Perisher Blue Pty Limited v Chubb Fire Safety Limited [2014] ACTCA 43

Cases Cited: Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194 Australian Securities Commission v Berona Investments Pty Ltd (1995) 18 ACSR 772 Australian Telecommunications Commission v Elmec Pty Ltd (1986) 43 NTR 8 Detheridge as executrix of the Estate of Wells v Chubb Fire Safety Limited [2013] ACTSC 75 Gribbles Pathology Pty Ltd v Health Insurance Commission (1997) 80 FCR 284 Gupta v Australian Capital Territory [2011] ACTSC 39 House v The King (1936) 55 CLR 499 Isaacs v Ocean Accident (1957) 58 SR (NSW) 69 Macedonian Orthodox Community Church St Petkan Inc v His Eminence Petar, the Diocesan Bishop of Macedonia Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66 Nichols v Lee [2008] NSWSC 1243 One.Tel Ltd v Deputy Commissioner of Taxation (2000) 101 FCR 548 Oschlack v Richmond River Council (1998) 193 CLR 72 Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 Re Will of F B Gilbert (dec’d) (1946) 46 SR (NSW) 318 Ringwood Plus Pty Ltd v Commissioner of State Revenue [2004] VSC 494 Rural & General Insurance Broking Pty Ltd v Australian Prudential Regulation Authority (2009) 231 FLR 199 Smith v Airservices Australia (2005) 146 FCR 37 Stojkoski v Belconnen Concrete Pty Ltd (2013) 274 FLR 316

Parties: Perisher Blue Pty Limited (Appellant) Chubb Fire Safety Limited (First Respondent) Vicki Detheridge as Executrix of the Estate of the late Brian Leslie Wells (Second Respondent) (Non-active party in the appeal)

Representation: Counsel Mr R Montgomery (Appellant) Mr R Crowe SC (First Respondent)

Solicitors Dibbs Barker (Appellant) (As agents for Hunt & Hunt Lawyers) Sparke Helmore (First Respondent)

File Number(s): ACTCA 26 of 2013

Decision under appeal: Court/Tribunal: Supreme Court Before: Master Harper Date of Decision: 29 April 2013 Case Title: Detheridge as executrix of the Estate of Wells v Chubb Fire Safety Limited Citation: [2013] ACTSC 75 Court File Number(s): SC 311 of 2009

THE COURT:

1. On 19 December 2006, Brian Leslie Wells was working for his employer, the first respondent, Chubb Fire Safety Limited (Chubb), at the Bullocks Flat ski tube station in the Kosciuszko National Park, New South Wales. Mr Wells was required to maintain the fire sprinklers there owned by the appellant, Perisher Blue Pty Ltd (Perisher).

2. While Mr Wells was working in the Sprinkler Valve Room, a battery in the room exploded and caused him acoustic trauma. Mr Wells died in 2008.

3. On 12 March 2009, the second respondent, the Executrix of the Estate of Mr Wells, commenced proceedings as plaintiff against Chubb, seeking compensation for the injuries, disabilities and loss and damages Mr Wells sustained as a result of the incident.

4. Sometime after being served with the Originating Claim issued by the plaintiff, Chubb commenced third party proceedings against Perisher on 27 May 2009, seeking contribution or indemnity, damages, interest and costs.

5. On 7 December 2009, the plaintiff joined Perisher as a second defendant. This did not render the Third Party Notice issued by Chubb to Perisher a nullity or of no effect but it remained valid as a claim for contribution or indemnity between Chubb and Perisher should Chubb be found liable to the plaintiff. See Stojkoski v Belconnen Concrete Pty Ltd (2013) 274 FLR 316 at 319-20; [14]-[15].

6. On 20 April 2010, Perisher filed a Notice of Contribution against Chubb.

7. The hearing of the proceedings was listed to commence on 20 February 2012. At 10:00 am on that day Perisher and the plaintiff announced that they had settled the proceedings between them.

8. At 11:46 am on that day, the hearing resumed and the Court by agreement entered judgment for Chubb against the plaintiff with each party to pay their own costs.

9. Perisher then sought an order for costs against Chubb. The learned Master heard the costs argument on 21 February 2012 and, on 29 April 2013, his Honour dismissed the contribution claims by Chubb and Perisher against each other and made no order as to costs. See Detheridge as executrix of the Estate of Wells v Chubb Fire Safety Limited [2013] ACTSC 75.

10. Perisher has now appealed against that order. It seeks the following orders:

(a) The appeal be allowed. (b) The judgment at first instance be set aside. (c) Judgment for the Appellant against the First Respondent on the claim for contribution filed by the First Respondent against the Appellant in May 2009. (d) In the alternative to (c) the claim for contribution commenced by the First Respondent against the Appellant in May 2009 be discontinued pursuant to CPR 1163(1)(a). (e) Judgment for the Appellant against the First Respondent in the claim for contribution commenced by the Appellant against the First Respondent in April 2010. (f) The First Respondent pay the Appellant’s costs of the competing claims for contribution in the proceedings below. (g) The First Respondent pay the Appellant’s costs of the Appeal.

11. While the form of the orders, bringing to an end the proceedings as between Chubb and Perisher, is made an issue on the appeal, the real dispute between the parties was as to whether or not Chubb should pay the costs of Perisher.

Nature of the Appeal

12. There are two relevant matters about the approach that this Court should take to an appeal from such an order as was made by the learned Master.

13. In the first place, the appeal is against a discretionary order. As a result, the appeal can only succeed if error of the kind identified in House v The King (1936) 55 CLR 499 at 505 is found. This requires the appeal court, before interfering with the discretion of the Court below, to find that that Court has acted on a wrong principle, failed to consider relevant considerations or considered irrelevant considerations, mistaken the facts or made a decision that was unreasonable or plainly unjust.

14. The reasons for such restraint on appellate interference, namely the risk of escalating litigation, delaying resolution of issues, incurring costs that may be disproportionate to the issues in dispute and improvidently incurring private and public costs are explained in Macedonian Orthodox Community Church St Petkan Inc v His Eminence Petar, the Diocesan Bishop of Macedonia Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66 at 125; [190].

15. The second matter is that the courts have generally considered that a point of practice or procedure, as opposed to substantive rights, should ordinarily not be disturbed on appeal unless the court from which the appeal has been taken applied a wrong principle of law or that injustice will result from the order. This was expressed by Jordan CJ, in a well-known passage in Re Will of F B Gilbert (dec’d) (1946) 46 SR (NSW) 318 at 323, where his Honour explained the reasons as being that frequent interference with such orders would cause excessive delays and impose unreasonable costs on litigants, effectively transferring exercises of discretion from a primary judge to the appellate court.

16. Despite this, issues of costs have become a greater feature of current litigation and have the capacity to affect litigants significantly and this may have to be borne in mind when considering such an issue. This is understandable when it is realised that the total costs Perisher says it has incurred are about $270,000.

The decision of the Master

17. The learned Master traced the history of the litigation. He expressly mentioned an issue that arose in relation to expert reports.

18. The parties signed and filed a Certificate of Readiness in January 2011, in which they indicated that expert reports on liability had not been served. The learned Master referred to r 1241 of the Court Procedures Rules 2006 (ACT). It sets out a timetable for the service of expert reports and prohibits the tender of an expert report at trial where it has not been served in accordance with the rule except by leave (for which the tendering party would be required to show exceptional circumstances) or with the consent of the parties.

19. An expert report was served by Chubb on 5 December 2011 which prompted Perisher to qualify two experts, whose reports were served on 15 February 2012; the service of all these reports breached the time requirements imposed by r 1241, with the consequence that they would have been inadmissible at trial without consent or leave.

20. The learned Master was informed that the service of these reports had led each defendant to settle the proceedings with the plaintiff. His Honour rejected criticism by Perisher of the late service of the Chubb report, acknowledging the difficulty that Chubb would have faced at trial, but stating (at [17]):

[it did not seek to tender the report as the trial] did not occur and the report seems to have served a useful purpose, perhaps in conjunction with the reports served by [Perisher].

21. His Honour rejected the submission of Perisher that Chubb had effectively discontinued or withdrawn its contribution claim. His Honour pointed out that both Perisher and Chubb had settled with the plaintiff on a “walk-away basis” and, accordingly, Chubb simply had no claim to pursue any longer.

22. His Honour then considered whether it was reasonable for Chubb to have joined Perisher and concluded that it was. His Honour also noted that, once Perisher was joined as a defendant, it became a principal party and it ceased to be open to Chubb to release Perisher unilaterally from the proceedings.

23. In the light of the failure of the plaintiff to serve expert reports and without knowledge of what lay evidence there was to be, it was conceivable, the learned Master held, that the plaintiff may nevertheless have been able to make out a case against Chubb or Perisher or both.

24. His Honour concluded (at [23]):

In summary, I am not persuaded that there was anything unreasonable about the conduct of the first defendant in joining the second defendant as a third party, or that anything happened prior to the joinder of the third party as a defendant, or indeed prior to the receipt of the expert reports, which made it unreasonable to continue with the claim for contribution. It follows that I am not persuaded that the second defendant has made out its case for an order for costs against the first defendant. It is inappropriate that there be any order as to the costs of the contribution claim of either defendant against the other. Grounds of the appeal

25. Perisher pleaded extensive grounds of appeal. It is not necessary to set them out in full.

26. Three of the grounds alleged error in the learned Master not entering judgment but instead dismissing the claims for contributions; Perisher submitted that if judgment had been entered, costs would have followed the event of that judgment. Two grounds alleged error that his Honour did not treat the application by Chubb as effectively an application for leave to discontinue or withdraw its proceedings and did not consequently make an order for costs against Chubb. Two grounds alleged errors made by the learned Master in failing to have regard to relevant considerations and in having regard to irrelevant considerations.

The law

27. In Oschlack v Richmond River Council (1998) 193 CLR 72 at 96-7; [66]-[67], McHugh J said

By far the most important factor which courts have viewed as guiding the exercise of the costs discretion is the result of the litigation. A successful litigant is generally entitled to an award of costs. ... The expression the “usual order as to costs” embodies the important principle that, subject to certain limited exceptions, a successful party in litigation is entitled to an award of costs in its favour. The principle is grounded in reasons of fairness and policy and operates whether the successful party is the plaintiff or the defendant. Costs are not awarded to punish an unsuccessful party. The primary purpose of an award of costs is to indemnify the successful party. If the litigation had not been brought, or defended, by the unsuccessful party the successful party would not have incurred the expense which it did. As between the parties, fairness dictates that the unsuccessful party typically bears the liability for the costs of the unsuccessful litigation. (Footnotes omitted)

28. This is often formulated as that “costs follow the event”, but at issue frequently is the question of what is the “event” that justifies an order for costs. In particular, where there is no hearing on the merits of the claim by a party, there is no “event”; that is to say, it is not then possible for the court to decide which party has been successful in the proceedings.

29. This case fell into that category; there was no hearing on the merits. As the plaintiff did not recover any damages, there was no occasion for Chubb to seek contribution or indemnity from Perisher or indeed for Perisher, who had itself filed a notice on Chubb for contribution or indemnity, to seek anything from Chubb. There was, then, no “event”.

30. After an examination of the relevant authorities, Hill J in Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194 at 201 set out propositions which may guide consideration of this issue. His Honour said, in a passage followed many times since

(1) Where neither party desires to proceed with litigation the Court should be ready to facilitate the conclusion of the proceedings by making a cost order ... (2) It will rarely, if ever, be appropriate, where there has been no trial on the merits, for a Court determining how the costs of the proceeding should be borne to endeavour to determine for itself the case on the merits or, as it might be put, to determine the outcome of a hypothetical trial ... This will particularly be the case where a trial on the merits would involve complex factual matters where credit could be an issue. (3) In determining the question of costs it would be appropriate, however, for the Court to determine whether the applicant acted reasonably in commencing the proceedings and whether the respondent acted reasonably in defending them ... (4) In a particular case it might be appropriate for the Court in its discretion to consider the conduct of a respondent prior to the commencement of the proceedings where such conduct may have precipitated the litigation ... (5) Where the proceedings terminate after interlocutory relief has been granted, the Court may take into account the fact that that interlocutory relief has been granted ...

31. In this case, the latter two propositions do not seem to bear directly on the issues to be decided, but do not make the other propositions irrelevant.

32. Cooper J said of these propositions in Australian Securities Commission v Berona Investments Pty Ltd (1995) 18 ACSR 772 at 774

These propositions are of assistance in focusing attention upon some of the relevant circumstances which should be considered in the exercise of the discretion to award costs where proceedings do not proceed to a final hearing. However they are not the only circumstances; nor are they intended to limit the discretion.

33. Later, in Gribbles Pathology Pty Ltd v Health Insurance Commission (1997) 80 FCR 284 at 287, Finkelstein J, referring with approval to what Hill J had said, went on to observe

For my own part I should wish to emphasise that in the absence of a hearing on the merits it is difficult to see how any order, other than an order that each party bear its own costs, can be made except in exceptional circumstances ...

34. Insofar as this comment might suggest a rigid approach, it has since been doubted. In Ringwood Plus Pty Ltd v Commissioner of State Revenue [2004] VSC 494 at [18]-[19], Hollingworth J, after referring to what Finkelstein J had said, commented However, in Champagne View Pty Ltd v Shearwater Resort Management Pty Ltd, Gillard J said that he would not go so far as Finkelstein J had, in saying that costs would only be ordered in “special circumstances”. “Each case must depend upon its own circumstances. As a general proposition if there is no other material before the court other than the pleadings then it would be extremely difficult to make any order other than each party bear its own costs.” In Hyder Consulting (Vic) Pty Ltd v CGU Insurance Ltd, Mandie J said that he also would not go as far as Finkelstein J, because each case must depend on its own circumstances. I agree with the comments of Gillard and Mandie JJ. (Footnotes omitted)

35. With respect, the approach of their Honours seems to be correct. The discretion as to costs is acknowledged as a wide one and should not be overly circumscribed.

36. That more flexible approach is evidenced in what McHugh J said in Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 at 624-5

In most jurisdictions today, the power to order costs is a discretionary power. Ordinarily, the power is exercised after a hearing on the merits and as a general rule the successful party is entitled to his or her costs. Success in the action or on particular issues is the fact that usually controls the exercise of the discretion. A successful party is prima facie entitled to a costs order. When there has been no hearing on the merits, however, a court is necessarily deprived of the factor that usually determines whether or how it will make a costs order. In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The court cannot try a hypothetical action between the parties. To do so would burden the parties with the costs of a litigated action which by settlement or extracurial action they had avoided. In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action. In administrative law matters, for example, it may appear that the defendant has acted unreasonably in exercising or refusing to exercise a power and that the plaintiff had no reasonable alternative but to commence a litigation ... Moreover, in some cases a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried ... 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 cost 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. (Citations omitted)

37. Finally, Burchett J pointed to an important distinction when his Honour said in One.Tel Ltd v Deputy Commissioner of Taxation (2000) 101 FCR 548 at 553; [6]:

In my opinion, it is important to draw a distinction between cases in which one party, after litigating for some time, effectively surrenders to the other, and cases where some supervening event or settlement so removes or modifies the subject of the dispute that, although it could not be said that one side has simply won, no issue remains between the parties except that of costs. In the former type of case, there will commonly be lacking any basis for an exercise of the Court's discretion otherwise than by an award of costs to the successful party. It is the latter type of case which more often creates problems, since there may be difficulty in discerning a clear reason why one party, rather than the other, should bear the costs.

38. These subsequent considerations leave the propositions articulated by Hill J as a useful starting point and guide, but with the need for flexibility and a recognition of the width of the costs discretion. No subsequent commentary, however, has doubted that, in a situation such as this case, the court should not, except rarely, attempt to determine for itself the case on the merits; none has doubted that an important factor is whether the plaintiff or other moving party acted reasonably in commencing the proceedings or whether the defendant or other responding party acted reasonably in defending them.

39. As Perisher suggested that the actions of Chubb should be likened to a discontinuance, it is appropriate also to consider briefly the costs position on discontinuance.

40. Stone J, in Smith v Airservices Australia (2005) 146 FCR 37 at 48-9; [38]-[44], noted that a party who discontinues or withdraws proceedings without leave (in this Territory under r 1163(1) of the Court Procedures Rules) is required to pay the costs of the other relevant party or parties, but that where a party discontinues or withdraws by leave (under r 1163(3)), the Court may make such order as it considers appropriate.

41. Her Honour noted that the power to award costs is a discretionary power unfettered other than to be exercised judicially, but accepted that, in the case of discontinuance (and presumably, withdrawal), there was an underlying policy that a party who discontinues proceedings is held liable for costs of the other parties but that this is not a “usual rule”. It is, however, a starting point for any consideration of the award of costs in the case of a discontinuance and, although the reasons for discontinuance may vary considerably, it is likely to be in the interests of justice that a party who discontinues proceedings should pay the costs of the other parties.

42. This general approach has been more extensively explained and elucidated by Penfold J in Rural & General Insurance Broking Pty Ltd v Australian Prudential Regulation Authority (2009) 231 FLR 199 at 213-4; [82] in terms which were adopted and applied by Refshauge J in Gupta v Australian Capital Territory [2011] ACTSC 39 at [80].

Judgment or dismissal

43. Among the grounds of appeal was a complaint that the learned Master should have entered judgment for Perisher on the contribution claim against it by Chubb instead of dismissing it. Presumably, Perisher would agree that his Honour should also, therefore, have entered judgment for Chubb on its contribution claim by Perisher.

44. No submissions were made as to the difference in substance or consequence of a judgment as opposed to a dismissal. It may be that there is a difference between them, though a dismissal will, in any event, entitle the party, in whose favour it is made, to move for judgment: Australian Telecommunications Commission v Elmec Pty Ltd (1986) 43 NTR 8. Certainly an order of dismissal will bring the proceedings to an end: Nichols v Lee [2008] NSWSC 1243 at [55].

45. Whether the termination of proceedings is final depends on the circumstances of the orders. Thus, r 1613 of the Court Procedures Rules permits a judgment (as well as an order for dismissal) to be set aside in certain circumstances set out in that rule. So far as this is concerned, there seems no difference between a judgment and a dismissal.

46. Under r 1614 of the Court Procedures Rules, a dismissal does not constitute a res judicata unless following a hearing on the merits. That, however, also applies to a judgment: Isaacs v Ocean Accident (1957) 58 SR (NSW) 69.

47. It may be that Perisher could move for judgment on the dismissal of the contribution claim but the effect of the dismissal seems to have little if any effects different from that of a judgment so far as these proceedings are concerned.

48. The learned Master did not err in dismissing the notices of contribution.

Reasonableness

49. The learned Master applied the correct test for determining costs when there had been no hearing on the merits. That is to say, his Honour did not attempt to determine what the outcome may have been had there been such a hearing and his Honour considered whether it was reasonable for Chubb to have commenced the third party proceedings and to have continued them.

50. Though formulated in various ways, the real thrust of the challenge by Perisher was that the learned Master erred in finding that it was reasonable for Chubb to have commenced those proceedings.

51. Perisher sought to disclose its position by a series of factual assertions made to the learned Master. These were:

(i) Purchase and installation of the battery occurred during Chubb’s contract to inspect and test for and report faults of the battery to Perisher. (ii) Chubb’s own log book of monthly inspection and testing of the battery did not record any discernible failure or fault up to the moment of the explosion. (iii) Chubb’s monthly inspection reports confirmed “correct battery type” and annual reports did not identify fault with the battery. (iv) Chubb was a specialist in the industry of maintenance of fire sprinkler systems and the battery was of a normal specification for the subject type of installation. (v) Chubb joined Perisher only on the basis that it was the occupier of the premises and owned the battery. (vi) Chubb joined Perisher to the proceedings and continued to prosecute the battery fault claim without evidence likely to establish why the battery exploded. The battery fault allegations “should never have been brought”. (vii) Chubb served expert opinion report evidence of Mr Holland in December 2011 which focused on the battery fault case between Chubb and Perisher. Mr Holland’s expert opinion report evidence did not identify why the battery exploded.

52. As was appropriate, these matters were for the most part merely recited by counsel, though some were confirmed by other matters such as the affidavit of Chubb in answer to Perisher’s interrogatories. It was made clear, during the hearing, however, that where the assertions of Perisher’s counsel were contested, Chubb’s counsel would expressly say so. None were so controverted.

53. These are not, in one sense, evidence but they were assertions of fact on which the learned Master was expected by the parties, and so entitled, to rely in order to decide the question of costs.

54. The only material that was said to be available to Chubb at the time the Third Party Notice was issued was a statement from its relevant manager who stated:

55. I understand the battery blew into a thousand pieces when it exploded. A battery explodes when it is extremely hot. A battery becomes extremely hot when it is undersized for the purpose it is being used. ... 38. The battery that exploded was owned by Perisher Blue Pty Ltd. Chubb Fire Safety maintains the system that the battery powers. 39. Further the battery was changed by Perisher Blue staff and Chubb believes that the wrong battery was installed. 40. The diesel pump manufacturer specifies the type of battery to be used. ... 44. Chubb tests monthly and Perisher Blue Pty Ltd tests weekly at Bullocks Flat Sprinkler valve room. I presume this is to save money by Perisher Blue Pty Ltd.

56. The information said to be available to Chubb was summarised by its counsel as follows:

(a) Perisher occupied the premises where the explosion occurred; (b) Perisher had obtained and installed the battery which had exploded; (c) While Chubb serviced the battery monthly Perisher had undertaken responsibility for the weekly services; and (d) There was a suggestion that a “wrong” battery had been installed.

56. These latter matters, however, have to be seen in the context of the matters set out above (at [51]).

57. While the battery was ultimately discovered stored at Bullocks Flat “in a shipping container in a rusty can because its [sic] environmentally a sensitive rubbish”, this was well after the parties had given discovery. An ex-employee identified that he had diaries and a view was conducted. Chubb never had a view of the area, nor did it or its expert inspect the battery. There was no information provided to the learned Master or to the Court whether the battery was, in fact, undersize or not in accordance with the specifications of the manufacturer of the sprinkler valve system.

58. Mr Holland’s report said that battery explosion is an extraordinarily rare event and completely unavailable to be detected beforehand by those who inspect batteries.

59. The actual reason for the explosion appears never to have been identified.

60. Neither Chubb nor Perisher had, until December 2011, an expert report on the issue. In particular, Chubb had no such report at the time it issued the Third Party Notice.

61. At a later time, Chubb amended the particulars of its claim against Perisher to allege technical defects in the installation of the battery. These were made because of the content of internal reports of Perisher that had been produced on discovery.

62. The result is that when Perisher purchased and installed the battery, it was regularly inspected by Chubb under a contract to do so which, from the content of the inspection reports, required Chubb to confirm that the battery was of the correct type. The type was specified by the manufacturer of the system which Chubb was contracted to inspect and it can be expected that Chubb would have had access to such specifications if it was to undertake its task effectively.

63. The Third Party Notice issued by Chubb against Perisher pleaded that the injuries suffered by Mr Wells were due to the negligence of Perisher and breach of Perisher’s contract with its employees, agent’s servants and director. The particulars of negligence or breach of contract were pleaded as follows:

64. Failing to ensure that the battery attached to the diesel pump within the room was an adequate size and could be safely used to power the diesel pump. 2. Failing to ensure that the battery attached to the diesel pump was not liable to explode when the diesel pump was operated. 3. Failing to provide any warning to employees of [Chubb], including the deceased, in relation to the danger posed by the undersized battery. 4. Failing to ensure that employees of [Chubb] engaged in work in the room were not at risk of injury due to the danger posed by the battery. 5. Failure to undertake a risk assessment of the tasks to be performed within the room. 6. Failing to inspect the battery to ensure that it was safe. 7. Failing to provide a correctly sized battery which was suitable for operation of the diesel pump within the room. 8. Failing to adequately supervise employees, servants or agents of [Perisher] to ensure that a battery suitable for operation of the diesel pump was installed. 9. Breaching an implied term of the agreement between the defendant and third party that employees, servants and agents of the third party would not negligently expose employees of the defendant to the risk of injury.

65. In the light of the material available to Chubb as at the date of this Notice, it is difficult to see the factual basis on which those allegations were made. The highest it could come was that Chubb’s manager had speculated that the battery may have been the wrong size. Despite the later finding of the battery as earlier noted (at [57]), it was never actually stated by anyone, especially by or on behalf of Chubb, that it did not comply with the manufacturer’s specifications.

66. Perhaps Chubb expected that evidence may have later come to light which would identify the cause of the battery explosion and thus who was responsible. Such evidence could have been compulsorily discovered through processes such as discovery or the answering of interrogatories. It may have come from subsequently obtained expert reports. To commence proceedings in such circumstances may be a legitimate forensic tactic.

67. That, however, is not the same as finding that there was a reasonable basis for the commencement of the proceedings.

68. Chubb did not, at the time it issued the Third Party Notice to Perisher, or subsequently, have a reasonable basis for asserting that Perisher bore a responsibility for the battery explosion. In so finding, the learned Master erred.

Surrender and discontinuance

68. While this finding is sufficient to dispose of the appeal, it is appropriate to refer briefly to two further arguments pressed on the Court.

69. Perisher submitted that Chubb had “surrendered” on the basis that it could not have made out its claim for contribution from Perisher.

70. It is correct that Chubb could not recover any contribution from Perisher but that was because it had not become liable to the plaintiff. The success of the claim for contribution depended entirely on it having a liability to the plaintiff and when Chubb and the plaintiff settled on the basis that no payment was to be made, resulting in no occasion arising for any contribution or indemnity under the Third Party Notice or the claim for contribution which it became, the basis for the contribution claim fell away.

71. This was a case of a supervening event which rendered further steps in the contribution proceedings futile.

72. That does not amount to a surrender in the sense that Chubb did not say it could not have proved its case against Perisher had there been an occasion for contribution or indemnity.

73. Perisher then submitted that the correct approach to this matter should be as if Chubb were discontinuing its claim for contribution. The fact is, however, that Chubb was not doing that; it was simply saying to the learned Master that events had rendered the continuation of the proceedings futile and they should be brought to an end. Indeed, Perisher was saying exactly the same thing to the learned Master as to its claim for contribution from Chubb. Interestingly, Perisher did not submit that it should pay Chubb’s costs of the termination of its claim for contribution since it, too, was virtually a discontinuance.

74. The principles relating to the making of costs orders when leave is given to discontinue proceedings have been set out above (at [40]-[42]). They are sufficiently broad that many of the principles set out by Hill J in Australian Securities Commission v Aust- Home Investments Ltd would be of assistance to a court considering the issue in any event.

75. There is no error in the approach taken by the learned Master to these two issues.

Conclusion

76. The appeal is upheld. Chubb is to pay the costs of Perisher, limited to

(c) the costs of the Third Party Notice before Perisher was joined as a defendant; and

(d) thereafter only the costs incurred in respect of the claim for contribution and indemnity which the Third Party Notice then in substance became.

77. Chubb is also to pay the costs of the appeal.

I certify that the preceding seventy-seven [77] numbered paragraphs are a true copy of the Reasons for Judgment of the Court of Appeal.

Associate:

Date: 5 September 2014