JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA

CITATION : SULUB -v- TYRES4U PTY LIMITED [2018] WADC 139 (S)

Costs orders following trial - Effect of plaintiff recovering judgment no less favourable than an offer made pursuant to Rules of the Supreme Court 1971

O 24A - Whether costs to be determined under Rules of the Supreme Court 1971 (WA) O 42A or District Court Rules 2005 (WA) r 42A - Whether facts of the way the litigation was conducted justifies departure from the applicable default position

District Court of Western Australia Act 1969 (WA)

District Court Rules 2005 (WA)

Workers' Compensation and Injury Management Act 1981 (WA)

Cooper Ellis (by his next friend Christopher Graham Ellis) v East Metropolitan Health Service [2019] WADC 36

1. This is the decision on costs which follows from the decision to award personal injuries damages in the sum of $268,405.20 (inclusive of workers' compensation benefits paid under the Workers' Compensation and Injury Management Act 1981 of $111,576.39) to the plaintiff Mr Sulub.
2. In the reasons for decision which were delivered on 28 November 2018 I found that the plaintiff had been injured in the course of lifting and stacking truck tyres at the defendant's tyre yard where he had been placed by the labour hire company for whom he worked. I also found that the defendant was liable to the plaintiff for the personal damages consequent upon that injury.
3. The plaintiff's primary position is that O 24A r 10(5A) of the Rules of the Supreme Court 1971 (RSC) governs the award of costs. That is because he made an offer which was expressed to have been made pursuant to RSC O 24A dated 30 June 2017 (which was received by the defendant on 4 July 2017) (the Offer) and because he received a judgment that was no less favourable to him than the Offer.
4. The plaintiff submits that in those circumstances the appropriate costs order is:

1.1 The defendant do pay the plaintiff's costs up to and including 3 July 2017 to be taxed on a party/party basis.

1.2 The defendant do pay the plaintiff's costs from 4 July 2017 to be taxed on an indemnity basis.

1. The plaintiff submits in the alternative, that if r 42A of the District Court Rules 2005 (DCR) displaces RSC O 24A r 10(5A), then the appropriate costs order is:

(a) the defendant pay the plaintiff's costs up to and including 3 July 2017 on a party and party basis; and

(b) the defendant pay the plaintiff's costs on and from 4 July 2017 on a solicitor and own client basis.

1. The defendant submits that DCR r 42A displaces RSC O 24A r 10(5A) and that, in the exercise of the discretion arising under DCR r 42A(4), the court should make the following costs order:
   1. The defendant do pay the plaintiff's costs incurred from the date of trial only, on a party/party basis to be taxed if not agreed; or alternatively
   2. The defendant do pay the plaintiff's costs of the action on a party/party basis, to be taxed if not agreed.

1. The issues for determination in this application are therefore:
   1. Are costs in this case to be determined according to RSC O 24A or DCR r 42A?
   2. What, if anything, is the consequence of the Offer having been made pursuant to RSC O 24A?
   3. What is the default position that applies to a costs order in the circumstances of this case?
   4. Is there any reason for the court to depart from the position which normally applies under the relevant rule?

1. In considering the costs applications I have had regard to the following material filed by the parties:
   1. plaintiff's amended outline of submissions in support of application for indemnity costs dated 12 December 2018;
   2. affidavit of Errol Vertannes in support of the plaintiff's application for indemnity costs sworn on 12 December 2018;
   3. submissions filed by the defendant dated 19 December 2018; and
   4. affidavit of Jock Innes-Campbell in support of defendant's submissions on costs sworn on 19 December 2018.

Relevant rules regarding the court's discretion to award costs

1. RSC O 66 r 1 provides that the court has discretion with respect to costs of and incidental to proceedings.
2. Section 64(3) of the District Court of Western Australia Act 1969 (DC Act) provides that a District Court judge has the same power in relation to the payment of costs by any party as has a judge of the Supreme Court.
3. The default position is that costs 'shall abide the event': Cooper Ellis (by his next friend Christopher Graham Ellis) v East Metropolitan Health Service [2019] WADC 36 (S) [7] (Ellis) (Gething DCJ).
4. As Gething DCJ said in Ellis at [13] apart from that default position:

... the court's discretion is unconfined in the sense that it contains no positive indication of the considerations upon which the court is to determine by whom and to what extent costs are to be paid. The discretion must be exercised judicially, that is, in accordance with established principles and factors directly connected with the litigation, and not arbitrarily, capriciously or so as to frustrate the legislative intent. It must be exercised so as to achieve what is fair and just between the parties according to the circumstances of the particular case.

1. Consistent with that default position the usual costs order is that costs be assessed on a party and party basis.
2. Rules of the Supreme Court O 24A deals with offers to compromise and how costs are to be awarded where offers to compromise which comply with the formal requirements of O 24A r 3A have been made and rejected. Relevantly, RSC O 24A r 10(4) and (5A) provide as follows:

(4) Where an offer is made by a plaintiff and not accepted by the defendant, and the plaintiff obtains judgment on the claim to which the offer relates no less favourable to him than the terms of the offer, then, unless the court otherwise orders, the plaintiff shall be entitled to an order against the defendant for his costs in respect of the claim from the date on which the offer was made, in addition to his costs incurred before that date, all such costs to be taxed on a party and party basis, except as provided in subrule (5A).

(5A) If the court is satisfied that the failure by the defendant to accept the offer made by the plaintiff was unreasonable, the plaintiff's costs from the date on which the offer was made are to be taxed on an indemnity basis, unless the interests of justice require otherwise.

1. With effect from 20 January 2014, the DCR included a rule concerning costs where an offer to compromise has been made by a plaintiff and not accepted by a defendant.
2. District Court Rules r 42A provides:

(1) The RSC Order 24A applies, subject to subrule (2).

(2) The RSC Order 24A r 10(4) does not apply to a case.

(b) the offer is not accepted by the defendant; and

(c) the plaintiff obtains judgment on the claim to which the offer relates; and

(d) the judgment is no less favourable to the plaintiff than the terms of the offer.

(4) Unless the Court otherwise orders, the plaintiff is entitled to an order against the defendant for -

(a) the plaintiff's costs in respect of the claim from the date on which the offer was made, taxed as between a law practice and its client; and

(b) the plaintiff's costs incurred before that date, taxed on a party and party basis.

1. If RSC O 24A r 10(5A) applies, the ways in which costs are to be dealt with is conceptually different from the positon which applies if DCR r 42A(4) applies. The difference in approach taken by a court pursuant to each of those provisions was considered by Gething DCJ in Ellis at [21] - [38]. It is not necessary to repeat his Honour's analysis of the difference in these reasons.
2. The defendant submits that RSC O 24A r 10(5A) does not apply and that costs should be determined pursuant to DCR r 42A(3) and (4).
3. Conversely, the plaintiff submits that O 24A r 10(5A) applies. It is said that that subrule continues to apply because, unlike (4), DCR r 42A(2) does not specifically exclude it.
4. In Ellis his Honour considered the question of whether O 24A r 10(5A) applies in proceedings in the District Court. His Honour posited that there were two possible interpretations open. They were:
   1. RSC O 24 r 10(5A) is substantively inconsistent with the terms of DCR r 42A(4). Accordingly, (5A) can have no operation because of the effect of DCR r 6(3); and
   2. RSC O 24A r 10(5A) provides conditions on when a court may make an order for indemnity costs, but does not apply when the costs order being sought is that costs be taxed on a solicitor and own client basis.
5. While his Honour did not need to decide the issue in Ellis, he expressed the preliminary view that the correct interpretation was the first of those two possibilities posited by him. His reasons for coming to that view were set out at [21] - [39] of the judgment.
6. The resolution of the costs applications in this case requires that this same issue be determined.
7. I agree with the analysis that led his Honour Judge Gething to reach his preliminary conclusion.
8. Additionally, I find that it does not make sense either linguistically or as a matter of logic to say that both DCR r 42A(4) and RSC 24A r 10(5A) apply and that (5A) gives content to when the court would make an order for party and party costs.
9. Nor would it make sense that the District Court, in making its own rules in relation to how costs are to be determined, would apply a different regime based only upon whether or not an offer to compromise met the formal requirements of RSC O 24A. There would be no logical basis for that distinction.
10. Accordingly, I find that DCR r 42A(3) and (4) govern how costs are to be awarded in this matter.

What does 'unless the court orders otherwise' mean in DCR r 42A?

1. The next question to be determined is therefore, whether there is any reason for the court to make a costs order different from the position set out in DCR r 42A(4).
2. The court's discretion to order otherwise than in accordance with the position set out in DCR r 42A(4) is unconfined in the sense that it contains no indication of the considerations to which the court should have regard when considering the issue.
3. Nevertheless, the discretion must be exercised judicially and so as to achieve what is fair and just between the parties in the circumstances of the case.
4. In Ellis, Gething DCJ set out the principles which have been established by the authorities dealing with the phrase 'unless the court orders otherwise' in the context of RSC O 24A r 10 ([44]). He then went on to find that the context of DCR r 42A was sufficiently similar as to make the principles analogous ([45]) and to explain the purpose of the rule ([46]). I respectfully adopt what his Honour said about those matters.
5. The principles which were identified by Gething DCJ at [44] warrant restating. They are:

(a) the purpose of the rule is to encourage the proper compromise of litigation, in the private interests of individual litigants and the public interest;

(b) the discretion to replace the rule is a judicial one, requiring that the private and public purposes of the rule be borne in mind;

(c) the prima facie consequence of non-acceptance will be that the rule will be enforced against the non-accepting party;

(d) in any ordinary case the rule should be applied in its terms;

(e) the rule should only be departed from for proper reasons which, in general, only arise in an exceptional case;

(f) to the extent that a party seeks an exercise of discretion to vary the ordinary operation of the rule, it is for that party to demonstrate that there are adequate reasons to justify the exercise of the discretion;

(g) the aim is to oblige the offeree to give serious thought to the risk involved in non-acceptance;

(h) lying behind the rule is the common knowledge that litigation is inescapably chancy;

(i) the offer cannot be viewed in isolation from the circumstances in which it was made;

(j) the mere fact that it was reasonable for the offeree to take the view that it did in rejecting the offer is not enough to displace the rule;

(k) the offeree is put on notice that unless it accepts the offer there is a significant risk that the order provided for by the rule may follow;

(l) in declining to accept the offer, the offeree undertakes the risk and consequences that naturally flow from that risk;

(m) the general factors which apply in most, if not all, cases such as hardship and difficulty predicting the result of the trial cannot support the exercise of the discretion in favour of the party who rejected the offer; and

(n) the ordinary operation of the rule is not to be displaced just because the case is a difficult one.

Is there a reason to order otherwise than as provided in DCR r 42A(4)?

1. So the issue to be determined in this case then is whether either the plaintiff or the defendant can establish that there are adequate reasons to 'otherwise order' and displace the default positon under DCR r 42A.
2. In order to reach a view about that issue it is necessary to say something about the basis upon which court determined the plaintiff's claim and to briefly set out the history of the action.

Basis for the judgment in favour of the plaintiff

1. In the reasons for decision delivered 28 November 2018, I found that the plaintiff had been injured in the course of lifting and stacking tyres on his first morning of work at the defendant's tyre warehouse. While I did not find that the method for lifting and stacking method generally required by the defendant to be used ('the barrel stacking method') was unsafe, I accepted the plaintiff's evidence that he received no instruction or training in that method prior to being tasked with the lifting and stacking of tyres, that he was not supervised by the defendant while he was carrying out the task and did not perform it correctly, causing him to injure his lower back.
2. I came to that view in significant part because Mr Devis, another labour hire company employee who gave evidence that he worked with Mr Sulub on the day on which he was injured, also gave evidence that he received no training in the barrel stacking method before being tasked with stacking the tyres on that morning but also because there were inconsistencies in the evidence of the defendant's witnesses about what had happened on the morning in question.

1. From the affidavits filed in the costs application and from an examination of the court file it can be ascertained that the relevant history of the proceedings is as follows:
   1. On or about 11 October 2016, the plaintiff filed and served his statement of claim
   2. On 18 November 2016, the defendant filed and served its defence.
   3. On 1 December 2016 the defendant's solicitor wrote to the plaintiff's solicitor and invited the plaintiff to dismiss his action on the basis that his instructions were that:

(a) Mr Sulub had informed the defendant that he was trained in manual handling;

(b) the defendant had given Mr Sulub clear instructions on how to stack the tyres in a safe manner; and

(c) Mr Sulub had been supervised by the defendant at all times.

1. On 5 December 2016 the plaintiff's solicitors referred to the letter of 1 December 2016 and declined to dismiss the action. The reasons for doing so were essentially a reiteration of the basis of liability set out in the statement of claim.
2. A pre-trial conference was held on 5 May 2017. The plaintiff's solicitor attests that his view was that at the time of that conference the plaintiff's credibility was in issue because there was no independent evidence that the plaintiff had been injured at the defendant's premises and because Dr Hardcastle, who had reviewed the plaintiff, was of the view that he had recovered from any strain within six weeks.
3. On 27 June 2017 the plaintiff's solicitors sent the report of Professor Ackland dated 28 June 2018 to the defendant and asked that they reconsider their position on liability.
4. On 27 June 2017 the defendant's solicitors informed the plaintiff's solicitors that the defendant would not reconsider its position on liability because the method of stacking tyres was not as the plaintiff alleged it to have been and because the alleged accident did not occur.
5. By letter dated 30 June 2017, the plaintiff made the Offer. By that letter the plaintiff offered to compromise his claim for the sum of $119,321 (in addition to worker's compensation payments) plus costs and disbursements to be taxed. The offer was expressed to have been made pursuant to RSC O 24A.
6. The Offer was received by the defendant on 4 July 2017.
7. On 7 August 2017 the defendant's solicitor notified the plaintiff's solicitors that the plaintiff was required to be examined by Dr Meyerkort on 16 August 2017.
8. On 31 August 2017 the defendant's solicitors received Dr Meyerkort's report which said that he was unable to clearly identify a physical cause for the defendant's continued condition and that it was his opinion that there were significant psychosocial factors influencing the plaintiff's presentation and that the plaintiff had no medical condition preventing him from returning to full-time work and that he was able to perform any type of work which he was motivated to attend.
9. On 13 September 2017 the defendant made a Calderbank offer to settle the plaintiff's claim for $25,000 plus costs to be taxed if not agreed. That offer was expressed to remain open until the close of business on 25 September 2017. In making the Calderbank offer the defendant:

(i) reiterated that liability was denied because the accident did not occur or, alternatively, if it did, it occurred despite the defendant exercising reasonable care; and

(ii) asserted that if the plaintiff were successful, damages would be limited to out of pocket expenses and a closed period of lost wages which would not exceed the offer of $25,000.

1. The plaintiff did not respond to the defendant's Calderbank offer.
2. The witness list filed by the plaintiff on 18 January 2018 did not list Mr Devis among the plaintiff's witnesses.
3. The trial ran from 29 January 2018 to 2 February 2018.

1. The plaintiff's submissions did not directly address why the order sought by the defendant ought not be made. There was no affidavit material filed by the plaintiff to contradict the defendant's statement that it had no notice of the corroborating evidence to be given by Mr Devis at any time prior to trial. I therefore accept that that was the case.
2. In circumstances where the plaintiff succeeded in his action and was awarded damages no less favourable than the Offer, I need to be satisfied of the existence of some special reason for departing from the default position as to costs.
3. For the most part the plaintiff's submissions were directed at addressing why indemnity costs should be awarded from the date on which the Offer was made in the event that I were to find that SCR O 24A r 10(5A) applied and the basis upon which I ought to find that that Order did apply. The plaintiff's alternative submission is that, if the court finds that DCR r 42A applies, then the costs order should reflect the default positon.
4. The DCR r 35AA provides that at a settlement conference, the parties must, in good faith, attempt to settle the case or, failing that, to resolve as many issues between them as possible and to identify the issues to be tried.
5. There was no suggestion in the material filed by the defendant that the plaintiff failed to negotiate in the way required by DCR r 35AA. It has not been suggested that the plaintiff knew of the evidence Mr Devis would give but withheld that information from the defendant at the settlement conference.
6. Nevertheless, given the defendant's appreciation of the evidence at the time it received the Offer, its rejection of the offer cannot have been said to have been unreasonable. I find that it was reasonable for the defendant to consider that it had reasonable prospects of success in relation to liability at that time in light of the information known by it.
7. The defendant submits that in this case the court should exercise its discretion to make the costs order it seeks because it had no opportunity to make an informed assessment of its chances of doing better than the offer because at no time prior to trial (either by the filing of a reply to the defence filed on 21 November 2016 or by including Mr Devis in the witness list filed on 18 January 2018) did the plaintiff inform the defendant that Mr Devis would give evidence which corroborated the plaintiff's account of the lack of training in the barrel stacking method.
8. The defendant submits that in circumstances where the plaintiff effectively took the defendant by surprise at trial, the appropriate costs order is that it pay costs only from the date of trial and then on a party and party basis. It submits that, in the alternative, it should pay the plaintiff's costs of the action on a party and party basis.
9. The absence of any evidence to corroborate the plaintiff's own evidence in the face of the defendant's own witnesses' contrary evidence about what training he had received on the morning he was injured will no doubt have been a significant factor in its decision to reject the Offer. However, so too will have been its assessment of the extent of the plaintiff's injury and therefore the quantum of damages likely to be awarded in the event that liability were to be established. In respect of that issue there was competing expert evidence.
10. In my view, although it is true that litigation is inherently chancy, the defendant has satisfied me that there are proper reasons to exercise the discretion to depart from the default position as to costs in this case. The fact that the defendant had no prior notice of the fact that Mr Devis would give evidence at all, and in the terms which he did, which was an important reason for reaching the conclusion I did in relation to liability, makes this case out of the ordinary.
11. I do not however accept that it is appropriate to award the plaintiff only costs on and from the date of trial. Rather, in the circumstances where the plaintiff was successful in respect of both quantum and damages, I find that the appropriate order is the defendant pay the plaintiff's costs of the action to be taxed on a party and party basis if not agreed.

1. I intend to make the following order. The defendant pay the plaintiff's cost of the action to be taxed on a party and party basis if not agreed.

I certify that the preceding paragraph(s) comprise the reasons for decision of the District Court of Western Australia.

[1] There was some cross-examination of Mr Sulub (ts 84 - 85) about whether he had his foot resting or leaning on the tyre which was on the ground or whether he was standing with both feet on the tyre pulling the other tyre up. For the purposes of the case though, I do not think the resolution of that issue makes any difference to the findings I make as to liability and quantum.

[17] Roads and Traffic Authority of NSW v Dederer [2007] HCA 42; (2007) 234 CLR 330 [70] (Gleeson CJ).

[18] Adeels Palace Pty Ltd v Moubarak; Adeels Palace Pty Ltd v Bou Najem [2009] HCA 48; (2009) 239 CLR 420 [31], [40] (French CJ, Gummow, Hayne, Heydon & Crennan JJ).

[19] Adeels Palace Pty Ltd v Bou Najem [40].

[20] Wyong Shire Council v Shirt [1980] HCA 12; (1980) 146 CLR 40, 48 (Mason J); Waverley v Ferreira [2005] NSWCA 418 [45].

[28] Exhibit 13 (Report dated 28 June 2017; Supplementary Report dated 30 November 2017).

[30] Exhibit 13 (Report of 28 June 2017, page 6).

[34] City of Stirling v Tremeer [2006] WASCA 73; (2006) 32 WAR 155 [73] (McLure JA); Grainger v Williams [2009] WASCA 60 [179] and [180] (McLure JA).

[35] City of Stirling v Tremeer [71] (McLure JA); Bennett v Minister of Community Welfare [1992] HCA 127; (1992) 176 CLR 408, 420 - 421 (Gaudron J).

[36] Bennett v Minister of Community Welfare, 420 - 421.

[37] Strong v Woolworths Ltd [2012] HCA 5; (2012) 246 CLR 182 [20] (French CJ, Gummow, Crennan & Bell JJ).

[38] Adeels Palace Pty Ltd v Bou Najem [45].

[39] Adeels Palace Pty Ltd v Bou Najem [51] - [52].

[43] ts 214 (1 February 2018) and exhibit 21 pages 6 - 7.

[59] Exhibit 10 (Curriculum Vitae prepared by Mr Sulub).

[66] Plaintiff's particulars of damages, page 2.

[67] Exhibits 7A - 7C (bundle of online applications completed and submitted by Mr Sulub).

[68] Exhibits 25 and 27 (Pay history inquiry and Allianz Australia List of Payments - Recovery).

[69] Plaintiff's particulars of damage, page 2.

[70] Plaintiff's particulars of damage, page 2.

[71] TA v Lucky Import & Export Co Pty Ltd [2002] WASCA 65 [24] (Parker, Hasluck & Pullin JJ).

[72] Medlin v State Government Insurance Commission [1995] HCA 5; (1995) 182 CLR 1, 16 (Deane, Dawson, Toohey & Gaudron JJ); Graham v Baker [1961] HCA 48; (1961) 106 CLR 340, 347.

[73] Plaintiff's particulars of damage, page 3.

[74] Sharman v Evans [1977] HCA 8; (1977) 138 CLR 563, 573 - 574 (Gibbs & Stephen JJ).

[75] Plaintiff's particulars of damage, page 3.

[76] Government Gazette 22 June 2018 page 2197.

[77] Government Gazette 22 June 2018 page 2197.

[78] Government Gazette 22 June 2018 page 2197.