Stavrakijev v Ready Workforce (No 2)
[2018] VSC 767
•7 December 2018
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
PERSONAL INJURIES LIST
S CI 2016 00797
| ICO STAVRAKIJEV | Plaintiff |
| v | |
| READY WORKFORCE (a division of CHANDLER MACLEOD PTY LTD) and HOLCIM (AUSTRALIA) PTY LTD | Defendants |
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JUDGE: | Keogh J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 15 November 2018 |
DATE OF RULING: | 7 December 2018 |
CASE MAY BE CITED AS: | Stavrakijev v Ready Workforce & Anor (No 2) |
MEDIUM NEAUTRAL CITATION: | [2018] VSC 767 |
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COSTS – Offer of compromise by plaintiff – Supreme Court (General Civil Procedure) Rules2015 (Vic) r 26.08 – Stevens v Spotless Management Services Pty Ltd (No 2) [2016] VSCA 311 (12 December 2016) – Nakos v Serdaris [2016] VSC 179 (27 April 2016) – Whether plaintiff entitled to costs on an indemnity basis – Calderbank offers by first defendant to second defendant – Calderbank v Calderbank (1975) 3 All ER 333 – Hazeldene’s Chicken Farm v VWA (No 2) [2005] VSCA 298 (13 December 2005) – Whether refusal of offers was unreasonable in the circumstances.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | L Allan | Shine |
| For the First Defendant | N Dunstan | Lander & Rogers |
| For the Second Defendant | G Worth | Sparke Helmore |
HIS HONOUR:
I delivered a judgment in favour of Mr Stavrakijev against both defendants on 13 November 2018, and determined contribution 20 per cent to Ready Workforce and 80 per cent to Holcim.[1] The parties agree judgment should be given for the plaintiff against both defendants for $855,264.[2] The parties are in dispute in relation to cost orders.
[1]Stavrakijev v Ready Workforce & Anor [2018] VSC 690 (13 November 2018) (‘Stavrakijev’).
[2]Assessed damages have been reduced as required by s 134AB(25) of the Accident Compensation Act 1958 (the ‘Act’) and increased for interest and Fox v Wood (1981) 148 CLR 438 damages.
Mr Stavrakijev seeks an order that Holcim pay his costs on an indemnity basis because it did not accept an offer of compromise he made. The judgment is more favourable to Mr Stavrakijev than the terms of the offer. Holcim opposes the order for indemnity costs on the basis that refusal to accept the offer of compromise was not unreasonable.
Ready Workforce seeks orders that:
a) Holcim pay its costs of the proceeding on an indemnity or, in the alternative, standard basis; and
b) Holcim indemnify it in respect of costs payable to Mr Stavrakijev.
Ready Workforce relies on three offers to Holcim to settle the proceeding which were made in accordance with the principles of Calderbank v Calderbank[3] and Hazeldene’s Chicken Farm v VWA (No 2).[4] Judgment as to contribution was more favourable to Ready Workforce than the terms of each offer. Holcim opposes these orders.
[3](1975) 3 All ER 333.
[4][2005] VSCA 298 (13 December 2005)(‘Hazeldene’).
Additionally, there was disagreement as to certification of counsel’s fees, the resolution of which depends in part on the determination of the basis upon which costs orders are made.
Background
On 15 November 2011 Mr Stavrakijev brought this proceeding claiming damages for an injury arising out of, or in the course of, or due to the nature of, his employment with Ready Workforce. Accordingly, before he could commence the proceeding, he had to access a gateway to recovery of damages in accordance with s 134AB of the Act.
Mr Stavrakijev made an application pursuant to s 134AB(4) on 16 July 2015. Such an application must be in an approved form and accompanied by medical reports and affidavits attesting to relevant matters. On 24 July 2015 a copy of Mr Stavrakijev’s serious injury application and accompanying documents were sent to Holcim.
On 6 November 2015 Ready Workforce advised that consent was given to Mr Stavrakijev to bring a proceeding for damages for the injury. At the same time Ready Workforce sent Mr Stavrakijev and Holcim medical reports and affidavits attesting to material upon which it intended to rely in common law proceedings.
On 20 January 2016 a conference was held pursuant to s 134AB(12)(a). Holcim was represented at that conference. On 1 February 2016 Ready Workforce made a nil statutory offer to Mr Stavrakijev pursuant to s 134 AB(12)(a). On 9 February 2016 Mr Stavrakijev made a statutory counter offer to settle the proceeding for $325,000.[5] Pursuant to s 134AB(12)(c) that offer remained open for 21 days.
[5]The offer was net of reduction required by s 134AB(25) of the Act.
On 26 February 2016 Ready Workforce wrote to Holcim offering to accept Mr Stavrakijev’s statutory counter offer on the basis that Holcim contribute 75 per cent towards the settlement, but have no liability to pay costs. The letter stated that if the Holcim rejected the offer:
An application will be made that your client pays our client’s costs on a party/party/or alternatively, an indemnity basis from the date of this letter, in accordance with the principles of Calderbank v Calderbank (1975) 3 All ER 333 and Hazeldene’s Chicken Farm v VWA (No 2) [2005] VSCA 298.
The offer was open until 2.00 pm on 1 March 2016.
On 3 March 2016 this proceeding was issued. Subsequently the following interlocutory steps were taken:
a) Ready Workforce’s affidavit of documents served on or about 14 July 2016;
b) Holcim’s affidavit of documents served on or about 14 July 2016;
c) Holcim’s further affidavit of documents served on or about 17 November 2016;
d) Ready Workforce’s answers to Holcim’s interrogatories served on or about 12 December 2016;
e) Ready Workforce’s answers to Mr Stavrakijev’s interrogatories served on or about 24 January 2017;
f) Mr Stavrakijev’s answers to interrogatories served on or about 7 February 2017;
g) Mr Waddell’s first expert report served on 7 July 2017; and
h) the parties attended mediation on 7 September 2017.
On 8 September 2017 Mr Stavrakijev served an offer of compromise on the defendants in accordance with r 26.02 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (the ‘Rules’) to settle his claim for $520,000. On 13 September Holcim expressly rejected that offer. On 14 September Holcim served an offer to bear its own costs in exchange for Mr Stavrakijev withdrawing his claim against it. The letter from Holcim to Mr Stavrakijev stated in part:
In the event that this matter proceeds to trial and your client obtains a result that is no more favourable than offered above our client will produce this letter to the Court on the question of costs in support of an application that your client pay our client’s costs on an indemnity basis from the date of this letter in accordance with the principles in Calderbank v Calderbank …
On 21 September 2017 Ready Workforce made an offer to Holcim to accept Mr Stavrakijev’s offer of compromise on the basis that Ready Workforce contribute 25 per cent and Holcim 75 per cent to the settlement amount. Ready Workforce again put Holcim on notice of its intention to raise its offer in relation to the question of costs in accordance with Calderbank[6] principles. That offer was open until 3.00 pm on 22 September.
[6](1975) 3 All ER 333.
On 5 February 2018 Mr Stavrakijev made an offer to the defendants in accordance with Calderbank[7] principles to settle his claim for $400,000. That offer was open until 4.00 pm on 9 February. On 7 February Ready Workforce made an offer to Holcim to settle the proceeding by accepting Mr Stavrakijev’s offer on the basis that Ready Workforce contribute 25 per cent and Holcim 75 per cent of the settlement amount. That offer was again made in accordance with Calderbank[8] principles, and was open until 4.00 pm on 9 February.
[7]Ibid.
[8]Ibid.
Relevant provisions
The offer of compromise dated 8 September 2017 was served in accordance with r 26.02 of the Rules. Holcim took no issue with the form of the offer.
The cost consequences of failing to accept an offer of compromise made by a plaintiff are set out in r 26.08(2):
Where an offer of compromise is made by a plaintiff and not accepted by the defendant, and the plaintiff obtains a judgment on the claim to which the offer relates no less favourable to the plaintiff than the terms of the offer, then, unless the Court otherwise orders, the plaintiff shall be entitled—
(a)if the claim of the plaintiff is for damages for or arising out of death or bodily injury, to an order against the defendant for the plaintiff’s costs in respect of the claim taxed on an indemnity basis …
Rule 63.16 provides:
Where an offer of compromise is served and the offer has not been accepted at the time of verdict or judgment, liability for costs shall be determined in accordance with Rule 26.08
Should an order for indemnity costs be made in favour of Mr Stavrakijev against Holcim?
Holcim submitted the critical question was whether its rejection of Mr Stavrakijev’s offer of compromise was unreasonable. It argued there were three reasons why it was reasonable for it to reject the offer. First, the plaintiff gave many different versions of how he was injured. As counsel for Holcim put it:
…it was not unreasonable for the defendant to take the position that the plaintiff’s case in respect of negligence and in respect of credit was unreliable, and it’s the question of unreasonableness that goes to the heart of whether indemnity costs are awarded.
Second, where there was ‘a strong body of evidence available’ to Holcim that Mr Stavrakijev retained capacity for work, and the offer of compromise included a significant amount for pecuniary damages, it was not unreasonable for Holcim to reject it. Third, Holcim submitted many of the medical and expert reports were served after the offer of compromise, and therefore it could not assess them at the time the offer was served. Relying on the decision of the Court of Appeal in Hazeldene,[9] Holcim submitted that the application for indemnity costs should not succeed because rejection of the offer of compromise was not unreasonable.
[9][2005] VSCA 298 (13 December 2005).
Holcim’s submissions must be rejected. Rule 26.08(2) establishes the position that Mr Stavrakijev is entitled to an order for indemnity costs against Holcim. The rule is intended to encourage compromise of litigation, which, by its nature, is inherently risky.[10] The only submission Holcim made was that it was reasonable for it to reject the offer of compromise. Contrary to Holcim’s submissions, whilst the reasonableness of rejecting an offer of compromise is a matter that may be taken into account, it is not of itself sufficient to displace operation of the rule.[11]
[10]Nakos v Serdaris [2016] VSC 179 [42] (27 April 2016) (‘Nakos’).
[11] Stevens v Spotless Management Services Pty Ltd(No 2) [2016] VSCA 311 [26] (12 December 2016)
(‘Stevens’); Nakos [2016] VSC 179 [39], [42] (27 April 2016).
I add these further observations. First, I do not agree that in substance histories given by Mr Stavrakijev in relation to the incident varied significantly. Differences, such as there were, could readily be explained by the circumstances in which Mr Stavrakijev gave these histories, and because of his limited proficiency in English. In any event, the fact that there were some differences in histories does not take this outside the ordinary case. In proceedings of this kind, very often at trial a plaintiff will be challenged on the basis of what are said to be prior inconsistent statements in an attempt to cast doubt on the circumstances of injury and to impugn credit. Second, the two most important liability witnesses, apart from Mr Stavrakijev, were Holcim’s Occupational Health and Safety officers, Mr Keogh and Mr Jones, both of whom were called by it. The outcome of the claim against Holcim relied heavily on the evidence of Mr Keogh and Mr Jones. I infer Holcim had access to those witnesses at relevant times. Third, while further medical and liability reports were served after the offer and closer to the trial, a great deal of material was available to Holcim when the offer was served, including the serious injury application and response material, pleadings, discovered documents, answers to interrogatories, medical and liability reports and subpoena records. Holcim also had the benefit of a mediation held just before the offer was served. Fourth, it is relevant to note that Ready Workforce wished to accept each offer made by Mr Stavrakijev on a contribution agreement more favourable to Holcim than the result achieved on judgment. I infer that Ready Workforce considered it had sufficient information to asses each offer in the context of the risks associated with litigation. Fifth, the offer represented a real compromise of Mr Stavrakijev’s claim.
When the offer was made Holcim was in a position to form a view as to the prospect of resisting Mr Stavrakijev’s claim. Viewing the matter at the time the offer was made, and having regard to the risks associated with the litigation, Holcim’s rejection of the offer was unreasonable.
I conclude there is no basis for departing from the presumptive position under r 26.08(2). I will order that Holcim pay Mr Stavrakijev’s costs on an indemnity basis.
Should Holcim be ordered to pay Ready Workforce’s costs?
The power to award costs, and to determine by whom and to what extent costs are to be paid, is in the Court’s discretion.[12] The question then is what consequences should flow from the three Calderbank offers served by Ready Workforce on Holcim. In Hazeldene,[13] the Court of Appeal concluded the critical question is whether rejection of the Calderbank offer was unreasonable in the circumstances. In that regard the Court said:
[12]Supreme Court Act 1986 s 24.
[13]Hazeldene [2005] VSCA 298 (13 December 2005).
The discretion with respect to costs must, like every other discretion, be exercised taking into account all relevant considerations and ignoring all irrelevant consideration. It is neither possible nor desirable to give an exhaustive list of relevant circumstances. At the same time, a court considering a submission that the rejection of a Calderbank offer was unreasonable should ordinarily have regard at least to the following matters:
a)the stage of the proceeding at which the offer was received;
b)the time allowed to the offeree to consider the offer;
c)the extent of the compromise offered;
d)the offeree’s prospects of success, assessed as at the date of the offer;
e)the clarity with which the terms of the offer were expressed;
f)whether the offer foreshadowed an application for indemnity costs in the event of the offeree’s rejecting it.[14]
[14]Ibid [25].
In Gill v Gill (No 2),[15] Derham AsJ identified the policy objectives underlying the principle in Calderbank[16] to include:
i.That it is in the interests of the administration of justice that litigation should be compromised as soon as possible and so save both private and public costs;
ii.To indemnify an offeror whose offer is later found to have been reasonable against the costs thereafter incurred. This is considered reasonable because from the time of rejection of the offer the real cause of the litigation is the offeree’s rejection of the offer;
iii.To this end, a party in receipt of an offer of compromise should have some incentive to consider the offer seriously. That incentive is the prospect of a special order as to costs;
iv.It is nevertheless important not to discourage potential litigants from bringing their disputes to the Court.[17]
[15][2014] VSC 612 (8 December 2014).
[16](1975) 3 All ER 333.
[17][2014] VSC 612 [14] (8 December 2014).
Holcim submitted that because the first Calderbank offer was made before the proceedings had commenced and it had not had the opportunity to obtain discovery, interrogate other parties and have Mr Stavrakijev medically examined, rejection of the offer was reasonable. Second, the second Calderbank offer was only open for a day, which was insufficient time in which to obtain instructions. Third, because the supplementary liability reports were received after the third Calderbank offer, rejection of that offer was reasonable.
The first Calderbank offer was made during the time Mr Stavrakijev’s statutory counter offer made in accordance with s 134AB(12) of the Act was open. Holcim was put on notice of Mr Stavrakijev’s claim over six months before the offer was made, and had received material from Mr Stavrakijev and Ready Workforce which accompanied the serious injury application and response. The first Calderbank offer was open for four days. The compromise offered was significant in respect of quantification of Mr Stavrakijev’s claim, assessment of contribution, and costs. By the time the offer was made surgery had been performed on Mr Stavrakijev’s right ankle and right shoulder, he was receiving ongoing treatment from his general practitioner and a psychologist, and he had been out of the workforce for over three years. Holcim would have been aware that Mr Stavrakijev’s pre-injury earnings were relatively high, and that he had few transferrable skills. In relation to liability, Holcim was the host employer, controlled the workplace, the stairs on which Mr Stavrakijev fell, and the system of work, and had access to relevant documents and witnesses. The outcome of the prospective litigation was of course uncertain. However, viewed at the time it was made, the offer represented a real compromise of the case. While it is not possible to fully assess Holcim’s prospects of success in the litigation as at the date of the offer, viewed objectively, at the time the offer was made there was sufficient material available for Holcim to appreciate the real risk it would not successfully withstand Mr Stavrakijev’s claim.[18] That is the position Ready Workforce took on the material available to it.
[18]Stavrakijev [2018] VSC 690 [22], [47], [48] (13 November 2018).
The second Calderbank offer was made during the time the offer of compromise made by Mr Stavrakijev was open. By the time the offer was made Holcim had over two years to fully investigate the claim. Holcim has the advantage of interlocutory steps to which I referred in paragraph [10] above. In my view, by the time the second Calderbank offer was made, Holcim was in a position to be able to form a view as to the prospects of successfully defending the proceeding. The second Calderbank offer was only open for one day. However, Holcim had been given notice of Ready Workforce’s attitude to contribution by the first Calderbank offer. Further, from the date the offer of compromise was made by Mr Stavrakijev, Holcim had the opportunity to consider the quantum he offered to accept, and the issue of contribution between the defendants if the offer were to be accepted. In relation to Holcim’s prospects, the second Calderbank offer stated:
We consider that, although the plaintiff faces some risk establishing liability, he will likely succeed against your client given the accident report completed after the incident notes;
a)“floors are permanently wet due to need to flush slurry traps”
b)“steps are not constructed from appropriate materials (checker plate instead of tread mesh)”
c)“there appears to be an unnecessary amount of manual labour involved in placing moulds onto and off traverse trolley”
Further, we note improvements were subsequently made to the stairs to provide better grip. In our view, the changes to the stairs following the incident will be highly persuasive evidence and will enable the plaintiff to establish liability against your client.
In our submission the offer of contribution is very reasonable because the plaintiff’s primary allegation are that the stairs were poorly designed and constructed, creating the hazard which has caused the injury. The design of the stairs is a matter that is clearly out of our client’s control. When our client placed workers at the site it observed a set of stairs that appeared compliant with the standards. Our client has no record of any complaints being made about the stairs despite having a consultant on site regularly. Our client had no control over the design of the factory or any permanent structures such as the layout and design of stairs and it is not reasonable to suggest our client could change the design of the stairs. We consider that our client has done everything a reasonable employer is required to do and had not breached its duty of care to the plaintiff.
The third Calderbank offer was made on the eve of trial, when Mr Stavrakijev’s Calderbank offer was open to both defendants. The third Calderbank offer was open for two days, and mirrored the content of the second offer, save as to the compromise amount Mr Stavrakijev offered to accept.
Each Calderbank offer was clearly expressed, foreshadowed an application for costs if rejected, and represented a serious attempt by Ready Workforce to settle the case. Acceptance of any of the offers would have brought the proceeding to an end, thereby saving very considerable costs.
Holcim had a significant opportunity to investigate and inform itself in relation to Mr Stavrakijev’s claim before the first Calderbank offer was made. However, it did not have the benefit of pleadings, discovery, interrogatories, liability expert reports, subpoena material and mediation. I conclude, with some hesitation, that Ready Workforce has not established Holcim’s rejection of the first offer was unreasonable. Holcim’s ability to assess the compromise in the second Calderbank offer was significantly enhanced by the interlocutory processes to which I have referred. By the time the offer was made there had been ample opportunity for Holcim to speak to witnesses who were likely to be critical to the outcome of the proceeding, in particular Mr Keogh, and to take other steps to investigate the claim. Although the second Calderbank offer was open for only one day, that timeframe needs to be considered in light of the notice given to Holcim by the first Calderbank offer and the offer of compromise. Holcim did not request that the offer of compromise and the second Calderbank offer be left open for a further period. Rather it quickly rejected the offer of compromise, and responded by making a walk away offer to Mr Stavrakijev. Holcim’s rejection of the second Calderbank offer was unreasonable. It follows that I also regard Holcim’s rejection of the third Calderbank offer unreasonable.
In the context of this case, the policy objectives to which I have referred point strongly in favour of Ready Workforce receiving some protection in relation to costs. The real cause of the matter proceeding after September 2017 to a lengthy trial was the unreasonable refusal of offers by Holcim. From the day after the second Calderbank offer closed Holcim should pay Ready Workforce’s costs, and should indemnify Ready Workforce in relation to costs payable by it to Mr Stavrakijev. The orders I will make give Ready Workforce substantial protection in relation to costs. After balancing relevant matters to which I have referred I conclude, with some hesitation, that Holcim should pay the costs of Ready Workforce on a standard, rather than indemnity, basis.
Certification
Mr Stavrakijev seeks certification of counsel’s fees as follows:
a)for Senior Counsel for 20 days (comprising 2 days of trial preparation, a day for a pre-trial view, and 17 days of trial, including judicial medication) at the daily fee of $9,000 including GST and for 8 hours of special conferences at $900 per hour including GST; and
b)for Junior Counsel for 20 days (comprising 2 days of trial preparation, a day for a pre-trial view, and 17 days of trial, including judicial medication) at the daily fee of $4,500 including GST and for 8 hours of special conferences at $450 per hour including GST.
The effect of the costs orders I will make is that Holcim will be responsible for Mr Stavrakijev’s costs of the trial on an indemnity basis.
Where an order for indemnity costs is made, Rule 63.30.1 provides:
(1)Subject to paragraph (2), on a taxation on the indemnity basis all costs shall be allowed except in so far as they are of an unreasonable amount or have been unreasonably incurred.
(2)Any doubt which the Costs Court may have as to whether the costs were unreasonably incurred or were unreasonable in amount shall be resolved in favour of the party to whom the costs are payable.
The trial was one in which all issues were alive and hard fought, and the stakes were high. Given costs are to be paid on an indemnity basis, it is appropriate I certify counsels’ fees in the amount sought. There is one exception. A full day for a pre-trial view is unreasonable. I will allow a half day. I will make the following orders:
1.There is judgment for the plaintiff against both defendants, after the reduction required by section 134AB(25) of the Accident Compensation Act1985 (Vic), for $855,264, calculated as follows:
a.$220,000 for pain and suffering, less impairment benefit compensation paid to date of $16,670;
b.plus $670,000 for past and future pecuniary loss, less weekly payments compensation paid to date of $83,231;
c.plus interest agreed at $52,239;
d.plus Fox v Wood damages agreed at $12,926.
2.The first defendant pay the plaintiff’s costs of the proceeding, including any reserved costs, on a standard basis.
3.The second defendant pay the plaintiff’s costs of the proceeding, including any reserved costs, on an indemnity basis.
4.The second defendant:
a.indemnify the first defendant for the plaintiff’s costs from 23 September 2017 payable by it under order 2; and
b.pay the first defendant’s costs of the proceeding from 23 September 2017 on a standard basis.
5.There is a certificate for two counsel with fees fixed as follows:
a.for Senior Counsel for 19.5 days (comprising 2 days of trial preparation, half day for a pre-trial view, and 17 days of trial, including judicial medication) at the daily fee of $9,000 including GST and for 8 hours of special conferences at $900 per hour including GST; and
b.for Junior Counsel for 19.5 days (comprising 2 days of trial preparation, half day for a pre-trial view, and 17 days of trial, including judicial medication) at the daily fee of $4,500 including GST and for 8 hours of special conferences at $450 per hour including GST.
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