on the Third Party Notice.
5. In addition, the first defendant submitted that the right to indemnity
which the second defendant
had was limited to damages only, and not costs.
6. Accordingly, the first defendant submitted that the plaintiff was not
entitled
to an order for costs against it at all, that the second defendant
should pay the plaintiff's costs up to the date of service of
the Notice of
Compromise, that the plaintiff should pay the second defendant's costs
thereafter, that the plaintiff should pay the
whole of the first defendant's
costs, or alternatively no order for costs should be made between the
plaintiff and the first defendant,
and the first defendant should pay the
second defendant's costs on the Third Party Notice.
7. The second defendant submitted that
the proper order is that the plaintiff
should have its costs against both defendants, and that the first defendant
should indemnify
the second defendant against the plaintiff's costs in the
main action and should pay the second defendant's costs on the Third Party
Notice. Alternatively, the second defendant submitted that if any effect were
to be given to the Offer of Compromise at all, the
second defendant alone
should pay such of the plaintiff's costs relating to the issue of damages as
were incurred after 14 October
1991.
8. As to those submissions I find that on 2 October 1991, the second
defendant served on the plaintiff an Offer of Compromise.
However, this was an
offer limited to the quantum of the plaintiff's claim only. The wording of the
offer was as follows:
"...
the Second Defendant HEREBY OFFERS to consent to
damages being assessed in the sum of $50,000 inclusive of
interest such damages
to be apportioned having regard to the
Court's findings as to fault on the part of the Plaintiff
and/or the First Defendant
and/or the Second Defendant."
9. The Supreme Court Rules do not specifically provide for an Offer of
Compromise relating to quantum
only. Order 26.02(1) provides: "Where in a
proceeding the plaintiff makes a claim for damages for or arising out of death
or bodily
injury, the plaintiff and the defendant may serve on one another an
offer of compromise of that claim on the terms specified in the
offer."
10. I consider that the words "offer of compromise of that claim" appearing
therein do not include an offer limited to quantum
only. To be a valid offer
of compromise within the meaning of the Rule, the offer must be such as to
entitle the other party to enter
a judgment of some kind. Order 26.07 provides
that where a party to an accepted offer fails to comply with the terms of the
offer,
the other party is entitled, at his election, to judgment in terms of
the accepted offer, or, in the case where the defendant is
at fault, to having
his defence struck out, and judgment accordingly. Thus O26 contemplates an
offer to consent to judgment with
or without damages to be assessed, but it
does not contemplate an offer limited to quantum only, as no judgment is
capable of being
entered unless liability is also agreed.
11. Secondly, where there are multiple defendants who are jointly or jointly
and severally
liable, and questions of contribution or indemnity appear to
exist between the defendants, O26.09 provides that the cost consequences
of
failure to accept an offer, which are provided for by O26.08, do not apply to
an offer made to the plaintiff unless the offer
is to compromise the claim
against all defendants. The offer made by the second defendant was not in
these terms.
12. The second
defendant's offer was accepted by the plaintiff on 14 October
1991. On 7 November, the plaintiff directed an offer to both defendants
for
$65,000 inclusive of interest which again was an offer as to quantum only. In
my view this offer was similarly ineffective as
it did not comply with
O26.02(1). Further, it contradicted the plaintiff's acceptance of the second
defendant's Offer of Compromise.
13. The plaintiff says, in his written submissions, that agreement as to
quantum was reached with both defendants on 11 November
1991. The second
defendant says that the first defendant did not join in the settlement of the
question of quantum until the first
day of the trial (which was 11 November
1991); and the first defendant agreed in its submissions that this was so.
14. I conclude
that there is no basis to the first defendant's submissions,
so far as they depend upon the Offer of Compromise. The plaintiff was
not at
any time in a position to obtain interlocutory judgment or judgment of any
kind against the defendant's pursuant to O26.07.
As the first defendant had
not agreed even to the question of quantum, the plaintiff had no alternative
but to proceed to trial,
at least so far as the first defendant was concerned,
on all issues.
15. As to the first defendant's other submissions, although
the first
defendant admitted in its pleading that the second defendant drove the vehicle
in question in the course of his employment
with the first defendant, both
defendants denied that the accident was caused by the negligent driving of the
second defendant and
the second defendant, but not the first defendant,
pleaded that the plaintiff was guilty of contributory negligence. The other
bases
of liability, although argued at the trial, did not require the calling
of any additional witnesses. The only witness called for
the plaintiff was the
plaintiff himself. The first defendant called no evidence and the second
defendant called only the second defendant.
Very little time was occupied in
submissions on these issues.
16. In all the circumstances I see no reason why the plaintiff, who
was
successful against both defendants, should not get his costs against both
defendants.
17. I turn now to consider the position
as between the defendants. As I
ordered that the second defendant is entitled to be indemnified by the first
defendant as to any
amount which the second defendant is required to pay to
the plaintiff, prima facie the second defendant is entitled to an order that
the first defendant pay the second defendant's costs on the Indemnity Notice.
As the first defendant had disputed that the second
defendant was negligent,
it seems to me that the first defendant cannot complain if the first defendant
denied liability to the plaintiff,
and that prima facie, the first defendant
should also indemnify the second defendant against any costs which the second
defendant
is called upon to pay to the plaintiff.
18. The first defendant did not dispute that it should be ordered to pay the
second defendant's
costs on the Indemnity Notice. However, it submitted that
as s40(1)(d) of the Motor Accidents (Compensation) Act places a statutory
obligation on the Territory Insurance Office to indemnify the second defendant
against all costs, the second defendant was not entitled
to any further order
for costs against the first defendant.
19. In my opinion s40(1)(d) of the Motor Accidents (Compensation) Act
does
not have the result contended for by the second defendant. I have already held
that the second defendant was not entitled to
indemnity from the Territory
Insurance Office under s6(1) of the Motor Accidents (Compensation) Act, but
was entitled to indemnity
from the first defendant pursuant to s22A of the Law
Reform (Miscellaneous Provisions) Act. Section 40(1)(d) provides:
"40. OFFICE MAY CONDUCT CERTAIN LEGAL, andC., PROCEEDINGS
(1) The Office -
(a) may undertake
the settlement of any claim against a
person referred to in section 6(1) in respect of his
liability referred to in that section;
(b) may take over during such period as it thinks fit the
conduct
on behalf of that person of any proceedings taken or
had to enforce the claim or for the settlement of any
question arising
with reference to the claim;
(c) may defend or conduct those proceedings in the name and
on behalf of that person; and
(d)
shall indemnify that person against all costs and
expenses of or incidental to any of those proceedings while
the Office retains
the defence or conduct of the
proceedings.
(2) The person referred to in subsection (1) shall sign all
such warrants and
authorities as the Office requires for the
purpose of enabling it to have the defence or conduct of any
proceedings referred
to in that subsection and, in default
of his doing so, the court in which the proceedings are
pending may order that the warrants
and authorities be signed
by the Office on behalf of that person.
(3) Nothing said or done by or on behalf of the Office in
connection with the settlement of any such claim or the
defence or conduct of any such proceedings shall be regarded
as
an admission of liability in respect of, or shall in any
way prejudice, any other claim, action or proceeding arising
out of
the same occurrence."
20. It is to be observed that s40(1)(d) refers to "that person", i.e. a
person referred to in s40(1)a). In
the circumstances of this case, it might be
said that a claim was made against such a person as is referred to in
s40(1)(a) in that
the plaintiff brought an action against the second defendant
who fell within the description of a person liable to pay damages in
respect
of bodily injury to the plaintiff in the circumstances contemplated by
s6(1)(a), etc., notwithstanding that there was no entitlement to indemnity
against the Office under s6(1). Be that as it may, the fact that the second
defendant is entitled to indemnity for his costs by an entity which is not a
party to
the suit ought not to preclude the second defendant from seeking an
order for his costs against another party to the suit. It is
true that there
are authorities to the effect that, if a party is not liable to pay any costs
to his own solicitor, no costs can
be recovered by the other side: see, for
example, Irving v Gagliardi; Ex parte Gagliardi (No.2) (1895) 6 QLJ 200, per
Griffith CJ.
However, more recent authorities show that that principle cannot
be taken too far. One well-established exception is where a party
is
represented by a solicitor employed by the Crown, and the party really
represented the Crown's interests: see, for example, Lenthall
v Hillson [1933] SAStRp 13; (1933)
SASR 31. In that case, the Full Court (Napier and Angus Parsons JJ) said (at
36): "We think that the principle that costs are given as an
indemnity can be
carried too far. It comes from the unwritten law, and depends upon
considerations of public policy and convenience,
and it follows that it must
be reasonably understood and applied." Later (at 37) their Honours concluded:
"It is apparent that in
these circumstances the rule that costs are an
indemnity must have been understood, as it was understood in Irving v
Gagliardi, i.e.
as applying to the liability of the real and not of the
nominal plaintiff."
21. There is no reason why any distinction should be
made between plaintiffs
and defendants. In the instant case, the "real" defendants were the Territory
Insurance Office and the first
defendant's employer's indemnity insurer, as
they ultimately will bear the losses.
22. In Backhouse v Judd [1925] SAStRp 49; (1925) SASR 395, the Society for the Prevention of
Cruelty to Animals employed an inspector called Judd who was the complainant
in certain proceedings
against Backhouse which were successful. Judd was
represented by solicitors and counsel employed by the Society. Poole ACJ held
that
unless it was shown that Judd was under no liability to pay his
solicitor's costs, an order for costs could be made against Backhouse,
notwithstanding the indemnity for costs which was given by the Society. This
decision was upheld on appeal: (1925) SASR 400. In the Full Court, Angas
Parsons J said (at 402-3):
"The facts are similar to those which one would expect in a
case where
an insurance company undertakes the conduct of
proceedings instituted by the assured or against him, nor do
they differ, in
my opinion, from those where an information
is laid by a member of the police force for whom counsel is
briefed by the Law
Department. In such a case, although the
police officer accepts the services of such counsel, and
would not contemplate that
in any event he would be left to
pay the costs, yet the proper inference to be drawn is that
liability therefor, in the absence
of a bargain to the
contrary, is not to be taken to be negatived, and in every-day
practice such an informant may be awarded
costs if
successful."
23. Each of the judges in Backhouse v Judd followed Adams v London Improved
Motor Coach Builders (1921) 1 KB 495. That was a case where a trade union gave
a plaintiff legal aid and instructed solicitors to act on his behalf. The
solicitors issued
proceedings and briefed counsel. The plaintiff succeeded at
trial, and was held to be entitled to his costs. The Court of Appeal
held that
once it was established that there were solicitors acting on the plaintiff's
behalf with his knowledge and approval, the
plaintiff must become liable for
his solicitor's costs, notwithstanding that the union also undertook to pay
his costs. In order
for the plaintiff's claim for costs to fail, the court
held that it would be necessary to go further and show that there was a
bargain
to the effect that under no circumstances was the plaintiff to be
liable for his solicitor's costs.
24. In Blackall v Trotter (No.1)
[1969] VicRp 114; (1969) VR 939, the Full Court of the Supreme
Court of Victoria took the matter one step further. In that case, an employed
solicitor of the Victorian
Insurance Commissioner represented a defendant
insured under a policy of the Commissioner. The defendant was successful in
the entitlement
to a costs order even though the solicitor was employed by the
Crown (the Insurance Commissioner being the Crown in another guise).
It is
true that that case depended in the end on the fact that the solicitor was an
employee of the Crown, but it is pertinent to
observe that their Honours said
(at 942):
The present is a case involving a Crown-employed solicitor,
but we are not to be
taken as deciding that the principle is
limited to such a case. In New Pinnacle Group Silver Mining
Co v Luhrig Coal and Ore
Dressing Appliances Co [1902] NSWStRp 4; (1902) 2 SR
(NSW) 50, for instance, the Full Court of New South Wales
held that a plaintiff company in civil proceedings
represented by a private
solicitor against whose costs it
was legitimately indemnified was not disentitled to recover
such costs (see in particular
per Walker J at 56, and also
Elborough v Ayres (1870) LR 10 Eq 367 -referred to in
Lenthal v Hillson, supra)."
25. There is no evidence that the second defendant has an agreement with his
solicitors
that, come what may, only the Territory Insurance Office will be
liable to meet his costs. Indeed, it would be surprising if that
were the
case, given that the Office's obligation under s40(1)(d) is to indemnify the
second defendant against all costs and proceedings.
If the second defendant's
solicitors have agreed not to charge the second defendant under any
circumstances, of what value would
an indemnity be?
26. Also, it may well be that the Territory Insurance Office is in law the
Crown in another guise, having regard
to ss17,12,13,26,30 and 33 of the
Territory Insurance Office Act, but it is unnecessary to decide this question.
27. The authorities to which I have referred show that the mere fact that a
party
to litigation is entitled to indemnity from a person not a party to the
proceedings does not disentitle that person to an order for
costs. It could
not therefore be argued that the second defendant is not entitled to his costs
against the first defendant on the
Indemnity Notice, and indeed the first
defendant does not argue to the contrary. But if that is so, there is no
reason in principle
why the second defendant ought not to be able to obtain an
indemnity for costs ordered to be paid by him to the plaintiff, merely
because
the second defendant is entitled to be indemnified by the Office.
28. I conclude therefore that the second defendant is
entitled to be
indemnified by the first defendant against any costs which the first defendant
is liable to pay to the plaintiff.
29. Accordingly, I order that:
- The defendants shall pay the plaintiff's costs of the
action to be taxed.
- The first
defendant shall pay the second defendant's
costs on the Indemnity Notice, to be taxed.
- The first defendant shall indemnify
the second defendant
from so much of the costs of the action which the second
defendant is called upon to pay to the plaintiff.