Supreme Court New South Wales Medium Neutral Citation: Smith v Brambles Australia Ltd [2011] NSWSC 1518 Hearing dates: 18 November 2011 Decision date: 09 December 2011 Jurisdiction: Common Law Before: Schmidt J Decision: As Concerns the First Defendant ('Brambles'): 1. Verdict and Judgment in favour of the Plaintiff against the First Defendant ('Brambles') for damages ($784,254.26) and interest ($42,818.00) in the sum of $827,072.26. 2. On the First Cross-Claim Verdict and Judgment in favour of Brambles against the Second Defendant ('Baden') in the sum of (45% x $827,072.26) $372,182.51. 3. On the Third Cross-Claim Verdict and Judgment in favour of Brambles as against the third Defendant ('Gillespies') in the sum of (20% of $520,785.00) $104,157.00. 4. Brambles to pay the Plaintiff's costs on a party/party basis. 5. In any event, the total liability of Brambles on the Second and Fourth Cross-Claims is not to exceed (35% of $827,072.26) $289,475.29, plus costs. As Concerns the Second Defendant ('Baden') 6. Verdict and Judgment in favour of the Plaintiff against the Second Defendant ('Baden') for damages ($784,254.26) and interest ($42,818.00) in the sum of $827,072.26. 7. On the Second Cross-Claim Verdict and Judgment in favour of Baden against Brambles in the sum of (35% x $827,072.26) $289,475.29. 8. On the Fifth Cross-Claim Verdict and Judgment in favour of Baden as against Gillespies in the sum of (20% of $520,785.00) $104,157.00. 9. Baden to pay the Plaintiff's costs on a party/party basis. 10. In any event the total liability of Baden on the First and Fourth Cross-Claims is not to exceed (45% of $827,072.26) $372,182.51, plus costs. As Concerns the Third Defendant ('Gillespies') 11. Verdict and Judgement in favour of the Plaintiff as against the Third Defendant ('Gillespies') for damages in the sum of $520,786.00. 12. Gillespies is to have credit for payments made to for or on behalf of the plaintiff pursuant to the Workers Compensation Act 1987 in the sum of $194,245.29. 13. The Plaintiff otherwise is to repay the Third Defendant's workers compensation insurer Gallagher Bassett Services Pty Ltd pursuant to section 151Z(1)(b) the sum of $194,245.29. 14. On the Fourth Cross-Claim Verdict and Judgment in favour of Gillespies as against Brambles in the sum of (35% of $520,785.00) $182,274.75. 15. On the Fourth Cross-Claim Verdict and Judgment in favour of Gillespies as against Baden in the sum of (45% of $520,785.00) $234,353.25. 16. In any event the total liability of Gillespies on the Third and Fifth Cross-Claims is not to exceed (20% of $520,785) $104,157.00 which, taking into account repayment of Workers Compensation, provides for a net repayment to Gillespies or to Gallagher Bassett Services Pty Limited of $90,088.29. 17. Gillespies to pay the Plaintiff's costs in accordance with provisions of the Workers Compensation Act 1987 and Workplace Injury Management Act 1998 as assessed or agreed. Catchwords: PROCEDURE - costs - departing from the general rule - whether indemnity costs order should be made - offers of compromise - Calderbank offers - orders Legislation Cited: Civil Procedure Act 2005 Workers Compensation Act 1987 Workplace Injury Management Act 1998 Uniform Civil Procedure Rules 2005 Cases Cited: Commonwealth of Australia v Gretton [2008] NSWCA 117 Smith v Brambles Australia Ltd [2011] NSWSC 963 Category: Costs Parties: Craig Lionel Smith (Plaintiff) Brambles Australia Limited (First Defendant) Baden Cranes Pty Limited formerly GM Baden Pty Limited (Second Defendant) Gillespies Cranes Nominees Pty Limited t/as Gillespies Crane Services (Third Defendant) Representation: Counsel: Mr H Kelly SC with Mr T McKenzie, counsel (Plaintiff) Mr R Seton SC (First Defendant) Mr G Curtin SC with Mr D Macfarlane (Second Defendant) Mr S Kettle, counsel (Third Defendant) Solicitors: Taylor & Scott Lawyers (Plaintiff) McCabe Terrill Lawyers (First Defendant) Riley Gray-Spencer Lawyers (Second Defendant) Hicksons (Third Defendant) File Number(s): 2006/267240 Publication restriction: None Judgment 1Judgment was given in this matter in August 2011 (see Smith v Brambles Australia Ltd [2011] NSWSC 963 ). The parties have agreed on various calculations and the orders to be made, except in relation to costs. The issues lying between the parties as to costs concerned the plaintiff's costs against Brambles Australia Limited ('Brambles') and Baden Cranes Pty Limited, formerly GM Baden Pty Limited, ('Baden') as well as the costs as between the defendants. 2Baden, Brambles and Gillespies Cranes Nominees Pty Limited t/as Gillespies Crane Services ('Gillespies') had agreed between themselves, subject to one argument, that they should each bear their own costs of their cross-claim, that being administratively easier. Prima facie they each accepted that costs follow the event. Gillespies advanced an argument, however, that there should be a different order made in its favour, given its success in the proceedings. 3Brambles' position rested on an understanding that its claim for contractual indemnity from Baden had been rejected and that there had been an apportionment between tortfeasors. That understanding accords with the conclusions reached in the judgment, including at [211] and [270] - [272], although it does appear that I omitted to deal with an aspect of the arguments advanced. 4In short, the position was that Brambles relied on contractual warranties, which rested on Gillespies' due diligence and it having warranted that the crane was in merchantable condition and fit for purpose. Brambles' case was that it was Gillespies' failure to discharge its obligations under the sale agreement which caused its loss and damage. 5That case could not be accepted, given Brambles' failure to ensure that it supplied Gillespies with information either as to the modifications it had Baden make to the crane, or how the modified crane could be safely operated, in circumstances where it had provided Gillespies with an operator's manual, an intrinsic part of the crane. That manual had not, however, been modified to reflect either the modifications made to the crane, or to provide information as to what its safe operation required. In the event, Brambles failed to meet its own contractual obligations. The contractual defence was not established. 6The issue in relation to the plaintiff's costs was whether there should be an indemnity costs order made in his favour against Baden and Brambles. The plaintiff's costs 7The plaintiff sought an order for indemnity costs against, Brambles and Baden, resting on offers of compromise of 21 April 2011 and Calderbank offers of 18 May 2011. There was no issue that on the sums which the parties had agreed, the plaintiff had bettered the offers. 8The two offers of compromise were in identical terms, to the effect that Baden and Brambles each pay the plaintiff $750,000 inclusive of workers compensation payback, plus $150,000 costs or party/party costs as agreed or assessed. Each offer was open for 21 days. 9The Calderbank offers were made on 18 May 2011, with the hearing due to commence on 23 May 2011. A schedule of damages was attached, but it was not in evidence. The schedule came to '$1,035,589 plus out of pockets plus Fox v Wood'. It was claimed that Baden and Brambles would each be assessed as having a liability in damages for the plaintiff's injuries in the sum of $250,000 plus costs. An offer to settle for $250,000 plus costs was made on the basis that if the claim was settled, the plaintiff would still pursue the other defendants. The offer was inclusive of workers compensation payments to date, estimated to be $200,000. 10The plaintiff accepted that the offers of compromise were not made in accordance with the requirements of the Uniform Civil Procedure Rules 2005, but it was common ground that while contravening the requirements of r 20.26(2), the offer was available to be considered as a Calderbank offer. 11The onus lies on the plaintiff to establish that it was unreasonable for the defendants to accept any of the offers received (see Commonwealth of Australia v Gretton [2008] NSWCA 117). The defendants submitted that the plaintiff had not met that onus. 12The plaintiff's case was that in total, the Calderbank offers made to the three defendants, each of $250,000 amounted to the sum earlier offered in the offer of compromise. What was proposed in the Calderbank offers, was that each of the defendants bear a one third share of the plaintiff's damages. Those offers had been bettered in the case of Baden and Brambles. It followed that the onus falling on the plaintiff had been satisfied. 13The fact that the offers had been bettered by only $39,000 was of no consequence, the order sought being a matter of the Court's discretion. The expert evidence relied on by the defendants was not a basis on which the costs order would be refused. The expert evidence was ultimately given little weight and, it was submitted, was not a relevant consideration on costs. It would also be considered that crucial documents were produced to the plaintiff only a month or so before the hearing. There was not much in dispute between the parties as to the amount of the plaintiff's damages. He was prepared to settle for less and should have the benefit of an indemnity costs order, in those circumstances. 14Brambles' case was that it would be accepted that the defendants had strong legal grounds for resisting the claim that they had legal liability for the plaintiff's claims; that the experts reports served by the defendants supported their cases; and that the amount of the offers made by the plaintiff, were in relative terms not much more than the judgment. In the case of the Calderbank offer, given the time and circumstances in which it was made, its rejection was not unreasonable. 15It was also argued not to have been unreasonable for Brambles to reject the offer of compromise. That offer was in the sum of $750,000 in total. It did not deal with the position of the other parties and did not disclose what was happening in respect of them. The risk of accepting the offer was to leave Brambles in the position of having to run the cross-claims against the other defendants, in circumstances where the offer was made on 21 April and the conclave of experts had only taken place on 19 April. It was open until 13 May, but no joint report was received by the parties until 20 May, after the offer had lapsed. In those circumstances, it was not unreasonable not to have accepted that offer. 16As to the Calderbank offer, which did make clear the position in relation to the other defendants, it was relevant that it was expressed to expire on 20 May, the day the joint report was received. The plaintiff later bettered the offer by some $39,000, but the circumstances were not such that the plaintiff would be able to establish that Brambles had been unreasonable in refusing the offer. 17Baden's case was that the plaintiff had not attempted in his submissions to meet the onus which fell upon him and on that basis alone, the application would be refused . 18It was relevant to consider that the plaintiff's preparation of the matter for hearing had been unsatisfactory, with a number of costs orders made against him. T he offer of compromise was sent by facsimile at 4.08pm on the Wednesday before the trial commenced on the following Monday. It was open until 5pm two days later. To that point, the defendants relied on expert evidence from engineers, as well as documentary material, which supported their defence of the plaintiff's claims. The plaintiff called no engineering experts, his experts had other qualifications, in ergonomics and occupational health and safety. Until 20 May, there was no joint report and no basis, even at that point, upon which the parties looking forward could foresee that the defendants' expert evidence would not be accepted. 19There were finally relatively few disputes on the facts, but a real contest as to liability and the applicable law. Even so, it was relevant that the plaintiff's case rested on further evidence which he was permitted to give by way of a statement dated 23 May, the first day of the hearing and after the offer had expired. 20It would also be considered that the Calderbank offer gave the defendants no explanation as to why, in the face of the expert opinions expressed in the various reports, there was a basis for the view that the plaintiff's claim would succeed against them. In those circumstances, the plaintiff could not satisfy the onus which fell upon him. 21It seems to me that the plaintiff has not satisfied the onus which falls upon him. It is that discussed in Commonwealth of Australia v Gretton where it was observed: "43 The making of a Calderbank offer does not automatically result in a favourable costs order, notwithstanding that the judgment is more favourable to the party making the offer than the terms of the offer. Rather, as Giles JA stated in SMEC Testing Services Pty Ltd v Campbelltown City Council at [37]: "...the question is 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 ..." (Emphasis added) See also Jones v Bradley (No 2) at [8]. 44 Two general 'rules' have emerged relating to Calderbank offers, namely, that to justify the making of an order for costs on an indemnity basis, the offer must be a genuine offer of compromise, which it is unreasonable for the appellant not to accept: Herning v GWS Machinery Pty Ltd (No 2) [2005] NSWCA 375 at [4]-[5]; Leichhardt Municipal Council v Green at [21]-[24], [36]. However, as this Court (Santow, Bryson JJA, Stein AJA) pointed out in Leichhardt Municipal Council v Green at [8], the 'common law principles' that have been developed in relation to costs " operate merely as guides to how the discretion might appropriately be exercised ". The principles or rules to which I have just referred fall within that category. 45 The discretion is to be exercised having regard to all the relevant circumstances in the case. The question that had been raised in Leichhardt Municipal Council v Green was whether there had been a genuine offer of compromise. As the Court said at [21]: "There is little appreciable difference between saying that an offer should not in the court's discretion attract costs sanctions in the circumstances and saying that an offer is not a genuine offer of compromise in the circumstances. Both depend upon a value judgment of the offer and the conduct of the parties in the circumstances of the claim." 46 The onus is on the party making a Calderbank offer to satisfy the court that it should exercise the costs discretion in its favour: see Evans Shire Council v Richardson (No 2) [2006] NSWCA 61." 22The issues lying between the parties must be assessed by reference to the position existing at the time the offers were made (see Commonwealth of Australia v Gretton at [78]). That both offers were genuine must be accepted. Indeed, that was not put in issue. That it was unreasonable for the defendants to have rejected the offers at the time that they were received, has, however, not been shown. 23This was a case where there were not only very significant issues lying between the plaintiff and Brambles and Baden, respectively, as to the question of whether, at the time of the plaintiff's injuries, any duty of care was owed him, there was also a considerable contest as to the matters which the experts dealt with in their reports. In part, the rejection of the views the experts expressed depended on the evidence revealed only at the trial. Mr Smith was given leave to rely on the statement which he swore only on 23 May. He also gave relevant oral evidence at the hearing, evidence which Mr Gillespie later corroborated in part. 24The course which the preparation of the matter for hearing took, may also not be overlooked. It was not entirely adequate, including in relation to the expert evidence. The parties had been directed to obtain a joint experts' report by 25 February, giving reasons for any disagreement. Such a report was never provided. Instead the experts were asked to answer two sets of questions posed by the parties. Those answers only emerged on 20 May. Not all of the expert evidence was finally tendered and not even all of the experts' joint report was relied on. 25What was known by the defendants as at 20 May, simply shed no light on the further evidence which would be led from Mr Smith at the hearing, the corroborative evidence which would then be given by Mr Gillespie, or the course which would be taken by the parties at the hearing in relation to the expert evidence. That the views which the defendants' experts had expressed would not be accepted, was not something which the defendants could readily have anticipated on the day the offer expired. 26In all of those circumstances, it simply may not be accepted that the defendants acted unreasonably in rejecting the offer made to them on 18 May. 27There can be no different conclusion reached in relation to the earlier offer of compromise. The application for indemnity costs must be refused. Gillespies' costs 28Gillespies' case was that it should have an order in respect of the costs of the cross-claims made in its favour against Baden and Brambles. It was accepted that on its face, all defendants were successful and that was why the parties had agreed to pay their own costs, subject to this argument. Nevertheless, it was submitted that it would be considered that Gillespies' liability to the plaintiff would be some $104,157 under the agreed orders. This reflected workers compensation payments of $194,245.19 and the resulting credit it received for such payments as employer. Costs should follow the event and given that there had been a net result in its favour, it should also have a favourable costs order. 29In the circumstances, the Court would exercise its discretion under s 98 of the Civil Procedure Act 2005 and r 42.1 in favour of Gillespies. 30Brambles and Baden resisted such an order being made. Baden submitted that Gillespies' position reflected the obligation falling on the plaintiff to repay money he had received pursuant to workers compensation legislation. Both Brambles and Baden had succeeded on the cross-claims they had brought against Gillespies. Costs should follow the event in the usual way. 31Brambles argued that Gillespies was a party to the proceedings as the result of the steps taken by the plaintiff, with the result that all defendants pursued cross-claims against each other. The agreement that the defendants would bear their own costs was administratively sensible, given the result of the proceedings, but the fact that Gillespies could say that it had ended up with money in its pocket, reflected only that, unlike the other two defendants, it already had a legal obligation to make workers compensation payments to the plaintiff. If the plaintiff had recovered a larger sum, Gillespies would not be in credit. 32Gillespies submitted that it was relevant that if the other two defendants had not been made parties to the proceedings, it would have had statutory rights to recover from them, in the circumstances. 33In my assessment, this issue must be resolved against Gillespies. Brambles and Baden succeeded on their cross-claims. The usual order in those circumstances is an order in their favour on those cross-claims. Such an order would also be made in favour of Gillespies, in respect of the cross-claims on which it succeeded. That the result of the plaintiff's obligation to repay workers compensation payments, is that Gillespies is in a positive position, given on the one hand, the payments it has already made in order to satisfy its statutory workers compensation obligations and on the other, the amount of the money orders made against the other two defendants in favour of the plaintiff, is not in the circumstances a basis upon which the discretion to depart from the usual order may justly be exercised. 34The end money result reflects the amount of the order made in favour of the plaintiff and the adjustment which must be made in order to reflect the workers compensation payments to which he was earlier entitled. The fact of the other defendants' success on their cross-claims against Gillespies may not be overlooked. 35It was common ground that if I came to that conclusion, there would be no order as to costs made as between the defendants. Orders 36I make the orders which the parties otherwise agreed, as follows: As Concerns the First Defendant ('Brambles'): 1. Verdict and Judgment in favour of the Plaintiff against the First Defendant ('Brambles') for damages ($784,254.26) and interest ($42,818.00) in the sum of $827,072.26. 2. On the First Cross-Claim Verdict and Judgment in favour of Brambles against the Second Defendant ('Baden') in the sum of (45% x $827,072.26) $372,182.51. 3. On the Third Cross-Claim Verdict and Judgment in favour of Brambles as against the third Defendant ('Gillespies') in the sum of (20% of $520,785.00) $104,157.00. 4. Brambles to pay the Plaintiff's costs on a party/party basis. 5. In any event, the total liability of Brambles on the Second and Fourth Cross-Claims is not to exceed (35% of $827,072.26) $289,475.29, plus costs. As Concerns the Second Defendant ('Baden') 6. Verdict and Judgment in favour of the Plaintiff against the Second Defendant ('Baden') for damages ($784,254.26) and interest ($42,818.00) in the sum of $827,072.26. 7. On the Second Cross-Claim Verdict and Judgment in favour of Baden against Brambles in the sum of (35% x $827,072.26) $289,475.29. 8. On the Fifth Cross-Claim Verdict and Judgment in favour of Baden as against Gillespies in the sum of (20% of $520,785.00) $104,157.00. 9. Baden to pay the Plaintiff's costs on a party/party basis. 10. In any event the total liability of Baden on the First and Fourth Cross-Claims is not to exceed (45% of $827,072.26) $372,182.51, plus costs. As Concerns the Third Defendant ('Gillespies') 11. Verdict and Judgement in favour of the Plaintiff as against the Third Defendant ('Gillespies') for damages in the sum of $520,786.00. 12. Gillespies is to have credit for payments made to for or on behalf of the plaintiff pursuant to the Workers Compensation Act 1987 in the sum of $194,245.29. 13. The Plaintiff otherwise is to repay the Third Defendant's workers compensation insurer Gallagher Bassett Services Pty Ltd pursuant to section 151Z(1)(b) the sum of $194,245.29. 14. On the Fourth Cross-Claim Verdict and Judgment in favour of Gillespies as against Brambles in the sum of (35% of $520,785.00) $182,274.75. 15. On the Fourth Cross-Claim Verdict and Judgment in favour of Gillespies as against Baden in the sum of (45% of $520,785.00) $234,353.25. 16. In any event the total liability of Gillespies on the Third and Fifth Cross-Claims is not to exceed (20% of $520,785) $104,157.00 which, taking into account repayment of Workers Compensation, provides for a net repayment to Gillespies or to Gallagher Bassett Services Pty Limited of $90,088.29. 17. Gillespies to pay the Plaintiff's costs in accordance with provisions of the Workers Compensation Act 1987 and Workplace Injury Management Act 1998 as assessed or agreed. ********** 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 January 2012