(1) The first defendant says there was no issue on the pleadings that the first defendant was vicariously liable for the negligence of the second defendant. (2) The plaintiff's alternative claims against the first defendant based upon the alleged negligence by the servants or agents of the first defendant, other than the negligent driving of the second defendant, and the alleged failure to provide a safe system of work, failed at the trial. (3) An Offer of Compromise was made by the second defendant to the plaintiff which the plaintiff accepted. Therefore, the plaintiff did not need to pursue the defendants any further in the action, and the only issue in the litigation left to be determined was the issues between the defendants

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:

1. The defendants shall pay the plaintiff's costs of the action to be taxed.
2. The first defendant shall pay the second defendant's costs on the Indemnity Notice, to be taxed.
3. 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.