VWA v Commonwealth of Australia
[2011] VCC 1461
•22 September 2011
| IN THE COUNTY COURT OF VICTORIA | Revised |
Not Restricted
AT MELBOURNE
CIVIL DIVISION
DAMAGES AND COMPENSATION
GENERAL DIVISION
Case No. CI-08-04529
| VICTORIAN WORKCOVER AUTHORITY | Plaintiff |
| v | |
| COMMONWEALTH OF AUSTRALIA | First Defendant |
| and | |
| TRANSFIELD SERVICES (AUSTRALIA) PTY LTD | Second Defendant |
| and | |
| TRANSFIELD CONSTRUCTION PTY LTD | Third Defendant |
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| JUDGE: | HIS HONOUR JUDGE SACCARDO |
| WHERE HELD: | Melbourne |
| DATE OF HEARING: | 15, 16, 17, 18, 19, 22, 23, 25 August 2011 |
| DATE OF JUDGMENT: | 22 September 2011 |
| CASE MAY BE CITED AS: | VWA v Commonwealth of Australia & Ors |
| MEDIUM NEUTRAL CITATION: | [2011] VCC 1461 |
REASONS FOR JUDGMENT
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Catchwords: Costs – effectiveness of Calderbank offers served by the defendants – relevance of fixing of short period of time for acceptance of offers.
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| APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J C Simpson | Russell Kennedy |
| For the First Defendant | Mr I McDonald | Norris Coates Lawyers |
| For the Second and Third | Mr R Dyer | Norris Coates Lawyers |
| Defendants HIS HONOUR: |
1 In this proceeding, the trial of which commenced before me on 15 August 2011, the parties, on 25 August 2011, consented to orders in the following terms:
(1) Judgment is entered against the first defendant in the sum of $165,000
inclusive of interest.(2) The proceeding against the second defendant, Transfield Services (Australia) Pty Ltd, and the third defendant, Transfield Construction Pty Ltd (“the Transfield defendants”), is dismissed. 2 Notwithstanding that these orders were made by consent and in the absence
of any findings by me as to:
• the quantum of the judgment; or • the defendants’ liability to the plaintiff the parties require me to determine the cost orders which should be made in
the proceeding.3 The first issue which I am required to determine is whether Calderbank letters made on behalf of the defendants should be taken into account in making the costs orders in the proceedings. In this regard, there is no issue between the parties that the outcome of the proceeding, namely:
• the sum for which the proceeding has been compromised; and •
the order that the proceeding commenced by the plaintiff against the Transfield defendants be dismissed
may be relied upon by the defendants.
The Defendant’s Calderbank Offers
4 On 15 August 2011, an offer was made to the plaintiff by the first defendant in the following terms:
“We advise that our client, Commonwealth of Australia, believes it has a defence to the proceeding and/or in the alternative, that if it does have a liability that liability will be considerably less than that of the employer.
We advise that our client is nevertheless conscious of the risks and costs associated with litigation and on that basis has instructed us to put a proposal to the plaintiff to settle the claim for an amount inclusive of interest plus costs on a full and final basis.
We advise that the first defendant, namely the Commonwealth of Australia is prepared to settle the claim against it by paying the plaintiff the sum of $260,000 inclusive of interest plus costs to be taxed on Scale in default of agreement including costs on the High Court Scales from the date on which the proceedings against the first defendant were issued until the date on which they were transferred or remitted to the County Court of Victoria at Melbourne.
We advise that the first defendant’s offer is reflective of the risk it faces in terms of its liability being assessed pursuant to the formula set out in s.138(3)(b) of the Accident Compensation Act 1985 if it is found to have liability to begin with.
We confirm that both the plaintiff and the first defendant are aware that the worker’s damages claim settled for $225,000 plus retention of benefits plus costs in relation to the claim which was for both pain and suffering and economic loss damages and that the employer contributed 65 per cent towards the settlement of the worker’s damages claim, the other 35 per cent being contributed by the Commonwealth of Australia, who is the first defendant in this proceeding.
We advise that if the matter proceeds to hearing and judgment and the plaintiff does not achieve a better result than that reflected by the first defendant’s offer to settle for $260,000 inclusive of interest plus costs on a full and final basis, that the first defendant reserves its right to produce this letter to Court in support of an application that the plaintiff pay the first defendant’s costs of the proceedings on a solicitor/client and/or indemnity basis from the date of this offer or from 1.00 pm on Tuesday, 16 August 2011 when the offer will expire.”
5 On the same date, the Transfield defendants submitted an offer to the plaintiff in the following terms:
“Notwithstanding that it is the belief of Transfield Services (Australia) Pty Ltd and Transfield Construction Pty Ltd that they do have a good defence to the plaintiff’s claim against them we have been instructed to indicate that in consideration of the plaintiff discontinuing the proceedings against our clients by no later than 1.00 pm on Tuesday, 16 August 2011, that our clients would be prepared to bear their own costs to the proceedings to date.
In the event that this offer is not accepted, and your client ultimately fails to obtain judgment in these proceedings against Transfield Services (Australia) Pty Ltd and Transfield Construction Pty Ltd, we intend to produce this letter to the Court on the question of costs and shall seek an order that your client pay our client’s costs on a solicitor/client basis from the date of this letter … .”
6 It is not in issue that each of these offers were submitted to the plaintiff’s solicitors shortly after 4.30 pm on 15 August 2011 and the period for their acceptance expired at 1.00 pm on 16 August 2011.
7 Neither of the offers was accepted by the plaintiff.
8 On 17 August 2011, the solicitors for the plaintiff submitted a counter offer to the defendants in the form of a Calderbank letter which proposed that the matter be resolved on the following terms:
“(1) The defendants to pay the plaintiff the sum of $300,000. (2) The defendants to pay the plaintiff’s party/party legal costs, including reserve costs, on High Court Scale to the date of the transfer and to County Court Scale (D) thereafter.“
9 This offer, which was made by facsimile letter shortly after 2.00 pm on 17 August 2011, was expressed as being open for acceptance until 5.00 pm on 18 August 2011.
10 It follows from this summary that the offers made by the defendants to the plaintiff were effectively open to be accepted during a period of approximately twenty hours and that the offer made by the plaintiff to the defendants jointly was open for acceptance for approximately twenty-seven hours.[1]
[1] Whilst counsel for the plaintiff submits that the period for which the defendants’ offers were open to be accepted should be calculated on the basis of available office hours, this approach is inconsistent with:
Should the Defendants’ Calderbank Offers be given effect to?
11 In Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No. 2),[2] the Court of Appeal, whilst commenting that it was neither possible nor desirable to provide an exhaustive list of relevant considerations to be applied when considering whether the failure to accept a Calderbank offer was unreasonable, set out the following matters which ordinarily should be considered by the Court:
[2] (2005) 13 VR 435
(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 at the time 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 rejecting it. 12 In considering the issue which arises for determination in the present case, I find it convenient initially to analyse the circumstances of the present case within the six headings proscribed by the Court of Appeal in Hazeldene’s
(No. 1).
The Stage of the Proceeding at which the Offer was Received
13 The defendants’ offers were made at the conclusion of the first day of the trial, whilst the trial was in its infancy, counsel for the plaintiff not having concluded his opening address. The duration of the trial had been estimated as being approximately eight days. In the circumstances, the legal costs associated with the prosecution of the trial to its completion were likely to be very significant, as were the costs savings to the parties if the offers were accepted and the proceeding resolved.
14 Equally, given the timing of the offers, the plaintiff should have been well acquainted with the evidence available to it and, accordingly, well placed to assess its prospects in the trial.
The Extent of the Compromise Offered
15 It is clear that the offer made by the first defendant to the plaintiff was a very generous offer having regard to the ultimate figure for which the proceeding was resolved.
16 Whilst the offer made by the Transfield defendants involved only the saving of the costs incurred by the Transfield defendants for the duration of the trial, those costs were, given the timing of the offer and the expected duration of the trial, likely to be significant. In the circumstances, I consider the offer made by the first defendant to represent a real offer when judged in the light of the Transfield defendants’ prospects of success in the proceeding, which prospects I will discuss later in the course of these reasons.
The Clarity with which the Terms of the Offer were Expressed
17 Neither of the offers made on behalf of the defendants contained statements explaining the strength of the defendants’ position both as to liability or quantum, or the reasons why it would be unreasonable for the plaintiff to reject the offers. Whilst this factor may, in some circumstances, assume critical significance, this is not necessarily so.[3] I do not consider it to be so in the circumstances of the present case for the following reasons:
[3] See Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No. 2)
(i)
The recovery proceeding brought by the plaintiff followed, and largely mirrored, the claim brought by the worker against his employer, Spotless Services Pty Ltd and the Commonwealth of Australia (“the worker’s proceeding”). In that proceeding, the defence of the claim against Spotless was managed by the Victorian Workcover Authority which was responsible for the decision to join Transfield Services (Australia) Pty Ltd as a third party to the proceeding.
Having been involved in that proceeding, and having been a party to the negotiated settlement of the proceeding, the plaintiff must have well appreciated the issues which arose as to the liability of the Commonwealth of Australia and the Transfield defendants in respect of the incident in which the worker was injured.
The difficulty for the plaintiff as to liability in this proceeding arose primarily by reason of the inconsistency by the worker in the various claim forms and injury reports which had been submitted by him to the employer where he described the circumstances in which he had sustained his injury and the absence of any witnesses to the injury. It could not therefore be contended that the plaintiff was unaware of the inconsistencies in the worker’s reporting in this regard or the relevance of those inconsistencies to its case as to liability against the defendants.
The further issues which arose as to liability in the present proceeding which related to the degree of control which the Commonwealth and the Transfield defendants had over the kitchen in which the worker was employed, arose equally in the worker’s proceeding and must have been considered by the plaintiff at the time at which it negotiated the agreement reached in the worker’s proceeding as to the settlement of the proceeding and the contribution which both the Commonwealth and Transfield Services should make to the settlement of the worker’s claim.
(ii) The issues which arose in the present proceeding as to the quantification of the damages which might be awarded with respect to the worker’s past and future loss of earning capacity, must have been known to the plaintiff at the time at which this proceeding came on for trial. These issues arose primarily by reason of the worker’s recent commencement of a business as a self-employed courier driver and his expectations as to the profitability of that business. Whilst for the defendants the detail as to the level of the plaintiff’s expected earnings as a courier driver emerged in cross-examination, this evidence was freely volunteered and it was my clear impression of the worker’s evidence in this regard that it was in no way disingenuous. Nor is there any suggestion that the worker’s proposed evidence in this regard was either not known or was not available to the plaintiff, in that the worker failed to co-operate with the plaintiff in its preparation of the trial.
(iii) On the first day of the trial the matter was stood down at the request of the parties to allow them the opportunity of exploring the prospect of resolving the matter. This afforded the plaintiff a further opportunity to explore any issues with the defendant which were relevant to the positions taken by the parties with respect to each of the issues in the proceeding.
In these circumstances, the plaintiff, who is a well experienced litigant, should have been in a good position at the time which the defendant’s offers were made to appreciate the issues in the trial and to assess the strength both of its position and that of the defendants as to those issues. For these reasons, I am satisfied that nothing turns on the point that the offers by the defendants did not descend to particularity as to the strength of the defendants’ position, vis-à-vis, that of the plaintiff.
The Offeree’s Prospects of Success Assessed at the Time of the Offer
18 Having regard to the worker’s:
ƒ Limited need for future medical treatment; and ƒ
Expected future earning capacity, in respect of which his expectation was that he would earn an income equal to or better than the income available to him had his employment as at the date of his injury continued;[4]
[4] T 295. There has been no suggestion that the worker’s evidence as to these issues was not available to the plaintiff at the time the worker was conferenced before he gave his evidence.
when considered in the light of the issues which arose as to liability between
the plaintiff and the defendants given:
ƒ The inconsistencies in the contemporaneous statements made by the
worker as to the circumstances in which he was injured;ƒ
The relative remoteness of the defendants from the day-to-day operation of the kitchen in which the plaintiff was working as to the time of his injury when compared with the position of the employer;
ƒ
The knowledge in the employer as to the problems that its employees were experiencing, vis-à-vis, the slipperiness of the floor in the kitchen in respect of which no report had been made to the defendants
I am of the opinion that it should have been obvious to the plaintiff that the Calderbank offer on behalf of the first defendant was such that it raised real risks for the plaintiff.
19 Equally, although the offer by the Transfield defendants was relatively modest, when it was considered in the light of the fact that in making its allegation that the Transfield defendants were occupiers of the premises in which the worker suffered injury,[5] the plaintiff’s case was based largely upon clauses in an agreement which had been executed between the first defendant and the Transfield defendants to which the plaintiff was not a party, and which:
[5] Thus owing to the worker a duty of care which was breached.
ƒ
imposed upon the Transfield defendants a duty to comply with the provisions of the occupational health and safety requirements “imposed upon” the Transfield Defendant’s “as an occupier”;[6] but
ƒ stipulated that the Transfield defendants were not to be deemed as being
the occupier of the premises;[7][6] Clause 19.2.1
[7] Clause 14.1.4
the offer by the Transfield defendants should have been seen by the plaintiff as one in respect of which it faced the very substantial risk of failing to better.
The Application of Costs Foreshadowed by the Offer
20 The offer made by the first defendant foreshadowed an application for costs on a solicitor/client and/or indemnity basis.
21 The offer made on behalf of the Transfield defendants foreshadowed an application for costs on a solicitor/client basis.
22 Having regard to the fact that the offers were made by the same solicitors within minutes of each other, the difference in the cost sanction sought on behalf of the first defendant when compared with that sought on behalf of the Transfield defendants is significant, particularly having regard to the application now made by the Transfield defendants for indemnity costs.
The Time Allowed to the Offeree to Consider the Offer
23 The defendants’ offers were both open only for an extremely short period of time, namely twenty hours. This fact is highlighted when the period for acceptance of the offers is considered in the context of the Rules of the Court which apply to offers of compromise which fix a period of fourteen days for their acceptance.
24 In the circumstances of the present case, the fact that the offers were being made to the Victorian WorkCover Authority, a body which might be regarded as a professional litigant, is, in my opinion, of some relevance, particularly having regard to the fact that the plaintiff considered it appropriate to address its Calderbank offer to the defendants on the basis that it was open for acceptance for a period of twenty-seven hours. In my opinion, this action by the plaintiff indicates that it considered a period of twenty-seven hours as being reasonable for the defendants’ respective insurers to assess whether or not the offer should be accepted. For this reason, I consider there to be considerable merit in the submissions made on behalf of the defendants that insurer litigants such as those involved in this proceeding do not require the time which is normally afforded to a personal litigant to consider and assess the merits of an offer. I am nevertheless of the opinion that the period of time during which the defendants’ offers were open for acceptance is extremely short; that it borders on the unreasonable; and, accordingly, that the circumstances which would justify the giving effect to Calderbank offers which were open to be accepted for such limited periods as those involved in this instance would be rare.
25 In the course of submissions made by counsel, positions were put on behalf of the parties as to the short period during which the defendants’ offers of compromise were open for acceptance. Having indicated to counsel my preliminary view that the period was unreasonably short, I sought the assistance of counsel as to any authorities which involved Calderbank offers made within similar timelines to those in the present case.
26 Mr Simpson, who appeared on behalf of the plaintiff, appropriately directed my attention to the decision of Habersberger J in Primus Telecommunications Pty Ltd v CCP Australia Airships Ltd & Ors [2003] VSC 141 which was potentially adverse to the plaintiff’s interests.
27 In that proceeding, Habersberger J endorsed the effectiveness of a Calderbank letter which was submitted shortly after 5.00 pm on 16 July 2002 and was expressed as being open for acceptance until 4.00 pm on 17 July 2002.
28 Whilst the issue as to whether the time period open for the acceptance of a Calderbank offer is appropriate must turn peculiarly upon the facts of each case, the decision of Habersberger J in Primus Telecommunications provides support for the position put by the defendants that the time fixed by them for the acceptance of their respective offers should not necessarily lead to a finding that the offers should not be given effect to.
29 In making their submission that, in the circumstances of this case, the time fixed for the acceptance of their respective offers was sufficient, the defendants point to the following:
[8] The offers were open for acceptance at this time and remained so until 1.00 pm on 16 August.
• Firstly, that the matter was stood down at the parties’ request on the morning after the defendants’ offers had been made[8] for the purpose of allowing negotiations to take place between the parties. In this respect, the parties were allowed the time sought by them to explore the possible resolution of the matter, the trial in fact not commencing until 11.30 am upon the parties indicating that no further time for discussion was required; • Secondly, that the plaintiff at no time requested further time to consider each of the offers made by the defendants. 30 It is submitted by the defendants that notwithstanding the very short period during which the defendants’ offers remained open for acceptance, the plaintiff had sufficient time to assess and reject the offers and that this is so is evidenced by the plaintiff’s decision to continue with the trial at 11.30 am on 16 August 2011.
31 I do not accept that the fact the plaintiff at no time requested further time to consider each of the offers made by the defendants is a matter of any significance, as it was the defendants who imposed the deadline and there was no indication that it was open to negotiation.
32 I do accept however that the action of:
• The parties in requesting time to explore the prospects of resolving the case on the morning of 16 August 2011, at a time at which the defendants’ offers were open to be accepted; and • The plaintiff in electing to proceed with the trial later that morning, at a time at which the offers remained open to be accepted; indicates that the plaintiff considered that it had had sufficient time to make an informed decision to reject the defendants’ offers and that the decision was made within the period during which the offers were open to be accepted.
33 When those actions are considered in light of the fact that:
•
On 30 August 2011, the plaintiff sought leave to make further submissions in this matter;
•
In giving the plaintiff the leave which was sought in this regard, I raised with plaintiff’s counsel the relevance of the time given to the parties on 16 August 2011 which I identified as being of critical significance upon the issue as to whether the plaintiff had in fact had sufficient time to make an informed decision as to the defendants’ Calderbank offers and whether its decision to reject the offers was unreasonable, and invited submissions on that issue;
•
In its further submissions dated 1 September 2011, the plaintiff has not sought to address that issue;
I am satisfied that the choice by the plaintiff to recommence the trial on 16 August 2011, at a time when the period for acceptance of the defendants’ Calderbank offers had not expired, came about by reason of the fact that the plaintiff considered that it had had sufficient time to consider the defendants’ offers and that it had chosen to reject those offers, and not by reason of the fact that the plaintiff had been given insufficient time to consider them.
Additional Factors to be Considered
34 The plaintiff asserts that the delay by the first defendant in serving its Court Book should be taken into account upon the issue as to whether the first defendant’s Calderbank offer should be given effect to. In its written submissions of 1 September 2011, the plaintiff points to the inclusion within the first defendant’s Court Book of three medical reports from Mr Clive Jones, an orthopaedic surgeon, dated 18 November 1993, 1 May 2003 and 15 February 2011, and submits that the introduction of those reports gave rise to “insufficient time for thoughtful consideration” on the part of the plaintiff of the defendants’ Calderbank offer.
35 Whilst In my opinion the failure of the first defendant to serve its Court Book in a timely manner is lamentable, the plaintiff does not point to any issue raised by Mr Jones in his reports which placed a different complexion upon the case to that which pertained prior to the service of those reports, and for this reason I do not consider that the late service by the first defendant of its Court Book should exert a decisive influence upon the issue as to whether the Calderbank offer by the first defendant should be given effect to.
36 The plaintiff points to the service by the first defendant of a Further Amended Defence on 16 August 2011. The plaintiff however, does not point to any new allegation raised by the first defendant in its Amended Defence. When the paragraphs of the Further Amended Defence of 16 August 2011 which are complained of by the plaintiff in its submissions are examined, it is clear that no amendments of any consequence were made to the Defence and I am of the opinion that there is no merit in the plaintiff’s submission in this regard. [9]
[9] The only amendment to the paragraphs complained of by the plaintiff involved the substitution in paragraph 28.2 of the defence of the words “first defendant” for the word “defendant”. Paragraph 28.4(b).2 was not amended in any relevant or material way.
37 The plaintiff contends that the first defendant was under an obligation in making its offer to disclose the method which it adopted in fixing the quantum of the offer. The plaintiff however points to no authority to support its contention that the process which it criticises the defendant for failing to adopt, is one which is usually adopted, or is one which for some reason should have been adopted by the first defendant, and I am not persuaded that there is any substance in the assertion by the plaintiff in this regard.
38 Further, it is submitted on behalf of the plaintiff that the complexity of the litigation, in that liability, causation of injury and the quantification damages were in issue, justified the plaintiff’s decision not to accept the defendants’ Calderbank offers. In my opinion, the fact that the case involved a multiplicity of issues, including serious contests as to liability, the identification of the injuries which were caused by the subject incident, and the quantification of damages, should have made the offers submitted by the defendants all the more attractive to the plaintiff.
39 Finally, I find the bland statement made on behalf of the plaintiff that I should take account of the fact that the Transfield defendants did not serve a court book prior to trial or otherwise, unsupported as it is by any submission as to the relevance of that failure, to be of little relevance in dealing with the issue as to whether the Calderbank offer by the Transfield defendants should be given effect to.
Conclusion
40 It is clear that whether a plaintiff has acted unreasonably in failing to accept a Calderbank offer must be considered in the circumstances of each case.
41 In my opinion, for the reasons which I have previously given, the only factor which would influence me not to give effect to the Calderbank offers which are relied upon by the defendants is the very short period during which they were open to be accepted.
42 In considering this issue as it applies to the facts in this particular case, when account is taken of:
(i) The fact that the decision making process, both as to the making of offers of settlement and the acceptance of offers of settlement, was a process which in this proceeding was undertaken by insurers who can be regarded as professional litigants and who, accordingly, should have systems in place to enable the making of quick decisions in the course of litigation;[10] (ii) My findings as to the whether the fixing by the defendants of the minimal period during which their offers remained open for acceptance in fact operated to deny the plaintiff a reasonable opportunity to consider the offers and to arrive at an informed decision as to whether they should be accepted; I am satisfied that in the peculiar circumstances of this matter, the fixing by the defendants of a time period for the acceptance of their Calderbank offers, which on face value was unreasonable, because it had the potential of affording the plaintiff insufficient time to properly consider their acceptance, did not prove to be so.
[10] That this is so is evidenced by the service by the plaintiff of a Calderbank letter on 18 August 2011 in which it imposed a time period for acceptance of twenty-seven hours. I take the fixing of this time period by the plaintiff as a statement that it considered the professional litigants to whom its offer was addressed, required no more than that period to reach a decision as to whether the offer should be accepted.
43 For the reasons set out above, I am of the opinion that the plaintiff acted unreasonably in failing to accept each of the defendants’ Calderbank offers.
44 Given that the parties have agreed that that I should make my findings and then should allow them to make submissions as to the orders which should follow, I will hear the parties upon that issue.
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ƒ The approach which the plaintiff employed in calculating the period during which the Calderbank offer submitted by it remained open to be accepted (see paragraph 6 of the plaintiff’s outline of submissions dated 1 September 2011); ƒ The approach adopted by Habersberger J in Primus Telecommunications Pty Ltd v CCP
Australian Airships Limited [2003} VSC 144 (9 May 2003).and I am satisfied that I should take into account total hours when calculating the period of time during which both the defendants’ Calderbank offers and the plaintiff’s Calderbank offer remained open to be accepted and not business hours alone.
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