Sloan v Service Stream Limited (No 3) - [2020] SADC 132

District Court of South Australia
(Civil)
SLOAN v SERVICE STREAM LIMITED (NO 3)
[2020] SADC 132
Ruling of Her Honour Judge Schammer (ex tempore)
21 September 2020
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - COSTS - SET-OFF OF COSTS
The plaintiff claimed damages for personal injuries allegedly sustained by him on 13 March 2013, while undertaking pit and pipe installation work for the defendant, under a labour hire contract with the plaintiff’s employer, Skilled Group Limited (Skilled).
The action proceeded to trial over seven days commencing 3 February 2020.
On 28 July 2020, I delivered judgment in this action wherein I determined that the defendant had breached the duty of care it owed to the plaintiff, causing harm to the plaintiff. In addition, I determined that the plaintiff’s negligence had contributed to that harm. I assessed damages in the sum of $80,355.06, which sum was reduced by 40% to reflect the plaintiff’s contributory negligence.
The plaintiff was awarded damages in the sum of $48,213.04 as against the defendant. The parties were to be heard on the issue of costs.
On 31 August 2020, I ordered the defendant pay the plaintiff’s costs of action incurred up to and including 4 November 2019 on a party/party basis and the plaintiff pay the defendant’s costs of action incurred as of 5 November 2019 on a party/party basis, with such costs to be taxed if not agreed.
The defendant seeks orders for a stay on the execution of the judgment and a set-off of its liability to pay the judgment sum and any costs payable to the plaintiff as against any liability the plaintiff has to pay the defendant’s costs.
Whether the court should exercise its discretion to order the set-off in circumstances where the plaintiff’s liability to pay the defendant’s costs is likely to exceed the defendant’s liability to pay the plaintiff’s costs, and where a non-party, Skilled, has a potential right of recovery of the judgment sum.
Orders:
1. The costs awarded in the defendant’s favour by order dated 31 August 2020 are to be set-off, first against the defendant’s liability to pay the plaintiff’s costs as ordered on 31 August 2020 and then against the defendant’s liability, if any, to pay the judgment sum.
2. A stay on the execution of the judgment until 28 days after the respective liabilities of the plaintiff and defendant to pay each other’s costs, as per the order made on 31 August 2020, are determined, either by way of taxation or agreement.
Return to Work Act 2014 (SA) s 66; Enforcements of Judgments Act 1991 (SA) s 17, referred to.
Sivritas v Sivritas, Suvritas and Buller McLeod Pty (ACN 073 207 137) [2008] VSC 580; Elphick v Elliott & Anor [2002] QSC 285; Gertig v Davies [2003] SASC 86; Settlement Wine Company Pty Ltd v National & General Insurance (No.2) (1994) 175 LSJS 287, considered.

SLOAN v SERVICE STREAM LIMITED (NO 3)
[2020] SADC 132
Introduction

The plaintiff, Eugene Sloan, claimed damages for personal injuries allegedly sustained by him on 13 March 2013, while undertaking pit and pipe installation work for the defendant, Service Stream Limited, under a labour hire contract with the plaintiff’s employer, Skilled Group Limited (Skilled).
The action proceeded to trial over seven days commencing 3 February 2020.
On 28 July 2020, I delivered judgment in this action wherein I determined that the defendant had breached the duty of care it owed to the plaintiff, causing harm to the plaintiff. In addition, I determined that the plaintiff’s negligence had contributed to that harm. I assessed damages in the sum of $80,355.06, which sum was reduced by 40% to reflect the plaintiff’s contributory negligence.
The plaintiff was awarded damages in the sum of $48,213.04 as against the defendant. The parties were to be heard on the issue of costs.
On 31 August 2020, I ordered the defendant pay the plaintiff’s costs of action incurred up to and including 4 November 2019 on a party/party basis and the plaintiff pay the defendant’s costs of action incurred as of 5 November 2019 on a party/party basis, with such costs to be taxed if not agreed.
The defendant seeks orders for a stay on the execution of the judgment and a set-off of its liability to pay the judgment sum and any costs payable to the plaintiff as against any liability the plaintiff has to pay the defendant’s costs (application).
On 15 September 2020, I made orders with respect to the application in the following terms:
1The costs awarded in the defendant’s favour by order dated 31 August 2020 are to be set-off, first against the defendant’s liability to pay the plaintiff’s costs as ordered on 31 August 2020 and then against the defendant’s liability, if any, to pay the judgment sum.
2A stay on the execution of the judgment until 28 days after the respective liabilities of the plaintiff and defendant to pay each other’s costs, as per the order made on 31 August 2020, are determined, either by way of taxation or agreement.
These are my reasons for ruling.
Background
The incident occurred during the course of the plaintiff’s employment with Skilled. Thereafter, Skilled paid compensation to the plaintiff pursuant to the Return to Work Act 2014 (SA) (RTWA) (and its predecessor legislation) in a sum exceeding that of the damages awarded.
Skilled potentially have a right of recovery pursuant to s 66(7) of the RTWA, which states:
(7)If—
(a)     compensation is paid or payable to a person (the injured party) under this Act; and
(b)     the injured party has received, or is entitled to, damages from another person (the wrongdoer) pursuant to rights arising from the same trauma as gave rise to the rights to compensation under this Act; and
(c)     the person by whom the compensation is paid or payable under this Act (the claimant) is entitled to recover the amount of the compensation by virtue of subsection (5) or (6),
then the following provisions apply:
(d)     the claimant is entitled to recover the amount of compensation paid or payable under this Act from the wrongdoer or the injured party but subject to the following qualifications:
(i)no amount may be recovered from the wrongdoer in excess of the wrongdoer's unsatisfied liability to the injured party; and
(ii)the claimant must exhaust its rights against the wrongdoer before recovering against the injured party; and
(iii)no amount may be recovered from the injured party in excess of the amount of the damages received by the injured party;
(e)     the claimant must, on giving notice to a wrongdoer of an entitlement to recover compensation under this section, have a first charge, to the extent of the entitlement, on damages payable by the wrongdoer to the injured party;
(f)     any amount recovered by the claimant against a wrongdoer under this subsection will be taken to be an amount paid in or towards satisfaction of the wrongdoer's liability to the injured party;
(g)     an action for the recovery of compensation under this subsection—
(i)may be heard and determined in proceedings brought in the District Court of South Australia; and
(ii)must be commenced within 3 years after the date of the trauma referred to in paragraph (b);
(h)     the injured party and the claimant may enter into an agreement (a deed of release) under which the parties agree that after the claimant has recovered from the injured party or the wrongdoer the full amount of compensation paid by the claimant to the injured party—
(i)the injured party is then entitled to retain the balance of any damages paid or payable to him or her by the wrongdoer; and
(ii)any liability by the claimant to the injured party under this Act in respect of the work injury (including a liability to provide recovery/return to work services or to provide compensation under Division 4) is discharged; and
(iii)the employer from whose employment the injury arose has no further obligation under this Act to provide suitable employment to the injured party;
(i)    a deed of release cannot be entered into unless the injured party has received—
(i)competent professional advice; and
(ii)competent financial advice,
about the consequences of entering into the deed of release;
(j)    if the claimant notifies the injured party that it is willing to enter into a deed of release, the claimant is liable to indemnify the injured party for reasonable costs of obtaining the advice required under paragraph (i) up to a limit prescribed by regulation. (my emphasis)
The defendant submitted that there was no evidence before the court that Skilled did, in fact, have a right of recovery, as Skilled had not issued recovery proceedings pursuant to s 66(7)(g) RTWA.
However, there was evidence led at trial that the plaintiff made a claim for workers compensation with Skilled following the incident, which claim was accepted, resulting in benefits being paid to the plaintiff by Skilled in a sum which exceeded the damages awarded. As such, in determining the application, I have proceeded on the basis that Skilled have a prima facie right of recovery.
Set-Off
The Uniform Civil Rules 2020 (UCR) apply with respect to the application, as an order for a set-off now is, in my view, a step taken in the proceeding after the commencement date of the UCR (18 May 2020).
UCR 194.3(4) states:
The Court may order that costs awarded to a party be set-off against any liability of the party (including a liability for costs).
The defendant submitted that in addition to the express power provided by UCR 194.3(4), the Court had the power to make the order as sought, either pursuant to the court’s inherent jurisdiction,[1] or in equity.[2]
[1] Sivritas v Sivritas, Suvritas and Buller McLeod Pty (ACN 073 207 137) [2008] VSC 580 at [20]-[23].
[2] Elphick v Elliott & Anor [2002] QSC 285 at [14]-[16].
UCR 194.3(4) is clear and unambiguous in its terms, such that I am satisfied I have the power to make the orders as sought. The issue is, however, whether I should exercise my discretion to make the order as sought, having regard to the circumstances of this matter.
The plaintiff did not oppose an order being made setting off the defendant’s liability to the plaintiff by way of costs as against the plaintiff’s liability for the defendant’s costs. In making that submission, counsel for the plaintiff acknowledged Skilled’s right of recovery, in the sense that counsel proceeded on the basis that the plaintiff had no interest in the damages awarded, given the sum did not exceed payments made by Skilled to the plaintiff.
Skilled was informed of the fact of the application and declined an opportunity to make any submissions with respect to it.
Neither the plaintiff’s costs, or the defendant’s costs have been taxed (or agreed), and it is uncertain how long that process will take. As the defendant’s costs include those incurred at trial, the quantum of such costs is likely to exceed the quantum of the plaintiff’s entitlement to costs. If so, and by what sum, is uncertain.
In Elphick v Elliott & Anor,[3] the court considered whether it had power to order a set-off of a defendant’s costs as against a judgment debt owed by that party, in circumstances where the amount of such costs remained unascertained (and in the absence of any specific rule giving such power). In that instance, the court applied equitable principles, to decline to order the set-off given the significant delay occasioned by the applicant’s failure to have its costs assessed. However, the court was satisfied it had the power to make the order, despite the fact the applicant’s costs claim had not been quantified.
[3] Ibid.
Pursuant to s 66(7)(d)(ii) RTWA, any right of recovery held by Skilled is limited to a sum not in excess of the defendant’s unsatisfied liability to the plaintiff. Further, pursuant to s 66(7)(e) the ‘first charge’ held by Skilled is only ‘with respect to the entitlement’ – which must be the entitlement arising under s 66(7)(d).
As outlined by Doyle CJ in Gertig v Davies,[4] although a set-off is procedural in nature, it also has a substantive effect. In ordering a set-off, the court is determining for whom an enforceable judgment is to be entered and for how much.
[4] [2003] SASC 86 at [27]-[31].
As such, in my view, granting the set-off does not elevate the defendant’s claim for costs such that it will assume priority over Skilled’s ‘first charge’. Rather, the practical and legal effect of an order for set-off, in this instance, is likely to reduce the defendant’s ‘unsatisfied liability’ to the plaintiff, thus consequentially reducing the extent of Skilled’s right of recovery and first charge.
Notwithstanding that observation, I note the decision in Settlement Wine Company Pty Ltd v National & General Insurance (No.2),[5] wherein Perry J was asked to set-off a defendant’s entitlement to costs as against its liability to pay the judgment sum, in circumstances where it was possible the plaintiff was to be put in liquidation. He stated:[6]
As to the offset claim by the defendant, the only aspect of that which causes me to hesitate is the question whether or not by allowing an offset of costs against the amount otherwise payable by the defendant, the court would be sanctioning a preference should the plaintiff be put into liquidation. It is clearly insolvent. However, the express provisions for an offset are to be found in rule 101.01(1)(c). In my opinion, given the express power in the rules to direct that costs are to be set off, the circumstances of this case are such that I should exercise that power, notwithstanding the possibility of a preference. At most, there is only a possibility of a preference arising, and I have not been taken to any authority which would satisfy me that there would be, when an order of the Court is made pursuant to Rule 101 for an offset of costs against a judgment, a preference in the context of any subsequent liquidation.
[5] (1994) 175 LSJS 287.
[6] Ibid at 287-288.
Perry J granted the application for a set off as sought and ordered a stay of execution of the judgment until the costs had been taxed and thereafter until further order.
The plaintiff gave evidence that he was unemployed and in receipt of a Newstart allowance from Centrelink. He lives in a Housing Trust home. He has not worked in a paid capacity since undertaking a brief period of employment as a traffic controller in 2017. I am satisfied that in the absence of the order for set-off being made, there is a very real risk that the plaintiff will be unable to meet his liability to pay the costs order made in favour of the defendant, resulting in prejudice to the defendant.
Having regard to the particular circumstances of this matter, I am satisfied it is appropriate to make an order for a set-off in the exercise of my discretion, in the terms as sought.
Stay
Section 17 of the Enforcements of Judgments Act 1991 (SA) (EOJA) states:
A party against whom a judgment has been given may apply to the court for a stay of execution, and the court may, if satisfied that there is a proper reason for granting the stay, grant the stay on such terms as it considers appropriate.
The court therefore has a discretion as to whether to order a stay and in exercising that discretion the court must balance the interests of the parties to determine whether the justice of the case warrants such an order.
Having regard to the set-off, the defendant’s liability to pay any judgment sum cannot be determined until the quantum of each party’s costs claim is taxed or agreed.
As such, I am satisfied that it is appropriate for an order to be made pursuant to s 17 EOJA, such that there will be a stay of execution on the judgment until 28 days after the respective liabilities of the parties as to costs have been taxed (or agreed).