New South Wales Supreme Court CITATION : Sam Chamma v Solima & Sons & Anor [2008] NSWSC 382 HEARING DATE(S) : 21 April 2008 JUDGMENT DATE : 7 May 2008 JUDGMENT OF : Patten AJ at 1 DECISION : See paragraph 24 Uniform Civil Procedure Rules LEGISLATION CITED : Workers Compensation Act 1987 Workers Compensation Regulation Corbett v Toll Stevedoring Pty Ltd & Ors [2007] NSWSC 749 CASES CITED : Calderbank v Calderbank [1975] 3 All ER 333 SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 Elite Protective Personnel Pty Ltd v Salmon [2007] NSWCA 322. Sam Chamma - Plaintiff PARTIES : Soliman & Sons Pty Ltd - First Defendant Chubs Construction Pty Ltd - Second Defendant FILE NUMBER(S) : SC 20252 of 2005 Mr P Semmler QC with Mr G Walsh- Plaintiff COUNSEL : Mr P Jones - First Defendant Mr D O'Dowd - Second Defendant CMC Lawyers - Plaintiff SOLICITORS : Lee and Lyons Lawyers - Frist Defendant Bartier Perry - Second Defendant IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION Patten AJ 7 May 2008 No: 20252 of 2005 Sam Chamma v Soliman & Sons Pty Ltd – First Defendant Chubs Construction Pty Ltd – Second Defendant JUDGMENT 1 On 5 March 2008, I published reasons for judgment in this matter. I deferred making any orders until the parties had an opportunity to consider the reasons and make submissions regarding costs. Such submissions were made on 21 April. 2 On 21 April, my attention was drawn to some arithmetical errors in the published reasons, which I correct in the schedule to this judgment. 3 There is consent to a verdict being entered against the First Defendant (Soliman) for $1,402,460 and against the Second Defendant (Chubs) for $890,676. It should be declared that those sums are not cumulative and that whole or part satisfaction of one verdict should pro tanto satisfy the other. 4 In relation to costs against Soliman, Mr Semmler QC, senior counsel for the Plaintiff, relied upon an offer of compromise dated 29 August 2007 served upon Soliman's solicitors, purportedly pursuant to rule 20. 26 of the Uniform Civil Procedure Rules (UCPR). The compromise offered on 29 August 2007 during the trial was to accept $1,182,195 plus costs, inclusive of Workers Compensation payments and Mr Semmler submitted that in accordance with rule 42.14, his client is entitled to costs on the ordinary basis up to 11am on 30 August 2007 and on an indemnity basis thereafter. Mr Jones, counsel for Soliman, conceded that his client should bear some proportion of the Plaintiff's costs on an indemnity basis, the offer not having been accepted. 5 With regard to Chubs, Mr Semmler contended that is should pay indemnity costs from 31 August 2006. This contention arises from the fact that on 31 August 2006, a letter was sent by the Plaintiff's solicitor to Chubs' solicitors in the following terms (omitting formal parts): "For the purposes of Regulation 94 of the Workers compensation Regulation 2003, the Plaintiff offers to settle the past and future economic loss component of this claim against Chubs Construction and against the current Supreme Court Defendant being Soliman & Sons Pty Ltd in the sum of $550,000 plus costs. The above offer is made to all potential Defendants being Chubs construction Pty Ltd and Soliman & Sons Pty Ltd and is an offer to settle the economic loss component of the claim against both corporations. The above-named offer is open for a period of 14 days after which it is withdrawn." 6 The above letter was not a formal offer within rule 20.26 but is relied on as a "Calderbank offer", (Calderbank v Calderbank (1975) 3 All ER 333). 7 The offer was not accepted but nearly 3 months later a further offer was made by the Plaintiff to Chubs, such offer being relied upon in the alternative. This offer was made in the context of a mediation. It was handwritten and handed to the solicitors for Chubs at the mediation. It was in the following terms: "Sam Chamma The Plaintiff offers to settle the economic loss component of his claim against the defendant in the work injury damages claim subject of this mediation and the offer is also made to the defendant, Soliman & Sons in the related Supreme Court proceedings, matter No. 20252/2005. The offer is a joint offer made to both abovementioned defendants. Economic Loss Component Offer is $500,000 plus costs inclusive of incapacity payments made by the employer but clear of all other payments made by the employer under the Workers Compensation Act 1987. 14.11.06" The offer was not accepted. 8 The action against Chubs was subject to the Workers Compensation Act 1987 (the WCA) and the Workers Compensation Regulation (the Regulation). The following clauses of the Regulation have particular relevance: "89 Costs where claimant no less successful than claimant's final offer If a claimant obtains an order or judgment on a claim that is no less favourable to the claimant than the terms of the claimant's final offer of settlement in mediation under the 1998 Act as certified by the mediator under section 318B of the 1998 Act, the court is to order the insurer to pay the claimant's costs on the claim assessed on a party and party basis. 90 Costs where claimant less successful than insurer's final offer or insurer found not liable (1) If a claimant obtains an order or judgment on a claim that is less favourable to the claimant than the terms of the insurer's final offer of settlement in mediation under the 1998 Act as certified by the mediator under section 318B of the 1998 Act, the court is to order the claimant to pay the insurer's costs on the claim assessed on a party and party basis. (2) If a claimant does not obtain an order or judgment on a claim (that is, if the court finds the insurer has no liability for the claim), the court is to order the claimant to pay the insurer's costs on the claim assessed on a party and party basis. 91 Costs in other cases Except as provided by this Subdivision, the parties to court proceedings for work injury damages are to bear their own costs. ………………………………. 94 Multiple parties Where 2 or more defendants are alleged to be jointly or jointly and severally liable to the claimant and rights of contribution or indemnity appear to exist between the defendants, this Subdivision does not apply to an offer of settlement unless: (a) in the case of an offer made by the claimant — the offer is made to all the defendants and is an offer to settle the claim against all of them, and (b) in the case of an offer made to the claimant: (i) the offer is to settle the claim against all the defendants concerned, and (ii) where the offer is made by 2 or more defendants — by the terms of the offer the defendants who made the offer are jointly or jointly and severally liable to the claimant for the whole amount of the offer." ………………………………. 113. This division does not limit any power of a court or the Commission to determine in any particular case the amount of costs payable or that the amount of the costs is to be determined on an indemnity basis." 9 Mr O'Dowd, counsel for Chubs, submitted that within clause 89 of the Regulation the Plaintiff had not obtained a result "no less favourable" than his final offer at mediation. This submission was based upon what I regard as the fallacious proposition that Chubs' liability is only $226,669 viz 25% of $890,676. The fallacy is contained in the circumstance that the verdict to be found against Chubs is $890,676 and the Plaintiff will be perfectly entitled, if he so chooses, to execute for that sum against Chubs. The apportionment of liability between Soliman and Chubs affects only their liability as between themselves and has nothing to do with the Plaintiff. 10 Mr O'Dowd also submitted that I should follow the reasoning of Studdert J in Corbett v Toll Stevedoring Pty Ltd & Ors [2007] NSWSC 749 where His Honour refused to make an order for costs against an unsuccessful defendant, which would have the effect of providing for the plaintiff's costs against an employer defendant. However, while Mr O'Dowd submitted that the two cases are on all fours, in my view, that is not the case. In Corbett, there was no mediation and therefore clause 89 had no application. The only offer made by the plaintiff (which Studdert J held complied with clause 94) was to accept a sum greater than the sum which the plaintiff recovered. In those circumstances Studdert J held that clause 91 should apply and I certainly do not question the correctness of that decision. 11 In this case there was a mediation, the Plaintiff offered to accept $500,000 from Chubs ($50,000 less than the offer previously made) and the offer was not accepted. Indeed, the mediator certified that Chubs made no offer of compromise. 12 In the circumstances, the Plaintiff, in my opinion, is entitled at least to an order that Chubs pay his costs on a party and party basis, in accordance with clause 89. I need not pause to consider whether the quantum of costs so recoverable is affected by schedule 7 to the Regulation. 13 The question of indemnity costs remains. In deciding whether to order indemnity costs following the failure of the offeree to accept a Calderbank offer where the offeror obtains a better result at hearing, the court must decide whether failure to accept was unreasonable or as Giles JA put it in SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323. "……. whether the offeree's failure to accept the offer, in all the circumstances, warrants departure from the ordinary rule as to costs, and that the offeree ends up worse off than if the offer had been accepted does not of itself warrant departure ……" 14 As Beazley JA pointed out in her ex curia paper delivered to the NSW State Conference of the Australian Lawyers Alliance 14-15 March 2008, "Two fundamental principles emerge: · That the Calderbank offer must be a genuine offer of compromise. · Secondly that the offeree must be provided with an appropriate opportunity to consider and deal with the offer." 15 Whilst I think it beyond argument that the Plaintiff's offers were genuine proposals for compromise, I have some difficulty in deciding whether Chubs had an appropriate opportunity to consider and deal with the offers made in August and November 2006. 16 The authorities make it plain that the opportunity of the other party to consider and evaluate the offer has more than a temporal connotation. In Elite Protective Personnel Pty Ltd v Salmon [2007] NSWCA 322 Basten JA said: "147] Greater sympathy may be accorded a defendant who receives an offer early in proceedings where there has been no reasonable opportunity for it to assess its questions of liability or its likely exposure in damages. Such matters must be assessed on a case by case basis. Usually litigation will not be the first that the defendant hears of the claim. However, a defendant which receives an offer of settlement in circumstances where it reasonably requires more time to consider its position would no doubt be advised to respond to that effect and, if necessary, make a counter-offer in due course. [148] Any assessment of the reasonableness of a party's conduct in not accepting an offer must be made on a summary basis. Just as it is undesirable that further expense be incurred in an assessment of costs, it is equally undesirable that questions of reasonableness be allowed to justify the presentation of further evidence or additional hearing time. [149] In the present case, the fact that the offer was said to be open for only seven days may well be a factor suggesting that a failure to accept the offer was not unreasonable. However, it is but one circumstances to be considered and should not by itself lead to any prima facie conclusion. The absence of any request for an extension of time would be relevant in assessing reasonableness, as would the fact that the offer was made in response to an offer by the defendants which itself required acceptance within seven days." 17 During the costs argument before me, Mr Jones sought to rely on the affidavit of Mr Nicholas Calnan, solicitor for Soliman, sworn 18 April 2008. He contended, in effect, that the Plaintiff's case changed with the service of further particulars and medical reports during the course of the trial. That may well be so, but the Plaintiff's prefiling statement served on 4 May 2006 made it clear that the Plaintiff claimed that since the accident he had been permanently incapacitated from entering the workforce. The statement was supported by service of a large number of medical and other reports. 18 Although the offer of 31 August 2006 to Chubs remained open for 14 days, so far as the evidence before me reveals, no complaint was made that this was too short a time, or that Chubs did not have an approppriate opportunity to consider and evaluate it. Similarly, no complaint was made in relation to the offer made during the course of mediation on 14 November 2006, even though it appears that the offer only remained open unitl 4pm on the day it was made. Perhaps it may be inferred that Chubs would not have participated in the mediation if it did not regard itself as supplied with sufficient particulars of the Plaintiff's claim. 19 In the circumstances, I think the Plaintiff has discharged its onus of showing that the letter of 28 August 2006 should be treated as a Calderbank letter and that Chubs' refusal to accept the offer was unreasonable. Acceptance would not, of course, have brought the whole litigation to an end but it would have disposed of the proceedigns against Chubs and saved, in the interests of both the community and the parties, significant expense. 20 Although, in the ordinary course, the Plaintiff would simply be entitled to an order for costs against Soliman and Chubs, I see practical difficulties and the potential for unfairness in a situation where, against Soliman, I intend to order inedmnity costs from 29 August 2007 and against Chubs from 15 September 2006 (the approximate date of expiry of the offer). I think those difficulties will be resolved without any prejudice to the Plaintiff if I do what Mr Jones suggested and that is order the parties to pay costs in those proportions which, as between themselves, they would be required to bear them. 21 Another outstanding matter is whether I should order that the Plaintiff is entitled to the services of two counsel, including one of Her Majesty's counsel. Mr Jones opposed such an allowance but I think the nature , magnitude and difficulty of liability and medical issues raised in the case manifestly warranted the retainer of two counsel by the Plaintiff. I reject Mr Jones' submission that, because on some issues, Mr O'Dowd's client had a similar interest to the Plaintiff, this in some way reduced the need for the Plaintiff to be represented as he was. 22 Soliman brought a formal cross claim against Chubs and sought an order upon that cross claim with costs. Mr O'Dowd opposed costs, submitting that the case was fought throughout on the basis that the question of contribution between Soliman and Chubs, both defendants to the Plaintiff's claim, was very much in issue. 23 I accept Mr O'Dowd's submission. While Soliman is entitled to a verdict upon its cross claim, I am of the opinion that it would be unjust to visit that verdict with any costs consequences. 24 Orders and Declarations: 1. Verdict for the Plaintiff against Soliman in the sum of $1,402,460. 2. Verdict for the Plaintiff against Chubs in the sum of $890,676. 3. Declaration that the sums in orders 1 and 2 are not cumulative and any satisfaction of either will pro tanto satisfy the other. 4. Declaration that as between themselves Soliman and Chubs should bear responsibility for the verdict against Soliman as to 75% Soliman, and as to 25% Chubs. 5. Verdict for Soliman against Chubs upon its cross claim for $222,669 with no order as to costs. 6. Order that Soliman pay 75% of the Plaintiff's costs on the ordinary basis up to 11am on 30 August 2007 and thereafter on an indemnity basis. 7. Order that Chubs pay 25% of the Plaintiff's costs on a party and party basis up to 15 September 2006 and thereafter on an indemnity basis. 8. Declaration that the Plaintiff's costs include fees for two counsel including Queen's Counsel. 9. Declaration that the whole of the judgment payable by Chubs is damages to which Part 5, Division 3 of the Workers Compensation Act 1987 applies. 10. Declaration pursuant to s151 Z (1)(b) of the Workers Compensation Act 1987 and s10 (2) of the Law Reform (Miscellaneous Provision) Act 1965, that the Plaintiff is liable to repay out of his damages 90% of the workers compensation paid to or on behalf of the Plaintiff by or on behalf of the Second Defendant in respect of the Plaintiff's injuries. 11. Exhibits may be returned. Schedule: Paragraph of judgment: Alteration 493 1. Substitute $890,676 for $989,640 2. Substitute $222,669 for $247,410 wherever appearing. 3. Substitute $170,594 for $145,853 4. Substitute $1,402,460 for $1,427,201 496 5. Substitute $1,402,460 for $1,427,201 496 6. Substitute $222,669 for $356,800. oOo 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.