Kay v Sydney Airport Corporation Limited

Supreme Court of NSW|2014-07-24|Before: Adamson J

Introduction 1On 6 June 2014 I published reasons for my orders in proceedings brought by Anna Kay and by her employer, Toll Aviation Engineering Pty Limited (Jetcare): Kay v Sydney Airport Corporation Limited [2014] NSWSC 744 (the principal judgment). I propose to adopt the same abbreviations in these reasons as I used in the principal judgment. I subsequently made orders quantifying the orders for judgment that I had made. The mathematical effect of these orders was that Ms Kay obtained judgment for $171,575.35 and Jetcare obtained judgment for $233,414.35, being the sum of $171,575.35 plus interest of $61,839. 2The effect of the judgments was, in substance, as follows. 3Ms Kay succeeded in establishing her claim for damages against Alltrack, but not against UGL. However, the quantum of her damages was substantially less than she had received by way of workers compensation payments (being a total amount as at 16 May 2014 of $337,282.05). Accordingly, she has put herself in a worse position by bringing the proceedings. 4Jetcare succeeded in its claim for statutory indemnity against Alltrack for repayment of workers compensation payments together with interest. It was unsuccessful in its claim against UGL. By reason of Ms Kay's judgment for damages, Jetcare is no longer liable to pay her workers compensation. Jetcare is accordingly in a better position as a result of the litigation. Although it was entitled to be indemnified by Alltrack by reason of the statutory indemnity, it was only entitled to interest because it brought proceedings to claim it (s 100 of the Civil Procedure Act 2005 (NSW)). 5Alltrack was found liable to Ms Kay but succeeded in having her damages reduced by 75% because of the notional liability of her employer, Jetcare. It was unsuccessful in its cross-claim against UGL, which was essentially a defensive cross-claim. 6The parties made submissions on costs which were supplemented by oral argument before me on 24 July 2014. 7Ms Kay contended for orders that Alltrack pay her costs and the costs of UGL. 8Toll Aviation contended for orders that Alltrack pay its costs and the costs of UGL. 9Alltrack contended for orders that there be no order as to costs between it and Ms Kay but that Ms Kay be ordered to pay UGL's costs.

Evidence in support of the costs application 10The evidence in support of the costs applications did not reveal that any party had made an offer which had been bettered by the outcome of the proceedings, although there was evidence of offers of compromise and negotiations in the course of an informal settlement conference that took place between all parties on 13 May 2014. There is no evidence to the effect that Ms Kay would have accepted the sum on offer from UGL or that Alltrack was aware of this offer. Alltrack's legal representatives were aware that Jetcare might compromise its costs and claim for interest but was not aware that Jetcare would compromise the principal amount of the statutory indemnity. Neither Alltrack nor UGL protected their positions by making Offers of Compromise or Calderbank offers that were sufficient to have operative effect in light of the principal judgment.

Relevant legislation 11The Workers Compensation Act 1987 (NSW) provides in part: 151A Effect of recovery of damages on compensation (1) If a person recovers damages in respect of an injury from the employer liable to pay compensation under this Act then (except to the extent that subsection (2), (3) or (4) covers the case): (a) the person ceases to be entitled to any further compensation under this Act in respect of the injury concerned (including compensation claimed but not yet paid), and (b) the amount of any weekly payments of compensation already paid in respect of the injury concerned is to be deducted from the damages (awarded or otherwise paid as a lump sum) and is to be paid to the person who paid the compensation, and . . . 151Z Recovery against both employer and stranger (1) If the injury for which compensation is payable under this Act was caused under circumstances creating a liability in some person other than the worker's employer to pay damages in respect of the injury, the following provisions have effect: (a) the worker may take proceedings both against that person to recover damages and against any person liable to pay compensation under this Act for payment of that compensation, but is not entitled to retain both damages and compensation, (b) if the worker recovers firstly compensation and secondly those damages, the worker is liable to repay out of those damages the amount of compensation which a person has paid in respect of the worker's injury under this Act, and the worker is not entitled to any further compensation, . . . (d) if the worker has recovered compensation under this Act, the person by whom the compensation was paid is entitled to be indemnified by the person so liable to pay those damages (being an indemnity limited to the amount of those damages), (e) if any payment is made under the indemnity and, at the time of the payment, the worker has not obtained judgment for damages against the person paying under the indemnity, the payment is, to the extent of its amount, a defence to proceedings by the worker against that person for damages, . . . (2) If, in respect of an injury to a worker for which compensation is payable under this Act: (a) the worker takes or is entitled to take proceedings independently of this Act to recover damages from a person other than the worker's employer, and (b) the worker also takes or is entitled to take proceedings independently of this Act to recover damages from that employer, the following provisions have effect: (c) the damages that may be recovered from the person by the worker in proceedings referred to in paragraph (a) are to be reduced by the amount by which the contribution which the person would (but for this Part) be entitled to recover from the employer as a joint tortfeasor or otherwise exceeds the amount of the contribution recoverable, (d) the amount of the contribution that the person is entitled to recover from the employer as a joint tortfeasor or otherwise is to be determined as if the whole of the damages were assessed in accordance with provisions of Division 3 as to the award of damages, (e) if the worker does not take proceedings against that employer or does not accept satisfaction of the judgment against that employer, subsection (1) applies as if the worker had not been entitled to recover damages from that employer, except that: (i) if the compensation paid by that employer exceeds the amount of the contribution that could be recovered from that employer as a joint tortfeasor or otherwise-the indemnity referred to in subsection (1) (d) is for the amount of the excess only, and (ii) if the compensation paid by that employer does not exceed the amount of that contribution-subsection (1) (d) does not apply and the employer has, to the extent of the compensation so paid, a defence to an action for such a contribution. . . . (4) If a worker is liable under subsection (1) (b) to repay any money out of damages recovered by the worker, the worker is not liable to repay the money out of any damages payable after the date of recovery by way of periodic or other payments for loss of future earnings or earning capacity or for future expenses. (5) For the avoidance of doubt, this section applies and is taken always to have applied to the recovery of compensation or damages, whether or not the compensation or damages were paid under an award or judgment. For example, compensation or damages may be paid under an agreement. 12The Court's power to award costs is discretionary: s 98 of the Civil Procedure Act.

Appropriate costs orders as between Ms Kay and Alltrack 13Mr Lloyd of counsel argued on behalf of Alltrack that, although Ms Kay had succeeded against it in that she had obtained damages arising from Alltrack's negligence, her victory was a Pyrrhic one and that therefore she was not entitled to a costs order in her favour. He submitted that she could not, on any view, be regarded as having improved her position as a result of the proceedings. He contended that the award of damages had brought to an end her right to workers compensation and that she was liable to repay the whole award to her workers compensation insurer. Therefore, she had enjoyed no practical success as a result of the proceedings and could not be said to have "won". In these circumstances he submitted that a costs order ought not be made against Alltrack. 14In the alternative, Mr Lloyd submitted on behalf of Alltrack that Ms Kay was not entitled to all her costs because she had effectively failed in two significant issues in the proceedings (quantum of damages and the deduction for Jetcare's negligence) and also because she had abandoned very late in the proceedings her claim for domestic care. He submitted accordingly that her costs ought be limited to 25% of her costs. 15Mr Lloyd submitted further that I ought infer that Ms Kay would not have to pay her own legal representatives because she had not had any effective success in the litigation and therefore it would not be just to require Alltrack to pay them. He relied on the fact that although Ms May (Ms Kay's solicitor) had specifically referred to the relevant passage from his written submissions in her affidavit where he had said as much, she had not rebutted the proposition. 16Mr McKenzie, who appeared on behalf of Ms Kay on the costs application (and as junior counsel to Mr Kelly SC at the trial), contended that costs ought follow the event (r 42.1 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR)) and that as Ms Kay had obtained a judgment for damages she ought have her costs of the proceedings paid by Alltrack. He submitted that I ought not inquire into arrangements between Jetcare and Ms Kay since they could be the subject of negotiation. It did not, he submitted, follow from Ms Kay's statutory liability to repay her compensation by reason of the award of damages, that she would, in fact, have to repay the monies. 17Mr McKenzie did not address the question whether Ms Kay was liable to pay the costs of her own legal representatives.

Appropriate costs order as between Jetcare and Alltrack 18Alltrack submitted that Jetcare's proceedings ought not to have been commenced in this Court because they were, on any view, within the jurisdictional limit of the District Court. Alltrack accepted that it would not be appropriate to apply r 42.34 of the UCPR against Ms Kay but contended that I would not be satisfied that the commencement or continuation of Jetcare's proceedings in this Court was warranted, having regard to the amount claimed. Accordingly, it submitted that Jetcare ought not obtain an order for costs in its favour, notwithstanding that it has succeeded in its proceedings. 19Mr Lloyd also submitted that the interests of Ms Kay and Jetcare were relevantly the same as against Alltrack and that, accordingly, Alltrack ought be liable for only one set of plaintiffs' costs.

Who ought pay UGL's costs 20Ms Kay and Jetcare submitted that it was appropriate that Alltrack, as the tortfeasor, ought pay UGL's costs since at all times it argued that it did not owe Ms Kay a duty of care. They contended that UGL was successful because it was found to have delegated its duty of care to Ms Kay to an appropriately qualified contractor, Alltrack. They submitted that it was reasonable for Ms Kay and Jetcare to keep UGL in the proceedings since the relationship between UGL and Alltrack was not entirely clear from the documents and that it was, accordingly, appropriate for Alltrack, as the unsuccessful party, to pay UGL's costs. 21Alltrack resisted the making of an order that it pay UGL's costs or that it indemnify the plaintiffs for their obligation to pay UGL's costs. Alltrack submitted that there was no basis for the allegation that its conduct in any way made it necessary or proper for either Jetcare or Ms Kay to sue UGL or to maintain the claim against UGL. Alltrack relied on the following circumstances: (1)Ms Kay decided to sue UGL before Alltrack was a party to the proceedings. (2)Although Alltrack filed a defensive cross-claim against UGL, it adduced no evidence against it and ran no positive case against it. (3)There was no basis for the suggestion that Alltrack would not have been willing to have UGL released from the proceedings. Alltrack relied on the fact that it had consented to release SACL (the first defendant in the proceedings brought by Ms Kay). Alltrack was unaware of the negotiations between UGL and Ms Kay to resolve the proceedings between them and the need for a release from Alltrack. (4)There is no suggestion that Jetcare was encouraged by anything Alltrack did or said to keep UGL in the proceedings.

Reasons 22The starting point is that costs ought follow the event. However this maxim must have regard to the realities of the litigation rather than the mere fact that Ms Kay has obtained a judgment in her favour. 23Although Ms Kay's award of damages was greater than nominal damages, on any view, she would have been better off had she not pursued the proceedings to judgment. Before judgment she had a continuing right to payment of workers compensation unless ceased by Jetcare and a right to retain those payments which had already been made (which amounted to a total in the order of $337,000). After judgment her right to workers compensation payments ceased (by reason of s 151Z) and she became liable to repay the whole of her damages to Jetcare (by reason of s 151Z(1)(b)). I do not accept Ms Kay's argument that I ought not take account of the practical realities of the outcome of the proceedings. Jetcare's claim for indemnity was not extraneous to the proceedings; its claim was heard together with Ms Kay's claim for damages. Alltrack could rely on its satisfaction of the judgment against it in favour of Jetcare as a defence to a claim for the judgment sum by Ms Kay since it is only liable to pay the $171,575.35 once, not twice. 24Ms Kay knew, before she commenced the proceedings, that before she could obtain any practical benefit from the litigation that she had to obtain an award of damages greater than the amount of workers compensation payments made to her or on her behalf and she also had to overcome the potential reduction in her damages by reference to the hypothetical liability arising from Jetcare's negligence: s 151Z(2)(c). The prospect of her obtaining a practical benefit from the proceedings was, in large measure, dependent on her proving a substantial claim for gratuitous assistance (past and future) and loss of economic capacity (past and future). Her claim under the former head of damages was entirely abandoned, presumably because it was unsustainable in light of the video evidence and her general lack of credibility. As for the latter head, she was unable to establish a loss of the order claimed for the reasons given in the principal judgment. 25The purpose of an award of damage in tort is to put the plaintiff in the position she would have been in, as far as money can do it, but for the defendant's wrongful conduct: Gates v City Mutual Life Assurance Society Limited [1986] HCA 3; (1986) 160 CLR 1. There was no other relevant remedy sought in these proceedings. To obtain a financial benefit by way of compensation was not only the salve but also the sole purpose of the proceedings. In a relevant sense, Ms Kay failed in her aim and ought not be regarded as having succeeded in her suit. 26Ms Kay's case is analogous in important respects to cases where a plaintiff has obtained only an award of nominal damages. The law of defamation is redolent with examples of costs orders being made against (or not made in favour of) parties who have technically won. In Connolly v 'Sunday Times' Publishing Co. Limited [1908] HCA 69; (1908) 7 CLR 263 the defence of truth was pleaded. The jury returned a verdict for the plaintiff of one shilling. The High Court unanimously decided that the facts showed good cause to deprive the plaintiff of his costs. Justice O'Connor said at 275-276: "Here, then, was an action which had involved a trial lasting over eleven days, the costs of a commission to London and Victoria, and an amount expended in out-of-pocket expenses which the plaintiff in his affidavit puts down at £500 over and above solicitors' costs, and after all this expenditure in litigation, the result was one shilling damages. The Judge was placed in the position of having to determine in the course of his duty whether, if he refused to interfere by making this order, he would not be permitting a grave injustice to take place. If he allowed the law to take its course without interference the whole of those costs would have to be paid by the defendants to the person who, after causing all this expensive litigation, had only succeeded in establishing that, in respect of this crushing indictment of his racing conduct grossly libellous if untrue, he was entitled to no more than one shilling damages. If ever there was a case in which a Judge ought to exercise his discretion under the Rule to prevent injustice being done, it was in a case such as this." 27To borrow the words of Devlin J in Anglo-Cyprian Trade Agencies Limited v Paphos Wine Industries Limited [1951] 1 All ER 873 at 875, Ms Kay has "not established anything which is of the least value" to her, and is therefore not to be regarded as a successful plaintiff. A more modern expression of the relevant principles is to be found in Motium Pty Limited v Arrow Electronics Australia Pty Limited [2011] WASCA 65 at [10] per McLure P, Newnes and Murphy JJA: While each case must depend upon its own facts, where it is not a primary purpose of proceedings simply to establish or vindicate some legal right but the primary purpose is to recover substantial damages, ordinarily an award of nominal damages will not entitle a party to the costs of the proceedings: see Thiess Contractors Pty Ltd v Placer (Granny Smith) Pty Ltd [2001] WASCA 166 [9]. In such a case, the party has obtained something of no real use to them and something which, if they had known it was all that was available, they would not have brought proceedings to recover. It would be contrary to modern notions of the efficient and cost-effective use of judicial resources to enable a party to recover its costs for a pyrrhic victory, having substantively failed in the action. 28To assess whether a plaintiff has succeeded involves a consideration of that at which she was aiming (see the authorities referred to in Rockcote Enterprises Pty Limited v FS Architects Pty Limited; Carelli v FS Architects Pty Limited [2008] NSWCA 39 at [100] per Campbell JA (McColl JA and Handley AJA agreeing). What Ms Kay was "aiming" for was a judgment in excess of her workers compensation payments, after any deduction for Jetcare's notional negligence was taken into account. On no view could she be said to have achieved her aim. Indeed, she fell far short of it. 29Although Ms Kay has obtained what at first blush appears to be a substantial award, her victory is, in effect, a defeat because of the consequences for her workers compensation entitlements and the circumstance that Alltrack can satisfy the judgment against it in her favour by paying Jetcare the judgment in its favour. Whether Jetcare chooses to remit any amount to her by way of ex gratia payment cannot affect how the matter ought be viewed in terms of the utility of any remedy that the Court has ordered as a result of her bringing the proceedings. For these reasons, I am persuaded that Alltrack ought not be ordered to pay Ms Kay's costs of the proceedings and that the appropriate order is that as between Ms Kay and Alltrack there be no order as to costs, with the intention that each party bear its, or her (as the case may be) costs of the proceedings. 30I should add for completeness that in exercising my discretion as to costs in the way set out above, I have not made any assumption as to whether Ms Kay will or will not be obliged to pay her own legal representatives. It is a matter of common knowledge that in cases of this nature it is often the case that solicitors and barristers instructed by plaintiffs do so on a "no win, no fee" basis. Many cases would not be brought in this area if it were otherwise since many plaintiffs lack the financial wherewithal to fund their own litigation. However, there is no evidence before me as to the arrangement between Ms Kay and her legal representatives. That Ms May did not address the matter in her affidavit does not lead me to conclude that Ms Kay has no liability to her legal representatives. There is simply no evidence on the matter. 31Because of the order I propose to make as between Alltrack and Ms Kay, there is no need for me to decide Alltrack's alternative submission that Ms Kay ought be entitled only to a percentage of her costs because of her conduct of the proceedings. It is sufficient to note that the defendants successfully challenged Ms Kay's credibility and substantially diminished her claim for damages. The defendants' challenge can be taken to have caused Ms Kay to abandon her claim for gratuitous assistance, which, in my view, ought never to have been brought. 32As for Jetcare, the bases on which Alltrack contended it ought not be ordered to pay Jetcare's costs of the proceedings was that there ought only be one set of costs and that Jetcare's commencement and maintenance of the proceedings was not warranted (UCPR, r 42.34). The first basis is no longer relevant because of my conclusion that Alltrack ought not be ordered to pay Ms Kay's costs. 33As to the latter contention, I consider that it was warranted for Jetcare to bring and maintain its proceedings in this Court rather than the District Court. Jetcare's interests and Ms Kay's interests in the proceedings both coincided and diverged in the following respects. 34The interests of Ms Kay and Jetcare were identical in three important respects: (1)Obtaining a judgment against either Alltrack or UGL; (2)Maximising the award of damages in Ms Kay's favour; and (3)Minimising the reduction for the hypothetical liability of Jetcare for Ms Kay's injuries. 35However Jetcare's interests and Ms Kay's interests were divergent in that Ms Kay had no interest in obtaining a judgment that was less than her workers compensation payments since she would thereby obtain no net gain from the judgment and would also lose her ongoing rights to workers compensation. It can reasonably be expected that a plaintiff whose proceedings are not going well might decide to abandon those proceedings or settle them on a walk-away basis without a judgment being entered in order to preserve the ongoing right to workers compensation payments. Such an outcome would be to the detriment of the employer, in this case, Jetcare. Accordingly, Jetcare had an interest in its proceedings being heard with Ms Kay's. It is desirable that all issues between parties in dispute be determined at the same time, if not in the same proceedings. It was a sensible course that the proceedings be heard together. This meant that Jetcare was obliged to litigate in the court selected by Ms Kay to litigate her claim, which happened to be this Court. In these circumstances, I do not consider that r 42.34 of the UCPR ought operate to deprive Jetcare of its costs of the proceedings. 36The next question to be determined is which party should pay UGL's costs. The threshold issue is whether Ms Kay acted reasonably in joining both UGL and Alltrack. In my view, that question must be answered in the affirmative. Ms Kay originally commenced proceedings against SACL, the occupier of Sydney Airport. When it emerged that SACL had contracted the maintenance of the infrastructure at the airport (including the GPUs) to UGL, Ms Kay moved to join UGL to the proceedings. However, documents produced on subpoena revealed that UGL had completely subcontracted out its obligation to maintain such equipment to Alltrack, which had been carrying on that maintenance task for some years prior to UGL being engaged by SACL. 37The conduct of the defendants after the joinder and up to and including the trial is also relevant and, in particular, whether one defendant has actively run a case inculpating the other throughout the proceedings or the trial: Almeida v Universal Dye Works Pty Limited (No. 2) [2001] NSWCA 156 at [35]. Further, as was said by Gibbs CJ in Gould v Vaggelas [1984] HCA 68; (1984) 157 CLR 215 at 229: "In my respectful opinion, however, the mere fact that the joinder of two defendants was reasonable does not mean that the unsuccessful defendant should be ordered to pay, directly or indirectly, the costs of the successful defendant. Obviously a judge should make a Bullock order only if he considers it just that the costs of the successful defendant should be borne by the unsuccessful defendant, and, if nothing that the unsuccessful defendant has said or done has led the plaintiff to sue the other defendant, who ultimately was held not to be liable, it is difficult to see any reason why the unsuccessful defendant should be required to pay for the plaintiff's error or overcaution." 38Alltrack did not run a positive case against UGL. Mr Lloyd, throughout the proceedings, emphasised that the cross-claim against UGL was solely defensive. However, Mr Lloyd in closing submissions said: "On apportionment of liability as between my client and United, I don't make any submission about United being liable, for largely the same reasons I have advanced to your Honour. In my submission, your Honour would find that United is not liable, but if your Honour finds that my client was under a duty, a proactive duty to inspect or should have done something more to put itself on notice of this problem, then because of the fact that the obligations in the contract on United are far more extensive than the obligations which were passed on to my client, if contrary to what has been put to you by my learned friend Mr Polin, if those were the findings, the lion's share of the liability would rest with United, if that sort of duty is owed." 39Alltrack's submission in the proceedings was, in effect, that neither it nor UGL was liable but that if it was liable, UGL was more culpable. Although Alltrack was not responsible for the joinder of UGL, its fallback position implicated UGL. I do not consider Ms Kay or Jetcare to have been "overcautious" in joining UGL in the proceedings. Although the case against UGL was not pressed with any vigour, it was UGL which had undertaken the contractual responsibility to maintain the relevant equipment and which, accordingly, owed a duty to Ms Kay. UGL was only found not to be liable because it had discharged the duty by engaging a suitably qualified contractor, Alltrack. In these circumstances I consider that the appropriate costs order is that Alltrack pay UGL's costs of both proceedings.

Orders 40I make the following orders as to costs: In proceedings 297470 of 2009 (1)The third defendant is to pay the second defendant's costs of the proceedings. (2)As between the plaintiff and the third defendant, make no order as to costs. In proceedings 146777 of 2012 (1)The second defendant is to pay the plaintiff's and the first defendant's costs of the proceedings. All exhibits and subpoenaed material may be returned forthwith; any exhibits returned must be retained intact by the party or person that produced the material until the expiry of the time to file an appeal, or until any appeal has been determined.

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: 29 July 2014

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