State of New South Wales v Howard Smith Limited (Re Neil Murphy)

[2019] NSWDDT 3

Dust Diseases Tribunal

New South Wales

Medium Neutral Citation:	State of New South Wales v Howard Smith Limited (Re Neil Murphy) [2019] NSWDDT 3
Hearing dates:	21 March 2019
Date of orders:	25 March 2019
Decision date:	25 March 2019
Before:	Russell SC DCJ
Decision:	(1)   Order that Svitzer Towage Holdings Pty Limited be added as a seventh cross-defendant to the first cross-claim. (2)   Order that the cross-claimant file and serve an amended first cross-claim by 1 April 2019. (3)   Grant leave to the cross-claimant to file by 1 April 2019 a Notice of Discontinuance in relation to its claim against the fifth cross-defendant. (4)   Order the cross-claimant to pay the costs of the fifth cross-defendant and of Svitzer Towage Holdings Pty Limited of the Notice of Motion filed on 29 January 2019. (5)   Order the cross-claimant to pay 50% of the balance of the fifth cross-defendant’s costs of the first cross-claim.
Catchwords:	CONTRIBUTION – cross-claimant sued incorrect cross-defendant – leave granted to discontinue – costs – both cross-claimant and cross-defendant labouring under same mistaken belief about identity of employer - power to otherwise order – Rules 12.1, 42.19 Uniform Civil Procedure Rules 2005 CONTRIBUTION – additional of cross-defendant – not appropriate to substitute added cross-defendant for cross-defendant wrongly sued - Rules 6.23, 6.24, 6.29 Uniform Civil Procedure Rules 2005
Legislation Cited:	Dust Diseases Tribunal Regulation 2013 Uniform Civil Procedure Rules 2005 (NSW)
Cases Cited:	Fordyce v Fordham [2006] NSWCA 274; (2006) 62 NSWLR 67
Category:	Procedural and other rulings
Parties:	State of New South Wales (Cross-Claimant) Howard Smith Limited (Fifth Cross-Defendant) Svitzer Towage Holdings Pty Ltd (Prospective Seventh Cross-Defendant)
Representation:	Counsel: J Sharpe (Cross-Claimant) G J Parker SC (Fifth Cross-Defendant) B Cussen solicitor (Prospective Seventh Cross-Defendant)   Solicitors: Thompson Cooper Lawyers (Cross-Claimant) McCulloch and Buggy (Fifth Cross-Defendant) William Roberts Lawyers (Prospective Seventh Cross-Defendant)
File Number(s):	DDT 320/17/1

Judgment

Background

1. By a Statement of Claim filed on 27 October 2017 Mr Neil Murphy sued the State of New South Wales as the sole defendant, in relation to his asbestos exposure while working at the State Dockyard in Newcastle between 1965 and 1975.

2. As required by the Dust Diseases Tribunal Regulation 2013 (NSW) (the Regulation), Mr Murphy filed a Statement Of Particulars dated 15 January 2018. In that document he was required to set out not only details of his State Dockyard asbestos exposure, but particulars of any other asbestos exposure. On p 14 under the heading “Howard Smith Industries” he said:

“I commenced employment with Howard Smith Industries as an electrical engineer in 1976.

3. On page 16 of the Statement of Particulars, he described his exposure “during my employment with Howard Smith Industries” as medium-high. He attributed 35% of his overall exposure to asbestos to the period of his employment with Howard Smith Industries. He said that during his employment with Howard Smith Industries, he was exposed to gaskets, Rockbestos, rope, powder lagging and blankets.

4. Annexed to the Statement of Particulars was a report from Dr Anthony Johnson dated 20 November 2017. On page 2 of the report Dr Johnson talked about the plaintiff’s employment with “Howard Smith Industries, Electrical Engineer”.

5. The State of New South Wales filed a cross-claim on 7 February 2018 seeking contribution. It sued a number of suppliers to the State Dockyard and also sued Howard Smith Limited as fifth cross-defendant, in respect of employment of the plaintiff at a shipyard in Birchgrove between 1976 and 1981.

6. The evidence shows that Howard Smith Limited (HSL) was a public company. The evidence also shows that one of its subsidiaries was Howard Smith Industries Pty Limited (Industries), which operated the Birchgrove shipyard. On 20 February 2018 HSL, as fifth cross-defendant, first instructed solicitors. As required under the Regulation, HSL filed a Reply on 21 March 2018. In that Reply in answer to the question “Do you admit that you employed the claimant, as alleged?”, HSL replied:

“The fifth cross-defendant does not know. Howard Smith does not have any evidence at this stage to contradict the allegations.”

7. That Reply was filed under the strict time limits imposed by the Regulation. A week after that Reply was filed, on 28 March 2018, the solicitor for the cross-claimant sent the solicitor for HSL copies of documents obtained from the Dust Diseases Board (the Board) in relation to a claim for compensation made by the plaintiff Mr Murphy. In those documents was a copy of a letter dated 14 March 1979 on the letterhead of “Howard Smith Industries Pty Limited”. The letter was addressed “To whom it may concern” and commenced:

“Mr Neil Murphy has been employed at Howard Smith Industries Birchgrove Workshops from 7th June 1976 in the category of Electrician and from time to time as Charge Hand and Draughtsman on substantial overhauls of vessels requiring technical expertise in his particular trade.”

8. The letter spoke highly of Mr Murphy and recommended him to any future employer. I infer that when that letter was written in March 1979, Mr Murphy was leaving his employment at the Birchgrove shipyard operated by Industries.

9. The evidence shows that neither the solicitor for the cross-claimant, nor the solicitor for the fifth cross-defendant, appreciated the significance of the letter stating categorically that Industries was the employer of the plaintiff at the Birchgrove shipyard. Had that fact been noticed by the solicitor for the cross-claimant, attention would have been given to the question of whether or not the cross-claimant had correctly sued HSL as the plaintiff’s employer at the Birchgrove shipyard. Had attention been given to that letter by the solicitor for the fifth cross-defendant, an issue would have been raised as to whether or not the fifth cross-defendant had been correctly sued as the employer.

10. The plaintiff’s action came before Judge Kearns on 15 May 2018 in order to be set down for hearing. The lawyer who appeared for the fifth cross-defendant indicated that his client wished to cross-examine the plaintiff only about the issue of exposure. No indication was given to the Tribunal on that occasion that employment by the fifth cross-defendant was in issue.

11. On 6 June 2018 the plaintiff’s action came on for hearing before me. It was settled. I made orders in accordance with a Consent Judgment filed in court in favour of the plaintiff. I also made Clause 56 Orders in accordance with a document filed in court. Against the fifth cross-defendant, I made a Clause 56 Order for payment of $59,412.50. That amount was subsequently paid by HSL.

12. On 25 October 2018 the fifth cross-defendant filed a Defence to the cross-claim. It denied employment. In the alternative, it said that if it did employ the plaintiff, it ceased to do so in 1979.

13. The matter came before the court for directions on 5 November 2018 when Short Minutes of Order were made by consent in relation to the service by the cross-claimant upon the fifth cross-defendant of interrogatories, and categories of documents for discovery.

14. The solicitor for the fifth cross-defendant realised on 20 November 2018 that HSL was not the employer. The next day on 21 November 2018 he telephoned the solicitor for the cross-claimant and told him of this discovery. The solicitor for HSL is to be commended for his frankness in his own affidavit dated 12 March 2019, in which he said:

“It was at that time [20 November 2018] I first put two and two together and realised the fifth cross-defendant, Howard Smith Limited, did not employ the plaintiff, as evidenced by the letter of 14th March 1979.”

The Notice of Motion

15. By a Notice of Motion filed on 29 January 2019, the cross-claimant sought orders, in effect, to remove Howard Smith Limited as a cross-defendant, and to sue Svitzer Towage Holdings Pty Limited (Svitzer) as a cross-defendant. Svitzer is the current corporate name of the company formerly known as Howard Smith Industries Pty Limited.

16. Paragraph 1 in the Notice of Motion sought an order to substitute Svitzer as fifth cross-defendant in lieu of Howard Smith Limited. Paragraph 2 of the Notice of Motion sought, in the alternative, leave to amend the first cross-claim to add Svitzer as a seventh cross-defendant, and to discontinue against Howard Smith Limited, the fifth cross-defendant to the first cross-claim.

17. Paragraph 3 of the Notice of Motion seeks an order that the costs of the first cross-claim be ordered against Howard Smith Limited. Paragraph 4 of the Notice of Motion seeks an order that the costs of the motion itself be ordered against Howard Smith Limited.

18. Removal of HSL and addition of Switzer

19. It was submitted that Rule 6.23 of the Uniform Civil Procedure Rules 2005 (NSW) (Rules) gave the court the power to substitute Svitzer for Howard Smith Limited. That rule provides:

“Proceedings are not defeated merely because of the misjoinder or non-joinder of any person as a party to the proceedings.”

20. I find that the rule does apply in the present circumstances. Howard Smith Limited has been misjoined to the proceedings. Svitzer has been not joined to the proceedings. There are other rules that enable Howard Smith to be removed and Svitzer to be added.

21. Counsel for the cross-claimant submitted that this was a case of “misnomer or misdescription of a party’s name”. I reject that submission. Howard Smith Limited and Svitzer are two distinct legal entities. In any event, r 6.23 is not concerned with misnomer, but rather with misjoinder.

22. Pursuant to r 6.24 of the Rules, if the court considers that a person ought to have been joined as a party, or is a person whose joinder as a party is necessary to the determination of all matters in dispute in any proceedings, the court may order that the person be joined as a party. On the evidence I find that it is necessary to order the joinder of Svitzer to the first cross-claim, as seventh cross-defendant. There will have to be a consequential order for the cross-claimant to file an amended first cross-claim.

23. Rule 6.29 of the Rules provides that the court may order that a person who has been improperly or unnecessarily joined, or who has ceased to be a proper or necessary party, may be removed as a party. This provides power to remove Howard Smith Limited as a party. However, that was not the order sought in para 1 of the Notice of Motion. That paragraph sought an order for Svitzer to be substituted for Howard Smith Limited. It is possible for the court to make such an order under r 6.32(1)(d) of the Uniform Civil Procedure Rules 2005. By r 6.32(2):

“If the court orders a substitution of one party for another party or former party, all things previously done in the proceedings have the same effect in relation to the new party as they had in relation to the old, subject to any other order by the court.”

24. The evidence shows that there was a Contributions Assessment Determination under the Regulation, and a mediation under the Regulation. Of course, Svitzer played no part in either of those. HSL did, but nothing it did or said, and nothing in its Reply, could possibly bind the way Svitzer may wish to conduct the case. To make an order substituting Svitzer for Howard Smith Limited at this stage could even fix Svitzer with the percentage liability found by the Contributions Assessor. That would be most unjust.

25. For those reasons, I decline to make para 1 in the Notice of Motion.

26. Paragraph 2 is in two parts. Firstly, it seeks an order that Svitzer be added as a seventh cross-defendant to the first cross-claim. I have already indicated my view that it is appropriate to make that order. The second part of paragraph 2 seeks leave to discontinue against Howard Smith Limited. Rule 12.1 of the Uniform Civil Procedure Rules 2005 provides that the plaintiff in any proceeding may, by filing a Notice of Discontinuance, discontinue the proceedings either with the consent of each active party in the proceedings or with the leave of the court. The cross-claimant does not have the consent of any other party to the first cross-claim to discontinue. It therefore needs the leave of the court.

27. It is appropriate to grant leave to the cross-claimant to file a Notice of Discontinuance pursuant to r 12.1. There is no utility whatsoever in HSL remaining in the proceedings. The cross-claim against it is doomed to failure. The cross-claimant does not want HSL in the proceedings any longer, and HSL does not want to be there.

28. I will therefore grant leave to the cross-claimant to file a Notice of Discontinuance against the fifth cross-defendant on the first cross-claim.

29. That leaves the difficult issue of costs.

Costs

30. Mr Cussen solicitor appeared for the prospective seventh cross-defendant Svitzer. On any view of things, he should have an order for costs in his favour. The cross-claimant is seeking an indulgence in relation to joinder of Svitzer, and should pay the costs of Switzer associated with doing so.

31. Since the only relief which the cross-claimant can obtain against HSL on this motion is leave to discontinue, consideration must be given to r 42.19. This rule applies to proceedings that are discontinued in accordance with r 12.1. Rule 42.19(2) provides:

“Unless the Court orders otherwise… the plaintiff must pay such of the defendant’s costs as, at the date on which the notice of discontinuance was filed, had been incurred by the defendant in relation to each claim in respect of which the proceedings have been discontinued.”

32. As senior counsel for the fifth cross-defendant put it, the default position is that the cross-claimant should pay the fifth cross-defendant’s costs, unless the court otherwise orders.

33. In Fordyce v Fordham [2006] NSWCA 274; (2006) 62 NSWLR 497, Justice Santow said:

“While it is true that the Court may otherwise order, the onus remains on the discontinuing party to justify such an order by reference to the circumstances said to justify exception to the normal cost outcome in such event. That the court retains a discretion to accommodate such circumstances does not alter their character as being by way of exception nor the consequence in terms of onus. That said, the discretion remains to otherwise order.”

34. Counsel for the cross-claimant submitted that HSL had an obligation to make enquiries and take steps to ensure that this problem about the identification of the correct employer did not happen. Why it had such obligation was not the subject of any submission.

35. Counsel also submitted that it was not inappropriate for the cross-claimant to sue HSL.

36. I reject that submission. The cross-claimant had in its hands, some time before 28 March 2018, an employment letter from Howard Smith Industries Pty Limited. A simple reading of that letter should have led the cross-claimant to understand that the plaintiff was employed at the Birchgrove shipyard by Industries and not by HSL.

37. The only source of information which the cross-claimant had, prior to bringing its cross-claim against the fifth cross-defendant on 7 February 2018, came from the Statement of Particulars filed by the plaintiff on 15 January 2018. As recited above, on multiple occasions in that document, the plaintiff referred to being employed at the Birchgrove shipyard by “Howard Smith Industries”. There is no evidence that the cross-claimant made any search of that name, and I infer that it simply assumed that HSL was the operator the Birchgrove shipyard and the employer of the plaintiff, even though the employer’s name nominated by the plaintiff was not the same as the name of the public company.

38. The cross-claim was wrongly commenced against the fifth cross-defendant entirely because of the actions (or rather the omissions) of the cross-claimant.

39. That does not automatically lead to the conclusion that the cross-claimant should pay the fifth cross-defendant’s costs of the first cross-claim. The fifth cross-defendant had the plaintiff’s Statement of Particulars which were served with the first cross-claim. The fifth cross-defendant had the employment letter dated 14 March 1979 when it was sent on 28 March 2018. A Reply had been filed a week earlier by the fifth cross-defendant, stating that the fifth cross-defendant did not know if it was the employer. If, a week later, the 1979 letter had been read and understood, the fifth cross-defendant could, and should, have realised that it was not the employer and was wrongly joined to the proceedings. I am certain that if the solicitor realised that at the time, the matter would have been raised with the solicitor for the cross-claimant, who would have discontinued at that early stage against the fifth cross-defendant.

40. HSL remained in the proceedings, in spite of not being the employer, and even paid $59,412.50 pursuant to a Clause 56 order, when it should not have. It also consented to interrogatories and discovery as late as November 2018, still on the basis that it believed itself to be the employer, or at the very least, could not establish that it was not the employer.

41. The unfortunate series of events between the filing of the cross-claim in February 2018, and the realisation in late November 2018 that Howard Smith Limited was not an appropriate cross-defendant, was caused by the failure of both the cross-claimant and the fifth cross-defendant to read and understand, firstly, the plaintiff’s Statement of Particulars, and secondly, the employment letter dated 1979.

42. The Tribunal appreciates that claims for the fatal disease of mesothelioma are dealt with on an urgent basis. However, four months elapsed between the filing of the cross-claim and the hearing of the plaintiff’s claim. Another five months elapsed before the parties realised the correct identity of the employer of the plaintiff at the Birchgrove shipyard.

43. HSL was joined in the first place because of a mistake on the part of the cross-claimant. It remained as a party to the first cross-claim for the next nine months, because of ignorance on the part of the fifth cross-defendant. Of course, during that period, the cross-claimant was also labouring under the same misapprehension and had failed to understand the information clearly conveyed by the Statement of Particulars and the 1979 employment letter.

44. The fifth defendant’s costs of defending the cross-claim have been thrown away. However in my view the blame for that cannot be laid entirely at the feet of the cross-claimant. HSL must share some of the burden.

45. I find that the appropriate order in relation to the fifth defendant’s costs of the first cross-claim is to order the cross-claimant to pay 50% of the fifth defendant’s costs of the cross-claim.

46. So far as the costs of the motion are concerned, the cross-claimant has failed to obtain order 1, and has obtained order 2. The motion concerned not only the existing fifth cross-defendant, but the application to add Svitzer as the seventh cross-defendant. Once again, it can be seen that the cross-claimant is seeking an indulgence arising out of its initial mistaken assumption that the fifth cross-defendant was the employer during the relevant period. The cost of obtaining orders to rectify its mistake should fall upon the cross-claimant. I will order that the cross-claimant pay the fifth cross-defendant’s costs of the motion.

47. Senior counsel for the fifth cross-defendant submitted that the combined operation of Clause 31 and Clause 70 of the Regulation meant that the cross-claimant should bear the costs of changing the facts on which the proceedings were commenced. I am of the view that those clauses apply while a matter is within the Claims Resolution Process but not otherwise. Those clauses are in the Regulation to dissuade parties from changing the facts on which they rely during the Claims Resolution Process. The clauses are designed to ensure that a party sticks to the facts upon which it relies, so as not to disrupt the contributions assessment and the mediation. To allow such disruption and delay would impede the prompt resolution of a plaintiff’s claim, which after all is the key aim of the Claims Resolution Process. Once the Claims Resolution Process is over, those regulations have no part to play.

Conclusion and Orders

48. My orders are:

1. Order that Svitzer Towage Holdings Pty Limited be added as a seventh cross-defendant to the first cross-claim.

2. Order that the cross-claimant file and serve an amended first cross-claim by 1 April 2019.

3. Grant leave to the cross-claimant to file by 1 April 2019 a Notice of Discontinuance in relation to its claim against the fifth cross-defendant.

4. Order the cross-claimant to pay the costs of the fifth cross-defendant and of Svitzer Towage Holdings Pty Limited of the Notice of Motion filed on 29 January 2019.

5. Order the cross-claimant to pay 50% of the balance of the fifth cross-defendant’s costs of the first cross-claim.

**********

Decision last updated: 25 March 2019