VWA v Commonwealth of Australia (Costs Ruling)

[2011] VCC 1496

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 and 25 August 2011
DATE OF RULING:	21 October 2011
CASE MAY BE CITED AS:	VWA v Commonwealth of Australia & Ors (Costs Ruling)
MEDIUM NEUTRAL CITATION:	[2011] VCC 1496
RULING AS TO COSTS

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Catchwords: COSTS – effectiveness of Calderbank offers served by the defendants – application for a Sanderson Order

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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:

Findings as to the Costs Order to which the Defendants are entitled by reason of their Calderbank Offers

1          In this matter, the parties have, by agreement, submitted written submissions as to the orders which I should make as to costs in the proceeding having regard to my Reasons for Judgment delivered 22 September 2011.[1]

[1]             I have taken account of each of those submissions. I consider it appropriate to comment however that the submission filed on behalf of the plaintiff contained what I consider to be inappropriate assertions of fact of which I took no account. For example, paragraph 4(g) (iii)-(v) and 4(h) of those submissions.

2          In Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No.2),[2] the Court of Appeal re-stated the policy objectives associated with the making of special orders for costs as follows:

[2] (2005) 13 VR 435; See also New South Wales Court of Appeal in Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 at 724.

(i)	to encourage the saving of private costs and the avoidance of the inherent risks, delays and uncertainties of litigation by promoting early offers of compromise by defendants which amount to a realistic assessment of the plaintiff’s real claim which can be placed before its opponent without risk that its “bottom line” will be revealed to the Court;
(ii)	to save the public costs which are necessarily incurred in litigation, which events demonstrate to have been unnecessary, having regard to an earlier (and, as found, reasonable) offer of compromise made by a plaintiff to a defendant; and
(iii)	to indemnify the plaintiff who has made the offer of compromise, later found to be reasonable, against the costs thereafter incurred. This is deemed appropriate because, from the time of the rejection or deemed rejection of the offer of compromise, notionally the real cause and occasion of the litigation is the attitude adopted by the defendant which has rejected the compromise. In such circumstances that party should ordinarily bear the costs of litigation.

3          The Court also approved the statement made by Redlich J in Overseas Chinese Banking Corporation v Richfield Investments Pty Ltd;[3] namely, that:

“Potential litigants should not be discouraged from bringing their dispute to the courts. It is such considerations which underly the general rule that an offer for special costs should only be made in special circumstances.”

[3] [2004] VSC 351

4          In exercising the discretion which I have as to the effect which should be given to the Calderbank offers made by the defendants to the plaintiff which I have found were unreasonably rejected by the plaintiff, I am cognisant of the statements by the superior courts to which I have referred and, accordingly, I consider it appropriate that I should take particular account of the short time period during which those offers were open for acceptance.

5          In the peculiar circumstances of the present case, I have found that the indulgence which the parties were given by the Court on the morning of 16 August 2011[4] to be of significance when determining the issue as to whether the plaintiff acted unreasonably in rejecting the offers made by the defendants. The practice employed by the defendants in fixing such short periods for consideration of offers made by them however, could hardly be said to be a practice which would necessarily encourage the resolution of proceedings and thus promote the policy objectives associated with the making of a special order for costs. Such a practice could only be efficacious if the parties happen to be given the indulgence afforded to them in the present case which, in itself, resulted in the loss of valuable Court time and inconvenience to witnesses whose evidence was stood down whilst discussions took place.[5]

[4]             The parties were invited to make use of the time they needed to explore the resolution of this matter. Insofar as the submissions made on behalf of the plaintiff appear to assert that the parties were provided with a time limit fixed by the Court of one hour to explore the prospects of resolving the case (paragraph 4(g)(i)) this misrepresents the actual position which was one in which the parties were told that they would be allowed the time they wished to explore the possibility of settlement, the matter not then proceeding until the parties advised the Court that they were ready to proceed.

[5]            It is primarily for this reason that I have previously commented that the fixing by parties of short periods for the acceptance of offers is a process which should not generally be encouraged.

6          For this reason I am satisfied that the approach which I should take in making the costs orders in this matter is to primarily give effect to the Calderbank offers made by the defendants in this proceeding but that in exercising the broad discretion which I have in fixing the quantum of costs, I should adopt a conservative approach in fixing the costs to which the defendants are entitled by reason of their Calderbank offers.

7          For these reasons, I am of the opinion that:

(i) Whereas I would otherwise have ordered that the plaintiff pay the costs

of the second and third defendants on a solicitor/client basis (the basis

sought by the second and third defendants in their Calderbank letter), I

propose to make the following order:

The plaintiff is to pay the costs of the second and third-named

defendants to be taxed on a party/party basis, together with fifty per cent

of any additional costs to which the second and third defendants would

have been entitled had their costs been taxed on a solicitor/client basis.

(ii)    Whereas I would otherwise have ordered that the plaintiff pay the costs of the first defendant on an indemnity basis as from 1.00 pm on 16 August 2011 (the basis sought by the first defendant in its Calderbank letter), I propose to make the following order:

The first defendant is to pay the plaintiff’s costs of and incidental to the proceedings to be taxed in default of agreement:

(a)	on High Court Scale until 16 August 2008, including any reserve costs; and
(b)	thereafter up to and inclusive of 16 August 2011, on Scale D of the County Court Civil Procedure Rules 2008, including any reserved costs.

(iii)    As from 1.00 pm on 16 August 2011, the plaintiff is to pay the first defendant’s costs to be taxed by the Costs Court in default of agreement on a party/party basis together with fifty per cent of any additional costs to which the first defendant would have been entitled had its costs been taxed on an indemnity basis.[6]

[6]                  Lest there be any doubt, it is my intention that the defendants should recover party/party costs plus an additional fifty per cent of the difference between their costs if taxed on that basis and their costs had they been taxed; on a solicitor/client basis in respect of the Transfield defendants; on an indemnity basis in respect of the first defendant.

The Application by the Plaintiff for a Sanderson Order

8          In Victorian WorkCover Authority v Kagan Brothers Consolidated Pty Ltd,[7] the Court of Appeal recognised the fact that the nature of the assessment involved by s.138 of the Accident Compensation Act did not preclude a Court making a Bullock order. In the course of its reasons for judgment, it commented:

“Where a plaintiff succeeds against only one of the defendants, 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 reimburse the plaintiff for the costs of the successful defendant (a “Bullock” order), or order the unsuccessful defendant to pay the costs of the successful defendant directly to the successful defendant (a “Sanderson” order). It must be reasonable and just for such orders to be made. An assessment of whether such an order will do justice to the unsuccessful party, usually commences with an inquiry as to whether it was reasonable for the plaintiff to have joined the successful defendant. In Central Goldfields Shire v Haley (No 2) Redlich JA doubted that it is always necessary to show that it was reasonable on the facts known at the time of the joinder. Subsequent events may demonstrate that the joinder was reasonable. The circumstances of the case may require that the decision should be adjudged by the conduct of the defendants after the joinder of the successful defendant and even up to the date the court makes its decision. But the fact that it is reasonable to have joined the successful defendant, will not by itself be sufficient to warrant the making of the order. It is commonly required that the plaintiff’s claims against each defendant be interconnected or in a real sense alternatives.”

[7] [2011] VSCA 91

9          As to the requirement that the plaintiff’s claim against each defendant be interconnected or alternatives, the Court observed that whilst this is an important factor which should be taken into account and which will commonly be a critical consideration –

“… regardless of how the claim has been initiated or formulated, the justice of the case may still merit such an order if there is a substantial connection between the claims.”

10        Adopting the approach set out by the Court of Appeal in Kagan, I am satisfied this proceeding is one in which a Sanderson order may be made if the circumstances warrant the making of such an order.

Should a Sanderson Order be Made?

11        In Lackersteen v Jones & Ors (No. 2),[8] the Court listed four necessary preconditions for the making of a Bullock v Sanderson order, namely:

[8] (1988) 93 FLR 422; see also Stevedoring Industry Finance Committee v Gibson [2000] NSWCA 179

“1	It must be seen to have been reasonable and proper for the plaintiff to have sued the successful defendant.
2	The causes of action against two or more defendants need not be the same but they must be substantially connected or dependent the one on the other.
3	While it is essential to find that the plaintiff has acted reasonably and properly that alone is not sufficient. The court must find something in the conduct of the unsuccessful defendant which makes it a proper exercise of discretion.
4	Finally, in considering whether to make such an order, the court should, in the exercise of its discretion balance overall two considerations of policy: the first, that an unnecessary multiplicity of actions should not be forced on litigants, so that a plaintiff who acts reasonably in joining two or more defendants should not be penalised or lose the fruits of his victory in costs on the basis that he should have either elected or taken separate actions; secondly, that an unsuccessful defendant should not have to pay more than one set of costs merely because he is unsuccessful.”

12        In Central Goldfields v Haley & Ors (No 2),[9] the Court of Appeal adopted a similar approach to its analysis as to whether a Sanderson Order should be made, basing its analysis on the cornerstone that it must be reasonable for such an order to be made.

[9] [2009] VSCA 203 (25 September 2009)

Does the Conduct of the First Defendant Warrant the Making of a Sanderson

Order?

The Timing Relevant to the Joinder of the Parties

13        This proceeding was commenced in August 2008 against the first defendant as the sole defendant. The second defendant was joined on 7 May 2010; the third defendant was joined on 19 April 2011.

The Relevant Conduct of the First Defendant

14        It is conceded by the first defendant that it “encouraged Transfield to be joined as a party to the proceedings”.[10]

[10]           See the concession by Mr McDonald, who appeared on behalf of the first defendant at T 731

15        A considerable history of emails and correspondence passing between the solicitors acting on behalf of the first defendant and those acting on behalf of the plaintiff was referred to in detail by Mr Simpson, who appeared on behalf of the plaintiff in the course of his submission in support of this application. That history included the following statements by the first defendant’s solicitors:

(i)         “From the obligations contained in the Garrison Support Services contract, it seems to me that (leaving aside contractual indemnity obligations and insurance requirements), Transfield Pty Ltd has a responsibility for the happening of 14 October 2001 accident.”[11]

(ii)        “I expect that as Transfield P/L was the Garrison Support Services contractor and that it contracted with Spotless Services Australia P/L to provide the hospitality services, when I get to the end of my enquiries I anticipate having to join Transfield to the litigation (Mr Pilioglou’s damages action No. CI-08-04478) which may require the 19 June 2009 trial date to be adjourned for a period.”[12]

(iii)       “We will be seeking to involve to this litigation as it was Transfield with whom Defence contracted to perform the services and there are multiple contractual obligations Transfield agreed to retain, so I think there will be contractual and common law duties that puts them in the liability firing line.”[13]

[11]           Letter dated 19 March 2011

[12]           Email dated 24 April 2009

[13]           Email dated 11 May 2009

16        A number of letters passing from the plaintiff’s solicitors to the solicitors acting on behalf of the first defendant were also relied upon by the first defendant.

17        On 26 August 2009, the plaintiff’s solicitors commented that it was:

“… difficult for us to give consideration to the joinder of Transfield Services Ltd in the absence of the information that we have previously sought from you regarding the breach of contract or negligence that you allege against Transfield Services (Australia) Pty Ltd.”

18        In letters dated 31 August 2009, 14 January 2010, and 2 February 2010, the plaintiff’s solicitors sought further information as to the way in which the first defendant asserted that the Transfield defendants were responsible for the worker’s injuries.

19        In its letter dated 14 January 2010, the plaintiff’s solicitor commented:

“As currently pleaded, we cannot see sufficient basis upon which a court could conclude that either SSA (as sub-contractor) or Transfield were negligent or that any negligence on their part ought to be taken into account when assessing Factor X.”

20        On 2 February 2010, the plaintiff’s solicitors wrote to the solicitors of the first defendant a letter, concluding:

“Hence, whilst the existence of a duty of a care has been pleaded and particularised in both the Amended Defence and the Further Amended Defence, there is still no allegation that Transfield breached that duty.”

21        On 12 March 2010, the first defendant amended its Defence in the proceeding to assert that Transfield Pty Ltd was responsible for the worker’s injury by reason of its obligations under the contract and its occupation of the premises.

22        In the course of opening the plaintiff’s case against the second defendant, counsel for the plaintiff relied upon:

(i)	The fact that the first defendant had asserted in its pleading that the Transfield defendants had contributed to the worker’s injury; and
(ii)	an allegation that the Transfield defendants had assumed the obligations of an occupier of the premises by reason of the contract executed between them and the first defendant (“the contract”)

as the basis upon which the plaintiff submitted that the Transfield defendants
were liable for the worker’s injury.

23        Insofar as the former allegation is concerned, I accept that the conduct by the first-named defendant to which I have referred, influenced the decision by the plaintiff to join the Transfield defendants.

Is It Reasonable that a Sanderson Order be Made?

Did the Plaintiff act reasonably in commencing proceedings against the
Transfield Defendants?

24        In considering this issue, I commence my analysis, taking into account the fact that:

• There is no suggestion that there was any reluctance on the part of either the employer or the worker to co-operate with the plaintiff in the preparation of its case or in the trial;

• The Victorian WorkCover Authority managed the defence of the worker’s claim brought for damages against the employer in which the Commonwealth was a defendant and the Transfield defendants were third parties.

25        For these reasons, whilst in some circumstances the plaintiff in a recovery proceeding of this nature may have difficulty in assessing the merit of its case against the particular defendant, I am not persuaded that the present case falls into that category. It follows that I do find the submission made on behalf of the plaintiff that it was in some way hamstrung in its ability to assess the merit of its case against the Transfield defendants independently of the assertions made by the first-named defendant to be persuasive.

26        It was put on behalf of the plaintiff that the obligations imposed upon the Transfield defendants by reason of the contract were such that they demonstrated the existence of a relationship between the Transfield defendants and the kitchen in which the worker was injured, consistent with that of an occupier of the premises.

27        Whilst the provisions of Clause 19.2.1 of the contract were relied upon by the plaintiff in support of this position, the Transfield defendants pointed to Clause 14.1.4 of the contract as having the opposite effect, and further contend that the contract did not impose a duty of care upon them which could be relied upon by the plaintiff, given that it was not a party to the contract.

28        In my opinion, the evidence adduced by the plaintiff during the trial fell well short of advancing a convincing position that the Transfield defendants acted on a day-to-day basis in a manner which was consistent with the assumption by them of the position of an occupier of the premises. Rather, it was my strong impression (the evidence not having been completed at the time the matter was settled) that the Transfield defendants had delegated any responsibility they may have assumed for the safety and suitability of the floor of the premises to the employer.

29        Having regard to the relationship between the Transfield defendants and the employer as principal contractor and sub-contractor in which:

• The employer undertook the day-to-day management of the premises, which included the responsibility to report (“the reporting process”) to the Transfield defendants the presence of any major defects in the premises;

• the employer was aware of problems associated with the slippery surface of the new floor grates which had been inserted in the floor which were subsequently implicated by the worker as being a cause of his injury;

• no reports as to the slipperiness of the floor of the premises were made by the employer to the Transfield defendants which would have alerted them to the danger to which the worker alleged he was exposed by the slipperiness of the floor of the premises; and

• the employer understood that in the absence of its activation of the reporting process to the Transfield defendants, no report of the presence of the defect in the floor of which the employer was aware could be passed onto the first defendant, and thus rectified;

I am of the opinion that the decision made by the plaintiff to join the Transfield defendants, whilst influenced by the behaviour of the first defendant, was undertaken in the absence of any real merit in the case which the plaintiff proposed to mount against them.

30        The clear impression which I gain from the correspondence passing between the plaintiff and the first defendant which is relied upon by the plaintiff in this application, is that the plaintiff made no independent inquiries of the employer or any proper investigation as to the merit of its potential claim against the Transfield defendants before election to join them as parties to its proceeding.

31        This impression is further fuelled by the submission made on behalf of the plaintiff that in making decisions as to the parties which should be joined to this recovery proceeding, the plaintiff was effectively at the mercy of the first defendant.[14]

[14]           T 713-714

32        In my opinion:

• Whilst it may be the case that the decision by the plaintiff to join the Transfield defendants could properly have been influenced by the behaviour of the first defendant, it remained incumbent upon the plaintiff to satisfy itself that the evidence available to it justified the joinder of those parties.

• An approach to litigation which allows the plaintiff to assert that the first defendant should be responsible for the plaintiff’s decision to join a party, which was made in circumstances in which the plaintiff did not until all the evidence was adduced at the trial “have a full appreciation of the liability (if any) of Transfield”;[15] represents an injudicious approach to litigation which should not be encouraged.

[15]           T 713

33        Whilst the issue as to whether it was reasonable for the plaintiff to have joined the Transfield defendants must be considered in the context of the totality of the evidence as it emerged even after the decision was made,[16] for the reasons set out above, I am of the opinion that the decision by the plaintiff to join the Transfield defendants was such that it would be inappropriate to make a Sanderson order in favour of the plaintiff.

[16]           Central Goldfields v Haley & Ors (No 2) [2009] VSCA 203 (25 September 2009)

34        Accordingly, I am of the opinion that the plaintiff has failed to demonstrate that it was reasonable and proper that the proceedings were commenced against the Transfield defendants and it follows that a Sanderson order should not be made in its favour.

Orders
35	For the reasons set out above, I will make the following orders:
(1) Judgment is entered against the first defendant in the sum of $165,000.00 inclusive of interest.
(2) The proceedings against the second defendant, Transfield Services (Australia) Pty Ltd, and the third defendant, Transfield Construction Pty Ltd, is dismissed.
(3) The first defendant is to pay the plaintiff’s costs of and incidental to the proceedings to be taxed by the Costs Court in default of agreement:

(a)	on High Court Scale until 16 August 2008, including any reserve costs; and
(b)	thereafter up to and inclusive of 16 August 2011, on Scale D of the County Court Civil Procedure Rules 2008, including any reserved costs.

(4) As from 1.00 pm on 16 August 2011, the plaintiff is to pay the first defendant’s costs to be taxed by the Costs Court in default of agreement on a party/party basis together with fifty per cent of any additional costs to which the first defendant would have been entitled had its costs been taxed on an indemnity basis.

(5) The plaintiff is to pay the costs of the second and third-named defendants to be taxed on a party/party basis together with fifty percent of any additional costs to which the second and third defendants would have been entitled had their costs been taxed on solicitor/client basis.

(6) Liberty is reserved to the parties to apply as to the form and content
of these orders.

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