration.[18] Nor has it been established that the appeal appears hopeless or is bound to fail.[19] The grant of leave to appeal demonstrates that that is not so. Moreover, the question of the applicability of s 135BA to two sets of proceedings which, it is argued, have indivisibly fused, is, in my opinion, an issue of general importance. Such a question
is relevant to an exercise of the discretion and supports a refusal of an order for security.[20]
[17]Merribee Pastoral v ANZ Banking Group (1998) 193 CLR 502, 513-4.
[18]Ibid 514.
[19]Ibid.
[20]Devenish v Jewel Food Stores Pty Ltd (1990) 64 ALJR 533, 534.
Furthermore, it is relevant that:[21]
if an order were made it would effectively shut a party out of relief according to law in circumstances where that party’s impecuniosity is itself a matter which the litigation may help to cure.
[21]Merribee Pastoral v ANZ Banking Group (1998) 193 CLR 502, 515.
That is so in this case.
In my opinion the application by Lennon Mazzeo for security for costs should be dismissed.
HARGRAVE AJA:
I agree with Tate JA.
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