Plaintiff v Defendant

1 In this proceeding the plaintiff made a claim for damages for injuries sustained by her in the course of her employment with the defendant, which she alleged were caused by the defendant's tortious conduct.

2 Very shortly prior to the commencement of the trial the defendant conceded liability. The jury trial proceeded as an assessment. As a consequence of a verdict delivered by the jury on 21 April 2016, T Forrest J on the same day made orders that:

1. There be judgment for the plaintiff against the defendant in the sum of $89,077.
2. The plaintiff pay the defendant's costs, to be assessed by the Supreme Court of Victoria Costs Court in default of agreement.
3. There be a stay of 21 days for payment of the judgment sum.

3 By summons dated 3 May 2016, the defendant has applied to set off the costs award in its favour against the damages awarded to the plaintiff. The application is supported by an affidavit of the solicitor for the defendant, sworn 3 May 2016. Written and oral submissions were made by each party.

4 The plaintiff was born on 16 July 1963 and is now 52 years of age.

5 By her statement of claim, the plaintiff pleaded that she was employed by the defendant from 2004, and that in the course of her employment she was required to carry out heavy work as a storeperson. The plaintiff alleged that in the course of performing that work on about 8 January 2008 she suffered injury to her lumbar spine, and that the injury was caused by the negligence and/or breach of statutory duty of the defendant. The plaintiff's claim was for pain and suffering and pecuniary loss damages.

6 By its defence filed 26 February 2015, the defendant denied negligence and breach of statutory duty, and alleged contributory negligence.

7 The trial commenced on 11 April 2016. On that day, the defendant filed an amended defence admitting negligence and withdrawing the allegation of contributory negligence.

8 The plaintiff's evidence at trial included that she:

(a) resided in a rented Housing Commission flat;

(b) had no income other than weekly payments paid in accordance with the Accident Compensation Act 1985 ('the Act') in respect of the injuries which were the subject of the proceeding; and

(c) had experienced financial difficulties in the past.

9 At the end of the trial, by its verdict the jury awarded the plaintiff the sum of $100,000 for pain and suffering damages, and $84,000 for pecuniary loss damages. After the reduction required by s 134AB(25) of the Act, judgment was entered for the plaintiff in the sum of $89,077.

10 At the prelitigation stage, the defendant made a statutory offer to the plaintiff to settle her claim for common law damages. That offer was made in accordance with s 134AB(12) of the Act. The amount of the judgment was less than the statutory offer. In those circumstances, s 134AB(28)(c) of the Act obliged T Forrest J to make the order that the plaintiff pay the defendant's costs of the proceeding.

11 The trial ran for eight days. The defendant's counsel's fees were certified at a daily rate of $5,332 for Senior Counsel and $1,736 for Junior Counsel. The defendant's solicitor has given evidence in his affidavit as to other disbursements incurred by the defendant in the proceeding. In addition to counsel's fees and those other disbursements, the costs order will entitle the defendant to an amount for the professional costs of its solicitors. I am satisfied that the quantum of costs is likely to exceed the damages awarded to the plaintiff.

12 Counsel for the defendant argued that the court had both an inherent and an equitable jurisdiction to make an order setting the costs awarded to the defendant off against damages awarded to the plaintiff.[1] It was appropriate in this case, counsel argued, that the court exercise its discretion pursuant to its inherent jurisdiction to make the setoff order sought. Whether the jurisdiction should be exercised was a question to be determined by reference to considerations of justice and fairness between the parties.

13 Counsel for the plaintiff argued that the issue of costs was to be determined exclusively in accordance with s 134AB(28). That section left no discretion to the court in relation to costs. In the circumstances, the court's discretion to exercise its inherent or equitable jurisdiction to make the orders sought by the defendant had been removed. Accordingly, it was argued, the orders sought by the defendant could not be made.

14 In Spotless Services Australia Ltd v Herbath & Anor,[2] Mandie JA (with whom Buchanan JA and Byrne AJA agreed) stated:

Spotless submitted that the concluding phrase in s 134AB(28) 'and the Court must not otherwise make an order as to costs' might be interpreted in two possible ways. One way was an 'exclusionary' way ie that no order other than those referred to in paragraphs (a) to (d) might be made in a proceeding which was subject to s 134AB. The second way was to give the phrase 'must not otherwise' a connotation of inconsistency ie the Court may make other orders as to costs but not orders which were inconsistent with any of paras (a) to (d). Spotless submitted, and I would agree, that the second way was the correct interpretation.

15 I do not accept the submission of counsel for the plaintiff that the court's power to make the orders sought by the defendant is precluded by s 134AB(28) of the Act.

16 Counsel for the plaintiff did not otherwise argue against the propositions advanced by the defendant that the court had inherent jurisdiction to make the orders sought, or that the exercise of the discretion should be determined by considerations of justice and fairness as between the parties.

17 The defendant argued that the court should exercise its discretion to make the orders sought for the following reasons:

(a) The defendant's costs will significantly outweigh the plaintiff's judgment sum;

(b) There is no utility in the defendant paying the plaintiff the judgment sum when it has a right to recover more than that sum for its costs;

(c) The financial situation of the plaintiff means it is unlikely she will be able to meet the order to pay the defendant's costs;

(d) If the defendant pays the judgment sum to the plaintiff, and then seeks to recover its costs, this is likely to have the effect of bankrupting the plaintiff;

(e) The purpose of the costs provisions in s 134AB of the Act are to encourage settlement of proceedings. The defendant's statutory offer was rejected and the plaintiff failed to reach a damages award to the level of that offer. The costs consequences (that is, the plaintiff having to pay the defendant's costs) are a flowon effect of those provisions and mitigate against arguments that a set-off would be unfair to the plaintiff who was awarded damages; and

(f) It would be unfair and prejudicial to the defendant, having been awarded its costs of the proceeding, to have to pay the plaintiff the judgment sum in circumstances where it is unlikely to recover its costs, which will be greater than the judgment sum.

18 In discussion, it was accepted by counsel for the defendant that it was relevant to take into account the fact that the plaintiff had been unable to work and was in receipt of WorkCover benefits in respect of the injury tortiously caused by the defendant, and that, following judgment and the termination of her weekly payments of compensation, the plaintiff could now be expected to be suffering immediate financial hardship. Counsel for the defendant argued that this was a relevant consideration which weighed in favour of the exercise of the discretion to order set-off, because it was evidence of the likely inability of the plaintiff to pay the amount of costs awarded in favour of the defendant.

19 In each of Sivritas and Slaveski, the conduct of the party against whom set-off was sought was relevant to the Court's determination to make the setoff order.[3] In Sivritas, the applicant for the order gave evidence, which was not contradicted, of his concern that the respondents, once they received the net proceeds of sale of the land, would leave the jurisdiction and in that way actively seek to avoid payment of the costs order. Kyrou J noted the animosity and lack of cooperation between the parties,[4] and concluded:

Based on the evidence given by the parties in the proceeding, my observation of and during the main hearing and what has transpired since that time at several mentions before me, I find that in the absence of a setoff order, there is a serious risk that the first and second defendants will not pay two-thirds of the plaintiff's costs when taxed, pursuant to my order of 10 October 2008.[5]

20 In Slaveski, factors relevant to the determination by McMillan J included:[6]

(a) The ongoing failure by the plaintiff to pay previous costs orders, even where instalment orders had been made by the court;

(b) That the plaintiff was on a disability pension, and that the reason for his disability had not arisen due to any wrongful act of the defendants;

(c) That the plaintiff's litigation guardian had openly stated to the court that she had no intention of abiding the court's costs orders; and

(d) That the conduct of the plaintiff had been found to be contumelious of court orders, deliberate, calculated and lacking in bona fides.

21 On this application there was no suggestion put by the defendant that the plaintiff had acted, or was likely to act, in a similar fashion. In particular, there is no evidence in this case that the plaintiff will, if the judgment sum is paid to her, dissipate that amount with the intention of depriving the defendant of the benefit of its costs order.

22 I accept that, leaving aside the judgment award, the financial resources of the plaintiff are likely to be such that she will not be able to pay the amount of the costs order. However, as I have said, there is no evidence that the plaintiff will actively dissipate the judgment sum in order to avoid the costs order. If the judgment sum is paid to the plaintiff, it is not possible to determine what portion of the judgment sum might remain in her hands and available to assist in meeting the costs order once the amount of costs has been determined.

23 I accept the defendant's submission that a purpose of the s 134AB(12) process is to encourage settlement of proceedings. However, there is no statutory provision in the Act requiring set-off of costs against a judgment sum in circumstances where the judgment falls below the amount of the statutory offer made by the defendant. The consequence the plaintiff faces in that circumstance is an adverse costs order. The court has no residual discretion in relation to that order.

24 I am not able to come to any conclusion as to the reasonableness or otherwise of the plaintiff's action in rejecting the statutory offer made at a prelitigation stage by the defendant. I know nothing of the circumstances of the rejection of the statutory offer by the plaintiff, or of the information which was available to her prelitigation to assist with her decision.

25 The evidence indicates that the financial position of the plaintiff is parlous. She has been financially dependent, for many years, on WorkCover benefits. Those benefits were paid in respect of the injuries which are the subject of this proceeding. Payment of those benefits constitutes an admission by the defendant that the plaintiff has been totally incapacitated for employment for some years to the date of trial by reason of those injuries. More recently, the defendant has admitted that its negligence was a cause of the injuries.

26 The WorkCover benefits have now been terminated by reason of the judgment. It seems likely that the plaintiff's financial resources are now extremely limited. I consider it relevant to this application that, at least in the short to medium term, the plaintiff's parlous financial state has been contributed to by the termination of the weekly payments of compensation which have been paid for some considerable period by the defendant's insurer, in respect of the injuries sustained by the plaintiff as a consequence of the tortious conduct of the defendant. Contrary to the submission of the defendant, I consider that the fact and cause of the plaintiff's parlous financial state weigh significantly in favour of the plaintiff on this application.

27 On balance, on the particular facts of this case, I am not satisfied that the setoff order sought by the defendant should be made.

28 I will make an order dismissing the application of the defendant, filed 6 May 2016. I will hear the parties on the issue of costs.

[1] Sivritas v Sivritas (No 2) [2008] VSC 580; (2008) 23 VR 349, 390 [22] ('Sivritas'); Slaveski v State of Victoria [2013] VSC 76, [16] ('Slaveski').

[2] (2009) 26 VR 373, 383 [38]; see also Baulch v Lyndoch Warrnambool Inc (No 2) [2010] VSCA 53, [5].

[3] Sivritas [2008] VSC 580; (2008) 23 VR 349, 393 [33]; Slaveski [2013] VSC 76, [8]-[12], [23].

[4] Sivritas [2008] VSC 580; (2008) 23 VR 349, 388 [10].

[6] Slaveski [2013] VSC 76, [23].