QBE Insurance (Australia) Ltd v CSR Limited

Patten v Moffatt [1999] NSWSC 1322 CASES CITED: Maitland Hospital v Fisher [No 2] [1992] 27 NSWLR 721 Antoon Frans Broers v Australian Cooperative Foods Ltd and ors [2008] NSW DDT 38 Energy Australia v Power Technologies Pty Limited [2009] NSWDDT 2

Mr G J Parker instructed by Moray and Agnew appeared for the Applicant on the Motion

Ms J Gleeson instructed by A R Connolly and Co appeared for the Respondent to the Motion

Dust Diseases Tribunal of New South Wales Matter Number 6290 of 2006 QBE Insurance (Australia) Ltd v CSR Limited 9 April 2009 CURTIS J RULING ON NOTICE OF MOTION Summary

1. Because CSR Limited (CSR), a cross defendant, acted unreasonably in delaying settlement with the plaintiff, it should pay the additional costs QBE Insurance (Australia) Ltd (QBE), a defendant to the proceedings, incurred in consequence of that delay. Introduction
2. A plaintiff, Mr Francis James Gibson, contracted asbestosis as a result of his employment by Austin Richards Proprietary Limited between 1962 and 1970. On 30 November 2006 Mr Gibson sued Austin Richards' insurer, QBE Insurance (Australia) Ltd, pursuant to s6(4) of the Law Reform (Miscellaneous Provisions) Act 1946 and Amaca Pty Limited (Amaca), the supplier of asbestos products, for damages.
3. Amaca cross-claimed against CSR Ltd, another supplier of asbestos products. Amaca and QBE did not cross-claim against each other.
4. Mr Gibson's claim was subject to the Claims Resolution Process established by Part 4 of the Dust Diseases Tribunal Regulation 2007.
5. On 14 February 2008 Mr J L Sharpe, appointed as Contributions Assessor, determined the contributions between the defendants in the following proportions: QBE 15 per cent Amaca 63.75 per cent CSR 21.25 per cent
6. By the same instrument, pursuant to cl 61(3)(b) of the Regulation, Mr Sharpe appointed Amaca as Single Claims Manager (SCM) for the purposes of cl 62(1), that is, to " manage and negotiate and seek to resolve the plaintiff's claim on behalf of all defendants."
7. Cl 47(1) provides that a reference to a defendant includes a reference to a cross-defendant.
8. By force of cl 62(4) each defendant is taken to authorise the SCM to settle the matter with the plaintiff, both informally and at any formal mediation. Cl 62(5) permits a defendant to impose a monetary limit on the authority of the SCM to settle a claim on behalf of the defendant but directs that it must act reasonably in imposing that limit. That direction is at the heart of this dispute.
9. On 27 March 2008 the claim was the subject of unsuccessful mediation. At this mediation, the plaintiff offered settlement in the sum of $240,000 inclusive of costs. The defendants and cross defendant offered $80,000 inclusive of costs because CSR would not agree to any settlement in excess of $80,000.
10. At the time of mediation the defendants and cross defendant held a report from Dr David McEvoy, a respiratory physician qualified by QBE in July 2007. Dr McEvoy was of the opinion that Mr Gibson, who was then only 59 years old, suffered breathlessness caused by asbestosis, and that he had a respiratory impairment of 20 per cent of the whole person. He said that Mr Gibson had a moderate disability, was unable to work and had limited recreational activities. Dr McEvoy estimated that future costs for Mr Gibson's care would be between $80,000 and $120,000.
11. On 7 April 2008 the plaintiff made an offer of settlement in the sum of $150,000 as provisional damages, inclusive of costs. This offer was acceptable to both defendants and communicated to the solicitors for CSR. CSR refused to authorise the SCM to settle with the plaintiff in that sum.
12. By July 2008, CSR held a copy of the report of Dr Roger Allen, a physician qualified by the plaintiff's solicitors. Dr Allen estimated Mr Gibson's respiratory impairment at around 20 per cent of the whole person. He said that the asbestos disease would worsen slowly with time, leading to increasing breathlessness and a reduction in the quality of life, with persisting chest pain. He estimated the cost of future medical care to be in the order of $80,000-$100,000.
13. I accept the submission of Mr Parker for QBE that a likely award of general damages was in the range of $75,000-$100,000.
14. On 4 July 2008 Mr Hoey, the occupational therapist engaged as the single expert, reported to the parties. The future cost of providing domestic assistance to Mr Gibson in accordance with his recommendations was, discounted, in the order of $90,000. On 15 July 2008, the solicitors for QBE wrote to the solicitors for CSR enquiring whether CSR would alter its position in the light of this report and the report of Dr Allen. The answer was no.
15. While CSR in correspondence stated that QBE and Amaca were free to settle with the plaintiff in the sum of $150,000, it nevertheless inhibited settlement by maintaining that in subsequent proceedings it would dispute the reasonableness of that settlement.
16. By 15 May 2008 the plaintiff's offer of $150,000 inclusive of costs had expired.
17. In consequence of the stalemate, the plaintiff's claim was listed for hearing in Brisbane on 24 September 2008 when it settled for the sum of $165,000 as provisional damages inclusive of costs. QBE agreed to pay the plaintiff $22,500, being 15 per cent of $150,000, in accordance with the Contributions Assessment. Amaca agreed to pay the balance of $142,500. Judgments were entered against each defendant in accordance with that agreement.
18. The cross-claim by Amaca against CSR was listed for directions before the Tribunal on 29 September 2008. By letter of 25 September 2008, QBE's solicitor advised CSR's solicitor that it wished to agitate a costs issue for resolution pursuant to those directions, and inquired whether CSR still maintained that $150,000 inclusive of costs on a provisional damages basis was an unreasonable settlement figure as at April 2008.
19. In response, CSR's solicitors confirmed that, for the purposes of any costs argument, CSR would not accept that in April 2008, $150,000 inclusive of costs was a reasonable amount in settlement of the plaintiff's claim.
20. Notwithstanding this assertion, on 16 February 2009, CSR agreed to pay the sum of $31,875 inclusive of costs and interest in settlement of the cross-claim by Amaca, the settlement being not on a provisional, but on a full and final basis. This was the same sum that CSR had refused to contribute to the plaintiff's initial offer of $150,000 in April 2008.
21. In the course of the present hearing CSR has, belatedly, conceded that, as at April 2008, $150,000 inclusive of costs was a reasonable settlement of Mr Gibson's claim for provisional damages. That concession does not go so far as to admit that it was unreasonable for CSR to reject that offer, the concession being only that the figure was "within the range" of reasonable settlements.
22. In the light of the medical evidence available to CSR, the imposition by CSR of a monetary limit of $80,000 on Amaca as the Single Claims Manager was quite unreasonable. In the course of argument counsel for CSR has not sought to explain or justify that limit.
23. Being aggrieved by the conduct of CSR in these events, QBE, by Notice of Motion filed 3 November 2008, seeks orders that CSR pay the costs of QBE, either on a party party or indemnity basis, from 27 March 2008, the date of the mediation, or, in the alternative, from 7 April 2008, when the plaintiff offered to accept the $150,000 as provisional damages inclusive of costs.
24. It is the contention of QBE that it would not have incurred these costs if CSR had acted reasonably in the Claims Resolution Process. Power to award costs
25. The general power to award costs is to be found in s98 of the Civil Procedure Act 2005 which provides that; 98 Courts powers as to costs (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.
26. Pursuant to s22(2)(b)(i) of the Act, a cross defendant becomes a party to the plaintiffs proceedings, and may, subject to rules of Court, be ordered to pay the costs of another party in the proceedings (Patten v Moffatt [1999] NSWSC 1322). QBE'Submissions
27. Although CSR was not the respondent to any formal offer made by QBE, Mr Parker for QBE relies upon the principles to be found in the authorities which consider the costs consequences generated by offers of compromise made either pursuant to the rules, or in Calderbank letters, and the provisions of the Dust Diseases Tribunal Regulation 2007.
28. It is sufficient for present purposes to cite the decision of the Court of Appeal (Kirby P, Mahoney JA and Samuels AJA) in Maitland Hospital v Fisher [No 2] [1992] 27 NSWLR 721, in which the court observed that the objects of the rules were to encourage the saving of costs both public and private, and to indemnify a party who has made an offer of compromise, later found to have been reasonable, against the costs thereafter incurred; "Because, from the time of the rejection or deemed rejection of the compromise offer, notionally the real cause and occasion of the litigation is the attitude adopted by the [party] which has rejected the compromise.
29. Cl 13 and cl 67 of the Dust Diseases Tribunal Regulation 2007 provide as follows: Objectives of claims resolution process 13 Objectives of claims resolution process The objectives of the claims resolution process are as follows: (a) … (b) to encourage early settlement of those claims, (c) to reduce legal and administrative costs in connection with those claims. 67 Costs penalties (1) In making an order as to the payment of costs in proceedings, the Tribunal must take into account any failure by a party to proceedings to comply with a provision of this Part. (2) In particular, the Tribunal must take into account any increase in the costs of the proceedings that is attributable to any such failure and may order the party responsible for the failure to pay the costs of each other party to the dispute occasioned by the failure, assessed on an indemnity basis. (3) The Tribunal may take into account a certificate issued by a mediator to the effect that in the mediator's opinion a party to a claim referred for mediation did not participate in good faith in the mediation.
30. It will be recalled that cl 62(5) directed that a defendant "act reasonably" in imposing a limit on the authority of the Single Claims Manager to settle a claim on behalf of that defendant. If CSR did not act reasonably in setting the limit of $80,000 it has not complied with a provision of the Claims Resolution Process established by Part 4 of the Regulation.
31. Mr Parker also relies upon the provisions of cl 52 of the Regulation: 52 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 taking, or determination by the Tribunal, of a dispute between defendants as to apportionment. (3) 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. (4) … (5) … (6) … (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.
32. The operation of cl 52(3) is triggered "If a defendant disputes the contribution that the defendant is liable to make to damages recovered by the plaintiff." It is idle for CSR to suggest that it was not in dispute with QBE and Amaca as to the contribution it should make because it accepted the Contribution Assessment, when at the same time it refused to contribute the reasonable sum required to settle the plaintiff's claim in accordance with that Assessment.
33. Mr Parker submits that, prima facie, the position adopted by CSR, at the mediation, in which it asserted that the appropriate cash contribution required from CSR to settle the plaintiff's claim did not exceed 21.25 per cent of $80,000 ($17,000), has not been materially improved by the Judgment of the Tribunal, albeit by consent, that it contribute 21.25 per cent of $150,000 ($31,875).
34. The description in cl 52(3) of costs as those occasioned by the dispute permits application of the clause not only to the costs incurred in the conduct of an action pursuant to s5(1)(c) of the Law Reform (Miscellaneous Provisions) Act 1946, but to all costs occasioned to the parties by the dispute. In the present case, those costs include the costs incurred by QBE between the date of the mediation and the date of the settlement in Brisbane. CSR's submissions
35. The authorities relating to the effect of offers of compromise made pursuant to rules, and Calderbank offers, justify a departure from the normal costs rule that costs follow the event only where, in the words of the Uniform Civil Procedure Rules 2005 the judgment is "no less favourable" to a party, or in the words of Cairns LJ in Calderbank v Calderbank [1975] 3 All ER 333 at 342 "if the court's apportionment is as favourable to the party who made the offer as what was offered, or more favourable to him".
36. Ms Gleeson for CSR submits that the judgment secured by Amaca against CSR, pursuant to which CSR paid $31,875 inclusive of costs to Amaca as a full and final settlement, is a result "no less favourable" or "more favourable" than the implied offer made by Amaca in April 2008 to accept $31,875 as a provisional settlement, because CSR has been released from any liability to contribute to the liability of Amaca should Mr Gibson contract another dust related condition, and recover further damages pursuant to s11A(2) of the Dust Disease Tribunal Act 1989 (There is no evidence as to whether, in April 2008, Amaca required that CSR pay the costs of its cross-claim in addition to the contribution assessed at $31,875.)
37. Any advantage secured by CSR by the release is illusory. Should Mr Gibson contract a further disease such as mesothelioma, he may still claim damages either from QBE who will be free to join CSR as a cross defendant, or directly from CSR as a tortfeasor liable for indivisible damage.
38. On 27 March 2008 CSR offered to Amaca and QBE a contribution of 21.25 per cent of $80,000, that is, $17,000. The result achieved by consent judgment, a contribution of $31,875 and continuing vulnerability to further claims by Mr Gibson, is certainly less favourable than that offer by CSR. This circumstance is relevant to my conclusion that the offer of $17,000 was unreasonable.
39. Ms Gleeson also argues that QBE voluntarily incurred the additional costs because, as it later demonstrated, it was free to settle with the plaintiff in the absence of contribution from CSR. The trouble with this submission is that not only did CSR refuse to contribute to the settlement initially proposed, it also signalled that in subsequent proceedings it would argue that such a settlement was too generous, and that QBE and Amaca, acting reasonably, should compel the plaintiff to have his damages assessed by the Tribunal.
40. QBE was placed in a no-win situation. If QBE settled with the plaintiff it faced the prospect of having to prove the plaintiff's damages in subsequent contribution proceedings, possibly without any assistance of the plaintiff. If it did not, it faced the possibility of a judgment at the hands of the plaintiff in a very much higher sum than his offer, together with the possibility that CSR may argue in the contribution proceedings that its responsibility for those damages was less than 21.25 per cent.
41. Before the decisions in Antoon Frans Broers v Australian Cooperative Foods Ltd and ors [2008] NSW DDT 38 and Energy Australia v Power Technologies Pty Limited [2009] NSWDDT 2, doubt existed as to whether the Regulation entitled parties to a Contribution Assessment to the entry of judgment in accordance with that Assessment.
42. QBE's solicitors, in a letter of 3 October 2008 to CSR's solicitors, explained their belief that in circumstances where some, but not all, defendants settled with the plaintiff, those settling defendants were precluded from obtaining contribution to that settlement in accordance with the Contributions Assessment, and that in those circumstances contribution could only be obtained by the prosecution of an action pursuant to s5(1)(c) of the Law Reform (Miscellaneous Provisions) Act 1946, the unstated premise being that this was a time-consuming and expensive exercise which nullified the benefits of the Contribution Assessment.
43. In that circumstance, if a party bound by a contribution assessment refused to contribute a reasonable proportional sum to a settlement, that party could thwart the objectives of the Claims Resolution Process, (to encourage early settlement and reduced legal and administrative costs), while still maintaining the pretence that it was not in dispute as to the contribution it was liable to make to the plaintiff's damages.
44. I do not regard it as unreasonable that QBE and Amaca did not, independently of CSR, accept the plaintiff's offer of $150,000 made on 7 April 2008 before it was withdrawn on 15 May 2008. During the interval QBE was, unsuccessfully, trying to persuade CSR to contribute to the settlement. QBE in all probability believed, as I find, that CSR's position was irrational.
45. Thereafter, until the matter came on for hearing in Brisbane, there was no offer from the plaintiff capable of acceptance.
46. Ms Gleeson further argues that, as a general proposition, it is not reasonable that a defendant incur costs in a cause in which it ultimately fails. In the present case, QBE incurred costs between 7 April 2008, when it could have joined with Amaca to accept the plaintiff's offer, and 24 September 2008, when it settled for the assessed contribution of $22,500. In the event, she argues, the expenditure of additional costs by QBE was futile, because those costs did not result in any improvement of QBE's position.
47. This submission has little merit. In the absence of any contribution from CSR to the proposed settlement in April 2008, either Amaca, or QBE, or a combination of both, had to make up the $31,875 shortfall between their assessed contributions and the plaintiff's demand. There is no evidence that in April 2008 Amaca was willing to contribute the whole of the shortfall. Conclusion
48. The submissions by QBE are persuasive. From the time CSR imposed a monetary limit of $80,000 on Amaca as the Single Claims Manager charged with settling the plaintiff's claim, the real cause and occasion of the continued litigation was the unreasonable attitude of CSR.
49. Cl 67 of the Dust Diseases Tribunal Regulation 2007 grounds an order that CSR pay the costs of QBE, another party to the proceedings. Further, the Tribunal in making such a costs order, must take into account failure by CSR to comply with a provision of the Claims Resolution Process. The Tribunal must also take into account any increase in the cost of proceedings attributable to such failure and… may order the party responsible for the failure to pay the costs of each other party to the dispute occasioned by the failure, assessed on an indemnity basis (cl 67(2)).
50. Cl 52(3) specifically empowers the Tribunal to award costs against an unsuccessful party to a contribution dispute on an indemnity basis. The solicitors for QBE, in a letter of 23 April 2008 to the solicitors for CSR, specifically drew their attention to cl 52, advising that they would seek a costs order against CSR in accordance with its terms.
51. CSR was on notice of its peril if it persisted with its unreasonable attitude. Its conduct was egregiously incompatible with the objectives of the Claims Resolution Process as set out in cl 13 of the Regulation. This is an appropriate matter in which costs should be paid on an indemnity basis. Orders
52. CSR Limited is to pay the costs of QBE Insurance (Australia) Ltd incurred in resisting the plaintiff's claim from and including 27 March 2008 to 24 September 2008 on an indemnity basis.
53. CSR Limited is to pay the costs of this motion on a party party basis. Mr G J Parker instructed by Moray and Agnew appeared for the Applicant on the Motion Ms J Gleeson instructed by A R Connolly and Co appeared for the Respondent to the Motion

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