Palmer & Anor v Finnigan & Ors [2010] QSC 86

Judgment (80 paragraphs)

[1]

Deacons Lawyers for the first and second defendants

[2]

[1] The first plaintiff was injured on 10 July 2001 in a fall from a balcony at the home of the first and second defendants when a railing gave way as he was working to dye carpets at the defendants' home.

[3]

[2] On 25 November 2002 the first plaintiff served a Personal Injuries Proceedings Act 2002 (Qld) (PIPA) notice of claim on the defendants in relation to personal injuries which he sustained in the fall. It was alleged that the defendants had failed in their duty to properly maintain or inspect the railing. The defendants then served notices of contribution on the previous owners of the house (first third party), the entity alleged to have installed the balcony in 1987 (second third party) and the Gold Coast City Council who inspected the balcony during the renovations in 1987 (third third party).

[4]

[3] On 9 July 2004 the plaintiffs obtained leave to commence proceedings against the first and second defendants pursuant to s 43 of PIPA. On 29 November 2004 the defendants' solicitor wrote to the plaintiffs' solicitor enclosing a copy of a notice seeking to join the third parties as contributors.

[5]

[4] On 8 June and 19 July 2006 the compulsory conference required under PIPA was conducted and mandatory final offers were exchanged on 19 July 2006. The defendants made a mandatory final offer of nil and the plaintiff made a mandatory final offer of $450,000. The third parties were not required by PIPA to exchange offers with the defendants and did not do so.

[6]

[5] On 5 October 2006 the defendants commenced proceedings against the third parties seeking indemnity and/or contribution in relation to any verdict the plaintiffs may obtain against them.

[7]

[6] On 14 February 2007 the second third party filed his defence to the defendants' third party proceedings denying he was the entity who manufactured or installed the railings. On 6 August 2007 the third third party served a notice of contribution on the second third party

[8]

[7] On 17 October 2008 the matter was mediated with each of the third parties participating in the mediation. The matter failed to settle at the mediation.

[9]

[8] On 30 October 2008 the plaintiffs made an application to add the third parties as defendants which was heard on 19 December 2008. In delivering judgment on 6 March 2009 Dutney J stated:[1]

[10]

"[21] It is acknowledged that the third parties are liable to indemnify the defendants if their conduct 20 years ago was below standard. Such indemnity would be conditional upon the defendants being liable to the plaintiffs. Since the defendants are lay people and they were not responsible for the installation, the claim against them is only that they failed to observe the deterioration in the railings. The prospect of the plaintiffs succeeding against the defendants is far from certain. Undoubtedly, that is why the plaintiffs now wish to join the third parties as defendants."

[11]

[9] His Honour then refused the plaintiffs' application on the basis that the plaintiffs had failed to act for four years after the defendants notified them of their intention to seek contribution from the third parties. His Honour held:[2]

[12]

"[25] In this case the plaintiffs became aware of the potential problems with the design of the railing, if not within the limitation period, then within a few months of its expiry. It is likely that an application made at that time under section 31 of the Limitation of Actions Act to extend the limitation period on the basis of new facts would have been granted. That was four years before the present application was filed. I am not satisfied that there is anything new in the more recent report of Dr Ludke. Dr Ludke merely confirms the conclusion reached by Wyatt Gallagher Bassett in 2001 concerning the absence of vertical support and what the first defendant observed at about the same time in relation to the type of bolts. The twelve months following the discovery of relevant and decisive facts within which an application to extend the limitation period might be brought has long since expired. By failing to act in the four years after being notified of the defendants' intention to seek contribution from the third parties and the reasons for seeking that contribution, the plaintiffs must be taken to have made a deliberate choice to limit their claims to the existing defendants. What the plaintiffs really seek is to revisit that decision.

[13]

[29] In my view 20 years is too long a period after which to sue the third parties in this case. The prejudice those parties suffer is not negated by the fact that they are third parties already. They may never be called upon to actually justify their position because the plaintiffs may fail against the defendants. The prospects of the plaintiffs failing against the defendants is a real one."

[14]

[10] On 26 March 2009 the defendants made an offer to settle the plaintiff's claim against the defendants and the defendants' claims against each of the third parties and any cross claims or claims for contributions. This was conditional upon acceptance by all of the third parties and was essentially a "walk away' offer but would have had benefits to the plaintiff if he had accepted in relation to costs. The matter did not settle.

[15]

[11] On 7 October 2009 the solicitors for the defendants wrote to the solicitors for the third parties offering to settle on the basis that the third third party pay $75,000 and the second third party pay $25,000 with each party paying their own costs as between the defendants and the third parties. The offer was conditional upon acceptance by all the third parties. The offer was expressed to be in accordance with Chapter 9 of the Uniform Civil Procedure Rules 1999 (Qld) (UCPR).

[16]

[12] On 16 October 2009 the solicitors for the third third party responded to that offer by offering to settle the defendants' claims against the third third party on the basis that the third party proceedings be discontinued and the respective parties pay their own costs.

[17]

[13] On 20 October 2009 the solicitors for the second third party indicated that they were willing to accept the defendants' offer of 7 October 2009 on a purely commercial basis without any admission of liability and indicating that should the offer not be accepted by the other third parties then they would seek their client's instructions to make a counter offer.

[18]

[14] The first third party and the third third party did not accept the offer of 7 October 2009.

[19]

[15] On 27 October 2009 the second third party wrote to the defendants' solicitors indicating that the second third party had always denied the allegation that he had manufactured or installed the railing, noting that the plaintiff's prospects of success were far from certain and stating their view that the claim against the second third party was being unreasonably maintained. In particular the letter stated the following:

[20]

"There is little justification of keeping our client in the proceeding as a Third party on the basis that there is a remote possibility of the Plaintiffs succeeding in their respective claims against your clients: and, your client (or indeed anyone) proving that our client indeed installed the offending balustrade.

[21]

Should your clients successfully defend the Plaintiffs claims you cannot expect that the Court will naturally order the Plaintiff to pay the costs of our client in circumstances where your client has unreasonably maintained their claim against our client in the proceeding. In this regard we refer you to the principles in Bullock v London General Omnibus Co. [1907] 1 KB (Con).

[22]

Accordingly, we are instructed to offer to settle the matter on the following basis:

[23]

The Defendant discontinue their claim against the Second Third Party;
The Defendants indemnify the Second Third Party in respect of the notices of contribution served on the Second Third Party by the First and Third Third Party;
The Defendant pay the Second Third Party's costs of and incidental to the proceeding on the standard basis to be assessed.

[24]

Chapter 9 Part 5 of the Uniform Civil Procedure Rules 1999; and
Calderbank v Caldderbank [1975] 3 All ER 333.

[25]

A copy of this letter is being sent to the solicitors for the First and Second Third Parties seeking the withdrawal of their claims for contribution against our client on the same basis as adumbrated above.

[26]

We advise that should your client refuse to discontinue its claim against our client, then we shall seek to tender this correspondence in respect to the issue of costs."

[27]

[16] On 1 November 2009 the solicitors for the third third party reopened the offer made on 16 October 2009 to settle the litigation. This was not accepted.

[28]

[17] The second plaintiff's claim was compromised on 27 October 2009. The defendants claim against the first third party was also settled and the first third party was released from trial.

[29]

[18] The trial with the remaining parties was then conducted over 4 days from 2-5 November 2009. On the conclusion of day three the defendants' third party proceedings against the second third party and the third third party were adjourned by consent with costs reserved. The second third party was also granted leave not to appear on the final day of the hearing. Written submissions were provided on 2 December 2009.

[30]

[19] On 9 February 2010 judgment was delivered and the plaintiff's claim was dismissed. Despite the fact that the third party proceedings have been adjourned the inevitable consequence was that the third party proceedings by the defendants would have been dismissed.

[31]

Costs as between the plaintiff and the First and Second Defendants:

[32]

[20] As the second plaintiff's claim had been compromised prior to judgment accordingly these cost orders necessarily relate to the first plaintiff.

[33]

[21] The general rule is of course that costs of a proceeding are in the discretion of the court but follow the event, unless the court orders otherwise.(r681(1) UCPR). The first plaintiff has failed in his action. In my view costs should be awarded on the Supreme Court scale even though the assessment would have been less than the Supreme Court Scale had the plaintiff been successful as those damages were assessed at $197,467.55. The defendants clearly had no choice but to litigate in the forum chosen by the plaintiff. I also consider that the costs should be awarded on the standard basis as I do not consider that the factors which would trigger an award on an indemnity basis have been engaged. I have come to this view after a consideration of the relevant factual situation as outlined above.

[34]

[22] In my view this factual situation does not lead to a conclusion that in the circumstances of this case there is some special or unusual feature which would justify an award of costs on the indemnity basis. Such features include false allegations of fraud, misconduct causing loss of time to the court or commencement of proceedings with some ulterior motive or an imprudent refusal of an offer to compromise as required by Colgate Palmolive v Cussons.[3] Whilst it is clear that the plaintiff did not accept the offer to settle on 26 March 2009 and that there had been an intimation by Dutney J that the "prospect of the plaintiffs succeeding against the defendants is far from certain." I do not consider that the prospects of success in this case were necessarily abundantly clear prior to trial given the state of the expert evidence at that time. Clearly his Honour was not appraised of all the factual material including some of the expert reports at the time of his decision. Issues at the trial included the flexibility of the railing and the visibility of the defect.

[35]

[23] The first plaintiff should therefore pay the first and second defendants' costs on the standard basis. I agree with the submission of the plaintiff that if the compulsory conference was adjourned by the defendants those costs should be excluded.

[36]

Costs as between the defendants and the second and third parties.

[37]

[24] It is clear that the action by the defendants against the first third party was settled and the first third party was released from trial.

[38]

[25] It is also clear that the case against the third parties in fact remains unlitigated as the Court was informed during the trial that "The Third Parties and the Defendants have come to an arrangement about the disposition of that case". The third party claim was adjourned to a date to be fixed and accordingly the defendants argue that the matters in issue were not determined as between the defendants and the third parties as no substantive order or judgment has been made. However as I have indicated the defendants proceedings against the third parties would inevitably have been dismissed.

[39]

[26] The defendants argue that the fact that the third parties were not liable to the defendants is not a trigger to the automatic award of costs and that the Court should look to the behaviour of the parties. The defendants submit that there should be no order as to costs between the defendants and the third parties. In particular the third third party admitted in its defence that it had inspected the balcony and that it owed a duty of care to the plaintiffs and the defendants. The defendants argue that it was therefore appropriate to join the third third party to a trial.

[40]

[27] The defendants also argue that the second third party and the defendants agreed by consent to adjourn a hearing on the issues between them. Accordingly it is submitted that the second third party should not obtain any benefit from its consent to adjourn a hearing of those factual matters. Furthermore the defendants argue that as the third third party served contribution proceedings against the second third party liability was therefore a live issue as between the third parties.

[41]

[28] Another alternative submitted by the defendants is that if the third parties are awarded costs this should be met by the plaintiff on the basis that the Court has jurisdiction to require an unsuccessful plaintiff to pay direct the costs of third parties joined by the successful defendant: (Edington v Clark[4]). The defendants argue that the defendants should not be visited with cost consequences as a result of the plaintiff's deliberate choice in the running of the action after a clear intimation that success was not certain. The defendants submit that such an order would distribute the burden of costs among the parties to the proceedings as justice requires, irrespective of how the parties came to be joined: (Steele-Smith and Ors v Liberty Financial Pty Ltd and Anor (no2)[5].

[42]

Submissions of the second third party and the third third party in relation to costs.

[43]

[29] The second third party relies on correspondence between the parties in October 2009 as set out above and the failure of the defendants to accept the second third party's offer contained in the correspondence. The second third party submits that this was a genuine attempt at compromise. Furthermore it is submitted that the plaintiff's claim was always "far from certain" and that no material change in the plaintiff's proceedings against the defendants took place between the date of dismissal of the plaintiff's application for joinder and the final determination of the plaintiff's proceeding against the defendants.

[44]

[30] It is clear that the finding of liability against the second third party was always contingent upon the plaintiff being ultimately successful against the defendants. In my view Dutney J's decision should have required the defendants to reconsider the merits of their claim for contribution against each third party. However the defendants maintained their action against the second third party until the conclusion of the third day. I consider that the offer contained in the letter of 27 October was in fact a genuine offer to compromise.

[45]

[31] In my view the defendants should pay the costs of the second third party given the correspondence set out above. The issue is whether this should be on an indemnity basis after the offer was made on 27 October 2009. The principles enunciated in Calderbank v Calderbank[6] do not necessarily entitle the party making the offer to indemnity costs but rather "the correct principle is that a Calderbank offer may entitle a party to a different costs order, other than that costs follow the event."[7] In some circumstances this will mean that it is not necessarily a favourable costs order as the principle is "...whether the offeree's failure to accept the offer, in all the circumstances, warrants departure from the ordinary rule as to costs, and that the offeree ends up worse off than if the offer had been accepted does not of itself warrant departure..."[8] In the circumstances of this case I consider given the clear intimations made to the defendants by the second third party that it was unreasonable for the defendant to maintain their claim against the second third party.

[46]

[32] I consider that the defendants should pay the costs of an incidental to the proceeding of the second third party up to 27 October 2009 on the standard basis to be assessed.

[47]

[33] In relation to the submissions of the third third party the third party seeks an order that the defendant pay its costs on the standard basis. I also consider that this is the appropriate order.

[48]

[34] The defendants also argued that the costs of the third parties should be the subject of a "Bullock Order" or "Sanderson Order". In his text Law of Costs Dal Pont discusses the orders as follows:[9]

[49]

"Actions with a multiplicity of defendants can give rise to special problems. Costs of a defended action can increase significantly where there are multiple defendants or additional parties. Also, the fruits of victory by a plaintiff against one defendant can be diminished if he or she loses against other defendants and is ordered to pay their costs. To meet the latter problem the courts have exercised their costs discretion, where it is just to do so, to oust the general rule that a plaintiff who succeeds against one defendant but fails against the other must pay the costs of a successful defendant. The court may order the unsuccessful defendant to reimburse the plaintiff for the costs of the successful defendant (a 'Bullock order'), or order the unsuccessful defendant to pay direct to the successful defendant the plaintiff's costs of proceedings against the latter (a 'Sanderson order')."

[50]

[35] The defendant seeks to utilise those principles to obtain an order that the plaintiff indemnify the defendants for the third party costs. In my view such an order is not warranted in the circumstances of this case. The question is whether it was reasonable for the defendants to join the third parties.

[51]

[36] The test of reasonableness was set out in Lombard Insurance Co (Australia) Ltd v Pastro[10] where King CJ stated:

[52]

"Where the nature of the plaintiff's claim, or allegations in support thereof, render it reasonable, having regard to the purposes of third party procedure, to bring in the third party, and the third party claim is unsuccessful solely by reason of the failure of the plaintiff to sustain its claim or the relevant allegations, the defendant should ordinarily recover from the plaintiff the costs of the third party claim including those which the defendant is ordered to pay to the third party."

[53]

[37] The factors supporting such an order were discussed in Misfud v ICT Pty Ltd[11] as including whether the causes of action between the three parties were substantially connected, whether there was a deliberate choice to limit the claim to the existing defendants and whether if liability attached it was almost a certainty that contribution would have been ordered.

[54]

[38] The complexity of the issue was discussed by Fryberg J in Yamacoe P/L v Michel Survey Group P/L & Anor[12] as follows:

[55]

"[27] The defendant submitted that if an order for costs were made in favour of the third party against it, it should have those costs included in the costs ordered to be paid by the plaintiff and the non-parties. It argued that it was reasonable for the defendant to join the third party, and that the need for it to do so arose only because the plaintiff brought a false claim against the defendant at the behest of Mr Currie and for the benefit of the non-parties.

[56]

[28] The plaintiff and the non-parties submitted that the third party proceedings were manifestly misconceived. They argued that the plaintiff did not sue the third party and did not allege he was liable to it. Further, the defendant had pleaded that the third party was at fault for not informing it of the requirements of the Council for a shadow diagram when its own employee had admitted to it that the relevant information had been provided. Finally, they argued that every matter raised against the third party as a ground of negligence would, if proved, have exonerated the defendant. Consequently, those matters should have been pleaded by way of defence, not raised by third party proceedings.

[57]

[29] The form of order sought by the defendant is analogous to the Bullock order sometimes made when a plaintiff succeeds against one defendant and fails against another. That was the view of the Appeal Division of the Supreme Court of Victoria in Burke v Gillett. I do not understand anything said in Gladstone Park Shopping Centre Pty Ltd v Ross Wills to stand contrary. In Gould v Vaggelas Wilson J, with whom Murphy and Brennan JJ agreed, said:

[58]

'Such an order may be made where the costs in question have been reasonably and properly incurred by the plaintiff as between him and the unsuccessful defendant: Bullock (1907) 1 K.B. 264 at p 269; Johnsons Tyne Foundry Pty Ltd v Maffra Corporation [1948] HCA 46; (1948) 77 CLR 544 at p 572_; Altamura v Victorian Railways Commissioners_ [1974] VicRp 4; (1974) VR 33. The making of such an order is a matter for the discretion of the trial judge'.

[59]

In the present case the plaintiff conceded that as a matter of principle, if the defendant acted reasonably in joining the third party, it would ordinarily be entitled to recover from the plaintiff any costs awarded against it in favour of the third party.

[60]

[30] It is important to observe that the reasonableness here under consideration is reasonableness as between the party claiming the benefit of the Bullock order (who, ex hypothesi, joined the ultimately successful party) and the party putatively liable under it. It is not simply a question of reasonableness as between the claimant and the party joined. In the context of the present case, the question is whether it was reasonable, as between the plaintiff and the defendant, for the defendant to join the third party. Unless the defendant establishes that it was, it does not bring itself within the dictum of Wilson J just quoted."

[61]

[39] I note the submissions of the defendants that the causes of action were substantially connected, and that if liability attached to the defendants it was almost certain that contribution would have been ordered against the third parties. However, in the circumstances of this case, I am not satisfied that the defendants have in fact established, as between themselves and the plaintiffs, that it was in fact reasonable to join the third parties. As Dutney J stated in his decision:[13]

[62]

"The only relief sought in the action is damages against the defendants based on the failure to observe the deterioration in the railings. The joinder of additional defendants is not relevant to that relief.

[63]

...The claims do not arise out of the same facts. The present defendants are sued on the basis that they were or ought to have been aware that the railings were unstable and did nothing. The proposed claim against third parties relates to the original installation of the railings."

[64]

[40] I do not therefore consider that the prerequisites for an order analogous to a "Bullock order" have been established.

[65]

1. The first plaintiff should pay the first and second defendants' costs of and incidental to the proceedings on the standard basis to be assessed.

[66]

2. The first and second defendants should pay the second third party costs of and incidental to the proceeding up to 27 October 2009 on the standard basis to be assessed.

[67]

3. The first and second defendants should pay the second third party's costs of and incidental to the proceeding from 28 October 2009 on the indemnity basis to be assessed.

[68]

4. The first and second defendants should pay the third third party costs on the standard basis to be assessed.

[69]

[1] Palmer & Anor v Finnigan & Ors [2009] QSC 42 at [21].

[70]

[3] [1993] FCA 536; 46 FCR 225 at 233-234.

[71]

[4] [1964] 1 QB 367.

[72]

[5] [2005] NSWSC 487 at [8].

[73]

[6] [1975] 3 All ER 333.