VWA v Bruck Textiles Pty Ltd

[2010] VCC 463

IN THE COUNTY COURT OF VICTORIA Revised

Not Restricted

AT MELBOURNE
DAMAGES AND COMPENSATION LIST

GENERAL DIVISION

Case No. CI-08-04154

Victorian Workcover Authority	Plaintiff
v
Bruck Textiles Pty Ltd	First Defendant
and
Peter Allen Villiers and Sharon Lee Villiers	Second Defendants
(trading as Millwright and Fabrication Services)

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JUDGE:	S. Davis
WHERE HELD:	Melbourne
DATE OF HEARING:	31 March 2010
DATE OF RULING:	21 May 2010
CASE MAY BE CITED AS:	VWA v Bruck Textiles Pty Ltd & Ors
MEDIUM NEUTRAL CITATION:	[2010] VCC 463
REASONS FOR RULING

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Catchwords: COSTS – s.138 Accident Compensation Act – Factor X – Form of Declaration – whether sum payable to plaintiff in settlement with first defendant to be deducted from sum claimed against second defendant – Certification for Counsel’s fees – Calderbank offers – Application for indemnity costs

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr J. Simpson	Russell Kennedy
with Ms G. Crafti
For the Defendant	Mr C. Grainger	Hall & Willcox
HER HONOUR:

Introduction

1          On 18 March 2010 I delivered judgment in this proceeding, determining, at paragraph 97, that the second defendant’s act, default or negligence caused or contributed to the worker’s injury to the extent of 50%. I invited the plaintiff (“VWA”) and the second defendant (“Villiers”) to exchange and file submissions on the consequential orders to be made, including any orders as to costs and whether any orders should be made deducting the sum of $15,000 (which was to be paid by the first defendant (“Bruck”) to the VWA following settlement of the proceeding as between them prior to the commencement of the hearing of the recovery action) from the non-statute barred weekly payments paid to the worker.

2          I heard extensive oral argument in relation to the written submissions filed by the parties. The parties agreed that I made a clerical error in calculating Factor X at page 97 of the judgment and that the correct outcome of the application of the formula: A ($427,000) – B (nil) + C ($27,000)) x 50% is the sum of $200,000. Pursuant to my discretion under the “slip rule”[1], and with the consent of the parties, I propose to note in the orders made today the fact of the error and the fact that the correct outcome of the application of the formula is the sum of $200,000.

Orders proposed by VWA

[1] Rule 36.07 County Court Civil Procedure Rules 2008

3          In its written submissions, the VWA sought orders in the following terms:

1.  The second defendant shall pay the plaintiff the sum of $51,710.07 together with interest thereon calculated in the sum of $13,683.81 pursuant to s.58 of the Supreme Court Act 1958 (Vic) making the total sum payable of $65,393.88.

2.  Declare that the plaintiff shall be indemnified by the second defendant:

(a) for all further payments of compensation made under the Accident Compensation Act 1985 (Vic) by the plaintiff to the worker, Geoffrey Fallon, in respect of the injury caused to him on 3 October 2000; and

(b) Up to an amount not exceeding a further sum of $148,289.93.

3.  The second defendant shall pay the plaintiff’s costs of the proceeding, including any reserved costs, to be taxed in default of agreement as follows:

(a)	from the commencement of the proceeding on 5 November 2007 until 22 September 2008, on a party and party basis on Supreme Court Scale, but only as to two-thirds of such costs for such period;
(b)	thereafter, until 4.00 pm on 8 February 2010 on a party and party basis on County Court Scale “D”, but only as to two-thirds of such costs for such period;
(c)	thereafter, for the remaining period of the proceeding on an indemnity basis as to the full amount of such costs;
(d)	certify for two Counsel with leading junior Counsel at the rate of $3300 per day for half-day’s preparation, 7 days trial, I days preparation for submissions, and half-day for appearances on 18 March 2010 and 31 March 2010, making a total of 9 days and for junior Counsel certify at the rate of $2000 per day for the same number of days;

(e) further certify the cost of transcript;

(f)	further certify for the costs of the plaintiff’s Court Book at the usual scale rates for the first copy and, thereafter, at commercial rates for subsequent copies;
(g)	further certify for expert witness expenses of:

(i)  Mr Kenneth Brearley, consultant surgeon, at $1,540.00 (inclusive of GST);

(ii) Dr Peter Dawkins, general medical practitioner, at $1,000.00 (inclusive of GST).

Matters in issue

4          Villiers agreed with orders 3(a), 3(e)-(g) proposed by the VWA. I turn to consider the remaining issues between the parties.

Factor X

5          In his written submissions, Mr Grainger argued that once the court determined that Factor X was 50%, “it fell to the Court to apportion this stated remaining liability namely 50% between the employer and the second defendant” and that the “Court’s reasons should be amended to reflect this oversight of calculation”.[2] Mr Grainger proposed that the first order be in the following terms:

(1) That the second defendant pay the plaintiff the sum of $18,355.04 being its proportion, being 25% of the compensation paid in respect of the injury, the subject of this proceeding up to the date of judgment together with interest agreed and fixed at the sum of $....., a total amount of $...... [2]             See paragraph 1.3 of the second defendant’s written submissions.

6          In his oral submissions, Mr Grainger submitted that during the trial he was working on the basis of a “concession” by VWA that

…X in the circumstances excluding Bruck but including the employer and Villiers was 50 per cent, there being in the light of the settlement a concession that X was only 50 per cent, not 100 per cent. There is only one apple. Fifty per cent of that’s gone because of a settlement with Bruck, or a percentage of that’s gone because of a settlement with Bruck. The only remaining parties….are Falon, the employer and Villiers, and” as there was no contributory negligence by Falon, “that leaves two parties….Whatever is left of the whole needs to be divided on an apportionment basis between the remaining parties”[3]

[3]             Transcript (T) page 477.

7          He submitted that the duty of care of the employer must be reflected in Factor X, “otherwise you wouldn’t be able to draw a conclusion as to the proportionate legal liability of the named defendant”.[4] He also submitted that “Factor X as a whole was 50% in that it has already taken into account the culpability of Brucks. If that’s not correct, then it is still open to consider the culpability of Brucks”.[5] He submitted that given the settlement by the plaintiff with Bruck, the court could not disregard the role of Bruck when comparing the “causative culpability” of Villiers and the employer, because they were all said by the plaintiff to be “a causative element in the production of the right to indemnity”.[6]

[4]             T page 479.

[5]             T page 503.

[6]             T page 504.

8          In support of his argument, Mr Grainger submitted[7] that the Court should give weight to the “distributive purpose” of section 138 and to the Court’s finding of “equal culpability between the employer and the second defendant”.

[7]             See paragraphs 1.4 to 1.6 and 2.0 of his written submissions.

9          In oral submissions on behalf of the VWA, Mr Simpson submitted that once the Factor X in relation to Villiers was determined to be to the extent of 50%, there was no “remaining liability” to apportion.[8] He agreed that the Court was not required to determine the culpability of Bruck because there was no evidence led about the conduct of Bruck and no submissions made about the role of Bruck.

[8]             T page 460.

10        I reject the submissions made on behalf of Villiers, for the following reasons. Although in its Further Amended Defence dated 16 February 2010, Villers alleged negligence by Bruck, the proceeding as between the plaintiff and Bruck settled at the commencement of the hearing of the recovery action. Orders were made by consent that the proceeding against Bruck be dismissed and that Bruck pay one-third of the plaintiff’s party-party costs on the relevant Scales. Thereafter, the conduct of the recovery action proceeded without any evidence being led in relation to the conduct of Bruck. Counsel for Villiers did not cross-examine any witnesses in relation to the allegations concerning Bruck made by Villiers in its Further Amended Defence, nor was any evidence led by Villiers at all, let alone in relation to the conduct of Bruck. In closing submissions, counsel for Villiers submitted that I should consider the comparative culpabilities of Villiers, GPS and the contributory negligence of the worker. Given the way in which the case was conducted by the parties, and the findings which I have reached in the judgment already delivered, I do not consider that it is open to me to say anything further other that I do not consider that the conclusion reached, namely that Factor X (in respect of the third party, Villiers) is 50% is a miscalculation open to amendment under the slip rule. Nor, having regard to the way in which the case was run by the parties, and to the fact that I have my published my reasons, do I consider that it is open to me now to make findings in relation to the conduct of Bruck.

Declaration

11        Mr Grainger submitted that in the absence of evidence of liability for future payments at the level of the notional ceiling, orders should not be made in the terms sought by the plaintiff. Rather, the declaration should be made in the following terms:[9]

(2) Declare for the purposes of s.138(3)(b) of the Accident Compensation Act

1985:

Factor X is – 25%
Factor A is - $427,000
Factor B - nil

[9]             Following the example of the declaration granted by Cummins J in VWA v Gray’s House Removalists

Factor C - $27,000.00

12        I have already dealt in paragraph 10 above with the problem in making the order sought now by Villiers in relation to Factor X.

13        Mr Simpson submitted that on the authorities, future payments are determined according to the ceiling under the formula, and no evidence about the future is required. In any event, he submitted, the sum agreed for Factor A contains a component representing a notional future. He submitted that the declaration proposed by VWA was consistent with the comments of President Winneke in Esso Australia Ltd v Victorian Workcover Authority and Anor10 (“Esso”).

14        I consider that it is appropriate to make the declaration in the form sought by the VWA. In Esso, Winneke J referred to the form of the declaration, which is similar to that proposed here, and was content to adopt it because the parties requested it and because “it appears to reflect the practice which has been adopted by courts which have constantly dealt with claims under s.138 of the Act.”11 On appeal, the High Court12 did not comment on Winneke J’s approach to the form of the declaration.

Double compensation

15 Mr Grainger made a number of submissions concerning the sum of $15,000 which Bruck agreed to pay the VWA as part of its settlement of the recovery action (“the settlement sum”). He submitted that the settlement sum “represents a partial satisfaction of accrued compensation….being the liquidated amount claimed pursuant to s.138(3)(a) and articulated by the

Pty Ltd (2005) VSC 451.

1. (2000) 1 VR 246 at 251, 252.

2. Ibid at paragraph 17.

3. (2001) 207 CLR 520.

   Statement of Claim”. He submitted that the “liability discharged by the first defendant is co-ordinate with the second defendant in discharge of a common obligation to the plaintiff” which is created by s.138 of the Act. He submitted that in accordance with the principles against double compensation,[13] and “in the absence of a contrary direction in s.138”, the settlement sum is to be deducted from the non-statute barred sum of $51,710.07.

   [13]           See Bon Christiano v Lohmann (1998) 4 VR 82 at 89 and Baxter v Obacelo Pty Ltd (2000) HCA 60 at 50-53.

   16        He also submitted that in the absence of evidence of Terms of Settlement or deed of release preserving the VWA’s right to entitlement, the release granted to Bruck was in the nature of a release granted to one joint tortfeasor or one joint debtor, and operated as a discharge of the other joint tortfeasor.[14]

   [14]           [fn In this regard, Mr Grainger relied on Thomson v Australian Capital Television Pty Ltd 14 and Duck v Mayeu. [1892] 2 QB 511.

   17        Further, he submitted that failure to make the deduction sought would result in a windfall to the VWA as the last payments made to the worker were made in December 2007 and there was no evidence that future payments will be made at any level let alone at the level of the notional ceiling.

   18 Mr Simpson submitted that the liability of Villiers was not concurrent with any potential liability of Bruck but that their respective liabilities were several and were required to be determined severally to give effect to the element of Factor X under the cause of action created by s.138 of the Act.[15] In this case, liability had been apportioned by reference to Factor X in relation to Villiers (as the third party) and the employer only, with no submissions being made by either party in respect of Bruck, and therefore there was no basis for reducing the second defendant’s liability to indemnify the VWA.

   [15]           See Esso Australia Ltd v Victorian WorkCover Authority & Anor [2000] 1 VR 246, per Winneke P at paragraphs 15-17; Townsend v Stone Toms & Paterson (1984) 27 BLR 26.

   19        Alternatively, it was submitted by Mr Simpson that under the Terms of Settlement between the VWA and Bruck, Bruck became a debtor of the VWA and, having failed to direct an appropriation, the right of application of the settlement funds devolves on the VWA, which may apply the sum as it sees fit, including: as a contribution towards the VWA’s legal costs in the proceeding; or in reduction of the total amount of compensation payments made to the worker; or in reduction of the “ceiling” amount of indemnification in respect of future payments up to $148,289.93 pursuant to the declaration made in the Judgment.

   20        Further, Mr Simpson submitted that there could be no “double compensation” recovered if the settlement funds are credited against the total amount of the compensation paid to the worker. Finally, Mr Simpson submitted that the purpose of settling proceedings was to buy finality and certainty, and for reasons of public policy a party who refuses to settle and then loses at trial should not benefit from the good judgment of the party who settled the claim against it earlier in time.

   21        For these reasons, Mr Simpson submitted that Mr Grainger was wrong in seeking to deduct the sum of $15,000 from the preserved relief of $51,710.07 and wrong in suggesting that the net sum would in turn also be subject to distribution between the remaining culpable parties.

   22 For the following reasons, I decline to deduct the settlement sum from the $51,710.07 judgment payable by Villiers to the VWA. In this proceeding, I was invited by the parties to determine Factor X in respect of one third party, Villiers. The statutory “extent” of the amount for which Villiers must indemnify the plaintiff for compensation both paid and payable, is prescribed under sub- section 138(3)(b) of the Act. There is no basis in the section for reducing Villiers’ liability to indemnify the plaintiff when such liability has been apportioned in accordance with the s.138(3)(b) formula and, in particular, by reference to Factor X.

   23        Secondly, having regard to the way the case was conducted before me, there is no basis for bringing the settlement sum into account in the proceeding between the VWA and Villiers. I was not invited to determine Factor X in respect of Bruck. Nor was the settlement sum characterised in any way. In particular the sum was not characterised in a way that makes it clear that the sum is referable to compensation payments made to the worker. Villiers has not produced evidence which establishes such a characterisation. On the material before me, the settlement sum is capable of characterisation in many different ways. For example, it may represent a once and for all commercial resolution of the proceeding between the VWA and Bruck aimed at securing finality for Bruck; or it may reflect some payments of compensation already made, or future compensation payments expected to be made by the VWA; or it may bespeak some contribution to the VWA’s own solicitor-client costs. As I am unable to be satisfied as to the characterisation of the settlement sum, I am unable to determine whether or how, the sum of $15,000 is to be brought into account in reducing the liability of Villiers in the proceeding.

   Appropriate Scale

   24        Mr Grainger submitted that the relevant scale in paragraph 3(b) of the VWA’s proposed orders, would depend on the Court’s finding as to whether the settlement sum of $15,000 was to be deducted from the $51,710.07 referred to in paragraph 1 of the orders. In the light of my finding in paragraph 22 above, it follows that the relevant scale would be that proposed by the VWA. For the sake of completeness, I note that I consider it appropriate to make the orders sought by the plaintiff at paragraphs 3(a) and 3(b) of its proposed orders as to costs.

   Certification for counsel’s fees

   25        Mr Grainger submitted that there ought not be certification for two counsel, and that in any event the basis of certification ought to be on the usual fee and refresher basis rather than in terms of the daily fees sought by the VWA.

   26        Mr Simpson submitted that there was a reasonable expectation on the VWA’s part that the trial would result in a contest between the versions of evidence adduced from the worker and Villiers’ witnesses as to who was requested by whom to do what concerning the ladder incident and related matters which resulted in injury to the worker. He submitted that it was an appropriate case in which to brief two counsel, and that the VWA could have briefed Senior Counsel, which it did not do, thereby saving considerable expense. Mr Simpson submitted that the case was a complex one which required the production of submissions and that certification for a daily fee was warranted.

   27        At the time counsel were briefed by the VWA, there were two defendants in the proceeding, and I consider that it was reasonable for a prudent solicitor to brief two counsel, particularly a leading junior and junior counsel. However, I do not consider that the case was so difficult or onerous that certification for a daily fee was warranted. Accordingly, I propose to certify for two counsel, but on a fee and refresher basis.

   28        I invited the parties to provide a joint calculation of the number of Court hours for the seven-day trial and two subsequent appearances. A letter from the VWA’s solicitor dated 7 April 2010 indicated that, contrary to the plaintiff’s written submissions at paragraph 18, the VWA was now seeking certification at a daily rate of $1,875 for John Simpson and $993 for Gabi Crafti, for the period of 9½ days. Alternatively, the VWA was seeking Brief on Trial plus 8 refreshers (two of which were in respect of the preparation of submissions). However, Villiers’ solicitors had agreed to only one refresher for the preparation of written submissions and to 7 refreshers in total.

   29        In the circumstances, having regard to the extensive written submissions provided by the VWA, I consider it appropriate to certify for two counsel on a fee and refresher basis for Brief on Trial plus 8 refreshers.

   Indemnity costs

   30        The VWA seeks indemnity costs from the date of the expiry (4 pm on 8 February 2010) of the Calderbank offer made by the VWA by letter dated 5 February 2010 (“the first Calderbank offer”). In that letter, the VWA offered to resolve the proceedings against Villiers on the basis that Villiers paid the VWA the sum of $40,000 as well as “two-thirds of the VWA’s party/party legal costs on Supreme Court Scale to 22 September 2008 and thereafter on County Court Scale “D” to be taxed in default of agreement, including certification of senior counsel’s fee of $3,747.70 and junior counsel’s fee of $1,092.30”. The letter stated that the offer was open for acceptance until 5.00 pm on Monday, 8 February 2010.

   31        Mr Simpson submitted that indemnity costs should be awarded to the VWA because the VWA has achieved a more favourable outcome than was offered in the first Calderbank letter dated 5 February 2010 both in terms of the judgment amount payable and in terms of the declaration as to future indemnity for a “ceiling” amount up to $148,289.93. Moreover, he submitted, Villiers’ refusal to accept the VWA’s offer was not reasonable in all the circumstances. Mr Simpson said it was appropriate to consider the chain of correspondence between the parties relating to the settlement negotiations.

   32        In this regard, he referred to the fact that the negotiations were close with respect to the quantum of the claim, exclusive of costs, but that the parties were some distance apart on the question of costs. In particular, Mr Simpson submitted that it was unreasonable for Villiers to increase its offer on quantum marginally while at the same time substantially reducing its offer on costs, in circumstances where it was unrealistic to expect that the VWA’s party/party scale costs of the proceeding at day 4 of the trial (including two expert medical witnesses at $1540.00 and $1,100 each) could be $40,000.

   33        He submitted that the offer to compromise liability at $40,000, as against the $51,700 for payments paid away, on the Friday before the commencement of the hearing on the following Tuesday, was a sufficient indication to Villiers that the claim was being reduced by $11,000. Moreover, the offer did not make any demand for a payment as to the future. In addition, he submitted that by 5 February 2010 Villiers was informed that the VWA had settled the matter with Bruck. For this reason, he submitted, the VWA was entitled to seek an order for indemnity costs from the first date of the trial, which was 9 February 2010.

   34        Alternatively, the VWA relied on a second Calderbank letter dated 10 February 2010, which was the second day of the hearing, in which the VWA set out its contentions as to what the evidence would establish and estimated, inter alia that the Court would find Factor X to be between 30% and 50%. The offer was for Villers to pay the VWA $35,000 as well as costs in similar terms as the first offer. The offer was open for acceptance until noon on 11 February 2010. Mr Simpson submitted that this offer was genuine, and that its rejection by Villiers was unreasonable, because Villiers knew that the VWA had settled with Bruck and also must have considered by then whether or not it would be calling any evidence.

   35        In addition, the VWA relied on what it submitted were the unreasonable negotiating positions of Villiers between 2 and 11 February on the question of costs, as revealed in the correspondence. In the light of my conclusions reached below, it is not necessary to set out the correspondence in this regard.

   36        Mr Grainger submitted that the first Calderbank letter was not a genuine offer of compromise for a number of reasons. Firstly, because it was open for too short a time[16] - the offer was made on a Friday, and the closing date for acceptance was the following Monday. Secondly, because the offer did not arm Villiers with material by which it could consider whether it should accept the offer. Mr Grainger submitted that the offer did not address the status of Bruck. There was no discovery in this case, and the plaintiff served two sets of Court Books on Villiers; the second Court Book contained additional material not previously exchanged. In addition, further documents (such as daily work sheets produced by Mr Golding) and surveillance reports were produced during the course of the trial.[17] Thirdly, because the offer did not appear to be giving anything away, Mr Grainger submitted that the offer could not be valued without disclosure of what the VWA had done with Bruck, and without an indication of the various contributions sought to be apportioned.

   [16]           Mr Grainger relied on the decision of Davies J in Nepean Country Club Limited v Patterson and Roberts 2009 VSC 436.

   [17]           In this regard, Mr Grainger relied on the decision of the Court of Appeal in Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435 …para 25 and on the comments of Redlich J in Aljade and Malaysian Kuwaiti Investment Co SDN BHD v Oversea-Chinese Banking Corp Ltd [2004] VSC 351.

   37        Mr Grainger made the same submissions in respect of the second Calderbank letter. He conceded that the second letter offered “more material facts” but submitted that it told Villiers nothing about what the VWA had done with Bruck.

   38        The rejection of a Calderbank offer is a matter to which the court should have regard when considering whether to order indemnity costs.[18] The test to be applied is whether the rejection of the offer was unreasonable in the circumstances,[19] and the factors relevant to assessing reasonableness include:[20]

   [18]           Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435, paragraph 20.

   [19] Ibid, paragraph 23.

   [20] Ibid, paragraph 25.

• the stage of the proceeding at which the offer was received;

• the time allowed to the offeree to consider the offer;

• the extent of the compromise offered;

• the offeree’s prospects of success, assessed as at the date of the offer;

• the clarity with which the terms of the offer were expressed;

• whether the offer foreshadowed an application for an indemnity costs order in the event of rejection of the offer by the offeree.

39        It is not necessary for the applicant for such an order to establish matters which might be relevant to other, well-recognised grounds for indemnity costs.[21]

[21] Ibid, paragraph 28.

40        I consider that the first Calderbank offer was clear in expressing the terms of the offer, and did offer a substantial compromise. On balance I consider that the time allowed to Villiers to consider the offer was sufficient. However, I consider that I must also have regard to the material in the possession of Villiers at the time the offer was made against which Villiers could assess the reasonableness of the offer. I note that Villiers was supplied at the commencement of the hearing with a second, different court book, by the VWA, one which contained additional documents not previously provided to Villiers. For this reason, I am not satisfied in the circumstances that the rejection of the first Calderbank offer was unreasonable.

41        However, I am satisfied on the material before me that the rejection of the second Calderbank offer was unreasonable. Whilst it was not required to do so as a matter of law,[22] the second offer set out with considerable specificity the basis for the VWA’s contention that Villiers should accept the compromise. In addition, the terms of the offer were clearly expressed and the terms clearly offered a substantial discount on the amount of the claim: not only was $35,000 a substantial reduction when viewed against the $51,700 paid away, but there was also no mention of future payments. Furthermore, by the time of the second Calderbank offer, which was made on the second day of the hearing, the settlement between the VWA and Bruck had been announced in open court.

[22] Ibid, paragraph 27.

Conclusion

42        I propose to make orders consistent with these reasons. At the costs hearing it was agreed that no further appearance would be made by the parties and that this judgment and the orders flowing from it would be sent to the parties. However, I will reserve liberty to the parties to apply in respect of the form of the orders.