Alpine Holdings Pty Ltd v Warwick Entertainment Centre Pty Ltd

Alpine Holdings Pty Ltd v Warwick Entertainment Centre Pty Ltd - [2009] WASCA 115 - WASCA 2009 case summary — Zoe

[53]

The defendant had a case of substance, supported by a substantial body of expert evidence. In some instances (Mr Rogers, Associate Professor McKenzie), the evidence of the defendant's experts conflicted directly with the plaintiff's experts. In other cases, the questions were as to the weight to be given to expert evidence on a subject (for instance, epidemiology), in determining the cause of the plaintiff's fibrosis.

The defendant cannot be expected to have been able to predict what my findings would be in determining the various issues regarding the expert evidence. Many of the plaintiff's submissions in support of an award of indemnity costs seem to me to involve, implicitly, expecting the defendant to have been able to do so.

The defendant's conduct in deciding to have the court decide the substantial issues arising from the expert evidence was, in my opinion, not unreasonable and certainly not so unreasonable as to make it just to order indemnity costs.

The plaintiff submitted that the defendant ought to have recognised that it faced a real risk in the litigation. I accept that that is so, but that fact alone does not provide an adequate basis for the award of indemnity costs.

Nor, in my opinion, is the question to be determined (as some of the plaintiff's submissions suggest), by whether the defendant reasonably held the view that it was 'likely' to succeed in its defence. That is a judgment which the court is not well placed to make, in that the views expressed by those who advised the defendant are not available. (The defendant's submissions contain various statements as to what the defendant 'believed' prior to trial, in various respects. As these assertions are not supported by evidence I have not had regard to them.) In any event, a decision to litigate a case of substance which had a reasonable prospect of success (albeit that such prospects were thought to be less than 'even money') in the face of an offer to settle, would not, in the absence of further facts, give rise to a sufficient ground to order indemnity costs.

It follows that I do not accept the plaintiff's submission that 'the defendant having chosen to take the risk of litigating, there ought to be a price to pay beyond party/party costs'. The 'price to be paid' by the defendant includes the excess of its liability under the judgment compared to the settlement offer, its own costs after the offer was rejected, as well as its liability for the plaintiff's costs on a party-party basis. In any case, for the reasons I have sought to explain, I do not consider that the plaintiff's submission in this regard reflects a proper basis for the award of indemnity costs.

This was not an instance where a party's case was doomed to fail, or suffered from a fatal flaw which was pointed out by the other party in the Calderbank offer; see NMFM [87].

The plaintiff emphasised that the defendant rejected his offer within one day of receiving it. In the circumstances of this case I do not consider that that fact affords any support for a conclusion that the rejection was hasty or pre-emptory and so unreasonable in the sense that I have explained.

The plaintiff also submitted that the relative ability of the parties to bear the additional costs of the trial is relevant. I do not accept that the differing means of the parties provides any ground for ordering indemnity costs.

In my opinion, neither the defendant's rejection of the offer of settlement, nor any other aspect of the defendant's conduct referred to in the plaintiff's submissions provides any sufficient basis to order indemnity costs.

The plaintiff seeks, in the alternative, costs on a solicitor-own client basis. No separate submissions were made in support of that application.

For the reasons already stated I am not satisfied that it is appropriate in this case to depart from the usual order for costs on a party-party basis [22] - [33].

[60]

(a) the approach to resolution of the question of the proper order for costs in the circumstances approved by Roberts-Smith J in Alpine Holdings following Rolfe J in Multicon Engineering Pty Ltd v Federal Airports Corporation (1996) 138 ALR 425;

(b) his Honour's acceptance that the defendant ought to have recognised that it faced a real risk in the litigation [25];

(c) his Honour's recognition that the defendant might have assessed its prospects of success as unlikely or less than 'even money' [26];

(d) failing to distinguish that the price to be paid for failing to accept a reasonable offer which was ultimately bettered is different to (and ought to have been something more than) the price to be paid for litigating and losing (in the absence of any, or any reasonable offer) [27];

(e) the defendant's conduct in the course of the litigation;

(f) the peremptory rejection of the plaintiff's offer within 24 hours of receipt as evincing its intention to litigate the claim whatever its prospects [29];

(g) failing to consider or give weight to the consequences to the plaintiff of having to bear the additional costs that should have been avoided by acceptance of the substantial compromise he offered;

(h) the possibility that the defendant had earlier settled or lost similar claims;

(i) the defendant's prospects, objectively assessed, of succeeding in its defence to the claim;

(j) the reasonableness or otherwise of the defendant's reasons (including the alleged potentially adverse consequences for its business) for litigating the claim in the face of the offer made;

(k) the reasons given by the defendant for rejecting the offer and the reasonableness of those reasons at the time of the rejection of the offer;

(l) the defendant's failure to put on evidence of its beliefs and reasoning at the time of the offer (see [26]) and justifying its conduct in response to the evidence adduced by the plaintiff;

(m) that the defendant must have realised that the offer made represented a substantial deduction - of the order of 50% - on the potential outcome based on a reasonable assessment of damages, the defendant ultimately substantially agreeing to the quantum of damages sought.

[69]

A decision to accept or not an offer of this kind will ordinarily be based upon the offeree's perception of its ultimate chances of success, that is, it involves a prediction as to the likely outcome of the trial. At the time the debate about costs occurs the trial will normally be over; the event will have demonstrated that the prediction which underlay the decision was not fulfilled, that it was erroneous or even imprudent (Colgate Palmolive Co v Cussons Pty Ltd [1993] FCA 536; (1993) 46 FCR 225 at 228, per Sheppard J). I put to one side the case where the decision was one based on factors other than the prospect of success. A decision to commence or to press on with litigation which is based on the desire to grind a less resourced opponent into capitulation or to put it out of competitive business could hardly be countenanced by the court. If an offeree sought to justify its decision to refuse an offer by reference to some consideration other than the prospect of success, this would be a matter for it to raise, leaving always the ultimate onus on the issue upon the offeror. In the same way that the failure to achieve a more advantageous result will not automatically put the offeree at risk, so too it is not sufficient for it to avoid the consequence of its erroneous prediction that it says only that the outcome was uncertain. The outcome of almost all litigation is uncertain. The erroneous prediction may not, however, be an unreasonable one if the predictor was not, at the time, for good reason in possession of sufficient information to make an assessment or if the circumstances upon which it was based later changed. It must be acknowledged that it is part of the ordinary function of a lawyer to make predictions of this kind. The lawyer must make them at the outset and during the litigation in order to enable the client to make responsible and informed decisions to commence the litigation, to pursue it and to make the various decisions in the course of the proceeding's progress to trial and judgment [13].

[122]

(i) In its draft statement of issues provided to the plaintiff (dated 25 September 2007, which is 13 days after it received the offer), the defendant stated that 'no claim of asbestos-linked disease consequent upon occupational exposure of motor mechanics has been accepted by any common Law Court in the western world'. In its Statement of Issues (dated 26 September 2007) the defendant said it was 'not aware of any case in which a mechanic has succeeded in a court claim against a car manufacturer arising out of exposure from some toxic element therein'. The defendant at the time it made these statements must have known them to be untrue. Its parent company had lost a number of such cases. Moreover, it had settled such a claim in Victoria.

(ii) The defendant argued in the costs application that it was entitled to believe that the evidence of Dr Paustenbach and Dr Goodman would be preferred to evidence adduced for the plaintiff. Dr Paustenbach's (and Dr Goodman's) links to the United States car companies, including the defendant's parent company Ford US, were readily ascertained by the plaintiff. Most of the major research on which they relied in their expert reports was paid for by Ford US and the other US car companies, and acknowledgement of this funding was included in those papers. Yet despite the links between Dr Paustenbach (and Dr Goodman) and the defendant's parent company, and the fact of Dr Paustenbach's extensive financial relationship with the defendant's parent company, and the fact that Dr Paustenbach's initial involvement in asbestos/mechanic issues came at the behest of the defendant's parent company, no reference to any of these issues was included in the expert reports. Dr Paustenbach told the court that he understood that Australian courts required a greater degree of independence for expert witnesses than did US courts. The defendant, which must have known of Dr Paustenbach's extensive relationship with the United States car industry and which should have seen that the Court was made aware of this relationship, ought to have contemplated the possibility of adverse assumptions about the evidence and the reduced weight that might be accorded to such evidence. The defendant's submission made clear that no such consideration was engaged in. The defendant's level of confidence that the witnesses would be accepted and preferred was objectively unreasonable conduct.

(iii) On 14 September 2007 the defendant served its lay witness statements; Gary Pettit and Peter Cattley (former Anderson Ford employees), David Ford, a former senior engineer at Ford Australia and Ford US, and an unsigned statement for Lenny Commons, the plaintiff's employer at Col Commons where Mr Lo Presti worked from 1975 to 1987. The statements for Mr Cattley and Mr Pettit were dated September 2006; Mr Ford's statement was dated 9 September 2007. The defendant's lay witness statements supported the plaintiff's case in many respects, especially with respect to the dust in the Quick Service, and the lay witnesses, with the exception of Mr Ford, were not called by the defendant at trial. Mr Ford's witness statement provided confirmation for the plaintiff of the frequent communication between Ford US and Ford UK and demonstrated the ease with which Ford Australia could have accessed information held by Ford US (which information had earlier been made available by the plaintiff to the defendant) about the dangers of asbestos in brakes for mechanics. If the defendant's swift rejection of the plaintiff's offer was due to the allegation in Mr Commons' statement that there was an alternate exposure, then such confidence was not reasonable. Indeed, there are sound reasons for concluding that the defendant's advisers were well aware that the allegation was unfounded and the service of it should be taken into account in considering the reasonableness of the defendant's conduct. That unsigned witness statement was served on the plaintiff on 14 September 2007. It contained an allegation that Mr Lo Presti had spent time working on the weekends carting asbestos cement sheets. Mr Commons said the work had been organised by a Mr John Kuhne. The plaintiff's lawyers spent many hours over the next days searching for Mr Kuhne who was eventually located working on a mine site near Southern Cross. The circumstances of this episode are set out in the affidavit, sworn by Michael Magazanik, Mr Lo Presti's solicitor. Mr Kuhne instructed that he knew Mr Lo Presti, that Mr Lo Presti to his knowledge had never worked with asbestos cement sheets, and that he had never organised such work. Mr Kuhne added that he had told a lawyer from Perth this information. The plaintiff's solicitors then contacted the defendant's solicitor Dr Maxwell who confirmed that Clayton Utz had interviewed Mr Kuhne. On Friday 21 September, the last weekday before the trial, and the day the Calderbank offer would have expired had it not already been rejected, Dr Maxwell advised that the reference to carting asbestos cement sheets would be dropped from Mr Commons' witness statement. The provision of this witness statement, with the reference to carting asbestos cement sheets, caused an unnecessary diversion of the plaintiff's resources on the eve of the trial, and caused great distress to the plaintiff, under circumstances where the allegation should never have been included in the witness statement and never served. Further, the defendant had had the material relating to the alternative exposure scenario for years and did not put the matter to the plaintiff until a few days before the trial (WAB 27 - 29).

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (179 paragraphs)

FORD MOTOR COMPANY OF AUSTRALIA LTD -v- LO PRESTI [2009] WASCA 115 (26 June 2009)

Parties

Cases Cited (12)