Apthorpe v QBE Insurance

Procedural context

1. At that time, a series of proportionate liability findings were made against all four defendants in respect of a work accident in which the plaintiff sustained serious injuries on a building site, on 8 September 2008.
2. That judgment identified two damages assessments made under separate compensation schemes. The first of those assessments was made only against the fourth defendant, the plaintiff's employer, in the amount of $288,530, pursuant to the scheme of the Workers' Compensation Act 1987 (NSW). The second assessment involved the first, second and third defendants in the amount of $788,467, pursuant to the scheme of the Civil Liability Act 2002 (NSW).
3. At that time proportionate liability findings were also made in respect of each of the four defendants, as follows: 1. 25 per cent in respect of the first defendant, QBE Insurance (Australia) Limited, the insurer of the building contractor, JS Petty Pty Ltd, that was responsible for the site where the plaintiff was injured; 2. 40 per cent in respect of the second defendant, HTE (Australia) Pty Ltd, a scaffolding contractor on the site; 3. 25 per cent in respect of the third defendant, Mr Christopher Wright, a fascia and guttering contractor on the site; 4. 10 per cent in respect of the plaintiff's employer, Burtwin Pty Ltd, a roofing contractor on the site.
4. The costs consequences of those findings must now be determined. Those cost consequences are not necessarily required to be in the same proportions as the above-cited proportionate liability findings. This is because of the way in which the parties approached settlement issues.
5. At the time judgment was delivered, the parties were required to prepare short minutes to give monetary effect to the findings and assessments made, and to also make their submissions on the consequential costs issues: [209] - [310]. On 26 April 2019, the parties presented short minutes which resulted in a series of agreed monetary judgments being entered as the final orders against each of the four defendants. Those orders require no further examination.
6. On 14 June 2019, the matter was re-listed for evidence and argument on the respective positions of the parties as to costs. Extensive written submissions were made analysing the pre-judgment positions adopted by the respective parties concerning settlement negotiations. These reasons are concerned with the consideration and determination of the costs issues.
7. The costs applications involve: 1. The plaintiff's costs of preparation in response to the third defendant's claim of a limitation defence which was abandoned on the second day of the trial; 2. The plaintiff's costs of the proceedings generally; 3. The costs of the respective defendants against each other.

Evidence

1. The following evidence was relied upon for the costs arguments: 1. A liability chronology prepared by the plaintiff: Exhibit "A", T311.9; 2. Correspondence from the third defendant's solicitor to the plaintiff's solicitor dated 13 March 2017 on the costs application: Exhibit "B", T311.35; 3. An affidavit affirmed on 1 February 2019 by Ms Kimberly Hollingsworth, the plaintiff's former solicitor relating to the preparation of the limitation defence; 4. An affidavit affirmed on 6 February 2019 by the plaintiff, relating to the s 151D issue; 5. An affidavit by Mr Anthony Pryor, solicitor for the plaintiff, sworn on 13 June 2019; 6. An affidavit by Mr Michael Nguyen, solicitor for the second defendant, sworn on 24 April 2019; 7. A folder comprising 120 pages of correspondence and email communications that have passed between the parties between 27 February 2018 and 6 June 2019. Some of the pages had parts redacted.
2. The plaintiff's liability chronology (Exhibit "A") sets out a series of uncontroversial dates and events that are relevant to the costs issues to be determined: T311.9.

Factual background relevant to costs

1. The material dates and events are as follows: 1. On 27 February 2018, in advance of an impending mediation on 7 March 2018, the plaintiff made an opening offer to resolve the proceedings against all defendants in the sum of $743,587 plus costs and disbursements: Bundle, p 1; 2. On 5 March 2018, the fourth defendant employer made an offer to all other defendants to contribute $60,000 inclusive of workers compensation payments and costs noting that the plaintiff's payments to that date amounted to $254,762.21, indicating a refund of $194,762.21 would be due to the fourth defendant, also noting the plaintiff was likely to receive damages for economic loss in the assessed amount of $235,000: Bundle, pp 8 - 9; 3. On 16 April 2018, the solicitor for the first defendant made a rules compliant offer to the other defendants to contribute 25 per cent to a proposed settlement or a judgment in favour of the plaintiff: Bundle, pp 10 - 12; 4. On 14 May 2018, the second defendant accepted the first defendant's offer to contribute dated 16 April 2018: Bundle, p 13; 5. On 17 May 2018, the second defendant communicated the position in (4) above to the other defendants: Bundle, pp 17 - 21; 6. On 31 May 2018, the first defendant's offer to contribute lapsed: Bundle, p 24; 7. On 18 July 2018, the second defendant attempted to seek agreement from the other defendants to each contribute 25 per cent to a joint offer to be made to the plaintiff: Bundle, pp 25 - 29; 8. On 6 August 2018, the second defendant renewed the offer in (7) above: Bundle, pp 30 - 35; 9. Between August and September 2018, the above negotiations did not bear fruit; 10. On 8 October 2018, the plaintiff made a rules compliant offer to settle in the sum of $743,587: Bundle, p 41; 11. Between October 2018 and 27 February 2019 negotiations between the parties continued to the point where they became resigned to having to proceed to judgment: Bundle, pp 42 - 56; 12. The trial proceeded on 25, 26, 27, 28 February and 14 March 2019; 13. On 28 February 2019, the third day of the trial, the third defendant's position was that it was willing to contribute $100,000 towards an "all-inclusive" settlement: Bundle, pp 59 - 60; 14. Judgment was delivered on 18 April 2019.

Costs submissions of the respective parties

1. The defendants sought no special costs orders as against the plaintiff.

Fourth defendant's position

1. It is convenient to first deal with the costs position of the fourth defendant, as that position is not the subject of any controversy. On 14 June 2019, the fourth defendant, by its solicitor, Mr Harris, accepted that in respect of the plaintiff's claim against the fourth defendant, costs should follow the event.
2. As the fourth defendant was not involved in any of the cross-claims that were exchanged between the other parties, no further orders were required against that defendant. The fourth defendant therefore withdrew and did not participate in the remaining costs arguments involving those other defendants: T298.42 - T298.47.

Plaintiff's position

1. The plaintiff sought two special orders as to costs.
2. The first application (identified in submissions as Option A), was for an order that the third defendant pay the plaintiff's costs against that defendant on the ordinary basis to 20 December 2018, and from 21 December 2018 (or, alternatively, from 26 February 2019) on an indemnity basis.
3. The second application (identified in submissions as Option B), was for an order that the third defendant pay the plaintiff's costs of and incidental to the limitation issues pleaded in the third defendant's defence (including the notice of motion filed on 20 February 2019) on an indemnity basis.
4. The plaintiff's costs submissions were referenced to a liability chronology tendered on the costs argument (Exhibit "A") and to the affidavit of Mr Pryor, the solicitor for the plaintiff.
5. Proposed costs Option A, as sought by the plaintiff, was based upon the proposition that it was unreasonable for the third defendant to have refused either of the joint offers of settlement made to the third defendant by the other defendants after an initiation offer to settle had been made by the plaintiff. That question will be revisited in the context of the analysis of the costs submissions made by the defendants.
6. Proposed costs Option B, as sought by the plaintiff, relates to the limitation issue which the plaintiff was obliged to prepare for contest at the trial. The relevant background to that application was that the proceedings had been commenced against the third defendant on 22 September 2014. The plaintiff had foreshadowed in his pleading that in support of his claim that the proceedings were viable, he would rely on the discoverability provisions within s 50C and s 50D of the Limitation Act 1969 (NSW). The third defendant pleaded, with the required certification of its solicitors, that there was a limitation bar to the plaintiff's claim.
7. The necessary consequence for the trial of the third defendant's unresolved plea of the existence of a limitation bar was that the third defendant intended to prove a positive assertion that the plaintiff had the requisite knowledge for making a claim at a point-in-time that was more than three years before the proceedings were commenced against the third defendant.
8. The plaintiff sought to resolve the limitation issue before the hearing. Despite a series of requests made of the third defendant, that defendant gave no particulars of when and how the plaintiff was said to have become relevantly aware of material facts, so as to justify the plea of a limitation bar to his claim. The third defendant steadfastly maintained that refusal to provide the requested particulars.
9. As a result, the limitation issue then remained unresolved until the morning of the hearing. In the lead-up to those circumstances, the plaintiff's legal representatives were therefore required to take proper steps to meet that pleaded defence. The question was only resolved in the face of a notice of motion filed by the plaintiff returnable on the first day of the hearing, Monday 25 February 2019. That notice of motion was then flagged to be dealt with during the course of the hearing. Ultimately, the limitation defence was withdrawn by the third defendant on the next day: T69.15.
10. As a consequence of that sequence of events, the plaintiff seeks a special costs order of the kind described as proposed costs order B because, by the time the third defendant abandoned its limitation defence, a great deal of the legal work that had been expended on that issue had by then become otiose.

First defendant's position

1. The costs orders sought by the first defendant were that: 1. The first defendant pay 25 per cent of the plaintiff's costs up to and including 16 April 2018; 2. The third defendant pay the plaintiff's costs from 16 April 2018; 3. In the alternative to (2) above, the third and second defendants pay the plaintiff's costs in equal proportions from 16 April 2018 to date; 4. The third defendant pay the costs of the first defendant on an indemnity basis from 16 April 2018; or 5. In the alternative to (4) above, the third and second defendants pay the costs of the first defendant on an indemnity basis in equal proportions from 16 April 2018 to date.
2. The first defendant accepted that the plaintiff was entirely blameless in the litigation and also accepted that the matter ought not have proceeded to trial at the great expense that was ultimately incurred. The first defendant also accepted that the evidence relevant to the costs applications demonstrates that very responsible efforts were made on the part of the plaintiff, the first and second defendants to seek to resolve the proceedings without the expense of a trial.
3. The first defendant submitted that the third defendant had taken and maintained a recalcitrant position to the effect that its defence to the plaintiff's claim was impregnable, which in hindsight tends to explain the failure of the third defendant to respond with counter-proposals to the proposals from the other parties for settlement of the proceedings in circumstances where the plaintiff was bound to succeed for substantial damages; and where all four defendants were exposed to liability findings against them.
4. The first defendant made two offers pursuant to UCPR r 20.32, which provides: 20.32 Offer to contribute (1) If in any proceedings: (a) one party (the first party) stands to be held liable to another party (the second party) to contribute towards any debt or damages which may be recovered against the second party in the proceedings, and (b) the first party, at any time after entering an appearance, makes an offer to the second party to contribute to a specified extent to the debt or damages, and (c) the offer is made without prejudice to the first party's defence, the offer must not be brought to the attention of the court or any arbitrator until all questions of liability or amount of debt or damages have been decided. (2) In subrule (1), debt or damages includes any interest up to judgment claimed on any debt or damages.
5. The position contemplated by UCPR r 20.32(1)(c) now arises for consideration.

Second defendant's position

1. The second defendant's primary position on costs was that the third defendant pay the plaintiff's costs in their entirety and indemnify each of the other defendants for their costs from 21 December 2018, or 25 February 2019, or 28 February 2019. In that regard, in substance, the second defendant supported the costs submissions made by the first defendant.
2. The second defendant's argument on costs was that the plaintiff had a very strong case to be made against all defendants; that this was plain well before the trial; the plaintiff was willing to settle his case on reasonable terms before the trial; all defendants except the third defendant co-operated to seek to transact a reasonable settlement, but the third defendant was recalcitrant to settlement negotiations, apparently believing that it had an unlosable case, which is a rarity in litigation, and therefore it declined to enter into any significant pre-trial settlement discussions, consequently, substantial legal costs were needlessly incurred.
3. Significantly, and in order to demonstrate the argued untenability of the position taken by the third defendant with regard to pre-trial negotiations, the second defendant pointed to the fact that at a related hearing in the Industrial Court on factual matters, where those factual matters were bound to be raised at the hearing of the present case, it was made plain to the third defendant that his stance was based on propositions that were factually incorrect, and unlikely to be reflected in findings of fact at the trial.
4. The second defendant therefore claims that the third defendant had acted unreasonably in the lead-up to the hearing, with a completely unrealistic view of the prospects of his exposure to a liability finding against him. The second defendant submitted that this is evident from the fact that the third defendant only commenced to meaningfully participate in settlement discussions during the trial by unrealistically offering to increase his contribution to a settlement by an amount of $50,000, and in doing so, expended significant costs, including by briefing senior counsel, where, it was observed in submissions, the third defendant was the only defendant to do so.
5. The second defendant therefore submitted that the third defendant should pay the plaintiff's costs in their entirety and indemnify each of the other defendants for their costs incurred from 21 December 2018, or 26 or 28 February 2019.
6. At this point, it is convenient to deal with that lastmentioned submission concerning the third defendant's lawyers briefing senior counsel. The third defendant was undoubtedly in a difficult position of exposure to liability in this complex case, and that potential liability was likely to be for a significant proportion. In my view, the third defendant was justified in briefing senior counsel.

Third defendant's position

1. In essence, the third defendant made two costs submissions, as follows.

As against the plaintiff

1. The third defendant submitted that the plaintiff should not be entitled to any order for indemnity costs, either in relation to the abandoned Limitation Act defence, or in relation to the proceedings generally.
2. The second defendant argued that the third defendant should pay the plaintiff's costs in their entirety, on account of claimed unreasonable conduct, and pay the other defendants' costs from 8 November 2018.

Third defendant's resistance to paying the plaintiff's costs on an indemnity basis

1. The third defendant's resistance to any order for indemnity costs was based on the proposition that there was no evidence that the plaintiff ever made any offer to settle the case for any amount less than the judgment that he ultimately recovered against the non-employer defendants.
2. The third defendant further maintained that there should be no indemnity costs order made in relation to the third defendant's abandoned limitation defence because ultimately, it was the third defendant's decision to not press that limitation defence, which was said to be due to possible delays in the hearing because there was an issue with a witness being available to give evidence.

Third defendant's resistance to the costs orders sought by the first and second defendants

1. The third defendant mounted a costs argument based on the percentages by which they were required to meet the judgment which the plaintiff had respectively obtained against each of them, namely, in conformity with those percentages.
2. The third defendant responded to the argument that alleged it was the third defendant's failure to approach the possibility of a settlement that precluded a timely and costs saving settlement being achieved with the plaintiff and with the other parties.
3. It was not until the final day of the hearing that the third defendant had ever offered to contribute other than in equal proportions to the first and the second defendants.
4. The third defendant relied upon a tabulation of settlement offers made between 16 May 2018 and 28 February 2019.

Consideration and determination

1. The power to order indemnity costs is found in the wide discretion conferred by s 98(1)(c) of the Civil Procedure Act 2005 (NSW), which enables an inquiry as to the extent to which and by whom, the costs of a successful party should be paid.
2. A focal point raised by the plaintiff concerning the analysis of the costs arguments is the degree to which certain parties have failed or have been delinquent in their compliance with the obligations required by s 56 of the Civil Procedure Act.
3. The circumstances in which an indemnity costs order may be made include out of the ordinary situations such as unreasonableness or a relevant procedural delinquency of a party. The purpose of such an order is not to punish the delinquent party but to more adequately compensate the party affected, namely the disadvantage of incurring needless expense due to the delinquency: Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11, at [11], [44]. Those principles are also embodied within s 98 of the Civil Procedure Act.

Determination of plaintiff's costs relating to limitation defence by third defendant

1. The costs relating to the limitation defence of the third defendant is a discrete issue that may be conveniently dealt with at this point.
2. The third defendant's limitation defence was at all times problematic in the lead-up to the trial. The third defendant faced the problem that it had failed to particularise that defence despite repeated requests from the plaintiff that it do so. This raised a problem for that defendant where its cards had not been placed on the table at the appropriate time in order to avoid the unfair disadvantage to the plaintiff, namely an ambush: Nowlan v Marsland Transport Pty Ltd (2001) NSWLR 116; [2001] NSWCA 346, at [28] - [30], [44]; White v Overland [2001] FCA 1333, at [4].
3. Whilst a party is entitled to maintain an arguable defence even to the point of final submissions, the procedural obligations of providing proper particulars when requested to do so, and to avoid needless expense, cannot be ignored. The failure of the third defendant to respond to the plaintiff's requests for particulars involved unreasonableness and delinquency.
4. I find that the third defendant's late abandonment of his reliance on the pleaded limitation defence in the face of earlier but ignored requests by the plaintiff for particulars of that defence, was an unreasonable and delinquent position taken by the third defendant, and for which the plaintiff should be compensated as to costs because this was an out of the ordinary event. To persist with a defence of that kind without employing the requested particularisation, was an untenable position adopted by the third defendant. Those circumstances have put the plaintiff to needless expense: Sze Tu v Lowe (No 2) [2015] NSWCA 91, at [37] - [39], applying Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11, at [67], Mahenthirasa v State Rail Authority of NSW (No 2) (2008) 72 NSWLR 73; [2008] NSWCA 201, at [8] - [9]; Latoudis v Casey (1990) 170 CLR 534; [1990] HCA 59, at 542.
5. As justification for an order for the plaintiff's submission that his costs incurred in preparing for the third defendant's limitation defence should be paid on the indemnity basis by the third defendant, reliance was placed on the decision in Sheridan v Colin Biggers & Paisley [2019] NSWSC 621, at [16] - [17]. The plaintiff argued that an order for indemnity costs was warranted where, properly advised, which must be presumed to be so until shown otherwise, the third defendant should have known that his claim of a limitation defence had no real prospects of success. The plaintiff had a compelling case to the contrary of the position maintained by the third defendant.
6. I accept the plaintiff's submission that all of the requisite features for that position are found in the correspondence from the third defendant's solicitor between 19 December 2018 and the filing of the plaintiff's notice of motion on 20 February 2019. I am satisfied that the failure of the third defendant to articulate his limitation defence when requested to do so, and his maintenance of that position until the hearing, leads to the compelling inference that it never had a viable limitation defence. The plaintiff had a compelling and irresistible claim for leave to proceed in the face of such a claimed defence. I find that the position adopted by the third defendant represented a significant departure from the obligations imposed upon parties and their representatives by s 56 of the Civil Procedure Act.
7. I do not accept that the claim of unavailability of a witness was the deciding factor for the third defendant's late withdrawal of the limitation defence. The Court has well tried and understood mechanisms for accommodating the circumstances of an unavailable witness so that evidence could be taken from such a witness by alternative means.
8. I accept the submission made by the plaintiff that the third defendant's reliance on the limitation defence, in the absence of the particulars that had been requested of that defendant, was an untenable position. It was inevitable that without such particulars, the limitation defence was unlikely to be permitted to proceed. The abandonment of that defence during the trial was just a short step away from its inevitable rejection.
9. I therefore propose to make costs order B as sought by the plaintiff. I find that the plaintiff's costs incurred in relation to the third defendant's abandoned plea of a limitation defence should be paid by the third defendant on the indemnity basis: s 98(1) of the Civil Procedure Act.

Determination of plaintiff's costs of the proceedings until 20 December 2018

1. As the blameless party, the plaintiff should have his costs of the proceedings paid by the defendants as a matter of course because he has succeeded in the litigation.
2. The position of the fourth defendant's liability for the plaintiff's costs has already been identified at [13] above as a discrete issue. The decision of responsibility for the plaintiff's costs and the costs of the other defendants on the cross-claims is not a simple matter to determine.
3. In reviewing the history of the matter in the lead-up to the trial it seems to me that the first, second and third defendants were justified in not seeking to settle with the plaintiff on an individual basis as between the plaintiff and an individual defendant, for so long as the other defendants were not brought into the settlement tent in a common interest.
4. In my view, that position remained the case until 20 December 2018. Until that time the individual defendants had not exhausted their attempts at trying to resolve the plaintiff's case without the need for a trial, where the plaintiff had demonstrated a willingness to negotiate a settlement.
5. Given the complexity of the litigation due to the involvement of multiple parties, a failure to settle prior to 20 December 2018 should only have the consequence of the costs liability of the first, second and third defendants to the plaintiff on the ordinary basis. In my view, up until that time, the respective defendants should bear the responsibility for that costs liability in accordance with the same percentages of the proportionate liability findings.

Determination of plaintiff's costs of proceedings from 21 December 2018

1. The plaintiff was bound to succeed in this litigation and he did so, thereby incurring substantial costs in the process of obtaining judgments against the defendants. The plaintiff's case against the respective defendants was of a kind that was readily amenable to and capable of settlement.
2. It is the right of a defendant to put a plaintiff to proof of a claim and to take a chance on the outcome of litigation. That right, which must necessarily carry a costs risk, is subject to the obligations imposed by s 56 of the CP Act. A defendant who makes the forensic decision and chooses to take a risk-laden course, takes that option at peril as to costs as an ordinary consequence of adversarial litigation.
3. Where a party has acted unreasonably, and as a result, and by that unreasonable conduct, has caused the opposing parties to incur costs that could have otherwise been avoided if a more reasonable course had been taken, the question of adequate costs compensation, as contemplated by s 98(1)(c) of the Civil Procedure Act and by the authorities cited at [51] above, arises for consideration.
4. In my view, the third defendant's conduct of the proceedings, by which he effectively remained aloof from entering into meaningful settlement negotiations with a plaintiff, who was clearly willing to negotiate on reasonable terms, was an unreasonable position to adapt.
5. As a consequence, the case did not settle, and the plaintiff was obliged to incur substantial costs, including the costs of the spectre of having his counsel having to sit and watch over the internecine dispute between the defendants in order to protect his own interests in the litigation.
6. In view of the problematic credit issues relating to the third defendant, as was exposed in a previous hearing in the Industrial Court, where those matters were required to be ventilated again in these proceedings, and as analysed in the principal judgment in those proceedings at [25] to [34], the third defendant adopted an unreasonable approach, which had the effect of prolonging the litigation and rendering it more costly for all of the other parties.
7. In my view, having regard to the authorities cited at [51] above, the plaintiff must be compensated as to costs for the consequences of the unreasonable position adopted on behalf of the third defendant: s 56 of the Civil Procedure Act.
8. In those circumstances I find that fair and proper compensation for such a course requires that the plaintiff's costs of the proceedings be paid by the third defendant on the indemnity basis from 21 February 2018.

Determination of third defendant's cost liability to first and second defendants

1. In my view, the non-settlement position adopted by the third defendant in this litigation was the most probable cause of the case remaining unresolved so as to require the first and second defendants to incur the undoubtedly expensive costs that were a consequence of the plaintiff's case proceeding to judgment.
2. The pivotal circumstance which led to that scenario was the third defendant's refusal to adopt a reasonable approach to attempting to negotiate a settlement position with the other defendants who were plainly otherwise amenable to that course. This was also in circumstances where the plaintiff was plainly amenable to such a course. In my view, the third defendant's position as so described was unreasonable in the circumstances and it was delinquent to the obligations of a party as required by s 56 of the Civil Procedure Act. On the basis of the authorities cited at [51] above, the first and second defendants must be adequately compensated for the third defendant's delinquency in its response to settlement opportunities.
3. As a consequence, I consider that the costs incurred by the first and second defendants from 21 December 2018 should also be paid by the third defendant on the indemnity basis.

Orders

1. I note the following costs orders: 1. As between the plaintiff and the fourth defendant, no order as to costs with the intent that each party pay their own costs; 2. The plaintiff's costs of and incidental to the limitation defence pleaded by the third defendant, are to be paid by the third defendant on the indemnity basis; 3. The plaintiff's costs of his claims against the first, second and third defendants are to be paid by those defendants on the ordinary basis to 20 December 2018, in the same proportions as the proportionate liability findings made against those defendants; 4. The third defendant is to pay its own costs incurred in the proceedings; 5. The first and second defendants are to pay their own costs incurred in the proceedings to 20 December 2018; 6. The third defendant is to pay the costs incurred by the first and second defendants in the proceedings from 21 December 2018 on the indemnity basis; 7. Liberty to apply on 7 days' notice if further or other orders are required; 8. The third defendant is to pay the costs incurred by the plaintiff in the proceedings from 21 December 2018 on the indemnity basis.

Amendments 30 August 2019 - At paragraph [73], order (1) replaced and addition of order (8). 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: 30 August 2019