Kingston Industries Pty Limited v Place Management NSW and CPB Contractors Pty Limited

The Claims Resolutions Process

1. The scheme of the Claims Resolutions Process was set out by Sackville AJA in Amaca Pty Ltd v Harry Daines Pty Ltd [2011] NSWCA 317 at [5]-[10] as follows: 5 To understand the background to the costs dispute, it is necessary to say something about the claims resolution process ("CRP") for asbestos-related conditions established by the Dust Diseases Tribunal Regulation 2007 (" DDT Regulation"). The relevant provisions are explained in some detail in Power Technologies Pty Ltd v Energy Australia [2010] NSWCA 107, at [13]-[17], [25]-[37], per Sackville AJA. For present purposes it is enough to note key elements of the CRP. 6 An original defendant in proceedings must make any cross-claim as soon as practicable after being served with the Plaintiff's claim (cl 25(1)). A cross-claim that is not served and filed as required by cl 25 cannot be made in the proceedings, but can be pursued in other proceedings. A cross-defendant is obliged to file a reply to the cross-claim in a prescribed form within strict time limits (cl 26). 7 Division 5 of Pt 4 of the DDT Regulation provides for an apportionment determination to be made. The operation of Div 5 was explained by Handley AJA in QBE Insurance (Australia) Ltd v Wallaby Grip Ltd [2007] NSWCA 43; 4 DDCR 331, at 335 [15] as follows: Division 5 establishes a procedure for the summary but provisional determination of contribution claims in order to facilitate settlement of the plaintiff's claim and the satisfaction of any judgment he may obtain by judicial decision or settlement. A defendant or cross-defendant who is dissatisfied with the summary determination can pursue its strict rights and seek a more favourable determination at a trial but will be subject to significant costs sanctions if a substantially better result is not achieved. Meanwhile the summary determination is immediately enforceable. A clear purpose of the scheme is to prevent the final determination of the plaintiff's claim being delayed by contribution disputes. 8 The defendants to a claim (including cross-defendants) must agree among themselves as to the contribution that each is liable to make to the Plaintiff's damages (cl 48(1)). If agreement is not reached within a specified period, the matter is to be referred to a Contributions Assessor. That process was described in Power Technologies, at [91], as follows: "The apportionment determination made by a Contributions Assessor is indeed the product of a ' rough and ready ' process. The Contributions Assessor is to determine the contribution that each defendant is liable to make on the assumption that the defendants (including cross-defendants) are liable: [cl 49(4)]. Moreover, the determination is to be made solely on the basis of the plaintiff's statement of particulars and the defendants' replies, together with the standard presumptions as to apportionment [cl 49(4)(a), (b)]. The Contributions Assessor must assess the contribution of a cross-defendant on the assumption that it is liable to the plaintiff, even if the cross-defendant denies any liability ... and provides cogent support in its reply for that denial." 9 An apportionment determination is conclusively binding on the defendants (including cross-defendants) for the purposes of the settlement or determination by the Tribunal of the Plaintiff's claim and payment of the Plaintiff's damages (cl 52(1)). However, the determination is not binding for the purposes of the subsequent determination by the Tribunal of a dispute between defendants as to apportionment (cl 52(2)). Nonetheless, if a defendant disputes the contribution it is liable to make to the Plaintiff's damages and the Tribunal's judgment does not " materially improve" the defendant's position, it is liable to pay the other party's costs assessed on an indemnity basis (cl 52(3)). 10 The effect of this scheme is that a cross-defendant who denies liability, but is forced in consequence of an apportionment determination to pay the sum assessed to or in respect of the Plaintiff's damages, is entitled to seek a refund of that payment. Moreover, if the cross-claim proceeds to a hearing, the onus remains on the cross-claimant (the original defendant) to establish an entitlement to a contribution or indemnity: Power Technologies, at [96]ff.
2. A defendant who wishes to challenge a CAD takes on the burden that it must "materially improve" its position, by reducing its determined contribution by at least 10% of the amount of the assessed contribution or $20,000, whichever is the greater.

Dust Diseases Tribunal Regulation 2019

1. Clause 55 of the Regulations provides: 55 EFFECT OF AGREEMENT OR DETERMINATION AS TO APPORTIONMENT (1) An agreement or determination as to apportionment among defendants for the purposes of this Division is conclusively binding on the defendants for the purposes of the settlement, or determination by the Tribunal, of the plaintiff's claim and payment of the plaintiff's damages. (2) The agreement or determination is not binding for the purposes of the subsequent determination by the Tribunal of a dispute between defendants as to apportionment in a separate proceeding. (3) A defendant may, within 12 months of the making of an agreement or determination as to apportionment, dispute the contribution that the defendant is liable to make by giving written notice to the other defendants and the registrar. (4) If a defendant disputes the contribution that the defendant is liable to make to damages recovered by the plaintiff and the judgment of the Tribunal in the dispute does not result in the defendant materially improving the defendant's position, the defendant is liable to pay the costs of each other party to the dispute occasioned by the dispute, assessed on an indemnity basis. (5) Even if the Tribunal's judgment does not result in the defendant materially improving the defendant's position, the defendant is not liable to pay costs under subclause (4) if-- (a) the Tribunal determines that the defendant is not liable on the claim, and (b) the ground on which the Tribunal makes that determination is a ground on which the defendant disputed liability on the claim and of which the defendant provided evidence in the defendant's reply to the claim, and (c) the Tribunal determines that the ground was the principal or only ground on which the defendant disputed liability on the claim. (6) To the extent of any inconsistency between this clause and Part 5, this clause prevails. (7) For the purposes of this clause, the defendant is considered to "materially improve" the defendant's position only if the Tribunal's determination of the dispute results in a reduction of the defendant's contribution of at least 10% of the amount of the defendant's agreed or determined contribution or $20,000, whichever is the greater.
2. Part 5 of the Regulations incorporates cls 86-96 of the Regulations.
3. Clause 86 of the Regulations provides: This Part displaces any provision of rules of court with respect to the acceptance or rejection of an offer of compromise.
4. Clause 87 relevantly provides: In this Part "defendant" includes cross-defendant. … "offer" means an offer of compromise referred to in clause 88. … "plaintiff" includes a cross-claimant.
5. Clause 88 of the Regulations relevantly provides: 88 MAKING OF OFFER (1) In any proceedings, any party may, by notice in writing, make an offer to any other party to compromise any claim in the proceedings, either in whole or in part, on specified terms. Note: This Part extends to offers between a cross-claimant and cross-defendant. An offer does not have to be made to all the parties to proceedings. (2) An offer must be exclusive of costs, except where it states that it is a verdict for the defendant and that the parties are to bear their own costs. (3) A notice of offer-- (a) must bear a statement to the effect that the offer is made in accordance with this clause, and (b) if the party making the offer has made or been ordered to make an interim payment to the other party, must state whether or not the offer is in addition to the payment so made or ordered. … (6) Unless the notice of offer otherwise provides, an offer providing for the payment of money, or the doing of any other act, is taken to provide for the payment of that money, or the doing of that act, within 28 days after acceptance of the offer. (7) An offer is taken to have been made without prejudice, unless the notice of offer otherwise provides. … (10) A notice of offer that purports to exclude, modify or restrict the operation of clauses 89 and 90 is of no effect for the purposes of this Part.
6. Clause 88 of the Regulations was essentially in the same terms as rule 20.26 of the UCPR, until it was amended.
7. Clause 89 of the Regulations provides: 89 WHERE OFFER NOT ACCEPTED AND JUDGMENT NO LESS FAVOURABLE TO PLAINTIFF (1) This clause applies if the offer concerned is made by the plaintiff, but not accepted by the defendant, and the plaintiff obtains an order or judgment on the claim concerned no less favourable to the plaintiff than the terms of the offer. (2) Unless the Tribunal orders otherwise in an exceptional case and for the avoidance of substantial injustice, the plaintiff is entitled to an order against the defendant for the plaintiff's costs in respect of the claim-- (a) assessed on a party and party basis up to the time from which those costs are to be assessed on an indemnity basis under paragraph (b), and (b) assessed on an indemnity basis-- (i) if the offer was made before the first day of the trial, as from the beginning of the day following the day on which the offer was made, and (ii) if the offer was made on or after the first day of the trial, as from 11 am on the day following the day on which the offer was made. (3) If the Tribunal in an exceptional case and for the avoidance of substantial injustice otherwise orders as referred to in subclause (2), the Tribunal must give its reasons for so ordering.
8. Clause 90 of the Regulations provides: 90 WHERE OFFER NOT ACCEPTED AND JUDGMENT AS OR LESS FAVOURABLE TO PLAINTIFF (1) This clause applies if the offer concerned is made by the defendant, but not accepted by the plaintiff, and the plaintiff obtains an order or judgment on the claim concerned as favourable to the plaintiff, or less favourable to the plaintiff, than the terms of the offer. (2) Unless the Tribunal orders otherwise in an exceptional case and for the avoidance of substantial injustice-- (a) the plaintiff is entitled to an order against the defendant for the plaintiff's costs in respect of the claim, to be assessed on a party and party basis, up to the time from which the defendant becomes entitled to costs under paragraph (b), and (b) the defendant is entitled to an order against the plaintiff for the defendant's costs in respect of the claim, assessed on an indemnity basis-- (i) if the offer was made before the first day of the trial, as from the beginning of the day following the day on which the offer was made, and (ii) if the offer was made on or after the first day of the trial, as from 11 am on the day following the day on which the offer was made. (3) If the Tribunal in an exceptional case and for the avoidance of substantial injustice otherwise orders as referred to in subclause (2), the Tribunal must give its reasons for so ordering.
9. Clause 92 of the Regulations provides: 92 ACCEPTANCE OF OFFER (1) A party may accept an offer by serving written notice of acceptance on the party making the offer at any time during the period of acceptance for the offer. (2) An offer may be accepted even if a further offer is made during the period of acceptance for the first offer. (3) If an offer is accepted in accordance with this clause, any party to the compromise may apply for judgment to be entered accordingly.
10. There is no provision in the Regulations equivalent to rule 42.13A of the UCPR.

Civil Procedure Act 2005

1. Section 98 of the Civil Procedure Act 2005 relevantly provides: (1) Subject to rules of court and to this or any other Act-- (a) costs are in the discretion of the court, and (b) the court has full power to determine by whom, to whom and to what extent costs are to be paid, and (c) the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis. (2) Subject to rules of court and to this or any other Act, a party to proceedings may not recover costs from any other party otherwise than pursuant to an order of the court. (3) An order as to costs may be made by the court at any stage of the proceedings or after the conclusion of the proceedings.

Uniform Civil Procedure Rules 2005

1. In its pre-amended form, rule 20.26 UCPR relevantly provided: (1) In any proceedings, any party may, by notice in writing, make an offer to any other party to compromise any claim in the proceedings, either in whole or in part, on specified terms. (2) An offer must be exclusive of costs, except where it states that it is a verdict for the defendant and that the parties are to bear their own costs. (3) A notice of offer: (a) must bear a statement to the effect that the offer is made in accordance with these rules, and (b) if the offeror has made or been ordered to make an interim payment to the offeree, must state whether or not the offer is in addition to the payment so made or ordered. … (8) Unless the notice of offer otherwise provides, an offer providing for the payment of money, or the doing of any other act, is taken to provide for the payment of that money, or the doing of that act, within 28 days after acceptance of the offer. (9) An offer is taken to have been made without prejudice, unless the notice of offer otherwise provides. … (12) A notice of offer that purports to exclude, modify or restrict the operation of rule 42.14 or 42.15 is of no effect for the purposes of this Division.
2. Rule 20.26 now provides: 20.26 MAKING OF OFFER (1) In any proceedings, any party may, by notice in writing, make an offer to any other party to compromise any claim in the proceedings, either in whole or in part, on specified terms. (2) An offer under this rule-- (a) must identify-- (i) the claim or part of the claim to which it relates, and (ii) the proposed orders for disposal of the claim or part of the claim, including, if a monetary judgment is proposed, the amount of that monetary judgment, and (b) if the offer relates only to part of a claim in the proceedings, must include a statement-- (i) in the case of an offer by the plaintiff, as to whether the balance of the proceedings is to be abandoned or pursued, or (ii) in the case of an offer by a defendant, as to whether the balance of the proceedings will be defended or conceded, and (c) must not include an amount for costs and must not be expressed to be inclusive of costs, and (d) must bear a statement to the effect that the offer is made in accordance with these rules, and (e) if the offeror has made or been ordered to make an interim payment to the offeree, must state whether or not the offer is in addition to that interim payment, and (f) must specify the period of time within which the offer is open for acceptance. (3) An offer under this rule may propose-- (a) a judgment in favour of the defendant-- (i) with no order as to costs, or (ii) despite subrule (2)(c), with a term of the offer that the defendant will pay to the plaintiff a specified sum in respect of the plaintiff's costs, or (b) that the costs as agreed or assessed up to the time the offer was made will be paid by the offeror, or (c) that the costs as agreed or assessed on the ordinary basis or on the indemnity basis will be met out of a specified estate, notional estate or fund identified in the offer. (4) If the offeror makes an offer before the offeree has been given such particulars of the offeror's claim, and copies or originals of such documents available to the offeror, as are necessary to enable the offeree to fully consider the offer, the offeree may, within 14 days of receiving the offer, give notice to the offeror that-- (a) the offeree is unable to assess the reasonableness of the offer because of the lack of particulars or documents, and (b) in the event that rule 42.14 applies to the proceedings, the offeree will seek an order of the court under rule 42.14(2). (5) The closing date for acceptance of an offer-- (a) in the case of an offer made two months or more before the date set down for commencement of the trial--is to be no less than 28 days after the date on which the offer is made, and (b) in any other case--is to be such date as is reasonable in the circumstances. (8) Unless the notice of offer otherwise provides, an offer providing for the payment of money, or the doing of any other act, is taken to provide for the payment of that money, or the doing of that act, within 28 days after acceptance of the offer. (9) An offer is taken to have been made without prejudice, unless the notice of offer otherwise provides. (10) A party may make more than one offer in relation to the same claim. (11) Unless the court orders otherwise, an offer may not be withdrawn during the period of acceptance for the offer. (12) A notice of offer that purports to exclude, modify or restrict the operation of rule 42.14 or 42.15 is of no effect for the purposes of this Division.
3. Rule 42.1 of the UCPR provides: Subject to this Part, if the court makes any order as to costs, the court is to order that the costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs.
4. Rule 42.13 of the UCPR provides: This Division applies to proceedings in respect of which an offer of compromise (the "offer") is made under rule 20.26 with respect to a plaintiff's claim (the "claim").
5. Rule 42.13A of the UCPR relevantly provides: (1) This rule applies if the offer-- (a) is accepted by the offeree, and (b) does not make provision for costs in respect of the claim. (2) If the offer proposed a judgment in favour of the plaintiff in respect of the claim, the plaintiff is entitled to an order against the defendant for the plaintiff's costs in respect of the claim, assessed on the ordinary basis up to the time when the offer was made. (3) If the offer proposed a judgment in favour of the defendant in respect of the claim (including a dismissal of a summons or a statement of claim), the defendant is entitled to an order against the plaintiff for the defendant's costs in respect of the claim, assessed on the ordinary basis up to the time when the offer was made.
6. Rule 42.14 of the UCPR provides: 42.14 WHERE OFFER NOT ACCEPTED AND JUDGMENT NO LESS FAVOURABLE TO PLAINTIFF (1) This rule applies if the offer is made by the plaintiff, but not accepted by the defendant, and the plaintiff obtains an order or judgment on the claim no less favourable to the plaintiff than the terms of the offer. (2) Unless the court orders otherwise, the plaintiff is entitled to an order against the defendant for the plaintiff's costs in respect of the claim-- (a) assessed on the ordinary basis up to the time from which those costs are to be assessed on an indemnity basis under paragraph (b), and (b) assessed on an indemnity basis-- (i) if the offer was made before the first day of the trial, as from the beginning of the day following the day on which the offer was made, and (ii) if the offer was made on or after the first day of the trial, as from 11 am on the day following the day on which the offer was made.
7. Rule 42.15 of the UCPR provides: 42.15 WHERE OFFER NOT ACCEPTED AND JUDGMENT NO MORE FAVOURABLE TO PLAINTIFF (1) This rule applies if the offer is made by the defendant, but not accepted by the plaintiff, and the plaintiff obtains an order or judgment on the claim no more favourable to the plaintiff than the terms of the offer. (2) Unless the court orders otherwise-- (a) the plaintiff is entitled to an order against the defendant for the plaintiff's costs in respect of the claim, to be assessed on the ordinary basis, up to the time from which the defendant becomes entitled to costs under paragraph (b), and (b) the defendant is entitled to an order against the plaintiff for the defendant's costs in respect of the claim, assessed on an indemnity basis-- (i) if the offer was made before the first day of the trial, as from the beginning of the day following the day on which the offer was made, and (ii) if the offer was made on or after the first day of the trial, as from 11 am on the day following the day on which the offer was made.
8. Rule 42.15A of the UCPR provides: 42.15A WHERE OFFER NOT ACCEPTED AND JUDGMENT NO LESS FAVOURABLE TO DEFENDANT (1) This rule applies if the offer is made by the defendant, but not accepted by the plaintiff, and the defendant obtains an order or judgment on the claim no less favourable to the defendant than the terms of the offer. (2) Unless the court orders otherwise-- (a) the defendant is entitled to an order against the plaintiff for the defendant's costs in respect of the claim, to be assessed on the ordinary basis, up to the time from which the defendant becomes entitled to costs under paragraph (b), and (b) the defendant is entitled to an order against the plaintiff for the defendant's costs in respect of the claim, assessed on an indemnity basis-- (i) if the offer was made before the first day of the trial, as from the beginning of the day following the day on which the offer was made, and (ii) if the offer was made on or after the first day of the trial, as from 11 am on the day following the day on which the offer was made.
9. For an offer to be "exclusive of costs" as provided for in clause 88 of the Regulations it must not deal with costs at all: Old v McInnes and Hodgkinson [2011] NSWCA 410 affirmed in Whitney v Dream Developments Pty Ltd [2013] NSWCA 188 at [24].
10. The scheme of Division 3 of Part 42 of the UCPR is intended to cover what will happen in the event of acceptance or non-acceptance of an offer: Whitney at [25].
11. Prior to the amendment of rule 42.13A of the UCPR, it provided that a plaintiff was entitled to an order for costs up to the date of the offer, unless the Court ordered otherwise. Accordingly, an offer made pursuant to rule 20.26 of the UCPR [2] that was expressed to be inclusive of costs or plus costs, was inconsistent with the scheme of the rules because it removed the court's discretion to order otherwise. The effect of the amendment to rule 42.13A of the UCPR is to provide that where an offer is made exclusive of costs, that costs on the ordinary basis will follow the acceptance of the offer.

Consideration

1. I was initially attracted to the proposition that the absence of an equivalent to rule 42.13A of the UCPR in the Regulations was an oversight. However, on reflection, the CRP is unique to the Tribunal and the UCPR does not have to accommodate it.
2. In my view, the Regulations and the applicable rules of the UCPR operate to give the Tribunal a discretion to "order otherwise" following the acceptance by a cross-claimant of an offer of compromise, to ensure that the requirement for a defendant to materially improve its position is maintained, thereby discouraging the prosecution of cross-claims over minor sums of money. My reasons for coming to that view are set out as follows.
3. Clause 86 of the Regulations has the effect of displacing rules 42.13A, 42.14, 42.15, 42.15A, 42.16 and 42.17 and they have no operation in relation to offers made in accordance with cl 88 of the Regulations.
4. On the other hand, the remaining rules in Part 42 of the UCPR continue to operate, including most significantly, rule 42.1 of the UCPR. In my view, this preserves the Tribunal's power to make an order that follows the event of acceptance of the offer of compromise or to order otherwise. It follows applying Whitney and the cases referred to in it, that in order for an offer to be "exclusive of costs" in accordance with cl 88(2) of the Regulations that it must not refer to costs at all, unless the offer proposes "a verdict for the defendant and that the parties are to bear their own costs".
5. The effect of cl 55(6) of the Regulations is to bring into consideration when exercising the discretion to award costs following the acceptance of an offer of compromise made in accordance with cl 88 of the Regulations, whether or not a defendant has materially improved its position by accepting the offer.
6. Kingston submitted that the award of costs should follow the event of the acceptance of the Offer of Compromise, because the acceptance of the offer entitles Kingston to the entry of a judgment on the cross-claim and thereby the success of its claim against Place Management and CPB. Kingston further submitted that in the absence of disentitling conduct that the successful party was usually entitled to its costs: Oshlack v Richmond River Council (1998) 193 CLR 71 at [67]-[70] (McHugh J) and [134] (Kirby J).
7. Place Management and CPB submitted that Kingston was not entitled to a costs order for two reasons. First, that their offer made no provision for the payment of Kingston's costs and second, that because there was no adjudication on the merits of the cross-claim and the settlement followed on the application of the CRP, that there should be no order for costs, relying on Amaca Pty Ltd v Harry Daines Pty Ltd [2011] NSWCA 317 and citing what was said by McHugh J in Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Quin (1986) 168 CLR 622 at 625: If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the costs discretion will usually mean that the court will make no order as to the cost of the proceedings. This approach has been adopted in a large number of cases.
8. I accept Kingston's submission that it has been successful in the litigation of the cross-claim, in that its acceptance of the Offer of Compromise by operation of cl 92 of the Regulations entitles it to the entry of judgment in its favour. However, I am also satisfied that its failure to materially improve its position to justify its challenge to the CAD amounts to disentitling conduct. A clear purpose of the CRP is to discourage the prosecution of cross-claims over small sums of money. Kingston, by challenging the CAD and prosecuting its cross-claim, has caused Place Management and CPB to incur costs and has occupied court time but it has not materially improved its position. At the conclusion of the cross-claim, by the entry of judgment in its favour against both cross-defendants, Kingston has only improved its position by 3.81% when compared to its apportionment determined by the Contributions Assessor.
9. I do not accept the cross-defendants' submissions, because they are both misconceived. First, the Offer of Compromise in order to be a valid offer, had to be made exclusive of costs and the effect of the first submission would be to treat it as an inclusive offer, which would make it invalid. Second, this matter can be distinguished from the decision in Harry Daines. In Harry Daines, neither party challenged the CAD. The cross-claimant was not entitled to a judgment on the cross-claim because the proceedings became futile and there was no event on which costs could follow. In the present case, active steps were taken to prepare the cross-claim for hearing and the parties each incurred costs in doing so. The acceptance of the offer of compromise entitled Kingston to have a judgment entered in its favour on the cross-claim, and costs would ordinarily follow that event.
10. The cross-defendants did not contend that the entry of the judgment following the offer of compromise was a "determination by the Tribunal" as referred to in cl 55 of the Regulations, thereby entitling them to indemnity costs of the proceedings. It appears to me that the argument was open, but in the absence of argument on the point, I do not need to consider it.

Orders

1. The orders I make are as follows: 1. Judgment for the cross-claimant against the first and second cross-defendant in the sum of $200,000. 2. There is no order as to costs of the first cross-claim. 3. The cross-claimant is to pay the costs of the Notice of Motion.

Endnotes

1. The Dust Diseases Tribunal Regulation 2013 was in force at the time of the Contributions Assessment Determination and when Kingston decided to challenge it. The provisions of the Dust Diseases Tribunal Regulations 2019 were in force at the time that the Offer of Compromise was made and accepted. There are no relevant substantive differences in the provisions of the 2013 Regulations and the 2019 Regulations. I have referred only to the current provisions, except in [8].
2. Prior to its amendment. 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: 17 June 2021