Supreme Court New South Wales Medium Neutral Citation: Perry & Bell v ARTC & Ors (No 3) [2013] NSWSC 1049 Hearing dates: 26/7/13 Decision date: 26 July 2013 Jurisdiction: Common Law Before: Campbell J Decision: (1) I direct the parties to bring in short minutes of order amending the orders first pronounced on 7th June 2013 within seven days of today. (2) Those short minutes may be brought in by forwarding a signed copy in PDF format by email to my Associate's email address to the intent that I will make the necessary orders in chambers without the need for any party to appear. Catchwords: COSTS - no question of principle Legislation Cited: Workers Compensation Act 1987 (NSW) Cases Cited: Barakat v Bazdarova [2012] NSWCA 140 Benton v Scott's Refrigerated Freightways Pty Ltd [2008] NSWCA 143 Lackersteen v Jones (No 2) (1998) 93 FLR 442 South Eastern Sydney Area Health Service v King [2006] NSWCA 2 Whitney v Dream Developments Pty Limited [2013] NSWCA 188 Category: Costs Parties: William Charles Perry (plaintiff) Stanley William Bell (plaintiff) Australian Rail Track Corporation Limited (first defendant) Kenneth William Eldridge (second defendant) GrainCorp Operations Limited (third defendant) Representation: Counsel: J. Catsanos (plaintiffs) D. Talintyre (first defendant) B. Hull (second defendant) Solicitors: White Barnes (plaintiffs) Wotton Kearney (first defendant) George Mallos Lawyer (second defendant) File Number(s): 2009/337578; 2009/337579 EX TEMPORE Judgment 1CAMPBELL J: I gave judgment in this matter on 7 June 2013. In pronouncing orders disposing of each case I granted liberty to the parties to apply in respect of any special order as to costs. Pursuant to that liberty the plaintiffs applied for two special orders. The first is an order for indemnity costs from the date upon which each of them served an offer of compromise, being 26 June 2010, and, the second, an order in the nature of a Bullock order in respect of the costs which each plaintiff has been ordered to pay to the successful third defendant. 2The first defendant also applies for special orders. It seeks an indemnity from the second defendant in respect of its liability, if any, to pay indemnity costs to the plaintiffs. It also seeks an order that the second defendant pay its costs on an indemnity basis from the date of its letter serving its offer to contribute, being 11 August 2011. 3Because of concessions properly made by the second defendant the only live issues for determination relate to the plaintiffs' applications, and in that regard, so far as the application for indemnity costs is concerned, the question really boils down to whether the plaintiffs should have the benefit of orders for indemnity costs from the date of their offers of compromise of 22nd June 2010 or, rather, whether the order should run from 3rd August 2011 when the plaintiff served a subsequent Calderbank letter. That is, both defendants accept that each plaintiff should have some of his costs on an indemnity basis. The only question is when should the order commence. 4During the course of argument the plaintiffs withdrew the application for a Bullock order against the first defendant, and the only remaining question is whether it should have the benefit of such an order against the second defendant. 5There is no issue in this particular case about whether the plaintiffs' offer of compromise complies with the rules as they stood as at 22nd June 2010. No issue like that finally settled by a five-judge Court of Appeal in Whitney v Dream Developments Pty Limited [2013] NSWCA 188 arises in this case. 6The remaining question that arises may be put in the following way: given a compliant offer well short of the damages actually awarded, have the defendants persuaded me that I should order otherwise than that the plaintiffs have their costs on the indemnity basis from 22nd June 2010? 7I was greatly assisted by able argument advanced on behalf of all parties by experienced counsel. 8My attention was drawn to what appears to be an outstanding question about what a defendant has to show to displace the usual rule expressed by r 42.14 Uniform Civil Procedure Rules 2005 (NSW). In particular, I was taken to the discussion of apparently competing authorities by Tobias AJA, (Bathurst CJ and Whealy JA agreeing) in Barakat v Bazdarova [2012] NSWCA 140 concerning whether it is necessary for a defendant seeking to displace the rule to demonstrate "exceptional circumstances". To my mind it is unnecessary for me to resolve the question Tobias AJA left open in Barakat at [48]-[50]. But in the absence of an express rule requiring the demonstration of "exceptional circumstances" I would have thought that some more flexible standard applies. Given the purpose of the rules in relation to offers of compromise, and the related costs provisions, persuasion of a court to "order otherwise" ought be no easy task. 9The debate before me tended to focus on the effect of r. 20.26 itself and in particular upon the operation of subrule 5. 10Following the service of the offers of compromise it might fairly be said that the solicitors for each of the first and second defendants wrote to the plaintiffs' solicitors "remonstrating" with them about the offer. But in my judgment, having regard to the evidence contained in and attached to the affidavit of the plaintiffs' solicitor, Miss Linda Yip, sworn 4 July 2013, the defendants, who carry the onus in this regard, have not made good their case. 11Both defendants' solicitors responded to the offers by letter out of time. Subrule 5 requires any complaint about an offer to be raised, if I may put it that way, within 14 days after receiving the offer, subject to the Court's discretion. I would not have disallowed the argument merely on the basis of the failure of the defendants to comply with the requirements as to time. But it seems to me that the complaints that were made by the defendants' solicitors did not really satisfy the chapeau to subrule 5, being that "the plaintiff has not supplied particulars or documents, or has not supplied sufficient particulars or documents", to enable the defendants to properly consider the offers. Rather, Mr Mallos, for instance, in his letter of 13th August 2010, Annexure AM to Miss Yip's affidavit, pointed out the complexity of the issues. He also referred to the fact that all parties remained in the midst of the necessary process of qualifying experts and obtaining other relevant documentation to prepare the case for trial. He said: In the light of the above it is not possible to currently assess the reasonableness or otherwise of the offers remitted by you on behalf of your client. 12Mr Buttigieg, who was handling the matter for the first defendant, said that his client: Is unable to give full and proper consideration to the offer of compromise as the plaintiff has not served any evidence to support the contentions made in the plaintiff's amended statement of claim that the first defendant was negligent. He continued: Absent such substantiation of the plaintiffs' allegation against the first defendant, the first defendant is unable to fully consider the merits of the plaintiffs' offer of compromise [emphasis added]. 13It seems to me that neither of the defendants' solicitors really complained that either plaintiff had failed to do anything that the plaintiff ought to have done to put the defendant in the position of knowing the nature and extent of the case that it was being called upon to meet. Certainly, requiring a plaintiff to "substantiate" his claim seems to miss the point entirely of why offers of compromise are encouraged by the rules and what is required to validate them, if I may put it that way. Substantiation comes when the plaintiff is put upon his trial, not when pre-trial offers are being made. Likewise, it seems to me that Mr Mallos' position was requiring something more of each plaintiff than a particularisation of his case, and the service of documents normally required under the rules. 14Mr Mallos considered that his client was unable to respond, in reality, because the case was a complex one and it was not easy for any party to weigh and assess his or its position or the strength of the case of opposing parties. 15To my mind, the purpose of offers of compromise would be undermined if the Court imposed a test that the plaintiff had to substantiate his or her case before a defendant was bound to give serious consideration to an offer genuinely made, especially in circumstances where the reasonableness of the offer as an attempt to reach a genuine compromise must necessarily be assessed with the benefit of hindsight through the prism of the result which actually pertained. 16As Mason P observed in South Eastern Sydney Area Health Service v King [2006] NSWCA 2, a party seeking to avoid the effects of an offer of compromise: ...must establish that he had given serious thought to the risk involved in non-acceptance of the offer, and that he had assessed the plaintiff's case properly and in the context of the rule and the achievement of its purpose 17Whatever the relevant standard of persuasion may be - that is to say whether exceptional circumstances need to be shown or not - it is not sufficient that a defendant demonstrate that it was reasonable for it to conclude that the plaintiff would encounter difficulty in making good his case, or the defendant reasonably thought he or it had a strong case capable of carrying the day at trial. 18In my judgment the defendants have failed to displace the normal effect of the rules and I find that the plaintiffs are entitled to indemnity costs from 23rd June 2010 rather than from 4th August 2011 (see r. 42.14 (2)(b)(i)). 19I turn then to the question of whether the second defendant ought to indemnify the plaintiffs for the costs each plaintiff has been ordered to pay to the successful third defendant. 20I was taken to many pertinent authorities in the course of argument. It seems to me, however, that in deciding this question the principles stated by Asche CJ in Lackersteen v Jones (No 2) (1988) 93 FLR 442 at 449 are never departed from. His Honour, after reviewing the large body of case law on this topic, distilled four principles, or guidelines, which would normally assist a court to exercise the relevant discretion. Of the four guidelines there is no question other than guidelines 1 to 3 favour the plaintiffs' application. 21What is really in contention between the parties is guideline 4 - I interpolate, Asche CJ did not refer to them as guidelines - which is in the following terms: Finally, in considering whether to make such an order, the court should, in the exercise of its discretion balance overall two considerations of policy: the first, that an unnecessary multiplicity of actions should not be forced on litigants, so that a plaintiff who acts reasonably in joining two or more defendants should not be penalised or lose the fruits of his victory in costs on the basis that he should have either elected or taken separate actions; secondly, that an unsuccessful defendant should not have to pay more than one set of costs merely because he is unsuccessful. 22Generally speaking, what seems to be decisive in this area is that the plaintiff identify something about the conduct of the unsuccessful defendant which makes it fair and reasonable as between that party and the plaintiff that the unsuccessful defendant ought bear the costs incurred by the plaintiff as against the successful defendant. Most commonly this will involve an aspect of conduct in the nature of inducement of the plaintiff to join the successful defendant by the unsuccessful defendant 23Miss Yip has sworn that the plaintiff would not have joined the third defendant but for the approach taken by the other defendants. I accept that evidence, but I am not satisfied that what is complained of in the conduct of the second defendant amounts to the type of unreasonable conduct that would normally excite a favourable exercise of the discretion for the plaintiff. 24There is no doubt that from an early time the second defendant pleaded with clarity, and in some detail, why it was it said that the third defendant, the plaintiffs' employer, who owed the plaintiff a non delegable duty of care, had a liability in the case. Indeed, the second defendant averred that the third defendant was perhaps "wholly liable" to the plaintiffs. However, I do not regard the careful and clear pleading as being unduly robust. It is the obligation of a defendant who wishes to rely on an assertion of liability on the part of an employer in reduction of the damages otherwise payable in accordance with s 151Z(2) Workers Compensation Act 1987 (NSW) to set out its case in that regard in quite some detail in accordance with the rules of pleading, as discussed by Campbell JA in Benton v Scott's Refrigerated Freightways Pty Ltd [2008] NSWCA 143 at [26]-[31]. 25Bearing this in mind, the pleading by the second defendant was not made for the purpose of pointing the finger at somebody else, and, sub silentio, suggesting that the plaintiff sue that party. The second defendant wanted to avail itself of the reduction in damages provided to a common law defendant by the provisions of s151Z(2) Workers Compensation Act. As Campbell JA pointed out, it needed to spell its case out, chapter and verse. And in my judgment the second defendant's pleadings amounted to no more than that. 26Nor does it make any difference to me, as I see things, that the second defendant took the additional step of joining the first defendant as a cross-defendant. The injuries to the plaintiffs were clearly very significant, especially if one considers them from the standpoint of the severe mental trauma to which each was subjected in the collision. In those circumstances, it may reasonably have seemed likely that the second defendant would not only obtain its reduction but also a contribution from the employer notwithstanding the strictures of Division 3 of Part 5 of the Workers Compensation Act. 27In my judgment the plaintiffs have not demonstrated unreasonable conduct on the part of the second defendant to satisfy the fourth consideration enunciated by Asche CJ. 28I note, for the purpose of recording it, that the second defendant has conceded that it should indemnify the first defendant for the indemnity costs payable by the first defendant to the plaintiffs after the date of the first defendant's offer to contribute. Moreover, the second defendant has acknowledged that it ought pay the first defendant's costs on an indemnity basis from that date onwards. (1)I direct the parties to bring in short minutes of order amending the orders first pronounced on 7th June 2013 within seven days of today. (2)Those short minutes may be brought in by forwarding a signed copy in PDF format by email to my Associate's email address to the intent that I will make the necessary orders in chambers without the need for any party to appear. ********** 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: 06 August 2013