Zhang v Popovic (No. 2)

[2016] NSWSC 666

Supreme Court

New South Wales

Medium Neutral Citation:

Zhang v Popovic (No. 2) [2016] NSWSC 666

Hearing dates:

5 May 2016 and written submissions thereafter

Decision date:

25 May 2016

Jurisdiction:

Common Law

Before:

Adamson J

Decision:

(1) Order the plaintiff to pay the seventh defendant’s costs (including any reserved costs) of the proceedings on the ordinary basis until 10 March 2016 and on an indemnity basis thereafter.

 

(2) Subject to (3) and (4) below, order the first, second and sixth defendants to pay the plaintiff’s costs (including any reserved costs) of the proceedings.

 

(3) Order the sixth defendant to pay the costs which the plaintiff is liable (pursuant to order (1)) to pay the seventh defendant but on the ordinary basis only.

 

(4) Order the sixth defendant to pay the costs to which the first and second defendants are liable to pay to the plaintiff.

 

(5) Order the sixth defendant to pay the first and second defendants’ costs of the proceedings, including their cross-claims.

 

(6) Dismiss the sixth defendant’s notice of motion filed on 26 April 2016.

 

(7) Order the sixth defendant to pay the costs of John Tabuso, the respondent to its notice of motion filed on 26 April 2016.

 (8) Note that the effect of orders (1) and (3) is that the plaintiff remains liable to the seventh defendant for the difference between its costs on an indemnity basis and its costs on the ordinary basis for the period from 10 March 2016.

Catchwords:

COSTS – plaintiff successful against first, second and sixth defendants and unsuccessful against seventh defendant – first, second and sixth defendants liable for plaintiff’s ordinary costs – sixth defendant insurer liable to indemnify first and second defendants – seventh defendant made Calderbank offer and Offer of Compromise– plaintiff liable for indemnity costs of seventh defendant after non-acceptance of Offer of Compromise – plaintiff seeking Sanderson or Bullock order against unsuccessful defendants in respect of liability for successful defendant’s costs – Bullock order made against sixth defendant for seventh defendants costs on ordinary basis – plaintiff liable for difference between seventh defendant’s ordinary and indemnity costs after non-acceptance of offer

  COSTS – sixth defendant made application for costs against non-party to proceedings – non-party a former director of third defendant who made statements leading to joinder of seventh defendant to the proceedings – no exceptional circumstances support making order against non-party

Legislation Cited:

Bankruptcy Act 1966 (Cth), s 58
Civil Procedure Act 2005 (NSW), ss 98, 101
Corporations Act 2001 (Cth), s 601D
Law Reform (Miscellaneous Provisions) Act 1946 (NSW), ss 5, 6
Uniform Civil Procedure Rules 2005 (NSW), rr 20.26, 42.1, 42.15A

Cases Cited:

Baxter v Obacelo [2001] HCA 66; 205 CLR 635
Bullock v London General Omnibus Company [1907] 1 KB 264
Calderbank v Calderbank [1975] 3 All ER 333
Knight v FP Special Assets Ltd (1992) 174 CLR 178
Regency Media Pty Ltd v AAV Australia [2009] NSWCA 368
Sanderson v Blyth Theatre Co [1903] 2 KB 533
Symphony Group Plc. V Hodgson [1994] QB 179
Yu v Cao [2015] NSWCA 276
Zhang v Popovic [2016] NSWSC 407

Category:

Costs

Parties:

Cheng Nian Zhang (Plaintiff)
Vlado Popovic (1st Defendant)
Calabro Real Estate Pty Ltd (2nd Defendant)
Interfreight (Australia) Pty Ltd (in liquidation) (3rd Defendant)
Popovic Haulage Pty Ltd (4th Defendant)
Insurance Australia Limited t/as NRMA Insurance (5th Defendant)
National Transport Insurance by its manager NTI Ltd (6th Defendant)
ROC Services (NSW) Pty Ltd (7th Defendant)
John Tabuso (Respondent to Notice of Motion of 26 April 2016)

Representation:

Counsel:
L King SC/CJM Palmer (Plaintiff)
P Barham (1st and 2nd Defendant)
M McCulloch SC/PR Stockley (6th Defendant)
RA Cavanagh SC/OJ Dinkha (7th Defendant)
P Afshar (Respondent to Notice of Motion of 26 April 2016)

  Solicitors:
Gorman Law (Plaintiff)
V L Macri Lawyers (1st and 2nd Defendant)
Walker Hedges & Co (6th Defendant)
Curwoods Lawyers (7th Defendant)
Spinks Eagle Lawyers (Respondent to Notice of Motion of 26 April 2016)

File Number(s):

2009/296370; 2009/298017

Judgment

The judgment on liability

1. On 12 April 2016 I gave judgment and delivered reasons for decision on liability and indemnity in this matter: Zhang v Popovic [2016] NSWSC 407 (the principal judgment), preserving liberty to the parties to make an application for costs.

2. In substance, the plaintiff was successful against the first (Mr Popovic), second (Calabro) and sixth defendants (NTI). The plaintiff would have obtained judgment against the third defendant (Interfreight) had it not been wound up and deregistered. No claim was pressed against the fourth defendant, which, in any event, had been deregistered by the time of the hearing. The plaintiff failed against the seventh defendant (ROC). Mr Popovic and Calabro succeeded against NTI, their insurer.

3. Each of the defendants had cross-claims against the others. The effect of the orders was that Mr Popovic and Calabro succeeded in their cross-claim against NTI; all cross-claims against ROC resulted in judgment for ROC and all other cross-claims were dismissed.

Evidence concerning costs

Offers made by ROC

4. The only offers that were tendered by any party in support of a costs order were those tendered by ROC. It relied on the following offers:

1. A Calderbank offer (after Calderbank v Calderbank [1975] 3 All ER 33) dated 13 August 2013 addressed to the plaintiff, setting out ROC’s instructions that it had not installed the clevis mounts on the trailer when it performed work on the trailer in August 2006. The letter enclosed copies of the business records of the work it had performed which included the documents relied upon by ROC at the hearing of the proceedings. ROC offered to accept judgment in its favour with no order as to costs.

2. An offer of compromise (made in accordance with Uniform Civil Procedure Rules 2005 (NSW), r 20.26) dated 10 March 2016 offering to pay the plaintiff the sum of $2.5m plus costs as agreed or assessed (the Offer of Compromise). The Offer of Compromise was expressed to be open for acceptance until 4pm on 18 March 2016.

Evidence relied on by NTI

Affidavit of Mr Hedges affirmed 26 April 2016

5. NTI relied on an affidavit affirmed by Mr Hedges, its solicitor, on 26 April 2016. Mr Hedges deposed that he appointed the late Vin Gallagher to investigate the plaintiff’s claim. These investigations were undertaken from May 2010 to August 2010. Mr Gallagher informed Mr Hedges that John Tabuso told him that Interfreight had engaged Hoxton Park Truck and Trailer Repairs Pty Ltd (Hoxton) to install new ramps on the trailer the subject of the proceedings and that Hoxton had subcontracted the installation of the hydraulic fittings to ROC. Mr Hedges understood from what he had been told that Hoxton had installed clevis mounts at the rear of the trailer, the failure of one of which (the left one) was the cause of the plaintiff’s injuries. Mr Hedges undertook a search and ascertained that Hoxton had been deregistered. By letter to the plaintiff’s solicitors dated 20 December 2012, Mr Hedges communicated his understanding to the plaintiff’s solicitors.

Affidavit of Nicole Hinks (annexed to Mr Hedges’ affidavit referred to above)

6. Ms Hinks, a solicitor employed by the plaintiff’s solicitors, swore an affidavit on 17 January 2013 in support of an application to vacate the hearing date of 29 January 2013. She deposed that NTI had served an expert report of Mr Hall, an engineer, in which he had been critical of the quality of the welding by which the clevis mount was attached to the rear of the trailer (which had failed and caused the ramp to fall). She also deposed to a concern that the only defendant who could meet an award of substantial damages was NTI, which had declined indemnity. She foreshadowed an application to join ROC, which would necessitate an adjournment of the proceedings. She set out the basis of the joinder of ROC in the following terms:

The legal representatives of the defendants other than the insurer were asked to provide information if they could from their clients as to who had undertaken the welding work, and counsel for those defendants, Mr Peter Barham, informed Mr King SC and the replacement junior counsel briefed for the plaintiff, Mr Christopher Palmer, following a conference with his clients which took place on 16 January 2013 that the work was done by ROC Services (NSW) Pty Ltd trading as ROC Hydraulics, then of 13 Walker Place, Wetherill Park (but now of Arndell Park) and that he had been briefed with contemporaneous copies of records relating to the performance of and payment for that work.

7. Mr Hedges deposed that the plaintiff’s application to vacate the hearing date came before McDougall J on 18 January 2013. The hearing date was vacated and a further amended statement of claim was filed which joined ROC as a defendant to the proceedings.

The parties’ submissions on the appropriate costs order

The plaintiff’s submissions

8. The plaintiff seeks an order against the unsuccessful defendants (Mr Popovic, Calabro and NTI) that they pay costs that include the plaintiff’s liability to a successful defendant (ROC) (Bullock order, named after Bullock v London General Omnibus Company [1907] 1 KB 264). In the alternative, the plaintiff submits that I ought order the unsuccessful defendants to pay ROC’s costs of the proceedings (Sanderson order, named after Sanderson v Blyth Theatre Co [1903] 2 KB 533).

9. The plaintiff submitted that his costs ought be paid by Mr Popovic, Calabro and NTI and that any liability he bore for ROC’s costs ought be borne by Mr Popovic, Calabro and NTI pursuant to a Bullock or Sanderson order. The plaintiff also contended that the Offer of Compromise ought not have the usual consequences, since it was not reasonable to expect him to accept an offer from a single defendant, ROC, thereby leaving the balance of the proceedings on foot. Mr King SC, who appeared with Mr Palmer for the plaintiff, contended that I ought infer that no mutually acceptable arrangement could be reached with all defendants and that, accordingly, it was reasonable for the plaintiff not to accept the Offer of Compromise.

10. The plaintiff also submitted that the Offer of Compromise, whilst substantial, did not amount to an offer that could reasonably be considered acceptable in the circumstances of this case, since its acceptance would not resolve the whole proceedings.

Mr Popovic’s and Calabro’s submissions

11. Mr Popovic and Calabro submitted that NTI should pay their costs of the cross-claim, and should also be liable for the costs for which they are liable to the plaintiff (on the footing that, if NTI had indemnified them, NTI would be liable to the plaintiff and they would not need to have been separately represented in the proceedings).

12. They resisted the plaintiff’s application that they ought bear the plaintiff’s liability to ROC for its costs, on the basis that the plaintiff made his own forensic decision to join ROC and was not encouraged to do so by either Mr Popovic or Calabro.

13. Mr Popovic and Calabro also sought interest on their costs on the footing that NTI was likely to appeal the decision and it could be some time before costs orders were met.

NTI’s submissions

14. NTI submitted that it ought not be liable for the plaintiff’s liability for the costs of ROC (either on the basis of a Bullock or a Sanderson order). It submitted that the joinder of ROC and the costs occasioned by its joiner resulted from a wilful and deliberate act of connivance by Mr Tabuso, the principal of Interfreight. It submitted that because Mr Popovic’s right to indemnity derived from Interfreight’s right to indemnity under the Fleet Motor Policy, Mr Popovic could not put himself in a better position than Interfreight and that he, accordingly, was adversely affected by Mr Tabuso’s conduct (which ought be attributed to Interfreight).

15. NTI submitted further that it was entitled to an order for costs thrown away by reason of the vacation of the hearing (due to commence on 29 January 2013) on 18 January 2013 as well as the vacation of the hearing date on 19 May 2015 (which was listed for hearing on 1 June 2015). NTI relied on the affidavit of Brent Arthur Hedges sworn 26 April 2016, referred to above.

16. In the alternative, NTI also submitted that, under the terms of the Fleet Motor Policy, NTI is not obliged to indemnify Mr Popovic or Calabro for the costs associated with the joinder of ROC by reason of Policy Exclusion 7(f).

17. Policy Exclusion 7(f) of the Fleet Motor Policy provides:

“We will not pay for;

7   Loss or damage or liability caused by:

. . .

(f)   an act or connivance by You or any person acting for You or on Your behalf, that is either wilful, deliberate or criminal.”

18. The word “We” is defined as meaning NTI. The words “You” and “Your” are defined as meaning the Client (or any of them) named on the Schedule. NTI accepted that Calabro was included on the Schedule but that Mr Popovic was not because he was insured only by reason of the extension clause (which covered employees of the insured).

19. NTI also applied for an order that Mr Tabuso pay NTI’s costs incurred and thrown away by the joinder of ROC, except to the extent that any part of those costs are ordered to be paid by another party. This matter will be dealt with separately as its determination depends on the costs orders I make between the parties to the proceedings, which will be addressed below.

Relevant principles

20. Costs are in the discretion of the Court: s 98 of the Civil Procedure Act 2005 (NSW). Rule 42.1 of the Uniform Civil Procedure Rules 2005 (NSW) provides that:

Subject to this Part, if the court makes any order as to costs, the court is to order that the costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs.

21. Rule 42.15A applies to a situation such as the present where an offer of compromise made in accordance with the rules is made by a defendant (ROC) and not accepted by the plaintiff and the defendant obtains judgment on the claim which is no less favourable than the terms of the offer. Rule 42.15A(2) provides:

(2) Unless the court orders otherwise:

(a) the defendant is entitled to an order against the plaintiff for the defendant’s costs in respect of the claim, to be assessed on the ordinary basis, up to the time from which the defendant becomes entitled to costs under paragraph (b), and

(b) the defendant is entitled to an order against the plaintiff for the defendant’s costs in respect of the claim, assessed on an indemnity basis:

(i) if the offer was made before the first day of the trial, as from the beginning of the day following the day on which the offer was made, and

(ii) if the offer was made on or after the first day of the trial, as from 11 am on the day following the day on which the offer was made.

Consideration

ROC’s application for costs

22. I propose to begin with the Calderbank offer and the Offer of Compromise. I am not satisfied that the Calderbank offer contains a sufficient degree of compromise to warrant alteration of the usual principles that costs on the ordinary basis follow the event.

23. I regard the Offer of Compromise as comprising a substantial element of compromise. The only significant argument in favour of ordering that the consequences of the plaintiff’s non-acceptance of the Offer of Compromise are such as to warrant ordering “otherwise”, is that it was made by one defendant only and did not deal with the whole proceedings. However, I am not persuaded that it would be appropriate to “otherwise” order. I reject the plaintiff’s argument that it was reasonable for him not to accept such a substantial offer on the ground that it did not bring the proceedings to a conclusion. It was open to him to accept ROC’s offer and continue to pursue his claims for damages against the other defendants: s 5(1)(b) of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW); Baxter v Obacelo Pty Ltd [2001] HCA 66; 205 CLR 635.

24. The test of reasonableness is to be determined at the time the offer was made: Regency Media Pty Ltd v AAV Australia [2009] NSWCA 368 at [33] per Spigelman CJ. At the time the Offer of Compromise was made all of the evidence adduced by ROC had been served and therefore it was known to the plaintiff that, although no employee of ROC could recall installing the hydraulic system, none of the business records indicated that the clevis mounts had been installed by ROC and ROC maintained that it did not perform such work. Moreover there were obvious questions about the credibility of Mr Tabuso and Mr Sanchez which were, or ought to have been known, at the time the offer was made.

25. I cannot conclude that the reason the plaintiff did not accept the Offer of Compromise was that it did not bring proceedings to an end, although so much was alleged on behalf of the plaintiff in reply (see above). It may be that the plaintiff adjudged that the amount offered, $2.5m, was insufficient unless he were to be successful against another defendant to augment the sum. Various possibilities may be conjectured but, in the absence of evidence, I am in no position to choose between them.

26. I am not satisfied that the plaintiff has established that there is any reason to make an order “otherwise” under UCPR r 42.15A(2). Accordingly, ROC is entitled to an order that the plaintiff pay its costs on an ordinary basis up to 10 March 2016 and from 11 March 2016 (being the day following the day the offer was made) on an indemnity basis.

The effect of exclusion clause 7(f) to the Fleet Motor Policy

27. Before turning to the question whether a Bullock or Sanderson order ought be made against Mr Popovic, Calabro and NTI in respect of the plaintiff’s liability for ROC’s costs, it is necessary to consider a further matter raised by NTI.

28. NTI accepted that ordinarily the first and second defendants would be entitled to an order that NTI pay their respective costs on their successful cross-claims since their liability to pay the plaintiff’s costs falls within the coverage extended to them under the Fleet Motor Policy. However, it contended that it was not liable to indemnify the first and second defendants for costs incurred by the joinder of ROC, since such costs were excluded by Policy Exclusion 7(f) which provided:

EXCLUSIONS TO THE POLICY

We will not pay for:

. . .

7   Loss or damage or liability caused by:

. . .

(f)   an act or connivance by You or any person acting for You or on Your behalf, that is either wilful, deliberate or criminal.

29. NTI submitted that my findings at [72], [89], [90], [95], [99] and [108] of the principal judgment had the effect that NTI’s liability for the costs of the first and second defendants would be excluded on the basis of the conduct of Mr Tabuso and, in particular, my finding at [89] that Mr Tabuso concocted a story with a view to implicating ROC. NTI submitted as follows:

“The concoction of a story to deflect liability away from the first, second and third defendants is clearly an act of connivance in the sense that Mr Tabuso conspired with Mr Sanchez. His misguided conduct was undoubtedly an attempt to protect the uninsured interests of the first, second and third defendants. Accordingly he was acting on behalf of those defendants. If a Sanderson or Bullock order is made against the first or second defendant, it will have been as a direct result of that connivance. Accordingly, NTI is not, as the plaintiff suggests, “effectively responsible for the obligations of the first and second defendants and Interfreight Pty Limited.”

30. On the assumption (and it was not contended to the contrary) that liability for costs is included within the opening words of exclusion cl 7(f), “Loss or damage or liability”, the question is whether the liability for costs (occasioned by a Bullock or Sanderson order) constituted an act or connivance “by You or any person acting for You or on Your behalf”. NTI submitted that the “You” meant the first, second or third defendants and that Mr Tabuso was acting on their behalf because his version (which I found to be untrue), if accepted, would have had the effect of benefiting them, if they were (potentially, although not, having regard to my findings), uninsured.

30. The first point is that Mr Tabuso could not have been acting on behalf of Interfreight at the relevant time since he did not implicate ROC in the installation of the clevis mounts until after Interfreight had ceased to exist, having been deregistered on 28 April 2012: s 601AD of the Corporations Act 2001 (Cth).

31. I am not satisfied that Mr Tabuso was acting on behalf of Mr Popovic when he represented to his own solicitors and to NTI that ROC installed the clevis mount. Although Mr Popovic was an employee of Interfreight, and Mr Tabuso was a director, it does not follow that Mr Tabuso was acting on behalf of Mr Popovic. Further, although Mr Popovic could have received an incidental benefit from Mr Tabuso’s representations (if he had been found liable, and uninsured), more is required before a finding can be made that Mr Tabuso was acting on his behalf.

32. As for Calabro, Mr Tabuso was not a director of that company, although his wife was. Once again, although Calabro could have received an incidental benefit from Mr Tabuso’s representations (if it had been found liable, and uninsured), more is required before a finding can be made that Mr Tabuso was acting on its behalf.

33. NTI further submitted that, as Mr Popovic claimed on the policy through Interfreight, his rights can raise no higher than the indemnity that would be available through Interfreight. It submitted that because Interfreight could not get indemnity for the costs, by reason of cl 7(f) (since Mr Tabuso would, as director, be acting on behalf of Interfreight), Mr Popovic could not get indemnity. I reject this argument. Mr Popovic’s rights under the policy may well derive from those of Interfreight (since he was its employee), but it does not follow that he is affected by what a former director of Interfreight did, after Interfreight ceased to exist.

34. For these reasons (and having regard to the principles that apply to the construction of exclusion clauses which are referred to in the principal judgment at [219] – [221]) I am not persuaded that exclusion cl 7(f) applies. As NTI accepts that, but for cl 7(f), it would be liable for Mr Popovic and Calabro’s liability for the costs of the plaintiff, there is no need to consider NTI’s position further on this question.

The plaintiff’s application for a Bullock or Sanderson order against the first, second and sixth defendants in respect of his liability for ROC’s costs

36. The first matter for consideration is whether, and in what circumstances, ROC was joined to the proceedings. The principal judgment contained a detailed narrative of the progress of the pleadings, which identified when each party was joined and what followed from the joinder. It is sufficient for present purposes to refer to the procedural summary in the principal judgment.

37. As appears from that narrative, the plaintiff sought to find a defendant with the wherewithal to meet a substantial judgment. The plaintiff joined NRMA Insurance Limited (NRMA) as fifth defendant two months after it commenced the proceedings. The plaintiff joined NTI on 17 September 2010. NTI denied indemnity in its defence filed on 22 November 2010. By 27 July 2011 the plaintiff accepted that his claim was not covered by the applicable compulsory third party policy and judgment was entered by consent in favour of the NRMA.

38. As at that time, the plaintiff was at risk, if the NTI policy did not extend to the other defendants’ liability to him, of obtaining a worthless judgment against the first, second and third defendants. There was a forensic imperative to find a solvent defendant who was liable to the plaintiff. I assume that this was the reason for the further investigation which led to the conference in January 2013 at which Mr Palmer was instructed that ROC was responsible. It is not clear who gave him those instructions but I infer that it was Mr Tabuso, the former principal of Interfreight (which had, by that time, been deregistered).

39. On 18 January 2013 MaDougall J granted leave to the plaintiff to join ROC to the proceedings on the basis of work ROC had performed on the trailer thirteen months before the accident. This necessitated an adjournment of the proceedings and led to the filing of a fourth amended statement of claim on 8 February 2013 in which the plaintiff alleged that ROC had negligently installed the left clevis mount and was accordingly responsible for the weld that failed and caused his injuries.

40. On 15 March 2013 leave was granted to NTI to file a cross-claim against ROC pursuant to ss 5 and 6 of the Law Reform (Miscellaneous Provisions) Act 1946. This cross-claim (the second cross-claim) was filed on 3 May 2013.

41. After ROC had served its evidence (denying that it had installed the clevis mount) the plaintiff sought to amend the fifth amended statement of claim to allege in the alternative that, in the event that ROC did not install or weld the left clevis mount, it was nonetheless in breach of its duty of care to the plaintiff by failing to ensure that the clevis mount that was already welded to the trailer was adequate to support the load. On 29 October 2015 Button J granted leave to the plaintiff to file a sixth amended statement of claim, which was filed on 4 November 2015.

42. The next relevant matter to consider is whether the conduct of the unsuccessful defendants contributed to the plaintiff’s joinder of ROC. I do not discern any basis on which it could be said that either Mr Popovic (who was employed by Interfreight at the time of the accident) or Calabro (which owned the trailer) urged the plaintiff to join ROC. Interfreight was deregistered on 28 April 2012 and therefore was incapable of doing anything after that date. The conduct of Mr Tabuso cannot be attributed to Interfreight after its deregistration because it ceased to exist.

43. Although the sequence was that the plaintiff joined ROC before ROC was joined to the cross-claims, I do not consider that much can be made of this since it was in the interests of the plaintiff and each of the other defendants that ROC be found liable. The plaintiff and the first and second defendants had as much idea as each other as to whether ROC would be found liable. NTI had a comparative advantage since it had been privy to Mr Tabuso’s original version (implicating Hoxton) and can therefore be expected to have been more sceptical towards his subsequent (and inconsistent) version.

44. A further matter to be taken into account in the exercise of my discretion as to costs is that the first and second defendants would not have been required to be separately represented at all if NTI had (as I have found that it should have) indemnified them for their liability to the plaintiff. Moreover, in that event, the plaintiff would not have needed to join ROC at all since it would have had a solvent insurer (NTI) behind two defendants who were, on my findings of fact, plainly liable to the plaintiff. In all the circumstances I am persuaded that it is appropriate to make an order that NTI ought pay the plaintiff’s liability to ROC for its costs, subject to the exception that arises from the consequence of the plaintiff’s non-acceptance of the Offer of Compromise.

The costs thrown away by the vacations of the hearing dates ordered on 18 January 2013 and 19 May 2015

45. It is also necessary to determine NTI’s application that a separate order be made as to the costs thrown away by the adjournment of the hearing which was due to commence on 29 January 2013 as well as the hearing that was due to commence on 1 June 2015. I am not persuaded that it is appropriate to make a separate costs order relating to those applications for an adjournment. I do not regard the circumstances or the evidence to be sufficient to distinguish the costs of these adjournments from the general costs orders made in the proceedings.

Whether any Sanderson or Bullock order ought include the plaintiff’s liability to pay ROC’s costs on an indemnity basis

46. NTI submitted that, if a Sanderson or Bullock order was made in favour of the plaintiff, such order ought be limited to costs on the ordinary basis on the ground that neither Mr Popovic, nor Calabro, nor NTI was party to the Offer of Compromise. I accept this submission. I am not persuaded that it is appropriate to visit the consequences of the non-acceptance of the Offer of Compromise on any party who was not privy to it. On this basis I consider that the plaintiff ought bear the difference between ROC’s costs on an indemnity basis and ROC’s costs on the ordinary basis for that limited period (after 10 March 2016), since it would not be in the interests of justice to visit these additional costs on the defendants.

Whether an order for interest ought be made in respect of the first and second defendants’ costs

47. The first and second defendant sought interest on costs having regard to the likelihood of an appeal by NTI. Section 101 of the Civil Procedure Act relevantly provides for the payment of interest with respect to costs:

(4) Unless the court orders otherwise, interest is payable on an amount payable under an order for the payment of costs.

(5) Interest on an amount payable under an order for the payment of costs is to be calculated, at the prescribed rate or at any other rate that the court orders, as from the date the order was made or any other date that the court orders.

48. The first and second defendants did not expand their submissions to explain why the provision made by s 101(4) and (5) was insufficient to protect their position. I have found that NTI is liable to pay the costs for which the first and second defendants are liable, as well as for their costs. I am not persuaded that any other order ought be made in respect of interest having regard to the terms of s 101(4) and (5).

The application by NTI that Mr Tabuso pay its costs of the joinder of ROC

49. By notice of motion filed on 28 April 2016, NTI applied for the following orders:

1.   That John Tabuso pay the costs of NTI incurred and thrown away by reason of the joinder of the Seventh Defendant to these proceedings excepting to the extent that any such costs are ordered to be paid by another party to the proceedings.

2.   That John Tabuso pay the costs of this application.

50. I was informed at the short hearing on 5 May 2016 (before further written submissions were provided) that Mr Tabuso may have been an undischarged bankrupt. However, since that time I have been informed that it is agreed between respective counsel for NTI and Mr Tabuso that NTI does not require leave to proceed against Mr Tabuso under s 58 of the Bankruptcy Act 1966 (Cth). Although Mr King SC, who appeared with Mr Palmer for the plaintiff, indicated on 5 May 2016 that the plaintiff was considering filing a notice of motion to the same effect as that filed by NTI, the plaintiff did not ultimately press any such motion. Accordingly, the only extant motion is that of NTI referred to above.

51. NTI submitted that an order should be made against Mr Tabuso pursuant to s 98 of the Civil Procedure Act on the bases that he had played an active role in the litigation; his wrongful conduct caused NTI to join ROC; and he ought, accordingly, bear the cost of the joinder. NTI also submitted that although Mr Tabuso might not have been directly involved with all the consequences of his initial falsehood (such as the subsequent amendment to the statement of claim by the filing of the sixth amended statement of claim) he, as it were, set the ball rolling and should be held liable for all the consequences.

52. Mr Afshar, who appeared on behalf of Mr Tabuso, submitted that NTI had failed to discharge its onus of establishing the requisite matters that would form a proper basis for making a non-party costs order. Mr Afshar identified the following relevant findings from the principal judgment (some of which are set out in the reasons above):

1. The accident took place on 16 September 2007.

2. In May 2008 Mr Tabuso told a WorkCover inspector that Hoxton had installed the clevis mounts although this work was probably done by Interfreight ([29], [69]-[71] of the principal judgment).

3. On about 2 June 2009 NTI instructed its solicitor, Mr Hedges in relation to the question of its liability under the NTI Fleet Motor Policy (the Policy).

4. On about 17 September 2010 NTI was joined to the proceedings. It admitted that the Policy covered the liability of the first three defendants but refused indemnity on the basis of various exclusion clauses ([5] of the principal judgment).

5. In November 2010 Mr Tabuso told Mr Steven Hall, a welding inspector retained by NTI, that Hoxton had installed the clevis mounts. Mr Hall had difficulty reconciling Mr Tabuso’s statements at the site visit with photographs of the trailer Mr Hall reported his disquiet to NTI in the following terms:

I am not fully convinced that the bracket produced by the owner [John Tabuso] has not been removed and replaced additionally to what had been mentioned at the time of the site visit. The bracket may have been removed and reused by the various companies carrying [out] the work on the trailer or by the owner himself if the bracket had in fact broken off in the time before the said accident involving Mr Zhang.”

([81] of the principal judgment).

6. On 18 January 2013 the plaintiff was granted leave to join ROC. He alleged that ROC had negligently installed the clevis mount and was therefore responsible for the failed weld.

7. ROC served evidence that it had not installed the clevis mount. The plaintiff thereafter sought leave to amend his pleading to allege that ROC was negligent in failing to ensure that the clevis mount was secure and sound before it installed the hydraulic system for the elevation of the ramp on it. Leave was granted, as a result of which the plaintiff filed the sixth amended statement of claim on 4 November 2015.

8. The accident was caused by the failure of the clevis mount ([46] and [66]).

9. Neither Mr Sanchez, nor Mr Tabuso was a credible witness.

10. NTI defended the proceedings on several bases, but principally on the basis that its liability was excluded by the Policy. This was independent of any involvement of Mr Tabuso.

53. It was submitted on behalf of Mr Tabuso that there was nothing exceptional about the case, which was, relevantly, one where the evidence of a witness (Mr Tabuso) had been rejected as false. Mr Afshar submitted that Mr Tabuso did not have the power to decide whether ROC was joined (since the party of which he was a director, Interfreight, had been deregistered and was therefore no longer a party to the proceedings when the issue first arose as to ROC’s joinder). Mr Afshar also submitted that NTI was aware of the inconsistencies between the versions given by Mr Tabuso (which ultimately led, at least in part, to my rejecting his evidence) and that there was nothing to suggest that NTI would have taken a different course irrespective of the content of Mr Tabuso’s evidence.

The relevant principles that apply to costs orders against non-parties

54. The discretion to order costs against a non-party is within s 98 of the Civil Procedure Act. The power is to be exercised judicially. Although guidance can be obtained from the authorities, the statements of principle ought not be read as a gloss on the wording of s 98, which confers a general discretion. The interests of justice are a relevant consideration: Yu v Cao [2015] NSWCA 276 at [138] and [139]. The exercise of the power to award costs against a non-party is regarded as exceptional: Knight v FP Special Assets Ltd (1992) 174 CLR 178 at 185.

55. It is open to me to have regard, in exercising the costs discretion, to my findings in the principal judgment: Yu v Cao at [147].

56. Where the person against whom a costs order is sought was a witness in the proceedings, the following principle is relevant (as derived from Symphony Group Plc. v Hodgson [1994] QB 179 per Balcombe LJ at 193 (approved in Yu v Cao at [148]):

(7) Again, the normal rule is that witnesses in either civil or criminal proceedings enjoy immunity from any form of civil action in respect of evidence given during those proceedings. One reason for this immunity is so that witnesses may give their evidence fearlessly … In so far as the evidence of a witness in proceedings may lead to an application for the costs of those proceedings against him or his company, it introduces yet another exception to a valuable general principle.

57. Mr Tabuso was, relevantly, little more than a witness who gave untruthful evidence (that ROC had installed the clevis mount) since by the time he gave the version which implicated ROC, Interfreight had been deregistered. NTI had a strong forensic interest in Mr Tabuso’s evidence being accepted. It had to hand all, or substantially all, of the material which was ultimately used by Mr Cavanagh SC, who appeared with Ms Dinkha for ROC, to discredit Mr Tabuso in cross-examination. Notwithstanding the obvious inconsistencies in Mr Tabuso’s accounts, NTI took the forensic chance that Mr Tabuso’s evidence would be accepted and that ROC would be found to be liable on the basis of his evidence.

58. It is telling that, even after ROC’s evidence had been served, NTI repeated the allegations made by the plaintiff in his sixth amended statement of claim against ROC on the basis of the alternative case, which presupposed that Mr Tabuso’s evidence that ROC had installed the clevis mount would not be accepted.

59. I am not persuaded that it is in the interests of justice to order Mr Tabuso to pay NTI’s costs incurred and thrown away by the joinder of ROC.

Orders

60. I make the following orders:

1. Order the plaintiff to pay the seventh defendant’s costs (including any reserved costs) of the proceedings on the ordinary basis until 10 March 2016 and on an indemnity basis thereafter.

2. Subject to (3) and (4) below, order the first, second and sixth defendants to pay the plaintiff’s costs (including any reserved costs) of the proceedings.

3. Order the sixth defendant to pay the costs which the plaintiff is liable (pursuant to order (1)) to pay the seventh defendant but on the ordinary basis only.

4. Order the sixth defendant to pay the costs to which the first and second defendants are liable to pay to the plaintiff.

5. Order the sixth defendant to pay the first and second defendants’ costs of the proceedings, including their cross-claims.

6. Dismiss the sixth defendant’s notice of motion filed on 26 April 2016.

7. Order the sixth defendant to pay the costs of John Tabuso, the respondent to its notice of motion filed on 26 April 2016.

8. Note that the effect of orders (1) and (3) is that the plaintiff remains liable to the seventh defendant for the difference between its costs on an indemnity basis and its costs on the ordinary basis for the period from 10 March 2016.

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Decision last updated: 25 May 2016