Supreme Court New South Wales Medium Neutral Citation: Building Partners Pty Ltd v AEA Constructions Pty Ltd [2018] NSWSC 1033 Hearing dates: On the papers Date of orders: 04 July 2018 Decision date: 04 July 2018 Jurisdiction: Common Law Before: Fagan J Decision: The plaintiff's costs of the proceedings including the cross-claim under the orders of 22 May 2018 are to be paid on the ordinary basis up to 23 December 2016 and on the indemnity basis from 24 December 2016. Catchwords: COSTS – party/party – bases of quantification – indemnity costs – proceedings by employer for indemnity for workers compensation benefits paid – judgment in related proceedings finding negligence of defendant causing personal injury to worker – Calderbank offer made by plaintiff – where offer open for 5 weeks – where offer involved elements of compromise – where offer rejected by defendant – whether rejection unreasonable – costs awarded on indemnity basis from date of offer Legislation Cited: Workers Compensation Act 1987 (NSW) Cases Cited: Calderbank v Calderbank [1975] 3 All ER 333 Wharekawa v AEA Constructions Pty Ltd [2018] NSWSC 684 Category: Costs Parties: Building Partners Pty Ltd (plaintiff) AEA Constructions Pty Ltd (defendant) Representation: Counsel: Mr Morris SC/Mr John Catsanos (plaintiff) Mr John Maconachie QC/Mr Mitchell Davis (defendant) Solicitors: Stephen Lee, Stephen Lee Legal (plaintiff) Bryan McMahon, McMahons Lawyers (defendant) File Number(s): 2016/129877 Judgment 1. The plaintiff applies for an order that the defendant pay its costs of these proceedings, including the costs of the defendant's cross-claim against the plaintiff, from 23 December 2016 to the conclusion of the proceedings on the indemnity basis. The proceedings involved a claim by the plaintiff for indemnity pursuant to s 151Z of the Workers Compensation Act 1987 (NSW) in respect of benefits the plaintiff had paid to Raymond Wharekawa, an employee. Mr Wharekawa claimed that he had been injured, whilst working for the plaintiff, as a result of negligence of the defendant which was performing construction work on an adjoining site. Mr Wharekawa's action was heard together with the plaintiff's claim for indemnity, in a joint trial. 2. On 17 May 2018 I published reasons (Wharekawa v AEA Constructions Pty Ltd [2018] NSWSC 684 – "the principal judgment") for upholding both Mr Wharekawa's claim for damages and the plaintiff's claim for indemnity. I dismissed the defendant's cross-claim against the plaintiff, in which the defendant had sought contribution to any judgment against it in favour of Mr Wharekawa. On 22 May 2018 I ordered that the defendant pay the plaintiff's costs of these proceedings including the defendant's cross-claim. I reserved to the plaintiff that it could make application regarding the scale at which costs should be assessed. On 24 May 2018 the defendant filed the notice of motion which is now before me. 3. The basis of the plaintiff's claim for indemnity costs is that on 23 December 2016 its solicitors sent to the defendant's solicitors a letter of the type considered in Calderbank v Calderbank [1975] 3 All ER 333. The letter included the following: 4. In relation to the cross-claim filed on behalf of your client … our client has instructed us to agree to accept a verdict in favour of [the plaintiff], as cross-defendant, on the basis that each party pay its own costs. 5. In relation to the claim for indemnity under Section 151Z of the Workers Compensation Act 1987, our client has instructed us to submit an offer with respect to a payment of compensation payments made to, for or on behalf of the worker … to date in the amount of … $298,806.99 plus costs as agreed or assessed, to the date of this offer. 6. Further payments may be made in the future and indemnity with respect to those payments will be sought in accordance with the provisions of section 151Z of the Workers Compensation Act 1987, although this offer relates to payments of compensation made to date, plus costs as agreed or assessed. 1. With respect to the cross-claim there was an element of compromise in the plaintiff's willingness to bear its own costs. Taken on its own the defendant's failure to accept this aspect of the offer was unreasonable because the cross-claim depended upon the defendant proving that the plaintiff, as the employer of Mr Wharekawa, breached its duty of care by failing to protect him against the explosive powered nail which the defendant's employee fired through the party wall. The cross-claim on that basis had very poor prospects of success. I found no difficulty in dismissing it, for the reasons given at [54]-[67] of the principal judgment. 2. With respect to the plaintiff's claim for indemnity, its offer of 23 December 2016 involved an element of compromise in that interest, which had accrued to approximately $40,000 by that date, would be waived. I consider it was unreasonable for the defendant not to have accepted this. The case for liability in negligence of the defendant to Mr Wharekawa was, in my view, very strong and I readily found it proved for the reasons given at [21]-[53] of the principal judgment. Having regard to the medical evidence which had been served on the defendant by late December 2016 it was clear that if Mr Wharekawa did establish his case on liability his damages would likely well exceed the figure of slightly under $300,000 for which the plaintiff sought indemnity under s 151Z. 3. The defendant's resistance to indemnity costs is based on the terms of par 6 of the Calderbank letter. The defendant asserts that if it had settled on the terms of this letter it would only have resolved indemnification of the plaintiff up to 23 December 2016 and the defendant would have been exposed to additional or renewed litigation for indemnity in respect of any further payments the plaintiff might make to the worker thereafter. Certainly it was likely that further workers compensation benefits would be paid out to Mr Wharekawa before his claim for damages was heard and determined, particularly as the defendant apparently took a view of Mr Wharekawa's prospects different from the view taken by the other parties and was proceeding to a hearing. However even if additional workers compensation payments did mount up and give rise to a further claim for indemnity, that would not necessarily have resulted in the plaintiff bringing a further recovery action prior to the Court delivering judgment in Mr Wharekawa's case. The defendant's suggested difficulty in being able to accept the Calderbank offer is in my view artificial. 4. The offer was originally open until 1 February 2017. The defendant complained about this in a letter written on the latter date, suggesting that it was unreasonable for time to be running from the last day before Christmas. I do not consider there was any justification for this complaint as the time allowed was 5 weeks. In any event, the plaintiff extended the time for acceptance to 23 March 2017. The defendant never replied to the plaintiff's solicitor's letter in which this extension of time was notified. 5. I conclude that the defendant's unreasonable failure to accept the compromise which was offered by the subject letter is sufficient ground for awarding indemnity costs. Accordingly the order of the Court is: The plaintiff's costs of the proceedings including the cross-claim under the orders of 22 May 2018 are to be paid on the ordinary basis up to 23 December 2016 and on the indemnity basis from 24 December 2016. ********** 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: 04 July 2018