Massouras v Kone Elevators Ptd Ltd (No 2); Pattinson v Kone Elevators Ptd Ltd (No 2); Shipton v Kone Elevators Ptd Ltd (No 2); Soesman v Kone Elevators Ptd Ltd (No 2)
[2020] ACTSC 181
•13 July 2020
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Massouras v Kone Elevators Ptd Ltd (No 2) Pattinson v Kone Elevators Ptd Ltd (No 2) Shipton v Kone Elevators Ptd Ltd (No 2) Soesman v Kone Elevators Ptd Ltd (No 2) |
Citation: | [2020] ACTSC 181 |
Hearing Date: | On the papers |
DecisionDate: | 13 July 2020 |
Before: | Burns J |
Decision: | See [78]-[89] |
Catchwords: | PRACTICE AND PROCEDURE – COSTS – costs applications made by the plaintiffs, first defendant and the second to eleventh defendants – applications by the plaintiffs that the first defendant be ordered to pay any costs which the plaintiffs may be liable to pay to the second to eleventh defendants – consideration of what orders should be made with regard to the second to eleventh defendants’ notice to the first defendant claiming contribution or indemnity |
Legislation Cited: | Court Procedure Act 2004 (ACT) s 5A Court Procedure Rules 2006 (ACT) pt 2.10; rr 1002, 1012, 1010, 1725 |
Cases Cited: | Abigroup Pty Ltd v Sandtara Pty Ltd [2002] NSWCA 45 Bullock v London General Omnibus Company [1907] 1 KB 264 Shipton v Kone Elevators Pty Ltd [2020] ACTSC 129 |
Parties: | Kellie Maree Massouras (Plaintiff) Jane Angela Pattinson (Plaintiff) Alison Shipton (Plaintiff) Jessica Soesman (Plaintiff) Kone Elevators Pty Ltd (1st Defendant) The Trust Company Limited (2nd Defendant) Cromwell Corporation Limited (3rd Defendant) Cromwell BT Pty Ltd (4th Defendant) Cromwell Property Securities Limited (5th Defendant) Cromwell Property Services Pty Ltd (6th Defendant) Cromwell Funds Management Limited (7th Defendant) Cromwell Project & Technical Solutions Pty Ltd (8th Defendant) Cromwell Property Group (9th Defendant) Cromwell Property Fund (10th Defendant) Cromwell Diversified Property Trust (11th Defendant) |
Representation: | Counsel A Bartley SC (Plaintiff) B K Nolan (1st Defendant) L Hawkes (2nd-11th Defendants) |
| Solicitors Ken Cush and Associates (Plaintiff) Moray & Agnew (1st Defendant) McCabe Curwood (2nd-11th Defendants) | |
File Numbers: | SC 399 of 2016; SC 400 of 2016; SC 401 of 2016; SC 403 of 2018 |
BURNS J:
On 3 April 2020 I entered judgment for the four plaintiffs against the first defendant (Kone). At the same time, I entered judgment for the remaining defendants (Cromwell) against the plaintiffs: see [2020] ACTSC 66 (the primary judgment). A number of issues remain to be resolved including:
(a)costs applications by the plaintiffs, Kone and Cromwell;
(b)applications by the plaintiffs that Kone be ordered to pay any costs which the plaintiffs may be liable to pay to Cromwell; and
(c)what orders should be made with regard to Cromwell’s notice to Kone claiming contribution or indemnity.
I will commence by considering what costs orders should be made between the plaintiffs and Kone.
Costs between the plaintiffs and Kone
Jane Pattinson v Kone (SC 403 of 2018)
On 3 April 2020, I entered final judgment for the plaintiff against Kone in the sum of $127,867.37.
As the damages awarded to the plaintiff were less than $175,000.00, prima facie her costs and disbursements (costs) are limited by r 1725 of the Court Procedure Rules 2006 (ACT) (CPR) which provides:
1725 Solicitors’ costs and determined fees—Supreme Court judgment within Magistrates Court jurisdiction
(1) This rule applies to a proceeding in the Supreme Court if—
(a) the Magistrates court—
(i) would have had jurisdiction and power to hear and decide the proceeding; or
(ii) would, apart from the amount claimed, have had jurisdiction and power to hear and decide the proceeding; and
(b) the plaintiff is entitled to the costs of the proceeding; and
(c) judgment (including judgment by consent) is entered for the plaintiff in the proceeding for an amount (excluding costs) of less than $175 000.
(2) The plaintiff is entitled to the following determined fee and costs only—
(a) the amount of any Magistrates Court determined fee that the plaintiff would have been entitled to recover had the proceeding been started in the Magistrates Court;
(b) if the plaintiff is awarded an amount (excluding costs) of less than $50 000—50% of the disbursements that the plaintiff would have been entitled to recover in the Supreme Court had the judgment been more than $250 000;
(c) if the plaintiff is awarded an amount (excluding costs) of $50 000 or more, but less than $100 000—50% of the costs and disbursements that the plaintiff would have been entitled to recover in the Supreme Court had the judgment been more than $250 000;
(d) if the plaintiff is awarded an amount (excluding costs) of $100 000 or more, but less than $175 000—75% of the costs and disbursements that the plaintiff would have been entitled to recover in the Supreme Court had the judgment been more than $250 000.
(3) Despite subrule (2), the court may order that the plaintiff is entitled to a different amount for the costs and disbursements (including the amount of any determined fee).
Note Pt 6.2 (Applications in proceedings) applies to an application for an order under
this subrule.
(4) In this rule:
determined fee means the relevant determined fee under the Court Procedures Act 2004, part 3 (Court and tribunal fees) in relation to a proceeding in the Magistrates Court or the Supreme Court (and includes a fee determined under any other territory law that applied to a proceeding in that court before the commencement of that part).
The plaintiff submits that pursuant to r 1725(3) of the CPR I should make a different order for costs, and submits that I should order that Kone pay her costs of the proceedings at the ACT Supreme Court scale. The bases upon which the plaintiff seeks this order are:
(a) the evidence with regard to the plaintiff’s claim was largely in common with the claims by the other plaintiffs; and
(b) it was necessary for all the related matters to be brought in the same court to avoid multiplicity of proceedings in different jurisdictions, unnecessary costs, and delay and to avoid the possibility of inconsistent findings of fact across different jurisdictions.
Many of Kone’s submissions applied to all of the plaintiffs’ proceedings. I will address Kone’s submissions principally with regard to Mrs Pattinson’s claim, but these remarks are intended to apply to all the plaintiffs unless it is clear that they do not apply in some manner to a particular plaintiff. It is Kone’s principle submission that the plaintiff should pay Kone’s costs of the proceeding and those of Cromwell. This submission was based on two asserted principles:
(a) the court may have regard to the issues in respect of which each of the parties has been successful and may apportion costs accordingly; and
(b) where a plaintiff has made a late amendment to pleadings to include a claim which had not been previously claimed and which was the only basis on which the plaintiff was entitled to succeed, this conduct is disentitling of costs.
Kone submitted that the plaintiff’s claim had originally been conducted on the basis that excessive vibrations occasioned a series of problems in the lift of which Kone and Cromwell were aware and which they had failed to resolve. It was not until a late amendment of the Further Amended Statement of Claim (FASOC) on 24 September 2019 that the case upon which the plaintiff was successful was pleaded.
Kone further submitted that my ultimate conclusion on liability “was not based on the plaintiffs’ pleaded case, nor was it based on the plaintiffs’ submissions; it was based on the Court’s own reasoning”. Kone went on to submit that “[i]f any basis for this conclusion emerged in the evidence at all, it emerged in cross examination by Cromwell and re-examination by Kone”. In these circumstances, Kone submitted, it has been caused to incur costs in defending a claim which the Court has “wholly rejected” and should “have its costs associated with reasonable defences, even if they ultimately proved to be unsuccessful”.
Kone’s first alternative submission is that the plaintiff should pay Kone’s costs up to the point of the amendment of the FASOC on 24 September 2019.
Kone’s second alternative submission is that the plaintiff bear her own costs of the proceeding and pay Kone’s costs thrown away by reason of the late amendment.
With regard to the bases upon which the plaintiff submitted it is appropriate to order that Kone pay her costs of the proceeding on the ACT Supreme Court scale (see [4] above), Kone submitted that there was no sound basis for the plaintiffs, other than Mrs Shipton, to have participated in the case on liability in this Court. Kone submitted they “could well have abided by” the outcome in Mrs Shipton’s case, “determined on a separate question in their matters, and applied for an assessment of quantum upon the result”.
Consideration
It is fair to say, as Kone has, that until 24 September 2019 the plaintiff pleaded her case on the basis that the malfunctioning of the lift on 4 September 2013 was the result of excessive vibration inside the lift controller cabinet which caused intermittent failure of the lift due to either a break in wiring connected to the drive unit, a break in a terminal connection to the drive unit and/or malfunctioning of the controller to the drive unit: see the primary judgment at [51]. This was consistent with expert opinion provided to the plaintiff. As I said in the primary judgment, before Kone called its senior elevator technician, Mr John Stevens, to give evidence on the 14th day of the hearing, all that was known to the plaintiff was that Mr Stevens had on 4 September 2013 investigated the elevator monitoring computer (EMC) information that the lift had performed two correction runs and he had found a broken wire “to a Terminal connection on transformer 240 intermittently going open circuit”. The experts retained by the plaintiff, Kone and Cromwell all agreed at an expert conclave on 20 March 2019 that the likely cause of the lift malfunction was vibration inside the control cabinet, causing either or all of a wire connected to the drive unit in the controller to break, a terminal connection to the drive unit to become too loose or a malfunction of the contactor of the drive unit on the controller.
At the time of this conclave, the experts did not have the advantage of the information which Mr Stevens gave in his evidence. Mr Stevens was the person who observed the relevant equipment and the broken wire in situ. He located and repaired the fault, including inspecting, loosening and tightening the screw designed to hold the wire in place. No evidence was called by Kone on the question of costs, so I adhere to my conclusion stated on 24 September 2019 that Kone must always have been aware of the evidence that Mr Stevens could give, and chose to allow the plaintiff, and the experts (including its own expert) to proceed on incomplete and flawed information. The failure to provide its own expert with the content of the evidence which Mr Stevens could give, leading to him joining in an opinion with the other experts as to the likely cause of the malfunction, could only have acted as a confirmation to the plaintiff and her expert that there was no other reasonable possible cause of the malfunction.
The purpose of civil litigation and the rules governing the conduct of that litigation in the ACT is to facilitate the just resolution of the real issues in civil proceedings with minimum delay and expense: s 5A Court Procedure Act 2004 (ACT) (CPA). The parties to civil litigation have a statutory obligation to help the Court achieve the objectives set out in s 5A of the CPA: see s 5A(4).
Kone was not obliged to admit liability, or to conduct the plaintiff’s case for her. What Kone was obliged to do was to assist the Court in ensuring the just resolution of the real issues in the proceeding with minimum delay and expense. One of the most significant issues was: what caused the broken wire observed by Mr Stevens. This was not addressed in Mr Stevens’ letter of 29 June 2016, which did no more than state that he observed a broken wire. It provided no information the equivalent of that which he gave at the hearing and which ultimately led to the plaintiff amending her case. The significance of Mr Stevens’ evidence on the question of liability was obvious. The decision of Kone to withhold from the plaintiff the nature of the evidence that Mr Stevens could give did not comply with its statutory obligation under s 5A of the CPA, and resulted in a waste of time and money.
The suggestion in Kone’s submissions on costs that the finding that the break in the wire was caused by “an act of casual negligence” by a Kone service person was not “based on the plaintiffs’ submissions; it was based on the Court’s own reasoning” is incorrect. The FASOC filed in Court by leave on 24 September 2019 included the following allegations (in addition to the initially pleaded case that the broken wire was caused by excessive vibration):
(o)(1) In addition, the malfunctioning of the lift was caused by the first defendant’s servants and/or agents;
(1) failing to strip or adequately strip a wire connected to the transformer;
(2) failing to inspect or adequately inspect a wire connected to the transformer;
(3) failing to install or adequately install a wire connected to the transformer;
(4) overtightening the screw connecting a wire to the transformer;
(5) failing to ensure that a wire connected to the transformer was terminated correctly, or
(6) bumping a wire connected to the transformer and dislodging it during maintenance.
(Emphasis added).
The plaintiffs’ joint written submissions on liability refer at [26] to the evidence of Mr Stevens that “the wire could also come loose by someone from Kone bumping or damaging it during maintenance checks”. Further mention of the evidence of Mr Stevens in that regard was made at [34] of those submissions. The reference to “a poorly terminated wire” in the evidence was not inconsistent with a finding that the wire had been broken by a casual act of negligence. The letter of 29 June 2016 prepared by Mr Stevens, in which he refers to “a broken wire” makes this plain.
The above should make it clear that the findings of fact made in the primary judgment were consistent with the evidence, and the basis for finding Kone liable was entirely consistent with the pleadings and the plaintiff’s submissions. The fact that Kone well understood that it was open on the evidence and pleadings to find Kone liable on the basis of a casual act of negligence in the process of maintenance is amply demonstrated by the fact that Kone made a submission to the effect that Mr Stevens’ “speculation” as to why the wire may have come loose did not provide a proper basis for the Court to draw a conclusion as to breach of duty: see the primary judgment at [70].
I do not accept Kone’s submission that Mrs Pattinson could have commenced proceedings in the ACT Magistrates Court and then abided the outcome of the liability claim in Mrs Shipton’s matter in this Court. Mrs Pattinson would clearly have been an important witness in Mrs Shipton’s claim. In circumstances where Kone was not only denying that Mrs Shipton was injured in the incident, but was positively asserting that the forces generated by a sudden stop of the lift could not cause injury, not only would Mrs Pattinson be able to give evidence about the incident but she would also be able to give evidence of any injury she suffered. In addition, any decision on liability in the claim brought by Mrs Shipton would not bind Kone in any claim brought by Mrs Pattinson or the other plaintiffs unless Kone agreed to be so bound. There is no evidence that Kone would have agreed to such a course.
The approach taken by Kone to this litigation is disappointing. For a long time during the course of the hearing, it took an inappropriately obstructive approach to medical witnesses being called to give evidence by audio or audio-visual link, instead insisting that they attend in person. Kone ultimately changed its approach but it was an approach that should never have been adopted. To the extent that Kone wanted the witnesses to view film taken of Mrs Shipton by a private investigator, that could have been arranged without the need for those witnesses to attend court in the ACT personally.
I reject Kone’s submission that it should be entitled to some form of costs order in its favour. I am satisfied that a costs order should be made in favour of Mrs Pattinson. I accept Mrs Pattinson’s submission that it was appropriate for her claim to be heard in this Court at the same time as Mrs Shipton’s claim and that of the other plaintiffs.
The appropriate order is that Kone pay Mrs Pattinson’s costs of the proceeding at the ACT Supreme Court scale and on a party and party basis.
Alison Shipton v Kone (SC 400 of 2016)
Final judgment for the plaintiff against Kone was entered in the sum of $2,181,073.17: see Shipton v Kone Elevators Pty Ltd [2020] ACTSC 129. The plaintiff now seeks an order pursuant to r 1010 of the CPR that Kone pay her costs of the whole proceeding on a solicitor and client basis. Rule 1010 provides:
1010 Offer not accepted and judgment no less favourable to plaintiff
(1)This rule applies if an offer is made by the plaintiff in relation to a claim, but not accepted by the defendant, and the plaintiff obtains an order or judgment on the claim no less favourable to the plaintiff than the terms of the offer.
(2)Unless the court orders otherwise, the plaintiff is entitled to an order against the defendant for the plaintiff’s costs in relation to the claim—
(a) if the claim is a personal injury claim—assessed on a solicitor and client basis for the whole of the proceeding; or
(b) in any other case—
(i) assessed on a party and party basis up to the time when the costs are to be assessed on a solicitor and client basis under subparagraph (ii); and
(ii) assessed on a solicitor and client basis—
(A) if the offer was made before the first day of the trial— from the day the period for acceptance of the offer ends; and
(B) if the offer was made on or after the first day of the trial—at and from 11 am on the day after the offer was made.
For the purposes of this application, the plaintiff relies on two offers of compromise made by her to Kone pursuant to r 1002 of the CPR prior to the judgment on 3 April 2020. The first such offer was made by letter dated 28 August 2018 in which the plaintiff offered to compromise the whole of her claim on the following basis:
(a) judgment for her in the sum of $1,800,000.00;
(b) the defendants pay her costs as agreed or assessed.
The offer was expressed to be open for acceptance for a period of 30 days from the date of the offer. The offer was expressed to be made in accordance with Part 2.10 of the CPR.
By letter dated 23 April 2019, the plaintiff made a further offer of compromise to Kone and the other defendants offering to compromise the whole of her claim on the following basis:
(a) judgment for her in the sum of $1,500,000.00;
(b) the defendants to pay her cost of the proceedings as agreed or assessed.
This offer of compromise was expressed to be open for acceptance until 24 April 2019 at 10 am. The plaintiff’s lawyers later extended the period during which this offer would be open for acceptance until Friday, 26 April 2019 at 3 pm.
Kone largely relied on its general submissions to which I have referred in addressing Mrs Pattinson’s costs application above. Kone submitted that if I did not accept its submission that a costs order be made in its favour, then the matters raised by it would provide a sound basis for rejecting Mrs Shipton’s application for costs on a solicitor and client basis.
To the extent that Kone repeats its submissions that costs should be awarded in its favour, I reject that submission for the same reasons given above with regard to Mrs Pattinson’s matter. In the light of the failure of Kone to reveal, even to its own expert, the evidence which Mr Stevens was capable of giving, I see no reason to make any order other than that contemplated by r 1010 of the CPR.
The appropriate order is that Kone pay Mrs Shipton’s costs of the proceeding as agreed or assessed on the ACT Supreme Court scale on a solicitor and client basis.
Kellie Massouras v Kone (SC 399 of 2016)
On 3 April 2020, I entered judgment for Mrs Massouras against Kone in the sum of $98,232.95. The plaintiff submits that I should make an order that Kone pay her costs of the proceeding on a solicitor and client basis pursuant to r 1010 of the CPR.
For the purpose of this application, Mrs Massouras relies on two offers of compromise made by her to Kone under Part 2.10 of the CPR. The first such offer was dated 18 April 2019 and offered to compromise the whole of Mrs Massouras’ claim on the following basis:
(a)judgment for her in the sum of $95,000.00; and
(b)the first defendant pay her costs as agreed or assessed at 100% of the Supreme Court scale.
The offer was expressed to be open for acceptance until 9:30 am on 23 April 2019. The second offer was dated 23 April 2019 and offered to compromise Mrs Massouras’ claim on the following basis:
(a)judgment for her in the sum of $55,000.00; and
(b)the defendants pay her costs to be agreed or assessed.
This offer was expressed to be open for acceptance until 24 April 2019 at 10 am, although the period for acceptance of the offer was subsequently extended until 3 pm on 26 April 2019.
As the damages awarded to Mrs Massouras were less than $175,000.00, prima facie her costs are limited by r 1725 of the CPR: see [4] above. For the same reasons that I gave with respect to making a different order for costs in Mrs Pattinson’s claim, I am satisfied that I should make a different order for costs in Mrs Massouras’ claim.
To the extent that Kone repeated its submission referred to above that it should have an order for costs made in its favour, I reject that submission for the same reasons given above.
Kone submitted that I should not exercise my discretion to award costs to Mrs Massouras on a solicitor and client basis on the following grounds:
(a) the judgment in favour of Mrs Massouras only exceeded the quantum of the 18 April 2019 offer by $3,252.95;
(b) the 18 April 2019 offer was sent at 12:18 pm on Easter Thursday before commencement of the hearing on the Tuesday following the Easter long weekend, and expired at 9:30 am on the first day of the hearing. Kone submitted that this was not a period of time which was reasonable in the circumstances for the purposes of r 1002(5)(b) of the CPR; and
(c) the plaintiff succeeded on different issues to those which were alive at the time the offers were made.
In my opinion, there is merit to the first two of Kone’s submissions. The offers were not expressed to be open for acceptance for a reasonable time in the circumstances of the case. The amount awarded to Mrs Massouras was very slightly higher than the offer of 18 April 2019 and it was not unreasonable on the part of Kone not to accept it. The subsequent offer of 23 April 2019 was considerably lower than the amount awarded, but the period of time allowed for the acceptance by the offer was not reasonable.
In my opinion, the appropriate order is that Kone pay Mrs Massouras’ costs of the proceeding as agreed or assessed on the ACT Supreme Court scale and on a party and party basis.
Jessica Soesman v Kone (SC 401 of 2016)
On 3 April 2020, I gave judgment for Mrs Soesman against Kone in the sum of $24,194.35. This, of course, is less than $175,000.00 and accordingly the prima facie position is that her costs should be limited pursuant to r 1725 of the CPR.
The plaintiff seeks an order that Kone pay her costs of the proceeding as agreed or assessed on the ACT Supreme Court scale.
To the extent that Kone repeats its submissions that a costs order should be made in its favour, I reject that submission for the same reasons given above with regard to Mrs Pattinson’s matter.
For the same reasons given above, I am satisfied that the only reasonable course available to the plaintiffs was to run all of the cases together in this Court.
The appropriate costs order is that Kone pay Mrs Soesman’s costs of the proceeding as agreed or assessed on the ACT Supreme Court scale and on a party and party basis.
Costs between plaintiffs and Cromwell
Applications for Sanderson orders
Each plaintiff was successful against Kone, but unsuccessful against Cromwell. In the ordinary course of things, the plaintiffs would be liable to pay Cromwell the costs of their claims against Cromwell. The plaintiffs, however, seek an order that Kone be directly responsible to Cromwell for those costs: see Sanderson v Blyth Theatre Co [1903] 2 KB 533 (a Sanderson order). The effect of making such an order would be that Cromwell would recover their costs directly from Kone.
A Sanderson order is different to a “Bullock” order, named after Bullock v London General Omnibus Company [1907] 1 KB 264. The effect of a Bullock order is that the unsuccessful defendant is ordered to pay to the plaintiff the costs which the plaintiff is liable to pay to the successful defendant. Kone submitted that the principles applicable to the making of both Sanderson and Bullock orders are those stated by Gibbs CJ in Gould v Vaggelas (1984) 157 CLR 215 at 229-230:
It is sometimes said that the court may make an order of that kind – a Bullock order – where it was reasonable in all the circumstances for the plaintiff to bring the action against two or more defendants. There are some statements in the authorities which appear to support that view, including the judgment of Latham C.J. in Johnsons Tyne Foundary Pty. Ltd v Maffra Corporation. In my respectful opinion, however, the mere fact that the joinder of two defendants was reasonable does not mean that the unsuccessful defendant should be ordered to pay, directly or indirectly, the costs of the successful defendant. Obviously a judge should make a Bullock order only if he considers it just that the costs of the successful defendant should be borne by the unsuccessful defendant, and, if nothing that the unsuccessful defendant has said or done has led the plaintiff to sue the other defendants, who ultimately was held not to be liable, it is difficult to see any reason why the unsuccessful defendant should be required to pay for the plaintiff’s error or overcaution.
The ground on which a Bullock order may be made is, in my opinion, more accurately stated … that the costs which the plaintiff has been ordered to pay to the defendant who succeeded, and which the plaintiff recovers from the defendant who has failed “are ordered to be paid by the unsuccessful defendant, on the ground that … those costs have been reasonably and properly incurred by the plaintiff as between him and the [unsuccessful] defendant”… In my respectful opinion the true position [is] that “there is a condition for the making of a Bullock order, in addition to the question whether the suing of the successful defendant was reasonable, namely that the conduct of the unsuccessful defendant has been such as to make it fair to impose some liability on it for the costs of the successful defendant”.
(Citations omitted).
Consideration
While the awarding of costs between parties to a proceeding is always a matter of discretion, a successful defendant will ordinarily expect an order of costs in its favour against an unsuccessful plaintiff. I accept the submission on behalf of Kone that in order to justify the making of a Sanderson order it is not enough for the plaintiffs to demonstrate that it was reasonable for them to join Cromwell in the action. Something more must be shown. It must be demonstrated that the conduct of the unsuccessful defendant (Kone) was such as to make it just that it bear the plaintiffs’ costs owing to Cromwell.
It was always known to the plaintiffs by reason of Mr Stevens’ letter of 29 June 2016 that he had located “a broken wire to a Terminal connection on transformer 240 intermittently going open circuit”. This was undoubtedly useful to the plaintiffs, so far as it went. It provided a probable immediate cause for the behaviour of the lift on 4 September 2013. This information was, of course, inadequate for the purpose of determining whether any party may be liable in tort for the injuries sustained by the plaintiffs when the lift malfunctioned. Cromwell was the owner of the building in which the lift was installed. It also owned the lift. It had contracted with Kone for Kone to be responsible for the maintenance of the lift. What the plaintiffs could not be aware of when they came to consider commencing proceedings was, how did the wire come to be broken? None of the experts retained by the parties, including Kone, suggested that a spontaneous break in the wire was a realistic possibility. The experts agreed that one possible cause of the breakage was vibration in the control cabinet. If that was the case, liability would depend, inter alia, on establishing who had responsibility for addressing that issue. Kone may well have been contractually responsible for maintaining the control cabinet, but Cromwell owned it and would have been responsible for directing its replacement if it proved to be faulty. It was eminently reasonable in those circumstances for the plaintiffs to have sued both Kone and Cromwell.
In his evidence, Mr Stevens said that he had had contact with Kone’s legal department “over the years” about this matter and was interviewed by them. As I said at the time, I permitted the plaintiffs to amend their Statement of Claim on 24 September 2019, it is simply inconceivable that in that process of interviewing Mr Stevens, the person who actually observed the transformer, the terminal and the broken wire in situ, Kone did not become aware of the nature of the evidence Mr Stevens could give. The thrust of the evidence that he could give was that when he checked the terminal in question, the “wire was loose but the terminal was secure”. He expressed the opinion that either the wire had not been terminated properly or it had broken for some reason. I will add at this point that, discounting the possibility that the wire was poorly terminated from the date of the transformer’s manufacture, either scenario made it probable that the cause of the poorly terminated wire was negligence on the part of Kone’s employees. The possibility that the transformer had been manufactured with a poorly terminated wire was laid to rest by Mr Stevens’ evidence of the routine practice of checking the connections to the terminal when the unit was installed, and every 6 months thereafter. It was inherently unlikely, as Mr Stevens said, that the wire had been poorly terminated for any length of time.
I will note at this point that there was never any attempt by Kone to call evidence that it was unaware of the evidence that Mr Stevens could give regarding the probable cause of the poorly terminated wire. He was not re-examined with a view to establishing that the evidence he gave went beyond any statement he had previously made to Kone’s lawyers, nor was there any application to recall him later in the hearing to deal with this issue. Kone has not attempted to call evidence to that effect on the question of costs. The inference is that Kone knew of the evidence that Mr Stevens could give regarding the probable cause of the poorly terminated wire.
It is true that in his report, Mr McWaters, the expert retained by Kone, referred to the possibility of someone bumping the wire as an explanation for the poor termination of the wire, but he did so in the context of that occurring in addition to vibration from the control cabinet. In other words, the focus of Mr McWaters’ opinion was on the proposition that vibration within the unit would not, by itself, be sufficient to explain the broken wire.
It is also true that when Mr Stevens was cross-examined by Senior Counsel for Cromwell about someone bumping that wire, he said: “[w]ell, we tap the wires with a little screwdriver. You give a light – we pulled on the wire a little bit too hard some stage. I don’t know”. To suggest, as Kone now does, that the addition of “I don’t know” by Mr Stevens makes his evidence speculation is simply wrong. Mr Stevens went through the possible causes of the scenario that he observed with the wire and the terminal with great care. Of course, he could not “know” which of the possible causes in fact occurred. Similarly, I do not “know” how the break occurred. Having considered Mr Stevens’ evidence, I was satisfied that the probable cause was negligence by Kone employees in maintaining the unit.
By operation of s 5A of the CPA, Kone had an obligation to assist the Court to achieve a just resolution of the real issues in dispute, as quickly, inexpensively and efficiently as possible. The single real issue in this dispute was the cause of the poorly terminated wire, and whether that cause established liability in any party for any damage sustained by the plaintiffs. The CPA does not make it an offence not to comply with s 5A, nor does it prescribe any consequences for failing to comply. Where, however, a party knowingly withholds information likely to be significant in the just resolution of a dispute, and as a consequence another party is put to increased inconvenience and expense, the party withholding the information may well be called to account to the other party in costs. It may well be said that in not informing the plaintiffs of the evidence that Mr Stevens could give, Kone was simply doing what it was entitled to do. The fact that a party to litigation does something it is entitled to do does not, however, mean that its action carries no consequences.
I am satisfied that Kone knowingly withheld the information given to it by Mr Stevens, effectively withholding information that would have made it the sole target of the plaintiffs’ claims. I am satisfied that had the plaintiffs been provided with a full account of the evidence that Mr Stevens could give, they would not have commenced or continued with proceedings against Cromwell. The proceedings would have been considerably shorter, and more focussed on the real issue. In my estimation, these are cogent reasons to make a Sanderson order with regard to the costs each plaintiff would otherwise be required to pay to Cromwell.
Costs between Cromwell and Kone
Cromwell’s notice of contribution or indemnity
Cromwell’s principal submission is that Kone should be ordered to indemnify them for all losses suffered in defence of the plaintiffs’ claims. This submission is based on cl 28.1 of the Maintenance Contract (the contract) between Kone and Cromwell dated 11 March 2013 (Exhibit 15 in the primary proceedings). The clause provides:
The Contractor indemnifies, holds harmless and will defend the Principal from and against all suits, actions loss, damage, expense (including, but not limited to, legal fees and costs of defence and any GST thereon) and liability for injury or death of persons, or damage to property or other damage or loss resulting from, arising out of, or in any way connected with:
(a)the breach by the Contractor or its personnel of any of the provisions of this agreement; and
(b)the act, omission or negligence of the Contractor or its Personnel.
The second submission by Cromwell is that Kone should be ordered to indemnify it for all losses suffered in defence of the plaintiffs’ claims by reason of the failure of Kone to take out public liability insurance noting Cromwell’s interest. This submission is based on cl 22 of the contract, which relevantly obliged Kone to keep current during the term of the contract public liability insurance for not less than $20 million, noting Cromwell’s interest. In the course of the hearing of the plaintiffs’ claims, Cromwell served a subpoena on Kone requiring it to produce a copy of the insurance policy effected in compliance with cl 22. Kone did not produce any documents in answer to the subpoena. Cromwell submitted that it may be inferred from Kone’s failure to produce a copy of the policy, as required by the subpoena, that no such policy existed at the relevant time. It further submitted that if Kone had been insured as required by cl 22, it would have been entitled to indemnity under the policy. On this basis it submitted that Kone should pay damages to it assessed at the entirety of their legal costs and expenses.
Cromwell – costs of the primary proceedings
The third submission made by Cromwell was that Kone should pay its costs of the entire proceedings on an indemnity basis because Kone’s conduct of the proceedings was unreasonable. This submission is based on the proposition that Kone was aware of the evidence which Mr Stevens could give and did not disclose it until Mr Stevens gave evidence. This was, Cromwell submitted, a breach of s 5A of the CPA. Cromwell noted in support of this submission that after Mr Stevens gave evidence, the plaintiffs effectively abandoned their case based on vibration, not cross-examining or making any submissions in support of that case nor any submissions with respect to the liability of Cromwell. Cromwell submitted that if the evidence that Mr Stevens could give had been revealed earlier, it was likely that the plaintiffs would not have commenced or continued their actions against Cromwell.
Cromwell – costs order against the plaintiffs
If the Court did not accept any of the above three submissions, Cromwell submitted that each plaintiff should be ordered to pay Cromwell’s costs of the proceedings on an indemnity basis from the dates on which Cromwell made offers of settlement to each of the plaintiffs. Offers of settlement were made as follows:
(a) an offer to Mrs Shipton dated 2 February 2018 that judgment be entered in her favour in the sum of $50,000.00 plus legal costs;
(b) an offer to Mrs Soesman dated 2 February 2018 that judgment be entered for her in the sum of $20,000.00 plus legal costs;
(c) an offer to Mrs Massouras dated 2 February 2018 that judgment be entered for her in the sum of $30,000.00 plus legal costs; and
(d) an offer to Mrs Pattinson dated 12 February 2019 that judgment be entered for the Cromwell entities in each exchange for each bearing the legal costs they had incurred to date.
Cromwell submitted that given judgment was entered in their favour against the plaintiffs in the primary proceeding, each of the above offers triggers r 1012 of the CPR as each offer made was on no less favourable terms than obtained by Cromwell on judgment.
Kone’s submissions regarding Cromwell
Kone submitted that “the relevant event” for the purpose of the notice of contribution or indemnity is that Cromwell was successful in defending the claims brought by the plaintiffs, and that costs should “follow the event” i.e. the plaintiffs should be ordered to pay Cromwell’s costs. Those orders should be made on an indemnity basis. If the plaintiffs are ordered to pay Cromwell’s costs of each of the proceedings on an indemnity basis, Cromwell will have suffered no loss, so that the notice claiming contribution or indemnity has no application.
Secondly, Kone submitted that no separate liability for costs arises under cl 28.1 of the contract because:
(a) on a proper interpretation of cl 28.1 the liability to indemnify only arises “if the relevant act or omission or negligence of Kone or its personnel also amounts to the breach of the contract”, which was not the case in the present matter;
(b) the indemnity required Kone to defend Cromwell from suit in circumstances where the allegation of negligence aligned with a relevant breach of contract. Despite this, Cromwell sought to defend the proceedings entirely itself. It chose to be an active party. Kone submitted that in these circumstances “the indemnity cannot respond” as Cromwell chose to pursue a course of action not contemplated or supported by the indemnity, and therefore Cromwell should bear its own costs to the extent that those costs are not borne by the plaintiffs; and
(c) in any event, if the plaintiffs are ordered to pay Cromwell’s costs on an indemnity basis, Cromwell will have suffered no loss, so that cl 28.1 of the contract is not enlivened. Kone submitted that the costs to which Cromwell is entitled under the contract are only party and party costs, in the absence of conduct warranting the making of a more onerous costs order or a contractual basis for enlarging the costs entitlement: Chen and Xu v Kevin McNamara & Son Pty Ltd [2012] VSCA 229 at [7], [8] and [10].
With regard to Cromwell’s submission on cl 22 of the contract, Kone submitted that the claim must fail because Cromwell has not proven that there is no insurance policy. It submitted that production of the policy was never pursued by Cromwell and the subpoena was never called upon. Cromwell also relied upon an affidavit sworn by Lauren Gail Smith on 18 May 2020 which had annexed to it a copy of what appears to be a public liability policy taken out by Kone covering the relevant period. Also annexed is a letter from Kone’s solicitors to Cromwell’s solicitors dated 14 September 2017 stating that they were instructed that Cromwell’s interest was noted on the policy although it was not explicitly noted on the certificate of currency.
Cromwell’s response
Cromwell submitted that liability to indemnify under cl 28.1 is not enlivened only if there is an “act or omission” which also amounts to a breach of contract. It submitted that cl 28.1 obliges Kone to indemnify it from losses (to use a general term) arising from two circumstances, being, (a) breach of contract by Kone or its personnel, and (b) any act, omission or negligence of Kone or its personnel. It submitted that by reason of the act or omission of Kone personnel, Cromwell has clearly suffered loss in the form of legal fees and costs in the defence of the plaintiffs’ claims.
Regarding Kone’s submission that the indemnity in cl 28.1 of the contract does not apply because Cromwell chose to defend itself in the primary proceedings, Cromwell asserted that Cromwell acted as it did because of a refusal by Kone to indemnify it and, in any event, it is wrong in principal to assert that incurring defence costs without the approval of another who may have an obligation to indemnify the defending party negates the indemnity.
In the alternative, if Kone’s interpretation of cl 28.1 were to be preferred, the negligent act of Kone’s personnel which caused the wire to break would be a breach of contract on Kone’s part, because cl 13.1 of the contract required Kone to “carry out the services in a good and workmanlike manner using best practice methods”.
Cromwell disputed Kone’s assertion that the exercise of the discretion to award costs in the case of a contractual right to those costs will result in costs being awarded on a party and party basis. Cromwell referred to the decision in Abigroup Pty Ltd v Sandtara Pty Ltd [2002] NSWCA 45 (Abigroup) as establishing that the relevant principles are:
(a) an order for the payment of costs of proceedings by one party to another party is always a discretionary order; and
(b) where there is a contractual right to costs, the discretion should ordinarily be exercised so as to reflect that contractual right.
In the present case, Cromwell submitted, the contractual right plainly extends to the totality of its costs. The language of cl 28.1 makes no reference to costs being limited to party and party costs, or otherwise. The reference to “legal fees and costs of defence” in cl 28.1 contemplates that the costs which must be indemnified extend beyond party and party costs.
Cromwell submitted that there can be no doubt that the subpoena to produce a copy of the insurance policy was tendered as Exhibit 16, and that at the time it was tendered Senior Counsel for Cromwell said “[y]es, your Honour, I am tendering that and there is, I am told from checks, there has been no production in relation to that”. Cromwell submitted that Kone did not object to the tender and did not object to the Court being informed that nothing had been produced to the Court in answer to the subpoena. Nor did Kone seek to produce documents to the Court in answer to the subpoena.
Kone’s reply
Kone submitted that the conjunctive “and” between sub-cls (a) and (b) of cl 28.1 of the contract cannot be read disjunctively. It further submitted that reading the clause as submitted by Cromwell would lead to Kone’s obligation to indemnify being potentially very wide. Kone further submitted that there was no evidence of the exact nature of the services required by the contract to be provided by Kone, as those services are fully set out in Annexure A to the contract, and the copy of the contract tendered as Exhibit 15 in the primary proceedings did not contain Annexure A. Kone submitted that the Court is therefore not in a position to determine whether the acts upon which it was found to be liable in the primary proceedings constituted a breach of the performance of services as contemplated by cl 28.1.
Kone submitted, with regard to cl 22 of the contract, that the Court should be satisfied that there was a policy of insurance on which Cromwell’s interest was noted by reason of the assertion of such in the affidavit of Lauren Gail Smith sworn on 18 May 2020. In any event, it is submitted that Cromwell has never asserted that it was prevented from making a claim against the policy because it did not exist. As such, it is submitted, causation was not established.
Finally, Kone submitted that Cromwell’s reference to Abigroup does not assist, because of the different form of indemnity clause in that case.
Consideration
The proper construction of cl 28.1 is that urged by Cromwell. The clause requires Kone to indemnify Cromwell against any loss (to use a general term) occasioned to it in two circumstances. The first is where the loss is occasioned by a breach of the contract by Kone or its personnel. The second is where the loss is occasioned by any act, omission or negligence of Kone or its personnel. I see nothing absurd in the clause being interpreted such that Kone must indemnify Cromwell for any loss occasioned to it by reason of an act of Kone or its personnel. The clause is not a source of liability, but determines the distribution of liability between Kone and Cromwell where such liability arises.
The failure of Kone to produce a copy of the insurance policy required to be taken out by Kone pursuant to cl 22 of the contract is prima facie evidence that such a policy does not exist. There can be no doubt that Kone was on notice that Cromwell was calling for the production of the policy at the time it tendered the subpoena to Kone. Despite Cromwell’s objection to my receiving the affidavit of Lauren Gail Smith, I propose to do so in order to determine the real issues between the parties. I am therefore not satisfied that Kone breached cl 22 of the contract by failing to take out the required insurance policy. There is also merit in Kone’s submission that there is, in any event, no evidence that Cromwell ever sought to make a claim against such a policy.
Kone’s submission that there is no evidence that the work being carried out by its employees at the time that they negligently damaged the wire was work covered by the contract should be rejected. The whole case, and in particular the evidence of Mr Stevens, was based by all parties on the proposition that the work undertaken by employees of Kone as described by Mr Stevens was maintenance work under the contract. It may be inferred from the evidence of Mr Stevens that this was the case, particularly as no submission to the contrary was made by Kone during the primary proceeding.
I am satisfied that any costs (again using a general word) payable by Kone on behalf of Cromwell by operation of cl 28.1 should be payable on an indemnity basis. This follows from the construction of the clause itself, which, as Kone observed, was very broadly expressed so as to place the burden for all losses sustained by Cromwell by reason of the acts of Kone or its personnel on Kone. There is no evidence that Kone offered to indemnify Cromwell against any judgment that may have been entered against it in these proceedings. The contractual obligation fell on Kone under cl 28.1. In the circumstances, it cannot be said that Cromwell acted unreasonably or contrary to the contract in defending itself in these proceedings.
In the alternative, the circumstances which I have referred to above as justifying the making of a Sanderson order also justify making an order that Kone pay any costs for which Cromwell may otherwise be liable on an indemnity basis.
In the circumstances, it is unnecessary to consider the other submissions made by Cromwell.
Orders
In proceeding SC 403 of 2018 – Pattinson v Kone
I order that Kone pay the plaintiff’s costs of the proceeding as agreed or assessed at the ACT Supreme Court scale and on a party and party basis.
I order that Kone pay Cromwell’s costs of the proceeding on an indemnity basis.
With regard to the notice of contribution or indemnity, I order that Kone indemnify Cromwell for all losses suffered by it including legal fees and costs incurred by it in the defence of the claim brought against it by the plaintiff.
In proceeding SC 400 of 2018 – Shipton v Kone
I order that Kone pay the plaintiff’s costs of the proceeding as agreed or assessed at the ACT Supreme Court scale on a solicitor and client basis.
I order that Kone pay Cromwell’s costs of the proceeding on an indemnity basis.
With regard to the notice of contribution or indemnity, I order that Kone indemnify Cromwell for all losses suffered by it including legal fees and costs incurred by it in defence of the claim brought against it by the plaintiff.
In proceeding SC 399 of 2016 – Massouras v Kone
I order that Kone pay the plaintiff’s costs of the proceeding as agreed or assessed at the ACT Supreme Court scale on a party and party basis.
I order that Kone pay Cromwell’s costs of the proceeding on an indemnity basis.
With regard to the notice of contribution or indemnity, I order that Kone indemnify Cromwell for all losses suffered by it including legal fees or costs incurred by it in the defence of the claim brought against it by the plaintiff.
In proceeding SC 401 of 2016 – Soesman v Kone
I order that Kone pay the plaintiff’s costs of the proceeding as agreed or assessed at the ACT Supreme Court scale on a party and party basis.
I order that Kone pay Cromwell’s costs of the proceeding on an indemnity basis.
With regard to the notice of contribution or indemnity, I order that Kone indemnify Cromwell for all losses suffered by it including legal fees and costs incurred by it in the defence of the claim brought against it by the plaintiff.
| I certify that the preceding eighty-nine [89] numbered paragraphs are a true copy of the Reasons for Judgment of his Honour Justice Burns. Associate: Date: |
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