New South Wales Court of Appeal CITATION: Gordian Runoff Ltd v Heyday Group Ltd [NO.2] [2005] NSWCA 124 HEARING DATE(S): On submissions JUDGMENT DATE: 22 April 2005 JUDGMENT OF: Beazley JA at 1; Santow J at 2; Tobias JA at 3 DECISION: (1) Order that the appellant pay the costs of the third respondent on the appeal and the costs of the second respondent on the basis of a submitting appearance; (2) Order that the third respondent pay the costs of the second respondent of and incidental to its appearance on the hearing of the appeal on 6 December 2004 CATCHWORDS: COSTS - Second respondent's interests not affected by orders sought in Notice of Appeal - Second respondent only appeared at hearing of appeal to meet submission made, but later withdrawn, by third respondent - Appeal dismissed - Which party to pay second respondent's appeal costs - LEGISLATION LEGISLATION CITED: N/A CASES CITED: N/A Gordian Runoff Limited Heyday Group Pty Limited PARTIES: Baulderstone Hornibrook Pty Limited GIO Workers Compensation (NSW) Pty Limited Steven John Garrard FILE NUMBER(S): CA 40335/04 A: Andrew Saxton (Solicitor) 1R: N/A COUNSEL: 2R: J C Sexton SC 3R: Larry King SC 4R: N/A SOLICITORS: LOWER COURT JURISDICTION: District Court LOWER COURT FILE NUMBER(S): 12469/01 LOWER COURT JUDICIAL OFFICER: McLoughlin DCJ IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40335/04 BEAZLEY JA SANTOW JA TOBIAS JA Friday 22 April 2005 GORDIAN RUNOFF LIMITED v HEYDAY GROUP PTY LIMITED [NO.2] Judgment 1 BEAZLEY JA: I agree with Tobias JA. 2 SANTOW JA: I agree with Tobias JA. 3 TOBIAS JA: This appeal was heard on 6 December 2004. On 25 February 2005 the Court published its reasons and it was ordered that the appeal be dismissed. 4 The published reasons for judgment proposed that the appeal should be dismissed with costs. At the time the reasons were published by me, I was requested on behalf of the appellant to delay making any order for costs that would involve the appellant paying the costs of the second respondent (Baulderstone) as it desired to make submissions with respect to the costs of that party. The appellant made no objection to paying the third respondent's costs, that is, those of the GIO. 5 Accordingly, I gave liberty to the appellant and the GIO to apply to the Court regarding the costs of Baulderstone within 14 days and directed that any submissions with respect to those costs be filed within that time upon the basis that the matter would then be decided on the papers. Submissions have now been received from the appellant, Baulderstone, and the GIO. 6 In order to put the issues raised by the submissions in context, it is necessary to restate briefly the relevant facts. The fourth respondent (the employee) sued the first respondent (the employer) and Baulderstone who was the occupier and controller of the premises where the employee was injured. The employer was a sub-contractor engaged by Baulderstone. The contract between them provided that the employer would indemnify Baulderstone in respect of any injury to any employee of the employer. 7 The employer had a workers compensation insurance policy with the GIO and a construction works legal liability insurance policy with the appellant (Gordian). At first instance the primary judge found in favour of the employee and apportioned responsibility between the employer and Baulderstone. His Honour also found that the GIO policy responded only to the amount payable to the employee for which the employer had been held responsible and that the Gordian policy responded to the amount that the employer was liable to pay to Baulderstone under the contractual indemnity (namely, the remainder of the damages to which the employee was entitled). 8 Gordian appealed to this Court arguing that the employee's judgment against the employer created a liability to which the GIO policy should fully respond. 9 A number of cross-claims were filed, one of which was by the employer against the GIO claiming indemnity with respect to the employee's claim. On the appeal, Gordian sought an order that judgment be entered for the employer against the GIO on the employer's cross-claim against the GIO for the entirety of the employer's liability to the employee and which would include the amount in respect of which the employer was required to indemnify Baulderstone under their sub-contract. 10 Gordian now submits that the foreshadowed costs order, that it pay the respondents' costs of the appeal, be varied with respect to the costs of Baulderstone who, it is contended, should bear its own costs. In support of this proposition, Gordian submits that firstly, the orders sought by it in its Notice of Appeal did not impact upon Baulderstone (apart from the orders sought in respect of the costs of the appeal) because the effect of those orders would only have been to substitute the GIO in place of Gordian as the insurer liable to indemnify the employer in respect of its contractual liability to Baulderstone. Baulderstone, so it was suggested, acknowledged as much in its written submissions. Secondly, it was submitted that it was therefore unnecessary for Baulderstone to take an active part in the appeal and given that it chose to do so, it should meet its own costs with respect thereto. 11 Baulderstone submits that it is at least entitled to its costs of a submitting appearance. However, it further contends that it is entitled to its costs of the appeal generally for the following reasons. 12 Firstly, in its written submissions on the appeal, the GIO contended that Order 5 in Gordian's Notice of Appeal (that there be judgment for the employer against the GIO on the employer's cross-claim against it for the entirety of the employer's liability to the employee including the amount in respect of which it was required to indemnify Baulderstone under the sub-contract) was not available as Gordian was not a party to that cross-claim. Secondly, if Gordian succeeded in the appeal by establishing that the whole of the employee's damages were responded to by the GIO policy but was found to be disentitled to the order it sought on the employer's cross-claim against the GIO, then Baulderstone would be left in the position where it had a judgment in its favour against the employer (who was insolvent) but the latter would not have had a judgment against either Gordian or the GIO in respect of its liability to Baulderstone. 13 Thirdly, it was therefore appropriate for Baulderstone to appear at the hearing of the appeal to protect its interests so as to ensure that the employer's liability to it under the sub-contract was the subject of an order for indemnity either under the GIO policy or the Gordian policy. 14 It will be apparent that Baulderstone's interest in the appeal was, therefore, to resist the contention of the GIO that it (Baulderstone) had no interest in contending that there should be judgment in favour of the employer against the GIO on the former's cross-claim. The GIO's written submissions with respect to this issue were in the following terms: "4. …There is also a flaw in the Notice of Appeal. Order 5 is incompetent and is not available to the appellant [Order 5 as sought in the Notice of Appeal was that there be judgment for the employer on its cross-claim against the GIO for the entirety of the employer's liability to the employee]. It was not a party to the Cross-claim by the first respondent and no order was made pursuant to Part 20 rule 4 (the equivalent of Part 6 rule 4 of the Supreme Court Rules ) such as might have given the appellant a basis for seeking to interfere in an aspect of the matter which was not an issue touching it. 5. Upon the hearing of the appeal the third respondent will contend that the Order 5 ought not to be entertained by the Court." 15 The GIO eventually abandoned this submission shortly before the hearing of the appeal but did not inform Baulderstone that it was proposed to do so until the commencement of the hearing. By that stage Baulderstone's costs of the hearing had been incurred including the briefing of senior counsel. 16 When called upon during the hearing of the appeal, senior counsel for Baulderstone confirmed that the only real reason that he appeared was to meet the submission made in paragraph 4 of the GIO's written submissions. In this respect, those submissions (which are dated 27 July 2004) succeeded Baulderstone's written submissions which were dated 21 June 2004. During the exchange which then took place, senior counsel for Baulderstone submitted that the GIO should, in the circumstances, pay his client's costs of his appearance at the hearing of the appeal and that the appellant should pay Baulderstone's costs on a submitting basis. 17 Senior counsel for the GIO responded by suggesting that the issue raised in paragraph 4 of his written submissions had been abandoned, and that this had been notified to Baulderstone's solicitors well prior to the hearing. It appears, however, that although the GIO's solicitor informed Gordian's solicitor that this was so, its abandonment of the submissions in paragraph 4 was not notified to Baulderstone's solicitor. The GIO therefore accepts that the first time that that solicitor and his counsel became aware that the point was to be abandoned was at the commencement of the hearing of the appeal. 18 However, the GIO submits that notwithstanding the foregoing, Baulderstone's solicitors ought to have communicated with the appellants and/or the GIO's solicitors at an earlier stage of the appeal and well before it went to the expense of briefing counsel to ascertain whether paragraph 4 of the GIO's written submissions was to be pressed. If that had occurred, so it is contended, "there would seem little to displace the conclusion that … it could have brought this feature of the case to the same conclusion at a convenient earlier stage." 19 Accordingly, the GIO submits that as it contested an order sought by the appellant "that was legitimately available and ought to have put the appellant and the third (sic) respondent on inquiry as to lead to its earlier abandonment" no proper basis exists to justify an order that the GIO pay the whole or any part of Baulderstone's costs of the appeal. 20 In my opinion there is no merit in the GIO's submissions. It raised an issue which affected the interests of Baulderstone. It was a matter for it as to whether and when it would abandon the point. I can find no justification to penalise Baulderstone for failing to second-guess the GIO's decision in this regard by ascertaining whether it was making a serious submission that it intended to press. Having raised the issue, the onus lay fairly and squarely upon the GIO to decide whether it intended to abandon the issue and, if so, to communicate that decision to Baulderstone expeditiously. It did not do so. 21 In the foregoing circumstances it seems to me that it was reasonable for Baulderstone to be represented at the hearing in order to refute the contention in paragraph 4 of the GIO's written submissions which were not abandoned (on Baulderstone's understanding) until the commencement of the hearing of the appeal. It is not contested that, had that submission been maintained and been successful, the employer would have been left without a judgment against either of the insurers for the amount payable by it to Baulderstone under the contractual indemnity. As the employer was then insolvent, the consequence would have been that Baulderstone would have 'fallen between two stools' and been left in a position where the amount payable to it under the contractual indemnity would have been irrecoverable. 22 It is thus apparent that had it not been for paragraph 4 of the GIO's written submissions, Baulderstone would (and should) have filed a submitting appearance. There is nothing in its written submissions of 21 June 2004 that required Baulderstone to be represented at the hearing, let alone by senior counsel. It follows that the appellant should pay Baulderstone's costs of the appeal on the basis of a submitting party. On the other hand, the briefing of senior counsel and his appearance at the hearing of the appeal was due solely to paragraph 4 of the GIO's abandoned written submissions but at a point of time too late to prevent the costs of his briefing and appearance being incurred. Accordingly, in my opinion, the GIO should be ordered to pay Baulderstone's costs of and incidental to its appearance on 6 December 2004. 23 I would therefore propose the following orders with respect to the costs of the appeal: (1) Order that the appellant pay the costs of the third respondent on the appeal and the costs of the second respondent on the basis of a submitting appearance; (2) Order that the third respondent pay the costs of the second respondent of and incidental to its appearance on the hearing of the appeal on 6 December 2004. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.