Victorian WorkCover Authority v The Australian Steel Company (Operations) Pty Ltd (No 2)
[2015] VSC 81
•13 March 2015
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
PERSONAL INJURIES LIST
S CI 2014 01108
| VICTORIAN WORKCOVER AUTHORITY | Plaintiff |
| v | |
| THE AUSTRALIAN STEEL COMPANY (OPERATIONS) PTY LTD | Defendant |
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JUDGE: | KAYE JA |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 6 March 2015 |
DATE OF JUDGMENT: | 13 March 2015 |
CASE MAY BE CITED AS: | Victorian WorkCover Authority v The Australian Steel Company (Operations) Pty Ltd (No 2) (Costs) |
MEDIUM NEUTRAL CITATION: | [2015] VSC 81 |
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COSTS —Trial of proceedings — Supreme Court (General Civil Procedure) Rules 2005 Order 26 — Offer of compromise by plaintiff — Judgment for plaintiff more favourable than offer — Whether plaintiff entitled to indemnity costs — Plaintiff not succeed on all issues at trial — Whether disentitled to costs.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Ms A Sheehan | Wisewould Mahony |
| For the Defendant | Mr C Grainger | Sparke Helmore |
HIS HONOUR:
In this proceeding, the plaintiff made a claim against the defendant, under s 138 of the Accident Compensation Act 1985 (‘the Act’), for indemnity in respect of compensation payments made, or payable, by it to Anthony Azzopardi (‘Azzopardi’) in respect of a back injury which he sustained while he was employed by Baringold Pty Ltd (‘the employer’) between 2004 and 2009.
I delivered my reasons for judgment on 3 March 2015,[1] as a result of which there will be judgment that:
(a) The defendant pay the plaintiff the sum of $157,311.51 pursuant to s 138 of the Act together with interest in the sum of $12,041.16, making a total sum of $169,352.67.
(b) The defendant indemnify the plaintiff, pursuant to s 138 of the Act, for such further and future payments of compensation after 14 February 2015, as the plaintiff may be required to make in respect of the injury sustained by Azzopardi in an amount not exceeding a further sum of $82,438.49.
[1]Victorian WorkCover Authority v The Australian Steel Company (Operations) Pty Ltd [2015] VSC 58.
After delivering my reasons for judgment, counsel raised two issues in relation to the costs of the proceedings. The first issue (raised by the plaintiff) concerns the effect of an Offer of Compromise served by the plaintiff in the defendant under Order 26 of the Supreme Court Rules, which the defendant did not accept. The second issue (raised by the defendant) arises from the circumstance that the plaintiff did not succeed on one of the bases upon which it sought to make the defendant liable in the proceeding.
The First Issue: The Offer of Compromise
The first issue arises out of an offer of compromise served by the plaintiff on the defendant on 14 October 2015. By that document, the plaintiff offered, first, to accept the sum of $73,000 in settlement of the defendant’s liability to indemnify the plaintiff, pursuant to s 138 of the Act, in respect of payments of compensation made between 17 October 2008 and 30 August 2014, and, secondly, to consent to a declaration that the defendant is liable to provide an indemnity to the plaintiff in respect of future compensation payments made by it in respect of Azzopardi’s injuries for a further amount of $20,000. The plaintiff, having obtained a judgment on its claim no less favourable than the terms of the offer made by it, claims to be entitled to costs of the proceeding on an indemnity basis as from 14 November 2014, pursuant to Rule 26.08(2) of the Supreme Court Rules.
Rule 26.08(2), so far as is relevant to the present proceeding, provides that where an offer of compromise is made by a plaintiff which is not accepted by the defendant, and the plaintiff obtains judgment on the claim no less favourable to the plaintiff than the terms of the offer, then ‘unless the court otherwise orders’, the plaintiff shall be entitled to an order for indemnity costs from the second business day after the offer was served. Mr Grainger, who appeared on behalf of the defendant, submitted that I should ‘otherwise order’, based on the particular circumstances in which the offer of compromise was served.
In support of that proposition, Mr Grainger relied on an affidavit by his instructing solicitor, Ms Jehan Mata. The following is a summary of that affidavit. In September 2013, Azzopardi commenced proceedings (‘the primary proceeding’) against the employer and the present defendant seeking damages for the injury he had sustained. Subsequently, in March 2014, the plaintiff issued this proceeding against the defendant. There was an understanding between the parties that the documents and pleadings, exchanged in the primary proceeding, would be relied on by the parties in this proceeding. Ms Mata stated that, at the time at which the offer of compromise was served by the plaintiff’s solicitor in the present proceeding (14 October 2014), there were ‘numerous interlocutory steps outstanding’ in the primary proceeding. She stated that those steps were critical to the issues of liability and quantum, and to enable factor A and factor X, in the statutory formula in s 138(3) of the Act, to be assessed. In particular, she stated that when the offer of compromise was served, it was not capable of being properly assessed because:
(a) Discovery and other interlocutory steps in the primary proceedings had not been completed; and
(b) There was insufficient material available to make an assessment of liability and quantum in the present proceeding; and
(c) There was insufficient material to enable the defendant to consider the interaction between the primary proceeding and the present proceeding.
Ms Mata set out communications which took place between Azzopardi’s solicitors, the employer’s solicitors and the defendant’s solicitors in the primary proceeding relating to a number of outstanding interlocutory steps. She stated that, at the date that the offer elapsed (7 November 2014) there were still various outstanding items, and in particular, answers to interrogatories and what she described as ‘the employer’s discovery’, which she stated were relevant to the assessment and analysis of the defendant’s liability in the overall quantum of the claim against it. I interpolate that Ms Mata, by referring to discovery, was referring to inspection of the employer’s discovered documents in the primary proceeding. In fact, the delay in the provision of copies of those documents to the defendant arose from the fact that the defendant’s solicitors had failed to pay an account rendered to them by the solicitors for the employer for photocopying those documents.
In response the plaintiff relied on an affidavit by its solicitor, Mr Wilson Yap. The material aspects of that affidavit are as follows. On 30 May 2013, a statutory conference was held in respect of Azzopardi’s claim for damages, pursuant to s 134AB(12) of the Act. It was attended by solicitors for the defendant. On 29 July 2013, the solicitors for the employer provided the defendant’s solicitors with a copy of the employer’s response affidavit in that application. On 1 October 2013, Azzopardi’s solicitors served upon the defendant the clinical records of the Bridge Street Clinic. On 24 March 2014, Azzopardi’s solicitors served on the defendant his answers to the employer’s interrogatories, and his affidavit of documents. On 19 August, the employer’s solicitors served on the defendant the reports of Dr Clark, Dr Russell, Mr Shannon, Dr Martin and Associate Professor Buzzard, all of which were admitted into evidence in the present case. In September, Azzopardi’s solicitors, and the plaintiff, both served copies of the expert report of Geoffrey Waddell on the defendant.
As I have noted, on 14 October 2014, the plaintiff served its offer of compromise on the defendant. On 30 October 2014, Azzopardi’s solicitors served on the defendant his further answers to the employer’s interrogatories, and his answers to the defendant’s interrogatories in the primary proceeding. On 4 November, Azzopardi’s solicitors served a copy of Professor Myers’ report on the defendant. On 5 November, Mr Yap had a telephone conversation with Ms Mata, in which he acceded to a request by Ms Mata for an extension of the time within which to accept the plaintiff’s offer of compromise to 14 November 2014. In the course of that conversation, Ms Mata stated that she had been ‘chasing’ the defendant for insructions in relation to the offer and that the defendant had not responded to her request for those instructions. The defendant did not thereafter request that the time for responding to the plaintiff’s offer of compromise be further extended after 14 November 2014.
Mr Grainger submitted that, in the circumstances set out in the affidavits, the defendant was not in a position to make an informed response to the plaintiff’s offer of compromise, at the time at which it was served upon the defendant. He submitted that there were then a number of interlocutory steps still outstanding in the primary proceeding and the present proceeding, which precluded the defendant from making a realistic assessment, particularly, of factors X, A and C in the formula prescribed by s 138(3)(b) of the Act. In that connection, he noted that the solicitors for Azzopardi did not serve the actuarial report, concerning Azzopardi’s claim for past and future economic loss, until 12 November 2014. He further noted that, shortly before the primary proceedings resolved, Azzopardi abandoned his claim for pecuniary loss. He submitted that that step, by Azzopardi, was critical to a proper assessment of factor C in the formula contained in s 138(3)(b).
In response, Ms Sheehan submitted that, at the time at which the offer of compromise was served on it, the defendant had sufficient information, obtained in the course of the interlocutory steps in the primary proceeding and in the present proceeding, with which to make a realistic assessment of the offer of compromise served by the plaintiff. She submitted that it was significant that, at the time at which the offer was served, the defendant did not indicate to the solicitors for the plaintiff that the defendant lacked sufficient information with which to realistically assess the offer of compromise, and to properly respond to it.
It is clear, from the terms of Rule 26.08(2), that, ordinarily, where a plaintiff achieves a result at trial that is no less favourable than the terms of an offer it has made in the course of the trial, the plaintiff should be entitled to indemnity costs as prescribed by that rule. As Vickery J observed in Blackman & Ors v Ganz & Anor (No 2),[2] Rule 26.08(2) creates a presumption that costs be awarded in that manner, unless the court is satisfied that there are particular circumstances which should displace that presumption.
[2][2010] VSC 246, [14].
It is not necessary for me to consider the type of circumstances which might qualify as being sufficient to displace the presumption created by Rule 26.08(2). I would accept that such circumstances might be found, where, in a case such as this, a defendant is genuinely unable to properly assess an offer of compromise at the time at which it is served, because the plaintiff, or another party to the proceeding, has in its possession information of which the defendant is ignorant, and which is critical to a proper assessment of the offer. However, it is clear, from the matters contained in the affidavits, that this was not such a case.
At the time at which the offer of compromise was served, and shortly thereafter, the defendant had in its possession a significant amount of information, by which it could assess, first, its own potential liability in respect of the two circumstances in which it was said to be liable to Azzopardi for the injury sustained by him, secondly, its potential exposure to Azzopardi in the primary proceeding, and, thirdly, the amount to be attributed to factor A in the formula prescribed by s 138(3)(b) (the amount of damages which the defendant is or would have been liable to pay in respect of Azzopardi’s injury).
In that respect, I do not accept Mr Grainger’s submission that the defendant was precluded from making such an assessment, because the actuarial report had not been served on it at the relevant time. There is no suggestion that the defendant did not, otherwise, have sufficient material in its possession, such as the relevant wage rates, which were necessary for an assessment of past and future economic loss. The actuarial tables, containing the relevant multipliers, are readily available and easy of application. The defendant had not obtained inspection of the documents discovered by the employer, but that was due to the failure of the defendant’s solicitors to pay the employer’s solicitors the amount requested for their photocopying expenses. If the defendant had desired to obtain those documents, it could have remedied that deficiency, and obtained ready access to them.
In addition, it is significant that when Mr Yap spoke to Ms Mata on 5 November 2014, she did not state to Mr Yap that the defendant was unable to assess the offer of compromise properly, because the defendant lacked particular information. Rather, she sought an extension of time, because she had had difficulty communicating with her client. It is further significant that the defendant did not seek any further extension of time after 14 November 2014 within which to respond to the plaintiff’s offer of compromise. The absence of any such request at that time detracts from the claim by the defendant that it was unable to properly assess the offer made by the plaintiff, because it lacked relevant information to enable it to do so.
In those circumstances, I am not persuaded that I should ‘otherwise order’ under Rule 26.08. Accordingly, and subject to resolution of the next issue, the plaintiff should be entitled to an order for its costs on an indemnity basis in accordance with Rule 26.08.
The Second Issue: Should costs be apportioned?
I turn to the second issue raised in relation to the question of costs, namely, whether the costs of the proceeding should be apportioned according to the outcome of the issues that were contested in the proceeding. In that respect, Mr Grainger pointed out that the defendant succeeded on the issue whether it was liable to Azzopardi in respect of the injury to his back, that he sustained as a result of the carrying work. That issue was a substantial issue in the trial, and occupied a significant part of the trial. Accordingly, he submitted that the plaintiff, and not the defendant, should pay the costs of that part of the proceeding in the trial that was occupied by the agitation of that issue.
In response, Ms Sheehan submitted that the ordinary rule is that costs should follow the event. She further submitted that, if the plaintiff had confined its claim to the slipping incident of 3 May 2006, nevertheless it would have been required to adduce evidence as to the carrying work, and as to the effect of that work on the injury sustained by Azzopardi as a consequence of the slipping incident. Ms Sheehan further submitted that, in any event, it is not appropriate to apportion costs according to the success of the parties on the various issues raised at trial, in a case in which one party has achieved a result more favourable than the terms of an offer of compromise made by it under Order 26. She submitted that, in such a case, the regime, for the order of costs, prescribed by Rule 26.08, should prevail. In that connection, Ms Sheehan told me that she had been unable to locate any decision in which a successful party had been awarded indemnity costs in respect of an offer of compromise under Order 26, but had been deprived of part of those costs, because that party did not succeed on particular issues agitated by it at the trial.
At the trial, there were four principal issues. The first issue was whether the injury, sustained by Azzopardi, in respect of which compensation had been paid or was payable by the plaintiff, was the injury sustained by Azzopardi as a consequence of the slipping incident in May 2006, and, further or alternatively, as a consequence of the carrying work. The plaintiff succeeded on that issue. The second issue is whether the injury, sustained by Azzopardi in the slipping incident, was caused under circumstances creating a liability in the defendant to pay damages to Azzopardi. The plaintiff also succeeded on that issue. The third issue was whether the injury, sustained by Azzopardi as a consequence of performing the carrying work, was caused under circumstances creating a liability in the defendant to pay damages to Azzopardi. The defendant succeeded on that issue. The fourth issue concerned the calculation of factor A in the formula prescribed in s 138(3)(b) of the Act, namely, the amount of damages which would have been payable by the defendant to Azzopardi in respect of the slipping injury. Ultimately, apart from two minor matters, there was substantial common ground on that issue.
Thus, the plaintiff succeeded on two of the principal issues that were agitated at trial, and the defendant succeeded on one issue. The issue, on which the defendant succeeded, did occupy a not insignificant part of the trial. While the performance by Azzopardi of the carrying work, and the aggravation of his back injury as a consequence of it, would, in any event, have been relevant factors in the trial, nevertheless, the fact that the plaintiff sought a finding that the defendant was liable in respect of that injury did involve evidence, both in chief and in cross-examination, that occupied a reasonably substantial part of the trial. In addition, some time was spent by both parties in final address relating to that issue.
The general rule is that costs should follow the event, and a successful party should obtain all of its costs, even if it has failed to establish some of its heads of claim.[3] However, in an appropriate case, a court may order that a successful party pay the costs of an unsuccessful party, where the successful party has failed on a discrete head of claim or a discrete issue.[4]
[3]Ritter v Godfrey [1920] 2 KB 47.
[4]McFadzean v Construction, Forestry, Mining and Energy Union (2007) 20 VR 250, 290 [153] and 291 [158]; Byrns v Davie [1991] 2 VR 568, 571.
The question, whether I should adopt such an approach in this case, is complicated by the operation of Rule 26.08 on the offer of compromise made by the plaintiff. It is not necessary for me to determine whether Rule 63.04 can have any application, where such an offer of compromise has not been accepted, and, if so, in what circumstances the costs of the proceeding may be divided according to which party has succeeded on particular issues. For, in my view, the offer of compromise in this case was of such a nature that, in any event, it would be inappropriate to apportion the costs of the parties according to their success on particular issues.
A most salient feature of the offer of compromise is that the amount, that was the subject of the offer, was particularly modest. For example, it was for an amount that was approximately equal to the defendant’s liability, at common law, for general damages payable to Azzopardi as a consequence of the slipping incident. In the outcome, the amount that would have been payable, if the defendant had accepted the offer of compromise, was approximately 30 per cent of its liability to the plaintiff pursuant to the judgment in this case.
The underlying purpose of Order 26 is to encourage parties to make a realistic assessment of the merits of the case, and to make offers of compromise based on such an assessment. In the present case, the offer of compromise made by the plaintiff was based on a particularly realistic assessment by the advisers for the plaintiff of the plaintiff’s prospects of success in the proceeding, and of the quantum of a potential claim for damages by Azzopardi. The offer clearly took into account that the plaintiff might not succeed to the full extent of its claim, and, indeed, that it might fall considerably short of doing so. In that way, the offer made particularly generous allowance for the prospect that the plaintiff might not succeed on the part of its claim arising from the performance by Azzopardi of the carrying work. In those circumstances, in my view, it would not be appropriate to apportion the costs payable to the plaintiff according to the issues on which each of the parties respectively succeeded.
Summary of conclusions
For those reasons, I have come to the following conclusions:
(1)The plaintiff should be entitled to its costs, taxed on an indemnity basis, from 16 October 2014, pursuant to Rule 26.08(2) of the Supreme Court Rules.
(2)I do not consider that this is an appropriate case for the application of Rule 63.04, so that the plaintiff is entitled to the whole of its costs in the proceeding.
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