Supreme Court New South Wales Medium Neutral Citation: Milich v The Council of the City of Canterbury (No. 3) [2012] NSWSC 1280 Hearing dates: 24 October 2012 Decision date: 31 October 2012 Jurisdiction: Common Law Before: Davies J Decision: 1. Judgment for the Plaintiff against the First Defendant in the sum of $232,315 80. 2. The First Defendant pay the Plaintiff's costs on a party/party basis as agreed or assessed. 3. Judgment for the Second Defendant. 4. The Plaintiff pay the Second Defendant's costs as agreed or assessed in accordance with the Workers Compensation Regulation 2010. 5. Judgment for the Second Defendant on the Cross-claim in the sum of $124,697.26 comprising payments made pursuant to the Workers Compensation Act 1987 in the sum of $89,744 26 and pre-judgment interest in the amount of $34,953. 6. The First Defendant to pay the Second Defendant's costs of the Cross-claim on a party/party basis as agreed or assessed. Catchwords: PROCEDURE - costs - offer of compromise by Defendant - offer not accepted by Plaintiff - whether Plaintiff obtained a judgment not less favourable than the offer - offer made without deduction for workers compensation indemnity - need to take indemnity into account - meaning of "less favourable" in r 42.15 UCPR - regard to be had to Plaintiff's net position - indemnity costs not ordered - judgment less than $500,000 - whether commencement and continuation of the proceedings in the Supreme Court was warranted pursuant to r 42.34 Legislation Cited: Uniform Civil Procedure Rules Workers Compensation Act 1987 Workers Compensation Regulation 2010 Cases Cited: Egan v Mangarelli [2012] NSWSC 1226 Hancock v Arnold (No. 2) [2009] NSWCA 19 In the matter of Cheal Industries Pty Limited [2012] NSWSC 932 JKB Holdings Pty Ltd v de la Vega (No 5) [2012] NSWSC 1238 Milich v The Council of the City of Canterbury [2012] NSWSC 59 Milich v The Council of the City of Canterbury (No. 2) [2012] NSWSC 450 Rail Corporation NSW v Vero Insurance Ltd (No 2) [2012] NSWSC 926 Vieira v O'Shea (No 2) [2012] NSWCA 121 Ziliotto v Dr Hakim (No 2) [2012] NSWSC 1079 Category: Costs Parties: Branislav (Bill) Milich (Plaintiff) The Council of the City of Canterbury (First Defendant) Ready Workforce Pty Ltd (Second Defendant) Representation: C Barry QC and M Boulton (Plaintiff) R Sheldon SC (First Defendant) P O'Connor (Second Defendant) Watkins Tapsell (Plaintiff) DLA Phillips Fox (First Defendant) Holman Webb Lawyers (Second Defendant) File Number(s): 2008/315064 Judgment 1The principal judgment in this matter was delivered on 23 April 2012: Milich v The Council of the City of Canterbury [2012] NSWSC 59. A supplementary judgment was published by me on 31 July 2012 dealing with the issue of the indemnity to which the Second Defendant was entitled and what amounts were recoverable under the indemnity: Milich v The Council of the City of Canterbury (No. 2) [2012] NSWSC 450. As I noted in Milich (No. 2) at [5] the parties asked that I should only determine matters of principle and not descend into arithmetic. As a result the parties were directed to bring in short minutes to reflect the matters in that and the earlier judgment. 2The matter was subsequently re-listed for an argument on costs although no short minutes had been brought in. I was informed at that hearing that the ultimate verdict in favour of the Plaintiff would be in the sum of $232,315.80 after making the appropriate deductions under the indemnity to which I found the Second Defendant was entitled pursuant to s 151Z(1)(d) Workers Compensation Act 1987. 3On 12 January 2011 the First Defendant served a Notice of Offer of Compromise on the Plaintiff in these terms: The First Defendant offers to compromise this action in whole on terms that: (1) Verdict for the Plaintiff in the sum of $320,000. (2) Defendant to pay the Plaintiff's party/party costs as agreed or assessed. The Plaintiff did not accept this offer. 4The issues in relation to costs were these: (a) whether in the outcome the Plaintiff obtained an order or judgment on the claim not less favourable to the Plaintiff than the terms of the offer; (b) whether the Notice of Offer of Compromise complied with the Rules by reason of the reference to the offer of the Defendant to pay the Plaintiff's costs; (c) whether the provisions of r 42.34 UCPR operated to deny the Plaintiff costs by reason of the fact that the proceedings were in this Court. (a) Was the judgment less favourable to the Plaintiff? 5On the face of it the First Defendant made an offer of $320,000 to the Plaintiff and the Plaintiff will obtain a judgment for $232,315.80. On the face of the offer and the judgment the Plaintiff obtained a judgment that was less favourable than the terms of the offer. 6The Plaintiff submitted, however, that consideration did not rest at that point. If the Plaintiff had accepted the offer of 12 January 2011 he would have received $320,000 from the First Defendant but, by reason of the indemnity in favour of the Second Defendant in the sum of $241,012, the judgment for the Plaintiff against the First Defendant would have been $78,988. The figure of $241,012 represented the Workers Compensation payments received to that time. 7In my first judgment I determined that the lower back injury from which the Plaintiff now suffers was not caused in the course of his employment with the Second Defendant nor whilst working for the First Defendant. That had the effect, as a result of findings I made in my second judgment, that although the Plaintiff obtains a judgment against the First Defendant for $232,315.80 (a sum lower than the offer) he is bound to repay a much smaller sum ($89,744.26) to the Second Defendant in repayment of Worker's Compensation payments received in respect of the injuries that I found were work related. 8By reason of my judgment the Plaintiff will receive, after the operation of the indemnity reduces the amount payable to the Plaintiff by the First Defendant, the sum of $142,571.54. Accordingly, the Plaintiff has achieved a better result as a result of the judgment than by accepting the offer in January 2011. 9The question is whether one looks simply to the figures of $320,000 and $232,315.80 or whether one takes account of the net result by reason of the different Worker's Compensation paybacks. 10In my opinion, two reasons suggest that it is the net position which is the appropriate consideration for the purposes of r 42.15(1). First, if the Rule had only been concerned with the bare figures of the offer and the judgment it could have read: ...the Plaintiff obtains an order or judgment on the claim concerned equal to or less than the terms of the offer. The inclusion of the word "favourable" at two places in the rule suggests that other considerations may be operative and that it is the result to the Plaintiff to which one looks rather than making a bare comparison of the figures. In Hancock v Arnold (No. 2) [2009] NSWCA 19 the Court of Appeal said at [23]: Whether there is an offer of compromise must be capable of objective determination by reference to the circumstances at the time the offer was made. One of those circumstances must have been the issue of any Worker's Compensation payback. 11The second, and not unrelated, reason is that the issue of the Worker's Compensation refund was inextricably linked with the outcome of the case for the Plaintiff. He had brought proceedings against his employer as well as the Council. The employer had sought the indemnity under s 151Z(1)(d). The inevitable result was that any verdict the Plaintiff would obtain from the First Defendant would be a figure net of the employer's indemnity. 12Mr Sheldon of Senior Counsel who appeared for the First Defendant submitted that it was inappropriate to consider the Worker's Compensation payback because to do so would open the matter for consideration of other deductions that might have to be made by a Plaintiff. These would include any payback to the Health Insurance Commission for medical costs and, perhaps, solicitor client costs over and above party/party costs received from the Defendants. 13In my opinion, those matters are extraneous to a consideration of whether the judgment obtained was not less favourable to the Plaintiff than the offer. That is because amounts other than the Worker's Compensation payback do not reflect themselves in any way in the judgments between the parties to the litigation. By virtue of the statutory indemnity, the sum the Plaintiff obtains against the First Defendant is reduced by the indemnity. Further, a determination of the amount of that indemnity forms part of the litigation in respect of which the Offer of Compromise has been made because of the cross-claim brought by the employer against the Council. 14It would be entirely artificial, in my opinion, to ignore the Worker's Compensation payback with the result that the Plaintiff's final position after the judgment would not be the appropriate comparison with the offer made taking into account that payback. 15In my opinion, the judgment obtained by the Plaintiff was not less favourable than the offer made by the First Defendant on 12 January 2011. In those circumstances the ordinary costs order applies that the First Defendant should pay the Plaintiff's costs. (b) Does the Offer of Compromise comply with the Rules? 16In the light of my conclusions in relation to the first matter it is not necessary to decide this. If it had been necessary to do so I would have followed what was said in Vieira v O'Shea (No 2) [2012] NSWCA 121 at [7] as I did in Ziliotto v Dr Hakim (No 2) [2012] NSWSC 1079, as Garling J did in Rail Corporation NSW v Vero Insurance Ltd (No 2) [2012] NSWSC 926 and as Hoeben JA did in Egan v Mangarelli [2012] NSWSC 1226. I note, with respect, the opposite view taken by Rein J in JKB Holdings Pty Ltd v de la Vega (No 5) [2012] NSWSC 1238 and Ward J in In the matter of Cheal Industries Pty Limited [2012] NSWSC 932 but do not agree with it. (c) Rule 42.34 17Rule 42.34 provides: (1) This rule applies if: (a) in proceedings in the Supreme Court, other than defamation proceedings, a plaintiff has obtained a judgment against the defendant or, if more than one defendant, against all the defendants, in an amount of less than $500,000, and (b) the plaintiff would, apart from this rule, be entitled to an order for costs against the defendant or defendants. (2) An order for costs may be made, but will not ordinarily be made, unless the Supreme Court is satisfied the commencement and continuation of the proceedings in the Supreme Court, rather than the District Court, was warranted. 18The proceedings were commenced in the District Court on 4 February 2008. At some time in the middle of 2010 the Plaintiff sought the consent of the First Defendant to extend the jurisdiction of the District Court in respect of the proceedings. That consent was refused on 9 August 2010. 19On 17 September 2010 the Plaintiff by summons sought that the proceedings be transferred to the Supreme Court. It appears that the proposed order for transfer was not opposed by the First Defendant. 20The Statement of Particulars filed on 4 February 2008 identified complaints about both the lumbar spine and the neck and shoulders area of the Plaintiff's back. If the Plaintiff had been successful in his claim concerning the lumbar spine his damages would have been much more substantial than the verdict that he has now obtained because it is likely that his incapacity for work, which appears permanent, was arguably related to the time of his employment by the Second Defendant and during the time he worked with the First Defendant. 21Rule 42.34 had effect from 10 September 2010. Because the summons to transfer was filed on 17 September 2010 the Rule, prima facie, applies. The Rule refers both to "commencement" and "continuation" in the Supreme Court. On one view the proceedings were only commenced in the Supreme Court by the order made on 5 October 2010 but, even if commencement refers to the time the proceedings begin in whatever court, the Plaintiff continued the proceedings in the Supreme Court from that date. 22Nevertheless, by reason of the serious nature of the injuries the Plaintiff was alleging and the effect those injuries might have had, at least on his earning capacity, I consider that the transfer of the proceedings to this Court and the continuation of them in this Court was warranted within the meaning of the Rule. I am strengthened in that view by the absence of opposition by the First Defendant to the transfer of the proceedings to this Court. Conclusion 23Because the Plaintiff was unsuccessful in obtaining a judgment against the Second Defendant, the Second Defendant seeks an order for costs pursuant to cl 105(2) Workers Compensation Regulation 2010. Such an order is not opposed by the Plaintiff. 24Apart from the dispute concerning the matter of costs between the Plaintiff and the First Defendant the parties have agreed on the orders which should be made to finalise the proceedings. Accordingly, I make the following orders: 1. Judgment for the Plaintiff against the First Defendant in the sum of $232,315 80. 2. The First Defendant pay the Plaintiff's costs on a party/party basis as agreed or assessed. 3. Judgment for the Second Defendant. 4. The Plaintiff pay the Second Defendant's costs as agreed or assessed in accordance with the Workers Compensation Regulation 2010. 5. Judgment for the Second Defendant on the Cross-claim in the sum of $124,697.26 comprising payments made pursuant to the Workers Compensation Act 1987 in the sum of $89,744 26 and pre-judgment interest in the amount of $34,953. 6. The First Defendant to pay the Second Defendant's costs of the Cross-claim on a party/party basis as agreed or assessed. ********** 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: 31 October 2012