McGuire v Amaca Pty Limited and Seltsam Pty Limited

[2005] NSWDDT 19

Dust Diseases Tribunal

of New South Wales

CITATION:	McGuire v Amaca Pty Limited and Seltsam Pty Limited [2005] NSWDDT 19
PARTIES:	Neil Thomas McGuire Amaca Pty Limited Seltsam Pty Limited
MATTER NUMBER(S):	DDT68 of 2004
JUDGMENT OF:	Duck J
CATCHWORDS:	Miscellaneous Matters :- Costs Indemnity Costs Costs thrown away by adjournment
DATES OF HEARING:	1 June 2005
DATE OF JUDGMENT:	06/06/2005
LEGAL REPRESENTATIVES:	FOR PLAINTIFF: Mr A Bartley SC with Mr F Tuscano Walker Smith FOR DEFENDANT: Mr D J Russell QC (first defendant) Henry Davis York Mr W Austron (second defendant) Leigh Virtue and Associates

JUDGMENT:

1. This matter was settled on 2 May 2005. On that day Terms of Settlement were signed and judgment was entered pursuant to which each defendant agreed to pay the plaintiff the sum of $99,000 plus costs as agreed or assessed.

2. Argument as to appropriate costs orders in the proceeding took place on the 1 June 2005.

3. Two special orders were sought:

i. The plaintiff sought an order that the defendants should

pay the costs thrown away by the adjournment of the proceedings on
17 February 2005.

ii. The plaintiff also sought an order for indemnity costs from the date of a Calderbank letter ie 21 January 2005 in which he had offered to settle for $190,000 plus costs. That offer was expressed to be open for 14 days from the date of the offer.

4. The defendants resisted both applications for special costs orders.

5. The plaintiff relied on the affidavit of his solicitor, Peter Bruce Smith sworn 4 May 2005. The letters making the Calderbank offer were tendered. In addition affidavits of potential witnesses were tendered.

6. The first defendant relied on the affidavit of Scott Murray Freeman sworn 25 May 2005. He was formerly the solicitor for the first defendant. In addition an affidavit was supplied by Liesa Jane Gorringe sworn 25 May 2005. She was a solicitor employed by the solicitors for the first defendant assisting Mr Freeman.

7. The second defendant relied on the affidavit of Nathan Handbury Luke sworn 23 May 2005 the solicitor with the conduct of the matter for the second defendant.

8. The plaintiff’s case was, stated broadly, that between the years 1954 to 1959 firstly and thereafter in the years 1960 to 1977 he was employed as a painter. His work required that he sand down surfaces to be painted. The work was done in the Griffith area. Many of the houses to be painted were made of asbestos cement. His case was that in the course of sanding down the houses he was exposed to the inhalation of asbestos dust and fibre. It was accepted by all parties that he suffers from malignant pleural mesothelioma.

9. The defendants were sued as the suppliers of asbestos cement products.

10. Clearly enough the plaintiff had to prove that he was exposed to the products of each of the defendants and that such exposure was in the prevailing circumstances negligent.

11. The statement of claim was filed on 4 March 2004. Directions were given by O’Meally J on 29 March 2004 about the further conduct of the case.

12. It was listed for directions again on 15 June 2004 by which time it was intended that the hearing date be fixed. An Issues and Listings Conference took place on 20 July 2004 before the Registrar. A note appearing on the court file following the Issues and Listings Conference is as follows:

“P worked as painter mainly in the Griffith area – still trying to establish products to which P was exposed. Diagnosis not likely to be in issue. Subject to proof of exposure breach of duty, foreseeability not likely to be in issue. To establish products to which P was exposed P will be issuing interrogatories. FD 26.7.04.”

13. On 23 August 2004 the matter went back before O’Meally J for directions. His Honour extended for three weeks the time within which the plaintiff was to identify the asbestos products to which he was exposed. Orders were made about the provision of particulars and the administration of interrogatories as to the supply of asbestos products.

14. Further orders were made on 20 September 2004 relating to inter alia, interrogatories and the costs associated with them.

15. On 21 December 2004 the matter was again listed before O’Meally J. The transcript of what took place that day is annexed to the affidavit of Mr P B Smith, annexure C. Commencing at line 22 the following appears:

“HIS HONOUR

Mr Freeman, what are the issues so far as you are concerned?

MR FREEMAN

Your Honour, diagnosis is not an issue. Provided that the plaintiff proves exposure as alleged over the period alleged then there will not be an issue with………………

HIS HONOUR

If exposure proved the issue is damages. I do not imagine it will be in dispute, but all exposure makes a material contribution to the disease, would it not? Mr Luke.

MR LUKE

Your Honour, the same issues.

HIS HONOUR

Why would it take 2 days then?

MR LUKE

Your Honour, I think exposure is clearly in issue whilst we are just putting the plaintiff to prove – the plaintiff was a painter. The allegation is he went into buildings in the I think Griffith area and sanded walls, and that is as much as we know at the time.

HIS HONOUR

I see, so you do not know who is –

MR LUKE

That is correct, your Honour.”

16. There was then a discussion about dates and the matter was fixed for hearing on 17 and 18 February 2005.

17. On 17 February 2005 the matter was listed before me for hearing. Mr Bartley SC announced his appearance for the Plaintiff, with Mr Tuscano. He then said:

“This is a claim for damages, your Honour, for a man with mesothelioma that is ready to proceed. Breach of duty of care is admitted.”

18. Mr G Watson SC who appeared for the first defendant said:

“It is certainly not, there is a real liability issue in this case.”

19. At line 24 Mr Watson said:

“There is a real issue in this case, it is, if you like, a cutting edge causation issue and my learned friend knows that, there have been special orders made in this case for provision of affidavits dealing with that issue.

MR BARTLEY

If this turns out to be a cutting edge case I will eat my hat………………………

20. As the haggling continued it became clear that the defendants had not served any witness statements or expert reports.

21. The plaintiff’s affidavits were then tendered. Mr Watson announced that he had no wish to cross examine the plaintiff.

22. Mr Watson at pg 4 of transcript made it clear that causation was in issue. He referred to a number of cases which he said would be relevant in argument. Mr Austron who appeared for the second defendant adopted the approach of the first defendant.

23. The discussion continued. Mr Bartley SC pointed out that the plaintiff had been served with nothing from the defendants no doctor’s report, no expert reports, no witness statements. He indicated he was taken by surprise by this approach from the defendants in the light of what had been previously been said. He applied for and was granted an adjournment. The costs thrown away by the adjournment are the subject of this application.

24. Annexure F to the affidavit of S M Freeman is a report from Liesa Gorringe following her attendance on the Registrar for the Issues and Listings Conference on 20 July 2004. Mr Tuscano is referred to in the note as Mr Cascardo but I suppose nothing turns on that.

25. The note includes the following:

“Mr Cascardo noted that the plaintiff in his affidavit does not identify the product one way or the other and that he had sued the defendants based on market share.

The plaintiff was making enquiries re the suppliers and attempting to identify the manufacturer, however, this has proved difficult.

Mr Cascardo informed the Registrar that it was likely the plaintiff was going to argue the case based on market share.

I informed the Registrar that breach of duty of care did not necessarily follow proof of exposure and there was issue in relation to knowledge……………..

Mr Cascardo informed the Registrar that it would be necessary to interrogate then in relation to the following:

The plaintiff is continuing in his enquiries. He is attempting to obtain evidence from the builders who built the homes and if that is obtained then the plaintiff will be relying upon that evidence. However, if this evidence cannot be procured, then the plaintiff will need to seek an inference from the court based on the market share of the defendants……………………………..”

26. By the time of the Issues and Listing Conference the defendants had the report of Professor A B X Breslin dated 6 May 2004 which was supportive of the plaintiff as to diagnosis and causation, but which did not identify, because the plaintiff could not, whose products were responsible.

27. Annexure G to the affidavit is a further report from Ms Gorringe to Mr Freeman following her attendance before O’Meally J on 23 August 2004. Included in the report is the following:

“I informed his honour the substantive issue remained that the plaintiff had not identified the first defendant’s product in his reply to particulars. His honour was very exasperated by this issue……………………….”

28. Annexure O to the affidavit is a file note of Mr Freeman’s bearing date 21 December 2004 relating to his appearance before O’Meally J on the directions hearing that day. The substance of the note is as follows:

“Diagnosis not in issue.

Breach of Duty to be admitted subject to proof of exposure as pleaded.

Pl to serve affidavit by 15 January 2005.

Def to serve witness stmts not later than 15 January 2005.

Listed for hearing 17 & 18 February 2005.”

29. The offer to settle was conveyed by the plaintiff by a letter bearing date 21 January 2005. In early January the plaintiff started supplying the defendants with affidavits from potential witnesses. The thrust of the evidence contained in the affidavits was to confirm that the plaintiff was a painter in Griffith in the years pleaded and that he was subject exposure to dust from sanding the fibro sheets. They contain some evidence designed to indicate which of the defendants’ products were involved.

30. The affidavits of Frank Mirabelli sworn 9 February 2005 and W D Donaldson sworn 14 February 2005 had not been served by the time the period in which the Calderbank offer might be accepted had expired. It is clear enough that the preparation of the plaintiff’s case was proving difficult for those advising him because initially at least they were having trouble gathering evidence to show whose products the plaintiff had been exposed to. In that context Mr Tuscano informed the Registrar at the Issues and Listings Conference in effect if they could do no better they would have to resort to an argument based on market share. However as time passed and the plaintiff started delivering affidavits directed to the issue of proving exposure it must have been plain to the defendants that the plaintiff’s case was to be proved by reference to such evidence and not by resort to inferences from market share of products.

31. The events of 21 December 2004 ie the Directions Hearing before O’Meally J assume importance in connection with the present argument. It is beyond doubt that the Judge was told that provided exposure to the defendants product was proved the only issue was to be damages.

32. When one couples what the Judge was told with the fact that no material either expert or lay had been served by the defendants on the plaintiff then the discomfiture of plaintiff’s legal representative on 17 February 2005 may be readily understood. Issues announced by Mr Watson that day amounted to a significant departure from what had been previously indicated were the matters in dispute between the parties. Whatever had been in Mr Freeman’s mind about what he wished to convey at the directions hearing what in fact was conveyed is demonstrated clearly from the transcript.

33. I indicated on 17 February 2005 when I granted the adjournment that prima facie the defendants were responsible for the costs being thrown away and that they should pay those costs. I remain of that view.

34. A submission was made that even if the matter was to go off the time could be utilised by taking the evidence of the lay witnesses and perhaps also of the plaintiff and hence little would be lost. The reply of the plaintiff’s Counsel to that proposition was in effect that he was not in a position to deal with the extra issues thrown up by the announced approach of the defendants. He had not arranged expert witnesses to deal with such things, he had not arranged any witnesses to deal with them. He said and I accept that it was not reasonable to expect the plaintiff to commence a case not knowing where it was to go as it unfolded. Further he repeated the submission that it was the conduct of the defendants that caused the problem in the first place.

35. I accept the submissions made by plaintiff’s Counsel in this respect and that the costs thrown away by the adjournment of the 17 February 2005 were occasioned by the conduct of the defendants. The defendants should pay the plaintiff’s costs thrown away by that adjournment.

36. So far as indemnity costs are concerned I accept the submission of Mr Russell SC who appeared for the first defendant on the costs application that the correct principle to be applied may be taken from the decision of the Court of Appeal in Jones v Bradley (No 2) [2003] NSW CA 258 (16 September 2003). In a joint judgment the Court said:

7 The other line of authority rejects the “prima facie presumption” approach. In MGICA (1992) Pty Ltd v Kenny & Good Pty Ltd (1996) 70 FCR 236 Lindgren J said at page 239:

“It is important, however, to appreciate that the mere making of an offer by a Calderbank letter and its non-acceptance followed by a result more favourable will not automatically lead to the making of an order for payment of costs on an indemnity basis.”

His Honour said the manner of exercise of the discretion “depends on all relevant circumstances of that case”. His Honour’s view reflected the jurisprudence in the Federal Court at the time: see WCW Pty Ltd v Charthill Ltd (unreported, Federal Court, Olney J, 7 July 1992); John S Hayes & Associates Pty Ltd v Kimberly-Clark Australia Pty Ltd (1994) 52 FCR 201; and has continued to be applied in that Court: see The Sanko Steamship Co Ltd v Sumitomo Australia Ltd (unreported, Federal Court, Sheppard J, 7 February 1996) and NMFM Property v Citibank (2001) 109 FCR 77.

8 This principle has also been enunciated in this Court. In SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 Giles JA stated at para 37:

“The making of an offer of compromise in the form of a Calderbank Letter … where the offeree does not accept the offer but ends up worse off than if the offer had been accepted, is a matter to which the court may have regard when deciding whether to otherwise order, but it does not automatically bring a different order as to costs. All the circumstances must be considered, and while the policy informing the regard had to a Calderbank letter is promotion of settlement of disputes an offeree can reasonably fail to accept an offer without suffering in costs. In the end the question is whether the offeree’s failure to accept the offer, in all the circumstances, warrants departure from the ordinary rule as to costs, and that the offeree ends up worse off than if the offer had been accepted does not of itself warrant departure.”

It appears that Priestley JA, by his Orders in this case, would endorse this approval. But in any event, the principle has been applied in the Supreme Court both at first instance and on appeal: see Enron Australia Finance Pty Limited (in liquidation) v Integral Energy Australia [2002] NSWSC 819; Nobrega v The Trustees of the Roman Catholic Church for the Archdiocese of Sydney (No 2) [1999] NSWCA 133; LMI Australasia Pty Ltd v Baulderstone Hornibrook Pty Ltd [2003] NSWCA 74; and Cummings v Sands [2001] NSWSC 706.

more apparent than real” as in either approach the Court must consider all the circumstances of the case: see CBA Investments Limited v Northern Star Limited (No 2) [2002] NSWCA 164. Be that as it may, we consider that the approach taken by the Court in SMEC Testing Services is correct and is the approach which should be consistently applied when dealing with Calderbank offers.

37. The following matters seem to me to be relevant:

1. At the time when the Calderbank offer expired the material served by the plaintiff in support of his case was pretty thin. In particular the affidavits of Mr Mirabelli and Mr Donaldson had not then been served. I accept the submission advanced on behalf of the first defendant there was nothing about the material which had been served which made the refusal to consider settlement as the plaintiff proposed unreasonable.
2. I am troubled by the fact that the parties settled this case and that the settlement involved no discussion about indemnity costs. If the parties were dealing frankly with one another one might have expected that such a matter would be discussed in connection with the settlement.

3. In considering the submission of the plaintiff that nothing happened to change things between January 2005 and April 2005 when the matter was settled I have regard to the provision of the affidavits of Messrs Mirabelli and Donaldson which provided some substance for the plaintiff’s case, at least against the first defendant which had hitherto been lacking.

38. I am not satisfied that the defendants failure to accept the plaintiff’s Calderbank offer in the circumstances of the case warrants any departure from the ordinary rule as to costs. I decline to order indemnity costs.

39. The orders in relation to costs in the proceedings are as follows:

1. I order the defendants to pay the plaintiff’s costs of the proceedings.

2. The defendants are to pay the plaintiff’s costs thrown away by the adjournment of proceedings on 17 February 2005.

3. I decline to order indemnity costs.

40. As regards the costs of the present application each side has succeeded in part. Each side should pay its own costs.

Mr A Bartley SC with Mr F Tuscano instructed by Walker Smith appeared for the plaintiff

Mr D J Russell QC instructed by Henry Davis York appeared for the first defendant

Mr W Austron instructed by Leigh Virtue and Associates appeared for the second defendant