Leighton Contractors Pty Ltd v Smith [No 3] Costs

[2000] NSWCA 250

NEW SOUTH WALES COURT OF APPEAL

CITATION:     Leighton Contractors Pty Ltd v Smith [No.3] Costs [2000]  NSWCA 250

FILE NUMBER(S):
40498/98

HEARING DATE(S):           Decided on written submissions

JUDGMENT DATE:            06/09/2000

PARTIES:
Leighton Contractors Pty Ltd (Appellant)
Rodney James Smith (1st Respondent)
B&B Detail Joinery Manufacturers Pty Ltd (2nd Respondent)

JUDGMENT OF:      Mason P Meagher JA Fitzgerald JA   

LOWER COURT JURISDICTION: Supreme Court - Common Law Division

LOWER COURT FILE NUMBER(S):        182/93

LOWER COURT JUDICIAL OFFICER:     Studdert, J

COUNSEL:
B Toomey QC / M McAuley (Appellant)
C Calloway QC / R Taperell (1st Respondent)
J Hislop QC / J Lonergan (2nd Respondent)

SOLICITORS:
John Sharpe HIH Workers' Compensation (NSW) Pty Limited Sydney (Appellant)
Baker & Love Solicitors (1st Respondent)
Dunhill Madden Butler (2nd Respondent)

CATCHWORDS:
Costs

LEGISLATION CITED:

DECISION:
In addition to orders made by the Court on 19 April 2000, AMP to pay Leighton and Smith, on an indemnity basis, all costs incurred by Leighton in respect of its cross-claim against B&B and all costs incurred by Leighton and Smith respectively in the proceedings in this Court.

JUDGMENT:

THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

CA  40498/98
SC 182/93

MASON P
MEAGHER JA
FITZGERALD JA

WEDNESDAY 6 SEPTEMBER 2000

LEIGHTON CONTRACTORS PTY LTD v SMITH [NO. 3]

JUDGMENT
COSTS

1. MASON P & FITZGERALD JA:    Rodney James Smith, an employee of Leighton Contractors Pty Ltd, was injured in the course of his employment. Both Leighton and B&B Detail Joinery Manufacturers Pty Ltd were found liable, and judgment was awarded against each in favour of Smith. Leighton sought a declaration that it is entitled to an indemnity from B&B. The trial judge refused that declaration. On 19 April this year, this Court allowed Leighton’s appeal and declared that it is entitled to an indemnity from B&B in respect of Leighton’s liability to Smith.

2. Leighton also appealed (or alternatively applied for leave to appeal) in respect of the amount of the damages which Smith was awarded against it, but did not press that appeal if, as occurred, it was held that it is entitled to an indemnity from B&B. The appeal was accordingly dismissed on 19 April. Smith’s motion to strike out Leighton’s appeal was also dismissed. In paragraph 20 of a joint judgment dated 5 July, we indicated that, subject to the matters discussed below, Leighton would be ordered to pay Smith’s costs of its appeal and application for leave to appeal and Smith would be ordered to pay the costs of his motion to strike out Leighton’s appeal.

3. Smith applied for leave to appeal to seek an increase in the amount which he was awarded against B&B, but did not press that application unless, as did not occur, the amount of the damages which he was awarded against Leighton was reduced. Smith’s application for leave to appeal was accordingly dismissed. In paragraph 20 of our judgment of 5 July, we indicated that, subject to the matters discussed below, Smith would be ordered to pay B&B’s costs of his application for leave to appeal.

4. All parties were aware that B&B was in liquidation prior to the trial, but Leighton and Smith were not aware that it had been deregistered. Neither Leighton nor Smith obtained the leave of the Court to proceed against B&B. There is no suggestion that B&B’s liquidator had any involvement in the litigation.

5. The litigation was conducted in B&B’s name by its general liability insurer, AMP General Insurance Limited. AMP instructed Mr Michael Bowyer, who was formerly a member of another firm but is currently a member of Pricewaterhouse Coopers Legal, the solicitors on the record for B&B. Mr Bowyer did not inform the other parties that B&B is not entitled to an indemnity from AMP in respect of its liability to Leighton until after the Court declared that Leighton is entitled to an indemnity from B&B.

6. Although it has apparently not seen the material insurance policy, Leighton has not in these proceedings disputed AMP’s contention that it is not obliged to indemnify B&B in respect of its liability to Leighton. Further, Leighton has not asserted that AMP is estopped from denying its liability to indemnify Leighton. It seems to be common ground that Leighton’s judgment against B&B, including the orders for costs against B&B in its favour, is worthless.

7. No attempt has been made to argue that AMP and Mr Bowyer were entitled to act in B&B’s name to oppose Leighton’s cross-claim for an indemnity from B&B although AMP was not B&B’s insurer in respect of that claim. Nor has any reason why AMP chose to contest Leighton’s cross-claim against B&B been suggested. Perhaps it was an oversight. Mr Bowyer might not have formed his present view that AMP is not obliged to indemnify B&B in respect of its liability to Leighton until later. Possibly he did not form that view until after this Court’s judgment of 19 April established that Leighton is entitled to an indemnity from B&B.

8. On the other hand, perhaps Mr Bowyer acted on AMP’s behalf in B&B’s name to oppose Leighton’s claim for an indemnity deliberately, for some perceived forensic advantage. It may have been perceived that, if Leighton had known that its indemnity from B&B was worthless, it would have proceeded with its appeal against the damages which Smith was awarded against Leighton and that, if Leighton’s appeal against him was successful, Smith would have proceeded with his application for leave to appeal against the damages which he was awarded against B&B. Smith’s damages award against B&B might have been increased, which would have increased the liability of AMP as B&B’s insurer in respect of its liability to Smith.

9. Whatever the reason for the course adopted by AMP and Mr Bowyer, AMP potentially benefited while others were disadvantaged. While Leighton’s cross-claim against B&B and its appeal from the dismissal of its cross-claim were futile, the result of that appeal caused Leighton not to pursue its appeal against Smith and Smith not to pursue his application for leave to appeal against B&B. Whether this gives rise to courses of action against AMP, Mr Bowyer or his firm is a matter for Leighton and Smith that falls outside the finalisation of these appeals.

10. At the least, AMP’s unauthorised interference in Leighton’s cross-claim against B&B has caused costs to be incurred unnecessarily.

11. Each of Leighton and Smith seeks costs orders against AMP. Alternatively, Leighton seeks costs orders against Mr Bowyer or his firm. Although it is not entirely clear, it seems that costs are sought an indemnity basis:

    (a)      by Leighton in respect of its cross-claim against B&B and the entire proceedings in this Court, including any costs which Leighton is ordered to pay to Smith, and

    (b)      by Smith in respect of the entire proceedings in this Court, including any costs which he is to be ordered to pay to Leighton. Although it is again not clear, it seems that Smith also contends that he should not be ordered to pay any costs to B&B as envisaged in paragraph 20(ii) of our joint judgment of 5 July.

12. If necessary for the purpose of the costs orders which it seeks, Leighton has asked that AMP be added as a defendant, presumably to its cross-claim against B&B (and to its appeal against the dismissal of that cross-claim). However, neither Mr Bowyer nor AMP has submitted that the Court lacks power to make the costs orders in the present proceedings without additional parties.

13. It is surprising, and disappointing, that Mr Bowyer has not frankly disclosed the reasons for what has occurred. Extraordinarily, he has offered no explanation to the Court and has assiduously ignored correspondence from the solicitor for Leighton seeking information. Instead, Counsel, presumably on Mr Bowyer’s instructions on behalf of himself and his firm and AMP, has filed a brusque submission effectively rejecting any suggestion that Mr Bowyer or AMP has anything to explain and blaming the other parties.

14. It is a clear inference from that submission, which includes an assertion that there is no conflict of interest between Mr Bowyer and his firm and AMP, that AMP has been informed of the Court’s judgment of 5 July 2000 and the present applications and has instructed Mr Bowyer to act on its behalf and to take the position which he has adopted.

15. On the material before the Court, Mr Bowyer acted on B&B’s behalf in connection with Leighton’s cross-claim both at trial and on appeal without any authority to do so apart from the irrelevant authority of AMP. The Court does not know whether that was deliberate or inadvertent. Rather than infer from Mr Bowyer’s silence that he consciously breached his duty to the Court, we propose to act on the basis that there was an oversight, and that the ultimate responsibility rests with his client, AMP. If that assumption is incorrect and the orders which we propose are made, AMP can seek redress against Mr Bowyer and his firm.

16. The costs wasted as a result of B&B’s defence of Leighton’s cross-claim on the instructions of AMP should be paid by AMP on an indemnity basis. Those costs include the entire proceedings in this Court.

17. In addition to orders made by the Court on 19 April 2000, AMP should be ordered to pay Leighton and Smith, on an indemnity basis, all costs incurred by Leighton in respect of its cross-claim against B&B and all costs incurred by Leighton and Smith respectively in the proceedings in this Court.

18. Meagher JA:           I agree with the joint judgment of Mason P and Fitzgerald JA.

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LAST UPDATED: 14/09/2000