Plaintiff v Second Third Party [2017] VSC 300 | Case summary

Supreme Court of Victoria|2017-06-09|Before: J FORREST J

COSTS - Application for grant of leave to discontinue proceedings against third party with no order as to costs - Exercise of discretion as to costs - Liability of defendant for costs of third party where claim not pursued - Civil Procedure Act 2010 (Vic) - Supreme Court (General Civil Procedure) Rules 2015 (Vic).

2 At the time of her detention, AS was 5 years old and spent approximately ten months in detention between July 2013 and August 2014.

3 The writ was issued in August 2014. The Commonwealth joined Serco as a third party on the basis that it was contracted to provide security and administrative services at the detention centre.

4 This ruling concerns whether the Commonwealth should be granted leave pursuant to r 25.02(6) of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (the Rules) to discontinue its third party claim against Serco and, if so, whether it should pay Serco's costs of the third party proceeding.

5 In essence, there are two questions to be resolved:

(a) Whether it was reasonable for the Commonwealth to join Serco as a third party and to maintain that joinder until trial?[1] and

(b) Assuming it was reasonable to join Serco, should the Commonwealth pay Serco's costs given that it is not prepared to prosecute the third party claim to conclusion?

6 I will not repeat, except where necessary, the factual background of the claim nor the pleadings of the case.[2]

7 AS issued her proceeding under Part 4A of the Supreme Court Act 1986 (Vic). The Commonwealth then issued its third party proceeding against Serco in March 2015. Serco (pursuant to a contract with the Commonwealth) provided a number of services associated with the custody of refugees, including AS, at the detention centre. The Commonwealth made allegations of negligence against Serco that, in effect, replicated the allegations made by AS against the Commonwealth. In addition, the Commonwealth alleged breach of terms of its contract with Serco in relation to its management of the detention centre.[3]

8 On 27 March 2017, I ruled that the representative claim of AS not proceed as a class action, but rather, as an individual claim.[4]

9 On 26 April 2017, I approved the compromise of AS' claim.

10 Following settlement of the primary proceeding, the Commonwealth announced that it would not pursue its third party claim against Serco. It wishes to discontinue that claim but without liability for Serco's costs.

11 Serco opposes the application solely on the basis that the Commonwealth should not be given leave to discontinue the third party proceeding against Serco, unless, what it says is the usual costs order (pursuant to rr 25.05 and 63.15 of the Rules) is made in its favour.

12 Serco also seeks an order pursuant to r 25.06 of the Rules that any grant of leave to the Commonwealth to discontinue the third party proceedings be accompanied by an order that the grant of leave acts as a defence to any subsequent proceeding by the Commonwealth against Serco for the same, or substantially the same, cause of action relating to the main proceeding. That bold application can be deferred until this ruling is delivered: if it is still sought to be prosecuted.

13 Both the Commonwealth and Serco filed affidavits in support of their respective applications.

14 Unless otherwise expressly provided by any Act or by the Rules, the costs of and incidental to all matters in the Supreme Court are in the discretion of the Court, and the Court has full power to determine by whom and to what extent the costs are to be paid.[5] This is a 'broad judicial discretion'.[6]

15 Order 25.02 of the Rules deals with discontinuance or withdrawal of proceedings. In particular, r 25.02(6) of the Rules concerns the discontinuance of a claim made against a third party by a defendant and reads as follows:

Discontinuance or withdrawal of proceeding or claim

(6) A defendant who has joined a third party may discontinue the claim made against the third party by the third party notice or withdraw any part of the claim at any time -

(a) by leave of the Court; or

(b) with the consent of the third party.

Discontinuance or withdrawal

Unless the court otherwise orders, a party who discontinues or withdraws part of a proceeding, counterclaim or claim by third party notice shall pay the costs of the party to whom the discontinuance or withdrawal relates to the time of the discontinuance or withdrawal.

17 It can be accepted that by these specific rules, the discretion of the Court conferred by s 24(1) of the Supreme Court Act 1986 (Vic) to make orders for costs is modified to the extent that it places an onus on the party seeking to discontinue the proceeding (in this case, the Commonwealth) to satisfy the Court that the costs of the third party (Serco) should not be paid by it.

18 In Burke v Gillett,[7] the plaintiff failed against the defendant, and the defendant in turn failed against the third party. Tadgell J concluded that, as the third party claim had been 'fully litigated', and the third party had been 'ultimately vindicated', the defendant should pay the third party's costs of the proceeding. His Honour (with whom Ormiston and Smith JJ agreed) said:

Assuming that the defendants acted reasonably in bringing the third party proceedings, that was not sufficient to justify an order either that the third party should not receive its costs or that the defendants should not be made responsible for them.

In my opinion, costs of the third party proceedings and of the third party's appeal should follow the event, as it was indicated in Johnson v Ribbins ... should ordinarily be the case.[8]

19 In Kheirs, the Court of Appeal set out the following principles in a case where a primary proceeding failed and the third proceedings were consequently dismissed:

(1) The usual rule as to costs applies to proceedings as between defendant and third party, the "event" being the success or failure of the defendant's claim against the third party.

(2) Where the third party claim is dismissed because the plaintiff's claim against the defendant fails, the defendant will ordinarily be liable for the third party's costs of the third party proceeding.

(3) The award of costs remains a matter of discretion, however, and there may be circumstances of the case which justify a departure from the usual rule.

(4) In deciding (in a case of the kind referred to in (2)) whether any departure from the usual rule is warranted, the court will ordinarily need to consider at least the following matters:

the reasonableness of the defendant's decision to join the third party;
Whether the joinder of the third party was reasonably foreseeable by the plaintiff, such that the plaintiff might be viewed as having some responsibility for the costs of the third party proceeding. (An order for the plaintiff to pay the defendant's costs may thus include the defendant's liability to pay the third party's costs of the third party proceeding.);
the responsibility of plaintiff, defendant and third party, respectively, for the time taken up in the hearing of the third party proceeding.[9]

20 Before I go to the two primary questions, I should make several observations.

21 First, as I hope is now clear, this case does not involve a concluded primary proceeding (either favourable, as in Kheirs, or unfavourable to the defendant) with a subsequent determination of which party should be responsible for payment of the third party costs. Rather, it requires a decision to be made where the primary proceeding has been settled and the defendant now does not seek to persist with its claim against the third party.

22 Second, most of the decisions concerning the payment of costs in a third party proceeding not prosecuted to successful determination (including Kheirs) preceded the enactment in January 2011 of the Civil Procedure Act 2010 (Vic) (CPA), and particularly its provisions requiring parties to narrow the issues, and use their best efforts to negotiate a resolution in preference to litigating a case out.[10]

23 It is now clear that a court, in exercising its discretion to grant leave to discontinue third party proceedings pursuant to r 25.02(6) of the Rules, must have regard to the provisions of the CPA and in particular, s 7 which states that the overarching purpose of the Act and Rules in civil proceedings is to 'facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute'.[11]

24 By s 8(1) of the CPA, the court is required to give effect to the overarching purpose in exercising its powers. In doing so, s 9 of the CPA directs the court to further the overarching purpose by having regard to the objects and matters which include the efficient use of judicial and administrative resources and dealing with the proceeding in a manner proportionate to the complexity and importance of the issues and amount in dispute.

25 Third, the effect of rr 25.05 and 63.15 should not be overstated. In Just Group Ltd v Joseph van Dyk & Ors,[12] Sloss J held that the wide discretion conferred on the Court to order costs must be exercised in conformity with rr 25.05 and 63.15 of the Rules.[13] However, her Honour then observed:

In essence, the cases summarised in Soteriadis[14] and Johnson[15] show that r 63.15 does not give rise to a presumption that costs will be ordered against the discontinuing party. Rather (and paraphrasing what their Honours have said), it creates 'a starting position' and the burden is on the party who seeks to persuade the court that a different order should be made to prove the relevant facts. All relevant circumstances, not just the fact of discontinuance, should be considered. If there is to be a departure from the starting position the Court should do so in a particularised and principled way and make such order as it thinks just in the particular circumstances of the case.[16]

26 I adopt the observations of Sloss J in Just Group. The 'starting position' in this case is that Serco is to be awarded its costs unless the Commonwealth persuades this Court to the contrary - but in looking at this issue, the Court is not confined to a myopic consideration of the fact of the discontinuance of the third party proceeding.

27 The allegations in the most recent version of the statement of claim of AS, dated 23 September 2016, make numerous references to Serco's role and its responsibility in relation to AS's confinement at the detention centre.

12. At all material times in the Relevant Period, Serco Australia Pty Limited (Serco) was contracted by the Commonwealth to provide accommodation, security and recreational services to and in respect of persons in detention on Christmas Island.

B.1.2 Conditions affecting all persons in detention - physical conditions

During the Relevant Period, detention on Christmas Island was subject to physical conditions and daily routine exclusively determined by the Commonwealth and/or the Minister (and/or their servants and agents, including Serco).
During the Relevant Period, the physical conditions of, and daily routine pertaining to, detention on Christmas Island which were exclusively determined by the Commonwealth and/or the Minister (and/or their servants and agents, including Serco) had the following features (Christmas Island Detention Conditions):

the standard of accommodation and the amenity provided to the persons in detention;

the quality, quantity and serving times of and conditions of access to food;

the occupational activities in which persons in detention on Christmas Island could participate;
whether there could be and conditions of access to clothes, toiletries, toys, stationery, and any other kinds of property or personal effects that a person in detention might reasonably require;
the times of day at which persons in detention were to retire and wake.

29 I should add that paragraph 16 of the statement of claim alleges that the conditions under which AS was subject to, were under the exclusive control of the defendants, together with their agents, including Serco. Further, paragraph 19 alleges that the physical conditions, and the daily routine pertaining to the detention (such as quality, quantity and serving times of and conditions of access to food), were determined by the defendants and/or by Serco.

30 In response to this iteration of the statement of claim, the Commonwealth issued an amended third party notice against Serco in October 2016 which replicated, to a large extent, the allegations AS made against Serco in her statement of claim.[17]

31 Paragraph 11 of the statement of claim annexed to that notice repeats, in essence, allegations of AS against the Commonwealth:

11. If the Plaintiff and/or other group members suffered injury while detained on Christmas Island (which is not admitted but specifically denied) she and the group members suffered injury as a result of the negligence or breach of duty of Serco.

(a) Failing to ensure that the physical conditions of detention on Christmas Island were not such as were likely to cause or exacerbate injury to the Plaintiff and Group Members.

For the purposes of this Third Party Claim (and without any admission) the Second Defendant repeats against Serco the allegations set out in paragraph 87 of the Statement of Claim.

(b) Failing to adequately assess and monitor the condition of AS and Group Members to determine whether, and to what extent, they suffered from injury which might be caused or exacerbated by detention on Christmas Island.

For the purposes of this Third Party Claim (and without any admission) the Second Defendant repeats against Serco the allegations set out in paragraph 88(a) of the Statement of Claim.

(c) Failing to have in place a system for the assessment and monitoring of the condition of AS and Group Members to determine whether, and to what extent, they suffered from injury which might be caused or exacerbated by detention on Christmas Island.

For the purposes of this Third Party Claim (and without any admission) the Second Defendant repeats against Serco the allegations set out in paragraph 88(b) of the Statement of Claim.

(d) Failing to provide AS and Group Members with timely access to adequate medical service for injuries which should have been identified had an adequate assessment and monitoring system been in place.

For the purposes of this Third Party Claim (and without any admission) the Second Defendant repeats against Serco the allegations set out in paragraph 88(c) of the Statement of Claim.

(e) Failing to provide AS and Group Members with timely access to adequate medical services for injuries which it had identified.

For the purposes of this Third Party Claim (and without any admission) the Second Defendant repeats against Serco the allegations set out in paragraph 88(d) of the Statement of Claim.

(f) Failing to have in place a system for the medical treatment of AS and Group Members which was capable of ensuring that they were provided with timely access to adequate medical services in respect of injuries.

For the purposes of this Third Party Claim (and without any admission) the Second Defendant repeats against Serco the allegations set out in paragraph 88(e) of the Statement of Claim;

(g) Failing to ensure that the physical conditions of detention on Christmas Island were not such as were likely to cause or exacerbate injury to the Plaintiff and Minor Members.