Court of Appeal Supreme Court New South Wales Medium Neutral Citation: Amaca Pty Ltd (ACN 000 035 512) Under NSW Administered Winding Up) v Harry Daines Pty Limited (ACN 000 683 205) [2011] NSWCA 317 Hearing dates: 21 September 2011 Decision date: 30 September 2011 Before: Beazley JA at 1 Sackville AJA at 2 Decision: 1. Application for leave to appeal dismissed. 2. Applicant pay the Respondent's costs. [Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.] Catchwords: COSTS - Dust Diseases Tribunal dismisses cross-claim by defendant after principal proceedings settled - whether Tribunal erred in refusing to order costs in favour of cross-claimant - relevance of settlement of principal claim in accordance with apportionment determination Legislation Cited: Dust Diseases Tribunal Act 1989 Law Reform (Miscellaneous Provisions) Act 1946 Dust Diseases Tribunal (Standard Presumptions - Apportionment) Order 2007 Dust Diseases Tribunal Regulation 2007 Uniform Civil Procedure Rules 2005 Cases Cited: Power Technologies Pty Ltd v Energy Australia [2010] NSWCA 107 QBE Insurance (Australia) Ltd v Wallaby Grip Ltd [2007] NSWCA 43; 4 DDCR 331 Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin [1997] HCA 6; 186 CLR 622 Category: Principal judgment Parties: Amaca Pty Ltd (ACN 000 035 512) (Under NSW Administered Winding Up) (Applicant) Harry Daines Pty Limited (CAN 000 683 205) (Respondent) Representation: Mr D J Russell SC (Applicant) Mr D Miller (Respondent) DLA Piper Australia (Applicant) Moray & Agnew (Respondent) File Number(s): 2011/157869 Publication restriction: No Decision under appeal Date of Decision: 2011-04-19 00:00:00 Before: O'Meally P File Number(s): 284/2010/1 Judgment 1BEAZLEY JA : I agree that the application for leave to appeal should be dismissed with costs for the reasons given by Sackville AJA. 2SACKVILLE AJA : This is an application for leave to appeal from a decision of the Dust Diseases Tribunal (" Tribunal ") (O'Meally P) in relation to costs only. Leave to appeal is required under s 32(4)(b) of the Dust Diseases Tribunal Act 1989 (" DDT Act "). 3The amount of costs in dispute is very modest indeed. However, according to Mr Russell SC, who appeared for the applicant (" Amaca "), the application for leave to appeal raises an issue of principle. For reasons that will become apparent, I do not think that this is the case. 4The costs order was made in proceedings in the Tribunal that were commenced by Mr Nicholson (" the Plaintiff ") against Amaca. The Plaintiff sought damages for personal injury, alleging that he had contracted mesothelioma as a result of exposure to asbestos dust and fibre from products manufactured by Amaca, while he was employed by the respondent (" Daines ") between 1979 and 1981. Claims Resolution Process 5To understand the background to the costs dispute, it is necessary to say something about the claims resolution process ("CRP") for asbestos-related conditions established by the Dust Diseases Tribunal Regulation 2007 (" DDT Regulation" ). The relevant provisions are explained in some detail in Power Technologies Pty Ltd v Energy Australia [2010] NSWCA 107, at [13]-[17], [25]-[37], per Sackville AJA. For present purposes it is enough to note key elements of the CRP. 6An original defendant in proceedings must make any cross-claim as soon as practicable after being served with the Plaintiff's claim (cl 25(1)). A cross-claim that is not served and filed as required by cl 25 cannot be made in the proceedings, but can be pursued in other proceedings. A cross-defendant is obliged to file a reply to the cross-claim in a prescribed form within strict time limits (cl 26). 7Division 5 of Pt 4 of the DDT Regulation provides for an apportionment determination to be made. The operation of Div 5 was explained by Handley AJA in QBE Insurance (Australia) Ltd v Wallaby Grip Ltd [2007] NSWCA 43; 4 DDCR 331, at 335 [15] as follows: "Division 5 establishes a procedure for the summary but provisional determination of contribution claims in order to facilitate settlement of the plaintiff's claim and the satisfaction of any judgment he may obtain by judicial decision or settlement. A defendant or cross-defendant who is dissatisfied with the summary determination can pursue its strict rights and seek a more favourable determination at a trial but will be subject to significant costs sanctions if a substantially better result is not achieved. Meanwhile the summary determination is immediately enforceable. A clear purpose of the scheme is to prevent the final determination of the plaintiff's claim being delayed by contribution disputes." 8The defendants to a claim (including cross-defendants) must agree among themselves as to the contribution that each is liable to make to the Plaintiff's damages (cl 48(1)). If agreement is not reached within a specified period, the matter is to be referred to a Contributions Assessor. That process was described in Power Technologies , at [91], as follows: "The apportionment determination made by a Contributions Assessor is indeed the product of a ' rough and ready ' process. The Contributions Assessor is to determine the contribution that each defendant is liable to make on the assumption that the defendants (including cross-defendants) are liable: [cl 49(4)]. Moreover, the determination is to be made solely on the basis of the plaintiff's statement of particulars and the defendants' replies, together with the standard presumptions as to apportionment [cl 49(4)(a), (b)]. The Contributions Assessor must assess the contribution of a cross-defendant on the assumption that it is liable to the plaintiff, even if the cross-defendant denies any liability ... and provides cogent support in its reply for that denial." 9An apportionment determination is conclusively binding on the defendants (including cross-defendants) for the purposes of the settlement or determination by the Tribunal of the Plaintiff's claim and payment of the Plaintiff's damages (cl 52(1)). However, the determination is not binding for the purposes of the subsequent determination by the Tribunal of a dispute between defendants as to apportionment (cl 52(2)). Nonetheless, if a defendant disputes the contribution it is liable to make to the Plaintiff's damages and the Tribunal's judgment does not " materially improve " the defendant's position, it is liable to pay the other party's costs assessed on an indemnity basis (cl 52(3)). 10The effect of this scheme is that a cross-defendant who denies liability, but is forced in consequence of an apportionment determination to pay the sum assessed to or in respect of the Plaintiff's damages, is entitled to seek a refund of that payment. Moreover, if the cross-claim proceeds to a hearing, the onus remains on the cross-claimant (the original defendant) to establish an entitlement to a contribution or indemnity: Power Technologies , at [96]ff. Course of Events 11Amaca filed a cross-claim on 1 December 2010 against the respondent (" Daines ") seeking contribution or indemnity in relation to the Plaintiff's claim pursuant to s 5(1)(c) of the Law Reform (Miscellaneous Provisions) Act 1946. The cross-claim was filed in conformity with the requirements of the DDT Regulation. Daines filed a reply, also in compliance with the DDT Regulation. Daines denied liability, apparently on the basis that the Plaintiff was employed in a position that did not expose him to asbestos products. 12As Amaca and Daines could not reach agreement as to apportionment, the matter was referred to a Contributions Assessor. On 2 February 2011, the Contributions Assessor, applying the standard presumptions in the Dust Diseases Tribunal (Standard Presumptions - Apportionment) Order 2007, determined that Amaca should contribute 60 per cent of the Plaintiff's damages and Daines 40 per cent. 13On 5 April 2011, Amaca and Daines reached agreement that the claim should be settled. On 11 April 2011, judgment was entered by consent in the Tribunal in favour of the Plaintiff against Amaca for $275,000. On the same day, immediately after that judgment had been entered, Daines consented to an order that it pay the Plaintiff $110,000 (being 40 per cent of $275,000). Judgment was not entered on the cross-claim. The matter was settled prior to Daines filing any defence to Amaca's cross-claim and none was ever filed. 14Amaca subsequently sought an order from the Tribunal that Daines pay the costs of the cross-claim. Daines resisted the application and sought an order in its favour for the costs of Amaca's application. Primary Judgment 15It is important to appreciate that the principal argument advanced by Amaca in the Tribunal was that it was entitled to judgment on its cross-claim against Daines and that, as the successful party in the cross-claim, a costs order should be made in its favour. It is by no means clear from the transcript of argument in the Tribunal that Amaca advanced an alternative contention that even if it did not succeed in obtaining judgment on the cross-claim, the Tribunal should make a costs order in its (Amaca's) favour. If such an argument was advanced, it was put on the limited basis that Daines had effectively capitulated by meeting Amaca's claim in full and that Amaca should therefore receive its costs as, in effect, the successful cross-claimant. 16The primary Judge rejected Amaca's principal argument. His Honour held that the decision in Power Technologies meant that an apportionment determination did not entitle a cross-claimant to judgment in accordance with the terms of the determination (at [18]). Prior to the decision in Power Technologies it had been thought that the Tribunal was entitled and bound to give effect to an apportionment determination by entering appropriate verdicts and judgment (at [16]). That view, however, had been overturned by the Court of Appeal's decision. The primary Judge considered that since Amaca had not applied to discontinue its cross-claim and since it was not entitled to judgment, the appropriate course was to dismiss the cross-claim. 17The primary Judge noted (at [21]) that Uniform Civil Procedure Rules 2005 (" UCPR "), r 42.20(1) provided as follows: "" If the court makes an order for the dismissal of proceedings, either generally or in relation to a particular cause of action or in relation to the whole or part of any claim, then, unless the court orders otherwise, the Plaintiff must pay the defendant's costs of the proceedings to the extent to which they have been dismissed. " 18His Honour also recorded a submission made on behalf of Daines that in the absence of a hearing on the merits, the judgment of McHugh J in Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin [1997] HCA 6; 186 CLR 622, suggested that an order for costs would not usually be made. McHugh J had stated (at 624) that where no hearing has been held on the merits, a court is necessarily deprived of the factor that usually determines whether or how it will make a costs order. 19His Honour did not discuss how UCPR r 42.20(1), might apply to the case before him. However, he remarked (at [18]) that it was his view: "as a general rule to which there may be exceptions, that a cross-claimant will be entitled to costs of a cross-claim where a cross-claim is disposed of on the merits or where there is an initial and continuing refusal to accept the determination of the Contributions Assessor which leads to a cross-claimant incurring costs. Neither occurred here." 20In the result, the primary Judge dismissed the cross-claim, with no order as to costs. The applicant was ordered to pay the respondent's costs of the costs application. Reasoning 21Amaca does not challenge the primary Judge's decision that Amaca was not entitled to judgment on its cross-claim. Nor is there any challenge to the order that the cross-claim be dismissed. 22However, Mr Russell submitted that the primary Judge had erred by failing to consider whether he should exercise the discretion conferred on him by UCPR, r 42.20(1). According to Mr Russell, his Honour had incorrectly assumed that the question of costs fell to be determined by whether Amaca was entitled to judgment in its favour. He had, therefore, not addressed matters relevant to the exercise of the discretion conferred by r 42.20(1). These included the fact that Amaca would not have received a contribution from Daines had it not filed a cross-claim and that Daines had initially denied liability. 23The fundamental difficulty confronting Amaca is that none of these matters was put to the primary Judge. The application for costs was founded on a contention, now no longer pursued, that Amaca was entitled to judgment on its cross-claim. Although his Honour's attention was drawn to UCPR, r 42.20(1), the party responsible for doing so seems to have been Daines. The reference occurred in the context of counsel for Daines pointing out that once the cross-claim was dismissed, the usual rule, unless the court otherwise determined, was an order in favour of the cross-defendant. 24In my opinion, the discretion conferred on the primary Judge cannot be said to have miscarried when he was not invited to take into account the matters now relied on by Amaca. 25As I have noted, it may have been put to his Honour (although it is not clear) that Amaca should have a costs order because Daines had effectively capitulated. If this argument was put, it was incorrect. 26Amaca's cross-claim did not merely seek a contribution of 40 per cent from Daines. It sought an order for contribution and indemnity: that is, the cross-claim, taken at its highest, sought to make Daines entirely responsible for any damages paid to the Plaintiff. Moreover, the factors which led Daines to compromise the cross-claim cannot readily be discerned from the evidence. It is clear from a letter dated 11 April 2011 from Daines' solicitors that Daines regarded the settlement as a compromise that took into account the risks of the cross-claim continuing. No doubt those risks included being held liable to pay Amaca's costs on an indemnity basis if Daines did not materially improve its position at the hearing of the cross-claim, when compared with the apportionment determination. 27In my view, it was not necessary for his Honour to consider the operation of UCPR, r 42.20(1) in detail, given the arguments advanced on behalf of Amaca. In any event, an exercise of discretion under r 42.20(1) would have had to take into account additional observations of McHugh J in Ex parte Lai Qin which were apparently not cited to the primary Judge. McHugh J said (at 625): "If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the costs discretion will usually mean that the court will make no order as to the cost of the proceedings. This approach has been adopted in a large number of cases." 28In the circumstances of the present case, it is difficult to see how a conclusion could be reached other than that both Amaca and Daines acted reasonably. 29The challenge to the primary Judge's decision on costs has no reasonable prospects of success. Nor would there be any injustice in refusing leave to appeal. 30The application for leave to appeal should be dismissed, with costs. ********** 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. Decision last updated: 30 September 2011