Victorian WorkCover Authority v Yarra City Council and Ors (Ruling)
[2014] VCC 1930
•24 November 2014
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE CIVIL DIVISION | Revised Not Restricted Suitable for Publication |
DAMAGES AND COMPENSATION LIST
GENERAL DIVISION
Case No. CI-12-04038
| VICTORIAN WORKCOVER AUTHORITY | Plaintiff |
| v | |
| YARRA CITY COUNCIL | First Defendant |
| and | |
| CITY OF MELBOURNE | Second Defendant |
| and | |
| CAPITAL TRANSPORT ASSET MANAGEMENT PTY LTD | Third Party |
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JUDGE: | HIS HONOUR JUDGE O'NEILL | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 19 November 2014 | |
DATE OF RULING: | 24 November 2014 | |
CASE MAY BE CITED AS: | Victorian WorkCover Authority v Yarra City Council & Ors (Ruling) | |
MEDIUM NEUTRAL CITATION: | [2014] VCC 1930 | |
RULING
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Subject:ACCIDENT COMPENSATION – COSTS
Catchwords: Application for indemnity costs following judgment – whether “walkaway” offer constitutes a genuine offer of compromise – whether defendant entitled to indemnity costs – costs of third party – whether third party entitled to order against defendant, or against plaintiff.
Legislation Cited: Accident Compensation Act 1985; Civil Procedure Act 2010; Supreme Court Act 1986; Trade Practices Act 1974 (Cth); County Court Act 1958
Cases Cited: Victorian WorkCover Authority v Yarra City Council & Ors [2014] VCC 1841; Calderbank v Calderbank [1975] 3 All ER 333; Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435; Aljade and Malaysian Kuwaiti Investment Co SDN BHD (MKIC) v Oversea-Chinese Banking Corp Ltd (OCBC) [2004] VSC 351; Enerka Apex Belting Pty Ltd v Vickers Systems Pty Ltd (No 2) [2002] VSC 409; Premier Building & Consulting Pty Ltd v Spotless Group Ltd & Ors (No 13) [2007] VSC 516; Berrigan Shire Council v Ballerini; Forestry Commission of New South Wales v Ballerini [2006] VSCA; Ultra Thoroughbred Racing Pty Ltd t/as Baree Stud v Those Certain Underwriters at Lloyd’s London (Ruling No 2) [2011] VSC 636; Bird v Ford (No 2) [2013] NSWSC 429; Leach v Nominal Defendant (QBE Insurance (Australia) Ltd) (No 2) [2014] NSWCA 391; Bullock v London General Omnibus Co (Bullock Order case) [1904-7] All ER Rep 44; Sanderson v Blyth Theatre Co [1903] 2 KB 533; Gould v Vaggelas (1984) 157 CLR 215; Jarrold v Isajul Enterprises Pty Ltd t/as Conveyancing Melbourne (No 2) [2013] VSC 657; Kheirs Financial Services Pty Ltd & Anor v Aussie Home Loans Pty Ltd & Anor (2010) 31 VR 46; Lombard Insurance Co (Aust) Ltd v Pastro& Voivodich [1994] 175 LSJS 448; GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd& Ors (2003) 201 ALR 55; Gladstone Park Shopping Centre v Wills [1984] 6 FCR 496; LE Catton Ltd v A Michaelides & Co (a firm) [1958] 2 All ER 125.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J Simpson | Russell Kennedy |
| For the First Defendant | Mr P Riordan QC with | DLA Piper |
| For the Second Defendant | Ms S Manova | Ligeti Partners |
| For the Third Party | Mr C Hanson | HWL Ebsworth Lawyers |
HIS HONOUR:
1 On 14 November 2014, I delivered judgment in this proceeding.[1] I found neither the first nor second defendants owed a duty of care to a worker injured in the course of his employment, in particular, on 3 December 2007. Thus, the claim by the Victorian WorkCover Authority (“the VWA”) seeking an indemnity pursuant to the provisions of s138 of the Accident Compensation Act 1985 (“the Act”), failed.
[1][2014] VCC 1841
2 There is no issue the first and second defendants’ costs should be paid by the plaintiff. Two matters remain to be determined before final orders are made. The first issue is whether the first defendant ought be entitled to indemnity costs following an offer of compromise made by way of a “Calderbank”[2] letter of 18 June 2013. The second issue concerns whether the third party, Capital Transport Asset Management Pty Ltd (“Capital Transport”), ought be entitled to an order in its favour for costs and whether those costs ought to be paid by the first defendant, Yarra City Council (“Yarra City”), or the plaintiff, the Victorian WorkCover Authority (“VWA”).
[2]Calderbank v Calderbank [1975] 3 All ER 333
Yarra City’s claim to indemnity costs
3 On 16 August 2012, the VWA commenced this proceeding against Yarra City.
4 On 19 June 2013, Yarra City served a Calderbank offer upon the VWA by letter dated 18 June 2013. The letter recites details of the allegation made in the VWA’s Statement of Claim, a brief reference to evidence proposed to be called, and made submissions as to liability. Those submissions contended:
· Group Messengers Pty Ltd (“Group Messengers”) or Capital Transport were the worker’s employer at the relevant time and owed a duty of care.
· Either Group Messengers or Capital Transport breached the duty of care by failing to provide a safe system of work.
· Yarra City contracted with either Group Messengers or Capital Transport to provide courier services. By that contract, Yarra City transferred responsibility for devising a safe system of work to those parties, in particular given they were competent independent contractors and responsible for the design and implementation of a safe system of work.
· There was no evidence that the crates lifted by the worker were over-filled or that he was unable to grip the handles of those crates.
5 The offer made by Yarra City was to withdraw from the proceeding, and bear its own costs.[3] The offer was said to be open until 3 July 2013, and in the event that Yarra City obtained judgment no less favourable than the offer, costs would be sought on an indemnity basis. Self-evidently, the offer was not accepted.
[3]Referred to in various authorities as a ‘walkaway offer’
6 According to an affidavit of Andrew Robert Ray, a solicitor employed by Yarra City’s solicitors, sworn 19 November 2014, mediation of the proceeding took place on 26 June 2013, thus after the offer of compromise. As at 30 June 2013, Mr Ray deposed that Yarra City had incurred costs and disbursements, to that point of $102,269 in respect not only of this proceeding, but in the proceeding brought by the worker (“the principal proceeding”). Between 29 August 2012 and 30 June 2013, the affidavit deposed that Yarra City had incurred costs and disbursements in both proceedings of $68,679.
7 The principles in determining whether the rejection of a Calderbank offer should result in the award of indemnity costs depend upon whether the rejection of the offer was “unreasonable in the circumstances”. The factors to be taken into account in determining whether the rejection of the offer was unreasonable are well established, and set out in Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2).[4]
[4](2005) 13 VR 435
8 The principals relevant to the circumstances of this proceeding are:
·the stage of the proceeding at which the offer was rejected
·the extent of the compromise offered
·whether the offer constituted a genuine offer of compromise.
9 The real issue of contention is whether the offer of compromise constituted a genuine offer of compromise in the circumstances which prevailed at the time.
10 In Aljade and Malaysian Kuwaiti Investment Co SDN BHD (MKIC) v Oversea-Chinese Banking Corp Ltd (OCBC),[5] Redlich J said:
“A compromise involves a party in giving something away. … Authorities differ as to whether an offer to settle a case by abandoning, withdrawing or dismissing the claim with each party bearing its own costs constitutes a genuine offer of compromise.
…
An offer to settle by dismissing the claim with no order as to costs is sometimes viewed as insufficient to constitute a genuine offer to settle or as being no offer of compromise at all.”
[5][2004] VSC 351
11 His Honour went on to consider a number of cases concerning walkaway offers of compromise.
12 In Enerka Apex Belting Pty Ltd v Vickers Systems Pty Ltd(No 2),[6] Habersberger J said public policy considerations are not advanced when an offer of compromise is not genuine and which would, when viewed objectively, not hold any attraction for an offeree. He observed that in other circumstances, walkaway offers of compromise may constitute a sufficient genuine offer when viewed in conjunction with the relevant circumstances. His Honour concluded:
“It is undesirable to attempt to define when terms of an informal offer of compromise will constitute a sufficient or genuine offer. The willingness of Aljade to forego its costs in exchange for the abandonment of the claim against it, should be viewed as genuine. The offer of Aljade was made at a time when the costs savings for the Defendant would have been substantial. Both Plaintiff’s offers called for serious consideration by the offeree.”[7]
[6][2002] VSC 409
[7] Aljade & MKIC v OCBC (supra) at paragraphs 77–81
13 In Premier Building & Consulting Pty Ltd v Spotless Group Ltd & Ors (No 13),[8] Byrne J said:
“There has, however, been more uncertainty about an offer by a defendant to settle on the basis that it pays nothing to the plaintiff but agrees to bear its own costs. In the Berrigan Shire Council case the view was expressed that such an offer was no more than an offer to accept capitulation by the plaintiff, so that a special costs order was not warranted.[9] Caution about giving effect to such an offer by making a special costs order is also said to be based upon the Court’s apprehension that defendants will at the earliest opportunity make such an offer in every case in the hope that this will put added pressure on the plaintiff which would then be at risk of a special costs order if its proceeding failed. The position of such an offer, however, may be different where the defendant proposes to bear its own costs later in the proceeding, for in such a case there is an acceptance by the offeror of part of the burden of the proceeding. In this sense there is an element of compromise because the acceptance of the offer will mean that the plaintiff will not have to pay the defendant’s costs previously incurred. This is of particular importance in a large case where the offer is made after considerable costs have been incurred by the offeror.”[10]
[8][2007] VSC 516
[9]Berrigan Shire Council v Ballerini; Forestry Commission of New South Wales v Ballerini [2006] VSCA 65 at paragraph 17 per Callaway JA; at paragraph 20 per Chernov JA
[10]At paragraph 17
14 In Ultra Thoroughbred Racing Pty Ltd t/as Baree Stud v Those Certain Underwriters at Lloyd’s London (Ruling No 2),[11] J Forrest J, in considering an application for indemnity costs following a walkaway offer, noted that at the time the offer was made, the factual circumstances were very much in issue and not easily understood on the basis of pleadings and discovery. The issues of whether or not there was a duty, breach of that duty and causation all turned upon findings of fact which were, at the time, far from clear-cut. He said the question of reasonableness was to be determined at the time of the receipt of the offer.
[11][2011] VSC 636
15 Further:
“…This was not the offer of a sum certain, but an offer to capitulate. I accept, as contended by counsel for Dr McKinnon, that because an offer is effectively one to walk away and bear costs does not of itself mean that it is unreasonable. However, the nature of the offer goes very much to the reasonableness of the rejection and in this case questions of fact and credibility were all part and parcel of the findings at trial rather than crystal ball gazing in August of 2010. On any view the claim could not have been regarded as either hopeless or conducted in bad faith. The offer by Dr McKinnon could not be said to be a ‘serious endeavour to resolve the proceeding’; rather it was an attempt to protect his position in relation to any differential between solicitor/client costs and party/party costs.”[12]
[12]At paragraph 14
16 In Bird v Ford (No 2),[13] Schmidt J said:
“There are cases where a walk away offer will involve genuine compromise, because the case which the plaintiff advances is so plainly a weak one. In my view a party advancing such a case, who receives a number of offers of compromise under the Rules, all of which it rejects and none of which it betters at trial, will not easily be able to resist the indemnity costs order which the Rules contemplate will follow such a rejection. Incurring significant costs as the result of a fruitless pursuit of a weak case is not a proper basis for departing from the consequences which the Rules provide will follow from the rejection of such an offer.”
[13][2013] NSWSC 429
17 Recently, the New South Wales Court of Appeal, in Leach v Nominal Defendant (QBE Insurance (Australia) Ltd) (No 2),[14] considered whether a walkaway offer was a genuine offer of compromise. The Court said:
“The essence of the appellant's opposition to the costs orders the respondent sought was that even if the Offer constituted a genuine offer of compromise, it was reasonable for him not to accept it as it was a ‘walk-away’ offer which merely invited his capitulation.
…
A walk-away offer can successfully trigger the indemnity costs mechanisms under the rules, however ‘the claim or defence would have to approach something of the character of being frivolous or vexatious for that to be the case’: Regency Media Pty Ltd v AAV Australia Pty Ltd (at [31]) per Spigelman CJ; Beazley and McColl JJA.”[15]
[14][2014] NSWCA 391
[15]At paragraphs 49 and 51
18 Further, the Court referred to the principle that a walkaway offer would not serve the public policy of encouraging settlement.
19 In my view, in the circumstances of this proceeding, the offer of compromise of 18 June 2013 was not unreasonably refused by the VWA. True it is at the time, Yarra City had incurred substantial costs and disbursements. Given the offer was made in June 2013, and the matter concluded at trial in October 2014, the costs and disbursements between the date of the offer and conclusion were also substantial. Thus, as the result subsequently showed, there was a significant benefit to the VWA in accepting the compromise.
20 However, there were two significant factors which, in my view, mitigate against the VWA’s refusal as being unreasonable. Firstly, at the time the offer was made, there had been no discovery, and there had been no mediation. There were a number of amendments to the VWA’s Statement of Claim after that date. There were extensive factual issues about which neither Yarra City nor VWA could have reached even a provisional view. In the end, whether the defendants owed the worker a duty of care and whether there was a breach of that duty, ware issues to be determined by the evidence at trial. This was very much a case where the facts and credibility of the witnesses were critical. The assertions on these issues in the Calderbank letter were superficial at best. At the stage the proceeding was at in June 2013, it was difficult for the VWA to make any real assessment of the risks of continuing with the litigation.
21 The second issue of significance is that of public policy. With the advent of the Civil Procedure Act 2010, and the obligation upon parties to take steps to resolve and determine issues in dispute,[16] a walkaway offer in the circumstances did little to achieve that end. As stated above, at the time the offer was made, it was difficult either for the VWA or Yarra City to determine the way the evidence was to be advanced and the credibility of the witnesses. An offer, involving a real compromise on the part of Yarra City, at that time, in my view, ought to have involved something more than walking away and foregoing costs to date. In the words of J Forrest J in Ultra Thoroughbred, the walkaway offer was more to protect Yarra City’s position on costs and not a genuine attempt to bring about the resolution of the action.
[16]Section 9
22 In the circumstances, the VWA’s rejection of the offer was not unreasonable.
The costs of the Third Party
23 In its Third Party Notice, Yarra City alleged as against Capital Transport a breach of the provisions of the agreement to provide courier services, and, further, that various representations by Capital Transport as to occupational health and safety were false and in breach of the provisions of the Trade Practices Act 1974 (Cth).
24 Given my finding that Yarra City did not owe the worker, Mr Yelken, a duty of care, the Third Party Notice did not fall to be determined. Mr Hanson, for Capital Transport, seeks costs. Mr Riordon, for Yarra City, submits that if I were to make a Costs Order in favour of Capital Transport against Yarra City, then a similar Costs Order ought be made against the VWA to reimburse Yarra City (a “Bullock order”[17]) or, alternatively, order directly that the VWA pay Capital Transport’s costs (a “Sanderson order”[18]). Alternatively, if I were to make neither a Bullock nor a Sanderson order, no order for costs ought be made in favour of Capital Transport.
[17]Bullock v London General Omnibus Co (Bullock Order case) [1904-7] All ER Rep 44
[18]Sanderson v Blyth Theatre Co [1903] 2 KB 533
25 It is well established that when a plaintiff succeeds against only one defendant, the Court may, in the exercise of its discretion as to costs, order that in addition to paying the plaintiff’s costs, the unsuccessful defendant should pay the successful defendant’s costs. The Court must be satisfied that it is reasonable and just for such an order to be made.[19]
[19]Gould v Vaggelas (1984) 157 CLR 215
26 In Jarrold v Isajul Enterprises Pty Ltd t/as Conveyancing Melbourne (No 2),[20] McMillan J analysed the applicable principles and reviewed earlier authorities. She referred to s24(1) of the Supreme Court Act 1986 which provided that the costs of and incidental to matters in the Court, is in the discretion of the Court.[21] Her Honour said:
“While the starting point is that costs usually follow the event, more complex considerations arise when a third party claim has failed for the same reason that the plaintiff’s claim has failed. In those circumstances the ultimate question is whether the costs of the third party ‘ought fairly to be borne’ by the unsuccessful plaintiff.”[22]
[20][2013] VSC 657
[21]The section is expressed in similar terms in s78A of the County Court Act 1958
[22]At paragraph 21
27 Her Honour analysed the findings of the Court of Appeal in Kheirs Financial Services Pty Ltd & Anor v Aussie Home Loans Pty Ltd & Anor,[23] where that Court said:
[23](2010) 31 VR 46
“In deciding [in a case where the third party claim has failed because the plaintiff’s claim has failed] whether any departure from the usual rule is warranted, the court will ordinarily need to consider at least the following matters:
·the reasonableness of the defendant’s decision to join the third party;
·whether the joinder of the third party was reasonably foreseeable by the plaintiff, such that the plaintiff might be viewed as having some responsibility for the costs of the third party proceeding. (An order for the plaintiff to pay the defendant’s costs may thus include the defendant’s liability to pay the third party’s costs of the third party proceeding);
·the responsibility of the plaintiff, defendant and third party, respectively, for the time taken up in the hearing of the third party proceedings.”[24]
[24]At 55
28 Her Honour referred to what was said to be “a guiding principle” in Lombard Insurance Co (Aust) Ltd v Pastro & Voivodich:[25]
“Where the nature of the plaintiff’s claim or allegations in support thereof, render it reasonable … to bring in the third party, and the third party claim is unsuccessful solely by reason of the failure of the plaintiff to sustain its claim or the recent allegations, the defendant should ordinarily recover from the plaintiff the costs of the third party claim including those which the defendant is ordered to pay to the third party. The emphasis is on the word ‘ordinarily’. The discretion is unfettered and a variety of factors may properly enter into the exercise of it.”
[25][1994] 175 LSJS 448 (King CJ)
29 In GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd& Ors,[26] Finn J outlined a variety of factors which he said could be relied upon in determining whether costs of a third party ought be awarded against an unsuccessful plaintiff. Those principles included:
·Whether it was “reasonable” or “appropriate” for the third party claim to have been made. His Honour urged caution in that there may be circumstances where it was reasonable for the third party claim to be brought, but unreasonable to pass the costs thereof onto the plaintiff.
·It may be relevant whether the plaintiff’s claim was the catalyst for the third party claim or rendered it inevitable.
·The relationship between the plaintiff’s claim and that of the third party could be significant.
[26](2003) 201 ALR 55
30 His Honour referred to King CJ in Lombard Insurance:[27]
“Does the nature of an applicant’s claim, or do allegations in support of it render it reasonable for the respondent to make in turn a cross claim that it does … or does the third party claim raise issues private to the parties to it?”
[27]Supra
31 McMillan J also referred to Gladstone Park Shopping Centre Pty Ltd v Wills,[28] which she said was authority for the proposition that a party who commences a proceeding against another bears the risk of doing so.
[28][1984] 6 FCR 496, 510–11
32 Mr Riordon made reference to “string of contract cases” and what was said in LE Catton Ltd v A Michaelides & Co (a firm):[29]
“In the ordinary way, however, where damages are claimed for breach of contract on one contract in a string of contracts, and the seller brings in his immediate seller as third party, and the third party brings in his immediate seller as a fourth party, then, provided that the contracts are the same or substantially the same so that the issue whether the goods comply with a description is the same, the defendant (in this case it was the plaintiff’s because it was a counter claim), if successful, should recover against the plaintiffs not only his costs but any costs of the third party which he has been ordered to pay: the third party in like manner should recover from the defendant his own costs and any costs of the fourth party which he has been compelled to pay, and so on down the string. This is the normal way in which costs should be dealt with in this kind of action where there is a string of contracts in substantially the same terms.”
[29][1958] 2 All ER 125 at 128
33 However, I am not satisfied that the present case is a “string of contracts” case. While it is true that similar allegations were made by the VWA against Yarra City as were made by Yarra City against Capital Transport – that is, that each failed to take appropriate occupational health and safety preventative steps – nonetheless, the nature of the legal allegations brought by Yarra City against Capital Transport were different from those made by the VWA. The third-party claim involved allegations of breach of contract and misrepresentation, while the VWA claim involved establishment and breach of a duty of care.
34 In response, Mr Simpson, for the VWA, submitted:
· Section 138 of the Act enables the VWA to take proceedings against a party whose “act, default or negligence” caused or contributed to the injury to a worker. A successful claim leads to an entitlement to an indemnity from that party for an amount determined according to the extent to which its act, default or negligence caused or contributed to injury (that is, Factor X of the formula contained in s138(3)(b)). Thus, said Mr Simpson, had a finding been made against Yarra City, that finding would only have been an amount proportionate to its liability. Were, for example, the worker’s injury been caused by the act, neglect or negligence of any other party, including Capital Transport, or the worker himself, then that party would bear a responsibility proportionate to that act neglect or default.
· Further, the relief sought by Yarra City against Capital Transport in its Third Party Notice in the principal proceeding, was precisely the same as the relief sought by Yarra City against Capital Transport in its third-party proceeding in the recovery action. Thus, he contended, upon resolution of third-party proceeding in the principal action, there was no basis upon which Yarra City could maintain an argument in the third-party action in the recovery proceeding, that the VWA should pay costs to the third party.
35 I reject these contentions. The fact that the entitlement under s138 is an entitlement based upon proportionate liability does not mean third-party action cannot be maintained. If, for example, a defendant joined its insurer in a s138 recovery proceeding as a third party, maintaining it was entitled to the cover of an insurance policy, there would be no prospect of a finding of proportionate liability against that insurer. Further, the resolution of the principal proceeding does not affect the question of costs in the recovery proceeding.
36 In my view, it is appropriate that the costs of the third party be paid by the VWA. I say that for the following reasons:
(i)It was reasonable and appropriate for Yarra City to join Capital Transport as a third party to the proceeding. While I was not called upon to determine the third-party proceeding, it was clear from the tender process and the agreement for the provision of courier services, that Capital Transport represented it would take certain steps to ensure occupational health and safety considerations concerning its courier drivers were given high priority and maintained. The nature of the allegations made by the VWA against Yarra City was that Yarra City owed a duty of care and failed to take appropriate occupational health and safety steps in the circumstances. It was entirely reasonable for Yarra City to then look to Capital Transport if it was found to have owed and then breached that duty of care.
(ii)It was clearly known to the VWA at an early time that either Group Messengers or Capital Transport was either the employer of the worker or was in a principal/independent contractor relationship. It was known that Yarra City had contracted to Capital Transport to provide courier services. In that sense, it was “reasonably foreseeable” that Capital Transport would be viewed as having some responsibility for the worker’s injury. That knowledge served as a catalyst for the bringing of the third-party claim.
(iii)The issues raised in the third-party claim were not “private issues” as between Yarra City and Capital Transport. The nature of the relationship between those parties was well known to the VWA. That knowledge placed the VWA in a different position from, for example, a situation where a defendant sought to join an insurance company for failing to honour the terms of an indemnity policy, or another party in a “string of contracts” case where the nature of the relationship was unknown.
37 In these circumstances, in my view, it is appropriate to impose a Sanderson order that the VWA pay the third party’s costs.
38 I shall make appropriate final orders with liberty to apply.
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